POTLATCH CORPORATION Third Quarter 2011 Conference Call Supplemental Information

Transcription

1 POTLATCH CORPORATION THIRD QUARTER 2011 CONFERENCE CALL POTLATCH CORPORATION Third Quarter 2011 Conference Call Supplemental Information Michael J. Covey Eric J. Cremers Chairman, President and Chief Executive Officer Vice President, Finance and Chief Financial Officer

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 future company performance, direction of sawlog, pulpwood, lumber and real estate markets, 2011 harvest volume, trends in foreclosed home inventory, single-family housing starts, earnings and cashflows in our Resource and Wood Products segments, demand and price levels for logs, pulpwood and wood products, cedar log demand and pricing, impact of the Canadian dollar, Chinese demand for sawlogs and Wood Products, mountain pine beetle epidemic, future harvest levels, estimated impact of the shutdown of an Arkansas customer s wood products facility, expected 25 or so real estate sales, performance of our Resource, Wood Products and Real Estate segments, expected seasonal slowdown across our businesses, quarterly dividend levels, the company s balance sheet, liquidity, tax provisions in 2011, price trends in real estate, the demand and interest in non-strategic timberlands and rural recreational real estate and HBU lands, capital spending, 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 prices; changes in policy regarding governmental timber sales; changes in the United States and international economies; changes in the level of construction 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 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 2011 Summary (unaudited) (Dollars in Thousands - except per-share amounts) Nine Months Nine Months 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Ended Ended Operating Income (Loss) Resource $ 25,598 $ 7,549 $ 14,061 $ 24,336 $ 47,208 $ 49,283 Real Estate 9,929 11,000 8,366 9,788 29,295 16,803 Wood Products 2,896 2,758 2,894 (608) 8,548 10,576 Eliminations and adjustments 1,634 1, (895) 4,160 1,678 40,057 23,288 25,866 32,621 89,211 78,340 Corporate (4,993) (5,917) (10,341) (6,472) (21,251) (19,343) Net cash interest expense (6,242) (6,223) (6,246) (6,397) (18,711) (19,661) Earnings from continuing operations before taxes 28,822 11,148 9,279 19,752 49,249 39,336 Income tax provision 3,223 2,699 1,583 1,588 7,505 7,960 Earnings from continuing operations $ 25,599 $ 8,449 $ 7,696 $ 18,164 $ 41,744 $ 31,376 plus: Net cash interest expense 6,242 6,223 6,246 6,397 18,711 19,661 Income tax provision 3,223 2,699 1,583 1,588 7,505 7,960 Depreciation, depletion & amortization 9,092 5,158 8,666 9,499 22,916 23,857 Basis of real estate sold 2,714 6,958 3,615 20,779 13,287 25,492 Net, non-cash asset impairment and eliminations (2,054) (2,054) - Earnings before interest expense, taxes, depreciation, depletion and amortization, and basis of real estate sold (EBITDDA) * $ 44,816 $ 29,487 $ 27,806 $ 56,427 $ 102,109 $ 108,346 Funds from continuing operations $ 35,351 $ 20,565 $ 19,977 $ 48,442 $ 75,893 $ 80,725 Discontinued operations, net of tax $ - $ - $ - $ (84) $ - $ (358) Net earnings $ 25,599 $ 8,449 $ 7,696 $ 18,080 $ 41,744 $ 31,018 Diluted earnings per common share from continuing operations $ 0.63 $ 0.21 $ 0.19 $ 0.45 $ 1.03 $ 0.78 Funds from operations (FFO) * $ 35,351 $ 20,565 $ 19,977 $ 48,358 $ 75,893 $ 80,367 * Non-GAAP measure - See pages for reconciliation to GAAP and definition. 3

4 Resource Operating Income and Margin $41.5 Timber Deed Impact $ Note: Q Resource results include a timber deed transaction that produced operating income of $41.5 million. However, the margin calculation excludes the impact of timber deed transaction. 4

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 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. No volume is reflected in the data above for the timber deed sale that occurred in Q

7 Real Estate Revenues (Dollars in Millions) $50 $45 $ Non-Strategic Timberland Rural Real Estate HBU-Development Conservation Easement $40 $35 $30 $ $ $25 $20 $15 $10 $5 $ $10.5 $7.0 $4.7 $ $ $14.8 $ $ Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

8 Real Estate Operating Income and Margin

9 Real Estate Acres Sold Acres 50,000 45,000 Non-Strategic Timberland Rural Real Estate HBU-Development Conservation Easement 48, , ,370 40,000 35,000 30,000 30, ,026 25,000 20,000 42,772 47,702 15,000 10,000 5, , ,551 2,118 8,666 9,290 10, ,547 5,675 1,872 2,513 3,663 11,965 3, , , ,627 6,282 5,612 2,927 4, ,617 2,435 3,500 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q

10 Real Estate Sales Prices Per Acre Dollars/Acre $3,000 Non-Strategic Timberland Rural Real Estate HBU-Development Conservation Easement $1,624 $1,214 $1,910 $1,116 $2,278 $500 $1,150 $2,342 $1,029 $1,248 $1,266 $1,902 $877 $1,097 $2,014 $693 $1,261 $2,000 $783 $1,139 $2,031 $1,433 $1,208 $1,901 $1,240 $1,325 $2,068 $1,485 $1,221 $2,074 $2,690 $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

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 824, , , ,442 1,546,925 1,533,684 Pulpwood 122,947 35, ,905 86, , ,588 Stumpage 6,063 7,386 25,170 10,248 38,619 37,056 Total 953, , , ,580 1,850,076 1,851,328 Southern region Sawlog 247, , , , , ,344 Pulpwood 247, , , , , ,058 Stumpage 7,312 5,903 1,791-15,006 - Total 502, , , ,640 1,287,606 1,308,402 Sales Prices/Unit ($ per ton) Northern region Sawlog $ 77 $ 73 $ 66 $ 71 $ 73 $ 67 Pulpwood Stumpage Weighted Average $ 71 $ 67 $ 59 $ 66 $ 66 $ 61 Southern region Sawlog $ 43 $ 42 $ 43 $ 46 $ 43 $ 46 Pulpwood Stumpage Weighted Average $ 35 $ 35 $ 38 $ 41 $ 36 $ 42 Wood Products Lumber Shipments (MBF) 157, , , , , ,075 Lumber Sales Prices ($ per MBF) $ 293 $ 299 $ 307 $ 266 $ 299 $

14 Financial Highlights (unaudited) (Dollars in Thousands) September 30, June 30, September 30, Balance Sheet Highlights: Working capital $ 72,636 $ 57,947 $ 96,192 Operating working capital 13,390 4,481 30,155 Total assets 752, , ,135 Long-term debt (including current portion) 366, , ,115 Stockholders' equity 190, , ,162 Long-term debt to stockholder's equity ratio 1.9 to to to 1 Nine months ended September 30, Cash Flow Highlights: Cash flows from continuing operations: Net cash provided by operating activities $ 72,106 $ 84,010 Net cash used for investing activities (2,898) (21,378) Net cash used for financing activities (68,584) (57,915) Capital expenditures (12,078) (10,658) * Operating working capital is calculated as working capital excluding cash, short-term investments, and current installments on long-term debt. 14

15 Long-Term Debt Maturity Profile (Dollars in Millions) $300 $293 $250 $200 $150 $100 $50 $0 $22 $21 $22 $8 $0 (1) Thereafter (1) $5 million maturity paid in January

16 Reconciliation of Non-GAAP Measures (unaudited) (Dollars in Thousands) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Earnings before interest, taxes, depreciation, depletion, and amortization (EBITDDA): GAAP net earnings $ 25,599 $ 8,449 $ 7,696 $ 18,080 $ 41,744 $ 31,018 Net cash interest expense 6,242 6,223 6,246 6,397 18,711 19,661 Income tax provision 3,223 2,699 1,583 1,588 7,505 7,960 Depreciation, depletion & amortization 9,092 5,158 8,666 9,499 22,916 23,857 Basis of real estate sold 2,714 6,958 3,615 20,779 13,287 25,492 Net, non-cash asset impairment and eliminations (2,054) (2,054) - Loss from discontinued operations, net of tax EBITDDA * $ 44,816 $ 29,487 $ 27,806 $ 56,427 $ 102,109 $ 108,346 * Non-GAAP measure - See page 18 for definition. 16

17 Reconciliation of Non-GAAP Measures (unaudited) (Dollars in Thousands) 3rd Quarter 2nd Quarter 1st Quarter 3rd Quarter Nine Months Ended Funds from Operations (FFO): GAAP net earnings $ 25,599 $ 8,449 $ 7,696 $ 18,080 $ 41,744 $ 31,018 Depreciation, depletion & amortization 9,092 5,158 8,666 9,499 22,916 23,857 Basis of real estate sold 2,714 6,958 3,615 20,779 13,287 25,492 Net, non-cash asset impairment and eliminations (2,054) (2,054) - Loss from discontinued operations, net of tax Funds from continuing operations $ 35,351 $ 20,565 $ 19,977 $ 48,442 $ 75,893 $ 80,725 Gain from discontinued operations, net of tax (84) - (358) Funds from Operations * $ 35,351 $ 20,565 $ 19,977 $ 48,358 $ 75,893 $ 80,367 * Non-GAAP measure - See page 18 for definition. 17

18 Definition of Non-GAAP Measures EBITDDA is a non-gaap measure that management uses to evaluate the cash generating capacity of the company. The most directly comparable GAAP measure is net earnings. EBITDDA, as we define it, is net earnings from continuing operations adjusted for net cash interest expense, provision/benefit for income taxes, depreciation, depletion and amortization from continuing operations, basis of real estate sold and net, non-cash asset impairment and eliminations. It should not be considered as an alternative to net earnings computed under GAAP. Funds from Operations (FFO) is a non-gaap measure that is commonly used by REITs in the real estate industry. The most directly comparable GAAP measure is net earnings. 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 earnings 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 earnings, plus depreciation, depletion and amortization from continuing operations, basis of real estate sold, and net, non-cash asset impairment and eliminations, adjusted for the gain/loss from discontinued operations, and plus depreciation, depletion and amortization from discontinued operations. 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. 18

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