SPOKANE, Wash., Jan. 29, 2018 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $11.6 million, or $0.28 per diluted share, on revenues of $175.2 million for the quarter ended December 31, 2017. Excluding after-tax special items, consisting primarily of a charge related to tax legislation and Deltic merger-related costs, adjusted net income was $25.7 million, or $0.62 per diluted share for the fourth quarter of 2017. Net income was $14.4 million, or $0.35 per diluted share, on revenues of $155.7 million in the quarter ended December 31, 2016.

Net income for the full year of 2017 was $86.5 million, or $2.10 per diluted share, on revenues of $678.6 million. Excluding after-tax special items, consisting primarily of a charge related to tax legislation, Deltic merger-related costs and environmental charges for Avery Landing, adjusted net income was $103.6 million, or $2.51 per diluted share. Net income was $10.9 million, or $0.27 per diluted share for 2016. Excluding the after-tax loss on the sale of central Idaho acreage and environmental charges for Avery Landing, 2016 net income was $48.2 million, or $1.18 per diluted share.

“Higher lumber prices and solid execution by each of our three businesses led to very strong financial results in 2017,” said Mike Covey, chairman and chief executive officer. “Operating income in both our Northern Resource business and Wood Products segments were at record levels. We increased our dividend by 7% in the fourth quarter at the same time we announced the merger with Deltic. We expect to close the merger by the end of February 2018,” stated Mr. Covey.

Financial Highlights (in millions, except per share data)

  Q4 2017  Q3 2017  Q4 2016 
Revenues $175.2  $190.4  $155.7 
Net income $11.6  $33.7  $14.4 
Net income per diluted share $0.28  $0.82  $0.35 
Distribution per share $0.40  $0.375  $0.375 
Net cash from operations $33.3  $50.0  $27.7 
Cash and cash equivalents $120.5  $116.8  $82.6 

Business Performance: Q4 2017 vs. Q3 2017

Resource

Resource’s operating income was $29.9 million on revenues of $75.8 million in the fourth quarter, compared to operating income of $41.8 million on revenues of $94.7 million in the third quarter of 2017. Northern sawlog prices decreased 9% relative to the third quarter. Harvest volumes were seasonally lower in the North and the South.

Wood Products

Wood Products earned $19.5 million on revenues of $114.5 million in the fourth quarter, compared to operating income of $19.3 million on revenues of $116.5 million in the third quarter of 2017. Average lumber prices increased 4% and lumber shipments decreased 6% in the fourth quarter compared to the third quarter. The segment recorded a loss of $0.1 million in the fourth quarter and a loss of $2.1 million in the third quarter related to a lumber price swap.

Real Estate

Real Estate’s operating income was $2.8 million on revenues of $4.7 million in the fourth quarter, compared to operating income of $1.4 million on revenues of $3.3 million in the third quarter of 2017. More acres were sold in the fourth quarter compared to the third quarter.

Outlook

“We expect the U.S. housing market to continue its recovery and our 2018 outlook assumes that approximately 1.3 million housing units will be built in the U.S. this year. We also expect lumber prices to remain strong in 2018 in light of final duties on Canadian lumber shipments to the U.S. and an anticipated increase in lumber demand. Deltic and Potlatch shareholder votes related to the merger are scheduled on February 20, 2018 and we remain confident that the merger presents significant strategic and financial opportunities,” concluded Mr. Covey.

Reconciliation of Q4 and Full Year 2017 Earnings (in millions, except per share data)

  Three months ended  Year ended 
  December 31, 2017  December 31, 2017 
  Amount  Per Share  Amount  Per Share 
Net income $11.6  $0.28  $86.5  $2.10 
Impact of tax legislation1  10.7   0.26   10.7   0.26 
Deltic merger-related costs2  3.4   0.08   3.4   0.08 
Environmental charges for Avery Landing, net of taxes  -   -   3.0   0.07 
Lumber price swap settlements, net of taxes3  -   -   0.7   0.02 
Change in unrealized (gain) loss on lumber price swap, net of taxes3  -   -   (0.7)  (0.02)
Adjusted net income4 $25.7  $0.62  $103.6  $2.51 
                 

1       The Tax Cuts and Jobs Act was enacted on December 22, 2017 and lowers U.S. corporate income tax rates as of January 1, 2018. The impact of the tax legislation was an increase in income tax expense of $10.7 million due to the remeasurement of U.S. deferred tax assets at lower enacted corporate tax rates.

2       The costs were incurred by our Real Estate Investment Trust (REIT), which generally is not subject to income taxes.

3          Lumber price swap adjusted to exclude the change in unrealized (gain) loss and includes cash settlements during the period.

4       Adjusted net income is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted net income should not be considered in isolation and is not intended to represent an alternative to our GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business and the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.

Pending Merger with Deltic Timber

On October 22, 2017, Potlatch and Deltic Timber entered into an Agreement and Plan of Merger. Our outlook does not consider any incremental operating results attributable to this pending merger.

Conference Call Information

A live conference call and webcast will be held Tuesday, January 30, 2018, at 9:00 a.m. Pacific Time (12:00 p.m. 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 1157958. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available two hours following the call until February 6, 2018 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 1157958 to access the replay.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. Potlatch, a certified 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. More information about Potlatch can be found on the company’s website at www.potlatchcorp.com.

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, our expectations regarding the U.S. housing market; strong repair and remodel market; lumber demand and pricing; increased capital investment in manufacturing in the U.S. South; the expected closing of the merger of Potlatch and Deltic; the proposed impact of the merger on Potlatch’s financial results; the estimated distribution of Deltic’s accumulated earnings and profits; and the integration of Deltic’s operations. You should carefully read forward-looking statements, including statements that contain these words, because they discuss the future expectations or state other “forward-looking” information about Potlatch. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond Potlatch’s control, including the U.S. housing market; 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; availability of logging contractors and shipping capacity; changes in the United States and international economies; changes in interest rates; changes in the level of construction activity; changes in Asia demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; 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; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; changes in share price; the successful execution of the company’s strategic plans; the company’s ability to consummate the merger with Deltic or satisfy the conditions to the completion of the transaction, including the receipt of stockholder approvals, the company’s ability to meet expectations regarding the timing, completion and accounting and tax treatments of the merger transaction; the possibility that any of the anticipated benefits of the proposed merger will not be realized or will not be realized within the expected time period; the risk that integration of Deltic’s operations with those of Potlatch will be materially delayed or will be more costly or difficult than expected; the failure of the proposed merger to close for any other reason; the effect of the announcement of the merger on customer relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); dilution caused by Potlatch’s issuance of additional shares of its common stock in connection with the merger; the possibility that the merger may be more expensive to complete than anticipated, including as a result of unexpected factors or events, the diversion of management’s time on transaction related issues; the estimation of Deltic’s accumulated earnings and profits is preliminary and may change with further due diligence; and the other factors described in Potlatch’s Annual Report on Form 10-K and in the company’s other filings with the SEC, including the risks discussed in the definitive joint proxy statement/prospectus filed with the SEC on Form 424B3 on January 18, 2018 in connection with the proposed transaction with Deltic. Potlatch assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, all of which speak only as of the date hereof.

ADDITIONAL INFORMATION

This communication is being made in respect of the proposed merger transaction involving Potlatch Corporation (“Potlatch”) and Deltic Timber Corporation (“Deltic”). This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. In connection with the proposed merger, Potlatch and Deltic filed a registration statement on Form S-4 that was declared effective on January 17, 2018, and Potlatch filed a joint proxy statement/prospectus on Form 424B3 on January 18, 2018 that has been mailed to stockholders of Potlatch and Deltic. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, SECURITY HOLDERS OF POTLATCH AND DELTIC ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS FILED ON JANUARY 18, 2018 REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The joint proxy statement/prospectus, as well as other filings containing information about Potlatch and Deltic are available without charge, at the SEC’s Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that are incorporated by reference in the joint proxy statement/prospectus can also be obtained, without charge, from Potlatch’s website at http://www.Potlatchcorp.com under the Investor Resources tab (in the case of documents filed by Potlatch) and on Deltic’s website at https://www.Deltic.com under the Investor Relations tab (in the case of documents filed by Deltic).

Potlatch and Deltic, and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Deltic and Potlatch in respect of the proposed merger transaction. Certain information about the directors and executive officers of Potlatch is set forth in its Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 17, 2017, its proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on April 3, 2017, its Current Report on Form 8-K, which was filed on May 1, 2017 and its joint proxy statement/prospectus which was filed with the SEC on Form 424B3 on January 18, 2018. Certain information about the directors and executive officers of Deltic is set forth in its Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 7, 2017, its proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on March 20, 2017, its supplement to the proxy statement for its 2017 annual meeting of the stockholders, which was filed with the SEC on March 30, 2017 and its Current Reports on Form 8-K, which were filed with the SEC on September 1, 2017, May 2, 2017, March 8, 2017 and February 27, 2017. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, are included in the joint proxy statement/prospectus filed on January 18, 2018 and other relevant documents filed with the SEC when they become available.

 

Potlatch Corporation
Consolidated Statements of Income
Unaudited

  Three Months Ended  Years Ended 
  December 31,  September 31,  December 31,  December 31, 
(Dollars in thousands, except per share amount) 2017  2017  2016  2017  2016 
Revenues $175,244  $190,441  $155,681  $678,595  $599,099 
Costs and expenses:                    
Cost of goods sold  121,055   124,971   116,980   470,365   462,304 
Selling, general and administrative expenses  13,662   14,592   12,985   55,408   51,697 
Environmental charges for Avery Landing     4,978      4,978   1,022 
Deltic merger-related costs  3,382   27      3,409    
Loss (gain) on lumber price swap  97   2,080      (1,088)   
Loss on sale of central Idaho timber and timberlands1              48,522 
   138,196   146,648   129,965   533,072   563,545 
Operating income  37,048   43,793   25,716   145,523   35,554 
Interest expense, net  (7,395)  (7,336)  (6,924)  (27,049)  (28,941)
Income before income taxes  29,653   36,457   18,792   118,474   6,613 
Income tax (provision) benefit  (18,065)  (2,757)  (4,419)  (32,021)  4,325 
Net income $11,588  $33,700  $14,373  $86,453  $10,938 
                     
Net income per share:                    
Basic $0.28  $0.83  $0.35  $2.12  $0.27 
Diluted $0.28  $0.82  $0.35  $2.10  $0.27 
Dividends per share $0.40  $0.375  $0.375  $1.525  $1.50 
Weighted-average shares outstanding (in thousands):                    
Basic  40,839   40,829   40,752   40,824   40,798 
Diluted  41,301   41,250   41,069   41,227   41,033 

1       In the second quarter of 2016, we sold approximately 172,000 acres of timberlands located in central Idaho for $114 million at a loss of $48.5 million before taxes.

 

Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited

  At December 31, 
  2017  2016 
ASSETS        
Current assets:        
Cash and cash equivalents $120,457  $82,584 
Customer receivables, net  11,240   14,842 
Inventories  50,132   52,622 
Other current assets  11,478   13,597 
Total current assets  193,307   163,645 
Property, plant and equipment, net  77,229   72,820 
Timber and timberlands, net  654,476   641,856 
Deferred tax assets, net  19,796   42,051 
Other long-term assets  8,271   7,309 
Total assets $953,079  $927,681 
         
LIABILITIES AND STOCKHOLDERS EQUITY        
Current liabilities:        
Current portion of long-term debt $14,263  $11,032 
Accounts payable and accrued liabilities  55,201   43,710 
Current portion of pension and other postretirement employee benefits  15,417   5,839 
Total current liabilities  84,881   60,581 
Long-term debt  559,056   572,956 
Pension and other postretirement employee benefits  93,441   123,284 
Other long-term obligations  15,159   14,586 
Total liabilities  752,537   771,407 
Commitments and contingencies        
Stockholders’ equity:        
Common stock, $1 par value  40,612   40,519 
Additional paid-in capital  359,144   355,274 
Accumulated deficit  (104,363)  (128,775)
Accumulated other comprehensive loss  (94,851)  (110,744)
Total stockholders’ equity  200,542   156,274 
Total liabilities and stockholders' equity $953,079  $927,681 

 

Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited

  For the Years Ended December 31, 
  2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $86,453  $10,938 
Adjustments to reconcile net income to net cash from operating activities:        
Depreciation, depletion and amortization  29,912   34,190 
Basis of real estate sold  6,827   8,011 
Change in deferred taxes  15,364   1,853 
Employee benefit plans  13,151   15,661 
Equity-based compensation expense  4,722   4,390 
Loss on sale of central Idaho timber and timberlands     48,522 
Other, net  (1,872)  (1,198)
Change in:        
Receivables  3,602   (3,712)
Inventories  2,490   (17,460)
Other assets  (15)  (473)
Accounts payable and accrued liabilities  11,591   7,232 
Other liabilities  (4,291)  (4,537)
Funding of qualified pension plans  (5,275)  (1,300)
Net cash from operating activities  162,659   102,117 
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Change in short-term investments      
Transfer from company owned life insurance (COLI)  1,278   6,384 
Transfer to COLI  (1,324)  (3,967)
Purchase of property, plant and equipment  (12,855)  (5,866)
Timberlands reforestation and roads  (15,207)  (13,422)
Acquisition of timber and timberlands  (22,043)  (1,244)
Net proceeds from sale of central Idaho timber and timberlands     111,460 
Other, net  131   6 
Net cash from investing activities  (50,020)  93,351 
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends to common stockholders  (61,931)  (60,842)
Revolving line of credit borrowings (repayment)     (30,000)
Repayment of long-term debt  (11,000)  (113,335)
Repurchase of common stock     (5,956)
Proceeds from issuance of long-term debt     93,235 
Other, net  (1,835)  (3,911)
Net cash from financing activities  (74,766)  (120,809)
Change in cash and cash equivalents  37,873   74,659 
Cash and cash equivalents at beginning of year  82,584   7,925 
Cash and cash equivalents at end of year $120,457  $82,584 

 

Potlatch Corporation
Segment Information
Unaudited

  Three Months Ended  Years Ended 
  December 31,  September 31,  December 31,  December 31, 
(Dollars in thousands) 2017  2017  2016  2017  2016 
Revenues:                    
Resource $75,802  $94,705  $66,805  $278,199  $256,163 
Wood Products  114,549   116,487   95,644   441,157   367,426 
Real Estate  4,733   3,282   8,658   30,655   32,604 
   195,084   214,474   171,107   750,011   656,193 
Intersegment Resource revenues  (19,840)  (24,033)  (15,426)  (71,416)  (57,094)
Total consolidated revenues $175,244  $190,441  $155,681  $678,595  $599,099 
                     
Income before income taxes:                    
Resource $29,860  $41,796  $22,736  $106,105  $81,918 
Wood Products  19,496   19,281   8,279   72,166   24,587 
Real Estate  2,739   1,469   5,974   18,576   (29,495)
Eliminations and adjustments  (1,676)  (3,141)  (1,551)  (2,705)  (3,001)
   50,419   59,405   35,438   194,142   74,009 
Corporate  (13,371)  (15,612)  (9,722)  (48,619)  (38,455)
Operating income  37,048   43,793   25,716   145,523   35,554 
Interest expense, net  (7,395)  (7,336)  (6,924)  (27,049)  (28,941)
Income before income taxes $29,653  $36,457  $18,792  $118,474  $6,613 
                     
Depreciation, depletion and amortization:                    
Resource $5,611  $6,207  $6,119  $20,476  $24,090 
Wood Products  1,860   1,821   1,819   7,347   7,357 
Real Estate  1      1   2   4 
   7,472   8,028   7,939   27,825   31,451 
Corporate  164   168   152   607   760 
Bond discounts and deferred loan fees  368   369   376   1,480   1,979 
Total depreciation, depletion and amortization $8,004  $8,565  $8,467  $29,912  $34,190 
                     
Basis of real estate sold:                    
Real Estate $640  $618  $1,400  $7,114  $8,518 
Eliminations and adjustments  (164)  (39)  (75)  (287)  (507)
Total basis of real estate sold $476  $579  $1,325  $6,827  $8,011 


Contact:(Investors)(Media) 
 Jerry RichardsMark Benson 
 509.835.1521509.835.1513