Potlatch Reports First Quarter 2009 Results

Q1 2009 Financial Summary

--
Earnings from continuing operations for the quarter were $28.8
million, or $0.72 per diluted common share, compared to $23.3 million,
or $0.59 per diluted common share for Q1 2008.

--
Net earnings for the quarter, including discontinued operations, were
$24.8 million, or $0.62 per diluted common share, compared to $10.3
million, or $0.26 per diluted common share for Q1 2008.


--
Discontinued operations for both periods included the effects of
the spin-off of the Clearwater Paper operations and the closure of
our Prescott, Arkansas lumber mill.

--
Q1 2009 discontinued operations results also included a pre-tax
charge of $5.75 million for a tentative legal settlement related
to the sale of our oriented strand board, or OSB, manufacturing
facilities in 2004.

--
Q1 2008 discontinued operations results also included a pre-tax
charge of $2.7 million related to a settlement with the direct
purchaser class in the OSB antitrust lawsuit.

--
Cash provided by operating activities from continuing operations was
$41.6 million for Q1 2009 compared to $13.5 million for Q1 2008.

"The Resource segment had lower earnings in Q1 2009, primarily due to
decreased pricing in both the southern and northern regions and lower
harvest levels in the northern region during the quarter," said Michael
J. Covey, chairman, president and chief executive officer. "Compared to
Q1 2008, sawlog pricing was approximately 25 percent lower in the
northern region and approximately 15 percent lower in the southern
region, while pulpwood pricing increased slightly in the northern region
and decreased 12 percent in the southern region.

"The Real Estate segment had excellent results in Q1 2009 compared to Q1
2008 primarily due to a large sale of land in Arkansas in January 2009.

"The Wood Products segment continued to experience extremely weak market
conditions, with an operating loss of $11.2 million in Q1 2009 compared
to a loss of $6.5 million in Q1 2008. Most of our wood products mills
ran at reduced production levels since the beginning of this year as we
took steps to mitigate losses. Since January, monthly results have
improved and the operating loss has been cut in half with continued
improvement expected," concluded Covey.

Q1 2009 Business Performance

Resource

--
Operating income for the segment was $10.8 million, compared to $17.2
million earned in Q1 2008.

Southern Region

--
Fee harvest levels increased 34 percent in Q1 2009 compared to Q1
2008, primarily due to excellent logging conditions and stable demand
from customers which allowed us to accelerate harvesting planned for
later in the year.

--
Sawlog pricing was lower by 15 percent, while pulpwood pricing was
lower by 12 percent in Q1 2009 compared to Q1 2008.

Northern Region

--
Fee harvest levels decreased 20 percent in Q1 2009 compared to Q1 2008
primarily to match log production with weaker demand caused by lumber
mill curtailments.

--
Sawlog pricing was lower by 25 percent, while pulpwood pricing
increased 1 percent in Q1 2009 compared to Q1 2008.

Real Estate

--
Operating income for the segment was $41.5 million in Q1 2009,
compared to $16.7 million in Q1 2008.


--
We sold approximately 24,500 acres of timberland in Arkansas in
January 2009 for approximately $43.3 million, or $1,760 per acre.
Other lands sales in Q1 2009 totaled approximately 5,500 acres at
an overall average price of approximately $880 per acre.

--
We sold approximately 23,500 acres of land in Minnesota in Q1 2008
at an average price of approximately $370 per acre. Other lands
sales in Q1 2008 totaled approximately 5,500 acres at an average
price of nearly $2,250 per acre.

Wood Products

--
The segment reported an operating loss of $11.2 million for Q1 2009,
compared to a loss of $6.5 million for Q1 2008.


--
Lumber results were negatively impacted by the continued downturn
in the housing market, resulting in lower net sales prices and
shipments.

--
Most of our mills were operating with reduced production schedules
during Q1 2009.

Dividend Distribution

During the first quarter, Potlatch paid a regular quarterly cash
distribution on the company's common stock of $0.51 per share.

Outlook

"Looking ahead, the second quarter is our weakest of the year due to
seasonal harvest curtailments in the Northern region caused by load
weight restrictions on roads and spring breakup conditions that limit
access to logging sites," Covey said. "Harvest levels for the remainder
of 2009 are dependent to a large degree on pricing and demand. A number
of sawmills in Idaho have curtailed or closed due to weak lumber
pricing, and it is uncertain when they will resume full operation.
Regarding our Real Estate segment, demand and interest in non-strategic
timberland and rural recreational real estate continues to be relatively
stable, although the demand for HBU lands remains soft. We expect
continued weakness from our Wood Products business through much of 2009,
but we are starting to see improvement in monthly results and expect the
mills to perform at cash breakeven levels during the second quarter."

Conference Call Information

A live webcast and conference call will be held today, April 28, 2009,
at 8 a.m. Pacific time (11 a.m. Eastern). Those interested may access
the webcast at www.potlatchcorp.com
and conference call by dialing 866-393-8403 for U.S./Canada and
973-638-3465 for international callers. Participants will be asked to
provide conference I.D. number 90566563. Supplemental materials
discussed during the call are available on our Web site.

For those unable to participate in the call, an archived recording will
be available through the Potlatch Corporation Web site at www.potlatchcorp.com
for approximately one year following the conference call. A telephone
replay of the conference call will be available until May 5, 2009, by
calling 800-642-1687 for U.S./Canada or 706-645-9291 for international
callers and entering passcode number 90566563.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6
million acres of timberland in Arkansas, Idaho, Minnesota and Wisconsin.
Potlatch, a verified forest practices leader, is committed to providing
superior returns to stockholders through long-term stewardship of its
forest resources. The company also conducts a land sales and development
business and operates wood products manufacturing facilities through its
taxable REIT subsidiary.

Forward-Looking Statements

This press release contains certain forward-looking statements within
the meaning of the Private Litigation Reform Act of 1995 as amended,
including without limitation statements about future company
performance, direction of markets, facility shutdowns, log pricing,
future harvest levels, demand for real estate, lumber pricing and lumber
mill closures, and the results of efforts to minimize losses in our Wood
Products segment. These forward-looking statements are based on current
expectations, estimates, assumptions and projections that are subject to
change, and actual results may differ materially from the
forward-looking statements. Factors that could cause actual results to
differ materially include, but are not limited to: changes in timberland
values; changes in timber harvest levels on the company's lands; changes
in timber prices; changes in policy regarding governmental timber sales;
changes in the United States and international economies; changes in the
level of construction activity; changes in tariffs, quotas and trade
agreements involving wood products; changes in demand for our products;
changes in production and production capacity in the forest products
industry; competitive pricing pressures for our products; unanticipated
manufacturing disruptions; changes in general and industry-specific
environmental laws and regulations; unforeseen environmental liabilities
or expenditures; weather conditions; changes in raw material and other
costs; the ability to satisfy complex rules in order to remain qualified
as a REIT; changes in tax laws that could reduce the benefits associated
with REIT status; and other risks and uncertainties described from time
to time in the company's public filings with the Securities and Exchange
Commission. The company does not undertake to update any forward-looking
statements.

Potlatch Corporation and Consolidated Subsidiaries
Statements of Operations and Comprehensive Income
Unaudited (Dollars in thousands - except per-share amounts)
                                                                                                   Three Months Ended
                                                                                                   March 31,
                                                                                                   2009              2008
Revenues                                                                                           $      129,593    $      112,559
Costs and expenses:
                               Depreciation, depletion and amortization                                   6,612             7,407
                               Materials, labor and other operating expenses                              77,893            71,468
                               Selling, general and administrative expenses                               9,177             12,656
                                                                                                          93,682            91,531
Earnings from continuing operations before interest and taxes                                             35,911            21,028
Interest expense                                                                                          (4,834  )         (5,281  )
Interest income                                                                                           30                328
Earnings from continuing operations before taxes                                                          31,107            16,075
Income tax (provision) benefit                                                                            (2,336  )         7,212
Earnings from continuing operations                                                                       28,771            23,287
Discontinued operations:
                               Loss from discontinued operations (including losses on disposal of         (6,554  )         (22,060 )
                               $- and $(19,100))
                               Income tax benefit                                                         2,603             9,032
                                                                                                          (3,951  )         (13,028 )
Net earnings                                                                                       $      24,820     $      10,259
Other comprehensive income, net of tax                                                             $      955        $      2,038
Comprehensive income                                                                               $      25,775     $      12,297
Earnings per common share from continuing operations
                               Basic                                                               $      0.72       $      0.59
                               Diluted                                                                    0.72              0.59
Loss per common share from discontinued operations
                               Basic                                                                      (0.10   )         (0.33   )
                               Diluted                                                                    (0.10   )         (0.33   )
Net earnings per common share:
                               Basic                                                                      0.62              0.26
                               Diluted                                                                    0.62              0.26
Average shares outstanding (in thousands):
                               Basic                                                                      39,742            39,316
                               Diluted                                                                    39,848            39,536
Certain 2008 amounts have been reclassified to conform to the 2009
presentation.

Potlatch Corporation and Consolidated Subsidiaries
Condensed Balance Sheets
Unaudited (Dollars in thousands - except per-share amounts)
                                                                       March 31,        December 31,
                                                                       2009             2008
Assets
Current assets:
                      Cash                                             $     1,117      $     885
                      Short-term investments                                 5,725            3,034
                      Receivables, net                                       18,435           38,750
                      Note receivable                                        100,000          100,000
                      Inventories                                            29,970           36,686
                      Other assets                                           16,863           16,423
                                            Total current assets             172,110          195,778
Land, other than timberlands                                                 3,521            3,521
Plant and equipment, at cost less accumulated depreciation                   81,079           82,613
Timber, timberlands and related deposits, net                                548,041          553,913
Deferred tax assets                                                          85,864           74,653
Other assets                                                                 27,279           27,843
                                                                       $     917,894    $     938,321
Liabilities and Stockholders' Equity
Current liabilities:
                      Current installments on long-term debt           $     100,010    $     100,410
                      Current notes payable                                  96,000           129,100
                      Accounts payable and accrued liabilities               66,839           57,635
                                            Total current liabilities        262,849          287,145
Long-term debt                                                               220,936          220,927
Liability for pensions and other postretirement employee benefits            215,051          216,926
Other long-term obligations                                                  14,423           15,089
Stockholders' equity                                                         204,635          198,234
                                                                       $     917,894    $     938,321
Stockholders' equity per common share                                  $     5.15       $     4.99
Working capital                                                        $     (90,739 )  $     (91,367 )
Current ratio                                                                0.7:1            0.7:1

Potlatch Corporation and Consolidated Subsidiaries
Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
                                                                                                                                             Three Months Ended
                                                                                                                                             March 31,
                                                                                                                                             2009             2008
Cash Flows From Continuing Operations
              Net earnings                                                                                                                   $     24,820     $     10,259
              Adjustments to reconcile net earnings to net operating cash flows
              from continuing operations:
                                                                       Loss from discontinued operations                                           3,951            1,377
                                                                       Loss on disposal of discontinued operations                                 -                11,651
                                                                       Depreciation, depletion and amortization                                    6,612            7,407
                                                                       Proceeds from sales deposited with a like-kind exchange intermediary        (2,030  )        (19,042 )
                                                                       Basis of real estate sold                                                   5,148            3,134
                                                                       Deferred taxes                                                              (9,219  )        (514    )
                                                                       Equity-based compensation expense                                           847              893
                                                                       Employee benefit plans                                                      (1,242  )        94
                                                                       Other                                                                       -                54
              Working capital changes                                                                                                              12,713           (1,860  )
                                    Net cash provided by operating activities from continuing operations                                           41,600           13,453
Cash Flows From Investing
              Change in short-term investments                                                                                                     15,549           13,462
              Additions to plant and properties                                                                                                    (2,462  )        (18,523 )
              Deposits on timberlands                                                                                                              -                (27,328 )
              Other, net                                                                                                                           (532    )        (703    )
                                    Net cash provided by (used for) investing activities from continuing                                           12,555           (33,092 )
                                    operations
Cash Flows From Financing
              Change in book overdrafts                                                                                                            576              (4,464  )
              Increase (decrease) in notes payable                                                                                                 (33,100 )        29,700
              Issuance of common stock                                                                                                             48               316
              Repayment of long-term debt                                                                                                          (391    )        (191    )
              Distributions to common stockholders                                                                                                 (20,269 )        (20,087 )
              Other, net                                                                                                                           (53     )        (2,460  )
                                    Net cash provided by (used for) financing activities from continuing                                           (53,189 )        2,814
                                    operations
Cash flows provided by (used for) continuing operations                                                                                            966              (16,825 )
Cash flows of discontinued operations:
              Operating cash flows                                                                                                                 (734    )        16,414
              Investing cash flows                                                                                                                 -                (2,243  )
              Financing cash flows                                                                                                                 -                (18     )
Increase (decrease) in cash                                                                                                                        232              (2,672  )
Cash at beginning of period                                                                                                                        885              9,047
Cash at end of period                                                                                                                        $     1,117      $     6,375
Certain 2008 amounts have been reclassified to conform to the 2009
presentation.

Potlatch Corporation and Consolidated Subsidiaries
Highlights
Unaudited (Dollars in thousands - except per-share amounts)
                                                    Three Months Ended
                                                    March 31,
                                                    2009              2008
Cash distributions per common share                 $      0.51       $      0.51
Segment Information
Unaudited (Dollars in thousands)
                                                    Three Months Ended
                                                    March 31,
                                                    2009              2008
Revenues
                 Resource                           $      47,206     $      60,755
                 Real Estate                               48,036            21,140
                 Wood Products
                                  Lumber                   27,865            36,057
                                  Plywood                  6,073             14,085
                                  Particleboard            2,449             4,428
                                  Other                    8,442             10,647
                                                           44,829            65,217
                                                           140,071           147,112
Intersegment revenues                                      (10,478 )         (34,553 )
Total consolidated revenues                         $      129,593    $      112,559
Operating income (loss)
                 Resource                           $      10,846     $      17,195
                 Real Estate                               41,512            16,651
                 Wood Products                             (11,183 )         (6,450  )
                 Eliminations and adjustments              751               1,673
                                                           41,926            29,069
Corporate                                                  (10,819 )         (12,994 )
Earnings from continuing operations before taxes    $      31,107     $      16,075
Certain 2008 amounts have been reclassified to conform to the 2009
presentation.

SOURCE: Potlatch Corporation

Potlatch Corporation 
Media 
Mark Benson, 509-835-1513 
Investors 
Eric Cremers, 509-835-1521

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