Potlatch Q1 net income narrows to US$5.1M from US$7.7M a year earlier; sawlog prices 'appear to have bottomed' says CEO, expects improvement in Northern, Southern regions in Q2, Q3
April 23, 2012
– Potlatch Corporation (Nasdaq:PCH) today reported financial results for the first quarter ended March 31, 2012.
"Our Resource segment performed as expected in the first quarter, with harvest levels coming in as planned and log prices relatively flat to slightly down compared to the fourth quarter of last year," said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. "Although sawlog prices fell modestly in Q1 this year from Q4 last year, they appear to have bottomed and we expect improvement in both our Northern and Southern regions moving into Q2 and Q3. Our Wood Products segment results solidly exceeded our expectations, as the first quarter of 2012 experienced a nice benefit from higher lumber and plywood prices that boosted results. Demand for our manufactured wood products was strong during the quarter, which allowed us to increase production and shipments. In our Real Estate segment, a large sale of HBU land in the first quarter and continued strong demand for rural real estate properties resulted in another solid quarter," concluded Mr. Covey.
Q1 2012 Financial Summary
Operating income for the Resource segment in Q1 2012 was $8.7 million, compared to $14.1 million in Q1 2011 and $12.6 million in Q4 2011. The primary reason for both variances was the previously announced planned harvest deferral for 2012, combined with favorable logging conditions in Q1 and Q4 2011 in Idaho that increased the harvest levels during those periods. In addition, the increased Q4 2011 logging resulted in customers holding relatively high inventories, which led to reduced demand in Q1 2012. As a result of the decreased harvest levels, there were corresponding reductions in logging and hauling expenses, which were partially offset by the increased cost of fuel.
Wood Products revenues were $73.9 million in Q1 2012 compared to $68.5 million in Q1 2011 and $67.2 million in Q4 2011. Operating income for the segment totaled $5.0 million in Q1 2012 compared to $2.9 million in Q1 2011 and an operating loss of $1.3 million in Q4 2011. Demand for manufactured wood products remained strong, allowing the company's mills to run at higher production levels during Q1 2012. Log costs increased in Q1 2012 due primarily to the increased production combined with slightly higher log prices.
Real Estate revenues totaled $8.2 million in Q1 2012 compared to $13.0 million in Q1 2011 and $3.2 million in Q4 2011. Operating income for the segment was $6.3 million in Q1 2012 compared to $8.4 million in Q1 2011 and $2.1 million in Q4 2011. In Q1 2012, a large sale of HBU acres resulted in revenues of approximately $5.2 million. The first phase of a non-strategic and rural real estate sale in Idaho occurred during Q1 2011, which resulted in revenues of $9.0 million in that quarter. A total of 41 rural recreational, HBU and non-strategic timberland transactions closed in Q1 2012.
Corporate expenses, including interest expense, were $14.3 million in Q1 2012 compared to $16.6 million in Q1 2011 and $16.5 million in Q4 2011. The year-over-year variance was due to the non-cash charges of $2.3 million for a mark to market adjustment for company stock in the deferred compensation plans and $1.2 million for deferred costs related to the reduction in the revolving credit facility in Q1 2011, partially offset by higher pension expense related to the company's legacy plans of approximately $1.5 million in Q1 2012. The sequential variance was due to the $1.2 million accrual for additional environmental remediation charges related to the company's Avery, Idaho site in Q4 2011 and lower compensation-related expense of $2.2 million in Q1 2012, partially offset by the higher pension expense in Q1 2012 mentioned above.
There were $16.5 million of debt maturities during the first quarter that were paid with cash on hand. Potlatch finished the quarter with $59.0 million of cash and short-term investments on the balance sheet.
During the first quarter, Potlatch paid a regular quarterly cash distribution on the company's stock of $0.31 per share.
"First quarter results exceeded our expectations and we are off to a good start in 2012. Most experts believe the domestic housing market has bottomed and is beginning to turn upward, and in spite of slowing demand for log exports to China, many expect this export slowdown to only be temporary. Furthermore, domestic repair and remodel activities are expected to increase, which will act as a counterbalance to continued relatively low levels of housing starts. At this time, we continue to expect our 2012 harvest to be approximately 3.5 million tons as we patiently wait for a better demand and pricing environment to increase our harvest levels. In our Wood Products business, we expect lumber and plywood prices to remain firm as we move through the year, and as a result expect continued strong performance from our Wood Products segment. We expect another good year for our Real Estate business as demand and interest in non-strategic timberlands and rural recreational real estate continues to be stable. Our balance sheet remains strong with $59.0 million in cash and short-term investments, and after a $5.2 million maturity on April 1, 2012, we have no debt maturities until the second half of next year," concluded Mr. Covey.
Conference Call Information
A live conference call and webcast will be held today, April 23, 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 61989128. 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 April 30, 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 61989128 to access the replay.
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.
The Potlatch Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=11346