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Press release from Business Wire

Plum Creek Timber Company, Inc. Reports Results for Second Quarter 2012

Monday, July 30, 2012

Plum Creek Timber Company, Inc. Reports Results for Second Quarter 201216:02 EDT Monday, July 30, 2012 SEATTLE (Business Wire) -- Plum Creek Timber Company, Inc. (NYSE: PCL) today announced second quarter earnings of $36 million, or $0.22 per diluted share, on revenues of $294 million. Earnings for the second quarter of 2011 were $44 million, or $0.27 per diluted share, on revenues of $284 million. Earnings for the first six months of 2012 were $65 million, or $0.40 per diluted share, on revenues of $631 million. Earnings for the first six months of 2011 were $82 million, or $0.50 per diluted share, on revenues of $559 million. Adjusted EBITDA, a non-GAAP measure of operating performance, for the first six months of 2012 was $234 million, up from $209 million in the same period of 2011. The company ended the quarter with $260 million in cash and cash equivalents. A reconciliation of adjusted EBITDA to net income and cash flow from operations is provided as an attachment to this release. “Earnings in our timber and manufacturing businesses improved over the past year,” said Rick Holley, Plum Creek's president and chief executive officer. “Improving demand for our lumber and panels drove a $4 million improvement in our Manufacturing segment's second quarter profit compared to 2011. In our resources segments, higher harvest volumes, supplemented by volume from our recent timber deed acquisition, helped drive $8 million of profit growth and a $15 million increase in adjusted EBITDA. In our Real Estate segment, last year's second quarter sales were anchored by a couple of large conservation transactions making for a challenging comparison. However, our Real Estate segment revenues for this second quarter of $47 million were a bit higher than we initially anticipated. We continue to be on track to grow our adjusted EBITDA by approximately $50 million this year.” Review of Operations The Northern Resources segment reported operating income of $4 million for the quarter, up $1 million from the second quarter of 2011. As expected, good harvesting conditions throughout much of the quarter allowed the company to bring more timber to market than the previous year. The sawlog harvest increased approximately 160,000 tons, or 34 percent, and the pulpwood harvest increased approximately 70,000 tons, or 29 percent. Sawlog prices of $71 per ton approximated second quarter of 2011 levels. Average pulpwood prices of $42 per ton were about $2 per ton higher than the same period of 2011. Operating income in the Southern Resources segment was $22 million, an increase of $7 million from the $15 million reported during the second quarter of 2011. Both sawlog and pulpwood prices were slightly higher (approximately $1 per ton) than the levels reported for the second quarter of 2011. As planned, harvest volumes in 2012 were higher than those in the same period of 2011. The company's harvest continues to emphasize pulpwood and smaller diameter sawlogs to maximize long-term value of the forest. Pulpwood volumes were up 341,000 tons, or 21%, higher compared to the second quarter of 2011. The sawlog harvest was 406,000 tons, or 36%, higher, than the same period of 2011. The Real Estate segment reported total revenue of $47 million and operating income of $29 million. Second quarter 2011 Real Estate segment revenue was $79 million, primarily consisting of $62 million of conservation transactions in the South. The second quarter 2011 operating income was $50 million. The 2012 sales consisted of $37 million of smaller rural land sales across the company's holdings and the completion of a $10 million conservation easement in the state of Maine as part of its Moosehead Lake Concept Plan. The Manufacturing segment reported $9 million of operating income for the second quarter, compared to the $5 million operating income reported for the second quarter of 2011. Profitability in each of the product lines improved on higher prices and sales volumes. Sales volumes for plywood and medium density fiberboard (MDF) increased 15 percent and 22 percent respectively. Lumber sales volume increased 2 percent and lumber prices increased approximately 4 percent. Plywood prices increased 7 percent and MDF prices improved 2 percent. Outlook Business conditions in most of the company's business segments have improved slowly over the past year. The company expects a slow pace of recovery to continue through the remainder of the year. The company expects its full-year harvest to approximate 17.5 million tons, including approximately 700,000 tons from our recent timber deed acquisition. This is at the high end of the company's original harvest projection of 16.5 to 17.5 million tons for 2012. The increase is comprised of pulpwood, primarily the result of increased yields from the thinning of young timber stands. During the third quarter, harvests in the Northern Resources segment are expected to increase seasonally from their second quarter low while the Southern harvest is expected to be similar to the second quarter's level. Third quarter Real Estate segment sales are expected to be between $90 million and $100 million. The company expects full-year Real Estate segment sales to be between $275 million and $325 million. Manufacturing results are expected to decline slightly from the second quarter's level. “Our operations are performing well and we look forward to continued growth in the second half of the year, but believe a stronger recovery in the nation's economy is more likely in 2013,” continued Holley. “We're maintaining our earnings guidance for the year at $1.00 to $1.25 per share. We expect to report third quarter earnings between $0.32 and $0.37 per share. “We continue to manage the company to maximize the long-term value of our shareholders' investment. To accomplish this, nothing is more important than continued disciplined capital allocation. We will continue to evaluate all our opportunities to maximize shareholder value through share repurchase, debt reduction, or timberland acquisition; whatever creates the most value for our shareholders,” concluded Holley. Earnings Conference Call and Supplemental Information Plum Creek will hold a conference call today, Jul. 30, at 5:00 p.m. ET (2:00 p.m. PT). A live webcast of the conference call may be accessed through Plum Creek's Internet site at www.plumcreek.com by clicking on the “Investors” link. Investors without Internet access should dial 1-800-572-9852 at least 10 minutes prior to the start of the call, referencing Plum Creek's earnings conference call. Those wishing to access the call from outside the United States and Canada should dial 1-706-645-9676, also referencing Plum Creek's earnings conference call. Replay of the call will be available for 48 hours after completion of the live call and can be accessed at 1-855-859-2056 or 1-404-537-3406 (international calls), using the code 21136767. Supplemental financial information for Plum Creek operations, including statistical data and reconciliations to non-GAAP measures is available in the Investors section of Plum Creek's website at www.plumcreek.com. Plum Creek is the largest and most geographically diverse private landowner in the nation with approximately 6.5 million acres of timberlands in major timber producing regions of the United States and wood products manufacturing facilities in the Northwest. For more information, visit www.plumcreek.com. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended. Some of these forward-looking statements can be identified by the use of forward-looking words such as "believes," "expects," "may," "will," "should," "seek," "approximately," "intends," "plans," "estimates," or "anticipates," or the negative of those words or other comparable terminology. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions including, but not limited to, the cyclical nature of the forest products industry, our ability to harvest our timber, our ability to execute our acquisition strategy, the market for and our ability to sell or exchange non-strategic timberlands and timberland properties that have higher and better uses, and various regulatory constraints. These and other risks, uncertainties and assumptions are detailed from time to time in our filings with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, and the Securities Act of 1933, as amended. It is likely that if one or more of the risks materializes, or if one or more assumptions prove to be incorrect, the current expectations of Plum Creek and its management will not be realized. Forward-looking statements are not guarantees of performance, and speak only as of the date made, and neither Plum Creek nor its management undertakes any obligation to update or revise any forward-looking statements.   PLUM CREEK TIMBER COMPANY, INC.CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)       (In Millions, Except Per Share Amounts) Six Months Ended June 30,2012 2011 REVENUES: Timber $312 $ 267 Real Estate 147 141 Manufacturing 161 141 Other 11   10 Total Revenues 631   559   COSTS AND EXPENSES: Cost of Goods Sold: Timber 244 208 Real Estate 84 49 Manufacturing 143 128 Other 1   1 Total Cost of Goods Sold 472 386 Selling, General and Administrative 55   53 Total Costs and Expenses 527   439   Other Operating Income (Expense), net 1   3   Operating Income 105 123   Equity Earnings from Timberland Venture 28 30   Interest Expense, net: Interest Expense (Debt Obligations to Unrelated Parties) 40 41 Interest Expense (Note Payable to Timberland Venture) 29   29 Total Interest Expense, net 69 70   Income before Income Taxes 64 83   Provision (Benefit) for Income Taxes (1) 1     Net Income $65   $ 82   PER SHARE AMOUNTS:   Net Income per Share – Basic $0.40 $ 0.51 Net Income per Share – Diluted $0.40 $ 0.50   Weighted-Average Number of Shares Outstanding – Basic 161.4 161.9 – Diluted 161.7 162.2     PLUM CREEK TIMBER COMPANY, INC.CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)     (In Millions, Except Per Share Amounts) Quarter Ended June 30,2012 2011 REVENUES: Timber $157 $ 126 Real Estate 47 79 Manufacturing 85 74 Other 5   5 Total Revenues 294   284   COSTS AND EXPENSES: Cost of Goods Sold: Timber 123 101 Real Estate 16 27 Manufacturing 73 67 Other 1   1 Total Cost of Goods Sold 213 196 Selling, General and Administrative 27   25 Total Costs and Expenses 240   221   Other Operating Income (Expense), net 1   —   Operating Income 55 63   Equity Earnings from Timberland Venture 15 16   Interest Expense, net: Interest Expense (Debt Obligations to Unrelated Parties) 19 20 Interest Expense (Note Payable to Timberland Venture) 15   15 Total Interest Expense, net 34 35   Income before Income Taxes 36 44   Provision (Benefit) for Income Taxes — —     Net Income $36   $ 44   PER SHARE AMOUNTS:   Net Income per Share – Basic $0.22 $ 0.27 Net Income per Share – Diluted $0.22 $ 0.27   Weighted-Average Number of Shares Outstanding – Basic 161.5 162.0 – Diluted 161.7 162.3     PLUM CREEK TIMBER COMPANY, INC.CONSOLIDATED BALANCE SHEETS(UNAUDITED)     June 30, December 31, (In Millions, Except Per Share Amounts) 2012 2011 ASSETS Current Assets: Cash and Cash Equivalents $260 $ 254 Accounts Receivable 36 28 Inventories 46 48 Deferred Tax Asset 6 6 Assets Held for Sale 76 103 Other Current Assets 15   15   439 454   Timber and Timberlands, net 3,431 3,377 Property, Plant and Equipment, net 131 138 Equity Investment in Timberland Venture 201 201 Deferred Tax Asset 18 17 Investment in Grantor Trusts (at Fair Value) 37 36 Other Assets 37   36   Total Assets $4,294   $ 4,259     LIABILITIES Current Liabilities: Current Portion of Long-Term Debt $176 $ 352 Line of Credit 451 348 Accounts Payable 24 25 Interest Payable 26 26 Wages Payable 11 20 Taxes Payable 13 9 Deferred Revenue 36 27 Other Current Liabilities 8   8   745 815   Long-Term Debt 1,467 1,290 Note Payable to Timberland Venture 783 783 Other Liabilities 97   108   Total Liabilities 3,092   2,996     Commitments and Contingencies   STOCKHOLDERS' EQUITY Preferred Stock, $0.01 Par Value, Authorized Shares – 75.0, Outstanding – None — — Common Stock, $0.01 Par Value, Authorized Shares – 300.6, Outstanding (net of Treasury Stock) – 161.5 at June 30, 2012 and 161.3 at December 31, 2011 2 2 Additional Paid-In Capital 2,269 2,261 Retained Earnings (Accumulated Deficit) (99) (28 ) Treasury Stock, at Cost, Common Shares – 26.9 at June 30, 2012 and 26.9 at December 31, 2011 (938) (937 ) Accumulated Other Comprehensive Income (Loss) (32) (35 ) Total Stockholders' Equity 1,202   1,263   Total Liabilities and Stockholders' Equity $4,294   $ 4,259       PLUM CREEK TIMBER COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)     Six Months Ended June 30, (In Millions) 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $65 $ 82 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation, Depletion and Amortization 56 44 Basis of Real Estate Sold 75 43 Equity Earnings from Timberland Venture (28) (30 ) Distributions from Timberland Venture 28 28 Deferred Income Taxes (1) 4 Deferred Revenue from Long-Term Gas Leases (Net of Amortization) (5) 12 Timber Deed Acquired (98) — Pension Plan Contributions (7) — Working Capital Changes Impacting Cash Flow: Like-Kind Exchange Funds — (35 ) Other Working Capital Changes (2) 4 Other 6   5   Net Cash Provided By Operating Activities 89   157     CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (Excluding Timberland Acquisitions) (35) (28 ) Timberlands and Minerals Acquired (13) (12 ) Other (1) —   Net Cash Used In Investing Activities (49) (40 )   CASH FLOWS FROM FINANCING ACTIVITIES Dividends (136) (136 ) Borrowings on Line of Credit 1,129 555 Repayments on Line of Credit (1,026) (494 ) Debt Issuance Costs (3) — Principal Payments and Retirement of Long-Term Debt — (49 ) Proceeds from Stock Option Exercises 3 9 Acquisition of Treasury Stock (1) (1 ) Net Cash Used In Financing Activities (34) (116 )   Increase (Decrease) In Cash and Cash Equivalents 6 1 Cash and Cash Equivalents: Beginning of Period 254 252     End of Period $260   $ 253       PLUM CREEK TIMBER COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)     Quarter Ended June 30, (In Millions) 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $36 $ 44 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation, Depletion and Amortization 29 22 Basis of Real Estate Sold 12 24 Equity Earnings from Timberland Venture (15) (16 ) Deferred Income Taxes — 1 Deferred Revenue from Long-Term Gas Leases (Net of Amortization) (3) 5 Pension Plan Contributions (7) — Working Capital Changes Impacting Cash Flow: Like-Kind Exchange Funds — (35 ) Other Working Capital Changes 28 34 Other 3   2   Net Cash Provided By Operating Activities 83   81     CASH FLOWS FROM INVESTING ACTIVITIES Capital Expenditures (Excluding Timberland Acquisitions) (17) (16 ) Timberlands and Minerals Acquired (11) (12 ) Net Cash Used In Investing Activities (28) (28 )   CASH FLOWS FROM FINANCING ACTIVITIES Dividends (68) (68 ) Borrowings on Line of Credit 370 310 Repayments on Line of Credit (370) (298 ) Proceeds from Stock Option Exercises —   2   Net Cash Used In Financing Activities (68) (54 )   Increase (Decrease) In Cash and Cash Equivalents (13) (1 ) Cash and Cash Equivalents: Beginning of Period 273 254     End of Period $260   $ 253       PLUM CREEK TIMBER COMPANY, INC.SEGMENT DATA(UNAUDITED)     Six Months Ended June 30, (In Millions) 2012 2011 Revenues: Northern Resources $120 $ 99 Southern Resources 202 173 Real Estate 147 141 Manufacturing 161 141 Other 11 10 Eliminations (10) (5 ) Total Revenues $631   $ 559     Operating Income (Loss): Northern Resources $10 $ 10 Southern Resources 43 34 Real Estate 59 88 Manufacturing 13 9 Other (A)9 11 Other Costs and Eliminations, net (29) (29 ) Total Operating Income $105   $ 123     Adjusted EBITDA by Segment: (B) Northern Resources $23 $ 21 Southern Resources 76 58 Real Estate 135 132 Manufacturing 20 15 Other 9 11 Other Costs and Eliminations, net (29) (28 ) Total $234   $ 209     (A)During the first six months of 2011, the company received a payment of $2 million forthe settlement of a dispute that related to certain mineral rights. This amount isreported as Other Operating Gain/(Loss) in our Other Segment and is included in OtherOperating Income (Expense), net in the Consolidated Statements of Income.   (B)Refer to the separate schedule, "Segment Data - Adjusted EBITDA" for reconciliations ofAdjusted EBITDA to operating income and net cash provided by operating activities.     PLUM CREEK TIMBER COMPANY, INC.SEGMENT DATA(UNAUDITED)     Quarter Ended June 30, (In Millions) 2012 2011 Revenues: Northern Resources $56 $ 44 Southern Resources 105 84 Real Estate 47 79 Manufacturing 85 74 Other 5 5 Eliminations (4) (2 ) Total Revenues $294   $ 284     Operating Income (Loss): Northern Resources $4 $ 3 Southern Resources 22 15 Real Estate 29 50 Manufacturing 9 5 Other 4 4 Other Costs and Eliminations, net (13) (14 ) Total Operating Income $55   $ 63     Adjusted EBITDA by Segment: (A) Northern Resources $10 $ 8 Southern Resources 40 27 Real Estate 42 75 Manufacturing 12 8 Other 4 4 Other Costs and Eliminations, net (13) (13 ) Total $95   $ 109     (A)Refer to the separate schedule, "Segment Data - Adjusted EBITDA" for reconciliations ofAdjusted EBITDA to operating income and net cash provided by operating activities.   Plum Creek Timber Company, Inc Segment Data - Adjusted EBITDA Reconciliation of Operating Income and Net Cash Provided by Operating Activities (Unaudited) We define Adjusted EBITDA as earnings from continuing operations, excluding equity method earnings, and before interest, taxes, depreciation, depletion, amortization, and basis in lands sold. Adjusted EBITDA is not considered a measure of financial performance under U.S. generally accepted accounting principles (U.S. GAAP) and the items excluded from Adjusted EBITDA are significant components of our consolidated financial statements. We present Adjusted EBITDA as a supplemental performance measure because we believe it facilitates operating performance comparisons from period to period, and each business segment's contribution to that performance, by eliminating non-cash charges to earnings, which can vary significantly by business segment. These non-cash charges include timber depletion, depreciation of fixed assets and the basis in lands sold. We also use Adjusted EBITDA as a supplemental liquidity measure because we believe it is useful in measuring our ability to generate cash. In addition, we believe Adjusted EBITDA is commonly used by investors, lenders and rating agencies to assess our financial performance. A reconciliation of Adjusted EBITDA to net income and net cash from operating activities, the most directly comparable U.S. GAAP performance and liquidity measures, is provided in the following schedules:     Six Months Ended June 30, 2012 (In Millions)       Depreciation, Depletion Basis of Real Adjusted Operating Income and Amortization Estate Sold EBITDA By Segment Northern Resources $ 10 $ 13 $ — $ 23 Southern Resources 43 33 — 76 Real Estate 59 1 75 135 Manufacturing 13 7 — 20 Other 9 — — 9 Other Costs and Eliminations (30 ) — — (30 ) Other Unallocated Operating Income (Expense), net 1   —   —   1   Total $ 105   $ 54   $ 75   $ 234     Reconciliation to Net Income(1) Interest Expense (69 ) (Provision) / Benefit for Income Taxes 1 Equity Earnings from Timberland Venture 28   Net Income $ 65     Reconciliation to Net Cash Provided By Operating Activities Net Cash Flows from Operations $ 89 Interest Expense 69 Amortization of Debt Costs (2 ) Provision / (Benefit) for Income Taxes (1 ) Working Capital Changes 2 Distribution from Timberland Venture (28 ) Deferred Income Taxes 1 Deferred Revenue from Long-Term Gas Leases 5 Timber Deed Acquired 98 Pension Plan Contributions 7 Other (6 ) Adjusted EBITDA $ 234       Six Months Ended June 30, 2011 (In Millions)       Depreciation, Depletion Basis of Real Adjusted Operating Income and Amortization Estate Sold EBITDA By Segment Northern Resources $ 10 $ 11 $ — $ 21 Southern Resources 34 24 — 58 Real Estate 88 1 43 132 Manufacturing 9 6 — 15 Other 11 — — 11 Other Costs and Eliminations (30 ) 1 — (29 ) Other Unallocated Operating Income (Expense), net 1   —   —   1   Total $ 123   $ 43   $ 43   $ 209     Reconciliation to Net Income(1) Interest Expense (70 ) (Provision) / Benefit for Income Taxes (1 ) Equity Earnings from Timberland Venture 30   Net Income $ 82     Reconciliation to Net Cash Provided By Operating Activities Net Cash Flows from Operations $ 157 Interest Expense 70 Amortization of Debt Costs (1 ) Provision / (Benefit) for Income Taxes 1 Working Capital Changes 31 Distribution from Timberland Venture (28 ) Deferred Income Taxes (4 ) Deferred Revenue from Long-Term Gas Leases (12 ) Other (5 ) Adjusted EBITDA $ 209     (1) Includes reconciling items not allocated to segments for financial reporting purposes.     Quarters Ended June 30, 2012 (In Millions)       Depreciation, Depletion Basis of Real Adjusted Operating Income and Amortization Estate Sold EBITDA By Segment Northern Resources $ 4 $ 6 $ — $ 10 Southern Resources 22 18 — 40 Real Estate 29 1 12 42 Manufacturing 9 3 — 12 Other 4 — — 4 Other Costs and Eliminations (14 ) — — (14 ) Other Unallocated Operating Income (Expense), net 1   —   —   1   Total $ 55   $ 28   $ 12   $ 95     Reconciliation to Net Income(1) Interest Expense (34 ) (Provision) / Benefit for Income Taxes — Equity Earnings from Timberland Venture 15   Net Income $ 36     Reconciliation to Net Cash Provided By Operating Activities Net Cash Flows from Operations $ 83 Interest Expense 34 Amortization of Debt Costs (1 ) Provision / (Benefit) for Income Taxes — Working Capital Changes (28 ) Deferred Revenue from Long-Term Gas Leases 3 Pension Plan Contributions 7 Other (3 ) Adjusted EBITDA $ 95         Quarters Ended June 30, 2011 (In Millions)   Depreciation, Depletion Basis of Real Adjusted Operating Income and Amortization Estate Sold EBITDA By Segment Northern Resources $ 3 $ 5 $ — $ 8 Southern Resources 15 12 — 27 Real Estate 50 1 24 75 Manufacturing 5 3 — 8 Other 4 — — 4 Other Costs and Eliminations (14 ) 1 — (13 ) Other Unallocated Operating Income (Expense), net —   —   —   —   Total $ 63   $ 22   $ 24   $ 109     Reconciliation to Net Income(1) Interest Expense (35 ) (Provision) / Benefit for Income Taxes — Equity Earnings from Timberland Venture 16   Net Income $ 44     Reconciliation to Net Cash Provided By Operating Activities Net Cash Flows from Operations $ 81 Interest Expense 35 Provision / (Benefit) for Income Taxes — Working Capital Changes 1 Deferred Income Taxes (1 ) Deferred Revenue from Long-Term Gas Leases (5 ) Other (2 ) Adjusted EBITDA $ 109     (1) Includes reconciling items not allocated to segments for financial reporting purposes.   Plum Creek Timber Company, Inc.Investors: John Hobbs, 1-800-858-5347Media: Kathy Budinick, 1-888-467-3751