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, 1996 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, 1996:
28,942,181 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, 1996 and 1995 2
Condensed Balance Sheets at March 31, 1996
and December 31, 1995 3
Condensed Statements of Cash Flows for the three
months ended March 31, 1996 and 1995 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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<PAGE>
<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
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Net sales $388,621 $394,608
- ----------------------------------------------------------------------
Costs and expenses:
Depreciation, amortization and cost of
fee timber harvested 35,064 32,707
Materials, labor and other operating
expenses 308,549 288,929
Selling, general and administrative
expenses 24,631 23,194
- ----------------------------------------------------------------------
368,244 344,830
- ----------------------------------------------------------------------
Earnings from operations 20,377 49,778
Interest expense (12,223) (12,604)
Interest and dividend income 812 61
Other income (expense), net (961) 722
- ----------------------------------------------------------------------
Earnings before taxes on income 8,005 37,957
Provision for taxes on income (Note 2) 3,042 14,424
- ----------------------------------------------------------------------
Net earnings $ 4,963 $ 23,533
======================================================================
Net earnings per common share (Note 3) $ .17 $ .81
Dividends per common share (annual rate) 1.66 1.60
Average shares outstanding (in thousands) 28,941 29,224
- ----------------------------------------------------------------------
<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 Balance Sheets
1996 amounts unaudited (Dollars in thousands -
except per-share amounts)
- ----------------------------------------------------------------------
<CAPTION>
March 31, December 31,
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash $ 3,800 $ 7,571
Short-term investments 9,296 102,583
Receivables, net 162,394 152,407
Inventories (Note 4) 183,830 191,102
Prepaid expenses 24,638 23,586
- ----------------------------------------------------------------------
Total current assets 383,958 477,249
Land, other than timberlands 9,089 9,089
Plant and equipment, at cost less
accumulated depreciation 1,384,474 1,356,020
Timber, timberlands and related
logging facilities 351,018 352,321
Other assets 92,210 70,632
- ----------------------------------------------------------------------
$2,220,749 $2,265,311
======================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments on long-term debt $ 91,928 $ 122,018
Accounts payable and accrued liabilities 223,426 227,165
- ----------------------------------------------------------------------
Total current liabilities 315,354 349,183
Long-term debt 610,949 616,132
Other long-term obligations 146,140 145,022
Deferred taxes 181,452 180,235
Put options 12,247 12,247
Stockholders' equity 954,607 962,492
- ----------------------------------------------------------------------
$2,220,749 $2,265,311
======================================================================
Stockholders' equity per common share $32.98 $33.23
Working capital $68,604 $128,066
Current ratio 1.2:1 1.4:1
- ----------------------------------------------------------------------
<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
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Cash Flows From Operations
Net earnings $ 4,963 $ 23,533
Adjustments to reconcile net earnings
to cash provided by operations:
Depreciation, amortization and cost of
fee timber harvested 35,064 32,707
Deferred taxes 1,217 4,327
Working capital changes (851) 20,214
Other, net (83) (131)
- ----------------------------------------------------------------------
Net cash provided by operations 40,310 80,650
- ----------------------------------------------------------------------
Cash Flows From Financing
Change in bank overdrafts (6,655) (2,192)
Decrease in notes payable - (5,391)
Repayment of long-term debt (35,273) (35,313)
Issuance of treasury stock 170 -
Purchase of treasury stock (1,089) -
Dividends (12,010) (11,690)
- ----------------------------------------------------------------------
Net cash used for financing (54,857) (54,586)
- ----------------------------------------------------------------------
Cash Flows From Investing
Decrease in short-term investments 93,011 200
Funding of qualified pension plans (19,734) -
Additions to plant and properties (61,453) (22,874)
Disposition of plant and properties 3,105 362
Other, net (4,153) (5,682)
- ----------------------------------------------------------------------
Net cash provided by
(used for) investing 10,776 (27,994)
- ----------------------------------------------------------------------
Decrease in cash (3,771) (1,930)
Balance at beginning of period 7,571 9,018
- ----------------------------------------------------------------------
Balance at end of period $ 3,800 $ 7,088
======================================================================
<FN>
Certain 1995 amounts have been restated to conform to the 1996 presentation.
Net interest payments (net of amounts capitalized) for the three months ended
March 31, 1996 and 1995 were $2.6 million and $3.7 million, respectively.
Net income tax payments (refunds) for the three months ended March 31, 1996
and 1995 were $(1.0) million and $6.7 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, 1996 and December 31, 1995, and the statements of earnings and the
condensed statements of cash flows for the three months ended March 31,
1996 and 1995, 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 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, 1996 and 1995.
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, 1996 December 31, 1995
-------------- -----------------
<S> <C> <C>
Raw materials $102,996 $105,067
Work in process 9,436 5,972
Finished goods 71,398 80,063
-------- --------
$183,830 $191,102
======== ========
</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 $40.3 million, compared with
$80.7 million for the first quarter of 1995.
The company's ratio of long-term debt to stockholders' equity was
.64 to 1 at March 31, 1996, unchanged from December 31, 1995. A $5.2
million decrease in long-term debt and a $7.9 million decrease in
stockholders' equity resulted in no change to the ratio for the period.
Working capital of $68.6 million at March 31, 1996, decreased $59.5
million from December 31, 1995. The change in working capital was
largely due to a decrease in cash and short-term investments of $97.1
million, which was partially offset by a $30.1 million decrease in
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<PAGE>
current installments on long-term debt.
Capital expenditures totaled $61.5 million for the first three
months of 1996. Of this amount, the company spent $8.5 million in the
wood products segment, which included expenditures for the upgrade of
the dry end at the Prescott, Arkansas, sawmill and the modernization of
the company's two plywood plants in Idaho. In the printing papers
segment the company spent $24.7 million, including expenditures for the
continued modernization and expansion of the company's pulp mill in
Cloquet, Minnesota. Spending in the other pulp-based products segment
totaled $28.3 million. A significant portion of this total related to
the continued development of the hybrid poplar plantation in Boardman,
Oregon, including the purchase of additional acreage to expand the
project.
<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
1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Net Sales
Wood products
Oriented strand board $ 39,945 $ 52,506
Lumber 40,560 43,661
Plywood 16,277 18,884
Particleboard 3,472 4,749
Other 9,152 8,592
- ----------------------------------------------------------------------
109,406 128,392
- ----------------------------------------------------------------------
Printing papers 113,812 108,500
- ----------------------------------------------------------------------
Other pulp-based products
Pulp 2,154 3,688
Paperboard 99,769 105,031
Tissue 63,480 48,997
- ----------------------------------------------------------------------
165,403 157,716
- ----------------------------------------------------------------------
Total net sales $388,621 $394,608
======================================================================
Operating Income
Wood products $ 11,034 $ 31,855
Printing papers 11,974 17,641
Other pulp-based products 4,330 8,424
- ----------------------------------------------------------------------
27,338 57,920
Corporate (19,333) (19,963)
- ----------------------------------------------------------------------
Earnings before taxes on income $ 8,005 $ 37,957
======================================================================
</TABLE>
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<PAGE>
Lower earnings for the first quarter of 1996 were due to severe
flooding, other weather-related problems and weaker markets in several
product lines. The weather-related problems caused slightly less than
break-even results for the first two months of the quarter. Net
earnings for the first quarter of 1996 were $5.0 million, or $.17 per
common share. First quarter 1995 earnings were $23.5 million, or $.81
per share. Net sales for the first quarter of 1996 were $388.6 million,
compared with $394.6 million a year ago.
Depreciation, amortization and cost of Potlatch timber harvested
totaled $35.1 million, a 7 percent increase from the $32.7 million
reported a year ago.
The wood products segment reported operating income of $11.0 million
for the first quarter of 1996, down from 1995's $31.9 million. Lower
net sales realizations for all wood products, especially panels, reduced
earnings. Oriented strand board net sales realizations have declined 20
percent from a year ago, largely due to increased capacity in the
industry. Flooding in Idaho also adversely affected first quarter
earnings for this segment.
The printing papers segment reported first quarter 1996 operating
income of $12.0 million, compared with $17.6 million earned in 1995.
Slightly higher shipments were more than offset by lower net sales
realizations. Realizations were affected by discounting in mid-line
grades and by a less favorable product mix.
The other pulp-based products segment, which includes the Pulp and
Paperboard Group and the Consumer Products Division, reported operating
income for the first quarter of 1996 of $4.3 million, compared with
income of $8.4 million in 1995's first quarter. The company's pulp mill
in Lewiston, Idaho, was shut down for six days in February due to an
inability to obtain clean water as a result of area flooding. The
paperboard and tissue mills at Lewiston were also forced to shut down
during the same time period because of a lack of water. Production
costs increased significantly during February because of these
shutdowns. Product shipments were adversely affected by the floods as
well. Lower net sales realizations for pulp also contributed to the
earnings decline. Despite the weather related problems in Idaho, the
Consumer Products Division benefited from higher shipments and
substantially higher net sales realizations to post improved results
compared with 1995's first quarter.
-7-
<PAGE>
<TABLE>
POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Changes in Statements of Earnings
(Dollars in thousands)
<CAPTION>
Three Months Ended March 31
Increase
1996 1995 (Decrease)
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $388,621 $394,608 (2%)
Costs and expenses:
Depreciation, amortization and
cost of fee timber harvested 35,064 32,707 7%
Materials, labor and other
operating expenses 308,549 288,929 7%
Selling, general and
administrative expenses 24,631 23,194 6%
Earnings from operations 20,377 49,778 (59%)
Interest expense (12,223) (12,604) (3%)
Interest and dividend income 812 61 1,231%
Other income (expense), net (961) 722 *
Provision for taxes on income 3,042 14,424 (79%)
Net earnings 4,963 23,533 (79%)
<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,
1996.
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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
and Chief Financial Officer
(Duly Authorized; Principal
Financial Officer)
By T. L. Carter
------------------------------
T. L. Carter
Controller
(Duly Authorized; Principal
Accounting Officer)
Date: April 30, 1996
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<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.
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,800
<SECURITIES> 7,725
<RECEIVABLES> 155,508
<ALLOWANCES> 2,386
<INVENTORY> 183,830
<CURRENT-ASSETS> 383,958
<PP&E> 2,869,297
<DEPRECIATION> 1,124,716
<TOTAL-ASSETS> 2,220,749
<CURRENT-LIABILITIES> 315,354
<BONDS> 610,949
<COMMON> 32,722
0
0
<OTHER-SE> 921,885
<TOTAL-LIABILITY-AND-EQUITY> 2,220,749
<SALES> 388,621
<TOTAL-REVENUES> 388,621
<CGS> 343,613
<TOTAL-COSTS> 343,613
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,223
<INCOME-PRETAX> 8,005
<INCOME-TAX> 3,042
<INCOME-CONTINUING> 4,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,963
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
