EX-99.1 2 a4682073ex99.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Potlatch Reports Second Quarter Results SPOKANE, Wash.--(BUSINESS WIRE)--July 19, 2004--Potlatch Corporation (NYSE:PCH) today reported significantly higher earnings for the second quarter of 2004, compared to the second quarter of 2003, due primarily to continued strength in its wood products markets. Improved financial performance from the company's Pulp and Paperboard and Consumer Products operating segments also contributed to the positive results, while the Resource segment posted lower earnings compared to the prior year second quarter. Second quarter 2003 earnings were positively affected by significant interest income of $12.5 million from a federal income tax settlement. For the second quarter of 2004, the company reported net earnings of $49.6 million, or $1.68 per diluted common share, compared to earnings from continuing operations of $6.8 million, or $.24 per diluted common share for the same period in 2003. Including discontinued operations, the company earned $6.6 million or $.23 per diluted common share for the second quarter of 2003. Net sales for the second quarter of 2004 were $472.6 million, substantially higher than the $368.1 million recorded in the second quarter of 2003. Net earnings for the first half of 2004 totaled $71.4 million or $2.42 per diluted common share. The loss from continuing operations for the first half of 2003 was $2.1 million or $.07 per diluted common share. Including discontinued operations, the net loss for the first half of 2003 totaled $2.9 million or $.10 per diluted common share. Net sales for the first half of 2004 were $893.1 million, compared with $702.9 million for 2003's first half. The Resource segment reported operating income of $6.8 million for the second quarter of 2004, substantially lower than the $23.5 million earned in the second quarter of 2003. Land sales revenue totaled $1.1 million in the second quarter of 2004, versus $14.1 million in the second quarter of 2003. The June 2003 sale of approximately 15,300 acres of hardwood timberland in Arkansas was the primary reason for the unfavorable comparison. Lower fiber sales in Arkansas during the second quarter of 2004 also negatively affected earnings. Operating income for the Wood Products segment was $94.4 million for the second quarter of 2004, a dramatic increase over the $2.3 million earned in the second quarter of 2003. "The conditions that started the rally in wood products markets during the third quarter of 2003 -- low interest rates, a strong housing market and a weaker U.S. dollar -- have continued through the second quarter of 2004," noted L. Pendleton Siegel, Potlatch chairman and chief executive officer. "Selling prices for all of the segment's products were higher when compared to the second quarter of 2003, especially oriented strand board, which was more than double last year's price early in the quarter," Siegel added. Prices began an expected decline mid-quarter, but still remained at favorable levels at the end of 2004's second quarter. The higher selling prices more than made up for lower shipments of oriented strand board, lumber and particleboard on a quarter-to-quarter comparison. The Pulp and Paperboard segment reported operating income for the second quarter of $5.9 million, versus a loss of $1.2 million for 2003's second quarter. "The segment benefited from higher paperboard and pulp shipments compared to 2003's second quarter, as well as higher selling prices for pulp. Additionally, higher production at both of the segment's facilities, especially the mill in Lewiston, Idaho, resulted in lower per ton costs," Siegel noted. "Pulp prices have steadily improved during the first half of 2004, and paperboard prices have improved modestly in recent months," Siegel added. The Consumer Products segment incurred an operating loss of $1.2 million during the quarter, smaller than the operating loss of $5.0 million posted in the second quarter of 2003. "Although markets for consumer tissue products continued to be very competitive, segment shipments increased 18% over the second quarter of 2003, and net selling prices also showed a slight improvement," Siegel remarked. Both shipment and selling price measures were positively affected by the rollout of the ultra towel product manufactured at the company's new Las Vegas tissue facility. Results for the second quarter of 2003 were adversely affected by downtime taken on numerous converting lines to reduce finished goods inventory levels. Potlatch is a diversified forest products company with timberlands in Arkansas, Idaho and Minnesota. This news release contains, in addition to historical information, certain forward-looking statements. These forward-looking statements are based on management's best estimates and assumptions regarding future events, and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. The company's actual results could differ materially from those expressed or implied by forward-looking statements. The company disclaims any intent or obligation to update these forward-looking statements. Potlatch Corporation and Consolidated Subsidiaries Statements of Operations and Comprehensive Income Unaudited (Dollars in thousands - except per-share amounts) Quarter Ended Six Months Ended June 30 June 30 2004 2003 2004 2003 ---------------------------------------------------------------------- Net sales $472,639 $368,094 $893,061 $702,896 ---------------------------------------------------------------------- Costs and expenses: Depreciation, amortization and cost of fee timber harvested 25,041 25,202 52,124 52,061 Materials, labor and other operating expenses 330,449 311,915 652,554 604,259 Selling, general and administrative expenses 23,022 20,239 45,477 37,491 Restructuring charges (87) - 1,193 227 ---------------------------------------------------------------------- 378,425 357,356 751,348 694,038 ---------------------------------------------------------------------- Earnings from operations 94,214 10,738 141,713 8,858 Interest expense (12,478) (12,128) (24,338) (24,890) Interest income 491 12,573 619 12,640 ---------------------------------------------------------------------- Earnings (loss) before taxes 82,227 11,183 117,994 (3,392) Provision (benefit) for taxes 32,659 4,361 46,608 (1,323) ---------------------------------------------------------------------- Earnings (loss) from continuing operations 49,568 6,822 71,386 (2,069) Discontinued operations: Loss from discontinued operations (including loss on disposal of $-, $-, $- and $45) - (283) - (1,389) Income tax benefit - (110) - (542) ---------------------------------------------------------------------- Net earnings (loss) 49,568 6,649 71,386 (2,916) ---------------------------------------------------------------------- Other comprehensive loss, net of tax: Cash flow hedges: Net derivative losses, net of income tax benefit of $-, $-, $44 and $- - - (68) - ---------------------------------------------------------------------- Comprehensive income (loss) $49,568 $6,649 $71,318 $(2,916) ====================================================================== Net earnings (loss) per common share from continuing operations: Basic $1.68 $.24 $2.43 $(.07) Diluted 1.68 .24 2.42 (.07) Net earnings (loss) per common share: Basic 1.68 .23 2.43 (.10) Diluted 1.68 .23 2.42 (.10) Average shares outstanding (in thousands): Basic 29,498 28,679 29,372 28,648 Diluted 29,611 28,679 29,487 28,648 ---------------------------------------------------------------------- Certain 2003 amounts have been reclassified to conform to the 2004 presentation. Potlatch Corporation and Consolidated Subsidiaries Condensed Balance Sheets 2004 amounts unaudited (Dollars in thousands - except per-share amounts) June 30, December 31, 2004 2003 ---------------------------------------------------------------------- Assets Current assets: Cash and short-term investments $204,606 $47,281 Receivables, net 123,027 105,345 Inventories 138,219 159,678 Prepaid expenses 20,511 18,315 ---------------------------------------------------------------------- Total current assets 486,363 330,619 Land other than timberlands 9,325 8,831 Plant and equipment, at cost less accumulated depreciation 718,212 740,342 Timber, timberlands and related logging facilities 401,936 398,899 Other assets 119,479 118,686 ---------------------------------------------------------------------- $1,735,315 $1,597,377 ====================================================================== Liabilities and Stockholders' Equity Current liabilities: Current installments on long-term debt $1,106 $507 Accounts payable and accrued liabilities 171,127 169,310 ---------------------------------------------------------------------- Total current liabilities 172,233 169,817 Long-term debt 617,194 618,278 Other long-term obligations 271,999 266,514 Deferred taxes 118,331 71,917 Stockholders' equity 555,558 470,851 ---------------------------------------------------------------------- $1,735,315 $1,597,377 ====================================================================== Stockholders' equity per common share $18.82 $16.33 Working capital $314,130 $160,802 Current ratio 2.8:1 1.9:1 Highlights Unaudited (Dollars in thousands - except per-share amounts) Quarter Ended Six Months Ended June 30 June 30 2004 2003 2004 2003 ---------------------------------------------------------------------- Net sales $472,639 $368,094 $893,061 $702,896 Earnings (loss) from continuing operations 49,568 6,822 71,386 (2,069) Net earnings (loss) 49,568 6,649 71,386 (2,916) Net earnings (loss) per common share from continuing operations: Basic $1.68 $.24 $2.43 $(.07) Diluted 1.68 .24 2.42 (.07) Net earnings (loss) per common share: Basic 1.68 .23 2.43 (.10) Diluted 1.68 .23 2.42 (.10) Dividends per common share (annual rate) .60 .60 .60 .60 ====================================================================== Segment Information (Dollars in thousands) Quarter Ended Six Months Ended June 30 June 30 2004 2003 2004 2003 ---------------------------------------------------------------------- Net sales Resource $44,784 $61,829 $106,574 $106,800 Wood products 251,706 156,903 460,760 293,978 Pulp and paperboard 138,024 128,682 258,934 246,743 Consumer products 83,145 67,414 157,113 145,478 ---------------------------------------------------------------------- 517,659 414,828 983,381 792,999 Intersegment sales (45,020) (46,734) (90,320) (90,103) ---------------------------------------------------------------------- Total net sales $472,639 $368,094 $893,061 $702,896 ====================================================================== Operating income (loss) Resource $6,756 $23,534 $18,809 $34,655 Wood products 94,447 2,343 152,246 (1,268) Pulp and paperboard 5,872 (1,159) (1,889) (10,492) Consumer products (1,238) (4,974) (5,055) 1,828 Eliminations 1,669 (1,400) 2,104 (1,330) ---------------------------------------------------------------------- 107,506 18,344 166,215 23,393 Corporate (25,279) (7,161) (48,221) (26,785) ---------------------------------------------------------------------- Earnings (loss) from continuing operations before taxes $82,227 $11,183 $117,994 $(3,392) ====================================================================== CONTACT: Potlatch Corporation Media: Michael D. Sullivan, 509-835-1516 (work) Investors: Douglas D. Spedden, 509-835-1549