SEATTLE - Plum Creek Timber Company, Inc. (NYSE: PCL) today announced first quarter earnings of $30 million, or $0.17 per diluted share, on revenues of $317 million. Earnings for the first quarter of 2013 were $56 million, or $0.35 per diluted share, on revenues of $340 million.

“We’re pleased with the results of the first quarter of 2014”

Adjusted EBITDA, a non-GAAP measure of operating performance, for the first quarter of 2014 was $93 million and was $128 million for the same period of 2013. A reconciliation of adjusted EBITDA to net income and cash flow from operations is provided as an attachment to this release.

“We’re pleased with the results of the first quarter of 2014,” said Rick Holley, Chief Executive Officer. “Results from our timber resources segment continue to grow with higher log prices and additional harvest volumes from our recently acquired timberlands. Earnings were in line with our initial expectations despite difficult weather conditions that hampered both log deliveries in the South and production and shipments from our Manufacturing facilities. As expected, first quarter’s income was lower than last year. This was solely the result of a large non-strategic timberland sale that contributed 21 cents to earnings per share in the first quarter of 2013.

“The timberlands and other assets we acquired from MeadWestvaco in December 2013 have been integrated into our portfolio and contributed $4 million in operating income and $9 million to adjusted EBITDA during the first quarter. As harvests increase and real estate activity grows, we expect greater contributions from these assets during the remainder of the year. We expect the acquisition to be cash accretive on a per share basis in 2014.

“We are on track to achieve our goal of growing Plum Creek’s non-real estate adjusted EBITDA by more than $80 million this year,” said Rick Holley, chief executive officer.

Review of Quarterly Operations

The Northern Resources segment reported operating profit of $16 million during the first quarter, a $5 million improvement over the first quarter of 2013. Sawlog prices increased $9 per ton, more than 11 percent, compared to the first quarter of 2013 driven by strong demand from both export markets and domestic lumber mills. Pulpwood markets in the Northeast and the Lake States remained attractive with stable pricing over the past year. Total Northern segment harvest volume was similar to the first quarter 2013’s harvest level.

Operating profit in the Southern Resources segment was $31 million, up $7 million from the $24 million reported for the first quarter of 2013 due to increased harvest volumes and higher log prices. The recently acquired lands in the South drove a 16 percent increase in harvest volumes for both sawlogs and pulpwood. Average sawlog prices have increased more than $1 per ton, or approximately 6 percent over the past year. Pulpwood prices have also increased and are up approximately 7 percent compared to the first quarter of 2013.

The Real Estate segment reported first quarter revenue of $23 million and operating income of $12 million. First quarter 2013 revenue was $78 million and operating income was $45 million. The 2013 results included a $53 million sale of large non-strategic timberlands. During the first quarter of 2014 the company sold approximately 3,000 acres of small, non-strategic timberlands at an average price of approximately $1,325 per acre, 4,000 acres of HBU/recreation lands for approximately $2,200 per acre and about 3,400 acres of conservation lands at $1,685 per acre. The quarter also benefitted from the sale of a $4 million conservation easement placed on approximately 10,000 acres in New Hampshire.

The Manufacturing segment reported operating income of $9 million, slightly lower than the $10 million reported in the first quarter of 2013. Plywood sales volumes were 17 percent lower compared to the first quarter of 2013. Severe weather limited log deliveries, reduced production levels at our mills, and hampered shipments to our customers. Lumber sales volumes increased 24 percent versus the prior year due to the re-start of production at the company’s Evergreen sawmill in April 2013. Lumber and plywood prices were similar to the first quarter of 2013, while MDF prices increased 6 percent over the past year.

Operating income from the Energy and Natural Resource segment was $6 million, up $1 million over the first quarter of 2013. Earnings growth was the result of incremental construction material and coal royalties from 2013 acquisitions, which are performing as expected.

Outlook

The company expects to harvest between 20 and 21 million tons of timber this year. During the second quarter, harvest levels in the Northern Resources segment are expected to seasonally decline to their lowest level of the year as thawing spring weather restricts harvesting activities. Southern Resources harvest volumes will expand in the second quarter, following a weather constrained first quarter.

Full-year Real Estate segment sales are expected to be between $240 million and $280 million, while second quarter Real Estate segment sales are expected to be between $60 million and $80 million.

Earnings for the Manufacturing segment are expected to grow during the remainder of the year with seasonal recovery in demand and continued strong prices for our industrial plywood, MDF and lumber products.

Reflecting all of these factors, the company expects 2014 income to be between $1.30 and $1.50 and second quarter income between $0.27 and $0.32 per share.

“The year is off to a good start despite the severe weather conditions during the first quarter. We expect the strengthening fundamentals in our core timber business will support strong sawlog prices in the West and to drive ongoing sawlog price recovery in the US South,” continued Holley. “Our sawmill customers in the South are making significant capital investments to expand their lumber production. We expect sawlog demand and prices will benefit from these investments as they come online. Additionally, pulpwood prices should grow as several new Southern pellet mills begin operations in the second half of the year.

“Plum Creek has a tremendous asset base and we are committed to achieving the best value for every tree and every acre we own through our comprehensive approach to timber and land management. We maintain our disciplined approach to capital allocation and continually evaluate the best use of the cash we generate with the goal of growing the per-share value of the company,” concluded Holley.

 
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
               
(In Millions, Except Per Share Amounts)   Quarter Ended March 31,
  2014   2013
REVENUES:        
Timber   $ 192     $ 170
Real Estate   23     78
Manufacturing   90     86
Energy and Natural Resources   9     6
Other   3    
Total Revenues   317     340
         
COSTS AND EXPENSES:        
Cost of Goods Sold:        
Timber   138     124
Real Estate   10     30
Manufacturing   79     75
Energy and Natural Resources   2     1
Other   3    

Total Cost of Goods Sold

  232     230
Selling, General and Administrative   29     32
Total Costs and Expenses   261     262
         
Other Operating Income (Expense), net   1    
         
Operating Income   57     78
         
Equity Earnings from Timberland Venture   15     14
Equity Loss from Real Estate Development Ventures   (1 )  
         
Interest Expense, net:        
Interest Expense (Debt Obligations to Unrelated Parties)   27     21
Interest Expense (Note Payable to Timberland Venture)   14     14
Total Interest Expense, net   41     35
         
Income before Income Taxes   30     57
         
Provision (Benefit) for Income Taxes       1
         
Net Income   $ 30     $ 56
         
PER SHARE AMOUNTS:        
         
Net Income per Share – Basic   $ 0.17     $ 0.35
Net Income per Share – Diluted   $ 0.17     $ 0.35
         
Weighted-Average Number of Shares Outstanding        
– Basic   177.0     162.3
– Diluted   177.3     162.8
           
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
                 
(In Millions, Except Per Share Amounts)  

March 31,

2014

 

December 31,

2013

ASSETS        
Current Assets:        
Cash and Cash Equivalents   $ 104     $ 433  
Accounts Receivable   44     29  
Inventories   57     55  
Deferred Tax Asset   7     9  
Assets Held for Sale   77     92  
Other Current Assets   13     15  
    302     633  
         
Timber and Timberlands, net   4,179     4,180  
Minerals and Mineral Rights, net   296     298  
Property, Plant and Equipment, net   115     118  
Equity Investment in Timberland Venture   198     211  
Equity Investment in Real Estate Development Ventures   142     139  
Deferred Tax Asset   19     17  
Investment in Grantor Trusts (at Fair Value)   46     45  
Other Assets   57     54  
Total Assets   $ 5,354     $ 5,695  
         
LIABILITIES        
Current Liabilities:        
Current Portion of Long-Term Debt   $     $  
Line of Credit   180     467  
Accounts Payable   32     24  
Interest Payable   30     22  
Wages Payable   10     29  
Taxes Payable   11     10  
Deferred Revenue   18     26  
Other Current Liabilities   10     10  
    291     588  
         
Long-Term Debt   2,414     2,414  
Note Payable to Timberland Venture   783     783  
Other Liabilities   78     78  
Total Liabilities   3,566     3,863  
         
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) – 177.1 at March 31, 2014 and 177.0 at December 31, 2013   2     2  
Additional Paid-In Capital   2,947     2,942  
Retained Earnings (Accumulated Deficit)   (221 )   (173 )
Treasury Stock, at Cost, Common Shares – 27.0 at March 31, 2014 and 27.0 at December 31, 2013   (942 )   (940 )
Accumulated Other Comprehensive Income (Loss)   2     1  
Total Stockholders’ Equity   1,788     1,832  
Total Liabilities and Stockholders’ Equity   $ 5,354     $ 5,695  
                 
PLUM CREEK TIMBER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
                 
    Quarter Ended March 31,
(In Millions)   2014   2013
CASH FLOWS FROM OPERATING ACTIVITIES        
Net Income   $ 30     $ 56  
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:        
Depreciation, Depletion and Amortization   32     26  
Basis of Real Estate Sold   6     25  
Equity Earnings from Timberland Venture   (15 )   (14 )
Distributions from Timberland Venture   28     27  
Equity Loss from Real Estate Development Ventures   1      
Deferred Income Taxes       1  
Deferred Revenue from Long-Term Gas Leases (Net of Amortization)   (2 )   (3 )
Timber Deed Acquired       (18 )
Working Capital Changes Impacting Cash Flow:        
Like-Kind Exchange Funds       (53 )
Other Working Capital Changes   (24 )   (52 )
Other   1     6  
Net Cash Provided By (Used In) Operating Activities   57     1  
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Capital Expenditures (Excluding Timberland Acquisitions)   (16 )   (14 )
Timberlands Acquired       (2 )
Contribution to Real Estate Development Ventures   (4 )    
Net Cash Provided By (Used In) Investing Activities   (20 )   (16 )
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends   (78 )   (68 )
Borrowings on Line of Credit   283     291  
Repayments on Line of Credit   (570 )   (117 )
Principal Payments and Retirement of Long-Term Debt       (174 )
Proceeds from Stock Option Exercises   1     25  
Acquisition of Treasury Stock   (2 )   (2 )
Net Cash Provided By (Used In) Financing Activities   (366 )   (45 )
         
Increase (Decrease) In Cash and Cash Equivalents   (329 )   (60 )
Cash and Cash Equivalents:        
Beginning of Period   433     356  
         
End of Period   $ 104     $ 296  
                 
PLUM CREEK TIMBER COMPANY, INC.
SEGMENT DATA
(UNAUDITED)
                 
    Quarter Ended March 31,
(In Millions)   2014   2013
Revenues:        
Northern Resources   $ 77     $ 74  
Southern Resources   123     104  
Real Estate   23     78  
Manufacturing   90     86  
Energy and Natural Resources   9     6  
Other   3      
Eliminations   (8 )   (8 )
Total Revenues   $ 317     $ 340  
         
Operating Income (Loss): (A)        
Northern Resources   $ 16     $ 11  
Southern Resources   31     24  
Real Estate   12     45  
Manufacturing   9     10  
Energy and Natural Resources   6     5  
Other   (1 )    
Other Costs and Eliminations, net   (17 )   (17 )
Total Operating Income   $ 56     $ 78  
         
Adjusted EBITDA by Segment: (B)        
Northern Resources   $ 24     $ 18  
Southern Resources   49     38  
Real Estate   18     70  
Manufacturing   12     14  
Energy and Natural Resources   8     5  
Other   (1 )    
Other Costs and Eliminations, net   (17 )   (17 )
Total   $ 93     $ 128  
                 

(A) For Segment reporting, Equity Loss from Real Estate Development Ventures of $1 million is included in Operating Income (Loss) for the Other Segment.

 

(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 - 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 Earnings from the Timberland Venture, and before interest expense (including any gains or losses from extinguishment of debt), taxes, depreciation, depletion, amortization, and basis in real estate sold. In addition to including Equity Earnings from Real Estate Development Ventures in Adjusted EBITDA, we also include, as an add back to Operating Income for the Other Segment, our proportional share of depreciation, depletion, amortization, and basis in real estate sold from this equity method investment. 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 real estate 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:

                                 
    Quarter Ended March 31, 2014
                 
   

Operating

Income

 

Depreciation,

Depletion and

Amortization

 

Basis of Real

Estate Sold

 

Adjusted

EBITDA

By Segment (1)                
Northern Resources   $ 16     $ 8     $     $ 24  
Southern Resources   31     18         49  
Real Estate   12         6     18  
Manufacturing   9     3         12  
Energy and Natural Resources   6     2         8  
Other   (1 )           (1 )
Other Costs and Eliminations   1             1  
Other Unallocated Operating Income (Expense), net   (18 )           (18 )
Total   $ 56     $ 31     $ 6     $ 93  
                 
Reconciliation to Net Income (2)                
Equity Earnings from Timberland Venture   15              
Interest Expense   (41 )            
(Provision) Benefit for Income Taxes                
Net Income   $ 30              
                 
Reconciliation to Net Cash Provided By Operating Activities (1)                
Net Cash Flows from Operations               $ 57  
Interest Expense               41  
Amortization of Debt Costs               (1 )
Provision / (Benefit) for Income Taxes                
Distributions from Timberland Venture               (28 )
Equity Earnings, Depletion and Basis of Real Estate Sold from Real Estate Development Ventures               (1 )
Deferred Income Taxes                
Gain on Sale of Properties and Other Assets                
Deferred Revenue from Long-Term Gas Leases               2  
Timber Deed Acquired                
Pension Plan Contributions                
Working Capital Changes               24  
Other               (1 )
Adjusted EBITDA               $ 93  
                     

(1) Includes Equity Loss from Real Estate Development Ventures ($1 million) in Operating Income for the Other Segment, along with our proportional share of depreciation, depletion, amortization ($0), and basis in real estate sold ($0) from this equity method investment.

 

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

 
    Quarter Ended March 31, 2013
                 
   

Operating

Income

 

Depreciation,

Depletion and

Amortization

 

Basis of Real

Estate Sold

 

Adjusted

EBITDA

By Segment                
Northern Resources   $ 11     $ 7     $     $ 18  
Southern Resources   24     14         38  
Real Estate   45         25     70  
Manufacturing   10     4         14  
Energy and Natural Resources   5             5  
Other                
Other Costs and Eliminations   (17 )           (17 )
Other Unallocated Operating Income (Expense), net                
Total   $ 78     $ 25     $ 25     $ 128  
                 
Reconciliation to Net Income (1)                
Equity Earnings from Timberland Venture   14              
Interest Expense   (35 )            
(Provision) Benefit for Income Taxes   (1 )            
Net Income   $ 56              
                 
Reconciliation to Net Cash Provided By Operating Activities                
Net Cash Flows from Operations               $ 1  
Interest Expense               35  
Amortization of Debt Costs               (1 )
Provision / (Benefit) for Income Taxes               1  
Distributions from Timberland Venture               (27 )
Equity Earnings, Depletion and Basis of Real Estate Sold from Real Estate Development Ventures                
Deferred Income Taxes               (1 )
Gain on Sale of Properties and Other Assets                
Deferred Revenue from Long-Term Gas Leases               3  
Timber Deed Acquired               18  
Pension Plan Contributions                
Working Capital Changes               105  
Other               (6 )
Adjusted EBITDA               $ 128  
                     

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

  Source: Plum Creek Timber Company, Inc.

 

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