MAXXAM Reports Results for Third Quarter 2005 and First Nine Months of 2005.HOUSTON -- MAXXAM Inc. (AMEX AMEX See: American Stock Exchange :MXM MXM Media Xchange Manager (VCON Inc.) MXM Mobile PCI Express Module (NVIDIA) ) reported net income of $4.3 million, or $0.62 earnings per share, on a fully diluted basis, for the third quarter of 2005, compared to a net loss of $20.2 million, or $3.37 per share loss, for the same period a year ago. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the third quarter of 2005 totaled $105.8 million, compared to $81.5 million in the third quarter of 2004. For the first nine months of 2005, MAXXAM reported a net loss of $19.5 million, or $3.26 per share loss, compared to a net loss of $45.8 million, or $7.66 per share loss, for the same period of 2004. Net sales for the first nine months of 2005 were $276.0 million, compared to $242.9 million for the first nine months of 2004. FOREST PRODUCTS OPERATIONS Net sales for forest products operations decreased to $42.6 million for the third quarter of 2005, as compared to $49.6 million for the third quarter of 2004. The $7.0 million decrease in net sales was due to a decline in lumber shipments during the quarter, compounded by an unfavorable shift in lumber sold from redwood lumber to lower-priced, common grade Douglas-fir lumber. Additionally, there was an approximate 24% decline in the average sales price of common grade Douglas-fir during the third quarter, as compared to the same period in 2004. Operating results declined by $3.1 million for the third quarter of 2005, compared to the same period in 2004, primarily due to decreased net sales, higher harvesting, hauling, and production costs, and a significant increase in legal and advisor fees relating primarily to Scotia LLC's efforts to pursue a negotiated restructuring of its Timber Collateralized Notes (Timber Notes). REAL ESTATE OPERATIONS Real estate sales and operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. more than doubled during the quarter, increasing to $52.3 million and $30.7 million, respectively, for the quarter ended September 30, 2005, due to a significant acreage sale at the Company's Palmas Palmas may refer to:
RACING OPERATIONS Net sales and operating results for the Company's racing operations declined $0.7 million and $0.3 million, respectively, for the third quarter of 2005, as compared to the same period in 2004, principally due to a fewer number of live race days at Sam Houston Race Park Sam Houston Race Park is a horse racing track located in northwest Houston, Texas. Built at a cost of approximately $90 million and opened on April 24, 1994, the facility is the first Class 1 horse racing venue constructed in Texas. and Valley Race Park during the third quarter of 2005. CORPORATE AND OTHER The Corporate segment's results declined from an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $4.2 million in the third quarter of 2004 to an operating loss of $7.1 million in the third quarter of 2005, primarily due to a $4.1 million charge recognized in the third quarter of 2005 related to changes in stock-based compensation, which is adjusted as the market value of the Company's common stock changes. For the nine months ended September 30, 2005, however, this charge is largely offset by a benefit of $3.8 million recognized during the first six months of 2005, also related to changes in stock-based compensation. Investment, interest and other income increased $4.1 million for the three months ended September 30, 2005, as compared to the same period a year ago, primarily due to higher returns on marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has and other short-term investments. PALCO PALCO Pacific Lumber Company - SCOTIA LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control LIQUIDITY UPDATE Prior to the issuance of this press release, MAXXAM filed its quarterly report on Form 10-Q Form 10-Q See 10-Q. with the Securities and Exchange Commission. The Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Notes to Financial Statements and other sections of the Form 10-Q discuss how the cash flows of The Pacific Lumber Company The Pacific Lumber Company or PALCO, owned by Maxxam Inc, is a logging company from northwestern California, USA. While their main function is still logging, they have expanded operations to include custom milling and treating. (Palco) and Scotia Pacific Company LLC (Scotia LLC), indirect subsidiaries of MAXXAM, have been materially adversely affected by ongoing regulatory, environmental and litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. challenges. Both Palco and Scotia LLC continue to experience liquidity difficulties. Scotia LLC's management has concluded that, in the absence of significant regulatory relief and accommodations, Scotia LLC's annual timber harvest levels and cash flows from operations will in future years be substantially below both historical levels and the minimum levels necessary in order to allow Scotia LLC to satisfy its debt service obligations in respect of the Timber Notes. Additionally, Palco's management has concluded that Palco will need additional liquidity beyond that provided by Palco's five-year $35.0 million secured term loan (Term Loan) and its five-year $30.0 million secured, asset based revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility (Revolving Credit Facility), as amended, to fund its working capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. in 2005 and 2006. In October 2005, the Term Loan and Revolving Credit Facility were amended to, among other things, temporarily increase the Revolving Credit Facility from $30.0 million to $35.0 million (subject to limitations). To the extent that Scotia LLC is unable to restructure its Timber Notes consistent with management's expectations as to future harvest levels and cash flows and/or Scotia LLC and Palco are unable to secure additional liquidity from external sources to fund their working capital and debt service requirements, the Company expects that Scotia LLC and/or Palco, will be forced to take extraordinary actions, which may include: further reducing expenditures by laying off employees and shutting down various operations; seeking other sources of liquidity; and seeking protection by filing under the Bankruptcy Code Bankruptcy Code may refer to:
OTHER MATTERS As previously announced in prior earnings statements, MAXXAM may from time to time purchase shares of its common stock on national exchanges or in privately negotiated transactions. Company press releases may contain statements that constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The company cautions that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those expressed or implied in the forward-looking statements as a result of various factors.
MAXXAM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In millions of dollars, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
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2005 2004 2005 2004
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(Unaudited)
Net sales:
Forest products $42.6 $49.6 $136.8 $149.2
Real estate 52.3 20.3 105.2 55.1
Racing 10.9 11.6 34.0 38.6
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105.8 81.5 276.0 242.9
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Costs and expenses (86.1) (83.0) (247.0) (241.9)
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Operating income (loss):
Forest products (2.1) 1.0 (8.0) 3.2
Real estate 30.7 3.2 48.4 10.3
Racing (1.8) (1.5) (2.9) (1.7)
Corporate (7.1) (4.2) (8.5) (10.8)
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19.7 (1.5) 29.0 1.0
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Other income (expense):
Investment, interest and
other income 4.1 - 9.6 9.0
Interest expense (19.5) (18.6) (58.1) (55.7)
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Income (loss) before income
taxes 4.3 (20.1) (19.5) (45.7)
Provision for income taxes - (0.1) - (0.1)
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Net income (loss) $4.3 $(20.2) $(19.5) $(45.8)
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Basic income (loss) per
common and common
equivalent share $0.72 $(3.37) $(3.26) $(7.66)
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Diluted income (loss) per
common and common
equivalent share $0.62 $(3.37) $(3.26) $(7.66)
========= ========= ========= =========
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