Exhibit 99.1
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| | Potlatch Corporation 601 W. First Ave., Suite 1600 Spokane, WA 99201 509.835.1500 www.potlatchcorp.com |
News Release
For immediate release:
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Contact: | | (Media) | | (Investors) |
| | Mark Benson | | Eric Cremers |
| | 509.835.1513 | | 509.835.1521 |
Potlatch Reports Third Quarter 2009 Results
SPOKANE, Wash—October 26, 2009—Potlatch Corporation (NYSE:PCH) today reported financial results for the third quarter ended September 30, 2009.
“We continued to make improvements in several areas during the quarter,” said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. “With the closing of the timber deed sale in September, we significantly improved our balance sheet and provided additional liquidity as the $48.7 million of net proceeds were used to pay down a portion of our credit facility. Additionally, the performance of our Wood Products business continued to improve as the division produced positive cash flow during the quarter. Finally, we are optimistic about our Resource business because log prices appear to have bottomed, so, as housing continues to improve, so should log prices,” concluded Mr. Covey.
Q3 2009 FINANCIAL SUMMARY
| • | | Earnings from continuing operations for the quarter were $46.0 million, or $1.15 per diluted common share, compared to $24.9 million, or $0.62 per diluted common share for Q3 2008. |
| | • | | The timber deed sale was finalized in September 2009, resulting in $48.7 million of net proceeds. |
| • | | Cash provided by operating activities from continuing operations was $78.4 million for Q3 2009 compared to $29.5 million for Q3 2008. Year-to-date 2009 cash provided by operating activities from continuing operations was $115.6 million compared to $46.4 million for the same period in 2008. |
Q3 2009 BUSINESS PERFORMANCE
Resource
The Resource segment had an excellent third quarter as a result of the timber deed sale in September. The third quarter is seasonally the Northern region’s strongest production quarter, but harvest levels remained relatively low as a result of the previously announced harvest deferral due to weak market conditions. Sequentially, prices for both sawlogs and pulpwood increased slightly in the Northern region and remained stable in the Southern region.
| • | | Operating income for the segment in Q3 2009 was $55.4 million, compared to $30.7 million in Q3 2008. The timber deed provided approximately $41.5 million of operating earnings in Q3 2009. |
Southern Region
| • | | Total fee harvest volume decreased 8 percent in Q3 2009 from Q3 2008, due to the harvest deferral as well as unseasonably wet logging conditions in Q3 2009. |
| • | | Prices for sawlogs and pulpwood remained stable in Q3 2009 compared to Q2 2009, but decreased 7 percent and 12 percent, respectively, compared to Q3 2008. |
Northern Region
| • | | Total fee harvest volume decreased 22 percent in Q3 2009 from Q3 2008. In Q3 2008, Idaho experienced very favorable logging conditions, resulting in higher harvest levels for that period. In Q3 2009, the Northern region experienced significantly lower log production due to depressed softwood lumber markets that contributed to weak log demand. |
| • | | Prices for both sawlogs and pulpwood increased slightly in Q3 2009 compared to Q2 2009, but decreased 29 percent and 10 percent, respectively, compared to Q3 2008. |
Real Estate
Results from the Real Estate segment were lower in Q3 2009 compared to Q3 2008, primarily due to a higher cost basis for land sold in 2009. The demand for property has continued at a fairly steady level, particularly for rural recreational property. Real Estate segment results depend on the timing of sales transactions, and are often uneven from one reporting period to another.
| • | | Operating income for the segment was $1.5 million in Q3 2009, compared to $1.5 million in Q2 2009 and $3.2 million in Q3 2008. |
| | • | | In Q3 2009, we sold 812 acres of HBU property for approximately $1.9 million, or |
| | $2,342 per acre. Rural land sales totaled 2,118 acres for which we received proceeds of approximately $2.4 million, for an average price of $1,150 per acre. We executed one non-strategic timberland sale for 2,617 acres in Q3 2009 for approximately $1.3 million, or $500 per acre. |
| | • | | In Q3 2008, HBU land sales totaled 327 acres at an average price of $2,462 per acre and rural land sales totaled 4,849 acres at an average price of $1,172 per acre. |
| | • | | Year-to-date 2009, operating income for the segment is up 43 percent over the comparable 2008 period, primarily due to a single sale of approximately 24,500 acres of Arkansas timberland in January 2009. |
Wood Products
The Wood Products segment posted improved results for the third consecutive quarter. The segment operated at positive cash flow during Q3 2009.
| • | | The segment reported an operating loss of $1.5 million for Q3 2009 compared to operating income of $1.6 million in Q3 2008. Sequentially, the business continues to improve, as the segment reported operating losses of $3.0 million and $11.2 million in Q2 2009 and Q1 2009, respectively. |
| | • | | Results for the Wood Products segment continue to be negatively impacted by the downturn in the lumber and housing market. |
| | • | | Lumber sales volumes decreased 3 percent and sales prices decreased 13 percent in Q3 2009 from Q3 2008. However, slight improvements were seen sequentially as lumber sales volumes increased 1 percent and sales prices increased 9 percent in Q3 2009 over Q2 2009. |
| | • | | Our lumber mill in Arkansas was shut down for one week in September as wet weather conditions impacted log deliveries, resulting in a log inventory shortage. Our particleboard plant in Idaho was shut down for two weeks in August due to a lack of orders and a build-up of finished goods inventory. All of our other lumber mills operated at full production levels during Q3 2009. |
Dividend Distribution
During the third quarter, Potlatch paid its regular quarterly cash distribution on the company’s common stock of $0.51 per share.
Timber Deed Sale
In September 2009, Potlatch completed the timber deed sale with Forest Investment Associates, a timberland investment management organization, for $49.0 million. The transaction is considered a sale of stumpage, which is qualified REIT income. The sale, which does not include the underlying land, was for 49,536 acres of pre-merchantable timber located in south central Arkansas. The age class of the trees ranges from 1 to 10 years, with the average age being just under 7 years. Full use of the land reverts back to Potlatch after a full harvest cycle is completed, which is no later than 30 years after the trees were initially planted. The basis of the timber sold, which is classified as depletion, totaled $7.1 million. Potlatch used the net proceeds to pay down its revolving credit facility.
OUTLOOK
“Our outlook for the next several quarters remains unchanged from the prior quarter. Softwood lumber prices remain relatively depressed due to the weak housing market, which is putting pressure on our Wood Products business. We expect that the business will not be a meaningful contributor until housing improves. Similarly, the outlook for our Resource business remains subdued due to relatively weak end-use markets. Nonetheless, we are encouraged by the recent price stabilization in our Resource business and look forward to significantly increasing harvest volumes when the pricing environment improves, which we expect to happen in the second half of 2010. Regarding our Real Estate segment, we expect continued interest in our HBU and our rural recreation properties. The non-strategic timberland sale in the first quarter, coupled with the timber deed sale in the third quarter, demonstrate the continued interest in our non-strategic timberland.
“In spite of today’s weak environment, we are encouraged about our long term prospects. We believe our business will grow once the housing market begins to recover, which we are starting to see. In the meantime we will continue to closely monitor raw material and other costs,” concluded Mr. Covey.
CONFERENCE CALL INFORMATION
A live webcast and conference call will be held Tuesday, October 27, 2009, at 8 a.m. Eastern (5 a.m. Pacific). Those interested may access the webcast athttp://ir.potlatchcorp.com and conference call by dialing 866-393-8403 for U.S./Canada and 706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 30926400. Supplemental materials that we will discuss during the call will be available on our website.
For those unable to participate in the call, an archived recording will be available through the Potlatch Corporation Web site athttp://ir.potlatchcorp.com for approximately one year following the conference call. A telephone replay of the conference call will be available until November 3, 2009, by calling 800-642-1687 for U.S./Canada or 706-645-9291 for international callers and entering passcode number 30926400.
ABOUT POTLATCH
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6 million acres of timberland in Arkansas, Idaho, Minnesota and Wisconsin. Potlatch, a verified forest practices leader, is committed to providing superior returns to stockholders through long-term stewardship of its forest resources. The company also conducts a land sales and development business and operates wood products manufacturing facilities through its taxable REIT subsidiary.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, statements about future company performance, direction of markets, log pricing, future harvest levels, demand for real estate, lumber pricing, the results of efforts to minimize losses in our Wood Products segment, and the recovery of the housing market. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in timberland values; changes in timber harvest levels on the company’s lands; changes in timber prices; changes in policy regarding governmental timber sales; changes in the United States and international economies; changes in the level of construction activity; changes in tariffs, quotas and trade agreements involving wood products; changes in demand for our products; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; changes in raw material and other costs; the ability to satisfy complex rules in order to remain qualified as a REIT; changes in tax laws that could reduce the benefits associated with REIT status; and other risks and uncertainties described from time to time in the company’s public filings with the Securities and Exchange Commission. These forward-looking statements are made as of the date hereof and the company does not undertake to update any forward-looking statements.
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Potlatch Corporation and Consolidated Subsidiaries
Statements of Operations and Comprehensive Income
Unaudited (Dollars in thousands - except per-share amounts)
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| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Revenues | | $ | 163,716 | | | $ | 130,791 | | | $ | 372,091 | | | $ | 346,374 | |
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Costs and expenses: | | | | | | | | | | | | | | | | |
Depreciation, depletion and amortization | | | 15,388 | | | | 9,489 | | | | 26,906 | | | | 22,026 | |
Materials, labor and other operating expenses | | | 89,614 | | | | 84,714 | | | | 230,620 | | | | 222,017 | |
Selling, general and administrative expenses | | | 13,930 | | | | 12,559 | | | | 33,246 | | | | 35,308 | |
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| | | 118,932 | | | | 106,762 | | | | 290,772 | | | | 279,351 | |
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Earnings from continuing operations before interest and taxes | | | 44,784 | | | | 24,029 | | | | 81,319 | | | | 67,023 | |
Interest expense | | | (5,102 | ) | | | (4,857 | ) | | | (14,816 | ) | | | (15,530 | ) |
Interest income | | | 7 | | | | 98 | | | | 45 | | | | 552 | |
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Earnings from continuing operations before taxes | | | 39,689 | | | | 19,270 | | | | 66,548 | | | | 52,045 | |
Income tax benefit | | | 6,333 | | | | 5,600 | | | | 11,937 | | | | 14,984 | |
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Earnings from continuing operations | | | 46,022 | | | | 24,870 | | | | 78,485 | | | | 67,029 | |
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Discontinued operations: | | | | | | | | | | | | | | | | |
Gain (loss) from discontinued operations (including losses on disposal of $-, $(387), $- and $(20,403)) | | | (300 | ) | | | 621 | | | | (6,724 | ) | | | (17,450 | ) |
Income tax benefit (provision) | | | 117 | | | | (241 | ) | | | 2,664 | | | | 7,408 | |
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| | | (183 | ) | | | 380 | | | | (4,060 | ) | | | (10,042 | ) |
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Net earnings | | $ | 45,839 | | | $ | 25,250 | | | $ | 74,425 | | | $ | 56,987 | |
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Other comprehensive income, net of tax | | $ | 1,816 | | | $ | 971 | | | $ | 3,848 | | | $ | 3,742 | |
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Comprehensive income | | $ | 47,655 | | | $ | 26,221 | | | $ | 78,273 | | | $ | 60,729 | |
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Earnings per common share from continuing operations | | | | | | | | | | | | | | | | |
Basic | | $ | 1.16 | | | $ | 0.63 | | | $ | 1.97 | | | $ | 1.70 | |
Diluted | | | 1.15 | | | | 0.62 | | | | 1.97 | | | | 1.69 | |
Earnings (loss) per common share from discontinued operations | | | | | | | | | | | | | | | | |
Basic | | $ | (0.01 | ) | | $ | 0.01 | | | $ | (0.10 | ) | | $ | (0.25 | ) |
Diluted | | | — | | | | 0.01 | | | | (0.10 | ) | | | (0.26 | ) |
Net earnings per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 1.15 | | | $ | 0.64 | | | $ | 1.87 | | | $ | 1.45 | |
Diluted | | | 1.15 | | | | 0.63 | | | | 1.87 | | | | 1.43 | |
Average shares outstanding (in thousands): | | | | | | | | | | | | | | | | |
Basic | | | 39,765 | | | | 39,515 | | | | 39,751 | | | | 39,432 | |
Diluted | | | 39,920 | | | | 39,793 | | | | 39,892 | | | | 39,713 | |
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Certain 2008 amounts have been reclassified to conform to the 2009 presentation.
Potlatch Corporation and Consolidated Subsidiaries
Condensed Balance Sheets
Unaudited (Dollars in thousands - except per-share amounts)
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| | | September 30,
2009 | | | December 31,
2008 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash | | $ | 1,388 | | | $ | 885 | |
Short-term investments | | | 302 | | | | 3,034 | |
Receivables, net | | | 27,797 | | | | 38,750 | |
Restricted cash | | | 106,250 | | | | — | |
Note receivable | | | — | | | | 100,000 | |
Inventories | | | 23,921 | | | | 36,686 | |
Other assets | | | 17,043 | | | | 16,423 | |
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Total current assets | | | 176,701 | | | | 195,778 | |
Land, other than timberlands | | | 3,521 | | | | 3,521 | |
Plant and equipment, at cost less accumulated depreciation | | | 76,887 | | | | 82,613 | |
Timber, timberlands and related deposits, net | | | 536,827 | | | | 553,913 | |
Deferred tax assets | | | 79,702 | | | | 74,653 | |
Other assets | | | 27,174 | | | | 27,843 | |
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| | $ | 900,812 | | | $ | 938,321 | |
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Liabilities and Stockholders’ Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Current installments on long-term debt | | $ | 100,011 | | | $ | 100,410 | |
Current notes payable | | | 72,500 | | | | 129,100 | |
Accounts payable and accrued liabilities | | | 75,322 | | | | 57,635 | |
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Total current liabilities | | | 247,833 | | | | 287,145 | |
Long-term debt | | | 220,943 | | | | 220,927 | |
Liability for pensions and other postretirement employee benefits | | | 209,491 | | | | 216,926 | |
Other long-term obligations | | | 15,975 | | | | 15,089 | |
Stockholders’ equity | | | 206,570 | | | | 198,234 | |
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| | $ | 900,812 | | | $ | 938,321 | |
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Stockholders’ equity per common share | | $ | 5.19 | | | $ | 4.99 | |
Working capital | | $ | (71,132 | ) | | $ | (91,367 | ) |
Current ratio | | | 0.7:1 | | | | 0.7:1 | |
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Potlatch Corporation and Consolidated Subsidiaries
Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
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| | | Nine Months Ended
September 30, | |
| | | 2009 | | | 2008 | |
Cash Flows From Continuing Operations | | | | | | | | |
Net earnings | | $ | 74,425 | | | $ | 56,987 | |
Adjustments to reconcile net earnings to net operating cash flows from continuing operations: | | | | | | | | |
Loss (gain) from discontinued operations | | | 4,060 | | | | (2,404 | ) |
Loss on disposal of discontinued operations | | | — | | | | 12,446 | |
Depreciation, depletion and amortization | | | 26,906 | | | | 22,026 | |
Proceeds from sales deposited with a like-kind exchange intermediary | | | (2,030 | ) | | | (34,626 | ) |
Basis of real estate sold | | | 9,730 | | | | 7,788 | |
Deferred tax benefit | | | (18,145 | ) | | | (7,642 | ) |
Equity-based compensation expense | | | 2,742 | | | | 3,150 | |
Employee benefit plans | | | (773 | ) | | | (1,803 | ) |
Other | | | (187 | ) | | | 292 | |
Working capital changes | | | 18,896 | | | | (9,787 | ) |
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Net cash provided by operating activities from continuing operations | | | 115,624 | | | | 46,427 | |
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Cash Flows From Investing | | | | | | | | |
Change in short-term investments | | | 21,361 | | | | 47,600 | |
Additions to plant and properties | | | (11,848 | ) | | | (31,848 | ) |
Deposits on timberlands | | | — | | | | (27,328 | ) |
Other, net | | | (444 | ) | | | 626 | |
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Net cash provided by (used for) investing activities from continuing operations | | | 9,069 | | | | (10,950 | ) |
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Cash Flows From Financing | | | | | | | | |
Change in book overdrafts | | | 1,143 | | | | (4,896 | ) |
Increase (decrease) in notes payable | | | (56,600 | ) | | | 3,400 | |
Issuance of common stock | | | 494 | | | | 3,793 | |
Repayment of long-term debt | | | (383 | ) | | | (182 | ) |
Distributions to common stockholders | | | (60,821 | ) | | | (60,405 | ) |
Other, net | | | 63 | | | | (1,650 | ) |
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Net cash used for financing activities from continuing operations | | | (116,104 | ) | | | (59,940 | ) |
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Cash flows provided by (used for) continuing operations | | | 8,589 | | | | (24,463 | ) |
Cash flows of discontinued operations: | | | | | | | | |
Operating cash flows | | | (8,086 | ) | | | 37,426 | |
Investing cash flows | | | — | | | | (16,147 | ) |
Financing cash flows | | | — | | | | (2,073 | ) |
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Increase (decrease) in cash | | | 503 | | | | (5,257 | ) |
Cash at beginning of period | | | 885 | | | | 9,047 | |
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Cash at end of period | | $ | 1,388 | | | $ | 3,790 | |
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Certain 2008 amounts have been reclassified to conform to the 2009 presentation.
Potlatch Corporation and Consolidated Subsidiaries
Highlights
Unaudited (Dollars in thousands - except per-share amounts)
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| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Cash distributions per common share | | $ | 0.51 | | | $ | 0.51 | | | $ | 1.53 | | | $ | 1.53 | |
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| Segment Information | |
| Unaudited (Dollars in thousands) | |
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| | | Three Months Ended
September 30, | | | Nine Months Ended
September 30, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
Revenues | | | | | | | | | | | | | | | | |
Resource | | $ | 109,045 | | | $ | 94,552 | | | $ | 183,539 | | | $ | 199,893 | |
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Real Estate | | | 5,646 | | | | 6,750 | | | | 58,379 | | | | 43,198 | |
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Wood Products | | | | | | | | | | | | | | | | |
Lumber | | | 38,097 | | | | 44,618 | | | | 100,733 | | | | 119,624 | |
Plywood | | | 10,476 | | | | 11,353 | | | | 24,499 | | | | 39,361 | |
Particleboard | | | 2,094 | | | | 4,456 | | | | 7,766 | | | | 14,177 | |
Other | | | 9,565 | | | | 14,884 | | | | 26,764 | | | | 37,968 | |
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| | | 60,232 | | | | 75,311 | | | | 159,762 | | | | 211,130 | |
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| | | 174,923 | | | | 176,613 | | | | 401,680 | | | | 454,221 | |
Intersegment revenues | | | (11,207 | ) | | | (45,822 | ) | | | (29,589 | ) | | | (107,847 | ) |
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Total consolidated revenues | | $ | 163,716 | | | $ | 130,791 | | | $ | 372,091 | | | $ | 346,374 | |
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Operating income (loss) | | | | | | | | | | | | | | | | |
Resource | | $ | 55,374 | | | $ | 30,746 | | | $ | 70,745 | | | $ | 60,102 | |
Real Estate | | | 1,455 | | | | 3,225 | | | | 44,474 | | | | 31,192 | |
Wood Products | | | (1,532 | ) | | | 1,585 | | | | (15,708 | ) | | | (2,261 | ) |
Eliminations and adjustments | | | (764 | ) | | | (3,337 | ) | | | 4,323 | | | | (109 | ) |
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| | | 54,533 | | | | 32,219 | | | | 103,834 | | | | 88,924 | |
Corporate | | | (14,844 | ) | | | (12,949 | ) | | | (37,286 | ) | | | (36,879 | ) |
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Earnings from continuing operations before taxes | | $ | 39,689 | | | $ | 19,270 | | | $ | 66,548 | | | $ | 52,045 | |
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Certain 2008 amounts have been reclassified to conform to the 2009 presentation.
