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 March 31, 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 March 31, 1995:
29,224,481 shares of Common Stock, par value $1 per share.
<PAGE>
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 three months
ended March 31, 1995 and 1994 2
Condensed Balance Sheets at March 31, 1995
and December 31, 1994 3
Condensed Statements of Cash Flows for the three
months ended March 31, 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 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>
Three Months Ended
March 31
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Net sales $394,608 $365,282
- ----------------------------------------------------------------------
Costs and expenses:
Depreciation, amortization and cost of
fee timber harvested 32,707 35,023
Materials, labor and other operating
expenses 288,929 280,351
Selling, general and administrative
expenses 23,194 19,514
- ----------------------------------------------------------------------
344,830 334,888
- ----------------------------------------------------------------------
Earnings from operations 49,778 30,394
Interest expense (12,604) (12,743)
Interest and dividend income 61 139
Other income (expense), net* 722 (9,219)
- ----------------------------------------------------------------------
Earnings before taxes on income 37,957 8,571
Provision for taxes on income (Note 2) 14,424 3,257
- ----------------------------------------------------------------------
Net earnings $ 23,533 $ 5,314
======================================================================
Net earnings per common share (Note 3) $ .81 $ .18
Dividends per common share (annual rate) 1.60 1.56
Average shares outstanding (in thousands) 29,224 29,211
- ----------------------------------------------------------------------
<FN>
* March 31, 1994, amount includes a pre-tax charge for early retirement
programs of $10.0 million or $.21 per share after tax.
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Condensed Balance Sheets
1995 amounts unaudited (Dollars in thousands -
except per-share amounts)
- ----------------------------------------------------------------------
<CAPTION>
March 31, December 31,
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 7,088 $ 9,018
Short-term investments 48,877 46,789
Receivables, net 131,955 137,418
Inventories (Note 4) 156,013 152,236
Prepaid expenses 24,904 25,857
- ----------------------------------------------------------------------
Total current assets 368,837 371,318
Land, other than timberlands 9,089 9,089
Plant and equipment, at cost less
accumulated depreciation 1,307,146 1,313,939
Timber, timberlands and related
logging facilities 348,714 346,199
Other assets 41,094 40,684
- ----------------------------------------------------------------------
$2,074,880 $2,081,229
======================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable $ 7,490 $ 12,881
Current installments on long-term debt 38,795 18,831
Accounts payable and accrued liabilities 212,261 196,878
- ----------------------------------------------------------------------
Total current liabilities 258,546 228,590
Long-term debt 578,196 633,473
Other long-term obligations 150,679 147,877
Deferred taxes 155,409 151,082
Stockholders' equity 932,050 920,207
- ----------------------------------------------------------------------
$2,074,880 $2,081,229
======================================================================
Stockholders' equity per common share $31.89 $31.49
Working capital $110,291 $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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<PAGE>
<TABLE>
Potlatch Corporation and Consolidated Subsidiaries
Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
- ----------------------------------------------------------------------
<CAPTION>
Three Months Ended
March 31
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operations
Net earnings $ 23,533 $ 5,314
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation, amortization and cost of
fee timber harvested 32,707 35,023
Deferred taxes 4,327 977
Working capital changes 20,214 (5,085)
Other, net (131) 499
- ----------------------------------------------------------------------
Net cash provided by operations 80,650 36,728
- ----------------------------------------------------------------------
Cash Flows From Financing
Change in bank overdrafts (2,192) 2,799
Decrease in notes payable (5,391) -
Repayment of long-term debt (35,313) (25,181)
Issuance of treasury stock - 288
Dividends (11,690) (11,392)
- ----------------------------------------------------------------------
Net cash used for financing (54,586) (33,486)
- ----------------------------------------------------------------------
Cash Flows From Investing
Decrease (increase) in
short-term investments (2,088) 16,188
Additions to plant and properties (22,874) (23,397)
Disposition of plant and properties 362 334
Other, net (3,394) 6,793
- ----------------------------------------------------------------------
Net cash used for investing (27,994) (82)
- ----------------------------------------------------------------------
Increase (decrease) in cash (1,930) 3,160
Balance at beginning of period 9,018 6,813
- ----------------------------------------------------------------------
Balance at end of period $ 7,088 $ 9,973
======================================================================
<FN>
Net interest payments (net of amounts capitalized) for the three months ended
March 31, 1995 and 1994 were $3.7 million and $3.3 million, respectively.
Net income tax payments for the three months ended March 31, 1995 and 1994
were $6.7 million and $.6 million, respectively.
The accompanying notes are an integral part of these financial statements.
</TABLE>
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<PAGE>
Potlatch Corporation and Consolidated Subsidiaries
Notes to Financial Statements
(Dollars in thousands)
_______________________________________________________________________
NOTE 1. GENERAL - The accompanying condensed balance sheets at March
31, 1995 and December 31, 1994, and the statements of earnings and the
condensed statements of cash flows for the three months ended March 31,
1995 and 1994, have been prepared in conformity with generally accepted
accounting principles. The management of Potlatch Corporation believes
that all adjustments necessary for a fair statement of the results of
such interim periods have been included.
NOTE 2. INCOME TAXES - The provision for taxes on income has been
computed by applying an estimated annual effective tax rate. This rate
was 38 percent for the quarters ended March 31, 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:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
-------------- -----------------
<S> <C> <C>
Raw materials $ 84,315 $ 87,836
Work in process 6,636 5,002
Finished goods 65,062 59,398
-------- --------
$156,013 $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 (as presented in the Condensed
Statements of Cash Flows on page 4) totaled $80.7 million, compared with
$36.7 million for the first quarter of 1994.
The company's ratio of long-term debt to stockholders' equity was
.62 to 1 at March 31, 1995, compared with .69 to 1 at December 31, 1994.
The decrease in the ratio was due to the reclassification of $55.0
million of the company's medium-term notes and commercial paper from
long-term to current.
Working capital of $110.3 million at March 31, 1995, decreased $32.4
million from December 31, 1994. The decrease in working capital was
largely due to a net $20.0 million increase in current installments on
long-term debt and a $15.4 million increase in accounts payable and
accrued liabilities.
-5-
<PAGE>
Capital expenditures totaled $22.9 million for the first three
months of 1995. Of this amount, the company spent $6.7 million in the
wood products segment, which included expenditures for the installation
of pollution control equipment at the Grand Rapids, Minnesota, oriented
strand board plant. In the printing papers segment the company spent
$9.6 million, including expenditures for the continued modernization and
expansion of the company's pulp mill in Cloquet, Minnesota, and the
rebuild of a paper machine in Brainerd, Minnesota. Spending in the
other pulp-based products segment totaled $6.5 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)
- ----------------------------------------------------------------------
<CAPTION>
Three Months
1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
Net Sales
Wood products
Oriented strand board $ 52,506 $ 56,011
Lumber 43,661 53,915
Plywood 18,884 17,989
Particleboard 4,749 4,170
Other 8,592 9,087
- ----------------------------------------------------------------------
128,392 141,172
- ----------------------------------------------------------------------
Printing papers 108,500 102,116
- ----------------------------------------------------------------------
Other pulp-based products
Pulp 3,688 91
Paperboard 105,031 79,452
Tissue 48,997 42,451
- ----------------------------------------------------------------------
157,716 121,994
- ----------------------------------------------------------------------
Total net sales $394,608 $365,282
======================================================================
Operating Income
Wood products $ 31,855 $ 46,443
Printing papers 17,641 8,459
Other pulp-based products 8,424 (28,513)
- ----------------------------------------------------------------------
57,920 26,389
Corporate (19,963) (17,818)
- ----------------------------------------------------------------------
Earnings before taxes on income $ 37,957 $ 8,571
======================================================================
</TABLE>
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<PAGE>
The company reported higher earnings for the first quarter of 1995
as improved earnings from its pulp-based businesses more than offset
softening market conditions for solid wood products. Net earnings for
the first quarter of 1995 were $23.5 million, or $.81 per common share.
First quarter 1994 earnings were $11.5 million, or $.39 per share,
before a one-time, pre-tax charge of $10.0 million for early retirement
programs. Including the charge, earnings were $5.3 million, or $.18 per
share. Net sales for the first quarter of 1995 were $394.6 million,
compared with $365.3 million a year ago.
Depreciation, amortization and cost of Potlatch timber harvested
totaled $32.7 million, a 7 percent decline from the $35.0 million
reported a year ago. In the first quarter of 1994, the company had $3.0
million of additional depreciation related to the write-off of obsolete
equipment.
The wood products segment reported earnings of $31.9 million for the
first quarter of 1995, down from 1994's $46.4 million. The results were
largely attributable to lower net sales realizations for most of the
company's wood products.
The printing papers segment reported excellent first quarter 1995
earnings of $17.6 million, up from $8.5 million earned in 1994.
Significantly higher net sales realizations for the division's coated
papers, due primarily to higher prices and in part to an improved
product mix, were largely responsible for the improvement. Lower
shipments and higher pulp costs partially offset the effects of the
higher net sales realizations. Both of the company's coated paper
facilities operated well during the quarter.
The other pulp-based products segment, which includes the Pulp and
Paperboard Group and the Consumer Products Division, reported first
quarter earnings of $8.4 million, compared with a loss of $28.5 million
in 1994's first quarter. The 1994 results included the $10.0 million
pre-tax charge for the costs of early retirement programs in the
company's pulp-based operations in Idaho. Strong markets for pulp and
paperboard resulted in higher net sales realizations and shipments
during the quarter, and operating results at both the Arkansas and Idaho
pulp and paperboard mills improved. Realizations for tissue products
began to improve as markets strengthened near the end of the quarter.
"Other expense, net" for the period ended March 31, 1994, included
the aforementioned pre-tax charge for early retirement programs of $10.0
million.
-7-
<PAGE>
<TABLE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Changes in Statements of Earnings
(Dollars in thousands)
<CAPTION>
Three Months Ended March 31
---------------------------
Increase
1995 1994 (Decrease)
---- ---- ----------
<S> <C> <C> <C>
Net sales $394,608 $365,282 8%
Costs and expenses:
Depreciation, amortization and
cost of fee timber harvested 32,707 35,023 (7%)
Materials, labor and other
operating expenses 288,929 280,351 3%
Selling, general and
administrative expenses 23,194 19,514 19%
Earnings from operations 49,778 30,394 64%
Interest expense (12,604) (12,743) (1%)
Interest and dividend income 61 139 (56%)
Other income (expense), net 722 (9,219) *
Provision for taxes on income 14,424 3,257 343%
Net earnings 23,533 5,314 343%
<FN>
*Not a meaningful figure.
</TABLE>
-8-
<PAGE>
PART II
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 March 31,
1995.
-9-
<PAGE>
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: May 2, 1995
-10-
<PAGE>
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
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 7088
<SECURITIES> 325
<RECEIVABLES> 131310
<ALLOWANCES> 2257
<INVENTORY> 156013
<CURRENT-ASSETS> 368837
<PP&E> 2711239
<DEPRECIATION> 1046290
<TOTAL-ASSETS> 2074880
<CURRENT-LIABILITIES> 258546
<BONDS> 578196
<COMMON> 32722
0
0
<OTHER-SE> 899328
<TOTAL-LIABILITY-AND-EQUITY> 2074880
<SALES> 394608
<TOTAL-REVENUES> 394608
<CGS> 321636
<TOTAL-COSTS> 321636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12604
<INCOME-PRETAX> 37957
<INCOME-TAX> 14424
<INCOME-CONTINUING> 23533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23533
<EPS-PRIMARY> .81
<EPS-DILUTED> 0
</TABLE>
