Potlatch, a publicly traded timber and paper-products company, said yesterday that it will follow the lead of several other timber companies...
SPOKANE — Potlatch, a publicly traded timber and paper-products company, said yesterday that it will follow the lead of several other timber companies and become a real-estate investment trust.
The board of directors approved the change, effective Jan. 1, the Spokane company said.
The change will allow Potlatch, which employs about 2,000 at a plant in Lewiston, Idaho, to increase its annual dividend from about 60 cents a share to $2.60 a share because of savings in corporate income taxes, spokesman Mike Sullivan said. The company predicted that its annual dividend after the conversion will be approximately $76 million.
Potlatch also plans to issue a special, taxable dividend to stockholders of its undistributed earnings and profits of approximately $440 million to $480 million in the first quarter of 2006.
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Potlatch will remain a publicly traded company and its manufacturing assets will be placed in a subsidiary that will be subject to normal corporate taxes, Sullivan said.
“Our board and management team have concluded that placing Potlatch’s timberland assets in a tax-efficient ownership structure is the best way to unlock value for our stockholders and better position the company for future growth,” said L. Pendleton Siegel, Potlatch’s chairman and chief executive.
Siegel said converting to a real-estate investment trust will increase cash flow and provide a lower cost of capital for buying additional forestland.
The conversion must be approved by shareholders and will require IRS approval.
Longview Fibre, Rayonier and Plum Creek Timber Co. also have made the switch.
As a real-estate investment trust, Potlatch will be exempt from federal corporate income taxes on its 1.5 million acres of timberland.
Potlatch makes lumber and timber products, pulp and paperboard, toilet paper and other consumer paper products. It has about 4,000 U.S. employees and had second-quarter sales of $367 million. The company manages timberland in Idaho, Minnesota and Arkansas, and has 14 manufacturing sites in those states.
Potlatch stock fell $1.26, or 2.3 percent, to $54.43 yesterday.