Exhibit 99.1 March 16, 2006 Contact: Ron Kurtz (713) 267-3686 MAXXAM REPORTS RESULTS FOR FOURTH QUARTER, TWELVE MONTHS OF 2005 HOUSTON, Texas (March 16, 2006) - MAXXAM Inc. (AMEX: MXM) reported net income of $15.5 million, or $2.22 income per share, on a fully diluted basis, for the fourth quarter of 2005, compared to a net loss of $0.8 million, or $0.13 per share loss, for the same period a year ago. Net sales for the fourth quarter of 2005 totaled $130.4 million, compared to $104.6 million in the fourth quarter of 2004. For 2005, MAXXAM reported a net loss of $4.0 million, or $0.66 per share loss, compared to a net loss of $46.6 million, or $7.79 per share loss, for 2004. Net sales for 2005 were $406.4 million, compared to $347.5 million for 2004. FOREST PRODUCTS OPERATIONS Net sales for forest products operations decreased to $45.0 million for the fourth quarter of 2005, as compared to $52.9 million for the fourth quarter of 2004. The $7.9 million decrease in net sales was due to a decline in lumber shipments, compounded by a decline in the average sales price of redwood lumber during the fourth quarter of 2005, as compared to the same period in 2004. Operating losses were $5.4 million for the fourth quarter of 2005, compared to operating income of $2.2 million during the same period in 2004, primarily due to decreased net sales, higher production costs, and a $4.6 million impairment charge related to the write down of certain long-lived assets. REAL ESTATE OPERATIONS Real estate sales were $73.1 million for the fourth quarter of 2005, as compared to $39.7 million during the same period a year ago. This significant increase is due to several large acreage and parcel sales at the Company's Palmas del Mar and Mirada developments during the fourth quarter of 2005. As the proceeds from these sales have not been redeployed in other real estate assets, the real estate segment does not expect that it will be able to achieve this level of quarterly sales in the future. RACING OPERATIONS Net sales and operating results for the Company's racing operations improved for the fourth quarter of 2005, as compared to the same period in 2004, principally due to increased wagering. CORPORATE AND OTHER The Corporate segment's operating losses represent general and administrative expenses that are not specifically attributable to the Company's operating segments. Investment, interest and other income was $9.0 million for the fourth quarter of 2005, as compared to $3.8 million for the fourth quarter of 2004. This increase is primarily the result of a reversal of a liability related to prior period intercompany interest and an increase in investment income. PALCO - SCOTIA LLC LIQUIDITY UPDATE Prior to the issuance of this press release, MAXXAM filed its report on Form 10-K with the Securities and Exchange Commission. The Notes to Financial Statements and other sections of the Form 10-K discuss how the cash flows of The Pacific Lumber Company (Palco) and Scotia Pacific Company LLC (ScoPac), indirect subsidiaries of MAXXAM, have been materially adversely affected by ongoing regulatory, environmental and litigation challenges. Both Palco and ScoPac continue to experience liquidity difficulties. ScoPac's management has concluded that, in the absence of significant regulatory relief and accommodations, ScoPac's annual timber harvest levels and cash flows from operations will, for at least the next several years, be substantially below both historical levels and the levels necessary to allow ScoPac to satisfy its debt service obligations in respect of the Timber Notes. ScoPac projects that, without additional liquidity, its cash flows from operations, together with funds available under its line of credit, will be insufficient, by a substantial amount, to pay the entire amount of interest due on the July 20, 2006, payment date on its Timber Notes. ScoPac also expects to incur interest shortfalls for at least the next several years after the July 20, 2006 payment date. As previously announced, in order to address future cash flow requirements, ScoPac is in the process of marketing certain non-timberland properties such as ranchlands and recreational areas, as well as certain non-strategic timberlands. There can be no assurance that these marketing efforts will be successful. To the extent that ScoPac is unable to generate sufficient additional liquidity from sales of these properties, the Company expects that ScoPac will be forced to take extraordinary actions, which may include: laying off employees, shutting down various operations, and seeking protection by filing under the Bankruptcy Code. Palco is in default under its $35.0 million term loan and its $30.0 million asset-based revolving credit facility. Palco estimates that without necessary amendments to these credit agreements and/or sufficient additional liquidity, its cash flow from operations, together with funds available under its revolving credit facility, will not provide sufficient liquidity to fund its current level of operations for the next several years. In the event that Palco is unable to secure the necessary liquidity to fund its expected future working capital shortfalls, it would be forced to take extraordinary actions, which may include: further reducing expenditures by laying off employees, shutting down various operations, and seeking protection by filing under the Bankruptcy Code. Deloitte & Touche LLP's ("Deloitte's") audit report on MAXXAM's Consolidated Financial Statements for the year ended December 31, 2005, contains an explanatory paragraph concerning these matters, which states that the cash flows of MAXXAM Inc.'s wholly owned subsidiary, Palco, and its wholly owned subsidiary, ScoPac, have been adversely affected by delays in obtaining regulatory approvals to harvest timber, and that the difficulties Palco is experiencing in meeting its loan agreement covenants and ScoPac's difficulties paying the interest on the Timber Notes raise substantial doubts about Palco's and ScoPac's ability to continue as going concerns. Further, Deloitte's audit report states that the difficulties of these subsidiaries raise substantial doubt about the ability of MAXXAM Inc. and subsidiaries to realize their timber related assets and discharge their timber related liabilities in the normal course of business and continue as a going concern. OTHER MATTERS As previously announced in prior earnings statements, MAXXAM may from time to time purchase shares of its common stock on national exchanges or in privately negotiated transactions. 176-011007 Company press releases may contain statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. The company cautions that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those expressed or implied in the forward-looking statements as a result of various factors. MAXXAM INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In millions of dollars, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, --------------------------- ----------------------------- 2005 2004 2005 2004 ----------- -------- ----------- ---------- (Unaudited) Net sales: Forest products operations $ 45.0 $ 52.9 $ 181.8 $ 202.1 Real estate operations 73.1 39.7 178.3 94.8 Racing operations 12.3 12.0 46.3 50.6 ----------- -------- ----------- ---------- 130.4 104.6 406.4 347.5 ----------- -------- ----------- ---------- Costs and expenses (103.9) (91.3) (350.9) (333.2) ----------- -------- ----------- ---------- Operating income (loss): Forest products operations (5.4) 2.2 (13.4) 5.4 Real estate operations 40.6 19.4 89.0 29.7 Racing operations (1.2) (1.4) (4.1) (3.1) Corporate (7.5) (6.9) (16.0) (17.7) ----------- -------- ----------- ---------- 26.5 13.3 55.5 14.3 ----------- -------- ----------- ---------- Other income (expense): Investment, interest and other income 9.0 3.8 18.6 12.8 Interest expense (20.1) (18.3) (78.2) (74.0) ----------- -------- ----------- ---------- Income (loss) before income taxes 15.4 (1.2) (4.1) (46.9) Benefit for income taxes 0.1 0.4 0.1 0.3 ----------- -------- ----------- ---------- Net income (loss) $ 15.5 $ (0.8) $ (4.0) $ (46.6) =========== ======== =========== ========== Basic earnings (loss) per share $ 2.60 $ (0.13) $ (0.66) $ (7.79) =========== ======== =========== ========== Diluted earnings (loss) per common and common equivalent share $ 2.22 $ (0.13) $ (0.66) $ (7.79) =========== ======== =========== ==========
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