Plum Creek Legacy News Releases
Plum Creek Timber Company, Inc. Reports Third Quarter Earnings
Oct 23, 2006
SEATTLE, Oct 23, 2006 (BUSINESS WIRE) -- Plum Creek Timber Company, Inc. (NYSE:PCL) today announced thirdquarter earnings of $92 million, or $0.51 per diluted share, onrevenues of $454 million. Earnings for the third quarter of 2005 were$96 million, or $0.52 per diluted share, on revenues of $427 million.Third quarter 2005 earnings included a $2 million expense, or $0.01per diluted share, related to timber destroyed by Hurricane Katrinaand a tax-benefit of approximately $5 million, or $0.03 per dilutedshare resulting from lower estimated tax liabilities.
Earnings for the first nine months of 2006 were $248 million, or$1.36 per diluted share, on revenues of $1.2 billion. Earnings for thefirst nine months of 2005 were $287 million, or $1.56 per dilutedshare, on revenues of $1.2 billion.
Results for the first nine months of 2006 include a $2 millionafter-tax cumulative benefit from accounting changes. As a result,income from continuing operations for the first nine months of 2006was $246 million, or $1.35 per fully diluted share. Results for thefirst nine months of 2005 include a $20 million, or $0.11 per share,after-tax gain on the sale of coal assets. As a result, income fromcontinuing operations for the first nine months of 2005 was $267million, or $1.45 per fully diluted share.
Cash provided by operating activities during the third quarter of2006 totaled $168 million. The company ended the third quarter of 2006with $389 million in cash and cash equivalents.
"During the third quarter our real estate segment continued togrow revenue and earnings," said Rick Holley, president and chiefexecutive officer. "Strong interest in rural properties continuedthroughout the quarter, and the prices we've received for thesetimberlands continue to outpace those of 2005. These positive resultswere offset by lower profits in our Resources and Manufacturingsegments as lumber demand slowed from the record high levels of 2005.We believe the strong results of our real estate segment and, to alesser extent, improving pulpwood markets will result in continuedstrong cash flow generation and good financial performance in thefourth quarter. We expect sawlog markets to be challenging in thefourth quarter and we will defer harvests in markets where pricingdoes not meet our expectations."
Review of Operations
The Northern Resources segment reported third quarter operatingprofit of $25 million, unchanged from the same period of 2005. Thesegment's third quarter harvest was 24 percent higher than the sameperiod of 2005 due primarily to harvests from Michigan timberlandsacquired during the fourth quarter of 2005. The Michigan operationsadded approximately $5 million to the segment's operating profitduring the third quarter of 2006. However, 2 percent lower softwoodsawlog prices and higher log and haul costs offset the positive impactof the Michigan operations. Average pulpwood prices were slightlylower when compared to the same period of 2005.
Operating profit in the Southern Resources segment was $38 millionfor the third quarter, down $6 million from the same period of 2005.The decline in segment profits is primarily the result of lower sawlogprices. Timberland accessibility, and therefore timber supply,remained excellent as moderate-to-severe drought conditions persistedacross the South. At the same time, sawlog demand decreased somewhatas regional lumber production slowed from the record pace it set in2005. As a result of this combination of abundant supply and reduceddemand, average softwood sawlog prices were approximately 7 percentlower during the third quarter of 2006 compared to the third quarterof 2005. The harvest of higher valued sawlogs was deferred in severalmarkets and resulted in a weaker harvest mix and a slight decline insawlog harvests when compared to the same period of last year. Aplanned increase in pulpwood thinnings to serve increased pulpwooddemand resulted in a 7 percent increase in total harvest volume duringthe third quarter of 2006 compared to the same period of 2005.
The Real Estate segment reported third quarter revenue of $129million compared to $116 million in the third quarter of 2005. Thesegment operating profit was $72 million for the third quarter of2006, up from $50 million for the same period of 2005. During thethird quarter of 2006, the company continued to capture higherper-acre prices for its timberlands when compared to the same periodof 2005. As planned, the company continued to increase its sales ofrecreation and higher and better use timberlands. The company soldapproximately 19,000 acres of small, non-strategic timberlands ataverage prices approaching $1,800 per acre. These lands are generallysmall tracts of lower productivity timberlands. The sale of 4,600acres of conservation properties captured nearly $3,900 per acre while7,900 acres of recreation property were sold at an average price ofapproximately $3,800 per acre. In addition, the company completed thesale of a 1,900 acre development property in a growing area of KingCounty, Washington for approximately $43 million.
The Manufacturing segment reported operating profit of $6 millionfor the third quarter of 2006, down from the $9 million reported forthe third quarter of 2005. The company's medium density fiberboard(MDF) business continued to benefit from operational efficiencies andstrong demand. Higher profits in the MDF business offset some of thedecline in lumber profits, the result of lower lumber demand andprices when compared to the same period of 2005. Compared to the sameperiod of 2005, average third quarter MDF prices were up 17 percent,average plywood prices were up 3 percent, and average lumber pricesdeclined 7 percent.
Share Repurchase
During the quarter the company repurchased approximately 2.3million shares of common stock at an average price of $33.87 pershare. Combined with the second quarter repurchases of approximately5.1 million shares, the company has repurchased over 7.4 millionshares of common stock for the year. This represents a 4 percentreduction in shares outstanding since the beginning of 2006. As ofSeptember 30, 2006, the company had 177.0 million shares of commonstock outstanding.
"Disciplined capital allocation is a crucial component oflong-term shareholder value delivery," continued Holley. "We areconstantly reviewing our capital allocation alternatives and seekingthe best long-term return for our shareholders. Through these sharerepurchases, we've effectively bought our own timberlands at asignificant discount to their intrinsic value. We will continue toevaluate all our capital allocation alternatives, including theacquisition of financially attractive timberlands, high-returninvestments in forest productivity, and continued opportunisticacquisition of our stock."
Outlook
Fourth quarter income from continuing operations is expected to bebetween $0.30 and $0.35 per share, resulting in full-year reportedincome from operations between $1.66 and $1.71 per share.
During the third quarter the United States and Canada reached anegotiated settlement to the softwood lumber trade dispute. The newagreement took effect on October 13. During the fourth quarter thecompany expects to receive an estimated $15 million payment as aresult of the negotiated settlement. The guidance above does notinclude the earnings impact of this payment.
The company expects that a combination of temporarily high lumberinventories in distribution channels, seasonal construction slowing,and poor cash returns at lumber mills will limit lumber productionduring the fourth quarter and help to stabilize lumber prices. Theseconditions are expected to translate into lower spot sawlog prices incertain markets.
In Northern markets, the company expects its sawlog prices toreturn to levels similar to the fourth quarter of 2005 as PacificNorthwest sawlog markets react to mill production curtailments.
In the South, the company expects average sawlog prices in mostmarkets to hold at current levels. While some markets may experiencemodest price erosion in response to lower lumber production,timberland owners have begun to pull timber from the market, choosingto allow the trees to grow rather than sell into lower-priced markets.The company will continue to adjust harvest decisions on amarket-by-market basis across its ownership.
Demand from new oriented strand board mills and tightening woodchip supplies in many regions are translating into increased demandfor pulpwood, particularly in the South and Northwest. Pulpwood pricesare firm and increasing in these markets. During the second half of2006 the company increased its thinning activity, particularly in theSouthern Resources segment, to serve the increased demand.
The company has increased its outlook for Real Estate segmentrevenue as the result of the continuing strength in demand for ruralreal estate properties. The company now expects this segment'srevenues to be between $305 million and $315 million for the year.Fourth quarter revenues are expected to be between $63 million and $73million, with development property sales accounting for approximately$7 million of the fourth quarter revenue.
Manufacturing profits are expected to continue to moderate. Lumbermarkets are expected to remain weak in the face of high lumberinventories and seasonally slower lumber demand. MDF profitability isexpected to seasonally soften as prices moderate from the recordlevels experienced during the third quarter.
The lower manufacturing profits and lower level of real estatedevelopment sales is expected to reduce the company's tax expense whencompared to the third quarter.
"We expect to end the year with good fourth quarter performance.Our Real Estate segment continues to perform well and we are buildingfuture value through the entitlement of select high value developmentproperties. Our timber business will face some challenging businessconditions in the short term as lumber customers work to achievebalance in their end markets. We view this as a temporary situation.We are well aware of the strong demographic underpinnings of demandfor our business segments and will continue to focus on maximizing thelong term value of all our land and timber assets," concluded Holley.
Earnings Conference Call and Supplemental Information
Plum Creek will hold a conference call today, October 23, at 5:00p.m. EDT (2:00 p.m. PDT). A live webcast of the conference call may beaccessed through Plum Creek's Internet site at www.plumcreek.com byclicking on the "Investors" link.
Investors without Internet access should dial 1-800-572-9852 atleast 10 minutes prior to the start, referencing Plum Creek'searnings. Those wishing to access the call from outside the UnitedStates/Canada should dial 1-706-645-9676, also referencing PlumCreek's earnings. Replay of the call will be available for 48 hoursafter completion of the live call and can be accessed at1-800-642-1687 or 1-706-645-9291 (international calls), using the code3473758.
Supplemental financial information for Plum Creek operations,including statistical data, is available in the "Investors" section ofPlum Creek's website at www.plumcreek.com.
Plum Creek is one of the largest private timberland owners in thenation, with approximately 8 million acres of timberlands in majortimber producing regions of the United States and 10 wood productsmanufacturing facilities in the Northwest.
Forward-Looking Statements
This press release contains forward-looking statements within themeaning of the Private Litigation Reform Act of 1995 as amended. Someof these forward-looking statements can be identified by the use offorward-looking words such as "believes," "expects," "may," "will,""should," "seek," "approximately," "intends," "plans," "estimates," or"anticipates," or the negative of those words or other comparableterminology. The accuracy of such statements is subject to a number ofrisks, uncertainties and assumptions including, but not limited to,the cyclical nature of the forest products industry, our ability toharvest our timber, our ability to execute our acquisition strategy,the market for and our ability to sell or exchange non-strategictimberlands and timberland properties that have higher and betteruses, and various regulatory constraints. These and other risks,uncertainties and assumptions are detailed from time to time in ourfilings with the Securities and Exchange Commission under theSecurities Exchange Act of 1934, as amended, and the Securities Act of1933, as amended. It is likely that if one or more of the risksmaterializes, or if one or more assumptions prove to be incorrect, thecurrent expectations of Plum Creek and its management will not berealized. Forward-looking statements are not guarantees ofperformance, and speak only as of the date made, and neither PlumCreek nor its management undertakes any obligation to update or reviseany forward-looking statements.
PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Nine Months Ended ------------------- September September 30, 30, 2006 2005 --------- --------- (In Millions, Except Per Share Amounts)Revenues: Timber $ 603 $ 572 Real Estate 242 220 Manufacturing 388 383 Other 15 10 -------- --------- Total Revenues 1,248 1,185 -------- ---------Costs and Expenses: Cost of Goods Sold: Timber 361 308 Real Estate 96 105 Manufacturing 353 349 Other 2 2 -------- --------- Total Cost of Goods Sold 812 764 Selling, General and Administrative 76 68 -------- --------- Total Costs and Expenses 888 832 -------- ---------Operating Income 360 353Interest Expense, net 98 80 -------- ---------Income before Income Taxes 262 273Provision for Income Taxes 16 6 -------- ---------Income from Continuing Operations 246 267Gain on Sale of Properties, net of tax - 20 -------- ---------Net Income Before Cumulative Effect of Accounting Change 246 287Cumulative Effect of Accounting Change, net of tax 2 - -------- ---------Net Income $ 248 $ 287 ======== =========Income from Continuing Operations per Share - Basic $ 1.35 $ 1.45 - Diluted $ 1.35 $ 1.45Net Income per Share - Basic $ 1.36 $ 1.56 - Diluted $ 1.36 $ 1.56Weighted Average Number of Shares Outstanding - Basic 181.7 183.9 - Diluted 182.1 184.6
PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Quarter Ended ------------------- September September 30, 30, 2006 2005 --------- --------- (In Millions, Except Per Share Amounts)Revenues: Timber $ 196 $ 180 Real Estate 129 116 Manufacturing 124 126 Other 5 5 ------- --------- Total Revenues 454 427 ------- ---------Costs and Expenses: Cost of Goods Sold: Timber 127 107 Real Estate 55 65 Manufacturing 113 114 Other 1 1 ------- --------- Total Cost of Goods Sold 296 287 Selling, General and Administrative 24 23 ------- --------- Total Costs and Expenses 320 310 ------- ---------Operating Income 134 117Interest Expense, net 33 26 ------- ---------Income before Income Taxes 101 91Provision (Benefit) for Income Taxes 9 (5) ------- ---------Net Income $ 92 $ 96 ======= =========Net Income per Share - Basic $ 0.51 $ 0.52 - Diluted $ 0.51 $ 0.52Weighted Average Number of Shares Outstanding - Basic 178.5 184.0 - Diluted 178.9 184.6
PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) September December 30, 31, 2006 2005 --------- -------- (In Millions, Except Per Share Amounts) ASSETSCurrent Assets: Cash and Cash Equivalents $ 389 $ 369 Restricted Advance from Customer 15 23 Accounts Receivable 42 44 Like-Kind Exchange Funds Held in Escrow 40 30 Inventories 75 75 Deferred Tax Asset 8 17 Real Estate Development Properties 4 26 Assets Held for Sale 77 43 Other Current Assets 18 16 -------- -------- 668 643Timber and Timberlands - Net 3,809 3,887Property, Plant and Equipment - Net 220 234Investment in Grantor Trusts 26 26Other Assets 32 22 -------- -------- Total Assets $ 4,755 $ 4,812 ======== ======== LIABILITIESCurrent Liabilities: Current Portion of Long-Term Debt $ 255 $ 161 Short-Term Debt - 50 Accounts Payable 35 45 Interest Payable 45 30 Wages Payable 20 25 Taxes Payable 28 18 Deferred Revenue 34 35 Other Current Liabilities 12 11 -------- -------- 429 375Long-Term Debt 1,617 1,524Lines of Credit 518 495Deferred Tax Liability 38 39Other Liabilities 51 54 -------- -------- Total Liabilities 2,653 2,487 -------- --------Commitments and Contingencies STOCKHOLDERS' EQUITYPreferred Stock, $0.01 par value, authorized shares - 75.0, outstanding - none - -Common Stock, $0.01 par value, authorized shares - 300.6, outstanding - 177.0 at September 30, 2006, and 184.2 at December 31, 2005 2 2Additional Paid-In Capital 2,188 2,179Retained Earnings 215 186Treasury Stock, at cost, Common Shares - 9.5 at (306) (44) September 30, 2006, and 2.0 at December 31, 2005Other Equity 3 2 -------- -------- Total Stockholders' Equity 2,102 2,325 -------- -------- Total Liabilities and Stockholders' Equity $ 4,755 $ 4,812 ======== ========
PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended ------------------- September September 30, 30, 2006 2005 --------- --------- (In Millions)Cash Flows From Operating Activities:Net Income $ 248 $ 287Adjustments to Reconcile Net Income toNet Cash Provided By Operating Activities: Depreciation, Depletion and Amortization 94 85 Basis of Real Estate Sold 66 82 Deferred Income Taxes 8 (5) Gain on Sales of Properties and Other Assets - (22) Working Capital Changes Impacting Cash Flow: Like-Kind Exchange Funds (10) (68) Other Working Capital Changes 18 2 Other (4) 1 --------- ---------Net Cash Provided By Operating Activities 420 362 --------- ---------Cash Flows From Investing Activities: Capital Expenditures (Excluding Timberland Acquisitions) (60) (53) Timberlands Acquired (22) (118) Proceeds from Sales of Properties and Other Assets 1 27 Other (4) (1) --------- ---------Net Cash Used In Investing Activities (85) (145) --------- ---------Cash Flows From Financing Activities: Dividends (219) (209) Borrowings on Line of Credit 2,167 1,806 Repayments on Line of Credit (2,144) (1,753) Proceeds from Issuance of Short-Term Debt - 50 Repayment of Short-Term Debt (50) - Proceeds from Issuance of Long-Term Debt 216 - Principal Payments and Retirement of Long-Term Debt (29) (51) Proceeds from Stock Option Exercises 6 4 Acquisition of Treasury Stock (262) (1) Other - (1) --------- ---------Net Cash Used In Financing Activities (315) (155) --------- ---------Increase In Cash and Cash Equivalents 20 62 Cash and Cash Equivalents: Beginning of Period 369 347 --------- --------- End of Period $ 389 $ 409 ========= =========
PLUM CREEK TIMBER COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Quarter Ended ---------------------------- September 30, September 30, 2006 2005 ------------- ------------- (In Millions)Cash Flows From Operating Activities:Net Income $ 92 $ 96Adjustments to Reconcile Net Income toNet Cash Provided By Operating Activities:Depreciation, Depletion and Amortization 34 30Basis of Real Estate Sold 43 54Deferred Income Taxes 8 (4)Gain on Sale of Properties - (1)Working Capital Changes Impacting Cash Flow: Like-Kind Exchange Funds (30) (22) Other Working Capital Changes 24 10Other (3) 1 ------------- -------------Net Cash Provided By Operating Activities 168 164 ------------- -------------Cash Flows From Investing Activities:Capital Expenditures (Excluding Timberland Acquisitions) (24) (25)Timberlands Acquired (5) (68)Proceeds from Sales of Properties and Other Assets - 22Other (1) (1) ------------- -------------Net Cash Used In Investing Activities (30) (72) ------------- -------------Cash Flows From Financing Activities:Dividends (72) (69)Borrowings on Line of Credit 693 666Repayments on Line of Credit (691) (660)Principal Payments and Retirement of Long-Term Debt - (2)Proceeds from Stock Option Exercises 3 -Acquisition of Treasury Stock (78) (1)Other - (1) ------------- -------------Net Cash Used In Financing Activities (145) (67) ------------- -------------Increase (Decrease) In Cash and Cash Equivalents (7) 25Cash and Cash Equivalents: Beginning of Period 396 384 ------------- ------------- End of Period $ 389 $ 409 ============= =============
Click Here for 3rd Quarter 2006 Financial Supplements (in PDF)
SOURCE: Plum Creek Timber Company, Inc.
Plum Creek Timber Company, Inc.
Investors: John Hobbs 1-800-858-5347
Media: Kathy Budinick 1-206-467-3620