Exhibit 99.1
Potlatch Reports Second Quarter Results
SPOKANE, Wash.--(BUSINESS WIRE)--July 31, 2006--Potlatch
Corporation (NYSE:PCH) today reported net earnings of $8.0 million, or
$.21 per diluted common share, for the second quarter of 2006,
compared to net earnings of $8.2 million for the second quarter of
2005. The slight decrease in earnings was due to lower results for the
Wood Products and Resource segments, which were nearly offset by
better results for the Consumer Products and Pulp and Paperboard
segments. The company also had a lower income tax provision during the
current quarter.
Net revenues for the second quarter of 2006 were $414.6 million,
compared with $368.5 million recorded in the second quarter of 2005.
Net earnings for the first six months of 2006 totaled $70.8
million, or $2.06 per diluted common share, compared to net earnings
of $12.0 million, or $.41 per diluted common share, for the first six
months of 2005. Results for the first six months of 2006 included a
net tax benefit of $51.2 million, or $1.49 per diluted common share,
related to the company's January 1, 2006, conversion to a real estate
investment trust (REIT).
The Resource segment reported operating income of $9.8 million for
the second quarter of 2006, compared with $13.5 million earned in the
second quarter of 2005. The lower earnings were primarily due to a
decreased harvest of fee timber in Arkansas and a loss at the
company's Boardman, Oregon, hybrid poplar operation. The Boardman
operation was in a development stage in the second quarter of 2005,
and most of the expenses were capitalized in that quarter. Following
the start of harvesting operations in late 2005, most operating costs
are now expensed against income. An increased fee harvest and higher
sales prices for logs in Idaho partially offset the unfavorable
comparison.
The Land Sales and Development segment, which is a new segment
beginning in 2006, reported operating income of $1.5 million for the
second quarter of 2006, compared with operating income of $0.5 million
for 2005's second quarter. The improved results were due to the sale
of a conservation easement in Minnesota recorded in the second quarter
of 2006.
Operating income for the Wood Products segment was $3.5 million
for the second quarter of 2006, compared with income of $13.7 million
for the second quarter of 2005. "Depressed markets for our southern
lumber products and higher log costs, especially in Idaho, were
largely responsible for the decline in Wood Products earnings," noted
Michael J. Covey, Potlatch president and chief executive officer.
"These unfavorable comparisons were partially offset by continued
strong markets for cedar products produced in our Idaho sawmills,"
added Covey.
For the second quarter of 2006, the Pulp and Paperboard segment
reported operating income of $3.9 million, versus an operating loss of
$0.1 million for the second quarter of 2005. "Pulp and Paperboard
results were favorably affected by higher selling prices and increased
shipments of both paperboard and pulp, as well as lower wood fiber and
maintenance costs," Covey remarked.
The Consumer Products segment reported operating income of $7.0
million for the second quarter of 2006, compared with operating income
of $1.8 million reported for the second quarter of 2005. "The higher
earnings were attributable to a 20% increase in shipments and higher
net selling prices for our consumer tissue products compared to 2005's
second quarter," noted Covey. The higher net selling prices were due
to a combination of price increases and sheet count reductions.
The company recorded an income tax provision of $1.3 million for
the second quarter of 2006, compared with an income tax provision of
$5.1 million for the same period in 2005. The lower provision was
largely the result of the company's conversion to a REIT in 2006, as
our qualified REIT activities are generally not subject to federal
corporate level income taxes.
Potlatch is a REIT with 1.5 million acres of forestland in
Arkansas, Idaho, Minnesota and Oregon. Through a taxable REIT
subsidiary, the company also operates 13 manufacturing facilities that
produce lumber and panel products and bleached pulp products,
including paperboard and tissue products.
This press release contains certain forward-looking statements
within the meaning of the Private Litigation Reform Act of 1995 as
amended. 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 those risks and uncertainties described from
time to time in the company's public filings with the Securities and
Exchange Commission. The company does not undertake to update any
forward-looking statements.
Potlatch Corporation and Consolidated Subsidiaries
Statements of Operations
Unaudited (Dollars in thousands - except per-share amounts)
Quarter Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
-------- -------- -------- --------
Revenues $414,623 $368,473 $817,104 $705,383
-------- -------- -------- --------
Costs and expenses:
Depreciation, depletion and
amortization 22,314 19,704 45,006 38,675
Materials, labor and other
operating expenses 353,917 307,552 693,623 591,810
Selling, general and
administrative expenses 22,093 21,289 45,740 42,285
-------- -------- -------- --------
398,324 348,545 784,369 672,770
-------- -------- -------- --------
Earnings from operations 16,299 19,928 32,735 32,613
Interest expense (7,323) (7,235) (14,682) (14,486)
Interest income 295 598 1,097 1,313
-------- -------- -------- --------
Earnings before taxes 9,271 13,291 19,150 19,440
Provision (benefit) for taxes 1,273 5,117 (51,621) 7,484
-------- -------- -------- --------
Net earnings $ 7,998 $ 8,174 $ 70,771 $ 11,956
======== ======== ======== ========
Net earnings per common share:(a)
Basic $ .21 $ .28 $ 2.07 $ .41
Diluted .21 .28 2.06 .41
Average shares outstanding (in
thousands):
Basic 38,681 29,020 34,159 28,993
Diluted 38,819 29,209 34,336 29,167
--------- --------- -------- --------
Certain 2005 amounts have been reclassified to conform to the 2006
presentation.
(a) On March 31, 2006, the Company paid a special earnings and profit
distribution, consisting of approximately 9.1 million shares of
common stock and $89 million in cash, in association with the REIT
conversion. Reflected below are pro forma results giving effect to
the common stock distribution for diluted earnings per common
share for the quarter and six months ended June 30, 2006 and 2005,
as if the common stock distribution had occurred at the beginning
of each period:
Quarter Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
-------- -------- -------- --------
Diluted earnings per common
share
As reported $ .21 $ .28 $ 2.06 $ .41
Pro forma $ .21 $ .21 $ 1.83 $ .31
Potlatch Corporation and Consolidated Subsidiaries
Condensed Balance Sheets
2006 amounts unaudited
(Dollars in thousands - except per-share amounts)
June 30, Dec. 31,
2006 2005
---------- ----------
Assets
Current assets:
Cash and short-term investments $ 20,432 $ 63,833
Receivables, net 118,756 114,641
Inventories 161,836 209,696
Prepaid expenses 18,990 15,006
---------- ----------
Total current assets 320,014 403,176
Land other than timberlands 8,507 8,507
Plant and equipment, at cost less
accumulated depreciation 577,302 589,161
Timber, timberlands and related
logging facilities 396,155 400,595
Other assets 232,710 227,358
---------- ----------
$1,534,688 $1,628,797
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments on long-term debt $ 8,658 $ 2,357
Accounts payable and accrued liabilities 151,050 144,943
---------- ----------
Total current liabilities 159,708 147,300
Long-term debt 324,460 333,097
Other long-term obligations 264,664 245,867
Deferred taxes 128,071 197,385
Stockholders' equity 657,785 705,148
---------- ----------
$1,534,688 $1,628,797
========== ==========
Stockholders' equity per common share $ 16.99 $ 24.01
Working capital $ 160,306 $ 255,876
Current ratio 2.0:1 2.7:1
---------- ----------
Certain 2005 amounts have been reclassified to conform to the 2006
presentation.
Highlights
Unaudited (Dollars in thousands - except per-share amounts)
Quarter Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
-------- -------- --------- ---------
Distributions per common
share (1) (annual rate) $ 1.96 $ .60 $ 1.96 $ .60
======== ======== ========= =========
(1) Distributions for 2006 reflect the annualized rate, after
adjustment for a special earnings and profit distribution of
$15.15 per common share paid in the first quarter.
Segment Information
(Dollars in thousands)
Quarter Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
-------- -------- --------- ---------
Revenues
Resource $ 68,787 $ 60,595 $ 133,979 $ 118,401
-------- -------- --------- ---------
Land sales and development 2,031 1,024 2,671 2,564
-------- -------- --------- ---------
Wood products
Lumber 107,671 102,429 213,068 185,807
Plywood 15,368 14,918 29,795 27,254
Particleboard 5,012 4,494 9,210 9,250
Other 9,773 9,706 20,844 16,742
-------- -------- --------- ---------
Total wood products
revenues 137,824 131,547 272,917 239,053
-------- -------- --------- ---------
Pulp and paperboard
Paperboard 132,130 126,176 264,663 239,504
Pulp 15,317 13,959 30,807 27,218
Other 294 265 613 475
-------- -------- --------- ---------
Total pulp and paperboard
revenues 147,741 140,400 296,083 267,197
-------- -------- --------- ---------
Consumer products 117,142 91,526 216,677 185,662
-------- -------- --------- ---------
473,525 425,092 922,327 812,877
Intersegment revenues (58,902) (56,619) (105,223) (107,494)
-------- -------- --------- ---------
Total revenues $414,623 $368,473 $ 817,104 $ 705,383
======== ======== ========= =========
Operating income (loss)
Resource $ 9,764 $ 13,495 $ 24,146 $ 22,997
Land sales and development 1,491 465 1,980 1,453
Wood products 3,481 13,705 10,742 22,269
Pulp and paperboard 3,913 (124) 2,258 2,293
Consumer products 6,984 1,805 13,873 851
Eliminations 1,049 480 1,719 2,131
-------- -------- --------- ---------
26,682 29,826 54,718 51,994
Corporate (17,411) (16,535) (35,568) (32,554)
-------- -------- --------- ---------
Earnings before taxes $ 9,271 $ 13,291 $ 19,150 $ 19,440
======== ======== ========= =========
Certain 2005 amounts have been reclassified to conform to the 2006
presentation.
CONTACT: Potlatch Corporation
Mark J. Benson, 509-835-1513 (Media)
Douglas D. Spedden, 509-835-1549 (Investors)