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Plum Creek Posts 4th Quarter 2013 Financial Results

February 2, 2014

Plum Creek Timber Company, Inc. announced fourth quarter earnings of $40 million , or $0.24 per share, on revenues of $331 million . In a release on Jan. 27 , the Company said earnings for the fourth quarter of 2012 were $79 million , or $0.49 per share, on revenues of $354 million . Results for the fourth quarter include $12 million of expenses directly related to the completion of the company's December acquisition of timberland, real estate, and subsurface resources from MeadWestvaco Corp. Excluding these expenses, adjusted fourth quarter earnings were $52 million , or $0.31 per share. Earnings for the full year of 2013 were $214 million , or $1.30 per share, on revenues of $1.34 billion . Excluding the expenses associated with the acquisition mentioned above and the $4 million fire loss recorded in the third quarter, adjusted earnings for 2013 were $230 million , or $1.39 per share. Earnings for the full year of 2012 were $203 million , or $1.25 per diluted share, on revenues of $1.34 billion . Adjusted EBITDA, a non-GAAP measure of operating performance, for 2013 was $502 million and was $530 million for 2012. As planned, lower real estate activity accounted for the decline in adjusted EBITDA. "Over the course of the past year, results have improved significantly in our timber resources, manufacturing and non-timber resource businesses," said Rick Holley , chief executive officer. "Importantly, we achieved our goal of growing the adjusted EBITDA from these three business segments by approximately $50 million . We completed a very good fourth quarter, with earnings coming in at the high-end of our initial expectations after taking into consideration the expenses related to closing the acquisition. Momentum is building and we are well positioned to grow the company's overall cash flow in 2014. "During 2013, Western log prices recovered to pre-recession levels and Southern log prices ended the year approximately 12 percent higher than they were at the end of 2012. We believe the improvements in the South represent the early stages of recovery in the region. "Our December acquisition of assets from MeadWestvaco added 501,000 acres of productive, well-stocked timberlands to our Southeast portfolio and grows our presence in these attractive, long- term markets. We integrated these assets into our operations in December and expect them to be accretive to the company's cash flow on a per share basis in 2014. We expect their contribution to expand in 2015 and beyond." Summary of 2013 Results The company reported $295 million in operating income for 2013, $14 million higher than 2012's $281 million operating income. Improving results from the company's timber business segments grew operating income by $30 million while operating income from the manufacturing business grew $14 million . This growth was partially offset by a planned reduction in land sale activities and higher corporate expenses during 2013. Acquisition Financing During the fourth quarter, Plum Creek completed the $1.1 billion acquisition of timberland, real estate, and related sub-surface resources from MeadWestvaco . The company financed the transaction through a combination of equity and debt designed to maintain the capital profile of the company. The company issued 13.9 million shares of common stock, generating $607 million of net proceeds, and increased debt by approximately $480 million . At the end of the year, the company's weighted average cost of third-party debt was approximately 4 percent with a mix of 76 percent fixed and 24 percent floating rate debt. Outlook The company expects continued demand growth from its lumber, plywood, and oriented strandboard (OSB) customers as residential construction activity is expected to grow to 1.1 million starts in 2014. As sawlog customers increase production to meet this demand, the company expects sawlog prices to improve, particularly in the lower-cost U.S. South. Pulpwood demand from pulp and paper mills throughout the nation remains good. Recovering demand from OSB producers and emerging demand from wood pellet producers are expected to keep pulpwood prices strong in both Southern and Northeastern markets. The acquisition of 501,000 acres of productive Southern timberland from MeadWestvaco in December will add about 3 million tons to the company's annual harvest in 2014. As a result, total harvest volume is expected to be between 20 and 21 million tons. Continued interest in rural land investments and improving consumer confidence is expected to provide a solid foundation for rural real estate activity in 2014. Real Estate segment sales for the year are expected to be between $240 million and $280 million . The company anticipates that segment sales will follow a typical seasonal pattern with activity weighted toward the second half of the year. The company expects to gradually reduce annual sales in this segment closer to $200 million over time. First quarter Real Estate segment sales are expected to be between $20 and $25 million . Land basis for 2014, the book value of the properties sold, is expected to be between 30 and 35 percent of sales, comparable to 2013's 32 percent of sales. Lumber, specialty plywood and medium density fiberboard markets are expected to remain strong. Manufacturing segment results are expected to grow modestly in 2014. Earnings and cash flow from the company's non-timber resources business are expected to grow with the addition of new royalty streams from coal, wind, and aggregate assets acquired during 2013. Third-party interest expense in 2014 is expected to be approximately $110 million . The company expects to report a small tax expense of less than $4 million as income from the Manufacturing segment grows in 2014. "We expect our cash flow from operations to grow in 2014 as business conditions continue to improve and the newly acquired assets add to our ongoing cash flow. As we initially expected, the acquired assets should be modestly cash flow accretive on a per share basis, but EPS dilutive in 2014," continued Holley. "Overall, we expect operating income growth from our timber resources, manufacturing and non-timber resource businesses to more than offset the impact of our planned reduction in land sales." Reflecting all of these factors, the company expects 2014 net income to be between $1.30 and $1.50 per share. The company expects to report first quarter net income between $0.12 and $0.17 per share, a disproportionately lower share of the full-year outlook due to the timing of real estate sales. "We are experiencing fundamental improvement in our businesses and continue to manage the company to maximize the value of each and every acre we own. We will continue our disciplined approach to capital allocation with the goal of increasing the long-term value of each shareholder's investment in Plum Creek ," concluded Holley. Plum Creek is a landowner with approximately 6.8 million acres of timberlands in major timber producing regions of the United States and wood products manufacturing facilities in the Northwest. More information: ((Comments on this story may be sent to ))

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