PCH 2014.06.30 10-Q


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________ 
Form 10-Q

(Mark One)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2014
Or 
¨
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from             to             
Commission File Number 1-32729
 

 POTLATCH CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
82-0156045
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
601 West First Avenue, Suite 1600
 
 
Spokane, Washington
 
99201
(Address of principal executive offices)
 
(Zip Code)
(509) 835-1500
(Registrant’s telephone number, including area code)


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  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
 
x
 
Accelerated filer
o
Non-accelerated filer
 
o  (Do not check if a smaller reporting company)
 
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  x
The number of shares of common stock of the registrant outstanding as of July 21, 2014 was 40,591,415.
 



POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
 
 
 
 
Page  Number
PART I. - FINANCIAL INFORMATION
 
ITEM 1.
 
 
 
 
 
 
ITEM 2.
ITEM 3.
ITEM 4.
PART II. - OTHER INFORMATION
 
ITEM 1.
ITEM 1A.
ITEM 6.




Part I

ITEM 1. FINANCIAL STATEMENTS
 
Potlatch Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
 

 
Quarter Ended   June 30,
 
Six Months Ended   June 30,
  
 
 
2014
 
2013
 
2014
 
2013
Revenues
$
143,919

 
$
133,212

 
$
283,498

 
$
272,465

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
101,849

 
91,904

 
200,442

 
190,203

Selling, general and administrative expenses
12,345

 
10,117

 
22,022

 
23,713

Environmental remediation charge
—

 
1,750

 
—

 
2,500

 
114,194

 
103,771

 
222,464

 
216,416

Operating income
29,725

 
29,441

 
61,034

 
56,049

Interest expense, net
(5,509
)
 
(5,667
)
 
(10,969
)
 
(12,003
)
Income before income taxes
24,216

 
23,774

 
50,065

 
44,046

Income taxes
(7,946
)
 
(4,592
)
 
(13,445
)
 
(9,377
)
Net income
$
16,270

 
$
19,182

 
$
36,620

 
$
34,669

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.40

 
$
0.47

 
$
0.90

 
$
0.86

Diluted
0.40

 
0.47

 
0.90

 
0.85

Distributions per share
$
0.35

 
$
0.31

 
$
0.70

 
$
0.62

Weighted average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
40,741

 
40,509

 
40,726

 
40,474

Diluted
40,850

 
40,694

 
40,833

 
40,655

The accompanying notes are an integral part of these consolidated financial statements.



2


 
Potlatch Corporation and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
Unaudited (Dollars in thousands)
 

 
Quarter Ended   June 30,
 
Six Months Ended   June 30,
  
 
 
2014
 
2013
 
2014
 
2013
Net income
$
16,270

 
$
19,182

 
$
36,620

 
$
34,669

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Pension and other postretirement employee benefits:
 
 
 
 
 
 
 
Amortization of prior service credit included in net periodic cost, net of tax of $(867) and $(871), $(1,734) and $(1,741)
(1,356
)
 
(1,361
)
 
(2,712
)
 
(2,723
)
Amortization of actuarial loss included in net periodic cost, net of tax of $1,568 and $2,267, $3,245 and $4,513
2,452

 
3,544

 
5,074

 
7,057

Other comprehensive income, net of tax
1,096

 
2,183

 
2,362

 
4,334

Comprehensive income
$
17,366

 
$
21,365

 
$
38,982

 
$
39,003

Amortization of prior service credit and amortization of actuarial loss are included in the computation of net periodic cost. See Note 7: Pension Plans and Other Postretirement Employee Benefits for additional information.
The accompanying notes are an integral part of these consolidated financial statements.



3


 
Potlatch Corporation and Consolidated Subsidiaries
Consolidated Condensed Balance Sheets
Unaudited (Dollars in thousands, except per-share amounts)
 

 
June 30,
2014
 
December 31,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
9,252

 
$
5,586

Short-term investments
73,916

 
52,251

Receivables, net
20,629

 
16,572

Inventories
26,071

 
36,275

Deferred tax assets
7,724

 
7,724

Other assets
7,584

 
11,961

Total current assets
145,176

 
130,369

Property, plant and equipment, net
62,402

 
59,976

Timber and timberlands, net
452,763

 
455,871

Deferred tax assets
16,728

 
21,576

Other assets
12,556

 
12,738

Total assets
$
689,625

 
$
680,530

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current installments on long-term debt
$
—

 
$
—

Accounts payable and accrued liabilities
54,937

 
50,318

Total current liabilities
54,937

 
50,318

Long-term debt
320,003

 
320,092

Liability for pension and other postretirement employee benefits
74,792

 
83,619

Other long-term obligations
15,557

 
22,353

Stockholders’ equity
224,336

 
204,148

Total liabilities and stockholders' equity
$
689,625

 
$
680,530

 
 
 
 
Shares outstanding (in thousands)
40,591

 
40,537

Working capital
$
90,239

 
$
80,051

Current ratio
2.6:1

 
2.6:1

The accompanying notes are an integral part of these consolidated financial statements.


4


 
Potlatch Corporation and Consolidated Subsidiaries
Consolidated Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
 

 
Six Months Ended   June 30,
 
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
36,620

 
$
34,669

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation, depletion and amortization
11,002

 
12,025

Basis of real estate sold
6,834

 
907

Change in deferred taxes
536

 
(338
)
Employee benefit plans
(267
)
 
3,484

Employee equity-based compensation expense
2,032

 
2,101

Other, net
(1,161
)
 
(61
)
Working capital and operating related activities
12,836

 
(11,272
)
Net cash from operating activities
68,432

 
41,515

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Change in short-term investments
(21,665
)
 
19,032

Additions to property, plant and equipment
(6,508
)
 
(5,792
)
Additions to timber and timberlands
(5,887
)
 
(4,683
)
Other, net
334

 
(654
)
Net cash from investing activities
(33,726
)
 
7,903

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions to common stockholders
(28,413
)
 
(25,115
)
Repayment of long-term debt
—

 
(36,663
)
Exercises of stock options
15

 
1,798

Employee tax withholdings on equity-based compensation
(1,079
)
 
(1,700
)
Change in book overdrafts
(1,424
)
 
1,723

Other, net
(139
)
 
(40
)
Net cash from financing activities
(31,040
)
 
(59,997
)
Change in cash
3,666

 
(10,579
)
Cash at beginning of period
5,586

 
16,985

Cash at end of period
$
9,252

 
$
6,406

SUPPLEMENTAL CASH FLOW INFORMATION
 
 
 
Cash paid during the period for:
 
 
 
Interest, net of amount capitalized
$
10,431

 
$
11,673

Income taxes, net
6,546

 
11,890

The accompanying notes are an integral part of these consolidated financial statements.

5



INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
Page Number
Note 1.
Note 2.
Note 3.
Note 4.
Note 5.
Note 6.
Note 7.
Note 8.
Note 9.
Note 10.

NOTE 1. BASIS OF PRESENTATION
For purposes of this report, any reference to “Potlatch,” “the company,” “we,” “us,” and “our” means Potlatch Corporation and all of its wholly owned subsidiaries, except where the context indicates otherwise.
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements; certain disclosures normally provided in accordance with generally accepted accounting principles in the United States have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on February 14, 2014. We believe that all adjustments necessary for a fair statement of the results of such interim periods have been included.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers. This update was issued as Accounting Standards Codification Topic 606. The core principle of this amendment is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, with earlier adoption not permitted. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The adoption of this guidance is not expected to have a significant effect on our consolidated financial statements.


6


NOTE 3. INCOME TAXES
As a real estate investment trust (REIT), we generally are not subject to federal and state corporate income taxes on income of the REIT that we distribute to our shareholders. We are, however, subject to corporate taxes on built-in gains (the excess of fair market value over tax basis on January 1, 2006) on sales of real property held by the REIT during the first ten years following the REIT conversion. The sale of standing timber is not subject to built-in gains tax. The Small Business Jobs Act of 2010 modified the built-in gains provisions to exempt sales of real properties in 2011, if five years of the recognition period had elapsed before January 1, 2011. The American Taxpayer Relief Act of 2012 extended the reduced five-year holding period for sales occurring in 2012 and 2013. Accordingly, the built-in gains tax did not apply to sales of real property that occurred in 2011, 2012 and 2013.
We conduct certain activities through our taxable REIT subsidiaries (TRS), which are subject to corporate level federal and state income taxes. These activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Income taxes for all periods presented in this Quarterly Report on Form 10-Q were primarily due to income of the TRS.




NOTE 4. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating the basic and diluted earnings per share for the quarters and six months ended June 30:
 
Quarter Ended   June 30,
 
Six Months Ended   June 30,
 
 
(Dollars in thousands, except per-share amounts)
2014
 
2013
 
2014
 
2013
Net income
$
16,270


$
19,182

 
$
36,620

 
$
34,669

 
 
 
 
 
 
 
 
Basic weighted average shares outstanding
40,740,979

 
40,508,872

 
40,726,397

 
40,473,705

Incremental shares due to:
 
 
 
 
 
 
 
Performance shares
82,013

 
107,391

 
77,139

 
109,258

Restricted stock units
24,642

 
70,089

 
26,727

 
65,319

Stock options
2,619

 
7,389

 
2,778

 
7,134

Diluted weighted average shares outstanding
40,850,253

 
40,693,741

 
40,833,041

 
40,655,416

 
 
 
 
 
 
 
 
Basic net income per share
$
0.40

 
$
0.47

 
$
0.90

 
$
0.86

Diluted net income per share
$
0.40

 
$
0.47

 
$
0.90

 
$
0.85

 
 
 
 
 
 
 
 
Antidilutive shares excluded from the calculation:
 
 
 
 
 
 
 
Performance shares
13,322

 
10,311

 
38,776

 
18,474

Restricted stock units
369

 
—

 
—

 
432

Total antidilutive shares excluded from the calculation
13,691

 
10,311

 
38,776

 
18,906




7


NOTE 5. EQUITY-BASED COMPENSATION
As of June 30, 2014, we had three stock incentive plans under which performance share grants, restricted stock unit (RSU) grants and stock options were outstanding, with approximately 1,082,161 shares authorized for future use under the 2014 Long-Term Incentive Plan.
On May 8, 2014, our board approved changes to our director compensation program. This amendment states that upon a director's separation from the company, all deferred awards will be settled in company stock and no longer settled in cash. This resulted in a reclassification of the related $4.3 million liability to shareholder equity.
As of June 30, 2014, there were 111,306 shares that will be distributed to directors in the future.
The following table details our equity-based compensation expense and director deferred compensation expense for the quarters and six months ended June 30:
 
Quarter Ended   June 30,
 
Six Months Ended   June 30,
 
 
(Dollars in thousands)
2014
 
2013
 
2014
 
2013
Employee equity-based compensation expense:
 
 
 
 
 
 
 
Performance shares
$
961

 
$
891

 
$
1,695

 
$
1,753

Restricted stock units
163

 
138

 
337

 
348

Total employee equity-based compensation expense
$
1,124

 
$
1,029

 
$
2,032

 
$
2,101

 
 
 
 
 
 
 
 
Total tax benefit recognized
$
81

 
$
64

 
$
155

 
$
140

 
 
 
 
 
 
 
 
Director deferred compensation (income) expense
$
427

 
$
(940
)
 
$
(14
)
 
$
350

PERFORMANCE SHARES
The following table presents the key inputs used in the Monte Carlo simulation method to calculate the fair value of the performance share awards in 2014 and 2013, and the resulting fair values:
 
2014
 
2013
Shares granted
87,441

 
83,111

Stock price as of valuation date
$
39.76

 
$
45.31

Risk-free rate
0.72
%
 
0.40
%
Fair value of a performance share
$
45.57

 
$
62.78

The following table summarizes outstanding performance share awards as of June 30, 2014, and changes during the six months ended June 30, 2014:
(Dollars in thousands, except grant date fair value)
Shares
 
Weighted Avg.
Grant Date
Fair Value
 
Aggregate
Intrinsic Value
Unvested shares outstanding at January 1
155,814

 
$
48.73

 
 
Granted
87,441

 
45.57

 
 
Forfeited
—

 


 
 
Unvested shares outstanding at June 30
243,255

 
47.60

 
$
10,071

As of June 30, 2014, there was $6.2 million of unrecognized compensation cost related to unvested performance share awards, which is expected to be recognized over a weighted average period of 1.5 years.





8


RESTRICTED STOCK UNITS
The following table summarizes outstanding RSU awards as of June 30, 2014, and changes during the six months ended June 30, 2014:
(Dollars in thousands, except grant date fair value)
Shares
 
Weighted Avg.
Grant Date
Fair Value
 
Aggregate
Intrinsic Value
Unvested shares outstanding at January 1
37,461

 
$
38.69

 
 
Granted
13,349

 
39.66

 
 
Vested
(4,350
)
 
44.31

 
 
Forfeited
—

 
—

 
 
Unvested shares outstanding at June 30
46,460

 
38.44

 
$
1,923

The fair value of each RSU equaled our common share price on the date of grant. The total fair value of RSU awards vested during the six months ended June 30, 2014 was $0.2 million. As of June 30, 2014, there was $0.9 million of total unrecognized compensation cost related to unvested RSU awards, which is expected to be recognized over a weighted average period of 1.4 years.
STOCK OPTIONS
The following table summarizes outstanding stock options as of June 30, 2014, and changes during the six months ended June 30, 2014:
(Dollars in thousands, except exercise prices)
Shares
 
Weighted Avg.
Exercise Price
 
Aggregate
Intrinsic Value
Outstanding at January 1
12,859

 
$
30.92

 
 
Shares exercised
(493
)
 
30.92

 
 
Shares canceled or expired
—

 
—

 
 
Outstanding and exercisable at June 30
12,366

 
30.92

 
$
130

The following table summarizes outstanding stock options as of June 30, 2014:
 
Options Outstanding and Exercisable
Exercise Price
Outstanding
 
Weighted Avg.
Remaining
Contractual Life
$30.9204
12,366

 
0.42 years


NOTE 6. INVENTORIES
The following table details the composition of our inventories:
(Dollars in thousands)
June 30,   2014
 
December 31, 2013
Inventories:
 
 
 
Lumber and other manufactured wood products
$
16,723

 
$
15,967

Logs
3,876

 
14,975

Materials and supplies
5,472

 
5,333

 
$
26,071

 
$
36,275




9


NOTE 7. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS
The following tables detail the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB) for the quarters and six months ended June 30:
 
Quarters Ended June 30
 
Pension
 
OPEB
(Dollars in thousands)
2014
 
2013
 
2014
 
2013
Service cost (credit)
$
1,339

 
$
1,246

 
$
(11
)
 
$
23

Interest cost
4,783

 
4,458

 
372

 
447

Expected return on plan assets
(6,126
)
 
(6,522
)
 
—

 
—

Amortization of prior service cost (credit)
187

 
195

 
(2,410
)
 
(2,427
)
Amortization of actuarial loss
3,606

 
5,021

 
414

 
790

Net periodic cost (benefit)
$
3,789

 
$
4,398

 
$
(1,635
)
 
$
(1,167
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30
 
Pension
 
OPEB
(Dollars in thousands)
2014
 
2013
 
2014
 
2013
Service cost
$
2,540

 
$
2,659

 
$
12

 
$
46

Interest cost
9,592

 
8,912

 
871

 
905

Expected return on plan assets
(12,256
)
 
(13,046
)
 
—

 
—

Amortization of prior service cost (credit)
374

 
390

 
(4,820
)
 
(4,854
)
Amortization of actuarial loss
7,226

 
9,965

 
1,093

 
1,605

Net periodic cost (benefit)
$
7,476

 
$
8,880

 
$
(2,844
)
 
$
(2,298
)
 
 
 
 
 
 
 
 
During the six months ended June 30, 2014, we made non-qualified supplemental pension plan payments of $0.9 million. We expect to make a contribution of $3.6 million to our qualified pension plans in 2014.

10


The following tables detail the changes in accumulated other comprehensive loss (AOCL) by component for the quarters and six months ended June 30:
 
Quarter Ended June 30, 2014
(Dollars in thousands)
Pension
 
OPEB
 
Total
AOCL at April 1
 
 
 
 
$
97,454

Amortization of defined benefit items, net of tax:(1)
 
 
 
 
 
Prior service credit (cost)
$
(114
)
 
$
1,470

 
1,356

Actuarial loss
(2,200
)
 
(252
)
 
(2,452
)
Total reclassification for the period
$
(2,314
)
 
$
1,218

 
(1,096
)
AOCL at June 30
 
 
 
 
$
96,358

 
 
 
 
 
 
 
Quarter Ended June 30, 2013
(Dollars in thousands)
Pension
 
OPEB
 
Total
AOCL at April 1
 
 
 
 
$
138,747

Amortization of defined benefit items, net of tax:(1)
 
 
 
 
 
Prior service credit (cost)
$
(119
)
 
$
1,480

 
1,361

Actuarial loss
(3,063
)
 
(481
)
 
(3,544
)
Total reclassification for the period
$
(3,182
)
 
$
999

 
(2,183
)
AOCL at June 30
 
 
 
 
$
136,564

 
 
 
 
 
 
 
Six Months Ended June 30, 2014
(Dollars in thousands)
Pension
 
OPEB
 
Total
AOCL at January 1
 
 
 
 
$
98,720

Amortization of defined benefit items, net of tax:(1)
 
 
 
 
 
Prior service credit (cost)
$
(228
)
 
$
2,940

 
2,712

Actuarial loss
(4,408
)
 
(666
)
 
(5,074
)
Total reclassification for the period
$
(4,636
)
 
$
2,274

 
(2,362
)
AOCL at June 30
 
 
 
 
$
96,358

 
 
 
 
 
 
 
Six Months Ended June 30, 2013
(Dollars in thousands)
Pension
 
OPEB
 
Total
AOCL at January 1
 
 
 
 
$
140,898

Amortization of defined benefit items, net of tax:(1)
 
 
 
 
 
Prior service credit (cost)
$
(238
)
 
$
2,961

 
2,723

Actuarial loss
(6,078
)
 
(979
)
 
(7,057
)
Total reclassification for the period
$
(6,316
)
 
$
1,982

 
(4,334
)
AOCL at June 30
 
 
 
 
$
136,564

 
 
 
 
 
 
(1) Amortization of prior service cost (credit) and amortization of actuarial loss are included in the computation of net periodic cost.



11


NOTE 8. FINANCIAL INSTRUMENTS
The following table presents the estimated fair values of our financial instruments:
 
June 30, 2014
 
December 31, 2013
(Dollars in thousands)
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash and short-term investments (Level 1)
$
83,168

 
$
83,168

 
$
57,837

 
$
57,837

Derivative asset related to interest rate swaps (Level 2)
1,597

 
1,597

 
1,830

 
1,830

Long-term debt, including fair value adjustments related to fair value hedges (Level 2)
320,003

 
351,712

 
320,092

 
347,869

FAIR VALUE HEDGES OF INTEREST RATE RISK
The following table presents the gross fair values of derivative instruments on our Consolidated Condensed Balance Sheets as of the balance sheet dates:
(Dollars in thousands)
Balance Sheet Location
 
June 30,
2014
 
December 31,
2013
Derivatives designated as hedging instruments:
 
 
 
 
 
Interest rate contracts
Other noncurrent assets
 
$
1,597

 
$
1,830

Total derivatives designated as hedging instruments
 
 
$
1,597

 
$
1,830


The following table details the effect of derivatives on the Consolidated Statements of Income for the quarters and six months ended June 30:
 
Location of Gain Recognized in Income
 
Gain Recognized in Income
 
 
 
Quarters Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
 
(Dollars in thousands)
 
 
2014
 
2013
 
2014
 
2013
Derivatives designated in fair value hedging relationships:
 
 
 
 
 
 
 
 
 
Realized gain on interest rate contract(1)
Interest expense
 
$
247

 
$
241

 
$
501

 
$
487

Net gain recognized in income from fair value hedges
 
 
$
247

 
$
241

 
$
501

 
$
487

 
(1) 
Realized gain on hedging instrument consists of net cash settlements and interest accruals on the interest rate swaps during the periods.
No net unrealized gain or loss associated with the interest rate swaps was recognized in income for any of the periods presented because we recognized no hedge ineffectiveness.


NOTE 9. COMMITMENTS AND CONTINGENCIES
There have been no material changes to our commitments and contingencies as reported in "Note 15: Commitments and Contingencies" in the Notes to Consolidated Financial Statements in our 2013 Annual Report on Form 10-K.



12


NOTE 10. SEGMENT INFORMATION
The following table summarizes information by business segment for the quarters and six months ended June 30:
 
Quarter Ended   June 30,
 
Six Months Ended   June 30,
 
 
(Dollars in thousands)
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Resource
$
39,512

 
$
45,269

 
$
91,417

 
$
100,237

Wood Products
100,572

 
94,982

 
188,376

 
186,526

Real Estate
15,737

 
5,809

 
30,176

 
10,444

 
155,821

 
146,060

 
309,969

 
297,207

Elimination of intersegment revenues - Resource
(11,902
)
 
(12,848
)
 
(26,471
)
 
(24,742
)
Total consolidated revenues
$
143,919

 
$
133,212

 
$
283,498

 
$
272,465

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Resource
$
10,818

 
$
14,467

 
$
27,042

 
$
29,992

Wood Products
14,870

 
19,725

 
27,577

 
38,635

Real Estate
12,378

 
4,116

 
20,649

 
7,199

Eliminations and adjustments
788

 
235

 
1,630

 
724

 
38,854

 
38,543

 
76,898

 
76,550

Corporate
(9,129
)
 
(9,102
)
 
(15,864
)
 
(20,501
)
Operating income
29,725

 
29,441

 
61,034

 
56,049

Interest expense, net
(5,509
)
 
(5,667
)
 
(10,969
)
 
(12,003
)
Income before income taxes
$
24,216

 
$
23,774

 
$
50,065


$
44,046

 
 
 
 
 
 
 
 
Depreciation, depletion and amortization:
 
 
 
 
 
 
 
Resource
$
2,728

 
$
3,040

 
$
6,644

 
$
7,632

Wood Products
1,515

 
1,520

 
3,044

 
3,029

Real Estate
14

 
14

 
29

 
27

 
4,257

 
4,574

 
9,717

 
10,688

Corporate
641

 
584

 
1,285

 
1,337

Total depreciation, depletion and amortization
$
4,898

 
$
5,158

 
$
11,002

 
$
12,025

 
 
 
 
 
 
 
 
Basis of real estate sold:
 
 
 
 
 
 
 
Real Estate
$
2,242

 
$
584

 
$
7,409

 
$
1,200

Eliminations and adjustments
(30
)
 
(134
)
 
(575
)
 
(293
)
Total basis of real estate sold
$
2,212

 
$
450

 
$
6,834

 
$
907



13


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information
This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements regarding recognition of compensation costs relating to our performance shares and RSUs, U.S. housing market conditions, housing starts and recovery, real estate demand and pricing, log prices, lumber demand and prices, business conditions for our business segments, Resource segment results, Wood Products segment results, Real Estate segment results, and similar matters. Words such as “anticipate,” “expect,” “will,” “intend,” “plan,” “target,” “project,” “believe,” “seek,” “schedule,” “estimate,” “could,” “can,” “may” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements reflect our current views regarding future events based on estimates and assumptions and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. Our actual results of operations could differ materially from our historical results or those expressed or implied by forward-looking statements contained in this report. For a nonexclusive listing of forward-looking statements and potential factors affecting our business, refer to “Cautionary Statement Regarding Forward-Looking Information” on page 1 and “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013.
Forward-looking statements contained in this report present our views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of our views to reflect events or circumstances occurring after the date of this report.

Overview
The operating results of our Resource, Wood Products and Real Estate business segments have been and will continue to be influenced by a variety of factors, including the cyclical nature of the forest products industry, which is largely dependent on the economy and U.S. housing starts, changes in timber prices and in harvest levels from our timberlands, competition, timberland valuations, demand for our non-strategic timberland for higher and better use purposes, the efficiency and level of capacity utilization of our wood products manufacturing operations, changes in our principal expenses such as log costs and fuel costs, asset dispositions or acquisitions, and other factors.
Operating results were affected by lower harvest volumes, primarily in Idaho. We pulled forward a portion of the harvest planned for the second half of 2013 into the first quarter to take advantage of higher log prices in Idaho. In addition, drier weather in Idaho during the second quarter of 2013 allowed for additional logging days. Consequently, harvest levels were lower in 2014 compared to 2013. Adverse winter weather conditions affected demand for our lumber during the first quarter of 2014, but resulted in increased shipments during the second quarter. We had two large rural real estate transactions in the first six months of 2014.
 
Results of Operations
Our business is organized into three reporting segments: Resource, Wood Products and Real Estate. Sales between segments are recorded as intersegment revenues based on prevailing market prices. Because our Resource segment supplies our Wood Products segment with a portion of its wood fiber needs, intersegment revenues typically represent a significant portion of the Resource segment’s total revenues. Our other segments generally do not generate intersegment revenues.
In the analysis of our consolidated results of operations, revenues are reported after elimination of intersegment revenues. In the analysis by business segments, each segment's revenues are presented before elimination of intersegment revenues.




14


Consolidated Results Comparing the Quarters Ended June 30, 2014 and 2013
The following table sets forth period-to-period changes in items included in our Consolidated Statements of Income for the quarters ended June 30:
(Dollars in thousands)
2014

2013

 
Amount of Change

Percent Change

Revenues
$
143,919

$
133,212

 
$
10,707

8
 %
Costs and expenses:
 
 
 
 
 
Cost of goods sold
101,849

91,904

 
9,945

11
 %
Selling, general and administrative expenses
12,345

10,117

 
2,228

22
 %
Environmental remediation charge
—

1,750

 
(1,750
)
(100
)%
 
114,194

103,771

 
10,423

10
 %
Operating income
29,725

29,441

 
284

1
 %
Interest expense, net
(5,509
)
(5,667
)
 
158

3
 %
Income before income taxes
24,216

23,774

 
442

2
 %
Income tax provision
(7,946
)
(4,592
)
 
(3,354
)
(73
)%
Net income
$
16,270

$
19,182

 
$
(2,912
)
(15
)%
Revenues – Revenues increased in the second quarter of 2014 over the same period in 2013 due to a large rural real estate transaction and increased Wood Products shipments, partially offset by decreased revenues that resulted from lower harvest volumes. A more detailed analysis of revenues follows in the operating results by business segments.
Cost of goods sold – Cost of goods sold increased in the second quarter of 2014 over the second quarter of 2013, due to the higher cost of logs consumed in our Wood Products segment, related to both increased shipments and higher per-unit costs, and increased basis of land sold by our Real Estate segment, partially offset by decreased logging and hauling costs and depletion expenses in our Resource segment due to decreased harvest volumes.
Selling, general and administrative expenses – Selling, general and administrative expenses increased in the second quarter of 2014 over the same period in 2013 primarily due to non-cash mark-to-market adjustments related to our deferred compensation plans and higher incentive plan expenses.
Environmental remediation charge – In the second quarter of 2013 we recorded a pre-tax charge of $1.8 million related to remediation costs associated with our Avery Landing site in Idaho.
Interest expense, net – Net interest expense decreased in the second quarter of 2014 from the same period in 2013 due to debt redemptions in 2013.
Income tax provision – Our consolidated effective tax rate for the second quarter of 2014 was 32.8% compared to 19.3% in the second quarter of 2013. The increase between periods resulted from proportionately higher operating income in the TRS compared to the REIT.



15


Business Segment Results Comparing the Quarters Ended June 30, 2014 and 2013
Resource Segment
 
 
Quarters Ended June 30,
 
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues (before elimination of intersegment revenues)
$
39,512

$
45,269

 
$
(5,757
)
(13
)%
Operating income
$
10,818

$
14,467

 
$
(3,649
)
(25
)%
 
 
 
 
 
 
Harvest Volumes (in tons)
 
 
 
 
 
Northern region
 
 
 
 
 
 
Sawlog
279,831

333,924

 
(54,093
)
(16
)%
 
Pulpwood
30,124

21,904

 
8,220

38
 %
 
Stumpage
2,475

1,489

 
986

66
 %
 
  Total
312,430

357,317

 
(44,887
)
(13
)%
 
 
 
 
 
 
 
Southern region
 
 
 
 
 
 
Sawlog
115,855

161,410

 
(45,555
)
(28
)%
 
Pulpwood
171,136

182,262

 
(11,126
)
(6
)%
 
Stumpage
952

—

 
952

n/m

 
  Total
287,943

343,672

 
(55,729
)
(16
)%
 
 
 
 
 
 
 
Total harvest volume
600,373

700,989

 
(100,616
)
(14
)%
 
 
 
 
 
 
 
Sales Price/Unit ($ per ton)




 
 
 
Northern region
 
 
 
 
 
 
Sawlog
$
91

$
92

 
$
(1
)
(1
)%
 
Pulpwood
$
43

$
37

 
$
6

16
 %
 
 
 
 
 
 
 
Southern region
 
 
 
 
 
 
Sawlog
$
43

$
42

 
$
1

2
 %
 
Pulpwood
$
33

$
33

 
$
—

—
 %
Revenues decreased in the second quarter of 2014 from the same period in 2013 due to lower harvest volumes in both regions and slightly lower sawlog prices in Idaho. Decreased harvest volumes and the lower Idaho sawlog prices accounted for $6.4 million and $0.6 million, respectively, of the negative revenue variance.
In our Northern region, drier weather in Idaho during the second quarter of 2013 allowed for additional logging days in 2013, resulting in comparatively lower harvest volumes in 2014. Pulpwood shipments and prices increased in the second quarter of 2014 over the second quarter of 2013 due to stronger demand. An oversupply of residuals and chips in the Northwest in the second quarter of 2013 resulted in decreased pulpwood prices, which led us to minimize pulpwood production in that period.
In our Southern region, unusually wet weather in the second quarter of 2014 negatively affected both sawlog and pulpwood production volumes, but had a positive effect on sawlog prices.
Expenses for the segment decreased $2.1 million, or 7%, in the second quarter of 2014 from the same period in 2013, primarily due to lower logging and hauling costs and depletion expense resulting from the decreased harvest volumes.



16


Wood Products Segment
 
Quarters Ended June 30,
 
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues
$
100,572

$
94,982

 
$
5,590

6
 %
Operating income
$
14,870

$
19,725

 
$
(4,855
)
(25
)%
 
 
 
 
 
 
Lumber shipments (MBF)
176,046

151,967

 
24,079

16
 %
Lumber sales prices ($ per MBF)
$
407

$
423

 
$
(16
)
(4
)%
Revenues for the segment increased in the second quarter of 2014 compared to the same period in 2013 due to increased shipments, partially offset by lower average lumber prices. Expenses for the segment increased $10.4 million, or 14%, due primarily to the higher cost of logs consumed, which was related to increased shipments and higher per-unit costs.
Real Estate Segment
 
Quarters Ended June 30,
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues
$
15,737

$
5,809

 
$
9,928

n/m

Operating income
$
12,378

$
4,116

 
$
8,262

n/m

 
 
 
 
 
 
  
2014
 
2013
  
Acres Sold

Average
Price/Acre

 
Acres Sold

Average
Price/Acre

Higher and better use (HBU)
1,424

$
2,025

 
534

$
2,053

Rural real estate
10,821

$
1,125

 
3,110

$
1,279

Non-strategic timberland
838

$
807

 
1,128

$
652

Total
13,083

 
 
4,772

 
Revenues increased $9.9 million, expenses increased $1.7 million and operating income increased $8.3 million in the second quarter of 2014 compared to the same period of 2013, due primarily to the sale of 9,400 acres of rural real estate in Minnesota during the second quarter of 2014.


17


Consolidated Results Comparing the Six Months Ended June 30, 2014 and 2013
The following table sets forth period-to-period changes in items included in our Consolidated Statements of Income for the six months ended June 30:
(Dollars in thousands)
2014

2013

 
Amount of Change

Percent Change

Revenues
$
283,498

$
272,465

 
$
11,033

4
 %
Costs and expenses:
 
 
 
 
 
Cost of goods sold
200,442

190,203

 
10,239

5
 %
Selling, general and administrative expenses
22,022

23,713

 
(1,691
)
(7
)%
Environmental remediation charge
—

2,500

 
(2,500
)
(100
)%
 
222,464

216,416

 
6,048

3
 %
Operating income
61,034

56,049

 
4,985

9
 %
Interest expense, net
(10,969
)
(12,003
)
 
1,034

9
 %
Income before income taxes
50,065

44,046

 
6,019

14
 %
Income tax provision
(13,445
)
(9,377
)
 
(4,068
)
(43
)%
Net income
$
36,620

$
34,669

 
$
1,951

6
 %
Revenues – Revenues increased in the first six months of 2014 over the same period in 2013 as a result of two large rural real estate transactions and slightly increased Wood Products shipments, partially offset by reduced revenues due to lower harvest volumes. A more detailed analysis of revenues follows in the operating results by business segments.
Cost of goods sold – Cost of goods sold increased in the first six months of 2014 over the same period in 2013, due to the higher cost of logs consumed in our Wood Products segment, primarily related to increased prices for sawlogs in Idaho and increased shipments, and increased basis of real estate sold, partially offset by decreased logging and hauling costs and depletion expenses in our Resource segment due to decreased harvest volumes.
Selling, general and administrative expenses – Selling, general and administrative expenses decreased in the first six months of 2014 from the same period in 2013 primarily due to lower incentive plan expenses and non-cash mark-to-market adjustments related to our deferred compensation plans.
Environmental remediation charge – In the first six months of 2013 we recorded pre-tax charges totaling $2.5 million related to remediation costs associated with our Avery Landing site in Idaho.
Interest expense, net – Net interest expense decreased in the first six months of 2014 from the same period in 2013 due to debt redemptions in 2013.
Income tax provision – Our consolidated effective tax rate for the first six months of 2014 was 26.9% compared to 21.3% in the first six months of 2013. The increase between periods resulted from proportionately higher operating income in the TRS compared to the REIT.



18


Business Segment Results Comparing the Six Months Ended June 30, 2014 and 2013
Resource Segment
 
 
 Six Months Ended June 30,
 
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues (before elimination of intersegment revenues)
$
91,417

$
100,237

 
$
(8,820
)
(9
)%
Operating income
$
27,042

$
29,992

 
$
(2,950
)
(10
)%
 
 
 
 
 
 
Harvest Volumes (in tons)
 
 
 
 
 
Northern region
 
 
 
 
 
 
Sawlog
722,915

841,270

 
(118,355
)
(14
)%
 
Pulpwood
90,703

94,263

 
(3,560
)
(4
)%
 
Stumpage
13,443

21,959

 
(8,516
)
(39
)%
 
  Total
827,061

957,492

 
(130,431
)
(14
)%
 
 
 
 
 
 
 
Southern region
 
 
 
 
 
 
Sawlog
237,765

314,690

 
(76,925
)
(24
)%
 
Pulpwood
368,965

365,180

 
3,785

1
 %
 
Stumpage
5,927

—

 
5,927

n/m

 
  Total
612,657

679,870

 
(67,213
)
(10
)%
 
 
 
 
 
 
 
Total harvest volume
1,439,718

1,637,362

 
(197,644
)
(12
)%
 
 
 
 
 
 
 
Sales Price/Unit ($ per ton)




 
 
 
Northern region
 
 
 
 
 
 
Sawlog
$
86

$
83

 
$
3

4
 %
 
Pulpwood
$
42

$
36

 
$
6

17
 %
 
 
 
 
 
 
 
Southern region
 
 
 
 
 
 
Sawlog
$
42

$
41

 
$
1

2
 %
 
Pulpwood
$
32

$
33

 
$
(1
)
(3
)%
Revenues decreased in the first six months of 2014 from the same period in 2013 due to lower harvest volumes, primarily in Idaho, partially offset by increased prices in Idaho. The decrease in harvest volumes accounted for a negative $11.8 million revenue variance, which was partially offset by a positive pricing variance of $1.8 million.
In our Northern region, we pulled forward a portion of the harvest planned for the second half of 2013 into the first quarter to take advantage of higher prices. In addition, drier weather in Idaho during the second quarter of 2013 allowed for additional logging days in 2013. Consequently, we had comparatively lower harvest volumes in 2014. Sawlog prices increased in 2014, particularly in the first quarter, due to improved markets. Pulpwood prices increased in the first six months of 2014 over the same period in 2013 due to improved demand. An oversupply of residuals and chips in the Northwest in the second quarter of 2013 resulted in decreased pulpwood costs, which led us to minimize pulpwood production in that period.
In our Southern region, the sawlog harvest was lower in 2014 due to wet weather and a shift to harvest regions that contained less pine sawlog volumes in the first quarter. Pulpwood harvest volumes increased due to additional pine plantation thinnings in the first quarter of 2014, partially offset by wet weather in the second quarter. Prices for both sawlogs and pulpwood were basically unchanged between periods.


19


Expenses for the segment decreased $5.9 million, or 8%, in the first six months of 2014 from the same period in 2013, primarily due to lower logging and hauling costs and depletion expense resulting from the decreased harvest volumes.
Wood Products Segment
 
Six Months Ended June 30,
 
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues
$
188,376

$
186,526

 
$
1,850

1
 %
Operating income
$
27,577

$
38,635

 
$
(11,058
)
(29
)%
 
 
 
 
 
 
Lumber shipments (MBF)
331,642

304,829

 
26,813

9
 %
Lumber sales prices ($ per MBF)
$
403

$
418

 
$
(15
)
(4
)%
Revenues for the segment increased in the first six months of 2014 compared to the same period in 2013 due to increased shipments, partially offset by lower average lumber prices. Expenses for the segment increased $12.9 million, or 9%, due primarily to the higher cost of logs consumed, mainly related to increased prices for sawlogs in Idaho and increased shipments.
Real Estate Segment
 
Six Months Ended June 30,
 
 
(Dollars in thousands)
2014

2013

 
Increase
(Decrease)

Percent Change

Revenues
$
30,176

$
10,444

 
$
19,732

n/m

Operating income
$
20,649

$
7,199

 
$
13,450

n/m

 
 
 
 
 
 
  
2014
 
2013
  
Acres Sold

Average
Price/Acre

 
Acres Sold

Average
Price/Acre

Higher and better use (HBU)
1,492

$
2,059

 
763

$
2,277

Rural real estate
24,024

$
1,093

 
5,388

$
1,337

Non-strategic timberland
1,066

$
804

 
2,107

$
713

Total
26,582

 
 
8,258

 
Revenues increased $19.7 million, expenses increased $6.3 million and operating income increased $13.5 million in the first six months of 2014 compared to the same period of 2013, due primarily to sales of 9,400 acres of rural real estate in Minnesota in the second quarter of 2014 and 11,000 acres of rural real estate in Idaho in the first quarter of 2014.

Liquidity and Capital Resources
Overview
At June 30, 2014, our financial position included long-term debt of $320.0 million. Cash and short-term investments totaled $83.2 million at June 30, 2014 compared to $57.8 million at December 31, 2013.
Net Cash from Operations
Net cash provided from operating activities was:
•
$68.4 million in 2014 and
•
$41.5 million in 2013.
Net cash from operations increased primarily due to increased cash received from Real Estate transactions. See Note 10: Segment Information for additional information.

20


Net Cash Flows from Investing Activities
Net cash used for investing activities was $33.7 million for the six months ending June 30, 2014, compared to net cash provided by investing activities of $7.9 million for the same period in 2013. In 2014, we increased short-term investments $21.7 million, compared to a decrease of $19.0 million in 2013.
Net Cash Flows from Financing Activities
Net cash used for financing activities was $31.0 million and $60.0 million for the six months ending June 30, 2014 and 2013, respectively. In 2014, net cash used for financing activities was primarily attributable to paying our quarterly distribution to shareholders of $28.4 million. Net cash used for financing activities in 2013 was primarily for our quarterly distribution to shareholders of $25.1 million and debt redemptions of $36.7 million.
Unsecured Credit Agreement
As of June 30, 2014, there were no borrowings outstanding under our revolving line of credit, and approximately $1.4 million of the letter of credit subfacility was being used to support several outstanding letters of credit. Available borrowing capacity at June 30, 2014 was $248.6 million.
The following table sets forth the financial covenants in the bank credit facility and our status with respect to these covenants as of June 30, 2014:
 
Covenant Requirements
 
Actual Ratios at
June 30, 2014
Minimum Interest Coverage Ratio
3.00 to 1.00
 
 
6.80 to 1.00
Minimum Timberland Coverage Ratio
3.00 to 1.00
 
 
5.85 to 1.00
Maximum Leverage Ratio
5.00 to 1.00
*
 
2.14 to 1.00
* Commencing January 1, 2015, the Maximum Leverage Ratio will decrease to 4.50 to 1.00.

Senior Notes
Our cumulative Funds Available for Distribution (FAD), as defined in our senior notes' covenants, less our dividends paid was $69.3 million at June 30, 2014. The remaining balance of the basket above FAD available for the payment of future dividends pursuant to the covenants was $90.1 million at June 30, 2014.
Contractual Obligations
There have been no material changes to our contractual obligations in the six months ended June 30, 2014 outside the ordinary course of business.
Off-Balance Sheet Arrangements
We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.













21


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposures to market risk have not changed materially since December 31, 2013. For quantitative and qualitative disclosures about market risk, see Item 7A – “Quantitative and Qualitative Disclosure about Market Risk” in our 2013 Annual Report on Form 10-K.
Quantitative Information about Market Risks
The following table summarizes our outstanding debt, interest rate swaps and average interest rates as of June 30, 2014:
(Dollars in thousands)
2014
2015
2016
2017
2018
THEREAFTER
TOTAL
Fixed rate debt:
 
 
 
 
 
 
 
Principal due
$
—

$
22,500

$
5,000

$
11,000

$
14,250

$
267,335

$
320,085

Average interest rate
—

6.95
%
8.80
%
5.64
%
8.88
%
6.80
%
6.90
%
Fair value at 6/30/2014
 
 
 
 
 
 
$
351,712

Interest rate swaps:(1)
 
 
 
 
 
 
 
Fixed to variable
$
—

$
568

$
136

$
217

$
676

$
—

$
1,597

Fair value at 6/30/2014
 
 
 
 
 
 
$
1,597

(1)
Interest rate swaps are included in long-term debt and the offsetting derivative asset is included in other noncurrent assets on the Consolidated Condensed Balance Sheets. See Note 8: Financial Instruments for additional information.

ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, or the Exchange Act), under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) as of June 30, 2014. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures were effective as of June 30, 2014.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Internal Control Over Financial Reporting
In the six months ended June 30, 2014 there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting.



22


Part II
ITEM 1. LEGAL PROCEEDINGS
We do not believe there is any pending or threatened litigation that could have a material adverse effect on our financial position, operations or liquidity.

ITEM 1A. RISK FACTORS
There have been no material changes in the risk factors previously disclosed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 6. EXHIBITS
Exhibits are listed in the exhibit index.

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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
   /s/ Jerald W. Richards
 
 
 
Jerald W. Richards
 
 
 
Vice President and Chief Financial Officer
 
 
 
(Duly Authorized; Principal Financial Officer and Principal Accounting Officer)
 
 
 
 
Date:
July 24, 2014
 
 



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POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

EXHIBIT INDEX
 
EXHIBIT
NUMBER
 
DESCRIPTION
 
 
 
(3)(a)*
 
Second Restated Certificate of Incorporation of the Registrant, effective February 3, 2006, filed as Exhibit 99.2 to the Current Report on Form 8-K filed by the Registrant on February 6, 2006.
 
 
 
(3)(b)*
 
Bylaws of the Registrant, as amended through February 18, 2009, filed as Exhibit (3)(b) to the Current Report on Form 8K filed by the Registrant on February 20, 2009.
 
 
 
(4)
 
Registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt.
 
 
 
(10)(a)*
 
Potlatch Corporation Director Compensation, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on May 13, 2014.

 
 
 
(10)(b)*
 
Potlatch Corporation Deferred Compensation Plan for Directors II, amended and restated effective January 1, 2014, filed as Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on May 13, 2014.
 
 
 
(10)(c)
 
Potlatch Corporation 2014 Long-Term Incentive Plan, effective May 5, 2014.

 
 
 
(10)(d)*
 
Potlatch Corporation 2014 Form of Performance Share Award Notice and Agreement, filed as Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on May 9, 2014.
 
 
 
(10)(e)*
 
Potlatch Corporation 2014 Form of RSU Award Notice and Award Agreement, filed as Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on May 9, 2014.
 
 
 
(31)
 
Rule 13a-14(a)/15d-14(a) Certifications.
 
 
 
(32)
 
Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350.
 
 
 
101
 
The following financial information from Potlatch Corporation’s Quarterly Report on Form 10-Q for the quarter and six months ended June 30, 2014, filed on July 24, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income for the quarters and six months ended June 30, 2014 and 2013, (ii) the Consolidated Statements of Comprehensive Income for the quarters and six months ended June 30, 2014 and 2013, (iii) the Consolidated Condensed Balance Sheets at June 30, 2014 and December 31, 2013, (iv) the Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2014 and 2013, and (v) the Notes to Consolidated Financial Statements.

 * Incorporated by reference


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