Apr. 26, 2011 Potlatch Corporation (NASDAQ:PCH) today reported financial results for the first quarter ended March 31, 2011.
“The year is off to a good start in each of our business segments,” said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. “Favorable logging conditions in Idaho allowed our Resource segment to roll forward some of our planned harvest for the year, in order to capture better than anticipated pricing. Our Wood Products segment benefitted from relatively strong lumber prices in January and February, though prices have recently softened. Our Real Estate segment had another solid quarter, completing the first of three phases of a non-strategic and rural real estate land sales transaction in Idaho along with a continued steady flow of other HBU and rural recreational land sales,” concluded Mr. Covey.
Q1 2011 FINANCIAL SUMMARY
- Total consolidated revenues increased 16 percent from $105.4 million in Q1 2010 to $122.2 million in Q1 2011.
- Net earnings for the quarter were $7.7 million, or $0.19 per diluted common share, compared to $1.2 million, or $0.03 per diluted common share for Q1 2010.
- Q1 2010 earnings included a $3.0 million after-tax charge, or $0.07 per share, related to health care reform legislation passed in Q1 2010.
- Cash provided by operating activities from continuing operations was $20.2 million for Q1 2011 compared to $11.9 million for Q1 2010.
Q1 2011 BUSINESS PERFORMANCE
Resource segment revenues increased 15 percent from $44.8 million in Q1 2010 to $51.6 million in Q1 2011. Operating income for the segment was $14.1 million, compared to $12.8 million in Q4 2010 and $9.9 million in Q1 2010. Q1 2010 results include Wisconsin operations which were sold in the second half of 2010.
- Total fee harvest volume for Q1 2011 increased 10 percent over Q4 2010 and 6 percent over Q1 2010.
- Sawlog volume increased 1 percent in Q1 2011 over Q4 2010, primarily as a result of favorable Q1 2011 logging conditions in Idaho that allowed the company to modestly accelerate harvest levels to capture stronger pricing opportunities for mixed sawlogs. Sawlog prices decreased 2 percent sequentially, primarily due to an unfavorable cedar product mix in Q1 2011.
- Sawlog volume and pricing increased 12 percent and 16 percent, respectively, in Q1 2011 over Q1 2010. Volumes were higher due to improved customer demand as well as favorable logging conditions in Idaho in Q1 2011 versus Q1 2010, while prices were higher due to stronger customer demand, primarily in Idaho.
- Pulpwood volume increased 36 percent in Q1 2011 over Q4 2010, while overall sales prices remained level. As is typical, the first quarter is Minnesota’s highest volume production quarter due to seasonal factors.
- Pulpwood volume decreased 14 percent comparing Q1 2011 to Q1 2010, primarily due to the inclusion of Wisconsin harvests in the Q1 2010 results. Excluding the impact of the Wisconsin harvest in Q1 2010, pulpwood harvest volume increased 13 percent. Pulpwood prices increased 4 percent in Q1 2011 versus Q1 2010, primarily due to increased customer demand in both Minnesota and Idaho.
- Total fee harvest volume decreased 9 percent in Q1 2011 from Q4 2010 and increased 4 percent over Q1 2010.
- Sawlog volume and pricing decreased 9 percent and 2 percent, respectively, in Q1 2011 from Q4 2010, primarily due to weaker demand. Log inventories were relatively high due to the extremely dry weather in the South which resulted in favorable logging conditions.
- Sawlog volume and pricing increased 4 percent and 1 percent, respectively, in Q1 2011 compared to Q1 2010, primarily due to a slight improvement in demand.
- Pulpwood volume and pricing decreased 10 percent and 5 percent, respectively, in Q1 2011 from Q4 2010, primarily due to weaker demand as a result of full customer inventories.
- Pulpwood volume increased 4 percent in Q1 2011 over Q1 2010, primarily due to the favorable logging conditions mentioned above, while sales prices decreased 10 percent due to extremely wet weather in the 2010 period that affected logging and resulted in relatively high prices in Q1 2010.
Real Estate segment revenues increased from $3.4 million in Q1 2010 to $13.0 million in Q1 2011. Operating income for the segment was $8.4 million in Q1 2011 compared to $13.6 million in Q4 2010 and $1.9 million in Q1 2010. The first phase of a non-strategic and rural real estate sale in Idaho occurred during Q1 2011. This phase of the sale was 5,907 acres resulting in revenue from the sale of $9.0 million. The Q4 2010 results include the sale of 47,702 acres of non-strategic land in Wisconsin and Arkansas. There continues to be steady demand for our real estate, as we closed a total of 30 rural recreational, HBU and non-strategic timberland transactions in Q1 2011.
Wood Products segment revenues increased 1 percent from $67.8 million in Q1 2010 to $68.5 million in Q1 2011. The segment reported operating income of $2.9 million in Q1 2011 compared to an operating loss of $3.4 million in Q4 2010 and operating income of $5.2 million in Q1 2010. Higher sales prices in Q1 2011 and a negative mark to market adjustment related to lumber hedges in Q4 2010 were the primary factors of the improved operating results between Q1 2011 and Q4 2010. Higher log costs in Idaho and the Lake States in Q1 2011 were the primary reason for the decrease in operating income from Q1 2010.
- Lumber sales prices in Q1 2011 increased 9 percent and 1 percent over Q4 2010 and Q1 2010, respectively.
- Lumber shipments in Q1 2011 decreased 1 percent and 2 percent from Q4 2010 and Q1 2010, respectively.
- In Q1 2011, the segment recorded a $0.6 million benefit from a lumber hedge entered into in October 2010, compared to a $2.9 million charge in Q4 2010.
Corporate expenses, including interest expense, were $16.6 million in Q1 2011 compared to $17.7 million in Q4 2010 and $13.1 million in Q1 2010. Included in the Q1 2011 corporate expense is a non-cash charge of $2.3 million for a mark to market adjustment for company stock in our deferred compensation plans, and a $1.2 million non-cash charge for deferred costs related to the reduction in our revolving credit facility. The Q4 2010 expenses include a $4.1 million charge for environmental remediation at Avery Landing.
During the first quarter, Potlatch paid a regular quarterly cash distribution on the company’s common stock of $0.51 per share.
“With housing starts expected to show only modest improvement during the year, business conditions for both our Resource and Wood Products segments are likely to continue to be somewhat challenging. However, U.S. log exports to China continue to grow and domestic repair and remodel activities are expected to increase, which will act as a counterbalance to continued lower housing starts. At this time, we still expect our 2011 harvest to be approximately 4.2 million tons. In our Wood Products business, we expect lumber prices to remain soft for the remainder of the year, but we expect the segment to remain cash flow positive each quarter. Regarding our Real Estate segment, we expect another good year as demand and interest in non-strategic timberlands and rural recreational real estate continues to be relatively stable. We have two additional phases of the Idaho land sale that will occur this year which will positively affect results for the segment. Our balance sheet remains strong with $80.8 million in cash and short-term investments, and we have no debt maturities for the rest of the year,” concluded Mr. Covey.
SOURCE: Potlatch Corp.
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