Exhibit 99.1
 | ||||
| Potlatch Corporation | ||||
| 601 W. First Ave., Suite 1600 | ||||
| Spokane, WA 99201 | ||||
| 509.835.1500 | ||||
| www.potlatchcorp.com |
News Release
For immediate release:
| Contact: | (Investors) | (Media) | ||||
| Eric Cremers | Mark Benson | |||||
| 509.835.1521 | 509.835.1513 |
Potlatch Reports Fourth Quarter and Full Year 2011 Results
SPOKANE, Wash — January 31, 2012 — Potlatch Corporation (NASDAQ:PCH) today reported financial results for the fourth quarter and full year ended December 31, 2011.
“Economic conditions remained challenging throughout 2011, which is reflected in our fourth quarter and full year results” said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. “For full year 2011, earnings from continuing operations were $40.3 million, which was comparable to 2010. In our Resource segment, we experienced varying conditions between our regions. Demand remained strong in our Northern region, which kept timber prices and harvest volumes at favorable levels. In fact, we were even able to shift a portion of our harvest from the Southern region to the Northern region to capture better pricing opportunities. In our Southern region, fiber availability due to dry weather kept prices depressed most of the year, which was the primary driver of our harvest deferral. Wood Products had a solid year, with operating income and shipments comparable to last year, and Real Estate had another very good year in 2011, with four large non-strategic timberland sales and continued steady demand for HBU and rural real estate properties,” concluded Mr. Covey.
Q4 2011 FINANCIAL SUMMARY
| • | In Q4 2011, Potlatch had a loss from continuing operations of $1.5 million, or a loss of $0.04 per diluted common share, compared to earnings from continuing operations of $8.9 million, or $0.22 per diluted common share in Q4 2010. |
| • | In Q4 2010, the company completed a non-strategic timberland sale of approximately 29,000 acres in Wisconsin and 17,400 acres in Arkansas to RMK Timberland Group, a timber investment management organization, for $36.1 million, which provided $0.16 of non-recurring positive EPS impact. |
Q4 2011 BUSINESS PERFORMANCE
Resource
Operating income for the Resource segment in Q4 2011 was $12.6 million, compared to $12.8 million in Q4 2010 and $25.6 million in Q3 2011. The decrease from Q3 2011 was primarily due to seasonal factors as the third quarter is the Northern region’s strongest production quarter.
Northern Region
| • | Total fee harvest volume in Q4 2011 increased 8 percent over Q4 2010, due to the harvest shift to the Northern region, together with an increased demand for pulpwood. Total fee harvest volume in Q4 2011 decreased 39 percent from Q3 2011, primarily due to normal seasonality. In addition, Q3 2011 volume was higher than it otherwise would have been as a result of our shift of a portion of the harvest to the Northern region from the Southern region to capture better pricing opportunities. |
| • | Sawlog volume increased 6 percent in Q4 2011 over Q4 2010 as a result of the harvest shift between the regions. Sawlog prices increased 6 percent year-over-year due to a general strengthening of sawlog demand in Idaho. |
| • | Sawlog harvest volume decreased 41 percent in Q4 2011 from Q3 2011 due to seasonal factors and the high volume in Q3 2011 mentioned above. Sawlog prices decreased 6 percent sequentially, driven by weak cedar prices coupled with a drop in the lumber price index, to which a majority of sales are tied. |
| • | Pulpwood volume and prices increased 23 percent and 10 percent, respectively, in Q4 2011 over Q4 2010 due to increased demand for pulpwood in the Pacific Northwest and continued strong demand in Minnesota for hardwood pulpwood. |
| • | Pulpwood volume decreased 22 percent in Q4 2011 from Q3 2011 because of normal seasonal factors. Pulpwood prices increased 8 percent in Q4 2011 over Q3 2011, primarily due to improved demand for pulpwood in the Pacific Northwest resulting from a shortage of residual chips. |
Southern Region
| • | Total fee harvest volume decreased 7 percent in Q4 2011 from Q4 2010 as a result of the harvest reduction following the closure of a large customer’s facility at the end of Q3 2011, partially offset by an increase in hardwood pulpwood harvest due to pine plantation thinnings and easier access to hardwood pulpwood stands afforded by dry logging |
conditions. Total fee harvest volume for the Southern region decreased 17 percent in Q4 2011 from Q3 2011 due to harvest reductions associated with the closure mentioned above, plus seasonal factors. |
| • | Sawlog volume and prices decreased 25 percent and 9 percent, respectively, in Q4 2011 from Q4 2010, due to weak demand for pine sawlogs and the harvest reduction. |
| • | Sawlog volume and prices decreased 18 percent and 7 percent, respectively, in Q4 2011 from Q3 2011 due to the harvest reduction and continued weak demand. |
| • | Pulpwood volume increased 21 percent in Q4 2011 over Q4 2010 as a result of the increase in pine plantation thinnings and the dry logging conditions that allowed access to hardwood pulpwood stands, while prices decreased 8 percent due to excess fiber availability. |
| • | Pulpwood volume decreased 14 percent in Q4 2011 from Q3 2011 due to normal seasonality coupled with decreased pulpwood production resulting from the harvest reduction. Pulpwood prices increased 3 percent in Q4 2011 over Q3 2011 due to reduced availability of residual chips. |
Wood Products
The Wood Products segment reported an operating loss of $1.3 million in Q4 2011 compared to an operating loss of $3.4 million in Q4 2010 and operating income of $2.9 million in Q3 2011.
| • | Lumber prices and shipment volumes increased 2 percent and 1 percent, respectively, in Q4 2011 over Q4 2010, primarily due to slightly better market conditions. |
| • | Lumber prices decreased 1 percent and shipment volumes decreased 3 percent in Q4 2011 compared to Q3 2011, primarily due to weaker demand. |
| • | In Q4 2011, the segment recorded a negative $0.4 million mark to market adjustment related to lumber hedges, compared to a positive $2.0 million adjustment in Q3 2011 and a negative $2.9 million adjustment in Q4 2010. |
Real Estate
Real Estate segment revenues totaled $3.2 million in Q4 2011 compared to $39.1 million in Q4 2010 and $14.8 million in Q3 2011. Operating income for the segment was $2.1 million in Q4 2011 compared to $13.6 million in Q4 2010 and $9.9 million in Q3 2011. The year to year variances in revenues and operating income were due to the approximately 46,400 acre non-strategic land sale in Wisconsin and Arkansas in Q4 2010. The sequential variances in revenues and operating income were due to the third and final phase of a 5,912 acre non-
strategic/rural real estate sale that occurred in Q3 2011. While there were no large non-strategic timberland sales in Q4 2011, sales of rural real estate and HBU properties continued at a steady pace and with comparable or greater average prices per acre compared to both Q3 2011 and Q4 2010. A total of 39 rural real estate, HBU and non-strategic timberland transactions closed in Q4 2011.
Corporate
Corporate expenses were $16.5 million in Q4 2011 compared to $17.7 million in Q4 2010, primarily due to lower environmental remediation charges. Q4 2010 included a charge of $4.1 million and an additional $1.2 million was accrued for the Avery, Idaho site in Q4 2011 to reflect increased remediation cost estimates, bringing the total accrual to $6.0 million as of December 31, 2011.
2011 FULL YEAR FINANCIAL SUMMARY
| • | Earnings from continuing operations for the full year 2011 were $40.3 million, or $1.00 per diluted common share, compared to $40.3 million, or $1.00 per diluted common share for the full year 2010. |
| • | Operating income for the Resource segment was $59.8 million in 2011 compared to $62.1 million in 2010. Total harvest volumes were 4.1 million tons in 2011 and 4.2 million tons in 2010. Harvest volumes and prices were generally higher in the Northern region and lower in the Southern region in 2011 compared to 2010. |
| • | Operating income for the Real Estate segment totaled $31.4 million in 2011 compared to $30.4 million in 2010. Although fewer acres were sold in 2011, the increased operating income was primarily due to the sale of lower basis non-strategic timberlands in 2011 compared to 2010. The timberland sold in Idaho in 2011 had been owned for a much longer time and thus had a much lower basis compared to the Wisconsin properties sold in 2010 that had been purchased in 2007. |
| • | The Wood Products segment had operating income of $7.3 million in 2011 compared to $7.1 million in 2010. Lumber shipment volumes and average prices were basically comparable between years. Lumber hedges provided earnings of $4.5 million in 2011, compared to a negative $2.9 million adjustment in 2010. |
| • | Corporate expenses totaled $56.4 million in 2011 compared to $56.7 million in 2010. |
Dividend Distribution
During the fourth quarter, Potlatch paid a quarterly cash dividend distribution on the company’s common stock of $0.31 per share, which reflects the current dividend level for the company.
Credit Agreement Amendment
In December 2011, the revolving credit agreement was amended, which reduced the Minimum Interest Coverage Ratio to 2.00 to 1.00 from 3.00 to 1.00 and added a Minimum Liquidity requirement of $60.0 million.
OUTLOOK
“Our outlook for 2012 remains cautious and conservative, which is in line with our harvest and dividend reduction announced December 5th. Although there was a slight increase in housing starts late in 2011, the housing market remains depressed and we expect only a modest improvement in housing starts in 2012. In our Wood Products segment, although there has been a small near-term improvement in some markets, we expect lumber prices in 2012 to be very similar to 2011. With the continued weak housing outlook and the impact of our customer’s mill closure in Arkansas, we plan to reduce our harvest volumes by 17% to approximately 3.5 million tons for 2012. In our Real Estate segment, although we do not anticipate any large non-strategic timberland sales in 2012, we will still have smaller sales of non-strategic properties. In addition, we expect a consistent level of rural and HBU sales to continue, at slightly higher prices. We remain in a position of strong liquidity with over $70 million of cash and short-term investments on our balance sheet. We have debt maturities of $22 million in the first half of 2012 that we will be able to cover with our cash on hand. We are cautiously optimistic about our outlook as we move into 2012 and beyond, as we expect the recovery of the housing market to begin slowly in the near term but then accelerate as we move into 2013, and demand from China should continue to positively affect our business,” concluded Mr. Covey.
CONFERENCE CALL INFORMATION
A live conference call and webcast will be held Tuesday, January 31, 2012, at 9 a.m. Pacific Time (noon Eastern Time). Investors may access the webcast at www.potlatchcorp.com by clicking on the Investor Resources link or by conference call at 1-866-393-8403 for U.S./Canada and 1-706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 40945433. Supplemental materials that will be discussed during the call will be available on our website.
A telephone replay of the conference call will be available until February 7, 2012, by calling 1-800-585-8367 for U.S./Canada or 1-404-537-3406 for international callers. Callers must enter conference I.D. number 40945433 to access the replay.
ABOUT POTLATCH
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.44 million acres of timberland in Arkansas, Idaho and Minnesota. 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, company outlook for 2012, housing starts in 2012, lumber demand and pricing, future harvest levels, non-strategic timberland sales in 2012, demand and pricing for rural and HBU real estate, company liquidity, 2012 debt maturities, recovery of housing market, Chinese demand,and related matters. 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, including changes in Asian demand; 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; insect infestation (including the mountain pine beetle); 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
Consolidated Condensed Statements of Operations
Unaudited (Dollars in thousands, except per-share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues | $ | 109,927 | $ | 146,174 | $ | 497,421 | $ | 539,447 | ||||||||
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Costs and expenses: | ||||||||||||||||
Cost of goods sold | 94,778 | 118,359 | 382,252 | 423,353 | ||||||||||||
Selling, general and administrative expenses | 12,081 | 11,439 | 40,549 | 39,347 | ||||||||||||
Environmental remediation charge | 1,200 | 4,096 | 1,200 | 4,096 | ||||||||||||
Asset impairment charge | — | — | 1,180 | — | ||||||||||||
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| 108,059 | 133,894 | 425,181 | 466,796 | |||||||||||||
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Earnings from continuing operations before interest and taxes | 1,868 | 12,280 | 72,240 | 72,651 | ||||||||||||
Interest expense, net | (6,706 | ) | (6,745 | ) | (27,829 | ) | (27,780 | ) | ||||||||
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Earnings (loss) from continuing operations before taxes | (4,838 | ) | 5,535 | 44,411 | 44,871 | |||||||||||
Income tax benefit (provision) | 3,360 | 3,364 | (4,145 | ) | (4,596 | ) | ||||||||||
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Earnings (loss) from continuing operations | (1,478 | ) | 8,899 | 40,266 | 40,275 | |||||||||||
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Discontinued operations, net of tax | — | 477 | — | 119 | ||||||||||||
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Net earnings (loss) | $ | (1,478 | ) | $ | 9,376 | $ | 40,266 | $ | 40,394 | |||||||
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Earnings (loss) per common share from continuing operations | ||||||||||||||||
Basic | $ | (0.04 | ) | $ | 0.22 | $ | 1.00 | $ | 1.01 | |||||||
Diluted | (0.04 | ) | 0.22 | 1.00 | 1.00 | |||||||||||
Earnings per common share from discontinued operations | ||||||||||||||||
Basic | $ | — | $ | 0.01 | $ | — | $ | — | ||||||||
Diluted | — | 0.01 | — | — | ||||||||||||
Net earnings (loss) per common share: | ||||||||||||||||
Basic | $ | (0.04 | ) | $ | 0.23 | $ | 1.00 | $ | 1.01 | |||||||
Diluted | (0.04 | ) | 0.23 | 1.00 | 1.00 | |||||||||||
Average shares outstanding (in thousands): | ||||||||||||||||
Basic | 40,195 | 40,021 | 40,159 | 39,971 | ||||||||||||
Diluted | 40,401 | 40,257 | 40,383 | 40,219 | ||||||||||||
Potlatch Corporation
Consolidated Condensed Balance Sheets
Unaudited (Dollars in thousands, except per-share amounts)
| December 31, 2011 | December 31, 2010 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 7,819 | $ | 5,593 | ||||
Short-term investments | 62,989 | 85,249 | ||||||
Receivables, net | 13,533 | 21,278 | ||||||
Inventories | 28,603 | 24,375 | ||||||
Deferred tax assets | 11,909 | 13,346 | ||||||
Other assets | 9,998 | 11,953 | ||||||
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Total current assets | 134,851 | 161,794 | ||||||
Property, plant and equipment, net | 61,453 | 67,174 | ||||||
Timber and timberlands, net | 459,687 | 472,349 | ||||||
Deferred tax assets | 57,924 | 49,054 | ||||||
Other assets | 32,305 | 31,340 | ||||||
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| $ | 746,220 | $ | 781,711 | |||||
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Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Current installments on long-term debt | $ | 21,661 | $ | 5,011 | ||||
Current liability for pensions and other postretirement employee benefits | 8,172 | 9,517 | ||||||
Accounts payable and accrued liabilities | 47,776 | 51,504 | ||||||
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Total current liabilities | 77,609 | 66,032 | ||||||
Long-term debt | 344,742 | 363,485 | ||||||
Liability for pensions and other postretirement employee benefits | 163,116 | 129,124 | ||||||
Other long-term obligations | 18,615 | 18,631 | ||||||
Stockholders' equity | 142,138 | 204,439 | ||||||
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| $ | 746,220 | $ | 781,711 | |||||
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Stockholders' equity per common share | $ | 3.54 | $ | 5.11 | ||||
Working capital | $ | 57,242 | $ | 95,762 | ||||
Current ratio | 1.7:1 | 2.5:1 | ||||||
Certain 2010 amounts have been reclassified to conform to the 2011 presentation.
Potlatch Corporation
Consolidated Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
| Twelve Months Ended December 31, | ||||||||
| 2011 | 2010 | |||||||
Cash Flows From Continuing Operations | ||||||||
Net earnings | $ | 40,266 | $ | 40,394 | ||||
Adjustments to reconcile net earnings to net operating cash flows from continuing operations: | ||||||||
Depreciation, depletion and amortization | 29,092 | 31,204 | ||||||
Basis of real estate sold | 10,219 | 48,670 | ||||||
Change in deferred taxes | 4,218 | 5,427 | ||||||
Loss (gain) on disposition of property, plant and equipment | (131 | ) | 1,078 | |||||
Employee benefit plans | (2,181 | ) | (6,241 | ) | ||||
Equity-based compensation expense | 4,404 | 3,952 | ||||||
Asset impairment | 1,180 | — | ||||||
Gain from discontinued operations | — | (119 | ) | |||||
Proceeds from sales deposited with a like-kind exchange intermediary | — | (341 | ) | |||||
Other | 55 | — | ||||||
Funding of qualified pension plans | (9,400 | ) | — | |||||
Working capital changes | (607 | ) | 2,049 | |||||
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Net cash provided by operating activities from continuing operations | 77,115 | 126,073 | ||||||
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Cash Flows From Investing | ||||||||
Decrease (increase) in short-term investments | 22,260 | (31,743 | ) | |||||
Additions to property, plant and equipment | (5,338 | ) | (5,215 | ) | ||||
Additions to timber and timberlands | (11,548 | ) | (9,786 | ) | ||||
Proceeds from disposition of property, plant and equipment | 224 | 3,075 | ||||||
Other, net | (1,095 | ) | (1,807 | ) | ||||
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Net cash provided by (used for) investing activities from continuing operations | 4,503 | (45,476 | ) | |||||
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Cash Flows From Financing | ||||||||
Distributions to common stockholders | (73,921 | ) | (81,578 | ) | ||||
Payments on long-term debt | (5,011 | ) | (11 | ) | ||||
Issuance of common stock | 1,430 | 2,156 | ||||||
Change in book overdrafts | 157 | 2,178 | ||||||
Deferred financing costs | (698 | ) | (249 | ) | ||||
Employee tax withholdings on equity-based compensation | (1,641 | ) | (2,075 | ) | ||||
Other, net | 292 | 41 | ||||||
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Net cash used for financing activities from continuing operations | (79,392 | ) | (79,538 | ) | ||||
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Cash flows provided by continuing operations | 2,226 | 1,059 | ||||||
Cash flows provided by discontinued operations | — | 3,002 | ||||||
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Increase in cash | 2,226 | 4,061 | ||||||
Cash at beginning of period | 5,593 | 1,532 | ||||||
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Cash at end of period | $ | 7,819 | $ | 5,593 | ||||
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Potlatch Corporation
Highlights
Unaudited (Dollars in thousands, except per-share amounts)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Cash distributions per common share | $ | 0.31 | $ | 0.51 | $ | 1.84 | $ | 2.04 | ||||||||
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Segment Information
Unaudited (Dollars in thousands)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
Revenues | ||||||||||||||||
Resource | $ | 54,382 | $ | 53,118 | $ | 226,969 | $ | 225,834 | ||||||||
Real Estate | 3,221 | 39,069 | 50,029 | 85,226 | ||||||||||||
Wood Products | 67,237 | 64,055 | 271,580 | 273,887 | ||||||||||||
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| 124,840 | 156,242 | 548,578 | 584,947 | |||||||||||||
Intersegment revenues – Resource | (14,913 | ) | (10,068 | ) | (51,157 | ) | (45,500 | ) | ||||||||
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Total consolidated revenues | $ | 109,927 | $ | 146,174 | $ | 497,421 | $ | 539,447 | ||||||||
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Operating income (loss) | ||||||||||||||||
Resource | $ | 12,584 | $ | 12,824 | $ | 59,792 | $ | 62,107 | ||||||||
Real Estate | 2,089 | 13,622 | 31,384 | 30,425 | ||||||||||||
Wood Products | (1,281 | ) | (3,436 | ) | 7,267 | 7,140 | ||||||||||
Eliminations and adjustments | (1,750 | ) | 222 | 2,410 | 1,900 | |||||||||||
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| 11,642 | 23,232 | 100,853 | 101,572 | |||||||||||||
Corporate | (16,480 | ) | (17,697 | ) | (56,442 | ) | (56,701 | ) | ||||||||
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Earnings (loss) from continuing operations before taxes | $ | (4,838 | ) | $ | 5,535 | $ | 44,411 | $ | 44,871 | |||||||
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Depreciation, depletion and amortization | ||||||||||||||||
Resource | $ | 3,569 | $ | 4,592 | $ | 17,420 | $ | 20,481 | ||||||||
Real Estate | 7 | — | 28 | — | ||||||||||||
Wood Products | 1,923 | 2,000 | 7,829 | 8,188 | ||||||||||||
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| 5,499 | 6,592 | 25,277 | 28,669 | |||||||||||||
Corporate | 677 | 755 | 3,815 | 2,535 | ||||||||||||
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Total depreciation, depletion and amortization | $ | 6,176 | $ | 7,347 | $ | 29,092 | $ | 31,204 | ||||||||
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Basis of real estate sold - Real Estate | $ | 213 | $ | 23,178 | $ | 13,500 | $ | 48,670 | ||||||||
Eliminations and adjustments | (47 | ) | — | (3,281 | ) | — | ||||||||||
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Total basis of real estate sold - Real Estate | $ | 166 | $ | 23,178 | $ | 10,219 | $ | 48,670 | ||||||||
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