Potlatch pays down debt with proceeds from sale

Potlatch Corp., flush with cash from the sale of three mills in Minnesota earlier this year, made good recently on its promise to pay down debt and to reward stockholders.

In a Nov. 9 filing with the U.S. Securities and Exchange Commission, the Spokane-based wood-products company said it spent

Potlatch said earlier that debt reduction was one of its priorities for use of the proceeds from the sale of the three oriented-strand-board mills, in Grand Rapids, Bemidji, and Cook, Minn. Potlatch said in September that it netted about $455 million in cash in that sale.

In the Nov. 9 filing, Potlatch said that its debt-reduction steps will improve future cash flows by reducing interest expense.

Potlatch, which had $740.5 million in net cash as of Sept. 30, also used its newfound financial muscle to reward its shareholders. On Oct. 25, the company's board of directors authorized a special cash dividend of $2.50 a share payable Nov. 29 to shareholders of record on Nov. 10. That payout is expected to cost the company $75 million.

The board also authorized the repurchase of $75 million of company stock through an accelerated stock buyback agreement, and Potlatch spokesman Mike Sullivan says the buyback now has been completed. By repurchasing its stock, a company reduces the number of its shares available in the public market, which can boost share prices.

The company's added financial strength didn't come only from the sale of the three mills. Potlatch noted in the Nov. 9 filing that during the first nine months of 2004, its sales shot up to $1.03 billion, from $895.4 million in the year-earlier period, and it earned $25 million from continuing operations, compared with a loss of $6.4 million from continuing operations in the first nine months of 2003.