Plum Creek Timber Company, Inc. Reports Results for Q2 2012

SEATTLE-Plum Creek Timber Company, Inc. (NYSE: PCL) today announced second quarter earnings of $36 million, or $0.22 per diluted share, on revenues of $294 million. Earnings for the second quarter of 2011 were $44 million, or $0.27 per diluted share, on revenues of $284 million.

 

Earnings for the first six months of 2012 were $65 million, or $0.40 per diluted share, on revenues of $631 million. Earnings for the first six months of 2011 were $82 million, or $0.50 per diluted share, on revenues of $559 million.

Adjusted EBITDA, a non-GAAP measure of operating performance, for the first six months of 2012 was $234 million, up from $209 million in the same period of 2011. The company ended the quarter with $260 million in cash and cash equivalents. A reconciliation of adjusted EBITDA to net income and cash flow from operations is provided as an attachment to this release.

“Earnings in our timber and manufacturing businesses improved over the past year,” said Rick Holley, Plum Creek’s president and chief executive officer. “Improving demand for our lumber and panels drove a $4 million improvement in our Manufacturing segment’s second quarter profit compared to 2011. In our resources segments, higher harvest volumes, supplemented by volume from our recent timber deed acquisition, helped drive $8 million of profit growth and a $15 million increase in adjusted EBITDA. In our Real Estate segment, last year’s second quarter sales were anchored by a couple of large conservation transactions making for a challenging comparison. However, our Real Estate segment revenues for this second quarter of $47 million were a bit higher than we initially anticipated. We continue to be on track to grow our adjusted EBITDA by approximately $50 million this year.”

Review of Operations

The Northern Resources segment reported operating income of $4 million for the quarter, up $1 million from the second quarter of 2011. As expected, good harvesting conditions throughout much of the quarter allowed the company to bring more timber to market than the previous year. The sawlog harvest increased approximately 160,000 tons, or 34 percent, and the pulpwood harvest increased approximately 70,000 tons, or 29 percent. Sawlog prices of $71 per ton approximated second quarter of 2011 levels. Average pulpwood prices of $42 per ton were about $2 per ton higher than the same period of 2011.

Operating income in the Southern Resources segment was $22 million, an increase of $7 million from the $15 million reported during the second quarter of 2011. Both sawlog and pulpwood prices were slightly higher (approximately $1 per ton) than the levels reported for the second quarter of 2011. As planned, harvest volumes in 2012 were higher than those in the same period of 2011. The company’s harvest continues to emphasize pulpwood and smaller diameter sawlogs to maximize long-term value of the forest. Pulpwood volumes were up 341,000 tons, or 21%, higher compared to the second quarter of 2011. The sawlog harvest was 406,000 tons, or 36%, higher, than the same period of 2011.

The Real Estate segment reported total revenue of $47 million and operating income of $29 million. Second quarter 2011 Real Estate segment revenue was $79 million, primarily consisting of $62 million of conservation transactions in the South. The second quarter 2011 operating income was $50 million. The 2012 sales consisted of $37 million of smaller rural land sales across the company’s holdings and the completion of a $10 million conservation easement in the state of Maine as part of its Moosehead Lake Concept Plan.

The Manufacturing segment reported $9 million of operating income for the second quarter, compared to the $5 million operating income reported for the second quarter of 2011. Profitability in each of the product lines improved on higher prices and sales volumes. Sales volumes for plywood and medium density fiberboard (MDF) increased 15 percent and 22 percent respectively. Lumber sales volume increased 2 percent and lumber prices increased approximately 4 percent. Plywood prices increased 7 percent and MDF prices improved 2 percent.

Outlook

Business conditions in most of the company’s business segments have improved slowly over the past year. The company expects a slow pace of recovery to continue through the remainder of the year.

The company expects its full-year harvest to approximate 17.5 million tons, including approximately 700,000 tons from our recent timber deed acquisition. This is at the high end of the company’s original harvest projection of 16.5 to 17.5 million tons for 2012. The increase is comprised of pulpwood, primarily the result of increased yields from the thinning of young timber stands.

During the third quarter, harvests in the Northern Resources segment are expected to increase seasonally from their second quarter low while the Southern harvest is expected to be similar to the second quarter’s level.

Third quarter Real Estate segment sales are expected to be between $90 million and $100 million. The company expects full-year Real Estate segment sales to be between $275 million and $325 million.

Manufacturing results are expected to decline slightly from the second quarter’s level.

“Our operations are performing well and we look forward to continued growth in the second half of the year, but believe a stronger recovery in the nation’s economy is more likely in 2013,” continued Holley. “We’re maintaining our earnings guidance for the year at $1.00 to $1.25 per share. We expect to report third quarter earnings between $0.32 and $0.37 per share.

“We continue to manage the company to maximize the long-term value of our shareholders’ investment. To accomplish this, nothing is more important than continued disciplined capital allocation. We will continue to evaluate all our opportunities to maximize shareholder value through share repurchase, debt reduction, or timberland acquisition; whatever creates the most value for our shareholders,” concluded Holley.


PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)









(In Millions, Except Per Share Amounts)
Six Months Ended June 30,

2012
2011
REVENUES:



Timber
$ 312

$ 267
Real Estate
147

141
Manufacturing
161

141
Other
11

10
Total Revenues
631

559





COSTS AND EXPENSES:



Cost of Goods Sold:



Timber
244

208
Real Estate
84

49
Manufacturing
143

128
Other
1

1
Total Cost of Goods Sold
472

386
Selling, General and Administrative
55

53
Total Costs and Expenses
527

439





Other Operating Income (Expense), net
1

3





Operating Income
105

123





Equity Earnings from Timberland Venture
28

30





Interest Expense, net:



Interest Expense (Debt Obligations to Unrelated Parties)
40

41
Interest Expense (Note Payable to Timberland Venture)
29

29
Total Interest Expense, net
69

70





Income before Income Taxes
64

83





Provision (Benefit) for Income Taxes
(1 )
1





Net Income
$ 65

$ 82





PER SHARE AMOUNTS:








Net Income per Share – Basic
$ 0.40

$ 0.51
Net Income per Share – Diluted
$ 0.40

$ 0.50





Weighted-Average Number of Shares Outstanding



– Basic
161.4

161.9
– Diluted
161.7

162.2







PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)








(In Millions, Except Per Share Amounts)
Quarter Ended June 30,

2012
2011
REVENUES:



Timber
$ 157

$ 126
Real Estate
47

79
Manufacturing
85

74
Other
5

5
Total Revenues
294

284





COSTS AND EXPENSES:



Cost of Goods Sold:



Timber
123

101
Real Estate
16

27
Manufacturing
73

67
Other
1

1
Total Cost of Goods Sold
213

196
Selling, General and Administrative
27

25
Total Costs and Expenses
240

221





Other Operating Income (Expense), net
1






Operating Income
55

63





Equity Earnings from Timberland Venture
15

16





Interest Expense, net:



Interest Expense (Debt Obligations to Unrelated Parties)
19

20
Interest Expense (Note Payable to Timberland Venture)
15

15
Total Interest Expense, net
34

35





Income before Income Taxes
36

44





Provision (Benefit) for Income Taxes







Net Income
$ 36

$ 44





PER SHARE AMOUNTS:








Net Income per Share – Basic
$ 0.22

$ 0.27
Net Income per Share – Diluted
$ 0.22

$ 0.27





Weighted-Average Number of Shares Outstanding



– Basic
161.5

162.0
– Diluted
161.7

162.3







PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)











June 30,
December 31,
(In Millions, Except Per Share Amounts)
2012
2011
ASSETS



Current Assets:



Cash and Cash Equivalents
$ 260

$ 254
Accounts Receivable
36

28
Inventories
46

48
Deferred Tax Asset
6

6
Assets Held for Sale
76

103
Other Current Assets
15

15


439

454





Timber and Timberlands, net
3,431

3,377
Property, Plant and Equipment, net
131

138
Equity Investment in Timberland Venture
201

201
Deferred Tax Asset
18

17
Investment in Grantor Trusts (at Fair Value)
37

36
Other Assets
37

36
Total Assets
$ 4,294

$ 4,259





LIABILITIES



Current Liabilities:



Current Portion of Long-Term Debt
$ 176

$ 352
Line of Credit
451

348
Accounts Payable
24

25
Interest Payable
26

26
Wages Payable
11

20
Taxes Payable
13

9
Deferred Revenue
36

27
Other Current Liabilities
8

8


745

815





Long-Term Debt
1,467

1,290
Note Payable to Timberland Venture
783

783
Other Liabilities
97

108
Total Liabilities
3,092

2,996





Commitments and Contingencies








STOCKHOLDERS’ EQUITY



Preferred Stock, $0.01 Par Value, Authorized Shares – 75.0, Outstanding – None



Common Stock, $0.01 Par Value, Authorized Shares – 300.6, Outstanding (net of Treasury Stock) – 161.5 at June 30, 2012 and 161.3 at December 31, 2011
2

2
Additional Paid-In Capital
2,269

2,261
Retained Earnings (Accumulated Deficit)
(99 )
(28 )
Treasury Stock, at Cost, Common Shares – 26.9 at June 30, 2012 and 26.9 at December 31, 2011
(938 )
(937 )
Accumulated Other Comprehensive Income (Loss)
(32 )
(35 )
Total Stockholders’ Equity
1,202

1,263
Total Liabilities and Stockholders’ Equity
$ 4,294

$ 4,259










PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)











Six Months Ended June 30,
(In Millions)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES



Net Income
$ 65

$ 82
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:



Depreciation, Depletion and Amortization
56

44
Basis of Real Estate Sold
75

43
Equity Earnings from Timberland Venture
(28 )
(30 )
Distributions from Timberland Venture
28

28
Deferred Income Taxes
(1 )
4
Deferred Revenue from Long-Term Gas Leases (Net of Amortization)
(5 )
12
Timber Deed Acquired
(98 )

Pension Plan Contributions
(7 )

Working Capital Changes Impacting Cash Flow:



Like-Kind Exchange Funds


(35 )
Other Working Capital Changes
(2 )
4
Other
6

5
Net Cash Provided By Operating Activities
89

157





CASH FLOWS FROM INVESTING ACTIVITIES



Capital Expenditures (Excluding Timberland Acquisitions)
(35 )
(28 )
Timberlands and Minerals Acquired
(13 )
(12 )
Other
(1 )

Net Cash Used In Investing Activities
(49 )
(40 )





CASH FLOWS FROM FINANCING ACTIVITIES



Dividends
(136 )
(136 )
Borrowings on Line of Credit
1,129

555
Repayments on Line of Credit
(1,026 )
(494 )
Debt Issuance Costs
(3 )

Principal Payments and Retirement of Long-Term Debt


(49 )
Proceeds from Stock Option Exercises
3

9
Acquisition of Treasury Stock
(1 )
(1 )
Net Cash Used In Financing Activities
(34 )
(116 )





Increase (Decrease) In Cash and Cash Equivalents
6

1
Cash and Cash Equivalents:



Beginning of Period
254

252





End of Period
$ 260

$ 253










PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)











Quarter Ended June 30,
(In Millions)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES



Net Income
$ 36

$ 44
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:



Depreciation, Depletion and Amortization
29

22
Basis of Real Estate Sold
12

24
Equity Earnings from Timberland Venture
(15 )
(16 )
Deferred Income Taxes


1
Deferred Revenue from Long-Term Gas Leases (Net of Amortization)
(3 )
5
Pension Plan Contributions
(7 )

Working Capital Changes Impacting Cash Flow:



Like-Kind Exchange Funds


(35 )
Other Working Capital Changes
28

34
Other
3

2
Net Cash Provided By Operating Activities
83

81





CASH FLOWS FROM INVESTING ACTIVITIES



Capital Expenditures (Excluding Timberland Acquisitions)
(17 )
(16 )
Timberlands and Minerals Acquired
(11 )
(12 )
Net Cash Used In Investing Activities
(28 )
(28 )





CASH FLOWS FROM FINANCING ACTIVITIES



Dividends
(68 )
(68 )
Borrowings on Line of Credit
370

310
Repayments on Line of Credit
(370 )
(298 )
Proceeds from Stock Option Exercises


2
Net Cash Used In Financing Activities
(68 )
(54 )





Increase (Decrease) In Cash and Cash Equivalents
(13 )
(1 )
Cash and Cash Equivalents:



Beginning of Period
273

254





End of Period
$ 260

$ 253














PLUM CREEK TIMBER COMPANY, INC.


SEGMENT DATA


(UNAUDITED)















Six Months Ended June 30,


(In Millions)
2012
2011


Revenues:





Northern Resources
$ 120

$ 99


Southern Resources
202

173


Real Estate
147

141


Manufacturing
161

141


Other
11

10


Eliminations
(10 )
(5 )


Total Revenues
$ 631

$ 559









Operating Income (Loss):





Northern Resources
$ 10

$ 10


Southern Resources
43

34


Real Estate
59

88


Manufacturing
13

9


Other (A)
9

11


Other Costs and Eliminations, net
(29 )
(29 )


Total Operating Income
$ 105

$ 123









Adjusted EBITDA by Segment: (B)





Northern Resources
$ 23

$ 21


Southern Resources
76

58


Real Estate
135

132


Manufacturing
20

15


Other
9

11


Other Costs and Eliminations, net
(29 )
(28 )


Total
$ 234

$ 209











(A)


During the first six months of 2011, the company received a payment of $2 million for



the settlement of a dispute that related to certain mineral rights. This amount is


reported as Other Operating Gain/(Loss) in our Other Segment and is included in Other


Operating Income (Expense), net in the Consolidated Statements of Income.











(B)


Refer to the separate schedule, "Segment Data - Adjusted EBITDA" for reconciliations of



Adjusted EBITDA to operating income and net cash provided by operating activities.
















PLUM CREEK TIMBER COMPANY, INC.


SEGMENT DATA


(UNAUDITED)















Quarter Ended June 30,


(In Millions)
2012
2011


Revenues:





Northern Resources
$ 56

$ 44


Southern Resources
105

84


Real Estate
47

79


Manufacturing
85

74


Other
5

5


Eliminations
(4 )
(2 )


Total Revenues
$ 294

$ 284









Operating Income (Loss):





Northern Resources
$ 4

$ 3


Southern Resources
22

15


Real Estate
29

50


Manufacturing
9

5


Other
4

4


Other Costs and Eliminations, net
(13 )
(14 )


Total Operating Income
$ 55

$ 63









Adjusted EBITDA by Segment: (A)





Northern Resources
$ 10

$ 8


Southern Resources
40

27


Real Estate
42

75


Manufacturing
12

8


Other
4

4


Other Costs and Eliminations, net
(13 )
(13 )


Total
$ 95

$ 109



(A)


Refer to the separate schedule, "Segment Data - Adjusted EBITDA" for reconciliations of



Adjusted EBITDA to operating income and net cash provided by operating activities.



Plum Creek Timber Company, Inc
Segment Data - Adjusted EBITDA
Reconciliation of Operating Income and Net Cash
Provided by Operating Activities
(Unaudited)

We define Adjusted EBITDA as earnings from continuing operations, excluding equity method earnings, and before interest, taxes, depreciation, depletion, amortization, and basis in lands sold. Adjusted EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (U.S. GAAP) and the items excluded from Adjusted EBITDA are significant components of our consolidated financial statements.

We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period, and each business segment’s contribution to that performance, by eliminating non-cash charges to earnings, which can vary significantly by business segment. These non-cash charges include timber depletion, depreciation of fixed assets and the basis in lands sold. We also use Adjusted EBITDA as a supplemental liquidity measure because we believe it is useful in measuring our ability to generate cash. In addition, we believe Adjusted EBITDA is commonly used by investors, lenders and rating agencies to assess our financial performance.

A reconciliation of Adjusted EBITDA to net income and net cash from operating activities, the most directly comparable U.S. GAAP performance and liquidity measures, is provided in the following schedules:




Six Months Ended June 30, 2012 (In Millions)













Depreciation, Depletion
Basis of Real
Adjusted


Operating Income
and Amortization
Estate Sold
EBITDA
By Segment







Northern Resources
$ 10

$ 13

$

$ 23
Southern Resources
43

33



76
Real Estate
59

1

75

135
Manufacturing
13

7



20
Other
9





9
Other Costs and Eliminations
(30 )




(30 )
Other Unallocated Operating Income (Expense), net
1





1
Total
$ 105

$ 54

$ 75

$ 234









Reconciliation to Net Income(1)







Interest Expense
(69 )





(Provision) / Benefit for Income Taxes
1






Equity Earnings from Timberland Venture
28






Net Income
$ 65















Reconciliation to Net Cash Provided By Operating Activities







Net Cash Flows from Operations






$ 89
Interest Expense






69
Amortization of Debt Costs






(2 )
Provision / (Benefit) for Income Taxes






(1 )
Working Capital Changes






2
Distribution from Timberland Venture






(28 )
Deferred Income Taxes






1
Deferred Revenue from Long-Term Gas Leases






5
Timber Deed Acquired






98
Pension Plan Contributions






7
Other






(6 )
Adjusted EBITDA






$ 234
















Six Months Ended June 30, 2011 (In Millions)













Depreciation, Depletion
Basis of Real
Adjusted


Operating Income
and Amortization
Estate Sold
EBITDA
By Segment







Northern Resources
$ 10

$ 11

$

$ 21
Southern Resources
34

24



58
Real Estate
88

1

43

132
Manufacturing
9

6



15
Other
11





11
Other Costs and Eliminations
(30 )
1



(29 )
Other Unallocated Operating Income (Expense), net
1





1
Total
$ 123

$ 43

$ 43

$ 209









Reconciliation to Net Income(1)







Interest Expense
(70 )





(Provision) / Benefit for Income Taxes
(1 )





Equity Earnings from Timberland Venture
30






Net Income
$ 82















Reconciliation to Net Cash Provided By Operating Activities







Net Cash Flows from Operations






$ 157
Interest Expense






70
Amortization of Debt Costs






(1 )
Provision / (Benefit) for Income Taxes






1
Working Capital Changes






31
Distribution from Timberland Venture






(28 )
Deferred Income Taxes






(4 )
Deferred Revenue from Long-Term Gas Leases






(12 )
Other






(5 )
Adjusted EBITDA






$ 209











(1) Includes reconciling items not allocated to segments for financial reporting purposes.







Quarters Ended June 30, 2012 (In Millions)













Depreciation, Depletion
Basis of Real
Adjusted


Operating Income
and Amortization
Estate Sold
EBITDA
By Segment







Northern Resources
$ 4

$ 6

$

$ 10
Southern Resources
22

18



40
Real Estate
29

1

12

42
Manufacturing
9

3



12
Other
4





4
Other Costs and Eliminations
(14 )




(14 )
Other Unallocated Operating Income (Expense), net
1





1
Total
$ 55

$ 28

$ 12

$ 95









Reconciliation to Net Income(1)







Interest Expense
(34 )





(Provision) / Benefit for Income Taxes







Equity Earnings from Timberland Venture
15






Net Income
$ 36















Reconciliation to Net Cash Provided By Operating Activities







Net Cash Flows from Operations






$ 83
Interest Expense






34
Amortization of Debt Costs






(1 )
Provision / (Benefit) for Income Taxes







Working Capital Changes






(28 )
Deferred Revenue from Long-Term Gas Leases






3
Pension Plan Contributions






7
Other






(3 )
Adjusted EBITDA






$ 95





























Quarters Ended June 30, 2011 (In Millions)













Depreciation, Depletion
Basis of Real
Adjusted


Operating Income
and Amortization
Estate Sold
EBITDA
By Segment







Northern Resources
$ 3

$ 5

$

$ 8
Southern Resources
15

12



27
Real Estate
50

1

24

75
Manufacturing
5

3



8
Other
4





4
Other Costs and Eliminations
(14 )
1



(13 )
Other Unallocated Operating Income (Expense), net







Total
$ 63

$ 22

$ 24

$ 109









Reconciliation to Net Income(1)







Interest Expense
(35 )





(Provision) / Benefit for Income Taxes







Equity Earnings from Timberland Venture
16






Net Income
$ 44















Reconciliation to Net Cash Provided By Operating Activities







Net Cash Flows from Operations






$ 81
Interest Expense






35
Provision / (Benefit) for Income Taxes







Working Capital Changes






1
Deferred Income Taxes






(1 )
Deferred Revenue from Long-Term Gas Leases






(5 )
Other






(2 )
Adjusted EBITDA






$ 109











(1) Includes reconciling items not allocated to segments for financial reporting purposes.

Source: Plum Creek Timber Company Inc.

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