SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1995 Commission file number 1-5313
POTLATCH CORPORATION
(Exact name of registrant as specified in its charter)
A Delaware Corporation 82-0156045
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Maritime Plaza
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 576-8800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes[X] No[ ]
The number of shares of common stock outstanding as of June 30, 1995:
29,219,981 shares of Common Stock, par value $1 per share.
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POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Index to Form 10-Q
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Statements of Earnings for the quarter and six
months ended June 30, 1995 and 1994 2
Condensed Balance Sheets at June 30, 1995
and December 31, 1994 3
Condensed Statements of Cash Flows for the six
months ended June 30, 1995 and 1994 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5 - 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
EXHIBIT INDEX 11
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<TABLE>
PART I
Item 1. Financial Statements
Potlatch Corporation and Consolidated Subsidiaries
Statements of Earnings
Unaudited (Dollars in thousands - except per-share amounts)
- ------------------------------------------------------------------------
<CAPTION>
Quarter Ended Six Months Ended
June 30 June 30
1995 1994 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $397,243 $345,120 $791,851 $710,402
- ------------------------------------------------------------------------
Costs and expenses:
Depreciation, amortization and
cost of fee timber harvested 32,491 34,387 65,198 69,410
Materials, labor and other
operating expenses 292,804 270,982 581,733 551,333
Selling, general and
administrative expenses 22,207 20,915 45,401 40,429
- ------------------------------------------------------------------------
347,502 326,284 692,332 661,172
- ------------------------------------------------------------------------
Earnings from operations 49,741 18,836 99,519 49,230
Interest expense (11,885) (12,562) (24,489) (25,305)
Interest and dividend income 269 85 330 224
Other income (expense), net 429 3,403 1,151 (5,816)*
- ------------------------------------------------------------------------
Earnings before taxes
on income 38,554 9,762 76,511 18,333
Provision for taxes on
income (Note 2) 14,650 3,710 29,074 6,967
- ------------------------------------------------------------------------
Net earnings $ 23,904 $ 6,052 $ 47,437 $ 11,366
========================================================================
Net earnings per
common share (Note 3) $ .81 $ .21 $1.62 $ .39
Dividends per common share
(annual rate) 1.60 1.56 1.60 1.56
Average shares outstanding
(in thousands) 29,223 29,214 29,224 29,213
- ------------------------------------------------------------------------
<FN>
* Includes pre-tax charges for early retirement programs of $10.0 million
or $.21 per share after tax in the first quarter of 1994.
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Condensed Balance Sheets
1995 amounts unaudited (Dollars in thousands -
except per-share amounts)
- ---------------------------------------------------------------------------
<CAPTION>
June 30, December 31,
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 10,014 $ 9,018
Short-term investments 31,333 46,789
Receivables, net 144,529 137,418
Inventories (Note 4) 161,044 152,236
Prepaid expenses 26,407 25,857
- ---------------------------------------------------------------------------
Total current assets 373,327 371,318
Land, other than timberlands 9,089 9,089
Plant and equipment, at cost less
accumulated depreciation 1,315,773 1,313,939
Timber, timberlands and related
logging facilities 352,212 346,199
Other assets 44,495 40,684
- ---------------------------------------------------------------------------
$2,094,896 $2,081,229
===========================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ - $ 12,881
Current installments on long-term debt 38,749 18,831
Accounts payable and accrued liabilities 220,806 196,878
- ---------------------------------------------------------------------------
Total current liabilities 259,555 228,590
Long-term debt 576,643 633,473
Other long-term obligations 154,525 147,877
Deferred taxes 159,788 151,082
Stockholders' equity 944,385 920,207
- ---------------------------------------------------------------------------
$2,094,896 $2,081,229
===========================================================================
Stockholders' equity per common share $32.32 $31.49
Working capital $113,772 $142,728
Current ratio 1.4:1 1.6:1
- ---------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
- ---------------------------------------------------------------------------
<CAPTION>
Six Months Ended
June 30
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operations
Net earnings $ 47,437 $ 11,366
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation, amortization and cost of
fee timber harvested 65,198 69,410
Deferred taxes 8,706 2,091
Working capital changes 4,903 4,815
Other, net 201 (1,167)
- ---------------------------------------------------------------------------
Net cash provided by operations 126,445 86,515
- ---------------------------------------------------------------------------
Cash Flows From Financing
Change in bank overdrafts 2,556 4,826
Decrease in notes payable (12,881) -
Repayment of long-term debt (36,912) (38,089)
Issuance of treasury stock 11 386
Purchase of treasury stock (208) -
Dividends (23,380) (22,785)
- ---------------------------------------------------------------------------
Net cash used for financing (70,814) (55,662)
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Cash Flows From Investing
Decrease in short-term investments 12,472 10,533
Additions to plant and properties (63,419) (48,351)
Disposition of plant and properties 1,049 2,448
Other, net (4,737) 3,987
- ---------------------------------------------------------------------------
Net cash used for investing (54,635) (31,383)
- ---------------------------------------------------------------------------
Increase (decrease) in cash 996 (530)
Balance at beginning of period 9,018 6,813
- ---------------------------------------------------------------------------
Balance at end of period $ 10,014 $ 6,283
===========================================================================
<FN>
Net interest payments (net of amounts capitalized) for the six months ended
June 30, 1995 and 1994 were $24.7 million and $25.4 million, respectively.
Net income tax payments for the six months ended June 30, 1995 and 1994 were
$27.9 million and $8.1 million, respectively.
The accompanying notes are an integral part of these financial statements.
</TABLE>
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Potlatch Corporation and Consolidated Subsidiaries
Notes to Financial Statements
(Dollars in thousands)
_______________________________________________________________________
NOTE 1. GENERAL - The accompanying condensed balance sheets at June 30,
1995 and December 31, 1994, and the statements of earnings for the
quarter and six months ended June 30, 1995 and 1994, and the condensed
statements of cash flows for the six months ended June 30, 1995 and
1994, have been prepared in conformity with generally accepted
accounting principles. The management of Potlatch Corporation (the
"company") believes that all adjustments necessary for a fair statement
of the results of such interim periods have been included. All
adjustments were of a normal recurring nature, there were no material
nonrecurring adjustments.
NOTE 2. INCOME TAX - The provision for taxes on income has been
computed by applying an estimated annual effective tax rate. This rate
was 38 percent for 1995 and 1994.
NOTE 3. EARNINGS PER COMMON SHARE - Earnings per common share are
computed by dividing net earnings by the weighted average number of
common shares outstanding. Common stock equivalents which would arise
from the exercise of stock options were not included in the weighted
average because of immateriality.
NOTE 4. INVENTORIES - Inventories at the balance sheet dates consist
of:
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<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
Raw materials $ 83,520 $ 87,836
Work in process 5,057 5,002
Finished goods 72,467 59,398
-------- --------
$161,044 $152,236
======== ========
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Funding
Net cash provided by operations for the first six months of 1995, as
presented in the Condensed Statements of Cash Flows on page 4, totaled
$126.4 million, compared with $86.5 million for the same period in 1994.
The company's ratio of long-term debt to stockholders' equity was
.61 to 1 at June 30, 1995, compared with .69 to 1 at December 31, 1994.
The decrease in the ratio was primarily due to the reduction in long-
term debt of $55.0 million. The ratio was also favorably affected by an
increase in stockholders' equity from current year earnings.
Working capital of $113.8 million at June 30, 1995, decreased $29.0
million from December 31, 1994. The decrease was due to changes in
several components of working capital. A net $19.9 million increase in
current installments on long-term debt, a $23.9 million increase in
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accounts payable and accrued liabilities and a decrease in cash and
short-term investments of $14.5 million were the factors responsible for
reducing working capital. These items were partially offset by
increases in receivables and inventories and by the repayment of $12.9
million of current notes payable.
Capital expenditures totaled $63.4 million for the first six months
of 1995. Of this amount, the company spent $16.6 million in the wood
products segment, which included expenditures for the installation of
pollution control equipment at the company's three oriented strand board
plants in Minnesota. The company spent $31.2 million in the printing
papers segment, including expenditures for the continued modernization
and expansion of the company's pulp mill in Cloquet, Minnesota and for
the rebuild of a paper machine in Brainerd, Minnesota. Spending in the
other pulp-based products segment totaled $15.5 million. A significant
portion of this total related to the continued development of the hybrid
poplar tree farm in Boardman, Oregon.
<TABLE>
Results of Operations
A summary of period-to-period changes in items included in the
statements of earnings is presented on page 8 of this Form 10-Q.
- ----------------------------------------------------------------------
Segment Information (Dollars in thousands)
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<CAPTION>
Second Quarter Six Months
1995 1994 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales
Wood products
Oriented strand board $ 45,364 $ 51,974 $ 97,870 $107,985
Lumber 45,798 48,277 89,459 102,192
Plywood 19,066 16,874 37,950 34,863
Particleboard 3,683 5,069 8,432 9,239
Other 7,230 7,572 15,822 16,659
- ----------------------------------------------------------------------
121,141 129,766 249,533 270,938
- ----------------------------------------------------------------------
Printing papers 112,289 91,148 220,789 193,264
- ----------------------------------------------------------------------
Other pulp-based products
Pulp 7,831 1,383 11,519 1,474
Paperboard 114,078 83,571 219,109 163,023
Tissue 41,904 39,252 90,901 81,703
- ----------------------------------------------------------------------
163,813 124,206 321,529 246,200
- ----------------------------------------------------------------------
Total net sales $397,243 $345,120 $791,851 $710,402
======================================================================
Operating Income
Wood products $ 22,371 $ 35,891 $ 54,226 $ 82,334
Printing papers 15,149 6,787 32,790 15,246
Other pulp-based products 19,508 (15,802) 27,932 (44,315)
- ----------------------------------------------------------------------
57,028 26,876 114,948 53,265
Corporate (18,474) (17,114) (38,437) (34,932)
- ----------------------------------------------------------------------
Earnings before taxes
on income $ 38,554 $ 9,762 $ 76,511 $ 18,333
======================================================================
</TABLE>
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The company reported improved earnings for the second quarter of
1995 due to improved results for its pulp-based businesses. Net
earnings for the second quarter were $23.9 million, up from $6.1 million
for the second quarter of 1994. Earnings per common share were $.81,
compared with $.21 reported for the second quarter of 1994. Net sales
were $397.2 million, compared with $345.1 million in 1994's second
quarter.
For the first half of 1995, net earnings were $47.4 million, or
$1.62 per common share. Net earnings for the first half of 1994 were
$17.6 million, or $.60 per common share, before a one-time, pre-tax
charge of $10.0 million for early retirement programs in Idaho.
Including the charge, 1994 first half earnings were $11.4 million, or
$.39 per share. Net sales for the first half of 1995 were $791.9
million, compared with $710.4 million for 1994's first half.
Depreciation, amortization and cost of Potlatch timber harvested
totaled $65.2 million for the first half of 1995, a 6 percent decline
from the $69.4 million reported in 1994's first half. In the first half
of 1994, the company had $6.0 million of additional depreciation related
to the write-off of obsolete equipment.
The wood products segment reported earnings of $22.4 million for the
second quarter of 1995, down from 1994's $35.9 million. Earnings
declined primarily because net sales realizations were lower for most of
the company's lumber and panel products as a result of decreased demand
and additional lumber imports from Canada. However, some improvement in
wood products markets was noted at the end of the quarter.
The printing papers segment second quarter earnings increased to
$15.1 million from the $6.8 million reported a year ago. Higher net
sales realizations and shipments were the driving forces behind the
improvement. The division also benefited from improved production at
its two coated paper facilities. Higher pulp costs, however, partially
offset these positive factors.
The other pulp-based products segment, which includes the Pulp and
Paperboard Group and the Consumer Products Division, reported second
quarter earnings of $19.5 million, versus a loss of $15.8 million last
year. Strong markets continued for pulp and paperboard products,
resulting in higher net sales realizations and an increase in pulp
shipments. Also, the company's pulp and paperboard mills in Arkansas
and Idaho operated at improved levels compared with the second quarter
of 1994. Sales realizations for tissue products improved during the
quarter, as markets strengthened.
"Other income (expense), net" for the period ended June 30, 1994,
included the aforementioned pre-tax charge of $10.0 million for early
retirement programs in Idaho.
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<TABLE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Changes in Statements of Earnings
(Dollars in thousands)
<CAPTION>
Quarter Ended June 30 Six Months Ended June 30
---------------------------- -----------------------------
Increase Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
---- ---- ---------- ---- ---- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $397,243 $345,120 15% $791,851 $710,402 11%
Costs and expenses:
Depreciation, amortization and
cost of fee timber harvested 32,491 34,387 (6%) 65,198 69,410 (6%)
Materials, labor and other
operating expenses 292,804 270,982 8% 581,733 551,333 6%
Selling, general and
administrative expenses 22,207 20,915 6% 45,401 40,429 12%
Earnings from operations 49,741 18,836 164% 99,519 49,230 102%
Interest expense (11,885) (12,562) (5%) (24,489) (25,305) (3%)
Interest and dividend income 269 85 216% 330 224 47%
Other income (expense), net 429 3,403 * 1,151 (5,816) *
Provision for taxes on income 14,650 3,710 295% 29,074 6,967 317%
Net earnings 23,904 6,052 295% 47,437 11,366 317%
<FN>
* Not a meaningful figure.
</TABLE>
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PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
At the annual meeting of stockholders of the company held on May 18,
1995, the company's stockholders voted in favor of the election of five
directors to the company's Board of Directors and the ratification of
KPMG Peat Marwick LLP as the company's independent auditors for 1995.
There were 61,152,061 votes represented which equaled 86.8 percent of
the total outstanding votes of 70,418,963. The number of votes for,
against or withheld, as well as the number of abstentions, as
applicable, as to each matter approved at the annual meeting of
stockholders were as follows:
Proposal No. 1 For Withheld
Election of 5 Directors
Richard A. Clarke 60,971,235 180,826
Allen F. Jacobson 60,906,345 245,716
George F. Jewett, Jr. 60,985,887 166,174
Vivian W. Piasecki 60,967,354 184,707
Robert G. Schwartz 60,947,220 204,841
Proposal No. 2 For Against Abstain
Ratification of Selection
of Independent Auditors 60,725,709 135,980 290,372
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
The exhibit index is located on page 11 of this Form 10-Q.
Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended June 30, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POTLATCH CORPORATION
(Registrant)
By G. E. Pfautsch
------------------------------
G. E. Pfautsch
Senior Vice President, Finance
(Duly Authorized; Principal
Financial Officer)
By T. L. Carter
------------------------------
T. L. Carter
Controller
(Duly Authorized; Principal
Accounting Officer)
Date: August 2, 1995
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POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Exhibit Index
Exhibit
PART II
(4) Registrant undertakes to file with the Securities and
Exchange Commission, upon request, any instrument with
respect to long-term debt.
(27) Financial Data Schedule
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 10014
<SECURITIES> 31225
<RECEIVABLES> 142768
<ALLOWANCES> 2378
<INVENTORY> 161044
<CURRENT-ASSETS> 373327
<PP&E> 2749143
<DEPRECIATION> 1072069
<TOTAL-ASSETS> 2094896
<CURRENT-LIABILITIES> 259555
<BONDS> 576643
<COMMON> 32722
0
0
<OTHER-SE> 911663
<TOTAL-LIABILITY-AND-EQUITY> 2094896
<SALES> 791851
<TOTAL-REVENUES> 791851
<CGS> 646931
<TOTAL-COSTS> 646931
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24489
<INCOME-PRETAX> 76511
<INCOME-TAX> 29074
<INCOME-CONTINUING> 47437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47437
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 0
</TABLE>
