Potlatch Corporation Third Quarter 2013 Conference Call Supplemental Information

Transcription

1 Potlatch Corporation Third Quarter 2013 Conference Call Supplemental Information Michael J. Covey Chairman & Chief Executive Officer Eric J. Cremers President & Chief Operating Officer Jerald W. Richards Vice President & Chief Financial Officer October 22, 2013

2 Forward-Looking Statements This presentation contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation statements about our expectations regarding our outlook for future operating conditions in sawlog, pulpwood, lumber, plywood and real estate markets, overtime in Wood Products, lumber inventory levels, fourth quarter 2013 harvest level, 2013 harvest level, 2013 and 2014 domestic housing starts, remodeling and repair activity in 2013 and 2014, tariffs on Canadian lumber exports to the U.S., Chinese demand for lumber and logs, earnings and cashflows in our Resource, Wood Products and Real estate segments in the fourth quarter of 2013, demand and pricing for sawlogs, pulpwood, lumber, plywood and residuals in the fourth quarter 2013 and for 2014, reduced production of pulpwood, logging costs, transportation availability and cost, fuel costs, expected 2013 sales of 18-20,000 acres, estimated average real estate sales price of $1,400 per acre and estimated basis of 15-20% for real estate sales in 2013, operating income and margin trends in the Real Estate segment, demand and pricing for Rural Recreational and HBU properties, performance of our Resource, Wood Products and Real Estate segments in fourth quarter 2013, shipments in our Wood Products segment in the fourth quarter of 2013, inventory levels, completion of high-return projects in our Wood Products segment to de-bottleneck our system and reduce costs, 2013 capital expenditures, the company s balance sheet, contributions to pension plans, liquidity, cashflow, long-term debt maturities, expected effective tax rate in the fourth quarter of 2013 and for the year, and related matters. These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in timberland values; changes in timber harvest levels on our lands; changes in timber prices; changes in lumber and plywood prices; changes in policy regarding governmental timber sales; changes in the United States and international economies; changes in the level of construction, repair and remodel activity; changes in tariffs, quotas and trade agreements involving wood products; changes in demand for forest 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; pest infestation; changes in raw material, fuel and other costs; the ability to satisfy complex rules in order to remain qualified as a REIT; changes in tax laws that could reduce the benefits associated with REIT status; and other risks and uncertainties described from time to time in our public filings with the Securities and Exchange Commission. These forward-looking statements are made as of the date of this presentation and we do not undertake to update any forward-looking statements. 2

3 Third Quarter 2013 Summary (unaudited) ($ in thousands except per-share amounts) Nine Months Nine Months 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Ended Ended Operating income Resource $ 25,369 $ 14,467 $ 15,525 $ 23,631 $ 55,361 $ 39,011 Real Estate 6,493 4,116 3,083 1,255 13,692 14,256 Wood Products 11,319 19,725 18,910 15,232 49,954 31,948 Eliminations and adjustments (791) (1,178) (67) (106) 42,390 38,543 38,007 38, ,940 85,109 Corporate (10,788) (7,712) (11,140) (10,609) (29,640) (28,034) Net cash interest expense (5,232) (5,307) (5,845) (5,848) (16,384) (17,746) Environmental remediation charge (1,022) (1,750) (750) - (3,522) - Income before taxes 25,348 23,774 20,272 22,483 69,394 39,329 Income tax provision 3,157 4,592 4,785 3,884 12,534 10,599 Net income $ 22,191 $ 19,182 $ 15,487 $ 18,599 $ 56,860 $ 28,730 EBITDDA* $ 39,664 $ 34,689 $ 33,441 $ 37,014 $ 107,794 $ 77,969 FFO* $ 31,275 $ 24,790 $ 22,811 $ 27,282 $ 78,876 $ 49,624 Diluted earnings per share $ 0.54 $ 0.47 $ 0.38 $ 0.46 $ 1.40 $ 0.71 Distributions per share $ 0.31 $ 0.31 $ 0.31 $ 0.31 $ 0.93 $ 0.93 *Non-GAAP measure See pages for reconciliation to GAAP and definition. 3

4 Resource Operating Income and Margin ($ in millions)

5 Northern Region Volume and Pricing Sawlog Pulpwood Tons $/Ton Tons $/Ton Note: Volumes include tonnage produced from company-owned fee land, while pricing data includes revenue generated from both company-owned fee land and non-fee stumpage purchased from third parties. 5

6 Southern Region Volume and Pricing Tons Sawlog $/Ton Tons Pulpwood $/Ton Note: Volumes include tonnage produced from company-owned fee land, while pricing data includes revenue generated from both company-owned fee land and non-fee stumpage purchased from third parties. 6

7 Real Estate Revenues ($ in millions) $25 Non-Strategic Timberland Rural Real Estate HBU-Development $20 $19.0 $ $15 $ $ $10 $5 $ $8.7 $8.9 $ $ $ $ $ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

8 Real Estate Operating Income and Margin ($ in millions) Third Quarter 2013 Earnings Supplemental Information October 22,

9 Real Estate Acres Sold Acres Non-Strategic Timberland Rural Real Estate HBU-Development 20,000 15,000 14, ,118 10,000 5, ,241 9, ,048 7,313 2,513 3, ,842 11,965 5,398 5,294 4,772 4,793 3, ,899 3,028 6, ,612 2,179 2,185 4,378 3, ,278 1, ,116 1,557 1,590 1, , Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

10 Real Estate Sales Prices Per Acre $1,433 $1,208 $1,901 $1,240 $1,325 $2,068 $1,485 $1,221 $2,074 $864 $1,338 $2,152 $709 $1,183 $1,847 $608 $1,160 $2,294 $728 $1,146 $2,444 $882 $1,307 $785 $1,416 $2,802 $652 $1,279 $2,053 $608 $1,295 $2,055 $4,436 Dollars/Acre $4,500 Non-Strategic Timberland Rural Real Estate $4,000 HBU-Development $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

11 Wood Products Operating Income (Loss) and Margin ($ in millions) Third Quarter 2013 Earnings Supplemental Information October 22,

12 Lumber Sales Prices and Shipments

13 Volumes and Sales Prices Per Unit (unaudited) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Resource Fee Volume (tons) Northern region Sawlog 649, , , ,240 1,490,333 1,445,772 Pulpwood 16,538 21,904 72, , , ,256 Stumpage 1,537 1,489 20,470 6,717 23,496 34,016 Total 667, , , ,377 1,624,630 1,748,044 Southern region Sawlog 209, , , , , ,834 Pulpwood 237, , , , , ,215 Stumpage Total 446, , , ,366 1,126, ,049 Total Fee Volume (tons) 1,113, , ,373 1,289,743 2,751,313 2,711,093 Sales Prices/Unit ($ per ton) Northern region Sawlog $ 89 $ 92 $ 77 $ 79 $ 86 $ 74 Pulpwood Stumpage Weighted Average $ 88 $ 88 $ 70 $ 73 $ 81 $ 68 Southern region Sawlog $ 46 $ 42 $ 40 $ 44 $ 43 $ 41 Pulpwood Stumpage Weighted Average $ 39 $ 37 $ 36 $ 37 $ 38 $ 36 Wood Products Lumber Shipments (MBF) 173, , , , , ,656 Lumber Sales Prices ($ per MBF) $ 363 $ 423 $ 412 $ 354 $ 398 $

14 Financial Highlights (unaudited) ($ in thousands) September 30, June 30, September 30, Balance Sheet Highlights: Working capital $ 75,616 $ 61,685 $ 63,310 Operating working capital* 12,817 11,234 9,261 Total assets 708, , ,716 Long-term debt (including current portion) 320, , ,721 Stockholders' equity 167, , ,885 Long-term debt to stockholders' equity ratio 1.9 to to to 1 Nine months ended September 30, Cash Flow Highlights: Net cash from operating activities $ 75,067 $ 43,033 Net cash from investing activities (11,564) 18,225 Net cash from financing activities (74,494) (60,044) Capital expenditures (16,935) (11,869) *Non-GAAP measure See pages for reconciliation to GAAP and definition. 14

15 Conservative Capital Structure: Long-Term Debt Maturity Profile ($ in millions) $300 $281 $250 $200 $150 $100 $50 $0 $23 $0 $0 $5 $ Thereafter 15

16 Reconciliation of Non-GAAP Measures (unaudited) ($ in thousands) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Earnings before interest, taxes, depreciation, depletion and amortization (EBITDDA): GAAP net income $ 22,191 $ 19,182 $ 15,487 $ 18,599 $ 56,860 $ 28,730 Net cash interest expense 5,232 5,307 5,845 5,848 16,384 17,746 Income tax provision 3,157 4,592 4,785 3,884 12,534 10,599 Depreciation, depletion and amortization 8,046 5,158 6,867 8,302 20,071 19,271 Basis of real estate sold 1, ,370 1,806 Non-cash asset impairment and eliminations (132) (134) (159) (16) (425) (183) EBITDDA* $ 39,664 $ 34,689 $ 33,441 $ 37,014 $ 107,794 $ 77,969 *Non-GAAP measure See page 21 for definition. 16

17 Reconciliation of Non-GAAP Measures (unaudited) ($ in thousands) Earnings before interest, taxes, depreciation, depletion and amortization (EBITDDA): 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Resource Operating Income $ 25,369 $ 14,467 $ 15,525 $ 23,631 $ 55,361 $ 39,011 Depreciation, depletion and amortization 5,888 3,040 4,592 6,061 13,520 12,071 Resource EBITDDA 31,257 17,507 20,117 29,692 68,881 51,082 Real Estate Operating Income 6,493 4,116 3,083 1,255 13,692 14,256 Basis of Land & depreciation 1, ,412 1,833 Real Estate EBITDDA 7,678 4,714 3,712 1,661 16,104 16,089 Wood Products Operating income 11,319 19,725 18,910 15,232 49,954 31,948 Depreciation and amortization 1,581 1,520 1,509 1,507 4,610 5,013 Wood Products EBITDDA 12,900 21,245 20,419 16,739 54,564 36,961 Corporate Corporate expense (10,788) (7,712) (11,140) (10,609) (29,640) (28,034) Environmental remediation charge (1,022) (1,750) (750) - (3,522) - Eliminations and adjustments (791) (1,178) (67) (106) Depreciation, amortization and basis of land adjustment ,474 1,977 Corporate EBITDDA (12,171) (8,777) (10,807) (11,078) (31,755) (26,163) Total EBITDDA* $ 39,664 $ 34,689 $ 33,441 $ 37,014 $ 107,794 $ 77,969 *Non-GAAP measure See page 21 for definition. 17

18 Reconciliation of Non-GAAP Measures (unaudited) ($ in thousands) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Funds from Operations (FFO): GAAP net income $ 22,191 $ 19,182 $ 15,487 $ 18,599 $ 56,860 $ 28,730 Depreciation, depletion and amortization 8,046 5,158 6,867 8,302 20,071 19,271 Basis of real estate sold 1, ,370 1,806 Non-cash asset impairment and eliminations (132) (134) (159) (16) (425) (183) FFO* $ 31,275 $ 24,790 $ 22,811 $ 27,282 $ 78,876 $ 49,624 *Non-GAAP measure See page 21 for definition. 18

19 Reconciliation of Non-GAAP Measures (unaudited) ($ in thousands) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Funds Available for Distribution (FAD): GAAP net income $ 22,191 $ 19,182 $ 15,487 $ 18,599 $ 56,860 $ 28,730 Depreciation, depletion and amortization 8,046 5,158 6,867 8,302 20,071 19,271 Basis of real estate sold 1, ,370 1,806 Non-cash asset impairment and eliminations (132) (134) (159) (16) (425) (183) Capital expenditures (6,460) (5,843) (4,632) (5,149) (16,935) (11,869) FAD* $ 24,815 $ 18,947 $ 18,179 $ 22,133 $ 61,941 $ 37,755 *Non-GAAP measure See page 21 for definition. 19

20 Reconciliation of Non-GAAP Measures (unaudited) ($ in thousands) Operating Working Capital: September 30, June 30, September 30, Current assets $ 134,872 $ 120,257 $ 138,769 Less current liabilities (59,256) (58,572) (75,459) Working capital 75,616 61,685 63,310 Less cash (5,994) (6,406) (9,033) Less short-term investments (56,805) (44,045) (53,429) Add current installments on long-term debt - - 8,413 Operating Working Capital* $ 12,817 $ 11,234 $ 9,261 *Non-GAAP measure See page 21 for definition. 20

21 Definition of Non-GAAP Measures EBITDDA is a non-gaap measure that management uses to evaluate the cash generating capacity of the company. EBITDDA, as we define it, is net income adjusted for net cash interest expense, provision for income taxes, depreciation, depletion and amortization, basis of real estate sold and noncash asset impairment and eliminations. Funds from Operations (FFO) is a non-gaap measure that is commonly used by REITs in the real estate industry. FFO is presented as a supplemental financial measure. We do not use FFO as, nor should it be considered to be, an alternative to net income computed under GAAP as an indicator of our operating performance, or as an alternative to cash from operating activities computed under GAAP as an indicator of our ability to fund our cash needs. FFO, as we define it, may not be comparable with measures of similar titles reported by other companies. We define FFO as net income, plus depreciation, depletion and amortization, basis of real estate sold and non-cash asset impairment and eliminations. Management believes that FFO is a meaningful supplemental measure of our operating performance because historical cost accounting for assets such as our manufacturing facilities and timberlands assumes that the value of such assets diminishes predictably over time. However, the values of our manufacturing facilities and timberlands have historically risen and fallen based on market conditions for the products we manufacture and for timber and timberlands. Management also considers the FFO measure in determining, among other things, quarterly and annual distribution rates to recommend to our board of directors, future levels of capital spending and debt repayment. We disclose this supplemental financial measure to enable investors to align their analysis and evaluation of our operating results along the same lines as management uses in planning and executing our business strategy. Funds Available for Distribution (FAD), as we define it, is net income adjusted for depreciation, depletion and amortization, basis of real estate sold, non-cash asset impairment and eliminations and capital expenditures. For purposes of this definition, capital expenditures exclude all expenditures relating to direct or indirect timberland purchases in excess of $5 million. Operating Working Capital is calculated as working capital excluding cash, short-term investments, and current installments on long-term debt. 21

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