Potlatch Reports Q2 Results: Net Loss of $6.6 Million
Press release from the issuing company
SPOKANE, Wash.--July 17, 2002--Potlatch Corporation today reported a loss for the second quarter of 2002, largely as a result of poor market conditions for the company's wood products, costs related to the repayment of debt and a charge taken for the scheduled closure of a sawmill in Arkansas.
The company incurred a net loss from continuing operations of $6.6 million or $.23 per diluted common share for the second quarter of 2002, compared to a loss of $3.9 million or $.14 per diluted common share for the same period in 2001. The $6.6 million loss includes a debt financing cost write-off of $3.9 million and a one-time early debt pre-payment fee of $2.0 million, both before taxes ($3.6 million net of taxes). Including discontinued operations, the company incurred a net loss of $20.1 million or $.70 per diluted common share for the second quarter of 2002, compared to a net loss of $9.8 million or $.35 per diluted common share for the second quarter of 2001. Excluding discontinued operations, net sales for the second quarter of 2002 were $333.2 million, down slightly from $335.0 million recorded in the second quarter of 2001.
The company's net loss from continuing operations for the first half of 2002 totaled $21.5 million or $.76 per diluted common share. The net loss from continuing operations for the first half of 2001 was $33.7 million or $1.19 per diluted common share. Including discontinued operations, the loss for the first half of 2002 totaled $187.5 million or $6.60 per diluted common share, compared to a loss of $41.2 million or $1.46 per diluted common share in 2001. Excluding discontinued operations, net sales for the first half of 2002 were $651.4 million, compared with $647.9 million for 2001's first half.
The Resource segment reported operating income of $12.5 million for the second quarter of 2002, an increase from the $10.0 million earned in the second quarter of 2001. The results reflect improved earnings for the segment's Idaho region, which benefited from higher net sales realizations for logs.
Operating income for the Wood Products segment was $.9 million for the second quarter of 2002, significantly below the $7.6 million earned in the second quarter of 2001. "Lower net sales realizations for all of our wood products, with the exception of plywood, were the primary reason for the unfavorable comparison to the prior year," stated L. Pendleton Siegel, Potlatch chairman and chief executive officer. "A significant amount of wood products was shipped into the United States from Canada early in the second quarter, ahead of a U.S.-imposed duty, causing prices to weaken," Siegel added. Increases in lumber and oriented strand board shipments helped to partially offset the decline in net sales realizations.
The Pulp and Paper segment reported operating income for the second quarter of $5.2 million, compared to $4.7 million for 2001's second quarter. "The modestly improved results were primarily due to decreased production costs compared to the second quarter of 2001, with energy costs in particular lower than in 2001," Siegel noted. "However, these benefits were largely offset by lower net sales realizations for paperboard, which decreased 10 percent on a comparative basis," he added. Markets for consumer tissue have remained steady, with an increase in shipments offsetting lower net sales realizations.
The company announced in June that it will close its Bradley hardwood lumber mill in Warren, Arkansas, and exit the hardwood lumber business. A $9.4 million pre-tax charge was recorded for estimated closure costs and asset write-downs. The company is seeking a buyer for the facility. Operating results for the mill during the second quarter and first six months of 2002 are presented as discontinued operations in the statements of operations, along with results for the Printing Papers segment. A majority of the Printing Papers assets were sold in May and the company exited the printing papers business. Prior year amounts have been reclassified for comparability.
The company's discontinued operations, which include the Printing Papers segment and the Bradley lumber mill, reported a second quarter loss of $13.5 million, net of tax. The amount includes results for the winding down of manufacturing operations in the Printing Papers segment prior to completion of the sale in May and a full quarter's operations at the Bradley lumber mill, which is scheduled for closure in August. The loss also includes a one-time charge of $9.4 million ($5.7 million net of tax) for asset write-downs and other costs related to the Bradley closure.
The company incurred significantly lower interest expense in the second quarter of 2002 compared to the same period last year. The reduced interest expense was due to the repayment of debt during the quarter, using a portion of the proceeds from the sale of a majority of the Printing Papers segment assets to Sappi Limited. However, the write-off of related debt financing costs totaling $3.9 million, which are normally amortized over the period the debt is outstanding, and a one-time fee of $2.0 million for early pre-payment more than offset the benefits of lower interest expense for the quarter.
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