POTLATCH CORP (Form: 10-K, Received: 02/14/2014 16:24:07)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-K



(Mark One)	x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2013
	o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to .

Commission File Number 1-32729

POTLATCH CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		82-0156045
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)
601 West 1st Ave., Suite 1600
Spokane, Washington		99201
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (509) 835-1500

Securities registered pursuant to Section 12(b) of the Act:



TITLE OF EACH CLASS		NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock		The Nasdaq Global Select Market
($1 par value)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. x Yes ¨ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act ¨ Yes x No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer (Do not check if a smaller reporting company) ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes x No

The aggregate market value of the common stock held by non-affiliates of the registrant at June 30, 2013, was approximately $1,638.9 million, based on the closing price of $40.44.

As of January 31, 2014 , 40,536,879 shares of the registrant's common stock, par value $1 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement expected to be filed on or about April 1, 2014 , with the Commission in connection with the 2014 annual meeting of stockholders are incorporated by reference in Part III hereof.

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Table of Contents



		PAGE NUMBER
PART I
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	9
ITEM 1B.	Unresolved Staff Comments	18
ITEM 2.	Properties	18
ITEM 3.	Legal Proceedings	18
ITEM 4.	Mine Safety Disclosures	18

PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
ITEM 6.	Selected Financial Data	20
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	20
ITEM 8.	Financial Statements and Supplementary Data	20
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	21
ITEM 9A.	Controls and Procedures	21
ITEM 9B.	Other Information	21

PART III
ITEM 10.	Directors, Executive Officers and Corporate Governance	22
ITEM 11.	Executive Compensation	22
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	23
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	23
ITEM 14.	Principal Accounting Fees and Services	23

PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	24
SIGNATURES		25
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES		26
EXHIBIT INDEX		74

EXPLANATORY NOTE

For purposes of this report, any references to "the company,” “us,” “we,” and “our” include Potlatch Corporation and its consolidated subsidiaries.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, statements regarding:


•	timber inventory;


•	payments under timber cutting contracts;


•	increasing lumber demand and pricing in North America in 2014;


•	increased North American housing starts and repair and remodel activity;


•	the expected positive effect on timber prices of increased lumber demand and higher lumber prices;


•	expected sawlog prices in 2014;


•	expected 2014 overall timber harvest of 4.8 million tons;


•	expected sales of 110,000 to 120,000 acres of HBU property, 80,000 to 90,000 acres of rural real estate property and 10,000 to 20,000 acres of non-strategic timberland over the next 10 years;


•	funding of our dividend distributions in 2014;


•	compliance with REIT tax rules;


•	FSC certification of our timberlands;


•	expectations regarding premium prices for FSC-certified logs and FSC-certified lumber;


•	realization of deferred tax assets;


•	expected capital expenditures in 2014;


•	expectations regarding funding of our pension plans in 2014;


•	estimated future benefit payments;


•	estimated future payments under operating leases; and


•	expected liquidity in 2014 to fund our operations, regular stockholder distributions, capital expenditures and debt service obligations and related matters.

Words such as “anticipate,” “expect,” “will,” “intend,” “plan,” “target,” “project,” “believe,” “seek,” “schedule,” “estimate,” “could,” “can,” “may,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements reflect our current views regarding future events based on estimates and assumptions, and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance.

Our actual results of operations could differ materially from our historical results or those expressed or implied by forward-looking statements contained in this report. Important factors that could cause or contribute to such differences include, but are not limited to, the following:


•	changes in timber growth rates;


•	changes in silviculture;


•	timber cruising variables;


•	changes in state forest acts or best management practices;


•	changes in timber harvest levels on our lands;


•	changes in timber prices;


•	changes in timberland values;


•	changes in policy regarding governmental timber sales;


•	changes in the United States and international economies;


•	changes in interest rates and discount rates;


•	changes in requirements for FSC certification;


•	changes in the level of residential and commercial construction and remodeling 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;

2013 FORM 10-K / 1


•	unforeseen environmental liabilities or expenditures;


•	weather conditions;


•	changes in raw material and other costs;


•	collectability of amounts owed by customers;


•	changes in federal and state tax laws;


•	the ability to satisfy complex rules in order to remain qualified as a REIT; and


•	changes in tax laws that could reduce the benefits associated with REIT status.

For a discussion of some of the factors that may affect our business, results and prospects, see Part 1 - Item 1A. Risk Factors .

Forward-looking statements contained in this report present our views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of our views to reflect events or circumstances occurring after the date of this report.

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Part I

ITEM 1. BUSINESS

General

Potlatch Corporation is a real estate investment trust (REIT) with approximately 1.4 million acres of timberlands in Arkansas, Idaho and Minnesota. We derive much of our income from investments in real estate, including the sale of standing timber. Through wholly owned taxable REIT subsidiaries, which we refer to collectively in this report as Potlatch TRS, we operate a real estate sales and development business and five wood products manufacturing facilities that produce lumber and plywood.

Our businesses are organized into three operating segments:

•

Resource : Our Resource segment manages our timberlands to optimize revenue producing opportunities while adhering to our strict stewardship standards. Management activities include planting and harvesting trees and building and maintaining roads. The Resource segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights leases, biomass production, carbon sequestration and other leasing opportunities.


•	Wood Products : Our Wood Products segment manufactures and markets lumber and plywood.


•	Real Estate : The business of our Real Estate segment consists primarily of the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives. The Real Estate segment engages in real estate sales, subdivision and development activities through Potlatch TRS.

Additional information regarding each of our operating segments is included in this section, as well as in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 17: Segment Information in the Notes to Consolidated Financial Statements .

We are focused on the ownership of timberland, which we view as a unique and attractive asset due to the renewable nature of timber resources and timber’s long-term history of price appreciation in excess of inflation. Our primary objectives include using our timberland investments to generate income and maximizing the long-term value of our assets. We pursue these objectives by adhering to the following strategies:

•

Managing our timberlands to improve their long-term sustainable yield. We manage our timberlands in a manner designed to optimize the balance among timber growth, prudent environmental management and current cash flow, in order to achieve increasing levels of sustainable yield over the long term. We may choose to harvest timber at levels above or below our then-current estimate of sustainability for various reasons from time to time, including improving the long-term productivity of certain timber stands or in response to market conditions. In addition, we focus on optimizing timber returns by continually improving productivity and yields through advanced silvicultural practices that take into account soil, climate and biological considerations.


•	Pursuing attractive acquisitions. We actively pursue timberland acquisitions that meet our financial and strategic criteria. The critical elements of our acquisition strategy generally include acquiring properties that complement our existing land base, are immediately cash flow accretive and have attractive timber or higher and better use (HBU) values.


•	Maximizing the value of our non-core timberland real estate. A portion of our acreage is more valuable for development or recreational purposes than for growing timber. We continually assess the potential uses of our lands to manage them proactively for the highest value. We have identified approximately 15% of our timberlands as having values that are potentially greater than timberland values.


•	Practicing sound environmental stewardship. We pursue a program of environmental stewardship and active involvement in federal, state and local policymaking to maximize our assets’ long-term value. We manage our timberlands in a manner consistent with the principles set forth by the Forest Stewardship Council (FSC).

Potlatch Corporation, formerly known as Potlatch Holdings, Inc., was incorporated in Delaware in September 2005 to facilitate a restructuring to qualify for treatment as a REIT for federal income tax purposes. It is the successor to the business of the original Potlatch Corporation, which was incorporated in Delaware in 1903.

2013 FORM 10-K / 3

Effective January 1, 2006, we restructured our operations to qualify for treatment as a REIT for federal income tax purposes. As a REIT, if we meet certain requirements we generally are not subject to federal and state corporate income taxes on our income from investments in real estate that we distribute to our stockholders, including the income derived from the sale of standing timber. We are, however, subject to corporate taxes on certain built-in gains (the excess of fair market value at January 1, 2006 over tax basis on that date) on sales of real property (other than timber) held by the REIT during the first ten years following our conversion to a REIT, except for sales that occurred in 2011, 2012 and 2013. The Small Business Jobs Act of 2010 modified the built-in gains provisions to exempt sales of real properties by a REIT in 2011, if five years of the recognition period had elapsed before January 1, 2011. The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, extended the reduced five-year holding period for sales that occurred in 2012 and 2013. If applicable, the built-in gains tax is eliminated or deferred if sale proceeds are reinvested in accordance with the like-kind exchange provisions of the Internal Revenue Code. The built-in gains tax is not applicable to the sale of timber pursuant to a stumpage sale agreement or timber deed. We are required to pay federal corporate income taxes on income from our non-real estate investments, principally the operations of Potlatch TRS.

The REIT tax rules require that we derive most of our income, other than income generated by a taxable REIT subsidiary, from investments in real estate, which for us primarily consists of income from the sale of our standing timber. Accordingly, we restructured to create a new parent company that holds our timberlands through a REIT subsidiary and substantially all of our non-timberland assets, consisting primarily of our manufacturing facilities, assets used for the harvesting of timber and the sale of logs, and selected land parcels that we expect to be sold or developed for higher and better use purposes, through Potlatch TRS. Our use of Potlatch TRS, which is taxed as a C corporation, enables us to continue to engage in these non-REIT qualifying businesses while complying with the REIT requirements.

Available Information

We make available on or through our website, www.potlatchcorp.com (under “Investor Resources – SEC Filings”), our periodic and current reports that we file with, or furnish to, the Securities and Exchange Commission, or SEC, at no charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC. Information on our website is not part of this report. In addition, the reports and materials that we file with the SEC are available at the SEC’s website (http://www.sec.gov) and at the SEC’s Public Reference Room at 100 F Street N.E., Washington DC 20549. Interested parties may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Business Segments

Resource Segment

Industry Background. The demand for timber depends primarily upon the markets for wood related products, including lumber, panel products, paper and other pulp-based products. The end uses for timber vary widely, depending on species, size and quality. Historically, timber demand has experienced cyclical fluctuations, although sometimes at different times and rates within the markets for sawlogs and pulpwood. The demand for sawlogs, lumber and other manufactured wood products is significantly dependent upon the level of new residential construction and remodeling activity, which, in turn, is affected by general economic and demographic factors, including population growth, new household formations, interest rates for home mortgages and construction loans, and credit availability. Reductions in residential construction and remodeling activities are generally followed by declining lumber prices, which are usually followed by declining log prices within a fairly short period of time. The demand for pulpwood is dependent on the paper and pulp-based manufacturing industries, which are affected by domestic and international economic conditions, global population growth and other demographic factors, industry capacity and the value of the U.S. dollar in relation to foreign currencies. Locally, timber demand also fluctuates due to the expansion or closure of individual wood products and pulp-based manufacturing facilities.

Over the past two decades, timber supplies have tightened relative to demand. Particularly in the western United States, the supply of timber has been significantly affected by reductions in timber sales by the United States government and by state governments. These reductions have been caused primarily by increasingly stringent environmental and endangered species laws and by a change in the emphasis of domestic governmental policy toward habitat preservation, conservation and recreation, and away from timber management. Because most timberlands in the southeastern United States are privately owned, changes in sales of publicly owned timber affect local timber supplies and prices in the Southeast less immediately than in the western United States and other regions with large proportions of public timber ownership. Timber supplies can fluctuate depending upon factors such as changes in weather conditions and harvest strategies of local forest products industry participants, as well

4 / POTLATCH CORPORATION

as occasionally high timber salvage efforts due to storm damage, unusual pest infestations such as the mountain pine beetle, or fires. Local timber supplies also change in response to prevailing timber prices. Rising timber prices often lead to increased harvesting on private timberlands, including lands not previously made available for commercial timber operations. Currently, the supply of timber generally is adequate to meet demand.

Operations. The Resource segment manages approximately 1.4 million acres of timberlands we own in two regions of the United States: the Northern region, consisting of our Idaho and Minnesota timberlands; and the Southern region, consisting of our Arkansas timberlands. We are the largest private landowner in Idaho. The following table provides additional information on our timberlands.



REGION	STATE	DESCRIPTION	ACRES (thousands)
Northern region	Idaho	Variety of commercially viable softwood species, such as grand fir, Douglas fir, inland red cedar and other associated softwoods	805
	Minnesota	Primarily aspen, pine and other mixed hardwoods	197
		Total Northern region	1,002
Southern region	Arkansas	Primarily southern yellow pine and other hardwoods	410
		Total	1,412

Our timberlands include a wide diversity of softwood and hardwood species and are certified by the FSC. As a participant in this program, we adhere to principles that include commitments to sustainable forestry, responsible practices, forest health and productivity, and protection of special sites. We are generally able to sell FSC-certified logs at premium prices.

As of the end of 2013, our estimated standing timber inventory is approximately 56 million tons. This estimate is derived using methods consistent with industry practice and is based on statistical methods and field sampling. Efforts are made to periodically update this estimate for growth, harvest, acquisitions and disposals. The estimated inventory volume includes timber from environmentally sensitive areas where the timberlands are managed in a manner consistent with best management practices, state forest practice acts and the FSC forest management standard.

The aggregate estimated volume of current standing timber inventory is updated at least annually to reflect increases in merchantable timber due to reclassification of young growth to merchantable timber, the annual growth rates of merchantable timber and the acquisition of additional merchantable timber, and to reflect decreases due to timber harvests and land sales. Timber volumes are estimated from cruises of the timber tracts, which are completed on our timberlands on approximately a five to ten year cycle. Since the individual cruises collect field data at different times for specific sites, the growth model projects standing inventory from the cruise date to a common reporting date. Annual growth rates for the merchantable inventory have historically been in the range of 2% - 5% .

The primary business of the Resource segment is the management of our timberlands to optimize the value of all possible revenue producing opportunities while adhering to our strict stewardship standards. Management activities include planting and harvesting trees and building and maintaining roads. The segment also seeks to increase our revenues from non-timber resources such as from hunting leases, recreation permits and leases, mineral rights leases, biomass production, carbon sequestration and various other leasing opportunities.

Our strategic focus involves increasing harvest levels in ways that ensure long-term sustainability while maintaining high stewardship standards, increasing timber harvest levels in times of strong market demand and decreasing harvest levels in times of weak demand, and seeking accretive acquisitions that complement our existing timberland base.

Because timber is a renewable resource, our objective is to maximize cash flow over the long term by managing our timberlands on a sustainable yield basis, reflecting a balance between timber growth and harvesting. From time to time, however, we may choose, consistent with our environmental commitments, to harvest timber at levels above or below our estimate of sustainability for various reasons. To maximize our timberlands’ long-term value, we manage them intensively, based upon timber species and local growing conditions. Our harvest plans take into account changing market conditions, are designed to contribute to the growth of the remaining timber, and reflect our policy of environmental stewardship. We reforest our acreage in a timely fashion to enhance its long-term value. We employ silvicultural techniques to improve timber growth rates, including vegetation control, fertilization and thinning. In deciding whether to implement any silvicultural practice, we analyze the associated costs and long-term benefits, with the goal of achieving an attractive return over time.

2013 FORM 10-K / 5

Our short-term and long-term harvest plans are critical factors in our long-term management process. Each year, we prepare a harvest plan designating the timber tracts and volumes to be harvested during that particular year. We also update our long-term harvest plan annually. Each harvest plan reflects our analysis of the age, size and species distribution of our timber, as well as our expectations about harvest methods, growth rates, the volume of each species to be harvested, anticipated acquisitions and dispositions, thinning operations, regulatory constraints and other relevant information. Among other things, the optimal harvest cycles, or rotations, for timber vary by location and species and tend to change over time as a result of silvicultural advances, changes in the markets for different sizes and ages of timber and other factors. Since harvest plans are based on projections of weather, timber growth rates, regulatory constraints and other assumptions, many of which are beyond our control, there can be no assurance that we will be able to harvest the volumes projected or the specific timber stands designated in our harvest plans.

Detailed harvest information by region and product is presented in Management's Discussion and Analysis of Financial Condition and Results of Operations . The following table presents a summary of our total 2013 fee timber harvest by region.



	FEE TIMBER HARVESTED (TONS)
(in thousands)	SAWLOGS	PULPWOOD	STUMPAGE	TOTAL
Northern region	2,032	128	25	2,185
Southern region	694	822	8	1,524
Total	2,726	950	33	3,709

Based on our current projections that take into consideration such factors as market conditions, the ages of our timber stands and recent timberland sales and acquisitions, we expect the overall timber harvest from our lands in 2014 to total approximately 3.8 million tons.

The volume and value of timber that can be harvested from our lands may be affected by natural disasters such as fire, insect infestation, disease, ice storms, hurricanes, wind storms, floods and other weather conditions and causes. We assume substantially all risk of loss to the standing timber we own from fire and other hazards, consistent with industry practice in the United States, because insuring for such losses is not practicable.

The Resource segment sells a portion of its logs at market prices to our wood products manufacturing facilities. Intersegment sales to our wood products manufacturing facilities in 2013 were approximately 25% of our total Resource segment revenues. The segment also sells sawlogs and pulpwood to a variety of forest products companies located near our timberlands. The segment’s customers range in size from small operators to multinational corporations. The segment competes with owners of timberlands that operate in areas near our timberlands, ranging from private owners of small tracts of land to some of the largest timberland companies in the United States. The segment competes principally on the basis of distance to market, price, log quality and customer service.

In 2013, approximately 36% of our Northern region’s volume and 37% of our Southern region’s volume was sold under log supply agreements. We expect approximately the same amount to be sold under log supply agreements in 2014. In general, our log supply contracts require a specified volume of timber to be delivered to certain customer facilities at prices that are adjusted periodically to reflect market conditions. Prices in our Northern region contracts are adjusted periodically by species to prevailing market prices for logs, lumber, wood chips and other residuals. Prices in our Southern region contracts are adjusted every three months for pine and hardwood logs based on prevailing market prices for logs. Currently our log supply agreements are in place for two to three years. Idaho Forest Group, LLC represented slightly more than 10% of our consolidated revenues in 2013 and 2012.

Our operations are subject to numerous federal, state and local laws and regulations, including those relating to the environment, endangered species, our forestry activities, and health and safety. Due to the significance of regulation to our business, we integrate wildlife, habitat and watershed management into our resource management practices. We also take an active approach to regulatory developments by participating in standard-setting where possible. We work cooperatively with regulators to create voluntary conservation plans that address environmental concerns while preserving our ability to operate our timberlands efficiently. Despite our active participation in governmental policymaking and regulatory standard-setting, there can be no assurance that endangered species, environmental and other laws will not restrict our operations or impose significant costs, damages, penalties and liabilities on us. In particular, we anticipate that endangered species and environmental laws will generally become increasingly stringent.

6 / POTLATCH CORPORATION

Wood Products Segment

Our Wood Products segment manufactures and markets lumber and plywood at five mills located in Arkansas, Idaho, Michigan and Minnesota. The segment’s products are largely commodity products, which are sold through our sales offices to end users, retailers or wholesalers for nationwide distribution primarily for use in home building, industrial products and other construction activity.

A description of our wood products manufacturing facilities, which are all owned by us, together with their respective 2013 capacities and actual production, are as follows:



	ANNUAL CAPACITY ^1,2	PRODUCTION ²
Sawmills:
Warren, Arkansas	175 mmbf	191 mmbf
St. Maries, Idaho	160 mmbf	168 mmbf
Gwinn, Michigan	170 mmbf	173 mmbf
Bemidji, Minnesota	120 mmbf	123 mmbf
Plywood Mill:
St. Maries, Idaho	150 mmsf	161 mmsf

Capacity represents the proven annual production capabilities of the facility under normal operating conditions and producing a normal product mix. Normal operating conditions are based on the configuration, efficiency and the number of shifts worked at each individual facility. In general, the definition includes two shifts for five days (two 40-hour shifts) per week at each facility, which is consistent with industry-wide recognized measures. Production can exceed capacity due to efficiency gains and overtime.


²	mmbf stands for million board feet; mmsf stands for million square feet, 3/8 inch panel thickness basis.

Our share of the markets for lumber and plywood is not significant compared to the total United States markets for these products. We believe that competitiveness in this industry is largely based on individual mill efficiency and on the availability of competitively priced raw materials on a facility-by-facility basis, rather than the number of mills operated. This is due to the fact that it is generally not economical to transfer wood between or among facilities, which might permit a greater degree of specialization and operating efficiencies. Instead, each facility must utilize the raw materials that are available to it in a relatively limited geographic area. For these reasons, we believe we are able to compete effectively with companies that have a larger number of mills. We compete based on product quality, customer service and price.

Our manufacturing facilities can produce and sell FSC-certified products that generally command premium pricing.

For our Wood Products operations, the principal raw material used is logs, which are obtained from our Resource segment or purchased on the open market. We generally do not maintain long-term supply contracts for a significant volume of logs. During 2013 and 2012, 39% and 36% of our log purchases, respectively, were provided by our Resource segment.

Real Estate Segment

The activities of our Real Estate segment consist primarily of the sale of selected non-core timberland real estate, which consist of three categories of property: HBU, rural real estate and non-strategic.


•	HBU properties have characteristics that provide development potential as a result of superior location or other attractive amenities. These properties tend to have a much higher value than timberlands.


•	Rural real estate properties also have a higher value than timberlands, but do not have the same developmental potential as HBU properties. For example, these properties may be appropriate for hunting, conservation or secondary rural housing.


•	Non-strategic properties often have locational or operational disadvantages for us, and are typically on the fringe of our ownership areas.

The Real Estate segment engages in real estate sales, subdivision and development activities through Potlatch TRS.

2013 FORM 10-K / 7

From time to time, we also take advantage of opportunities to sell timberland where we believe pricing to be particularly attractive, to match a sale with a purchase of more desirable property in order to defer taxes in a like-kind exchange (LKE) transaction, or to meet various other financial or strategic objectives. Sales of conservation properties and conservation easements on our properties are also included in this segment. Results for the segment depend on the demand for our non-core timberlands, the types of properties sold, the basis of these properties and the timing of closings of property sales. Although large sales of non-strategic properties can cause results that are not comparable or predictable between periods, we have maintained a relatively consistent level of rural real estate and HBU sales.

A main focus of this segment is to continually assess the highest value use of our lands. We conduct periodic stratification assessments on our lands and as new lands are acquired. The following tools are used in assessing our lands:


•	electronic analysis, using geographic information systems;


•	on-the-ground analysis and verification of modeling assumptions; and


•	certain measured and ranked attributes, such as timber potential, recreational opportunities, accessibility, special features and population and demographic trends.

As a result of this continual assessment of our lands, we currently have identified 200,000 to 230,000 acres of non-core timberland real estate. This includes approximately 110,000 to 120,000 acres of HBU property, 80,000 to 90,000 acres of rural real estate property and 10,000 to 20,000 acres of non-strategic timberland. Sales of these lands are expected to occur over a 10-year period, with the goal of utilizing LKE transactions or other tax-advantaged methods when it is appropriate.

Seasonality

Log and pulpwood sales volumes in our Resource segment are typically lower in the first half of each year, as winter rains in the Southern region and spring thaw in the Northern region limit timber harvesting operations due to softened roadbeds and wet logging conditions that restrict access to logging sites. The third quarter is typically our Resource segment's strongest production quarter. Real Estate dispositions and acquisitions can be adversely affected when access to any properties to be sold or considered for acquisition is limited due to adverse weather conditions. Demand for our manufactured wood products typically decreases in the winter months when construction activity is slower and increases in the spring, summer and fall when construction activity is generally higher.

Geographic Areas

All of our timberlands, wood products manufacturing facilities and other real estate and assets are located within the continental United States. In 2013, 2012 and 2011, approximately 2%, 2% and 1%, of the respective year's revenues were derived from sales of manufactured wood products to Canada and Mexico, with the remainder of our revenues resulting from domestic sales.

Environmental Regulation

We are subject to extensive federal and state environmental regulation of our wood products manufacturing facilities and timberlands, particularly with respect to air emissions, wastewater discharges, solid and hazardous waste management, site remediation, forestry operations, and threatened and endangered species. We are also subject to the requirements of the Federal Occupational Safety and Health Act and comparable state statutes relating to the health and safety of our employees. We maintain environmental and safety compliance programs and conduct regular internal and independent third-party audits of our facilities and timberlands to monitor compliance with these laws and regulations. Compliance with environmental regulations is a significant factor in our business and requires capital expenditures as well as additional operating costs.

We believe that our manufacturing facilities and timberland operations are currently in substantial compliance with applicable environmental laws and regulations. We cannot be certain, however, that situations that give rise to material environmental liabilities will not be discovered.

Enactment of new environmental laws or regulations, or changes in existing laws or regulations, particularly relating to air and water quality, or their enforcement, may require significant expenditures by us or may adversely affect our timberland management and harvesting activities.

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Similarly, a number of species indigenous to our timberlands have been listed as threatened or endangered or have been proposed for one or the other status under the Endangered Species Act. As a result, our activities in or adjacent to the habitat of these species may be subject to restrictions on the harvesting of timber, reforestation activities and the construction and use of roads.

We expect legislative and regulatory developments in the area of climate change to address carbon dioxide emissions and renewable energy and fuel standards. It is unclear as of this date how any such developments will affect our business.

At this time, we believe that federal and state laws and regulations related to the protection of endangered species and air and water quality will not have a material adverse effect on our financial position, results of operations or liquidity. We anticipate, however, that increasingly strict laws and regulations relating to the environment, natural resources and forestry operations, as well as increased social concern over environmental issues, may result in additional restrictions on us leading to increased costs, additional capital expenditures and reduced operating flexibility.

Information regarding potentially material environmental proceedings is included in Note 15: Commitments and Contingencies in the Notes to Consolidated Financial Statements contained in this report and incorporated herein by reference.

Employees

As of December 31, 2013, we had approximately 880 employees. The workforce consisted of approximately 220 salaried, 630 hourly and 30 temporary or part-time employees. As of December 31, 2013, 18% of the workforce was covered under one collective bargaining agreement, which expires in May 2016.

ITEM 1A. RISK FACTORS

Investing in our common stock involves a significant degree of risk. Our business, financial condition, results of operations or liquidity could be materially adversely affected by any of the following risks and, as a result, the trading price of our common stock could decline. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also impair our business, financial condition, results of operations or liquidity. In addition to the risk factors discussed below, investors should carefully consider the risks and uncertainties presented in Part 1 - Item 1. Business .

Business and Operating Risks

Our cash distributions are not guaranteed and may fluctuate, which could adversely affect our stock price.

Under the REIT rules, to remain qualified as a REIT, a REIT must distribute, within a certain period after the end of each year, 90% of its ordinary taxable income for such year. Our REIT income, however, consists primarily of net capital gains resulting from payments received under timber cutting contracts with Potlatch TRS and third parties, rather than ordinary taxable income. Therefore, unlike most REITs, we are not required to distribute material amounts of cash to remain qualified as a REIT. If, after giving effect to our distributions, we have not distributed an amount equal to 100% of our REIT ordinary taxable income and net capital gains income, then we would be required to pay tax on the undistributed portion of such taxable income at regular corporate tax rates and our stockholders would be required to include their proportionate share of any undistributed capital gain in income and would receive a credit or refund for their share of the tax paid by us.

Our Board of Directors, in its sole discretion, determines the actual amount of distributions to be made to stockholders based on consideration of a number of factors, including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions in our industry and in the markets for our products, tax considerations, borrowing capacity, debt covenant restrictions, timber prices, harvest levels on our timberlands, market demand for timberlands, including timberland properties we have identified as potentially having a higher and better use, and future acquisitions and dispositions. For a description of debt covenants that could limit our ability to make distributions to stockholders in the future, see Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations . Consequently, the level of future distributions to our stockholders may fluctuate, and any reduction in the distribution rate may adversely affect our stock price.

2013 FORM 10-K / 9

Our operating results and cash flows will be materially affected by the fluctuating nature of timber prices.

Our results of operations and cash flows will be materially affected by the fluctuating nature of timber prices. A variety of factors affect prices for timber, including factors affecting demand, such as changes in economic conditions, the level of domestic new construction and remodeling activity, foreign demand, interest rates, credit availability, population growth, weather conditions and pest infestation, as well as changes in timber supply and other factors. All of these factors can vary by region, timber type (sawlogs or pulpwood logs) and species.

Timber prices are affected by changes in demand on a local, national or international level. The closure of a mill in the regions where we own timber can have a material adverse effect on demand and therefore pricing. In 2011, due to continuing poor market conditions and the resulting closure of a significant customer's mill in Arkansas, we saw a substantial decline in log prices in the region. As the demand for paper nationwide continues to decline, closures of pulp mills have adversely affected the demand for pulpwood and wood chips in certain of the regions in which we operate. Also, demand in other parts of the world may affect timber prices in the markets in which we compete. For example, during the past few years, demand from Asia has remained steady, and although we do not sell into the Asian markets, Asian demand has affected supply and demand in the markets in which we participate. A decrease in Asian demand may have a negative impact on lumber and timber prices in the markets in which we compete.

Timber prices are also affected by changes in timber availability at the local, national and international level. Our timberland ownership is currently concentrated in Arkansas, Idaho and Minnesota. In Arkansas and Minnesota, most timberlands are privately owned. Historically, increases in timber prices have often resulted in substantial increases in harvesting on private timberlands, including lands not previously made available for commercial timber operations, causing a short-term increase in supply that has tended to moderate price increases. Decreases in timber prices have often resulted in lower harvest levels, causing short-term decreases in supply that have tended to moderate price decreases. In Idaho, where a greater proportion of timberland is government owned, any substantial increase in timber harvesting from government-owned land could significantly reduce timber prices, which would harm our results of operations. For more than 20 years, environmental concerns and other factors have limited timber sales by federal agencies, which historically had been major suppliers of timber to the U.S. forest products industry, particularly in the West. Any reversal of policy that substantially increases timber sales from government-owned land could have a material adverse effect on our results of operations and cash flows.

On a local level, timber supplies can fluctuate depending upon factors such as changes in weather conditions and harvest strategies of local timberland owners, as well as occasionally high timber salvage efforts due to events such as unusual pest infestations or fires.

The cyclical nature of our business could adversely affect our results of operations.

The financial performance of our operations is affected by the cyclical nature of our business. The markets for timber, manufactured wood products and real estate are influenced by a variety of factors beyond our control. The demand for our timber and manufactured wood products is affected by the level of new residential construction activity and, to a lesser extent, home repair and remodeling activity, which are subject to fluctuations due to changes in economic conditions, interest rates, credit availability, population growth, weather conditions and other factors. The demand for logs is also affected by the demand for wood chips in the pulp and paper markets. The supply of timber and logs has historically increased during favorable pricing environments, which then causes downward pressure on prices. Historical prices for our manufactured wood products have been volatile, and we have limited direct influence over the timing and extent of price changes for our manufactured wood products. The demand for real estate can be affected by changes in factors such as interest rates, credit availability and economic conditions, as well as by the impact of federal, state and local land use and environmental protection laws.

We may be unable to harvest timber or we may elect to reduce harvest levels due to market conditions, either of which could adversely affect our results of operations and cash flows.

Our timber harvest levels and sales may be limited due to weather conditions, timber growth cycles, restrictions on access, availability of contract loggers, and regulatory requirements associated with the protection of wildlife and water resources, as well as by other factors, including damage by fire, insect infestation, disease and natural disasters such as ice storms, wind storms, hurricanes and floods. Changes in global climate conditions could intensify one or more of these factors. Although damage from such natural causes usually is localized, affecting only a limited percentage of our timber, there can be no assurance that any damage affecting our timberlands will be limited. We typically experience seasonally lower harvest activity during the winter and early spring due to weather conditions. Severe weather conditions and other natural disasters can also reduce the productivity of

10 / POTLATCH CORPORATION

timberlands and disrupt the harvesting and delivery of logs. Our financial results and cash flows are dependent to a significant extent on our continued ability to harvest timber at adequate levels.

On a short-term basis, we may adjust our timber harvest levels in response to market conditions. For example, in 2011, in response to weak demand and low prices, we shifted a portion of our harvest from our Southern region to our Northern region to capture better pricing opportunities. Following the closure of a significant customer ’ s mill in Arkansas, in 2012 we reduced our overall timber harvest to 3.6 million tons from 4.1 million tons in 2011.

Longer term, our timber harvest levels will be affected by acquisitions of additional timberlands and sales of existing timberlands. In addition to timberland acquisitions and sales, future timber harvest levels may be affected by changes in estimates of long-term sustainable yield because of silvicultural advances, natural disasters, fires and other hazards, regulatory constraints and other factors beyond our control.

We do not insure against losses of standing timber from any causes.

The volume and value of timber that can be harvested from our lands may be affected by natural disasters such as fire, insect infestation, disease, ice storms, wind storms, hurricanes, floods and other weather conditions and causes beyond our control. As is typical in the forest industry, we assume substantially all risk of loss to the standing timber we own from fire and other hazards because insuring for such losses is not practicable. Consequently, a reduction in our timber inventory could adversely affect our financial results and cash flows.

Changes in demand for our real estate and delays in the timing of real estate transactions may affect our revenues and operating results.

A number of factors, including availability of credit, a slowing of residential real estate development, population shifts and changes in demographics could reduce the demand for our real estate and negatively affect our results of operations. Changes in investor interest in purchasing timberlands could reduce our ability to execute sales of non-strategic timberlands and could also negatively affect our results of operations. In addition, changes in the interpretation or enforcement of current laws, or the enactment of new laws, regarding the use and development of real estate, or changes in the political composition of federal, state and local governmental bodies could lead to new or greater costs, delays and liabilities that could materially adversely affect our real estate business, profitability or financial condition.

In addition, there are inherent uncertainties in the timing of real estate transactions that could adversely affect our operating results in any particular quarter. The timing of real estate sales is a function of many factors, including the general state of the economy, demand in local real estate markets, the number of properties listed for sale, the seasonal nature of sales, the plans of adjacent landowners and our expectations of future price appreciation. Delays in the completion of transactions or the termination of potential transactions may be beyond our control. These events could adversely affect our operating results.

We may be unsuccessful in carrying out our acquisition strategy.

We have pursued, and intend to continue to pursue, acquisitions of strategic timberland properties and other forest products assets. We compete with buyers that have substantially greater financial resources than we have for acquisition opportunities. We intend to finance acquisitions through cash from operations, borrowings under our credit facility, proceeds from equity or debt offerings, or proceeds from asset dispositions, or any combination thereof. In addition, it is uncertain whether any acquisitions we make will perform in accordance with our expectations. The failure to identify and complete acquisitions of suitable properties, our inability to finance future acquisitions on favorable terms or our inability to complete like-kind exchanges, could adversely affect our operating results and cash flows.

Our wood products are commodities that are widely available from other producers.

Because commodity products have few distinguishing properties from producer to producer, competition for these products is based primarily on price, which is determined by supply relative to demand and competition from substitute products. Prices for our products are affected by many factors outside of our control, and we have no influence over the timing and extent of price changes, which often are volatile. Our profitability with respect to these products depends, in part, on managing our costs, particularly raw material and energy costs, which represent significant components of our operating costs and can fluctuate based upon factors beyond our control.

2013 FORM 10-K / 11

The forest products industry is highly competitive.

The markets for our wood products are highly competitive, and companies that have substantially greater financial resources than we do compete with us in each of our lines of business. Our wood products are subject to competition from wood products manufacturers in the United States, and to a lesser extent in Canada. After years of trade disputes over Canadian lumber imports, the United States and Canada signed an agreement, which has been extended to 2015, establishing a system of tiered taxes and volume restrictions relating to Canadian lumber imports to the United States. Notwithstanding the signing of this agreement, there can be no assurance that it will at all times, or at any time, effectively create a fair trade environment. The London Court of International Arbitration has twice ruled that Canada has violated the Softwood Lumber Agreement. In addition, our wood products manufacturing facilities are relatively capital intensive, which leads to high fixed costs and generally results in continued production as long as prices are sufficient to cover variable costs. These conditions have contributed to substantial price competition, particularly during periods of reduced demand. Some of our wood products competitors may currently be lower-cost producers than we are, and accordingly these competitors may be less adversely affected than we are by price decreases. Wood products also are subject to significant competition from a variety of substitute products, including non-wood and engineered wood products. To the extent there is a significant increase in competitive pressure from substitute products or other domestic or foreign suppliers, our business could be adversely affected.

Our businesses are affected by transportation availability and costs.

Our business depends on the availability of logging contractors and providers of transportation of wood products, and is materially affected by the cost of these service providers. Therefore, increases in the cost of fuel could negatively impact our financial results by increasing the cost associated with logging activities and transportation services, and could also result in an overall reduction in the availability of these services.

A material disruption at one of our manufacturing facilities could prevent us from meeting customer demand, reduce our sales or negatively affect our results of operations and financial condition.

Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could cease operations unexpectedly due to a number of events, including unscheduled maintenance outages, prolonged power failures, equipment failures, labor difficulties, disruptions in the transportation infrastructure, such as roads, bridges, railroad tracks and tunnels, fire, ice storms, floods, windstorms, hurricanes or other catastrophes, terrorism or threats of terrorism, governmental regulations and other operational problems.

Any such downtime or facility damage could prevent us from meeting customer demand for our products and/or require us to make unplanned capital expenditures. If one of these machines or facilities were to incur significant downtime, our ability to meet our production targets and satisfy customer requirements could be impaired, resulting in lower sales and income.

Our businesses are subject to extensive environmental laws and regulations.

Our operations are subject to a variety of federal, state and local laws and regulations regarding protection of the environment, including those relating to the protection of timberlands, endangered species, timber harvesting practices, recreation and aesthetics, protection and restoration of natural resources, air and water quality, and remedial standards for contaminated soil, sediments and groundwater. Failure to comply with these requirements can result in significant fines or penalties, as well as liabilities for remediation of contaminated sites, natural resource damages, or alleged personal injury or property damage claims.

Laws, regulations and related judicial decisions and administrative interpretations affecting our business are subject to change and new laws and regulations that may affect our business are frequently enacted. These changes may adversely affect our ability to harvest and sell timber and operate our manufacturing facilities and may adversely affect the ability of others to develop property we intend to sell for higher and better use purposes. Over time, the complexity and stringency of these laws and regulations have increased markedly and the enforcement of these laws and regulations has intensified. We believe that these laws and regulations will continue to become more restrictive and over time could adversely affect our operating results.

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Regulatory restrictions on future harvesting activities may be significant. Federal, state and local laws and regulations, which are intended to protect threatened and endangered species, as well as waterways and wetlands, limit and may prevent timber harvesting, road building and other activities on our timberlands. For example, the Clean Water Act and comparable state laws, regulations and best management practices programs protect water quality. As a result, our resource management activities adjacent to rivers and streams as well as the point source discharges from our manufacturing facilities are subject to strict regulation and there can be no assurance that our forest management and manufacturing activities will not be subject to increased regulation under the Clean Water Act in the future.

Similarly, the threatened and endangered species restrictions apply to activities that would adversely impact a protected species or significantly degrade its habitat. A number of species on our timberlands have been and in the future may be protected under these laws. If current or future regulations or their enforcement become more restrictive, the amount of our timberlands subject to harvest restrictions could increase.

We anticipate that increasingly strict laws and regulations relating to the environment, natural resources and forestry operations, as well as increased social concern over environmental issues, may result in additional restrictions on us leading to increased costs, additional capital expenditures and reduced operating flexibility.

Our manufacturing operations are subject to stringent environmental laws, regulations and permits covering air emissions, wastewater discharge, water usage, and waste handling and disposal that govern how we operate our facilities. These laws, regulations and permits, now and in the future, may restrict our current production and limit our ability to increase production, and impose significant costs on our operations with respect to environmental compliance. For example, in December 2012, the Environmental Protection Agency (EPA) issued new Major Source Boiler Maximum Achievable Control Technology, or Boiler MACT, rules that could require capital investments at our Wood Products manufacturing facilities. These rules are effective in early 2016. We are unable at this time to estimate the cost of compliance with these new rules because we are still in the process of reviewing the new rules as they apply to our wood products manufacturing facilities, however, the capital investments required to comply with the new rules could be significant. Overall, it is expected that environmental compliance costs will likely increase over time as environmental requirements become more stringent, and as the expectations of the communities in which we operate become more demanding.

Certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) impose strict, and under certain circumstances joint and several, liability on responsible parties, including current and former owners and operators of contaminated sites, for costs of investigation and remediation of contamination. They also impose liability for related damages to natural resources. We have in the past been identified by the EPA as a potentially responsible party under CERCLA at various locations, and we are currently identified as a potentially responsible party in connection with one of our properties. Additional information regarding this matter is included in Note 15: Commitments and Contingencies in the Notes to Consolidated Financial Statements included in this report, and that information is incorporated herein by reference. It is possible that other facilities we own or operate, or formerly owned or operated, or timberlands we now own or acquire, could also become subject to liabilities under these laws. The cost of investigation and remediation of contaminated properties could increase operating costs and adversely affect our financial results. Although we believe we have appropriate reserves recorded for the investigation and remediation of known matters, there can be no assurance that actual expenditures will not exceed our expectations, that reserves will not be increased, or that other unknown liabilities will not be discovered in the future.

Environmental groups and interested individuals may intervene in the regulatory processes in the locations where we own timberland and operate our wood products mills. Delays or restrictions on our operations due to the intervention of environmental groups or interested individuals could adversely affect our operating results. In addition to intervention in regulatory proceedings, interested parties may file or threaten to file lawsuits that seek to prevent us from obtaining permits, implementing capital improvements or pursuing operating plans or to require us to obtain permits before pursuing operating plans. Any lawsuit, or even a threatened lawsuit, could delay harvesting on our timberlands or impact our ability to operate or invest in our wood products mills.

Our defined benefit pension plans are currently underfunded.

As a result of the steep downturn in the stock market in the fourth quarter of 2008 and the resulting effects on long-term interest rates and discount rates, our defined benefit pension plans have been underfunded since December 31, 2008, as the projected benefit obligation exceeds the aggregate fair value of plan assets. As a result of the underfunding, we may be required to make contributions to our qualified pension plans. We did not make a contribution in 2013, however, we contributed $21.6 million and $9.4 million, respectively, in 2012 and 2011. We funded the 2012 contribution by taking a loan against our company owned life insurance plan, or COLI, based on

2013 FORM 10-K / 13

the cash surrender value that has accumulated in the plan over the years. Based on estimated year-end asset values and projections of plan liabilities, during 2014 we expect to be required to make a contribution of $1.7 million to our qualified pension plans. In addition, we will be making payments of approximately $1.8 million for our non-qualified pension plan.

The determination of pension plan expense and the requirements for funding our pension plans are based on a number of actuarial assumptions. Two critical assumptions are the expected rate of return on plan assets and the discount rate applied to pension plan obligations. Pension plan assets primarily consist of equity and fixed income investments, so fluctuations in actual equity market returns and changes in long-term interest rates may result in increased pension costs in future periods. Changes in assumptions regarding discount rates and expected rates of return on plan assets could also increase future pension costs. Changes in any of these factors may significantly impact future contribution requirements.

We depend on external sources of capital for future growth.

Our ability to finance growth is dependent to a significant degree on external sources of capital. Our ability to access such capital on favorable terms could be hampered by a number of factors, many of which are outside of our control, including a decline in general market conditions, decreased market liquidity, a downgrade to our public debt rating, increases in interest rates, an unfavorable market perception of our growth potential, a decrease in our current or estimated future earnings or a decrease in the market price of our common stock. In addition, our ability to access additional capital may also be limited by the terms of our existing indebtedness, which, among other things, restricts our incurrence of debt and the payment of dividend distributions. Any of these factors, individually or in combination, could prevent us from being able to obtain the capital we require on terms that are acceptable to us, and the failure to obtain necessary capital could materially adversely affect our future growth.

A strike or other work stoppage, or our inability to renew collective bargaining agreements on favorable terms, could adversely affect our financial results.

As of December 31, 2013, approximately 18% of our workforce was covered by one collective bargaining agreement, which expires in May 2016. While we believe our relations with our employees are satisfactory, we cannot assure you that we will be able to negotiate a new collective bargaining agreement on favorable terms. If we are unable to negotiate an acceptable new agreement with the union upon expiration of the existing contract, we could experience a strike or work stoppage. Even if we are successful in negotiating a new agreement, the new agreement could call for higher wages or benefits paid to union members, which would increase our operating costs and could adversely affect our profitability. If our unionized workers were to engage in a strike or other work stoppage, or other non-unionized operations were to become unionized, we could experience a significant disruption of operations at our facilities or higher ongoing labor costs. A strike or other work stoppage in the facilities of any of our major customers or suppliers could also have similar effects on us.

Risks Related to Our Indebtedness

Our indebtedness could materially adversely affect our ability to generate sufficient cash to make distributions to stockholders and fulfill our debt obligations, our ability to react to changes in our business and our ability to incur additional indebtedness to fund future needs.

Our debt requires interest and principal payments. As of December 31, 2013, we had long-term debt of $320.1 million , with no installments due in 2014. Subject to the limits contained in our debt instruments, we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks related to our indebtedness could intensify.

Our indebtedness increases the possibility that we may be unable to generate cash sufficient to pay, when due, the principal of, interest on or other amounts due in respect of our indebtedness or to make distributions to our stockholders. Our indebtedness, combined with our other financial obligations and contractual commitments, could have important consequences for stockholders. For example, it could:


•	make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations under any of our debt instruments, including restrictive covenants, could result in an event of default under the agreements governing such indebtedness;


•	require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing funds available for distributions to stockholders, working capital, capital expenditures, acquisitions and other purposes;

14 / POTLATCH CORPORATION


•	increase our vulnerability to adverse economic and industry conditions, which could place us at a competitive disadvantage compared to our competitors that have relatively less indebtedness;


•	limit our flexibility in planning for, or reacting to, changes in our business and the industries in which we operate; and


•	limit our ability to borrow additional funds, or to dispose of assets to raise funds, if needed, for distributions to stockholders, working capital, capital expenditures, acquisitions and other corporate purposes.

Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely affect our cost of financing and have an adverse effect on the market price of our securities.

Credit rating agencies rate our debt securities on factors that include our operating results, actions that we take, their view of the general outlook for our industry and their view of the general outlook for the economy. Actions taken by the rating agencies can include maintaining, upgrading or downgrading the current rating or placing the company on a watch list for possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a watch list for possible future downgrading could limit our access to the credit markets, increase our cost of financing, and have an adverse effect on the market price of our securities.

REIT and Tax-Related Risks

If we fail to remain qualified as a REIT, income from our timberlands will be subject to taxation at regular corporate rates and we will have reduced funds available for distribution to our stockholders.

Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code to our operations, including satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements, on a continuing basis. Given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances, no assurance can be given that we will remain qualified as a REIT.

In addition, the rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury (Treasury). Changes to the tax laws affecting REITs or taxable REIT subsidiaries, which may have retroactive application, could adversely affect our stockholders or us. We cannot predict how changes in the tax laws might affect our stockholders or us. Accordingly, we cannot provide assurance that new legislation, Treasury regulations, administrative interpretations or court decisions will not significantly affect our ability to remain qualified as a REIT, the federal income tax consequences of such qualification, the determination of the amount of REIT taxable income or the amount of tax paid by the TRS.

If in any taxable year we fail to remain qualified as a REIT:


•	we would not be allowed a deduction for distributions to stockholders in computing our taxable income; and


•	we would be subject to federal income tax on our taxable income at regular corporate rates, including any applicable alternative minimum tax.

Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our common stock. In addition, we would be disqualified from treatment as a REIT for the four taxable years following the year during which the qualification was lost, unless we are entitled to relief under certain statutory provisions. As a result, net income and the funds available for distribution to our stockholders could be reduced for up to five years, which would have an adverse impact on the value of our common stock.

Certain of our business activities are potentially subject to a prohibited transactions tax on 100% of our net income derived from such activities, which would reduce our cash flow and impair our ability to make distributions.

REITs are generally intended to be passive entities and can thus only engage in those activities permitted by the Internal Revenue Code, which for us generally include owning and managing a timberland portfolio, growing timber and selling standing timber.

2013 FORM 10-K / 15

Accordingly, the manufacture and sale of wood products, certain types of timberland sales, and the harvest and sale of logs are conducted through Potlatch TRS because such activities generate non-qualifying REIT income and could constitute “prohibited transactions” if such activities were engaged in directly by the REIT. In general, prohibited transactions are defined by the Internal Revenue Code to be sales or other dispositions of property held primarily for sale to customers in the ordinary course of a trade or business.

By conducting our business in this manner, we believe we will satisfy the REIT requirements of the Internal Revenue Code and thus avoid the 100% tax that could be imposed if a REIT were to conduct a prohibited transaction. We may not always be successful, however, in limiting such activities to Potlatch TRS. Therefore, we could be subject to the 100% prohibited transactions tax if such instances were to occur, which would adversely affect our cash flow and impair our ability to make quarterly distributions.

Our REIT structure may limit our ability to invest in our non-REIT qualifying operations.

Our use of Potlatch TRS enables us to continue to engage in non-REIT qualifying business activities consisting primarily of our manufacturing facilities, assets used for the harvesting of timber and the sale of logs, and selected land parcels that we expect to be sold or developed for higher and better use purposes. However, under the Internal Revenue Code, no more than 25% of the value of the assets of a REIT may be represented by securities of our taxable REIT subsidiaries. This may limit our ability to make investments in our wood products manufacturing operations or in other non-REIT qualifying operations.

Our ability to fund distributions and service our indebtedness using cash generated through our taxable REIT subsidiary may be limited.

The rules with which we must comply to maintain our status as a REIT limit our ability to use dividends from Potlatch TRS for the payment of stockholder distributions and to service our indebtedness. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from sales of our standing timber and other types of real estate income. No more than 25% of our gross income may consist of dividends from Potlatch TRS and other non-qualifying types of income. This requirement may limit our ability to receive dividends from Potlatch TRS and may impact our ability to fund distributions to stockholders and service the REIT's indebtedness using cash from Potlatch TRS.

We may not be able to complete desired like-kind exchange transactions for property we sell.

We sometimes seek to match sales and acquisitions of properties, which allows us to use Internal Revenue Code section 1031 like-kind exchange tax-deferred treatment. The matching of sales and purchases provides us with significant tax benefits, primarily the deferral of any gain on the property sold until the ultimate disposition or harvest of the replacement property. While we may attempt to complete like-kind exchanges when it is appropriate, it is unlikely that we will be able to do so in all instances due to various factors, including the lack of availability of suitable replacement property on acceptable terms and the inability to complete a qualifying like-kind exchange transaction within the time frames required by the Internal Revenue Code. The inability to obtain like-kind exchange treatment could result in the payment of taxes with respect to REIT property sold in 2014 and 2015, and a corresponding reduction in income and cash available for distribution to stockholders.

We may not be able to realize our deferred tax assets.

We may not have sufficient future taxable income to realize all our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which our temporary differences are deductible as governed by the tax code. The amount of our deferred tax assets could be reduced in the near term if future taxable income does not materialize or management is unable to implement one or more strategies that it has identified to generate taxable income. See Note 9: Income Taxes in the Notes to Consolidated Financial Statements contained in this report for additional information about our deferred tax assets.

16 / POTLATCH CORPORATION

Risks Related to Ownership of Our Common Stock

The price of our common stock may be volatile.

The market price of our common stock may be influenced by many factors, some of which are beyond our control, including those described above under " Business and Operating Risks" and the following: actual or anticipated fluctuations in our operating results or our competitors’ operating results, announcements by us or our competitors of capacity changes, acquisitions or strategic investments, our growth rate and our competitors’ growth rates, the financial markets and general economic conditions, changes in stock market analyst recommendations regarding us, our competitors or the forest products industry generally, or lack of analyst coverage of our common stock, failure to pay cash dividends or the amount of cash dividends paid, sales of our common stock by our executive officers, directors and significant stockholders or sales of substantial amounts of common stock, and changes in accounting principles.

In addition, there has been significant volatility in the market price and trading volume of securities of companies operating in the forest products industry that often has been unrelated to the operating performance of particular companies.

Certain provisions of our certificate of incorporation and bylaws and of Delaware law may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile take over attempts that some of our stockholders may consider to be beneficial.

Certain provisions of our certificate of incorporation and bylaws and Delaware law may have the effect of delaying or preventing changes in control if our board of directors determines that such changes in control are not in the best interest of us and our stockholders. The provisions in our certificate or incorporation and bylaws include, among other things, the following:


•	a classified board of directors with three-year staggered terms;


•	the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval;


•	stockholder action can only be taken at a special or regular meeting and not by written consent and stockholders cannot call a special meeting except upon the written request of stockholders entitled to cast not less than a majority of all of the votes entitled to be cast at the meeting;


•	advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings;


•	removal of directors only for cause;


•	allowing only our board of directors to fill vacancies on our board of directors;


•	in order to facilitate the preservation of our status as a REIT under the Internal Revenue Code, a prohibition on any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8% of our outstanding common or preferred stock, unless our board waives or modifies this ownership limitation;


•	unless approved by the vote of at least 80% of our outstanding shares, we may not engage in business combinations, including mergers, dispositions of assets, certain issuances of shares of stock and other specified transactions, with a person owning or controlling, directly or indirectly, 5% or more of the voting power of our outstanding common stock; and


•	supermajority voting requirements to amend our bylaws and certain provisions of our certificate of incorporation.

While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction that stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors. We are also subject to Delaware laws that could have similar effects. One of these laws prohibits us from engaging in a business combination with a significant stockholder unless specific conditions are met.

2013 FORM 10-K / 17

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Information on our locations and facilities is included in Part I - Item 1. Business under each of the respective segment headers.

ITEM 3. LEGAL PROCEEDINGS

Other than the environmental proceedings described in Note 15: Commitments and Contingencies in the Notes to Consolidated Financial Statements , which is incorporated herein by reference, we believe there is no pending or threatened litigation that would have a material adverse effect on our financial position, operations or liquidity.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

18 / POTLATCH CORPORATION

Part II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER

MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock trades on The Nasdaq Global Select Market (NASDAQ). The quarterly high and low sales price per share of our common stock and the quarterly cash distribution payments per share for 2013 and 2012 , were as follows:



	2013						2012
QUARTER	HIGH		LOW		CASH DISTRIBUTIONS		HIGH		LOW		CASH DISTRIBUTIONS
1st	$	46.01	$	39.43	$	0.31	$	34.45	$	29.73	$	0.31
2nd	51.48		39.66		0.31		32.13		28.02		0.31
3rd	44.93		37.59		0.31		38.49		31.12		0.31
4th	43.84		38.01		0.35		39.21		36.65		0.31

There were approximately 1,172 stockholders of record at January 31, 2014 .

Our Board of Directors, in its sole discretion, determines the actual amount of distributions to be made to stockholders based on consideration of a number of factors, including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions in our industry and in the markets for our products, tax considerations, borrowing capacity, debt covenant restrictions, timber prices, harvest levels on our timberlands, market demand for timberlands, including timberland properties we have identified as potentially having a higher and better use, and future acquisitions and dispositions. Consequently, the level of distributions to our stockholders may fluctuate and any reduction in the distribution rate may adversely affect our stock price.

Reference is made to the discussion in Liquidity and Capital Resources in Management’s Discussion and Analysis of Financial Condition and Results of Operations , of (i) the covenants in our bank credit facility and term loan and the indenture governing our senior notes with which we must comply in order to make cash distributions and (ii) the REIT tax rules, which under certain circumstances may restrict our ability to receive dividends from Potlatch TRS, our taxable REIT subsidiary.

There are currently no authorized repurchase programs in effect under which we may repurchase shares.

See Part III - Item 12. Security Ownerships of Certain Beneficial Owners and Management and Related Stockholder Matters of this report for a tabular summary of shares authorized for issuance under our equity compensation plans, which information is incorporated herein by this reference.

2013 FORM 10-K / 19

Company Stock Price Performance

The following graph and table show a five-year comparison of cumulative total stockholder returns for the company, the NAREIT Equity Index, the Standard & Poor’s 500 Composite Index and a group of six companies that we refer to as our Peer Group for the period ended December 31, 2013 . The total stockholder return assumes $100 invested at December 31, 2008, with quarterly reinvestment of all dividends.



	At December 31,
	2009		2010		2011		2012		2013
Potlatch Corporation	$	132	$	143	$	144	$	188	$	207
NAREIT Equity Index	128		164		177		209		215
S&P 500 Composite	126		146		149		172		228
2013 Peer Group ¹	130		142		148		203		216


¹	Our Peer Group companies are Deltic Timber Corp., Plum Creek Timber Co., Inc., Rayonier Inc., St. Joe Co., Universal Forest Products Inc. and Weyerhaeuser Co.

ITEMS 6, 7, 7A and 8.

The information called for by Items 6, 7, 7A and 8, inclusive, of Part II of this form is contained in the following sections of this report at the pages indicated below:



		PAGE NUMBER

ITEM 6	Selected Financial Data	27
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
ITEM 7A	Quantitative and Qualitative Disclosures About Market Risk	40
ITEM 8	Financial Statements and Supplementary Data	42

20 / POTLATCH CORPORATION

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act)), under the supervision and with the participation of management, including the Chief Executive Officer (CEO)and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of December 31, 2013. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO and CFO have concluded that these disclosure controls and procedures were effective as of December 31, 2013.

Management's Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act of 1934.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, with the participation of our CEO and CFO, assessed the effectiveness of our internal control over financial reporting as of December 31, 2013 . In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (1992) .

Based on our assessment, management believes that, as of December 31, 2013 , our internal control over financial reporting is effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2013 , has been audited by KPMG LLP, an independent registered public accounting firm. The audit report is included in the Reports of Independent Registered Public Accountants section of this document.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the latest fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

2013 FORM 10-K / 21

Part III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Certain of the information required by this item is incorporated by reference to the information appearing under the headings "Board of Directors," "Corporate Governance" and "Security Ownership of Certain Beneficial Owners and Management – Section 16(a) Beneficial Ownership Reporting Compliance" from our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 .

Our Corporate Conduct and Ethics Code, which is applicable to all directors, officers and employees, can be found on our website at www.potlatchcorp.com . We post any amendments to or waivers from our Corporate Conduct and Ethics Code on our website.

Executive Officers of the Registrant

Information as of February 14, 2014 , and for at least the past five years concerning our executive officers is as follows:

Michael J. Covey (age 56), has served as Chief Executive Officer since February 2006 and served as President and Chief Executive Officer from 2006 to March 2013. He has been a director of the company since February 2006, and has served as Chairman of the Board of the company since January 2007.

Eric J. Cremers (age 50), has served as President and Chief Operating Officer, and a director of the company, since March 2013, as Executive Vice President and Chief Financial Officer from March 2012 to March 2013, and as Vice President, Finance and Chief Financial Officer from July 2007 to March 2012.

Jerald W. Richards (age 45), has served as Vice President and Chief Financial Officer since September 2013. He was employed by Weyerhaeuser Company and served as Chief Accounting Officer from October 2010 to August 2013 and corporate segment controller from 2008 to October 2010.

William R. DeReu (age 47), has served as Vice President, Real Estate and Lake States Resource since February 2012 and as Vice President, Real Estate from May 2006 to February 2012.

Lorrie D. Scott (age 59), has served as Vice President, General Counsel and Corporate Secretary since July 2010. Prior to July 2010, she was employed by Weyerhaeuser Realty Investors, Inc., and served as Senior Vice President and General Counsel from October 2007 to July 2010.

Thomas J. Temple (age 57), has served as Vice President, Wood Products and Arkansas Resource since February 2012, as Vice President, Wood Products from January 2009 to February 2012, and as Vice President from November 2008 to January 2009.

The term of office of the officers of the company expires at the annual meeting of our board, and each officer holds office until the officer’s successor is duly elected and qualified or until the earlier of the officer’s death, resignation, retirement, removal by the board or as otherwise provided in our bylaws.

ITEM 11. EXECUTIVE COMPENSATION

Information set forth under the headings "Report of the Executive Compensation Personnel Policies Committee," "Compensation Discussion and Analysis" and "Corporate Governance - Compensation Committee Interlocks and Insider Participation" in our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 , is incorporated herein by reference.

22 / POTLATCH CORPORATION

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding any person or group known by us to be the beneficial owner of more than five percent of our common stock as well as the security ownership of management set forth under the heading "Security Ownership of Certain Beneficial Owners and Management" in our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 , is incorporated herein by reference.

The following table provides certain information as of December 31, 2013 , with respect to our equity compensation plans:



EQUITY COMPENSATION PLAN INFORMATION
PLAN CATEGORY	NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS OR RIGHTS ¹	WEIGHTED AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS OR RIGHTS ²		NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS
Equity compensation plans approved by security holders	557,943	$	30.92	269,358
Equity compensation plans not approved by security holders	—		—	—
Total	557,943	$	30.92	269,358


¹	Includes 455,350 performance shares and 89,734 restricted stock units, or RSUs, which are the maximum number of shares that can be awarded under the performance share and RSU programs, not including future dividend equivalents.


²	Performance shares and RSUs do not have exercise prices and are therefore not included in the weighted average exercise price calculation.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR

INDEPENDENCE

The information required by this item regarding certain relationships and related transactions is included under the heading "Corporate Governance - Transactions with Related Persons" in our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 , and is incorporated herein by reference.

The information required by this item regarding director independence is included under the headings "Board of Directors" and "Corporate Governance - Director Independence" in our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 , and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this item regarding principal accounting fees and services is included under the heading "Fees Paid to Independent Registered Public Accounting Firm in 2013 and 2012" in our definitive Proxy Statement to be filed with the Commission on or about April 1, 2014 , and is incorporated herein by reference.

2013 FORM 10-K / 23

Part IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Consolidated Financial Statements

Our consolidated financial statements are listed in the Index to Consolidated Financial Statements and Schedules .

Financial Statement Schedules

None.

Exhibits

Exhibits are listed in the Exhibit Index .

24 / POTLATCH CORPORATION

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



POTLATCH CORPORATION
(Registrant)
By	/S/ MICHAEL J. COVEY
	Michael J. Covey
	Chairman of the Board and Chief Executive Officer

Date: February 14, 2014

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on February 14, 2014 , by the following persons on behalf of the registrant in the capacities indicated.



BY	/S/ MICHAEL J. COVEY	Director, Chairman of the Board, and Chief Executive Officer (Principal Executive Officer)
	Michael J. Covey

BY	/S/ ERIC J. CREMERS	Director, President and Chief Operating Officer
	Eric J. Cremers

BY	/S/ JERALD W. RICHARDS	Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
	Jerald W. Richards

	*	Director
	Boh A. Dickey

	*	Director
	William L. Driscoll

	*	Director
	Charles P. Grenier

	*	Director
	Jerome C. Knoll

	*	Director
	John S. Moody

	*	Director
	Lawrence S. Peiros

	*	Director
	Gregory L. Quesnel



*By	/S/ LORRIE D. SCOTT
	Lorrie D. Scott
	(Attorney-in-fact)

2013 FORM 10-K / 25

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Index to Consolidated Financial Statements and Schedules

The following documents are filed as part of this report:



	PAGE NUMBER

Selected Financial Data	27

Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Consolidated Financial Statements:
Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011	42
Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011	43
Consolidated Balance Sheets at December 31, 2013 and 2012	44
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	45
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012 and 2011	46

Notes to Consolidated Financial Statements	47
Reports of Independent Registered Public Accounting Firm	72

26 / POTLATCH CORPORATION

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Selected Financial Data

(Dollars in thousands – except per-share amounts)



	2013		2012		2011		2010		2009
Revenues	$	570,289	$	525,134	$	497,421	$	539,447	$	476,169
Income from continuing operations	70,581		42,594		40,266		40,275		81,431
Net income	70,581		42,594		40,266		40,394		77,328

Total assets	$	680,530	$	718,897	$	746,220	$	781,711	$	823,565
Working capital	80,051		74,510		57,242		95,762		63,225
Long-term debt (including current portion)	320,092		357,576		366,403		368,496		368,431
Stockholders’ equity	204,148		138,643		142,138		204,439		229,790

Current ratio	2.6 to 1		2.2 to 1		1.7 to 1		2.5 to 1		2.1 to 1
Long-term debt to stockholders’ equity ratio	1.6 to 1		2.6 to 1		2.6 to 1		1.8 to 1		1.6 to 1

Capital expenditures:
Property, plant and equipment	$	10,280	$	5,636	$	5,338	$	5,215	$	4,317
Timber and timberlands, net	13,373		23,552		11,548		9,786		11,380
Total capital expenditures	$	23,653	$	29,188	$	16,886	$	15,001	$	15,697

Net income per share from continuing operations:
Basic	$	1.74	$	1.06	$	1.00	$	1.01	$	2.05
Diluted	1.73		1.05		1.00		1.00		2.04
Net income per share:
Basic	$	1.74	$	1.06	$	1.00	$	1.01	$	1.94
Diluted	1.73		1.05		1.00		1.00		1.93
Weighted-average shares outstanding (in thousands):
Basic	40,503		40,333		40,159		39,971		39,763
Diluted	40,709		40,553		40,383		40,219		39,974
Distributions per share	$	1.28	$	1.24	$	1.84	$	2.04	$	2.04

2013 FORM 10-K / 27

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our 2013 performance demonstrated a strong year, marked by the improvement in lumber prices and higher log prices in Idaho. The Resource segment income increased 48% year over year, or $23.9 million, on flat harvest levels. The Wood Products segment operated well and posted its highest level of earnings in nearly a decade. Results for our Real Estate segment were strong and it continues to be a stable earnings contributor based on steady demand for our HBU and rural recreational properties.

According to industry forecasts, total demand for North American lumber is anticipated to increase an additional 4 billion board feet, or approximately 7%, from 2013 levels. The majority of the growth is expected in the new home construction market segment as the U.S. housing market continues its gradual recovery. Factors such as home price increases, the cost of new mortgages, the mortgage approval process and the availability of desirable building lots will continue to play into the pace of the housing recovery. Participation by first-time homebuyers has been low to this point in the recovery by historical standards, and would provide an additional boost to demand. We anticipate southern pine sawlog prices will remain flat in 2014.

Factors Influencing Our Results of Operations and Cash Flows

The operating results of our Resource, Wood Products and Real Estate business segments have been and will continue to be influenced by a variety of factors, including the cyclical nature of the forest products industry, changes in timber prices and in harvest levels from our timberlands, competition, timberland valuations, demand for our non-strategic timberland for higher and better use purposes, the efficiency and level of capacity utilization of our wood products manufacturing operations, changes in our principal expenses such as log costs, asset dispositions or acquisitions, and other factors. See Part I - Item 1. Business for additional information.

Results of Operations

As of December 31, 2013 , our business is organized into three reporting segments: Resource, Wood Products and Real Estate. Sales between segments are recorded as intersegment revenues based on prevailing market prices. Because of the role of the Resource segment in supplying our Wood Products segment with a portion of its wood fiber needs, intersegment revenues can represent a significant portion of the Resource segment’s total revenues. Our other segments generally do not generate intersegment revenues.

In the period-to-period discussions of our consolidated results of operations, our revenues are reported after elimination of intersegment revenues. In the discussions by business segments, each segment’s revenues are presented before elimination of intersegment revenues.

28 / POTLATCH CORPORATION

CONSOLIDATED RESULTS COMPARING 2013 WITH 2012

The following table sets forth year-to-year changes in items included in our Consolidated Statements of Income for the years ended December 31, 2013 and 2012 .



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2013			2012			AMOUNT OF CHANGE			PERCENT CHANGE
Revenues	$	570,289		$	525,134		$	45,155		9	%
Costs and expenses:
Cost of goods sold	408,772			390,666			18,106			5	%
Selling, general and administrative expenses	50,397			49,419			978			2	%
Environmental remediation charge	3,522			—			3,522			n/m
Asset impairment charge	—			107			(107		)	n/m
	462,691			440,192			22,499			5	%
Operating income	107,598			84,942			22,656			27	%
Interest expense, net	(23,132		)	(25,539		)	2,407			9	%
Income before income taxes	84,466			59,403			25,063			42	%
Income tax provision	(13,885		)	(16,809		)	2,924			17	%
Net income	$	70,581		$	42,594		$	27,987		66	%

Revenues. Revenues increased in 2013 over 2012 from the Resource segment, primarily from higher log prices in Idaho, and the Wood Products segment, due to higher prices for manufactured wood products, partially offset by decreased revenues from our Real Estate segment due to fewer acres sold in 2013. A more detailed discussion of revenues follows in the operating results by business segments.

Cost of goods sold. Cost of goods sold increased in 2013 over 2012, primarily due to higher log costs in Wood Products and and higher logging and hauling costs and depletion expense in our Resource segment as a result of higher harvest volumes.

Environmental remediation charge. In 2013, we recorded pre-tax charges of $3.5 million to reflect increased remediation costs associated with liabilities related to our Avery Landing site in Idaho. Physical clean-up activities at the site were completed in 2013.

Asset impairment charge. In 2012, we recorded a $0.1 million charge related to write-downs of two of our real estate development projects.

Interest expense, net. Net interest expense decreased in 2013 from 2012 primarily due to the early redemption of $36.7 million of debt in 2013.

Income tax provision. Our effective tax rate for 2013 was 16.4% compared to 28.3% in 2012. The decrease resulted primarily from proportionately higher operating income in the REIT.

2013 FORM 10-K / 29

BUSINESS SEGMENT RESULTS COMPARING 2013 WITH 2012

Resource Segment



		YEARS ENDED DECEMBER 31,
(Dollars in thousands)		2013		2012		INCREASE (DECREASE)			PERCENT CHANGE
Revenues (before elimination of intersegment revenues)		$	238,228	$	207,846	$	30,382		15	%
Operating income		$	73,425	$	49,543	$	23,882		48	%

Harvest Volumes (in tons)
Northern region
	Sawlog	2,031,637		1,946,138		85,499			4	%
	Pulpwood	127,998		299,934		(171,936		)	(57	)%
	Stumpage	25,397		34,049		(8,652		)	(25	)%
	Total	2,185,032		2,280,121		(95,089		)	(4	)%

Southern region
	Sawlog	694,147		586,658		107,489			18	%
	Pulpwood	821,781		691,411		130,370			19	%
	Stumpage	8,353		—		8,353			n/m
	Total	1,524,281		1,278,069		246,212			19	%

Total harvest volume		3,709,313		3,558,190		151,123			4	%

Sales Price/Unit ($ per ton)
Northern region
	Sawlog	$	85	$	75	$	10		13	%
	Pulpwood	$	36	$	40	$	(4	)	(10	)%
	Stumpage	$	8	$	10	$	(2	)	(20	)%
	Weighted Average	$	81	$	69	$	12		17	%

Southern region
	Sawlog	$	43	$	42	$	1		2	%
	Pulpwood	$	32	$	31	$	1		3	%
	Stumpage	$	12	$	—	$	12		n/m
	Weighted Average	$	37	$	36	$	1		3	%

Revenues increased in 2013 over 2012 due to increased prices, primarily for sawlogs in Idaho, and the incremental harvest volumes provided by land acquisitions in Arkansas in late 2012. Increased prices accounted for $22.0 million of the revenue variance, while the increase in total harvest volume accounted for $8.6 million of the variance.

In our Northern region, sawlog prices and volume increased due to stronger demand. An oversupply of residuals and chips in the Northwest market resulted in lower pulpwood prices, which led us to minimize pulpwood production.

In our Southern region, both sawlog and pulpwood volumes increased. Sawlog prices increased due primarily to a shift in product mix related to increased demand for higher priced hardwoods. Pulpwood prices increased as a result of slightly improved demand for both pine and hardwood pulpwood.

Expenses for the segment increased $6.5 million, or 4%, in 2013 over 2012, primarily due to higher logging and hauling costs, from increased per-unit costs as well as volume, and higher depletion expense from increased harvest volumes.

30 / POTLATCH CORPORATION

Wood Products Segment



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2013		2012		INCREASE (DECREASE)			PERCENT CHANGE
Revenues	$	366,015	$	329,404	$	36,611		11	%
Operating income	$	58,892	$	45,456	$	13,436		30	%

Lumber shipments (MBF)	641,217		649,119		(7,902		)	(1	)%
Lumber sales prices ($ per MBF)	$	392	$	342	$	50		15	%

Revenues for the segment increased in 2013 over 2012 as lumber prices increased, but were partially offset by a small decrease in shipments. Expenses for the segment increased $23.2 million, or 8%, due to the higher cost of logs consumed, primarily related to increased prices for sawlogs in Idaho, and increased logging and hauling expenses, primarily due to a higher volume of logs sourced from third party timberlands in Idaho, and labor-related expenses.

Real Estate Segment



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2013		2012		INCREASE (DECREASE)			PERCENT CHANGE
Revenues	$	26,160	$	38,238	$	(12,078	)	(32		)%
Operating income	$	18,266	$	28,056	$	(9,790	)	(35		)%

	2013				2012
	ACRES SOLD		AVERAGE PRICE/ACRE		ACRES SOLD			AVERAGE PRICE/ACRE
HBU	4,799		$	2,033	7,080			$	2,969
Rural real estate	9,494		$	1,310	11,724			$	1,218
Non-strategic timberland	4,669		$	849	4,140			$	711
Total	18,962				22,944

Revenues decreased $12.1 million, expenses decreased $2.3 million and operating income decreased $9.8 million in 2013 compared to 2012, all primarily due to the sale of fewer acres of land in 2013 and product mix.

2013 FORM 10-K / 31

CONSOLIDATED RESULTS COMPARING 2012 WITH 2011

The following table sets forth year-to-year changes in items included in our Consolidated Statements of Income for the years ended December 31, 2012 and 2011 .



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2012			2011			AMOUNT OF CHANGE			PERCENT CHANGE
Revenues	$	525,134		$	497,421		$	27,713		6	%
Costs and expenses:
Cost of goods sold	390,666			382,252			8,414			2	%
Selling, general and administrative expenses	49,419			40,549			8,870			22	%
Environmental remediation charge	—			1,200			(1,200		)	n/m
Asset impairment charge	107			1,180			(1,073		)	(91	)%
	440,192			425,181			15,011			4	%
Operating income	84,942			72,240			12,702			18	%
Interest expense, net	(25,539		)	(27,829		)	2,290			8	%
Income before income taxes	59,403			44,411			14,992			34	%
Income tax provision	(16,809		)	(4,145		)	(12,664		)	n/m
Net income	$	42,594		$	40,266		$	2,328		6	%

Revenues. Revenues increased in 2012 compared to 2011 due to increased revenues from our Wood Products segment, partially offset by decreased revenues from our Resource and Real Estate segments. A more detailed discussion of revenues follows in the operating results by business segments.

Cost of goods sold. Cost of goods sold increased in 2012 over 2011, primarily due to the increased cost of logs consumed, customer freight, and wages and benefits that resulted from increased production and operating hours at our wood products manufacturing facilities, partially offset by reduced logging and hauling costs from our Resource segment due to the harvest deferral and lower basis of acres sold by our Real Estate segment.

Selling, general and administrative expenses. Selling, general and administrative expenses increased in 2012 over 2011, primarily due to higher pension expense related to our legacy plans, increased compensation expenses and mark to market adjustments related to deferred compensation plans.

Environmental remediation charge. In 2011, we recorded a pre-tax charge of $1.2 million to reflect increased remediation cost estimates associated with estimated liabilities related to our Avery Landing site in Idaho.

Asset impairment charge. In 2012, we recorded a $0.1 million charge related to write-downs of two of our real estate development projects. In 2011, we recorded a charge of $1.2 million that resulted from a change in the intended use of a warehouse.

Interest expense, net. Net interest expense decreased in 2012 from 2011 due to the maturity and redemption of $21.7 million of debt in 2012 and the lower interest rates associated with our interest rate swaps in 2012. In addition, a $1.2 million non-cash charge was recorded in 2011 for deferred costs related to the reduction in the available borrowing capacity in our previous bank credit facility.

Income tax provision. Our effective tax rate for 2012 was 28.3% compared to 9.3% in 2011. The increase resulted from increased operating income earned by Potlatch TRS in 2012.

32 / POTLATCH CORPORATION

BUSINESS SEGMENT RESULTS COMPARING 2012 WITH 2011

Resource Segment



		YEARS ENDED DECEMBER 31,
(Dollars in thousands)		2012		2011		INCREASE (DECREASE)			PERCENT CHANGE
Revenues (before elimination of intersegment revenues)		$	207,846	$	226,969	$	(19,123	)	(8	)%
Operating income		$	49,543	$	59,792	$	(10,249	)	(17	)%

Harvest Volumes (in tons)
Northern region
	Sawlog	1,946,138		2,034,465		(88,327		)	(4	)%
	Pulpwood	299,934		360,391		(60,457		)	(17	)%
	Stumpage	34,049		41,008		(6,959		)	(17	)%
	Total	2,280,121		2,435,864		(155,743		)	(6	)%

Southern region
	Sawlog	586,658		875,933		(289,275		)	(33	)%
	Pulpwood	691,411		812,577		(121,166		)	(15	)%
	Stumpage	—		15,006		(15,006		)	n/m
	Total	1,278,069		1,703,516		(425,447		)	(25	)%

Total harvest volume		3,558,190		4,139,380		(581,190		)	(14	)%

Sales Price/Unit ($ per ton)
Northern region
	Sawlog	$	75	$	73	$	2		3	%
	Pulpwood	$	40	$	38	$	2		5	%
	Stumpage	$	10	$	10	$	—		—
	Weighted Average	$	69	$	66	$	3		5	%

Southern region
	Sawlog	$	42	$	42	$	—		—
	Pulpwood	$	31	$	29	$	2		7	%
	Stumpage	$	—	$	6	$	(6	)	n/m
	Weighted Average	$	36	$	36	$	—		—

Resource revenues decreased in 2012 from 2011 due to our planned harvest deferral, primarily in Arkansas, partially offset by higher sales prices, primarily in Idaho, due to improving market conditions. The decline in total harvest volume accounted for a negative $31.2 million revenue variance, which was partially offset by a positive pricing variance of $12.3 million.

In our Northern region, sawlog volume decreased, while sawlog prices increased as a result of strengthening demand for cedar and mixed sawlogs, partially offset by a change in product mix that contained less cedar. Northern pulpwood volume decreased as a result of reduced pulpwood production in Idaho in 2012 due to lower prices, and pulp and paper mill curtailments and closures in the Lake States in 2012. Pulpwood prices increased in 2012 over 2011 due to very low prices in the first half of 2011.

In our Southern region, sawlog volume and prices decreased. Southern pulpwood volume decreased due to the harvest deferral in 2012, combined with increased production of pulpwood in 2011 resulting from pine plantation thinnings and favorable weather conditions in the latter part of 2011. Pulpwood prices increased due to stronger demand that resulted from decreased pine availability, and a shift in product mix to higher-priced hardwoods.

2013 FORM 10-K / 33

Expenses for the segment decreased $8.9 million, or 5%, in 2012 from 2011, primarily due to decreased logging and hauling costs and lower depletion expense as a result of the reduced harvest volume, partially offset by higher per-unit logging and hauling expenses, increased forest management costs due to catching up on deferred road maintenance, pre-commercial thinning and replanting, and increased commercial thinning.

Wood Products Segment



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2012		2011		INCREASE (DECREASE)		PERCENT CHANGE
Revenues	$	329,404	$	271,580	$	57,824	21	%
Operating income	$	45,456	$	7,267	$	38,189	n/m

Lumber shipments (MBF)	649,119		602,510		46,609		8	%
Lumber sales prices ($ per MBF)	$	342	$	297	$	45	15	%

Wood Products revenues increased due to improved market conditions, as both lumber prices and volumes increased in 2012 over 2011. Expenses for the segment increased $19.6 million, or 7%. The cost of logs consumed, customer freight, and wages and benefits all increased as a result of increased production and operating hours. We recognized a $0.9 million charge to income related to our lumber hedge in 2012 compared to a benefit of $4.5 million in 2011.

Real Estate Segment



	YEARS ENDED DECEMBER 31,
(Dollars in thousands)	2012		2011		INCREASE (DECREASE)			PERCENT CHANGE
Revenues	$	38,238	$	50,029	$	(11,791	)	(24		)%
Operating income	$	28,056	$	31,384	$	(3,328	)	(11		)%

	2012				2011
	ACRES SOLD		AVERAGE PRICE/ACRE		ACRES SOLD			AVERAGE PRICE/ACRE
HBU	7,080		$	2,969	2,592			$	2,054
Rural real estate	11,724		1,218		9,851			1,259
Non-strategic timberland	4,140		711		24,015			1,345
Total	22,944				36,458

Revenues decreased $11.8 million, expenses decreased $8.5 million and operating income decreased $3.3 million in 2012 compared to 2011, all primarily due to the sale of fewer acres of land in 2012.

Liquidity and Capital Resources

Overview

At December 31, 2013, our financial position included long-term debt of $320.1 million, compared to $357.6 million at December 31, 2012, due to the redemption in 2013 of $36.7 million of revenue bonds before their stated maturity dates. The ratio of long-term debt to stockholders’ equity was 1.6 to 1 and 2.6 to 1 at December 31, 2013 and 2012, respectively. We increased our quarterly cash distributions in the fourth quarter of 2013 to $0.35 per share from $0.31 per share.

Cash and short-term investments totaled $57.8 million at December 31, 2013. The available borrowing capacity under our credit agreement is $248.1 million. We have no scheduled debt maturities until December 2015.

34 / POTLATCH CORPORATION

Net Cash From Operations

Net cash provided from operating activities was:


•	$90.3 million in 2013,


•	$80.0 million in 2012 and


•	$77.4 million in 2011.

Year ended December 31, 2013 compared to year ended December 31, 2012

Net cash from operating activities in 2013 increased $10.3 million from 2012:


•	Cash received from customers increased $36.4 million, primarily due to increased sales and cash received by Resource and Wood Products, partially offset by decreased sales and cash received from our Real Estate Segment.


•	Qualified pension plan contributions decreased $21.6 million in 2013 from 2012, as we did not make a qualified pension plan contribution in 2013.

Partially offsetting these increases were:


•	Cash paid to employees, suppliers and others increased $29.4 million in 2013 from 2012.


•	Net cash outflows related to income taxes increased $20.0 million. Net cash paid in taxes in 2013 was $20.1 million compared to $0.1 million in 2012.

Year ended December 31, 2012 compared to year ended December 31, 2011

Net cash from operating activities in 2012 increased $2.6 million from 2011:


•	Cash received from customers increased $22.8 million, primarily due to increased sales and cash received by Wood Products, partially offset by decreased sales and cash received in our Resource and Real Estate segments.

Partially offsetting increased cash from customers were:


•	Cash contributions to our qualified pension plans increased $12.2 million in 2012 from 2011. The qualified pension plan contribution in 2013 was $21.6 million compared to $9.4 million in 2011.


•	Net cash outflows related to income taxes in 2012 was $0.1 million compared to a net cash inflow in 2011 of $6.0 million.


•	Cash paid to employees, suppliers and others increased $3.4 million in 2012 from 2011.

Net Cash Flows from Investing Activities

Net cash used for investing activities was $12.0 million in 2013, compared to $8.6 million in 2012. Net cash provided by investing activities was $4.5 million in 2011. In 2013, we used $23.7 million for capital expenditures partially offset by $10.8 million provided by short-term investments. In 2012, we used $29.2 million for capital expenditures, which was partially offset by the $21.8 million we borrowed against our COLI plan to fund our 2012 qualified pension contributions. In 2011, the decrease in short-term investments of $22.3 million was partially offset by $16.9 million used for capital expenditures.

We anticipate that we will spend $28 million for capital expenditures in 2014. Our capital spending is primarily related to reforestation expenditures, logging road construction, high-return discretionary projects and routine general replacement projects for our wood products manufacturing facilities.

Net Cash Flow From Financing Activities

Net cash used for financing activities was $89.6 million in 2013, $62.2 million in 2012 and $79.7 million in 2011. In 2013, net cash used for financing activities was primarily attributable to paying our quarterly distribution to shareholders of $51.9 million and the redemption of $36.7 million of debt. Net cash used for financing activities in 2012 was primarily attributable to paying our quarterly cash distributions to stockholders of $50.0 million and the maturity and redemption of $21.7 million of debt, partially offset by the issuance of $12.0 million of term loans. Net cash used for financing activities in 2011 was primarily attributable to paying our quarterly cash distributions to stockholders of $73.9 million and the maturity and redemption of $5.0 million of medium-term notes.

2013 FORM 10-K / 35

Unsecured Credit Agreement

Our current unsecured credit agreement, which expires on December 11, 2017, provides for a revolving line of credit of up to $250 million, including a $40 million subfacility for letters of credit and a $15 million subfacility for swing line loans. Usage under either or both subfacilities reduces availability under the revolving line of credit. Subject to certain conditions and agreement of the lenders, the bank credit facility may be increased by up to an additional $100 million. As of December 31, 2013, there were no borrowings outstanding under the revolving line of credit, and approximately $1.9 million of the letter of credit subfacility was being used to support several outstanding letters of credit. Available borrowing capacity at December 31, 2013 was $248.1 million.

We may use the funds borrowed under the credit agreement, among other things, to refinance existing indebtedness, fund working capital needs and capital expenditures, and for other general corporate purposes, including acquisitions.

The agreement governing our bank credit facility contains certain covenants that limit our ability and that of our subsidiaries to create liens, merge or consolidate, dispose of assets, incur indebtedness and guarantees, repurchase or redeem capital stock and indebtedness, make certain investments or acquisitions, enter into certain transactions with affiliates or change the nature of our business. The bank credit facility also contains financial maintenance covenants establishing a minimum interest coverage ratio, a minimum timberland coverage ratio and a maximum leverage ratio. We will be permitted to pay distributions to our stockholders under the terms of the bank credit facility so long as we remain in pro forma compliance with the financial maintenance covenants.

The table below sets forth the financial covenants in the bank credit facility and our status with respect to these covenants as of December 31, 2013 :



	COVENANT REQUIREMENT	ACTUAL RATIO AT DECEMBER 31, 2013
Minimum Interest Coverage Ratio	3.00 to 1.00	6.09 to 1.00
Minimum Timberland Coverage Ratio	3.00 to 1.00	5.94 to 1.00
Maximum Leverage Ratio	5.00 to 1.00 *	2.29 to 1.00

* Commencing January 1, 2015, the Maximum Leverage Ratio will decrease to 4.50 to 1.00.

The Interest Coverage Ratio is our twelve months ended EBITDDA, which we define as net income adjusted for interest expense, provision for income taxes, depreciation, depletion and amortization, the basis of real estate sold and non-cash equity compensation expense, divided by interest expense for the same period.

The Timberland Coverage Ratio is the value of our timberlands divided by our total funded indebtedness, which consists of our long-term debt, including current installments on long-term debt, plus the total amount outstanding under the letter of credit subfacility.

The Leverage Ratio is our total funded indebtedness divided by our twelve months ended EBITDDA, both as computed in the other covenant calculations above.

Term Loans

In December 2012, we entered into a $12 million term loan to fund two timberland acquisitions. The term loan consists of two $6 million tranches, with rates of 2.95% on the 2017 maturity and 3.70% on the 2020 maturity. The term loan contains the same covenants and restrictions as those in our unsecured credit agreement.

Senior Notes

In 2009, we sold $150 million aggregate principal amount of 7.5% senior notes. The terms of the notes limit our ability and the ability of any subsidiary guarantors to borrow money, pay dividends, redeem or repurchase capital stock, enter into sale and leaseback transactions, and create liens. With respect to the limitation on dividends and the repurchase of our capital stock, these restricted payments are permitted as follows:


•	We may use 100% of our Funds Available for Distribution, or FAD, for the period January 1, 2010 through the end of the quarter preceding the payment date, less cumulative restricted payments previously made from FAD during that period, to make restricted payments. Our cumulative FAD less our dividends paid was $55.7 million at December 31, 2013.


•	If our cumulative FAD, less cumulative restricted payments previously made from FAD, is insufficient to cover a restricted payment, then we are permitted to make payments from a basket amount, which was approximately $90.1 million at December 31, 2013.

36 / POTLATCH CORPORATION

•

If our cumulative FAD less our aggregate restricted payments made from FAD is insufficient to cover a restricted payment and we have depleted the basket, we may still make a restricted payment, so long as, after giving effect to the payment, our ratio of indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and basis of real estate sold, or EBITDDA, from continuing operations for the preceding four full fiscal quarters does not exceed 4.25 to 1.00.

FAD, as defined in the indenture governing the senior notes, is earnings from continuing operations, plus depreciation, depletion and amortization, plus basis of real estate sold, and minus capital expenditures. For purposes of this definition, capital expenditures exclude all expenditures relating to direct or indirect timberland purchases in excess of $5 million.

Future Cash Requirements

Based on our outlook for 2014 and taking into account planned harvest activities, we expect to fund a majority of our 2014 annual cash distributions using the cash flows from our REIT-qualifying timberland operations and from cash and short-term investments on hand at December 31, 2013. The rules with which we must comply to maintain our status as a REIT limit our ability to use dividends from Potlatch TRS for the payment of stockholder distributions. In particular, at least 75% of our gross income for each taxable year as a REIT must be derived from sales of our standing timber and other types of real estate income. No more than 25% of our gross income may consist of dividends from Potlatch TRS and other non-qualifying types of income. This requirement may limit our ability to receive dividends from Potlatch TRS and may impact our ability to fund distributions to stockholders using cash flows from Potlatch TRS.

Credit Ratings

The major debt rating agencies routinely evaluate our debt and our access to capital, and our cost of borrowing can increase or decrease depending on our credit rating. In April 2013, Moody’s upgraded our debt rating to investment grade 'Baa3' from 'Ba1', with a stable outlook. In April 2013, Standard & Poor's upgraded our corporate credit and senior unsecured ratings to 'BB+' from 'BB', and in December 2013 affirmed our 'BB+' rating, with a stable outlook.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2013:



	PAYMENTS DUE BY PERIOD
(Dollars in thousands)	TOTAL		WITHIN 1 YEAR		1-3 YEARS		3-5 YEARS		MORE THAN 5 YEARS
Long-term debt ¹	$	320,085	$	—	$	27,500	$	25,250	$	267,335
Interest on long-term debt ²	153,048		21,241		41,097		37,955		52,755
Operating leases ³	9,985		3,335		5,028		1,491		131
Purchase obligations ⁴	13,284		1,599		6,867		4,818		—
Other obligations ⁵	192,316		51,524		39,549		36,206		65,037
Total	$	688,718	$	77,699	$	120,041	$	105,720	$	385,258


¹	See Note 10: Debt in the Notes to Consolidated Financial Statements .


²	Amounts presented for interest payments assume that all long-term debt outstanding as of December 31, 2013 will remain outstanding until maturity.


³	See Note 15: Commitments and Contingencies in the Notes to Consolidated Financial Statements .

⁴

Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the company and that specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude arrangements that the company can cancel without penalty.

⁵

Other obligations includes current liabilities, as well as qualified pension contributions, supplemental pension payments and payments for other postretirement employee benefit obligations. See Note 11: Accounts Payable and Accrued Liabilities and Note 14: Savings Plans, Pension Plans and Other Postretirement Employee Benefits in the Notes to Consolidated Financial Statements for additional detail.

2013 FORM 10-K / 37

Off-Balance Sheet Arrangements

We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.

Distributions to Shareholders

The following table summarizes the historical tax characteristics of distributions to shareholders for the years ended December 31:



(Amounts per share)	2013		2012		2011
Capital gain distributions	$	1.28	$	0.71	$	0.83
Non-taxable return of capital	—		0.53		1.01
Total distributions	$	1.28	$	1.24	$	1.84

Critical Accounting Policies and Estimates

Our accompanying Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The following are critical accounting policies which are both very important to the portrayal of our financial condition and results of operations and which require some of management’s most difficult, subjective and complex judgments. The accounting for these matters involves forming estimates based on current facts, circumstances and assumptions which, in management’s judgment, could change in a manner that would materially affect management’s future estimates with respect to such matters and, accordingly, could cause our future reported financial condition and results of operations to differ materially from financial results reported based on management’s current estimates.

Timber and timberlands. Timber and timberlands are recorded at cost, net of depletion. Expenditures for reforestation, including all costs related to stand establishment, such as site preparation, costs of seeds or seedlings and tree planting, are capitalized. Expenditures for forest management, consisting of regularly recurring items necessary to the ownership and administration of our timber and timberlands, are accounted for as current operating expense. Our depletion is determined based on costs capitalized and the related current estimated recoverable timber volume. Recoverable volume does not include anticipated future growth, nor are anticipated future costs considered.

There are currently no authoritative accounting rules relating to costs to be capitalized in the timber and timberlands category. We have used relevant portions of current accounting rules, industry practices and our judgment in determining costs to be capitalized or expensed. Alternate interpretations and judgments could significantly affect the amounts capitalized. Additionally, models and observations used to estimate the current recoverable timber volume on our lands are subject to judgments that could significantly affect volume estimates.

Different assumptions for either the cost or volume estimates, or both, could have a significant effect upon amounts reported in our Consolidated Financial Statements . Because of the number of variables involved and the interrelationship between the variables, sensitivity analysis of individual variables is not practical.

Long-lived assets. A significant portion of our total assets are invested in our timber and timberlands and our wood products manufacturing facilities. The cyclical patterns of our businesses cause cash flows to fluctuate by varying degrees from period to period. As a result, long-lived assets are a material component of our financial position with the potential for material change in valuation if assets are determined to be impaired.

Our long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, as measured by its undiscounted estimated future cash flows. We use our operational budgets to estimate future cash flows. Budgets are inherently uncertain estimates of future performance due to the fact that all inputs, including revenues, costs and capital spending, are subject to frequent change for many different reasons, including the reasons previously described above under “Factors Influencing our Results of Operations and Cash Flows.” Because of the number of variables involved, the interrelationship between the variables and the long-term nature of the impairment measurement, sensitivity analysis of individual variables is not practical.

38 / POTLATCH CORPORATION

Income taxes. We believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which temporary differences are deductible. In making this assessment, we consider the scheduled reversal of deferred tax liabilities (including the impact of available carryforward periods), projected taxable income and tax planning strategies. Based on projected taxable income for Potlatch TRS over the periods for which the deferred tax assets are deductible, as well as certain tax planning strategies that management has undertaken and expects to have the ability to undertake in the future, we believe that it is more likely than not that we will realize the $45.9 million in benefits of these deductible differences and carryforwards, net of the existing $2.2 million in valuation allowances at December 31, 2013 . The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced and management is unable to implement one or more of the tax planning strategies that it has identified.

Contingent liabilities. We are subject to lawsuits, investigations and other claims related to environmental, product and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. We record contingent liabilities when it becomes probable that we will have to make payments and the amount of loss can be reasonably estimated. Assessing probability of loss and estimating probable losses requires analysis of multiple factors, including historical experience, judgments about the potential actions of third party claimants and courts, and recommendations of legal counsel. In addition to contingent liabilities recorded for probable losses, we disclose contingent liabilities when there is a reasonable possibility that an ultimate loss may occur.

While we do our best in developing our projections, recorded contingent liabilities are based on the best information

available and actual losses in any future period are inherently uncertain. If estimated probable future losses or actual losses exceed our recorded liability for such claims, we would record additional charges. These exposures and proceedings can be significant and the ultimate negative outcomes could be material to our operating results or cash flow in any given quarter or year. See Note 15: Commitments and Contingencies in the Notes to Consolidated Financial Statements for more information.

Pension and postretirement employee benefits. The determination of pension plan expense and the requirements for funding our pension plans are based on a number of actuarial assumptions. Two critical assumptions are the discount rate applied to pension plan obligations and the expected rate of return on plan assets. For other postretirement employee benefit (OPEB) obligations related to certain health care and life insurance benefits provided to qualified retired employees, critical assumptions in determining OPEB expense are the discount rate applied to benefit obligations and the assumed health care cost trend rates used in the calculation of benefit obligations.

Note 14: Savings Plans, Pension Plans and Other Postretirement Employee Benefits in the Notes to Consolidated Financial Statements includes information on the components of pension and OPEB expense and the underlying actuarial assumptions used to calculate periodic expense for the three years ended December 31, 2013, as well as the funded status of our pension plans and OPEB obligations as of December 31, 2013 and 2012.

The discount rate used in the determination of pension and OPEB benefit obligations in 2013, 2012 and 2011 was calculated using hypothetical bond portfolios consisting of “AA” or better rated securities that match the expected monthly benefit payments under our pension plans and OPEB obligations. The portfolios were well-diversified over corporate industrial, corporate financial, municipal, federal and foreign government issuers. At December 31, 2013, we calculated pension obligations using a 5.10% discount rate. We used a discount rate of 4.15% and 4.95% at December 31, 2012 and 2011, respectively.

To determine the expected long-term rate of return on pension assets, we employ a process that analyzes historical long-term returns for various investment categories, as measured by appropriate indices. These indices are weighted based upon the extent to which plan assets are invested in the particular categories in arriving at our determination of a composite expected return. The expected long-term rates of return on pension plan assets was 8.0% for the years ended December 31, 2013 and December 31, 2012, and 8.5% for the year ended December 31, 2011. We reduced the expected long-term rate of return to 7.5% for 2014 to reflect the change in the pension plan's investment portfolio.

2013 FORM 10-K / 39

Net periodic pension plan cost in 2013 was $17.8 million. An increase in the discount rate or the rate of expected return on plan assets, all other assumptions remaining the same, would decrease net periodic cost. A 25 basis point increase in the discount rate would increase net periodic cost by approximately $0.6 million in 2014 and decrease the projected benefit obligation by approximately $10.1 million at December 31, 2013. A 25 basis point decrease in the assumption for the expected return on plan assets would increase net periodic cost by approximately $0.8 million. The actual rates of return on plan assets may vary significantly from the assumption used because of unanticipated changes in financial markets.

For our OPEB obligations, the net periodic benefit for 2013 was $4.6 million. The discount rate used to calculate OPEB obligations, which was determined using the same methodology we used for our pension plans, was 4.45%, 3.70% and 4.85% at December 31, 2013, 2012 and 2011, respectively. The assumed health care cost trend rate used to calculate OPEB obligations as of December 31, 2013 was 0% for our salaried and non-represented plans and a certain group of participants over age 65 in our hourly plan; 6.3% for our Arkansas participants covered by a collective bargaining agreement, grading ratably to an assumption of 5.0% in 2083; and 7.7% for a certain group of participants under age 65 in our hourly plan, grading ratably to an assumption of 5.0% in 2083.

An increase in the discount rate or decrease in the health care cost trend rate assumption, all other assumptions remaining the same would decrease our OPEB liability. A 25 bases point increase in the discount rate would decrease the OPEB liability approximately $0.9 million. A 1% increase in the health care cost trend rate assumption would have affected our OPEB obligation by approximately $0.5 million, as reported in Note 14: Savings Plans, Pension Plans and Other Postretirement Employee Benefits in the Notes to Consolidated Financial Statements . The actual rates of health care cost increases may vary significantly from the assumption used because of unanticipated changes in health care costs.

PROSPECTIVE ACCOUNTING PRONOUNCEMENTS

Currently there are no significant prospective accounting pronouncements that are expected to have a material impact on us.

Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risks on financial instruments includes interest rate risk on our short-term investments, bank credit facility and interest rate swap agreements. All market risk sensitive instruments were entered into for purposes other than trading purposes.

The interest rates applied to borrowings under our bank credit facility adjust often and therefore react quickly to any movement in the general trend of market interest rates. We do not attempt to mitigate the effects of short-term interest rate fluctuations on our bank credit facility borrowings through the use of derivative financial instruments. There were no outstanding borrowings at December 31, 2013.

All of our long-term debt is fixed rate and therefore changes in market interest rates do not expose us to interest rate risk for these financial instruments. However, we entered into interest rate swap agreements to effectively convert some of our debt to variable rate. As of December 31, 2013, we had six separate interest rate swaps with notional amounts totaling $46.75 million. The swaps convert interest payments with fixed rates ranging between 6.95% and 8.89% to a three-month LIBOR plus a spread between 4.738% and 6.518%. The interest rate swaps terminate at various dates between December 2015 and February 2018. See Note 13: Financial Instruments and Concentration of Risk in the Notes to Consolidated Financial Statements for additional information.

We occasionally enter into lumber hedging contracts to mitigate commodity price risk related to sales by the Wood Products segment. These contracts normally cash settle at various dates throughout the length of the contracts. Our last lumber hedge settled in 2012; there were no lumber hedges outstanding at December 31, 2013 or 2012. See Note 13: Financial Instruments and Concentration of Risk in the Notes to Consolidated Financial Statements for additional information about our lumber hedges.

40 / POTLATCH CORPORATION

Quantitative Information about Market Risks

The following table summarizes our outstanding debt, interest rate swaps and average interest rates as of December 31, 2013:



	EXPECTED MATURITY DATE
(Dollars in thousands)	2014		2015			2016			2017			2018			THEREAFTER			TOTAL
Fixed rate debt:
Principal due	$	—	$	22,500		$	5,000		$	11,000		$	14,250		$	267,335		$	320,085
Average interest rate	—		6.95		%	8.80		%	5.64		%	8.88		%	6.80		%	6.90		%
Fair value at 12/31/13																		$	347,869

Interest rate swaps ¹ :
Fixed to variable	$	—	$	727		$	171		$	238		$	694		$	—		$	1,830
Fair value at 12/31/13																		$	1,830
¹ Interest rate swaps are included in the long-term debt line on the Consolidated Balance Sheets.

We are not subject to interest rate risk on our fixed rate obligations. We are subject to interest rate risk on our interest rate swap agreements. A hypothetical increase or decrease of 50 and 100 basis points (BPS) related to our interest rate swap agreements would have the following effects on fair value:



(Dollars in thousands)	LONG-TERM DEBT PRINCIPAL AMOUNT		INTEREST RATE SWAP AGREEMENTS - FAIR VALUE ¹
(Dollars in thousands)	LONG-TERM DEBT PRINCIPAL AMOUNT		Current		+50 BPS		+100 BPS		-50 BPS		-100 BPS
Maturing in:
2014	$	—	$	—	$	—	$	—	$	—	$	—
2015	22,500		747		546		349		952		956
2016	5,000		179		131		82		231		235
2017	5,000		249		166		85		334		412
2018	14,250		723		441		166		1,016		1,305
Total	$	46,750	$	1,898	$	1,284	$	682	$	2,533	$	2,908
¹ Fair value for purpose of this table is calculated on a termination value basis. Accrued interest is included and a credit value adjustment, which is used for GAAP purpose, is excluded.

2013 FORM 10-K / 41

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income

(Dollars in thousands, except per-share amounts)



	FOR THE YEARS ENDED DECEMBER 31,
	2013			2012			2011
Revenues	$	570,289		$	525,134		$	497,421
Costs and expenses:
Cost of goods sold	408,772			390,666			382,252
Selling, general and administrative expenses	50,397			49,419			40,549
Environmental remediation charges	3,522			—			1,200
Asset impairment charges	—			107			1,180
	462,691			440,192			425,181
Operating income	107,598			84,942			72,240
Interest expense, net	(23,132		)	(25,539		)	(27,829		)
Income before income taxes	84,466			59,403			44,411
Income tax provision	(13,885		)	(16,809		)	(4,145		)
Net income	$	70,581		$	42,594		$	40,266

Net income per share:
Basic	$	1.74		$	1.06		$	1.00
Diluted	1.73			1.05			1.00

Distributions per share	$	1.28		$	1.24		$	1.84

The accompanying notes are an integral part of these consolidated financial statements.

42 / POTLATCH CORPORATION

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Dollars in thousands)



	FOR THE YEARS ENDED DECEMBER 31,
	2013			2012			2011
Net income	$	70,581		$	42,594		$	40,266
Other comprehensive income (loss), net of tax:
Defined benefit pension plans and other postretirement employee benefits (OPEB):
Net gain (loss) arising during the period, net of tax expense (benefit) of $21,424, $(5,968) and $(21,960)	33,510			(9,334		)	(34,347		)
Prior service credit arising during the period, net of tax expense of $0, $2,159 and $2,264	—			3,273			3,541
Amortization of actuarial loss included in net periodic cost, net of tax expense of $9,024, $7,208 and $5,414	14,114			11,275			8,469
Amortization of prior service credit included in net periodic cost, net of tax benefit of $(3,482), $(3,343) and $(3,062)	(5,446		)	(5,230		)	(4,790		)
Other comprehensive income (loss), net of tax	42,178			(16		)	(27,127		)
Comprehensive income	$	112,759		$	42,578		$	13,139

The accompanying notes are an integral part of these consolidated financial statements.

2013 FORM 10-K / 43

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands, except per-share amounts)



	AT DECEMBER 31
	2013			2012
ASSETS
Current assets:
Cash	$	5,586		$	16,985
Short-term investments	52,251			63,077
Receivables, net of allowance for doubtful accounts of $450	16,572			10,668
Inventories	36,275			28,928
Deferred tax assets	7,724			10,507
Other assets	11,961			7,932
Total current assets	130,369			138,097
Property, plant and equipment, net	59,976			58,050
Timber and timberlands, net	455,871			464,467
Deferred tax assets	21,576			43,292
Other assets	12,738			14,991
Total assets	$	680,530		$	718,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments on long-term debt	$	—		$	8,413
Current liability for pensions and other postretirement employee benefits	6,701			6,888
Accounts payable and accrued liabilities	43,617			48,286
Total current liabilities	50,318			63,587
Long-term debt	320,092			349,163
Liability for pensions and other postretirement employee benefits	83,619			145,047
Other long-term obligations	22,353			22,457
Total liabilities	476,382			580,254
Stockholders’ equity:
Preferred stock, authorized 4,000,000 shares, no shares issued	—			—
Common stock, $1 par value, authorized 100,000,000 shares, issued 40,536,879 and 40,389,180 shares	40,537			40,389
Additional paid-in capital	337,887			333,348
Accumulated deficit	(75,556		)	(94,196		)
Accumulated other comprehensive loss, net of tax of $(64,868) and $(91,834)	(98,720		)	(140,898		)
Total stockholders’ equity	204,148			138,643
Total liabilities and stockholders' equity	$	680,530		$	718,897

The accompanying notes are an integral part of these consolidated financial statements.

44 / POTLATCH CORPORATION

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)



	FOR THE YEARS ENDED DECEMBER 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	70,581		$	42,594		$	40,266
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization	26,962			26,247			29,092
Basis of real estate sold	2,904			5,048			10,219
Deferred income taxes	(2,467		)	15,992			4,218
Employee benefit plans	7,561			4,317			(2,181		)
Equity-based compensation expense	4,377			4,067			4,404
Other, net	(1,972		)	599			1,104
Change in:
Receivables	(5,904		)	2,865			7,745
Inventories	(7,347		)	(325		)	(4,228		)
Prepaid expenses and other assets	1,668			(1,459		)	(8		)
Accounts payable and accrued liabilities	(3,468		)	163			(4,116		)
Funding of qualified pension plans	—			(21,630		)	(9,400		)
Operating related activities	(2,643		)	1,503			310
Net cash from operating activities	90,252			79,981			77,425
CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments	10,826			(88		)	22,260
Proceeds from company owned life insurance (COLI) loan	—			21,751			—
Additions to property, plant and equipment	(10,280		)	(5,636		)	(5,338		)
Additions to timber and timberlands	(13,373		)	(23,552		)	(11,548		)
Other, net	823			(1,122		)	(871		)
Net cash from investing activities	(12,004		)	(8,647		)	4,503
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders	(51,868		)	(50,041		)	(73,921		)
Repayment of long-term debt	(36,663		)	(21,662		)	(5,011		)
Proceeds from issuance of long-term debt	—			12,000			—
Issuance of common stock	1,904			1,075			1,430
Change in book overdrafts	(955		)	462			157
Deferred financing costs	(25		)	(2,148		)	(698		)
Employee tax withholdings on vested performance share awards	(1,738		)	(1,714		)	(1,641		)
Other, net	(302		)	(140		)	(18		)
Net cash from financing activities	(89,647		)	(62,168		)	(79,702		)
Increase (decrease) in cash	(11,399		)	9,166			2,226
Cash at beginning of year	16,985			7,819			5,593
Cash at end of year	$	5,586		$	16,985		$	7,819

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid (received) during the year for:
Interest	$	22,229		$	23,884		$	25,241
Income taxes, net	20,097			53			(5,984		)

The accompanying notes are an integral part of these consolidated financial statements.

Certain 2012 and 2011 amounts have been reclassified to conform to the 2013 presentation.

2013 FORM 10-K / 45

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity

(Dollars in thousands, except per-share amounts)



	Common Stock Issued			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
Balance, December 31, 2010	40,032,587	$	40,033	$	330,894		$	(52,733	)	$	(113,755	)	$	204,439
Exercise of stock options and stock awards	77,446	77		1,261			—			—			1,338
Performance share and restricted stock unit awards	92,137	92		2,744			—			—			2,836
Net income	—	—		—			40,266			—			40,266
Pension plans and OPEB obligations	—	—		—			—			(27,127		)	(27,127		)
Transfer of assets from REIT to subsidiary	—	—		(5,693		)	—			—			(5,693		)
Common distributions, $1.84 per share	—	—		—			(73,921		)	—			(73,921		)
Balance, December 31, 2011	40,202,170	$	40,202	$	329,206		$	(86,388	)	$	(140,882	)	$	142,138
Exercise of stock options and stock awards	60,857	61		1,031			—			—			1,092
Performance share and restricted stock unit awards	126,153	126		3,096			(361		)	—			2,861
Net income	—	—		—			42,594			—			42,594
Pension plans and OPEB obligations	—	—		—			—			(16		)	(16		)
Transfer of assets from REIT to subsidiary	—	—		15			—			—			15
Common distributions, $1.24 per share	—	—		—			(50,041		)	—			(50,041		)
Balance, December 31, 2012	40,389,180	$	40,389	$	333,348		$	(94,196	)	$	(140,898	)	$	138,643
Exercise of stock options and stock awards	70,968	71		1,833			—			—			1,904
Performance share and restricted stock unit awards	76,731	77		2,706			(73		)	—			2,710
Net income	—	—		—			70,581			—			70,581
Pension plans and OPEB obligations	—	—		—			—			42,178			42,178
Common distributions, $1.28 per share	—	—		—			(51,868		)	—			(51,868		)
Balance, December 31, 2013	40,536,879	$	40,537	$	337,887		$	(75,556	)	$	(98,720	)	$	204,148

The accompanying notes are an integral part of these consolidated financial statements.

46 / POTLATCH CORPORATION

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

INDEX FOR NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



		PAGE NUMBER
Note 1.	Summary of Principal Accounting Policies	48
Note 2.	REIT Conversion	51
Note 3.	Earnings per Share	51
Note 4.	Short-Term Investments	52
Note 5.	Inventories	52
Note 6.	Property, Plant and Equipment	52
Note 7.	Timber and Timberlands	53
Note 8.	Other Assets	53
Note 9.	Income Taxes	53
Note 10.	Debt	55
Note 11.	Accounts Payable and Accrued Liabilities	56
Note 12.	Other Long-Term Obligations	57
Note 13.	Financial Instruments and Concentration of Risk	57
Note 14.	Savings Plans, Pension Plans and Other Postretirement Employee Benefits	59
Note 15.	Commitments and Contingencies	65
Note 16.	Equity-Based Compensation Plans	66
Note 17.	Segment Information	69
Note 18.	Asset Impairment Charges	71
Note 19.	Financial Results by Quarter	71

2013 FORM 10-K / 47

NOTE 1. SUMMARY OF PRINCIPAL ACCOUNTING POLICIES

CONSOLIDATION

The Consolidated Financial Statements include the accounts of Potlatch Corporation and its subsidiaries after elimination of significant intercompany transactions and accounts. There are no significant unconsolidated subsidiaries.

We are primarily engaged in activities associated with timberland management, including the sale of timber, the management of approximately 1.4 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacture and sale of wood products. Our timberlands and all of our wood products facilities are located within the continental United States. The primary market for our products is the United States. As discussed in Note 2: REIT Conversion , we converted to a Real Estate Investment Trust, or REIT, effective January 1, 2006.

SIGNIFICANT ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, which we refer to in this report as U.S. GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions.

Significant estimates are described in further detail in this section and the following Notes to Consolidated Financial Statements . Significant estimates include timber volumes, pension and postretirement obligation assumptions, environmental liabilities, fair value of derivative instruments and assumptions utilized for asset and disposal group impairment tests.

EQUITY-BASED COMPENSATION

Equity-based awards are measured at fair value on the dates they are granted or modified. These measurements establish the cost of the equity-based awards for accounting purposes. The cost of the equity-based award is then recognized in the Consolidated Statements of Income over each employee’s required service period. See Note 16: Equity-Based Compensation Plans for more information about our equity-based compensation.

INVENTORIES

Inventories are stated at the lower of cost or market. The last-in, first-out method is used to determine cost of logs, lumber and plywood for most of our operations. The average cost method is used to determine cost of all other inventories. Expenses associated with idle capacity or other curtailments of production are reflected in cost of goods sold in the periods incurred.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are valued at cost less accumulated depreciation. Depreciation of buildings, equipment and other depreciable assets is determined using the straight-line method of depreciation. Estimated useful lives range from 30 to 40 years for buildings and structures and 2 to 25 years for equipment.

Major improvements and replacements of property are capitalized. Maintenance, repairs, and minor improvements and replacements are expensed. Upon retirement or other disposition of property, applicable cost and accumulated depreciation or amortization are removed from the accounts. Any gains or losses are included in earnings.

TIMBER AND TIMBERLANDS

Timber and timberlands are valued at cost less accumulated depletion and amortization. For fee timber, the capitalized cost includes costs related to stand establishment, such as site preparation, including all costs of preparing the land for planting, cost of seeds or seedlings, tree planting, including labor, materials, depreciation of company-owned equipment and the cost of contract services. Upon completion of planting activities and field inspection to assure the planting operation was successful, a plantation will be considered “established.” Subsequent expenditures made to maintain the integrity or enhance the growth of an established plantation or stand are expensed. Post-establishment expenses include release spray treatments, pest control activities, thinning operations, fertilization and replanting seedlings lost through mortality. Expenditures for forest management consist

48 / POTLATCH CORPORATION

of regularly recurring items necessary for ownership and administration of timber producing property such as fire protection, property taxes and insurance, silviculture costs incurred subsequent to stand establishment, cruising (physical inventory), property maintenance and salaries, supplies, travel, record-keeping and other normal recurring administrative personnel costs. These expenditures are accounted for as current operating expenses. Timberland purchased on the open market is capitalized and the cost is allocated to the relative values of the component items as appraised, such as timberland, merchantable sawlogs, merchantable pulpwood, reproduction (young growth not merchantable), logging roads and other land improvements. The capitalized cost includes purchase price, title search and title recording, transfer taxes and fees, timber cruises, appraisals and running of boundary lines.

Reproduction accounts are reviewed annually, and dollars are transferred from reproduction accounts to merchantable timber accounts on a reasonable and consistent basis. Volumes and the related accumulated costs are tracked and, as the timber is harvested, the cost is amortized to depletion.

Depletion represents the amount charged to expense for logs cut from fee timber. Generally, rates at which timber is depleted are calculated annually for each of our Resource regions by dividing the beginning of year balance of the timber accounts by the forest inventory volume, after inventory updates for growth projection adjustments and new timber cruises.

The base cost of logging roads, such as the clearing, grading, and ditching, is not amortized and remains a capitalized item until obliteration or other disposition, while other portions of the initial cost, such as bridges, culverts and gravel surfacing are amortized over their useful lives, which range from 5 to 20 years. Costs associated with temporary logging roads that will not become part of our road system are expensed as incurred.

REAL ESTATE SALES

Sales of non-core timberland are considered to be part of our normal operations. We therefore classify revenue and costs associated with real estate sold in revenues and cost of goods sold, respectively, in our Consolidated Statements of Income . Cash generated from real estate sales is included as an operating activity in our Consolidated Statements of Cash Flows , and is adjusted for the basis of real estate sold.

LIKE-KIND EXCHANGES AND RESTRICTED CASH

In order to acquire and sell assets, primarily timberlands, in a tax efficient manner, we sometimes enter into like-kind exchange (LKE) tax-deferred transactions. There are two main types of LKE transactions: forward transactions, in which property is sold and the proceeds are reinvested by acquiring similar property; and reverse

transactions, in which property is acquired and similar property is subsequently sold by us. Both forward and reverse transactions must be completed within prescribed time periods under Internal Revenue Code section 1031.

We use a qualified intermediary to facilitate LKE transactions. Proceeds from forward transactions are held by the intermediary and are classified as restricted cash, within non-current other assets, because the funds must be reinvested in similar properties. If the acquisition of suitable LKE properties is not completed within 180 days of the sale of the company-owned property, the proceeds are distributed to us by the intermediary and are reclassified as available cash and applicable income taxes are determined. In the case of reverse transactions in which we have not yet completed LKE sales of company-owned land to match with property purchased on our behalf by the intermediary, the amount associated with the property purchased on our behalf but not yet matched with LKE sales is classified as a non-current asset and included in “Timber and timberlands, net” in our Consolidated Balance Sheets and as “Additions to timber and timberlands” in the investing activities section of our Consolidated Statements of Cash Flows .

2013 FORM 10-K / 49

LONG-LIVED ASSETS

Our long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, as measured by its undiscounted estimated future cash flows. We use our operational budgets to estimate future cash flows. Budget estimates are adjusted periodically to reflect changing business conditions, and operations are reviewed, as appropriate, for impairment using the most current data available. In certain circumstances we may also use fair market value to determine the carrying value of certain assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

We recognize a liability and an asset equal to the fair value of our legal obligations to perform asset retirement activities if the amount can be reasonably estimated. Our primary obligations relate to asbestos located within our manufacturing facilities and a landfill site. We have recorded assets and corresponding liabilities that are not material to our financial position or results of operations. We have also identified situations that would have resulted in the recognition of additional asset retirement obligations, except for an inability to reasonably estimate the fair value of the liability. Most of these situations relate to asbestos located within our manufacturing facilities where a settlement date or range of settlement dates cannot be specified. We review these obligations annually and do not expect them to have a material effect on our financial position, results of operations or cash flows.

INCOME TAXES

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases, operating loss carryforwards and tax credit carryforwards. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. We recognize the effect of a change in income tax rates on deferred tax assets and liabilities in the Consolidated Statements of Income and Consolidated Statements of Comprehensive Income in the period that includes the enactment date of the rate change. We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such deferred tax assets will not be realized.

REVENUE RECOGNITION

We recognize revenue from the sale of timber when legal ownership and the risk of loss transfers to the buyer and the quantity sold is determinable. The company sells timber under delivered log agreements as well as through sales of standing timber, or stumpage. For delivered sales, revenue, which includes amounts billed for shipping and handling (logging and hauling of timber), is recognized when the log is delivered to the customer. Stumpage is sold using pay-as-cut, timber deed or lump-sum sale agreements. Under a pay-as-cut sales contract, the purchaser acquires the right to harvest specified timber on a tract, at an agreed upon price per unit. The sale and any related advances are recognized as revenue as the purchaser harvests the timber on the tract. Under a timber deed sale, the buyer agrees to purchase and harvest specified timber on a tract of land over the term of the contract, the risk of loss and title to the trees transfer to the buyer when the contract is signed and the buyer pays the full purchase price when the contract is signed. Revenue from a timber deed sale is recognized when the contract is signed. Under a lump-sum sale, the parties agree to a purchase price for all the timber available for harvest on a tract of land. Generally the purchase price is paid when the contract is signed. Title to the timber and risk of loss transfers to the buyer as the timber is harvested. Therefore, revenue under a lump-sum sale is recognized over the term of the contract based on the timber harvested compared to the total estimated timber available to be harvested. An adjustment may be required to the extent the actual timber harvested is different than the estimate of timber available.

Substantially all of our real estate sales are considered cash sales, as we receive the entire consideration in cash at closing. Also at closing, all risks and rewards of ownership are transferred to the buyer, and we do not have a substantial continuing involvement in any of our properties after sales are consummated. We recognize revenue under the full accrual method for cash sales of real estate when the sale is consummated (i.e., at closing). Sales of properties that qualify for LKE tax-deferred treatment involve a third party intermediary that receives proceeds related to the property sold and holds the proceeds for reinvestment in like kind property. The proceeds are recorded as revenue when the third party intermediary receives them.

50 / POTLATCH CORPORATION

We recognize revenue from the sale of manufactured wood products and residual by-products when there is persuasive evidence of a sales agreement, the price to the customer is fixed and determinable, collection is reasonably assured, and title and the risk of loss passes to the customer. Shipping terms generally indicate when title and the risk of loss have passed. Revenue is recognized at shipment for sales when shipping terms are FOB (free on board) shipping point. For sales where shipping terms are FOB destination, revenue is recognized when the goods are received by the customer. Shipping terms for wood products and related by-products depend upon the sales agreement with the customer.

Revenue is recognized net of any sales taxes collected. Sales taxes, when collected, are recorded as a current liability and remitted to the appropriate governmental entities.

SHIPPING AND HANDLING COSTS

Costs for shipping and handling of manufactured goods are included in cost of goods sold in our Consolidated Statements of Income .

NOTE 2. REIT CONVERSION

Effective January 1, 2006, we restructured our operations to qualify for treatment as a Real Estate Investment Trust (REIT) for federal income tax purposes. As a REIT, we generally are not subject to federal corporate income taxes on our income from investments in real estate that we distribute to our stockholders, including the income derived from the sale of standing timber. The REIT tax rules require that we derive most of our income, other than income generated by a taxable REIT subsidiary, from investments in real estate, which for us primarily consists of income from the sale of our standing timber. Accordingly, we restructured to create a new parent company that holds our timberlands through a REIT subsidiary and substantially all of our non-timberland assets, consisting primarily of our manufacturing facilities, assets used for the harvesting of timber and the sale of logs, and selected land parcels that we expect to be sold or developed for higher and better use purposes through wholly owned taxable REIT subsidiaries, which we refer to collectively in this report as Potlatch TRS. Our use of Potlatch TRS, which is taxed as a C corporation, enables us to continue to engage in these non-REIT qualifying businesses and comply with the REIT requirements.

NOTE 3. EARNINGS PER SHARE

The following table reconciles the number of shares used in calculating the basic and diluted earnings per share for the years ended December 31:



(Dollars in thousands, except per-share amounts)	2013		2012		2011
Net income	$	70,581	$	42,594	$	40,266

Basic weighted-average shares outstanding	40,502,878		40,333,333		40,159,141
Incremental shares due to:
Performance shares	133,766		134,079		146,157
Restricted stock units	69,076		70,217		32,455
Stock options	3,567		15,520		45,232
Diluted weighted-average shares outstanding	40,709,287		40,553,149		40,382,985

Basic net income per share	$	1.74	$	1.06	$	1.00
Diluted net income per share	$	1.73	$	1.05	$	1.00

Anti-dilutive shares excluded from the calculation:
Performance shares	3,441		—		77,767
Restricted stock units	—		315		1,500
Total anti-dilutive shares excluded from the calculation	3,441		315		79,267

2013 FORM 10-K / 51

NOTE 4. SHORT-TERM INVESTMENTS

Our short-term investments consist of diversified depository accounts, money market funds and variable rate demand obligations, all of which have very short maturity periods and therefore earn an interest rate commensurate with low-risk instruments. We classify our short-term investments as "available for sale" and there is no significant difference between cost and fair value. We do not attempt to hedge our exposure to interest rate risk for our short-term investments. All short-term investments of REIT funds are made in compliance with the requirements of the Internal Revenue Code with respect to qualifying REIT investments.

NOTE 5. INVENTORIES



(Dollars in thousands)	2013		2012
Logs	$	14,975	$	12,493
Lumber and other manufactured wood products	15,967		11,761
Materials and supplies	5,333		4,674
	$	36,275	$	28,928
Valued at lower of cost or market:
Last-in, first-out basis	$	23,250	$	14,636
Average cost basis	13,025		14,292
Total inventories	$	36,275	$	28,928

If the last-in, first-out inventory had been carried at average cost, the values would have been approximately $11.3 million , $10.6 million , and $9.7 million higher at December 31, 2013 , 2012 , and 2011 , respectively. LIFO inventories valued at higher costs prevailing in prior years decreased net income by $0.9 million , $1.2 million and $0.8 million in 2013 , 2012 and 2011 , respectively.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT



(Dollars in thousands)	2013			2012
Land and land improvements	$	17,201		$	16,448
Buildings and structures	33,985			32,908
Machinery and equipment	171,385			165,369
Construction in progress	1,225			3,188
	223,796			217,913
Less: accumulated depreciation	(163,820		)	(159,863		)
Total property, plant and equipment	$	59,976		$	58,050

Depreciation charged against operating income totaled $8.2 million , $8.8 million and $9.8 million in 2013 , 2012 and 2011 , respectively.

52 / POTLATCH CORPORATION

NOTE 7. TIMBER AND TIMBERLANDS



(Dollars in thousands)	2013		2012
Timber and timberlands	$	391,916	$	394,913
Deposits on timberlands	—		7,871
Logging roads	63,955		61,683
Total timber and timberlands	$	455,871	$	464,467

Depletion from company-owned lands totaled $14.6 million , $12.9 million and $14.1 million in 2013 , 2012 and 2011 , respectively. Amortization of logging roads totaled $2.7 million , $2.6 million and $2.4 million in 2013, 2012 and 2011 , respectively.

In 2012, we made two timberland acquisitions in and around our existing ownership in Arkansas. One acquisition was 2,981 acres for approximately $3.9 million , and the other was 6,304 acres for approximately $7.9 million . The deposits on timberland balance of $7.9 million at December 31, 2012 is related to amounts associated with the Arkansas timberland purchased on our behalf by a qualified LKE intermediary.

Payments due under timber cutting contracts total $2.1 million , $4.5 million , $1.5 million and $4.2 million in 2014, 2015, 2016 and 2017, respectively.

NOTE 8. OTHER ASSETS



Current Other Assets
(Dollars in thousands)	2013		2012
Basis of real estate held for sale	$	10,010	$	5,871
Deferred charges	1,008		1,066
Prepaid expenses	943		995
Total current other assets	$	11,961	$	7,932



Noncurrent Other Assets
(Dollars in thousands)	2013		2012
Deferred charges	$	5,668	$	6,837
Noncurrent investments	3,144		1,754
Derivative asset associated with interest rate swaps	1,830		2,952
Developed land held for sale	1,733		1,733
Other	363		123
Long-term note receivable	—		1,592
Total noncurrent other assets	$	12,738	$	14,991

Deferred charges primarily consist of deferred financing costs, which are being amortized over the life of the associated debt.

NOTE 9. INCOME TAXES

As a REIT, we generally are not subject to federal and state corporate income taxes on income of the REIT that we distribute to our shareholders. We are, however, subject to corporate taxes on built-in gains (the excess of fair market value over tax basis on January 1, 2006) on sales of real property held by the REIT during the first ten years following the REIT conversion. The sale of standing timber is not subject to built-in gains tax. The Small Business Jobs Act of 2010 modified the built-in gains provisions to exempt sales of real properties in 2011, if five years of the recognition period had elapsed before January 1, 2011. The American Taxpayer Relief Act of 2012 extended the reduced five-year holding period for sales occurring in 2012 and 2013. Accordingly, the built-in gains tax does not apply to sales of real property that occurred in 2011, 2012 and 2013.

2013 FORM 10-K / 53

We conduct certain activities through taxable REIT subsidiaries (TRS), which are subject to corporate-level federal and state income taxes. These activities are principally comprised of our wood products manufacturing operations and certain real estate investments held for development and resale.

We reflect accrued interest related to tax obligations, as well as penalties, in our provision for income taxes. For the years ended December 31, 2013, 2012 and 2011, we recognized insignificant amounts related to interest and penalties in our tax provision. At December 31, 2013 and 2012, we had no accrued interest related to tax obligations and insignificant accrued interest receivable with respect to open tax refunds.

The income tax provision consists of the following for the years ended December 31:



(Dollars in thousands)	2013			2012		2011
Current	$	16,352		$	292	$	(73	)
Deferred	(2,754		)	8,197		4,990
Net operating loss carryforwards	287			8,320		(772		)
Income tax provision	$	13,885		$	16,809	$	4,145

The income tax provision differs from the amount computed by applying the statutory federal income tax rate of 35% to income before income taxes due to the following for the years ended December 31:



(Dollars in thousands)	2013			2012			2011
U.S. federal statutory income tax	$	29,563		$	20,791		$	15,544
REIT income not subject to federal income tax	(13,918		)	(5,241		)	(11,739		)
Change in valuation allowance	(683		)	—			897
State income taxes, net of federal income tax	942			1,615			54
Domestic production activities deduction	(1,579		)	—			—
All other items	(440		)	(356		)	(611		)
Income tax provision	$	13,885		$	16,809		$	4,145
Effective tax rate	16.4		%	28.3		%	9.3		%

The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:



(Dollars in thousands)	2013			2012
Deferred tax assets:
Pensions	$	16,807		$	38,986
Postretirement employee benefits	18,464			20,293
Nondeductible accruals	2,405			3,841
Inventories	2,636			3,126
Incentive compensation	2,807			2,843
Tax credits	2,135			2,678
Employee benefits	1,586			1,795
Net operating loss carryforwards	1,056			1,346
Other	200			124
Total deferred tax assets	48,096			75,032
Valuation allowance	(2,184		)	(2,867		)
Deferred tax assets, net of valuation allowance	45,912			72,165
Deferred tax liabilities:
Timber and timberlands	(5,871		)	(6,006		)
Property, plant and equipment	(10,741		)	(12,360		)
Total deferred tax liabilities	(16,612		)	(18,366		)
Net deferred tax assets	$	29,300		$	53,799

54 / POTLATCH CORPORATION

Net deferred tax assets and liabilities consist of:



(Dollars in thousands)	2013		2012
Current deferred tax assets	$	7,724	$	10,507
Noncurrent deferred tax assets	21,576		43,292
Net deferred tax assets	$	29,300	$	53,799

With the exception of the valuation allowances discussed below, we believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax assets.

Our valuation allowance on deferred taxes was $2.2 million at the end of 2013; which related to state net operating loss and tax credit carryforwards. The valuation allowance decreased $0.7 million in 2013 due to the change in actual use and expected future use of state net operating loss carryforwards and state credits.

We have state net operating loss carryforwards of $24.0 million at December 31, 2013 which expire from 2014 through 2031 . We have state investment tax credits of $3.2 million at December 31, 2013 which expire from 2016 through 2027 .

The following table summarizes the tax years subject to examination by major taxing jurisdictions:



Jurisdiction	Years
Federal	2008	-	2013
Arkansas	2010	-	2013
Michigan	2009	-	2013
Minnesota	2009	-	2013
Idaho	2010	-	2013

During the fourth quarter of 2013 the IRS closed our federal income tax exams for 2009. As of December 31, 2013 our 2008 TRS federal income tax return is under exam. We do not expect the outcome of the exam to have a material effect on our Consolidated Financial Statements .

As of December 31, 2013 and December 31, 2012, we did not have any liabilities for unrecognized tax benefits. We do not currently believe there is a reasonable possibility of recording a liability for unrecognized tax benefits within the next twelve months.

NOTE 10. DEBT

The following table presents our long-term debt as of December 31:



(Dollars in thousands)	2013			2012
Senior Notes, 7.50%, due 2019	$	150,000		$	150,000
Revenue bonds, 5.90% to 7.75%, due 2014 through 2026 ¹	108,335			144,985
Debentures, 6.95%, due 2015	22,500			22,500
Medium-term notes, 8.75% to 8.89%, due 2016 through 2022	27,250			27,250
Term loans, 2.95% due 2017 and 3.70% due 2020	12,000			12,000
Other notes	—			13
	320,085			356,748
Interest rate swaps	1,830			2,952
Less unamortized discounts	(1,823		)	(2,124		)
	320,092			357,576
Less current installments on long-term debt	—			(8,413		)
Long-term debt	$	320,092		$	349,163

¹ In 2013, $36.7 million of long-term debt was redeemed prior to its scheduled maturities. This included $8.4 million that was due later in 2013 and $21.0 million that was the total amount due in 2014.

2013 FORM 10-K / 55

UNSECURED CREDIT AGREEMENT

Our current unsecured credit agreement, which expires on December 11, 2017 , provides for a revolving line of credit of up to $250 million , including a $40 million subfacility for letters of credit and a $15 million subfacility for swing line loans. Usage under either or both subfacilities reduces availability under the revolving line of credit. Subject to certain conditions and agreement of the lenders, the bank credit facility may be increased by up to an additional $100 million . As of December 31, 2013 , there were no borrowings outstanding under the revolving line of credit, and approximately $1.9 million of the letter of credit subfacility was being used to support several outstanding letters of credit. Available borrowing capacity at December 31, 2013 was $248.1 million .

Pricing is set according to the type of borrowing. Eurodollar Rate Loans are issued at a rate equal to the British Bankers Association LIBOR Rate, while Base Rate Loans are issued at a rate equal to the Base Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) the British Bankers Association LIBOR Rate that would then be applicable to a new Eurodollar Rate Loan with a one month Interest Period plus 1.00%, and (c) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate.” The interest rates we pay for borrowings under either type of loan include an additional Applicable Rate, which can range from 1.25% to 2.50% for Eurodollar loans and from 0.25% to 1.50% for Base Rate loans, depending on the current Leverage Ratio, as defined below. As of December 31, 2013 , we were able to borrow under the bank credit facility with the additional applicable rate of 1.50% for Eurodollar Rate Loans and 0.50% for Base Rate Loans, with commitment fees of 0.25% on the unused balance of the bank credit facility.

TERM LOANS

In December 2012 , we entered into a $12 million term loan to fund two timberland acquisitions. The term loan consists of two $6 million tranches, with rates of 2.95% on the 2017 maturity and 3.70% on the 2020 maturity. The term loans contain the same covenants as those in the unsecured credit agreement.

DEBT MATURITIES

Scheduled payments due on long-term debt during each of the five years subsequent to December 31, 2013 , are as follows:



(Dollars in thousands)
2014	$	—
2015	22,500
2016	5,000
2017	11,000
2018	14,250

NOTE 11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES



(Dollars in thousands)	2013		2012
Wages, salaries and employee benefits	$	15,908	$	14,992
Trade accounts payable	7,702		6,599
Taxes other than income taxes	6,247		6,363
Interest	4,018		4,250
Logging related expenses	1,600		3,456
Deferred recreational lease income	880		899
Freight	802		426
Environmental remediation	—		4,250
Book overdrafts	2,920		3,875
Other	3,540		3,176
Total	$	43,617	$	48,286

56 / POTLATCH CORPORATION

NOTE 12. OTHER LONG-TERM OBLIGATIONS



(Dollars in thousands)	2013		2012
Employee benefits and related liabilities	$	15,423	$	15,215
Other	6,930		7,242
Total	$	22,353	$	22,457

NOTE 13. FINANCIAL INSTRUMENTS AND CONCENTRATION OF RISK

FAIR VALUE OF FINANCIAL INSTRUMENTS

Estimated fair values of our financial instruments as of December 31 are as follows:



	2013				2012
(Dollars in thousands)	CARRYING AMOUNT		FAIR VALUE		CARRYING AMOUNT		FAIR VALUE
Cash and short-term investments (Level 1)	$	57,837	$	57,837	$	80,062	$	80,062
Net derivative asset related to interest rate swaps (Level 2)	1,830		1,830		2,952		2,952
Long-term debt (including current installments on long-term debt and fair value adjustments related to fair value swaps) (Level 2)	320,092		347,869		357,576		379,048

A framework has been established for measuring fair value, which provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below.


Level 1	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets.


Level 2	Inputs to the valuation methodology include:


•	Quoted prices for similar assets or liabilities in active markets;


•	Quoted prices for identical or similar assets or liabilities in inactive markets;


•	Inputs other than quoted prices that are observable for the asset or liability; and


•	Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observed for substantially the full term of the asset or liability.


Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

For cash and short-term investments, the carrying amount approximates fair value due to the short-term nature of these financial instruments. The fair value of the interest rate swaps was determined using discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate forward curves. The fair value of our long-term debt is estimated based upon the quoted market prices for the same or similar debt issues. Long-term debt for which there is no quoted market price, fair value is estimated based on average market prices for comparable liquid revenue bonds.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

We record all derivatives on our balance sheet at fair value. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that is attributable to the hedged risk in a fair value hedge.

2013 FORM 10-K / 57

We formally document all relationships between hedging instruments and hedged items, as well as the risk-management objective and strategy for undertaking various hedge transactions.

FAIR VALUE HEDGES OF INTEREST RATE RISK

As of December 31, 2013 , we had six separate interest rate swaps with notional amounts totaling $46.75 million associated with our $22.5 million debentures and $24.25 million of our medium-term notes. The swaps convert interest payments with fixed rates ranging between 6.95% and 8.89% to a variable rate of 3-month LIBOR plus a spread between 4.738% and 6.518% . The interest rate swaps terminate at various dates between December 2015 and February 2018 .

NON-DESIGNATED LUMBER SWAP

Derivatives not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, commodity price movements or other identified risks, but do not meet the strict hedge accounting requirements. In February 2012 , we entered into two commodity swap contracts that settled during the second quarter of 2012 . In September 2011 , we entered into two commodity swap contracts that settled in February 2012 . Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in net income. There were no outstanding lumber swap contracts at December 31, 2013 or 2012.

The fair values of derivative instruments on our Consolidated Balance Sheets as of December 31 are as follows:



	DERIVATIVE ASSETS
		2013		2012
(Dollars in thousands)	BALANCE SHEET LOCATION	FAIR VALUE		FAIR VALUE
Derivatives designated as hedging instruments:
Interest rate contracts	Other noncurrent assets	$	1,830	$	2,952
Total derivatives designated as hedging instruments		$	1,830	$	2,952

The effect of derivatives on the Consolidated Statements of Income for the years ended December 31, 2013 , 2012 and 2011 are as follows:



	LOCATION OF GAIN (LOSS) RECOGNIZED IN INCOME	AMOUNT OF GAIN (LOSS) RECOGNIZED IN INCOME
(Dollars in thousands)		2013		2012			2011
Derivatives designated in fair value hedging relationships:
Interest rate contracts
Realized gain on hedging instrument ¹	Interest expense	$	960	$	868		$	1,027
Net gain recognized in income from fair value hedges		$	960	$	868		$	1,027

Derivatives not designated as hedging instruments:
Lumber contracts
Unrealized gain (loss) on derivative	Cost of goods sold	$	—	$	(480	)	$	3,356
Realized gain (loss) on derivative	Cost of goods sold	—		(396		)	1,164
Net gain (loss) recognized in income from derivatives not designated as hedging instruments		$	—	$	(876	)	$	4,520


¹	Realized gain on hedging instrument consists of net cash settlements and interest accruals on the interest rate swaps during the period.

CONCENTRATION OF RISK

One customer accounted for slightly more than 10% of our revenues in the years ended December 31, 2013 and December 31 , 2012 .

58 / POTLATCH CORPORATION

NOTE 14. SAVINGS PLANS, PENSION PLANS AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS

SAVINGS PLANS

Substantially all of our employees are eligible to participate in 401(k) savings plans. In 2013 , 2012 and 2011 , we made matching 401(k) contributions on behalf of employees of $1.8 million , $1.6 million and $1.4 million , respectively. Effective January 1, 2011, we closed our defined benefit pension plans to any new salaried and hourly non-represented entrants. In connection with these closures, additional company 401(k) contributions are made for employees hired after that date.

PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

We also provide benefits under company-sponsored defined benefit retiree health care plans, which cover certain salaried and hourly employees. Most of the retiree health care plans require retiree contributions and contain other cost-sharing features.

We recognize the underfunded status of our defined benefit pension plans and other postretirement employee benefit obligations on our Consolidated Balance Sheets . We recognize the changes in that funded status, in the year in which changes occur, through our Consolidated Statements of Comprehensive Income .

We use a December 31 measurement date for our benefit plans and obligations.

The change in benefit obligation, change in plan assets and funded status for company-sponsored benefit plans and obligations are as follows:



	PENSION PLANS						OTHER POSTRETIREMENT EMPLOYEE BENEFITS
(Dollars in thousands)	2013			2012			2013			2012
Benefit obligation at beginning of year	$	445,535		$	418,251		$	52,033		$	65,195
Service cost	5,318			5,238			94			284
Interest cost	17,826			19,986			1,810			2,478
Plan amendments	—			510			—			(6,045		)
Actuarial loss (gain)	(41,178		)	38,329			(2,692		)	(4,878		)
Benefits paid	(33,936		)	(36,779		)	(3,902		)	(5,001		)
Benefit obligation at end of year	393,565			445,535			47,343			52,033

Fair value of plan assets at beginning of year	345,633			312,158			—			—
Actual return on plan assets	37,157			46,905			—			—
Employer contributions and benefit payments	1,734			23,349			3,902			5,001
Benefits paid	(33,936		)	(36,779		)	(3,902		)	(5,001		)
Fair value of plan assets at end of year	350,588			345,633			—			—

Amounts recognized in the consolidated balance sheets:
Current liabilities	$	(1,772	)	$	(1,775	)	$	(4,929	)	$	(5,113	)
Noncurrent liabilities	(41,205		)	(98,127		)	(42,414		)	(46,920		)
Funded status	$	(42,977	)	$	(99,902	)	$	(47,343	)	$	(52,033	)

Changes in actuarial assumptions, primarily the increase in the discount rate, used to calculate our pension liabilities resulted in an increase to the funded status of our pension plans at the end of 2013.

Our company-sponsored pension plans were underfunded at December 31, 2013 and 2012 . In 2012 , we borrowed against our company owned life insurance plan, based on the cash surrender value that had accumulated over the years, to make a $21.6 million pension contribution. We contributed $9.3 million to our qualified salaried pension plan, $6.8 million to our qualified hourly plan and $5.5 million to our qualified non-represented pension plan, with $11.9 million being discretionary funding. We were not required to make contributions to our qualified defined benefit plans during 2013.

2013 FORM 10-K / 59

The accumulated benefit obligation for all defined benefit pension plans was $387.4 million and $438.6 million at December 31, 2013 and 2012 , respectively.

PENSION ASSETS

We utilize formal investment policy guidelines for our company-sponsored pension plan assets. These guidelines are periodically reviewed by the board of directors. The board of directors has delegated its authority to management to insure that the investment policy and guidelines are adhered to and the investment objectives are met.

The general policy states that plan assets will be invested to seek the greatest return consistent with the fiduciary character of the pension funds and to allow the plans to meet the need for timely pension benefit payments. The specific investment guidelines stipulate that management will maintain adequate liquidity for meeting expected benefit payments by reviewing, on a timely basis, contribution and benefit payment levels and appropriately revise long-term and short-term asset allocations. Management takes reasonable and prudent steps to preserve the value of pension fund assets and to avoid the risk of large losses. Major steps taken to provide this protection include the following:

• Assets are diversified among various asset classes, such as domestic equities, global equities, fixed income, convertible securities and liquid reserves. The long-term asset allocation ranges are as follows:



Domestic and international equities	15	%	-	60%
Fixed income securities	35	%	-	60%
Alternatives	5	%	-	15%
Cash	0	%	-	5%

The ranges are more heavily weighted toward equities since the liabilities of the pension plans are long-term in nature and equities historically have significantly outperformed other asset classes over long periods of time. Periodic reviews of allocations within these ranges are made to determine what adjustments should be made based on changing economic and market conditions and specific liquidity requirements.


•	Assets are managed by professional investment managers and may be invested in separately managed accounts or commingled funds. Assets are diversified by selecting different investment managers for each asset class and by limiting assets under each manager to no more than 25% of the total pension fund.


•	Assets are not invested in Potlatch stock.

The investment guidelines also provide that the individual investment managers are expected to achieve a reasonable rate of return over a market cycle. Emphasis will be placed on long-term performance versus short-term market aberrations. Factors to be considered in determining reasonable rates of return include performance achieved by a diverse cross section of other investment managers, performance of commonly used benchmarks (e.g., Russell 3000 Index, Barclays US Long Credit Index, Morgan Stanley Capital International All Country World Index ex US), actuarial assumptions for return on plan investments and specific performance guidelines given to individual investment managers.

At December 31, 2013 , eleven active investment managers managed substantially all of the pension funds, each of whom had responsibility for managing a specific portion of these assets. Plan assets were diversified among the various asset classes within the allocation ranges established by our investment policy.

The weighted average asset allocations of the pension benefit plans’ assets at December 31 by asset category are as follows:



	PENSION PLANS
ASSET CATEGORY	2013		2012
Domestic equity securities	20	%	22	%
Debt securities	38		36
Global/international equity securities	27		28
Other	15		14
Total	100	%	100	%

60 / POTLATCH CORPORATION

The pension assets are stated at fair value. Refer to Note 13. Financial Instruments and Concentration of Risk for discussion of the framework for measuring fair value.

Following is a description of the valuation methodologies used for assets measured at fair value:

•

Corporate common and preferred stocks are valued at quoted market prices reported on the major securities markets, and are classified in Level 1. Investments in registered investment company funds for which market quotations are generally readily available are valued at the last reported sale price, official closing price or publicly available net asset value, or NAV, (or its equivalent) on the primary market or exchange on which they are traded, and are classified in Level 1.

•

Investments in common and collective trust funds, hedge funds and liquidating trusts that maintain investments in mortgage-backed securities, are generally valued based on their respective NAV (or its equivalent), as a practical expedient to estimate fair value due to the absence of readily available market prices. Investments that may be fully redeemed at NAV in the near-term are generally classified in Level 2.


•	Investments in funds that may not be fully redeemed at NAV in the near-term are generally classified in Level 3.

Fair Value Measurements at December 31, 2013 :



(Dollars in thousands)
ASSET CATEGORY	QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		TOTAL
Cash and equivalents	$	9,673	$	—	$	—	$	9,673
Equity securities:
U.S. large cap ¹	32,304		—		—		32,304
U.S. small/mid cap ²	19,053		—		—		19,053
International companies	34,773		—		—		34,773
Mutual funds ³	185,505		—		—		185,505
Collective investments:
Developed markets ⁴	—		17,401		—		17,401
Emerging markets ⁵	—		41,300		—		41,300
Hedge funds ⁶	—		—		10,579		10,579
Total	$	281,308	$	58,701	$	10,579	$	350,588


¹	These are managed investments in US large cap equities that track the Russell 1000 Value index.


²	These are managed investments in US small/mid cap equities that track the Russell 2500 Growth index.


³	The mutual funds were 50% invested in high-quality intermediate and long-term investment grade securities and 50% invested in a diversified portfolio of fixed-income instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements and debt securities.


⁴	These collective investments are invested in equity funds of developed markets outside of the US & Canada, that track the MSCI EAFE index.


⁵	These collective investments are invested in equity funds of emerging markets outside of the US & Canada, that track the MSCI Emerging Markets index.


⁶	The hedge funds are 37% invested in long/short and event-driven equity, 24% invested in long and short credit, 11% in relative value, 10% invested in distressed debt, 6% invested in convertible bond hedging, with the remaining 12% in other investments.

2013 FORM 10-K / 61

Fair Value Measurements at December 31, 2012 :



(Dollars in thousands)
ASSET CATEGORY	QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)			SIGNIFICANT OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)		TOTAL
Cash and equivalents	$	2,085		$	—	$	—	$	2,085
Equity securities:
U.S. large cap ¹	35,099			—		—		35,099
U.S. small/mid cap ²	21,516			—		—		21,516
International companies	9,400			—		—		9,400
Mutual funds ³	124,453			—		—		124,453
Collective investments:
U.S. small/mid cap ⁴	—			19,803		—		19,803
Developed markets ⁵	—			47,916		—		47,916
Emerging markets ⁶	—			40,983		—		40,983
Hedge funds ⁷	—			—		45,693		45,693
Securities pledged to creditors:
Money market ⁸	—			1,499		—		1,499
Mortgage-backed securities ⁹	—			1,992		—		1,992
Subtotal	192,553			112,193		45,693		350,439
Payable held under securities lending agreements ¹⁰	(4,806		)	—		—		(4,806		)
Total	$	187,747		$	112,193	$	45,693	$	345,633


¹	These are managed investments in US large cap equities that track the Russell 1000 Value index.


²	These are managed investments in US small/mid cap equities that track the Russell 2500 Growth index.


³	The mutual funds were 50% invested in high-quality intermediate and long-term investment grade securities and 50% invested in a diversified portfolio of fixed-income instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements and debt securities.


⁴	These are managed investments in US small/mid cap equities that track the Russell 2500 Value index.


⁵	These collective investments are invested in equity funds of developed markets outside of the US & Canada, that track the MSCI EAFE index.


⁶	These collective investments are invested in equity funds of emerging markets outside of the US & Canada, that track the MSCI Emerging Markets index.


⁷	The hedge funds are 53% invested in long/short and event-driven equity, 11% invested in long and short credit, 14% in relative value, 5% invested in fixed income relative value, 4% invested in distressed debt, with the remaining 13% in other investments.


⁸	The money market holdings are invested in the Mount Vernon Securities Lending Trust Prime Portfolio.


⁹	The mortgage-backed securities are maintained in the U.S. Bank Illiquid Securities Liquidating Trust.


¹⁰	This category represents a payable under the securities lending agreements.

The following table sets forth a summary of changes in the fair value of the plans’ Level 3 assets for the years ended December 31:



	Hedge Funds
(Dollars in thousands)	2013			2012
Balance, beginning of year	$	45,693		$	42,940
Sales and settlements	(34,500		)	—
Unrealized gains (losses) relating to assets still held at the reporting date	(614		)	2,753
Balance, end of year	$	10,579		$	45,693

62 / POTLATCH CORPORATION

PLAN ACTIVITY

Pre-tax components of net periodic cost (benefit) recognized in our Consolidated Statements of Income were as follows:



	PENSION PLANS									OTHER POSTRETIREMENT EMPLOYEE BENEFITS
(Dollars in thousands)	2013			2012			2011			2013			2012			2011
Service cost	$	5,318		$	5,238		$	4,456		$	94		$	284		$	446
Interest cost	17,826			19,986			21,325			1,810			2,478			3,486
Expected return on plan assets	(26,092		)	(28,755		)	(31,804		)	—			—			—
Curtailment credit	—			—			—			—			(103		)	—
Amortization of prior service cost (credit)	779			770			684			(9,708		)	(9,343		)	(8,536		)
Amortization of actuarial loss	19,929			15,356			9,916			3,209			3,127			3,967
Net periodic cost (benefit)	$	17,760		$	12,595		$	4,577		$	(4,595	)	$	(3,557	)	$	(637	)

Other amounts recognized in our Consolidated Statements of Comprehensive Income were as follows:



	PENSION PLANS									OTHER POSTRETIREMENT EMPLOYEE BENEFITS
(Dollars in thousands)	2013			2012			2011			2013			2012			2011
Net amount at beginning of year	$	161,667		$	158,883		$	130,445		$	(20,769	)	$	(18,001	)	$	(16,690	)

Amounts arising during the period:
Net loss (gain)	(52,242		)	20,180			57,220			(2,692		)	(4,878		)	(913		)
Prior service cost (credit)	—			510			—			—			(5,942		)	(5,805		)
Taxes	20,374			(8,069		)	(22,316		)	1,050			4,260			2,620
Net amount arising during the period	(31,868		)	12,621			34,904			(1,642		)	(6,560		)	(4,098		)

Amounts reclassified during the period:
Amortization of prior service (cost) credit	(779		)	(770		)	(684		)	9,708			9,343			8,536
Amortization of actuarial loss	(19,929		)	(15,356		)	(9,916		)	(3,209		)	(3,127		)	(3,967		)
Taxes	8,076			6,289			4,134			(2,535		)	(2,424		)	(1,782		)
Net reclassifications during the period	(12,632		)	(9,837		)	(6,466		)	3,964			3,792			2,787

Net amount at end of year	$	117,167		$	161,667		$	158,883		$	(18,447	)	$	(20,769	)	$	(18,001	)

Amounts recognized in accumulated other comprehensive loss on our Consolidated Balance Sheets , net of tax, consist of:



	PENSION PLANS				OTHER POSTRETIREMENT EMPLOYEE BENEFITS
(Dollars in thousands)	2013		2012		2013			2012
Net loss	$	115,404	$	159,429	$	16,490		$	20,090
Prior service cost (credit)	1,763		2,238		(34,937		)	(40,859		)
Net amount recognized	$	117,167	$	161,667	$	(18,447	)	$	(20,769	)

2013 FORM 10-K / 63

The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are $14.5 million and $0.7 million , respectively. The estimated net loss and prior service credit for OPEB obligations that will be amortized from accumulated other comprehensive loss into net periodic benefit over the next fiscal year are $2.7 million and $9.6 million , respectively.

EXPECTED FUNDING AND BENEFIT PAYMENTS

We are required to make a minimum contribution of approximately $1.7 million to our qualified pension plan in 2014. Our non-qualified pension plan is unfunded and benefit payments are paid from our general assets. We estimate approximately $1.8 million in supplemental pension plan payments in 2014.

Our other postretirement employee benefit plans are unfunded and benefit payments are paid from our general assets they come due. Estimated future benefit payments represent benefit costs incurred during the year by eligible participants.

Estimated future benefit payments, which reflect expected future service are as follows for the years indicated:



(Dollars in thousands)	PENSION PLANS		OTHER POSTRETIREMENT EMPLOYEE BENEFITS
2014	$	30,033	$	4,929
2015		29,836		4,835
2016		29,566		4,699
2017		29,287		4,490
2018		29,064		4,248
2019 – 2022		143,152		17,734

ACTUARIAL ASSUMPTIONS

The weighted average assumptions used to determine the benefit obligation as of December 31 were:



	PENSION PLANS						OTHER POSTRETIREMENT EMPLOYEE BENEFITS
	2013		2012		2011		2013		2012		2011
Discount rate	5.10	%	4.15	%	4.95	%	4.45	%	3.70	%	4.85	%
Rate of salaried compensation increase	3.00	%	3.50	%	3.50	%	—		—		—

The weighted average assumptions used to determine the net periodic benefit (cost) for the years ended December 31 were:



	PENSION PLANS						OTHER POSTRETIREMENT EMPLOYEE BENEFITS
	2013		2012		2011		2013		2012		2011
Discount rate	4.15	%	4.95	%	5.65	%	3.70	%	4.85	%	5.40	%
Expected return on plan assets	8.00	%	8.00	%	8.50	%	—		—		—
Rate of salaried compensation increase	3.50	%	3.50	%	4.00	%	—		—		—

The discount rate used in the determination of pension and other postretirement employee benefit obligations in 2013 and 2012 was calculated using hypothetical bond portfolios consisting of “AA” or better rated securities that match the expected monthly benefit payments under our pension plans and other postretirement employee benefit obligations. The portfolios were well-diversified over corporate industrial, corporate financial, municipal, federal and foreign government issuers.

The expected return on plan assets assumption is based upon an analysis of historical long-term returns for various investment categories, as measured by appropriate indices. These indices are weighted based upon the extent to which plan assets are invested in the particular categories in arriving at our determination of a composite expected return. The expected rate of return assumption that will be used to determine net periodic cost for 2014 is 7.5%.

64 / POTLATCH CORPORATION

The assumed health care cost trend rate used to calculate other postretirement employee benefit obligations as of December 31, 2013 was 7.7% for a certain group of participants under age 65 in our hourly plan and our Arkansas participants covered by a collective bargaining agreement, grading ratably to an assumption of 5.0% in 2083. The level of subsidy is frozen for our salaried and non-represented plans and a certain group of participants over age 65 in our hourly plan, so that all future increments in health care costs are borne by the retirees.

A one percentage point change in the health care cost trend rates would have the following effects on our December 31, 2013 Consolidated Financial Statements :



(Dollars in thousands)	1% INCREASE		1% DECREASE
Effect on total service and interest cost components	$	33	$	(29	)
Effect on accumulated postretirement benefit obligation	519		(475		)

NOTE 15. COMMITMENTS AND CONTINGENCIES

We have operating leases covering office space, equipment, land and vehicles expiring at various dates through 2028. As leases expire, it can be expected that, in the normal course of business, certain leases will be renewed or replaced.

As of December 31, 2013 , the future minimum rental payments required under our operating leases are as follows:



(Dollars in thousands)
2014	$	3,335
2015	3,012
2016	2,016
2017	1,052
2018	439
2019 and thereafter	131
Total	$	9,985

Operating lease expense was $3.6 million , $3.1 million and $2.4 million for the years ended December 31, 2013 , 2012 and 2011 , respectively.

In January 2007, the Environmental Protection Agency (EPA) notified us that we are a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and the Clean Water Act for cleanup of a site known as Avery Landing in northern Idaho. We own a portion of the land at the Avery Landing site, which we acquired in 1980 from the Milwaukee Railroad. The land we own at the site and adjacent properties were contaminated with petroleum as a result of the Milwaukee Railroad's operations at the site prior to 1980. We entered into a consent order with the EPA in August 2008 to conduct an Engineering Evaluation/Cost Analysis (EE/CA) study to determine the best means of addressing the contamination at the site. In January 2010, we submitted our draft EE/CA report to the EPA outlining various alternatives for addressing the contamination at the entire site. Ultimately, the EPA published a draft EE/CA report on January 26, 2011 for public comment. The public comment period closed March 11, 2011, and on July 5, 2011, the EPA issued an Action Memorandum for the Avery Landing Site selecting contaminant extraction and off-site disposal as the remedial alternative. On May 23, 2012, we signed a consent order with the EPA pursuant to which we agreed to provide $1.75 million in funding for EPA cleanup on a portion of our property (including the adjacent riverbank owned by the Idaho Department of Lands). On April 4, 2013, the EPA issued a unilateral administrative order requiring us to remediate the portion of the Avery Landing site that we own. During the first quarter of 2013, we increased our accrual by $0.75 million . We began work on the site in May 2013 and discovered more contaminant on our property than had been expected based upon previous testing, and accordingly, during the second quarter of 2013 we increased our expense by an additional $1.75 million . During the third quarter of 2013, we increased our accrual by approximately $1.0 million to reflect the final work completed on the site in September 2013. On January 23, 2014, the EPA project manager informed us that he approved our Final Completion Report dated January 17, 2014 and our Final Natural Attenuation Performance Monitoring Plan dated January 17, 2014, and we have no further obligations with regard to our property other than fulfillment of the Monitoring Plan.

2013 FORM 10-K / 65

The following table details our Avery Landing environmental remediation charge and reserve balance for the years ended December 31 :



(Dollars in thousands)	2013			2012
Beginning reserve balance	$	4,250		$	6,000
Environmental remediation charge	3,522			—
Cash payments	(7,772		)	(1,750		)
Ending reserve balance	$	—		$	4,250

Negotiations with the EPA continue regarding a final settlement and release of EPA claims against us regarding the site, and we cannot predict at this time what additional costs, if any, that we may incur on this matter. We have reserved all of our rights to seek reimbursement for the costs of remediation from all parties potentially responsible.

We believe there is no pending or threatened litigation that would have a material adverse effect on our financial position, operations or liquidity.

NOTE 16. EQUITY-BASED COMPENSATION PLANS

At December 31, 2013 , we had three stock incentive plans under which performance shares, restricted stock units, or RSUs and stock options were outstanding. All of these plans have received shareholder approval. We were originally authorized to issue up to 1.7 million shares, 1.4 million shares and 1.6 million shares under our 1995 Stock Incentive Plan, 2000 Stock Incentive Plan and 2005 Stock Incentive Plan, respectively. At December 31, 2013 , no shares were available for future use under the 1995 and 2000 Stock Incentive Plans, while approximately 269,000 shares were authorized for future use under the 2005 Stock Incentive Plan. We issue new shares of common stock to settle stock option exercises and performance share and RSU awards.

Our outside directors are granted an annual award of common stock units that are credited to an account established on behalf of each director. These accounts are then credited with additional common stock units equal in value to the distributions that are paid on the same amount of common stock. Upon separation from service as a director, the common stock units held by the director in his or her stock unit account will be converted to cash based upon the then market price of the common stock and paid to the director.

Our outside directors and certain employees can elect to defer compensation in the form of common stock units. We record compensation expense or income during each reporting period based on the amount of compensation deferred during the period and the increase or decrease in the value of our common stock.

The following table details our compensation expense and the related income tax benefit as of December 31:



(Dollars in thousands)	2013		2012		2011
Employee equity-based compensation expense:
Performance shares	$	3,635	$	3,440	$	3,821
Restricted stock units	742		627		583
Total employee equity-based compensation expense	$	4,377	$	4,067	$	4,404

Director deferred compensation expense	$	1,265	$	2,008	$	619

Actual tax benefit realized for tax deductions from equity-based plans	$	71	$	525	$	—

PERFORMANCE SHARES

Performance share awards granted under the stock incentive plans have a three-year performance period and shares are issued at the end of the period if the performance measure is met. The performance measure is based on the percentile ranking of our total shareholder return relative to the total shareholder return performance of both a selected peer group of companies and a larger group of indexed companies over the three-year performance period. The number of shares actually issued, as a percentage of the amount subject to the performance share award, could range from 0% to 200% . Performance share awards granted under our stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of the three-year performance measurement period, the recipients will receive distribution equivalents in the form of additional

66 / POTLATCH CORPORATION

shares at the time of payment equal to the distributions that would have been paid on the shares earned had the recipients owned the shares during the three-year period. Therefore, the shares are not considered participating securities.

A Monte Carlo simulation method is used to estimate the stock prices of Potlatch and the selected peer companies at the end of the three-year performance period. The expected volatility of each company’s stock price and covariance of returns among the peer companies are key assumptions within the Monte Carlo simulation. Historical volatility over a term similar to the performance period is considered a reasonable proxy for forecasted volatility. Likewise, because the returns of Potlatch and the peer group companies are correlated, the covariance, a measure of how two variables tend to move together, is calculated over a historical term similar to the performance period and applied in the simulations. The simulations use the stock prices of Potlatch and the peer group of companies as of the award date as a starting point. Multiple simulations are generated, resulting in share prices and total shareholder return values for Potlatch and the peer group of companies. For each simulation, the total shareholder return of Potlatch is ranked against that of the peer group of companies. The future value of the performance share unit is calculated based on a multiplier for the percentile ranking and then discounted to present value. The discount rate is the risk-free rate as of the award date for a term consistent with the performance period. Awards are also credited with dividend equivalents at the end of the performance period, and as a result, award values are not adjusted for dividends.

The following table presents the key inputs used in calculating the fair value of the performance share awards in 2013 , 2012 and 2011 , and the resulting fair values:



	2013			2012			2011
Shares granted	83,111			85,028			77,767
Stock price as of valuation date	$	45.31		$	31.11		$	39.10
Risk-free rate	0.40		%	0.40		%	1.26		%
Fair value of a performance share	$	62.78		$	34.24		$	55.84

The following table summarizes outstanding performance share awards as of December 31, 2013 , 2012 and 2011 , and changes during those years:



(Dollars in thousands, except per-share amounts)	2013					2012					2011
	SHARES			WEIGHTED AVG. GRANT DATE FAIR VALUE		SHARES			WEIGHTED AVG. GRANT DATE FAIR VALUE		SHARES			WEIGHTED AVG. GRANT DATE FAIR VALUE
Unvested shares outstanding at January 1	160,214			$	44.50	154,594			$	50.54	184,601			$	38.45
Granted	83,111			62.78		85,028			34.24		77,767			55.84
Vested	(71,861		)	55.84		(76,812		)	45.30		(103,960		)	33.32
Forfeited	(15,650		)	47.32		(2,596		)	44.99		(3,814		)	42.77
Unvested shares outstanding at December 31	155,814			48.73		160,214			44.50		154,594			50.54
Total grant date fair value of share awards vested during the year	$	4,013				$	3,480				$	3,464
Aggregate intrinsic value of unvested share awards at December 31	$	6,504				$	6,019				$	4,747

As of December 31, 2013 , there was $4.2 million of unrecognized compensation cost related to unvested performance share awards, which is expected to be recognized over a weighted average period of 1.5 years.

RESTRICTED STOCK UNITS

Our 2005 Stock Incentive Plan also allows for awards to be issued in the form of RSU grants. During 2013 , 2012 and 2011 , certain officers and other select employees of the company were granted RSU awards that will accrue distribution equivalents based on distributions paid during the RSU vesting period. The distribution equivalents will be converted into additional RSUs that will vest in the same manner as the underlying RSUs to which they relate. Therefore, the shares are not considered participating securities. The terms of the awards state that the RSUs will vest in a given time period of one to three years, and the terms of certain awards follow a vesting schedule within the given time period.

2013 FORM 10-K / 67

A summary of the status of outstanding RSU awards as of December 31, 2013 , 2012 and 2011 , and changes during these years is presented below:



	2013					2012					2011
	SHARES			WEIGHTED AVERAGE GRANT DATE FAIR VALUE		SHARES			WEIGHTED AVERAGE GRANT DATE FAIR VALUE		SHARES			WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Unvested shares outstanding at January 1	40,219			$	34.82	36,359			$	35.60	41,715			$	29.37
Granted	23,449			44.41		20,225			31.53		18,053			38.57
Vested	(19,796		)	38.19		(14,861		)	32.41		(21,510		)	26.26
Forfeited	(6,411		)	36.91		(1,504		)	33.36		(1,899		)	32.78
Unvested shares outstanding at December 31	37,461			38.69		40,219			34.82		36,359			35.60
Total grant date fair value of RSU awards vested during the year (in thousands)	$	756				$	482				$	565
Aggregate intrinsic value of unvested RSU awards at December 31 (in thousands)	$	2,511				$	1,575				$	1,131

As of December 31, 2013 , there was $0.8 million of total unrecognized compensation cost related to outstanding RSU awards, which is expected to be recognized over a weighted average period of 1.0 years.

STOCK OPTIONS

All outstanding stock options were granted with an exercise price equal to the market price on the date of grant, were fully exercisable after two years and expire not later than 10 years from the date of grant. No new stock options were granted in 2013 , 2012 or 2011 .

A summary of the status of outstanding stock options as of December 31, 2013 , 2012 and 2011 and changes during those years is presented below:



	2013					2012					2011
	SHARES			WEIGHTED AVG. EXERCISE PRICE		SHARES			WEIGHTED AVG. EXERCISE PRICE		SHARES			WEIGHTED AVG. EXERCISE PRICE
Outstanding at January 1	83,827			$	27.46	144,684			$	23.34	222,130			$	21.64
Shares exercised	(70,968		)	26.25		(60,857		)	17.66		(77,446		)	18.47
Outstanding and exercisable at December 31	12,859			30.92		83,827			27.46		144,684			23.34
Total intrinsic value of options exercised during the year (in thousands)	$	1,423				$	938				$	1,496

There were no unvested stock options outstanding during 2013 , 2012 or 2011 .

The following table summarizes information about stock options outstanding at December 31, 2013 :



	OPTIONS OUTSTANDING AND EXERCISABLE
EXERCISE PRICE	NUMBER OUTSTANDING AT 12/31/12	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE	WEIGHTED AVERAGE OPTION PRICE		AGGREGATE INTRINSIC VALUE (IN THOUSANDS)
$30.9204	12,859	0.92 years	$	30.92	$	139

Cash received from stock option exercises for the years ended December 31, 2013 , 2012 and 2011 was $1.9 million , $1.1 million and $1.4 million , respectively.

68 / POTLATCH CORPORATION

NOTE 17. SEGMENT INFORMATION

As of December 31, 2013 , our businesses are organized into three reportable operating segments: Resource, Wood Products and Real Estate. The Resource segment manages our timberlands to optimize revenue producing opportunities while adhering to our strict stewardship standards. Management activities include planting and harvesting trees and building and maintaining roads. The Resource segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights leases, biomass

production, carbon sequestration and other leasing opportunities. The Wood Products segment manufactures and markets lumber and plywood. The business of our Real Estate segment consists primarily of the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives. The Real Estate segment engages in real estate subdivision and development activities through Potlatch TRS.

The reporting segments follow the same accounting policies used for our Consolidated Financial Statements , as described in the summary of principal accounting policies, with the exception of the valuation of inventories. All segment inventories are reported using the average cost method, while the LIFO reserve is recorded at the corporate level. Management evaluates a segment’s performance based upon profit or loss from operations before income taxes. Intersegment revenues are recorded based on prevailing market prices.

2013 FORM 10-K / 69

The following table presents business segment information for each of the past three years. Corporate information is included to reconcile segment data to the Consolidated Financial Statements .



(Dollars in thousands)	2013			2012			2011
Revenues:
Resource	$	238,228		$	207,846		$	226,969
Wood Products	366,015			329,404			271,580
Real Estate	26,160			38,238			50,029
	630,403			575,488			548,578
Elimination of intersegment revenues - Resource ¹	(60,114		)	(50,354		)	(51,157		)
Total consolidated revenues	$	570,289		$	525,134		$	497,421
Operating Income:
Resource	$	73,425		$	49,543		$	59,792
Wood Products	58,892			45,456			7,267
Real Estate	18,266			28,056			31,384
Eliminations and adjustments	(907		)	(1,061		)	2,410
	149,676			121,994			100,853
Corporate	(65,210		)	(62,591		)	(56,442		)
Income before income taxes	$	84,466		$	59,403		$	44,411
Depreciation, depletion and amortization:
Resource	$	18,103		$	16,446		$	17,420
Wood Products	6,194			6,538			7,829
Real Estate	56			36			28
	24,353			23,020			25,277
Corporate	2,609			3,227			3,815
Total depreciation, depletion and amortization	$	26,962		$	26,247		$	29,092
Basis of real estate sold:
Real Estate	$	3,536		$	5,413		$	13,500
Elimination and adjustments	(632		)	(365		)	(3,281		)
Total basis of real estate sold	$	2,904		$	5,048		$	10,219
Assets:
Resource and Real Estate ²	$	476,628		$	477,271		$	476,483
Wood Products	115,664			100,190			102,957
	592,292			577,461			579,440
Corporate	88,238			141,436			166,780
Total consolidated assets	$	680,530		$	718,897		$	746,220
Capital Expenditures:
Resource and Real Estate ²	$	13,509		$	23,916		$	12,003
Wood Products	9,013			4,427			4,050
	22,522			28,343			16,053
Corporate	1,131			845			833
Total capital expenditures	$	23,653		$	29,188		$	16,886


¹	Intersegment revenues for 2011-2013, which were based on prevailing market prices, consisted of logs sold by our Resource segment to the Wood Products segment.


²	Assets are shown on a combined basis for the Resource and Real Estate segments, as we do not produce information separately for those segments for internal purposes.

70 / POTLATCH CORPORATION

All of our wood products facilities and all other assets are located within the continental United States. We sell and ship products to Canada and Mexico. Geographic information regarding our revenues is summarized as follows:



(Dollars in thousands)	2013		2012		2011
United States	$	558,138	$	516,466	$	490,409
Canada	9,645		5,180		4,646
Mexico	2,506		3,488		2,366
Total consolidated revenues	$	570,289	$	525,134	$	497,421

NOTE 18. ASSET IMPAIRMENT CHARGES

In 2012, we recorded a pre-tax asset impairment charge of $0.1 million related to write-downs of two of our real estate development projects. In 2011, we recorded a pre-tax asset impairment charge of $1.2 million as a result of a change in the intended use of a warehouse. Both charges are reflected in the operating results of our Real Estate segment and included in costs and expenses in our Consolidated Statements of Income .

NOTE 19. FINANCIAL RESULTS BY QUARTER (UNAUDITED)



	THREE MONTHS ENDED
(Dollars in thousands, except per-share amounts)	MARCH 31				JUNE 30				SEPTEMBER 30				DECEMBER 31
(Dollars in thousands, except per-share amounts)	2013		2012		2013		2012		2013		2012		2013		2012
Revenues	$	139,253	$	112,384	$	133,212	$	117,540	$	157,869	$	151,911	$	139,955	$	143,299
Operating income	26,608		12,519		29,441		17,090		30,904		28,763		20,645		26,570
Net income	15,487		5,051		19,182		5,080		22,191		18,599		13,721		13,864
Net income per share ¹
Basic	$	0.38	$	0.13	$	0.47	$	0.13	$	0.55	$	0.46	$	0.34	$	0.34
Diluted	0.38		0.13		0.47		0.13		0.54		0.46		0.34		0.34


¹	Per-share amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly per-share amounts may not equal the total computed for the year.

2013 FORM 10-K / 71

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Potlatch Corporation:

We have audited the accompanying consolidated balance sheets of Potlatch Corporation and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the years in the three‑year period ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Potlatch Corporation and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three‑year period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Potlatch Corporation’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 14, 2014 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Portland, Oregon

February 14, 2014

72 / POTLATCH CORPORATION

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Potlatch Corporation:

We have audited Potlatch Corporation’s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Potlatch Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Potlatch Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control - Integrated Framework (1992) by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Potlatch Corporation and subsidiaries as of December 31, 2013 and 2012, a nd the related consolidated statements of income, comprehensive income, cash flows and stockholders’ equity for each of the years in the three‑year period ended December 31, 2013, and our report dated February 14, 2014 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Portland, Oregon

February 14, 2014

2013 FORM 10-K / 73

POTLATCH CORPORATION AND CONSOLIDATED SUBSIDIARIES

Exhibit Index



EXHIBIT NUMBER	DESCRIPTION

(3)(a)*	Second Restated Certificate of Incorporation of the Registrant, effective February 3, 2006, filed as Exhibit 99.2 to the Current Report on Form 8-K filed by the Registrant on February 6, 2006.

(3)(b)*	Bylaws of the Registrant, as amended through February 18, 2009, filed as Exhibit (3)(b) to the Current Report on Form 8-K filed by the Registrant on February 20, 2009.

(4)	See Exhibits (3)(a) and (3)(b). The Registrant also undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt.

(4)(a)*	Indenture, dated as of November 3, 2009, between the Registrant and U.S. Bank National Association, as trustee, filed as Exhibit 4.1 to the Current Report on Form 8-K filed by the Registrant on November 9, 2009.

(4)(a)(i)*	Form of 7 1/2% Senior Notes due 2019 (included as Exhibit A to the Indenture filed as Exhibit 4(a)).

(4)(a)(ii)*	Registration Rights Agreement, dated as of November 3, 2009, between the Registrant and the parties named therein, filed as Exhibit 4.1 to the Current Report on Form 8-K filed by the Registrant on November 9, 2009.

(4)(b)*	Indenture, dated as of December 18, 1995, between Potlatch Corporation, a Delaware corporation and the Registrant's former parent corporation (“Original Potlatch”) (on February 3, 2006, Original Potlatch merged with and into Potlatch Operating Company, a Delaware corporation and a wholly owned subsidiary of the Registrant, the Registrant then changed its name to “Potlatch Corporation” and became the new, publicly traded parent corporation) and U.S. Bank, National Association (as successor to First Trust of California, National Association), as trustee, executed in connection with the 6.95% Debentures due 2015, filed as Exhibit 4(b) to the Annual Report on Form 10-K filed February 15, 2013. (SEC File No. 001-32729)

(4)(b)(i)*	Form of 6.95% Debentures due 2015 (included as Exhibit 4(b)(i) to the Annual Report on Form 10-K filed February 15, 2013. (SEC File No. 001-32729)

(4)(c)*	Indenture, dated as of November 27, 1990, between Original Potlatch and Deutsche Bank National Trust Company (successor in interest to Bankers Trust Company of California, National Association), as trustee, filed as Exhibit (4)(a) to the Original Potlatch Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (SEC File No. 001-05313)

(4)(c)(i)*	Officer’s Certificate, dated January 24, 1991, filed as Exhibit (4)(a)(i) to the Original Potlatch Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (SEC File No. 001-05313)

(4)(c)(ii)*	Officer’s Certificate, dated December 12, 1991, filed as Exhibit (4)(a)(i) to the Original Potlatch Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (SEC File No. 001-05313)

(10)(a)1*	Potlatch Corporation Management Performance Award Plan, as amended effective December 2, 2004, filed as Exhibit (10)(a) to the Annual Report on Form 10-K filed by Original Potlatch for the fiscal year ended December 31, 2004. (SEC File No. 001-05313)

74 / POTLATCH CORPORATION



(10)(a)(i)1*	Amendment to Potlatch Corporation Management Performance Award Plan, filed as Exhibit 10.6 to the Current Report on Form 8-K filed by the Registrant on December 11, 2008.

(10)(b)1	Potlatch Corporation Severance Program for Executive Employees, amended and restated effective February 14, 2014.

(10)(c)1*	Potlatch Corporation 2000 Stock Incentive Plan, adopted December 2, 1999, as amended effective December 29, 2005, filed as Exhibit (10)(c) to the Current Report on Form 8-K filed by Original Potlatch on January 5, 2006, and as amended September 16, 2006, filed as Exhibit (10)(c) to the Current Report on Form 8-K filed by the Registrant on September 21, 2006.

(10)(c)(ii)1*	Form of employee Stock Option agreement for the Potlatch Corporation 2000 Stock Incentive Plan together with the Addendum thereto as used for options granted in December 2000, 2001, 2002, 2003 and 2004, filed as Exhibit (10)(c)(i) to the Annual Report on Form 10-K filed by Original Potlatch for the fiscal year ended December 31, 2001 (“2001 Form 10-K”). (SEC File No. 001-5313)

(10)(c)(iii)1*	Form of outside director Stock Option agreement for the Potlatch Corporation 2000 Stock Incentive Plan together with the Addendum thereto as used for options granted in December 2000, 2001, 2002 and 2003, filed as Exhibit (10)(c)(ii) to the 2001 Form 10-K. (SEC File No. 001-5313)

(10)(d)1*	Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan, as amended and restated effective January 1, 1989, and as amended through May 24, 2005, filed as Exhibit (10)(d) to the Quarterly Report on Form 10-Q filed by Original Potlatch for the quarter ended June 30, 2005.

(10)(d)(i)1*	Amendment, effective as of January 1, 1998, to Plan described in Exhibit (10)(d), filed as Exhibit (10)(d)(i) to the Annual Report on Form 10-K filed by Original Potlatch for the fiscal year ended December 31, 2003. (SEC File No. 001-5313)

(10)(d)(ii)1*	Amendment, effective as of December 5, 2008, to Plan described in Exhibit (10)(d), filed as Exhibit 10.5 to the Current Report on Form 8-K filed by the Registrant on December 11, 2008.

(10)(g)1*	Potlatch Corporation Deferred Compensation Plan for Directors, as amended through May 24, 2005, filed as Exhibit (10)(g) to the Quarterly Report on Form 10-Q filed by Original Potlatch for the quarter ended June 30, 2005.

(10)(h)1	Potlatch Corporation Benefits Protection Trust Agreement, amended and restated effective February 14, 2014.

(10)(i)(i)1*	Compensation of Outside Directors, effective as of January 1, 2008, filed as Exhibit (10)(i)(i) to the 2008 Form 10-K. (SEC File No. 001-32729)

(10)(j)1*	Form of Indemnification Agreement with each director of the Registrant and with each executive officer of the Registrant, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on September 23, 2009.

(10)(n)1*	Potlatch Corporation 1995 Stock Incentive Plan, adopted December 7, 1995, as amended effective December 29, 2005, filed as Exhibit (10)(n) to the Current Report on Form 8-K filed by Original Potlatch on January 5, 2006.

(10)(n)(vi)1*	Form of employee Stock Option Agreement for the Potlatch Corporation 1995 Stock Incentive Plan together with the Addendum thereto as used for options granted in December 2002, filed as Exhibit (10)(n)(vi) to the 2004 Form 10-K. (SEC File No. 001-5313)

2013 FORM 10-K / 75



(10)(r)1*	Potlatch Corporation 2005 Stock Incentive Plan, as amended and restated May 19, 2006, filed as Exhibit (10)(r) to the Quarterly Report on Form 10-Q filed by the Registrant for the quarter ended June 30, 2006, and as further amended and restated effective September 16, 2006, filed as Exhibit (10)(e) to the Current Report on Form 8-K filed by the Registrant on September 21, 2006.

(10)(r)(i)1*	Form of Restricted Stock Unit Agreement (2005 Stock Incentive Plan), as amended and restated May 19, 2006, to be used for restricted stock unit awards to be granted subsequent to May 19, 2006, filed as Exhibit (10)(r)(i) to the Quarterly Report on Form 10-Q filed by the Registrant for the quarter ended June 30, 2006.

(10)(r)(ii)1*	Form of Performance Share Agreement (2005 Stock Incentive Plan), as amended and restated May 19, 2006, to be used for performance share awards to be granted subsequent to May 19, 2006, filed as Exhibit (10)(r)(ii) to the Quarterly Report on Form 10-Q filed by the Registrant for the quarter ended June 30, 2006, and as further amended on January 17, 2007, filed as Exhibit (10)(r)(ii) to the Current Report on Form 8-K filed by the Registrant on January 19, 2007.

(10)(r)(iv)1*	Potlatch Corporation Management Performance Award Plan II, as amended through February 20, 2008, filed as Exhibit (10)(r)(iv) to the Current Report on Form 8-K filed by the Registrant on February 26, 2008.

(10)(r)(v)1*	Amendment to Potlatch Corporation Management Performance Award Plan II, effective June 1, 2008, filed as Exhibit (10)(r)(v) to the Current Report on Form 8-K filed by the Registrant on May 21, 2008.

(10)(s)1*	Potlatch Corporation Deferred Compensation Plan for Directors II, filed as Exhibit (10)(s) to the 2008 Form 10-K. (SEC File No. 001-32729)

(10)(t)1	Potlatch Corporation Salaried Supplemental Benefit Plan II, effective December 5, 2008, and amended and restated as of February 14, 2014.

(10)(w)(i)1	Potlatch Corporation Annual Incentive Plan, amended and restated effective January 1, 2014.

(10)(x)1	Potlatch Corporation Management Deferred Compensation Plan, effective June 1, 2008, amended and restated on February 14, 2014.

(10)(aa)*	Credit Agreement, dated as of December 11, 2012, among the Registrant and its wholly owned subsidiaries, as borrowers, Bank of America, N.A., as administrative agent, swing line lender and L/C issuer, the Guarantors from time to time party thereto and the Lenders from time to time party thereto, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on December 12, 2012.

(10)(bb)*	Credit Agreement, dated December 18, 2012, by and among the Registrant and Potlatch Forest Holdings, Inc., as borrowers, Northwest Farm Credit Services, PCA as administrative agent, the Guarantors from time to time party thereto and the Lenders from time to time party thereto, filed as Exhibit (10)(dd) to the Annual Report on Form 10-K filed February 15, 2013. (SEC File No. 001-32729)

(12)	Computation of Ratio of Earnings to Fixed Charges.

(21)	Potlatch Corporation Subsidiaries.

(23)	Consent of Independent Registered Public Accounting Firm.

(24)	Powers of Attorney.

76 / POTLATCH CORPORATION



(31)	Rule 13a-14(a)/15d-14(a) Certifications.

(32)	Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350.

101	The following financial information from Potlatch Corporation’s Annual Report on Form 10-K for the year ended December 31, 2013, filed on February 14, 2014, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Statements of Income for the years ended December 31, 2013, 2012 and 2011, (ii) the Consolidated Statements of Comprehensive Income for the years ended December 31, 2013, 2012 and 2011, (iii) the Consolidated Balance Sheets at December 31, 2013 and 2012, (iv) the Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011, (v) the Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2013, 2012 and 2011 and (vi) the Notes to Consolidated Financial Statements.


*	Incorporated by reference.


¹	Management contract or compensatory plan, contract or arrangement.

2013 FORM 10-K / 77

Exhibit (10b)

POTLATCH CORPORATION
SEVERANCE PROGRAM FOR EXECUTIVE EMPLOYEES

Amended and Restated Effective February 14, 2014

POTLATCH CORPORATION

SEVERANCE PROGRAM FOR EXECUTIVE EMPLOYEES

Effective September 5, 2013
Amended and Restated Effective February 14, 2014


Section 1	ADOPTION AND PURPOSE OF PROGRAM .

Potlatch Corporation (the “Company”) most recently amended and restated the Potlatch Corporation Severance Program for Executive Employees (the “Program”), effective September 5, 2013. This amendment and restatement is effective as of February 14, 2014 and applies in the case of any Separation from Service on and after such date; the applicable prior version of the Program applies to any Separation from Service prior to such date. The Program is designed to provide a program of severance payments to certain employees of the Company and its designated subsidiaries. The Program is an employee welfare benefit plan within the meaning of Section 3(1) of ERISA and Section 2510.3-1 of the regulations issued thereunder. The plan administrator of the Program for purposes of ERISA is the Committee.


Section 2	DEFINITIONS .

(a) “Affiliate” means any other entity which would be treated as a single employer with the Company under Section 414(b) or (c) of the Code, provided that in applying such Sections and in accordance with the rules of Treasury Regulation Section 1.409A-1(h)(3), the language “at least 50 percent” shall be used instead of “at least 80 percent.”

(b) “Base Compensation” means an Eligible Employee’s base rate of pay as in effect at the time the Eligible Employee Separates from Service, or, if greater, the rate in effect at the time Good Reason occurs or the time a Change in Control occurs, if applicable. An Eligible Employee’s base rate of pay shall be determined without reduction for (i) any deferred contributions made by the Eligible Employee pursuant to the Salaried 401(k) Plan, or (ii) any contributions made by the Eligible Employee pursuant to the Potlatch Management Deferred Compensation Plan.

(c) “Beneficiary” means the person or persons who become entitled to receive payment as a result of the death of an Eligible Employee. The Eligible Employee may designate a beneficiary under the Program in a form provided by the Committee.

(d) “Benefits Committee” means the Potlatch Corporation Benefits Committee and any successor committee thereto.

(e) “Board” means the Board of Directors of the Company.

(f) “Cause” means dishonesty, fraud, serious or willful misconduct, conduct prohibited by law (except minor violations), or the Eligible Employee’s material breach of any of his or her obligations regarding noncompetition, nonsolicitation or the protection of confidential or proprietary information and trade secrets, as those obligations are set forth in any written agreement executed between the Eligible Employee and the Participating Company, in each case as determined by the Vice President, Human Resources, of the Company or, in the case of executive officers, the Board or the Committee.

(g) “Change in Control” means the occurrence of any of the following events:

(i) The consummation of a merger or consolidation involving the Company (a “Business Combination”), in each case, unless, following such Business Combination,

(A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity which as a result of such transaction owns the Company either directly or through one (1) or more subsidiaries),

(B) no individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or such other corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock or common equity of the corporation or other entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation or other entity except to the extent that such ownership is based on the beneficial ownership, directly or indirectly, of Outstanding Common Stock or Outstanding Voting Securities immediately prior to the Business Combination, or

(C) at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for, or of the action of the Board to approve, such Business Combination; or

(ii) Individuals who, as of May 6, 2013 constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director of the Company subsequent to May 6, 2013 whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors of the Company then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors of the Company, an actual or threatened solicitation of proxies or consents or any other actual or threatened action by, or on behalf of any Person other than the Board; or

(iii) The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either:

(A) the then Outstanding Common Stock, or

(B) the combined voting power of the Outstanding Voting Securities,

provided, however, that the following acquisitions shall not be deemed to be covered by this paragraph (iii):

(I) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company;

(II) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company; and

(III) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any corporation pursuant to a transaction that complies with clauses (A), (B) and (C) of paragraph (i) of this definition; or

(iv) The consummation of the sale, lease or exchange of all or substantially all of the assets of the Company.

(h) “Code” means the Internal Revenue Code of 1986, as amended.

(i) “Committee” means the Executive Compensation and Personnel Policies Committee of the Board.

(j) “Company” has the meaning set forth in Section 1. References to the Company include Participating Companies where the context so indicates.

(k) “Eligible Employee” means a Principal Officer of a Participating Company or other employee of a Participating Company who participates in the Program.

(l) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(m) “Good Reason” means the existence of any one or more of the following conditions without an Eligible Employee’s express written consent: (i) the assignment to the Eligible Employee of any duties or responsibilities that results in a material diminution of his or her duties or responsibilities as in effect immediately prior to such assignment; provided, however, that, for the avoidance of doubt, a change in his or her title or reporting relationships shall not constitute Good Reason; (ii) a material reduction in the Eligible Employee’s annual base salary, as determined by taking into account the annual base salary in effect immediately prior to such reduction (and as may have been increased after the date of a Change in Control); (iii) a material reduction in the Eligible Employee’s aggregate employee benefit opportunities provided under material Benefit Plans, as determined by taking into account, in the aggregate, such opportunities in effect immediately prior to such reduction (and as may have been increased after the date of a Change in Control), unless such reduction is part of an across-the-board reduction of employee benefit opportunities for substantially all similarly-situated employees of the Participating Company as of the time of such reduction; (iv) a relocation of the Eligible Employee’s business office to a location more than fifty (50) miles from the location at which he or she performs duties as of the date such relocation requirement or request is communicated to the Eligible Employee by the Participating Company, except for required business travel to an extent substantially consistent with his or her business travel obligations prior to such date; or (v) a material breach by the Participating Company of any material written agreement between the Eligible Employee and the Participating Company concerning the terms and conditions of the Eligible Employee’s employment or other service relationship with the Participating

Company. For purposes of this definition of “Good Reason,” the term “Benefit Plan” means any cash or equity-based incentive plan, qualified and nonqualified employee benefit plan or any employee welfare plan of the Participating Company.

(n) “Identification Date” means each December 31.

(o) “Incentive Plan” means the Potlatch Corporation Annual Incentive Plan and any successor plan.

(p) “Key Employee” means an Eligible Employee who, on an Identification Date, is:

(i) An officer of the Company or an Affiliate having annual compensation greater than the compensation limit in Section 416(i)(l)(A)(i) of the Code, provided that no more than fifty (50) officers of the Company and its Affiliates shall be determined to be Key Employees as of any Identification Date;

(ii) A five percent (5%) owner of the Company; or

(iii) A one percent (1%) owner of the Company having annual compensation from the Company and its Affiliates of more than $150,000.

If an Eligible Employee is identified as a Key Employee on an Identification Date, then such Eligible Employee shall be considered a Key Employee for purposes of the Program during the period beginning on the first April 1 following the Identification Date and ending on the next March 31.

(q) “Normal Retirement Date” means “normal retirement date” as determined under the Retirement Plan.

(r) “Participating Company” means the Company and its subsidiaries designated by the Committee to participate in the Program.

(s) “Present Value” means the present value calculated using the assumed discount rate applied in projecting the Company’s pension benefit obligations for financial reporting purposes and the RP 2000 mortality table.

(t) “Principal Officers” means the chairman and chief executive officer, president and chief operating officer, chief financial officer, secretary, treasurer and controller and any elected vice president of a Participating Company.

(u) “Program” has the meaning set forth in Section 1.

(v) “Retirement Plan” means the Potlatch Salaried Retirement Plan as in effect from time to time.

(w) “Salaried 401(k) Plan” means the Potlatch Salaried 401(k) Plan as in effect from time to time.

(x) “Section 409A” means Section 409A of the Code, including regulations and guidance promulgated thereunder.

(y) “Separation from Service” or “Separates from Service” means termination of an Eligible Employee’s service as an Eligible Employee consistent with the requirements of Section 409A. For purposes of the Program, “Separation from Service” (including “Separates from Service”) generally

means termination of an Eligible Employee’s employment as a common-law employee of the Company and each Affiliate.

(z) “Supplemental Plans” means the Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan and Potlatch Corporation Salaried Supplemental Benefit Plan II and any successor plan.

(aa) “Year of Service” means a year of vesting service as determined under the Retirement Plan.


Section 3	ELIGIBILITY .

All Principal Officers and appointed vice presidents of the Participating Companies and such other employees of the Participating Companies who are designated by the Committee to participate in the Program shall be eligible to participate in the Program. As a condition to participation in the Program, each Eligible Employee shall agree in writing to become bound by its terms.


Section 4	SEVERANCE BENEFITS .

(a) Basic Severance Benefits . Upon the occurrence of any of the events specified in Section 5(a), an Eligible Employee shall receive (in lieu of any other severance benefit payable under any other plan or program now or hereafter maintained by a Participating Company) basic severance benefits under the Program as follows:

(i) A lump sum cash benefit equal to three (3) weeks of the Eligible Employee’s Base Compensation for each full Year of Service completed by such Eligible Employee, provided that the sum of the amounts payable under this Section 4(a)(i) shall not be less than an amount equal to one (1) year of the Eligible Employee’s Base Compensation;

(ii) A lump sum cash benefit equal to the Eligible Employee’s unused and accrued vacation pay, if any, determined as of the date when the Eligible Employee Separates from Service under the terms of the Participating Company’s vacation policy as in effect when the applicable event specified in Section 5(a) occurs (which, in the case of Separation from Service pursuant to Section 5(a)(iii), shall be the date of the material change rather than the date the Eligible Employee Separates from Service);

(iii) Eligibility for an “Award” under the Incentive Plan for the “Award Year” in which the Eligible Employee Separates from Service, determined under all the terms and conditions of the Incentive Plan;

(iv) In consideration of the Eligible Employee’s future health care needs, a lump sum cash benefit in an amount equal to the product of (A) the total monthly premium for medical and dental coverage, if any, for the Eligible Employee in effect on the day preceding the date of the Eligible Employee’s Separation from Service, and (B) twelve (12); and

(v) Reimbursement for outplacement services incurred for a period of up to twelve (12) months from the date of the Eligible Employee’s Separation from Service. The Eligible Employee must submit his or her receipts in accordance with the Participating Company’s then current expense reimbursement policy.

(b) Change in Control Benefits . Upon the occurrence of any of the events specified in Section 5(b), an Eligible Employee shall receive (in lieu of any severance benefit payable under Section 4(a) or any other severance benefit payable under any other plan or program now or hereafter maintained by a Participating Company) Change in Control benefits under the Program as follows:

(i) A lump sum cash benefit equal to the Eligible Employee’s annual Base Compensation plus his or her annual Base Compensation multiplied by his or her target bonus percentage (as determined pursuant to the Incentive Plan), determined as of the date of the Change in Control or the effective date the Eligible Employee Separates from Service, whichever produces the larger amount, multiplied by the appropriate factor from the following table:



Eligible Employee	Pay Multiple Factor
Chief Executive Officer Other Eligible Employees	3.00 2.50

(ii) A lump sum cash benefit equal to the Eligible Employee’s unused and accrued vacation pay, if any, determined as of the date on which the Eligible Employee Separates from Service under the terms of the Participating Company’s vacation policy. For this purpose, an Eligible Employee’s Base Compensation and the terms of the vacation policy shall be determined as of the date when the Eligible Employee Separates from Service;

(iii) Eligibility for an “Award” for the “Award Year” in which the Eligible Employee Separates from Service under the Incentive Plan determined under all the terms and conditions of such plan but based on the Eligible Employee’s target bonus determined pursuant to such plan; provided, however, that such benefit shall not be payable with respect to any Award Year for which the Eligible Employee receives a payment pursuant to any similar change in control provision in or related to the Incentive Plan;

(iv) In consideration of the Eligible Employee’s future health care needs, a lump sum cash benefit in an amount equal to the product of (A) the total monthly premium for medical and dental coverage, if any, for the Eligible Employee and his or her spouse and dependents in effect on the day preceding the date of the Eligible Employee’s Separation from Service, and (B) twelve (12);

(vi) In the case of an Eligible Employee who has less than two (2) Years of Service on the date he or she Separates from Service, a lump sum cash benefit equal to the unvested portion, if any, of the Eligible Employee’s “401(k) Plan Supplemental Benefit” account under the Supplemental Plans. The value of those portions of the Eligible Employee’s “401(k) Plan Supplemental Benefit” account referred to in the preceding sentence shall be determined as of the date the Eligible Employee Separates from Service with the Participating Company; and

(vii) A lump sum cash benefit equal to the Present Value of the Eligible Employee’s “Normal Retirement Benefit” and “Retirement Plan Supplemental Benefit” determined under the Retirement Plan

and the Supplemental Plans, respectively, if the Eligible Employee was not entitled to a “Vested Benefit” under the Retirement Plan as of the date the Eligible Employee Separates from Service with the Participating Company.

(i) Notwithstanding any other provision under the Program, in the event that an Eligible Employee becomes entitled to receive or receives any payments or benefits under the Program or under any other plan, agreement, program or arrangement with an Affiliate (collectively, the “Payments”), that may separately or in the aggregate constitute “parachute payments” within the meaning of Section 280G of the Code and the Treasury regulations promulgated thereunder (“Section 280G”) and it is determined that, but for this Section 4(c)(i), any of the Payments will be subject to any excise tax pursuant to Section 4999 of the Code or any similar or successor provision (the “Excise Tax”), the Participating Company shall pay to the Eligible Employee either (A) the full amount of the Payments or (B) an amount equal to the Payments reduced by the minimum amount necessary to prevent any portion of the Payments from being an “excess parachute payment” (within the meaning of Section 280G) (the “Capped Payments”), whichever of the foregoing amounts results in the receipt by the Eligible Employee, on an after-tax basis (with consideration of all taxes incurred in connection with the Payments, including the Excise Tax), of the greatest amount of Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax. For purposes of determining whether an Eligible Employee would receive a greater after-tax benefit from the Capped Payments than from receipt of the full amount of the Payments and for purposes of Section 4(c)(iii) (if applicable), the Eligible Employee shall be deemed to pay federal, state and local taxes at the highest marginal rate of taxation for the applicable calendar year.

(ii) All computations and determinations called for by Sections 4(c)(i) and 4(c)(iii) shall be made and reported in writing to the Company and the Eligible Employee by a third-party service provider selected by the Company (the “Tax Advisor”), and all such computations and determinations shall be conclusive and binding on the Company and the Eligible Employee. For purposes of such calculations and determinations, the Tax Advisor may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Eligible Employee shall furnish to the Tax Advisor such information and documents as the Tax Advisor may reasonably request in order to make the required calculations and determinations. The Company shall bear all fees and expenses charged by the Tax Advisor in connection with its services.

(iii) In the event that Section 4(c)(i) applies and a reduction is required to be applied to the Payments thereunder, the Payments shall be reduced by the Company in a manner and order of priority that provides the Eligible Employee with the largest net after-tax value; provided that payments of equal after-tax present value shall be reduced in the reverse order of payment. Notwithstanding anything to the contrary herein, any such reduction shall be structured in a manner intended to comply with Section 409A.

(d) No Duty to Mitigate; Offset . The Eligible Employee shall not be required to mitigate the amount of any payments provided under Section 4(b), nor shall any payment or benefit provided for in Section 4(b) be offset by any compensation earned by the Eligible Employee as the result of employment by another employer or by retirement benefits. Notwithstanding the foregoing, the Committee in its sole discretion may reduce any payments provided under Section 4(a), 4(b) and 4(c) (to an amount not less than zero) by any payments that an Eligible Employee has or will receive pursuant to an arrangement or agreement

with the Participating Company that provides for severance payments, including related tax payments, to which such Eligible Employee may be entitled in the event of termination of employment, provided that no such payments are subject to the requirements of Section 409A.


Section 5	CONDITIONS FOR PAYMENT OF SEVERANCE BENEFITS .

(a) Payment of Basic Severance Benefits . Subject to the provisions of Section 5(c), an Eligible Employee will be eligible for the benefits specified in Section 4(a) upon the occurrence of any of the following events (except that an Eligible Employee who has satisfied the conditions of Section 5(b) will be eligible for the benefits specified in Section 4(b) rather than the benefits specified in Section 4(a)):

(viii) The Eligible Employee’s involuntary termination of employment that constitutes a Separation from Service by the Company for any reason other than Cause; or

(ix) Termination as a Participating Company of the entity employing the Eligible Employee due to the sale to a third party or a spin-off of a designated subsidiary, subject to the limitations of Section 5(c)(ii) and provided that such transaction is a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as defined in the regulations promulgated under Section 409A; or

(x) The Eligible Employee Separates from Service with a Company within twenty-four (24) months following an event that constitutes Good Reason. An Eligible Employee shall not be deemed to have experienced a Separation from Service hereunder unless (i) the Eligible Employee notifies the Company in writing of the condition that he or she believes constitutes Good Reason within thirty (30) days of the initial existence thereof (which notice specifically identifies such condition and the details regarding its existence), (ii) the Company fails to remedy or cause to be remedied such condition within thirty (30) days after the date on which it receives such notice (the “Remedial Period”), and (iii) the Eligible Employee terminates his or her service relationship with the Company within sixty (60) days after the end of the Remedial Period. An Eligible Employee’s failure to include in the notice any fact or circumstance that contributes to a showing of Good Reason shall not waive any right he or she has hereunder or preclude the Eligible Employee from asserting such fact or circumstance in enforcing his or her rights hereunder.

For the avoidance of doubt and purposes of this Section 5(a), the term “Company” includes any Participating Company or successor entity, as applicable.

Notwithstanding the foregoing, no benefits shall be available under this Section 5(a) if (i) the Eligible Employee Separates from Service with a Company due to death or because he or she is eligible for or receiving long-term or permanent disability benefits under the Company’s disability income plan as in effect on the date of onset of disability or (ii) the Eligible Employee satisfies all of the following conditions:

(A) he or she Separates from Service on or after his or her Normal Retirement Date;

(B) for the two (2) year period immediately before retirement, he or she qualified as an Eligible Employee; and

(C) his or her benefits under the Retirement Plan, Salaried 401(k) Plan and Supplemental Plans which, when converted to a straight life annuity (and excluding any portion of the

benefit under the Salaried 40l(k) Plan which represents contributions by the Eligible Employee), equals, in the aggregate, at least $44,000.

(b) Payment of Change in Control Benefits . Subject to the provisions of Section 5(c), an Eligible Employee will be eligible for the benefits specified in Section 4(b) upon the occurrence of any of the following events within twenty-four (24) months following a Change in Control:

(iv) The Eligible Employee experiences an involuntary termination of employment that constitutes a Separation from Service for any reason other than Cause; or

(v) The Eligible Employee Separates from Service for Good Reason, provided that the Eligible Employee was employed by the Company on the date immediately preceding the Change in Control. An Eligible Employee shall not be deemed to have experienced a Separation from Service hereunder unless (i) the Eligible Employee notifies the Company in writing of the condition that he or she believes constitutes Good Reason within thirty (30) days of the initial existence thereof (which notice specifically identifies such condition and the details regarding its existence), (ii) the Company fails to remedy or cause to be remedied such condition within thirty (30) days after the date on which it receives such notice (the “Remedial Period”), and (iii) the Eligible Employee terminates his or her service relationship with the Company within sixty (60) days after the end of the Remedial Period. An Eligible Employee’s failure to include in the notice any fact or circumstance that contributes to a showing of Good Reason shall not waive any right he or she has hereunder or preclude the Eligible Employee from asserting such fact or circumstance in enforcing his or her rights hereunder.

For the avoidance of doubt and for purposes of this Section 5(b), the term “Company” includes any Participating Company or successor entity, as applicable.

Notwithstanding the foregoing, no benefits shall be available under this Section 5(b) if the Eligible Employee Separates from Service with a Company due to death or because he or she is eligible for or receiving long-term or permanent disability benefits under the Company’s disability income plan as in effect on the date of onset of disability.

(i) If an Eligible Employee is assigned from one to another Participating Company, he or she shall not be considered to have Separated from Service under the provisions of the Program.

(ii) No benefit will be payable hereunder due to an Eligible Employee’s Separation from Service because of the sale to a third party or spin-off of a division (or other operating assets) of a Participating Company or the termination of the Eligible Employee’s employer’s status as a Participating Company upon the sale to a third party or spin-off of a designated subsidiary where such sale or spin-off is a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as defined in the regulations promulgated under Section 409A, if (A) (I) the Eligible Employee is employed in the same or better job by the purchaser of such division, assets, or subsidiary or such other spun-off entity or (II) such purchaser or spun-off entity is contractually obligated to offer the Eligible Employee the same or a better job and (B) such purchaser or spun-off entity is contractually obligated to maintain a plan which in all material respects is equivalent to the Program, providing for continuing coverage of the Eligible Employee for two (2) years following the sale or spin-off of such division, assets or subsidiary.

(iii) To the extent that an Eligible Employee shall have received severance payments or other severance benefits under any other plan or agreement of the Participating Company before receiving benefits hereunder, the severance payments or other severance benefits under such other plan or agreement shall reduce (but not below zero) the corresponding benefits to which the Eligible Employee shall be entitled under Section 4. To the extent that an Eligible Employee accepts payments made pursuant to Section 4, he or she shall be deemed to have waived his or her right to receive a corresponding amount of future severance payments or other severance benefits under any other plan or agreement of the Participating Company. Benefits provided under the Program shall be in lieu of or offset by, as determined by the Committee, any termination or severance payments or other severance benefits for which the Eligible Employee may be eligible under any of the plans or agreements of the Company or an Affiliate or under the Worker Adjustment Retraining Notification Act of 1988 or any similar statute or regulation.

(iv) Any and all amounts payable and benefits or additional rights provided pursuant to the Program shall only be payable if an Eligible Employee timely delivers to the Participating Company and does not revoke a general waiver and release of claims in favor of the Participating Company and related parties identified therein in the form presented by the Participating Company, and the revocation period related to such general waiver and release has expired. Such general waiver and release shall be executed and delivered (and the revocation period related thereto, if any, shall have lapsed without revocation having been made) within sixty (60) days following the Eligible Employee’s Separation from Service.

(v) Any amounts or benefits payable but not made as of the Eligible Employee’s death shall be paid to the Beneficiary. If a designated Beneficiary does not survive the Eligible Employee or dies before receiving all such payments, payment of the balance shall be made to the estate of the last to die of the Eligible Employee or the designated Beneficiary.


Section 6	TIME AND FORM OF BENEFIT .

(a) Time of Benefit . Except as provided in Section 6(b), distributions made to Eligible Employees will commence no more than sixty (60) days following the Eligible Employee’s Separation from Service, provided the applicable revocation period required for the release under Section 5(c)(iv) has lapsed at that time without revocation having been made.

(b) Key Employees . Notwithstanding any other provision of the Program, a distribution of benefits subject to the requirements of Section 409A made to an Eligible Employee who is identified as a Key Employee at the time of his or her Separation from Service will be delayed for a minimum of six (6) months if the Eligible Employee’s distribution is triggered by his or her Separation from Service. Any payment that otherwise would have been made except for the application of this Section 6(b) during such six (6) month period will be made in one (1) lump sum payment not later than the last day of the second month following the month that is six (6) months from the date the Eligible Employee Separates from Service. The determination of which Eligible Employees are Key Employees will be made by the Committee in its sole discretion in accordance with this Section 6(b) and Sections 416(i) and 409A of the Code and the regulations promulgated thereunder.

(c) Form of Benefit . The benefits described in Section 4(a)(i) shall be paid, less withholding for applicable taxes, in monthly installments over a period not to exceed twelve (12) months from the date the Eligible Employee Separates from Service. The benefits described in Sections 4(a)(ii) and 4(a)(iv)

shall be paid, less withholding for applicable taxes, in a lump sum. The benefits described in Sections 4(b)(i), (ii), (iv), (vi) and (vii) shall be paid, less withholding for applicable taxes, in a lump sum.


Section 7	EFFECT OF DEATH OF EMPLOYEE .

Should an Eligible Employee die after Separation from Service but while participating in the Program and prior to the payment of the entire benefit due hereunder, the balance of the benefit payable under the Program shall be paid in a lump sum to the estate of the Eligible Employee.


Section 8	AMENDMENT AND TERMINATION .

The Company reserves the right to amend or terminate the Program at any time and to increase or decrease the amount of any benefit provided under the Program; provided, however, that as to any individual who has qualified as an Eligible Employee and has become entitled to any Change in Control benefit under Section 4(b), the Program cannot be terminated or amended to reduce any benefit provided under Section 4(b) or make any condition pertaining to qualification for the Change in Control benefit under Section 4(b) materially more restrictive. Once an individual has qualified as an Eligible Employee, the Program may not be amended to cause such individual to cease to qualify as an Eligible Employee for purposes of determining that individual’s eligibility for the Change in Control benefit under Section 4(b). Notwithstanding any other provision of the Program, following a Change in Control this Section 8 may not be amended for a period of three (3) years.

Notwithstanding the foregoing, the Vice President, Human Resources, of the Company shall have the power and authority to amend the Program with respect to any amendment that (i) does not materially increase the cost of the Program to the Company or (ii) is required to comply with new or changed legal requirements applicable to the Program, including, but not limited to, Section 409A.


Section 9	CLAIMS PROCEDURE .

(a) Claims . All applications for benefits and all inquiries concerning claims under the program shall be submitted to the following address: Benefits Committee, Severance Program for Executive Employees, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201.

(b) Denial of Claims . In the event that any application for benefits under the Program is denied in whole or in part, the Benefits Committee shall notify the applicant in writing of such denial and shall advise the applicant of the right to a review thereof. Such written notice shall set forth, in a manner calculated to be understood by the applicant, specific reasons for such denial, specific references to the provisions of the Program on which such denial is based, a description of any information or material necessary for the applicant to perfect his or her application, an explanation of why such material is necessary and an explanation of the Program’s review procedures and the time limits applicable to such procedures, including a statement of the applicant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review of the claim, as described in Section 10. Such written notice shall be given to the applicant within ninety (90) days after the Benefits Committee receives the application, unless special circumstances require an extension of time of up to an additional ninety (90) days for processing the application. If such an extension of time for processing is required, written notice of the extension shall be furnished to the applicant prior to the termination of the initial ninety (90) day period. This notice of extension shall indicate the special circumstances requiring the extension of time and the date by which the Benefits Committee expects to render its decision on the application for benefits.


Section 10	REVIEW PROCEDURE .

(a) Informal Resolution of Questions . Any Eligible Employee who has questions or concerns about his or her benefits under the Program is encouraged to communicate with the Vice President, Human Resources, of the Company. If this discussion does not give the Eligible Employee satisfactory results, a formal claim for benefits may be made within one (1) year of the event giving rise to the claim in accordance with the procedures of this Section 10. If a participant fails to file a formal claim within the preceding limitation period, the participant shall not be entitled to bring any legal or equitable action for benefits under the Program.

(b) Formal Benefits Claim – Review by Benefits Committee . An Eligible Employee may make a written request for review of any matter concerning his or her benefits under the Program. The claim must be submitted to the following address: Benefits Committee, Severance Program for Executive Employees, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee shall decide the action to be taken with respect to any such request and may require additional information, if necessary, to process the request. The Benefits Committee shall review the request and shall issue its decision, in writing, no later than ninety (90) days after the date the request is received, unless the circumstances require an extension of time. If such an extension is required, written notice of the extension shall be furnished to the person making the request within the initial ninety (90) day period, and the notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the request. In no event shall the extension exceed a period of ninety (90) days from the end of the initial period.

(c) Notice of Denied Request . If the Benefits Committee denies a request in whole or in part, it shall provide the person making the request with written notice of the denial within the period specified in Section 10(b). The notice shall set forth the specific reason for the denial, reference to the specific Program provisions upon which the denial is based, a description of any additional material or information necessary to perfect the request, an explanation of why such information is required, and an explanation of the Program’s appeal procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

(d) Appeal to Benefits Committee .

(i) A person whose request has been denied in whole or in part (or such person’s authorized representative) may file an appeal of the decision in writing with the Benefits Committee within sixty (60) days of receipt of the notification of denial. The appeal must be submitted to the following address: Benefits Committee, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee, for good cause shown, may extend the period during which the appeal may be filed for another sixty (60) days. The appellant and his or her authorized representative shall be permitted to submit written comments, documents, records and other information relating to the claim for benefits. Upon request and free of charge, the appellant should be provided reasonable access to, and copies of, all documents, records or other information relevant to the appellant’s claim.

(ii) The Benefits Committee’s review shall take into account all comments, documents, records and other information submitted by the appellant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Benefits

Committee’s review shall not be restricted to those provisions of the Program cited in the original denial of the claim.

(iii) The Benefits Committee shall issue a written decision within a reasonable period of time but not later than sixty (60) days after receipt of the appeal, unless special circumstances require an extension of time for processing, in which case the written decision shall be issued as soon as possible, but not later than one hundred twenty (120) days after receipt of an appeal. If such an extension is required, written notice shall be furnished to the appellant within the initial sixty (60) day period. This notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the appeal.

(iv) If the decision on the appeal denies the claim in whole or in part, written notice shall be furnished to the appellant. Such notice shall state the reason(s) for the denial, including references to specific Program provisions upon which the denial was based. The notice shall state that the appellant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits. The notice shall describe any voluntary appeal procedures offered by the Program and the appellant’s right to obtain the information about such procedures. The notice shall also include a statement of the appellant’s right to bring an action under Section 502(a) of ERISA.

(v) The decision of the Benefits Committee on the appeal shall be final, conclusive and binding upon all persons and shall be given the maximum possible deference allowed by law.

(e) Exhaustion of Remedies . No legal or equitable action for benefits under the Program shall be brought unless and until the claimant has submitted a written claim for benefits in accordance with Section 10(a), has been notified that the claim is denied in accordance with Section 10(c), has filed a written request for a review of the claim in accordance with Section 10(d), and has been notified in writing that the Benefits Committee has affirmed the denial of the claim in accordance with Section 10(d); provided, however, that an action for benefits may be brought after the Benefits Committee has failed to act on the claim within the time prescribed in Section 10(b) and Section 10(d), respectively.


Section 11	ADMINISTRATION OF THE PROGRAM .

In addition to the powers and duties otherwise set forth in the Program, the Committee shall have full power and authority to administer and interpret the Program, to establish procedures for administering the Program, to adopt and periodically review such rules consistent with the terms of the Program as the Committee deems necessary or advisable in order to properly carry out the provisions of the Program, and to take any and all necessary action in connection therewith. The Committee’s interpretation and construction of the Program and its determination of the amount of any Award thereunder shall be conclusive and binding on all persons. In its discretion, the Committee may delegate to the Vice President, Human Resources, of the Company the authority for the effective administration of the Program and for assigning responsibility to designated managers to carry out such duties.


Section 12	APPLICATION OF SECTION 409A .

(a) General . The Program and payments hereunder are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) or otherwise. To the extent

Section 409A is applicable to the Program or any payments under the Program, it is intended that the Program and such payments comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Program to the contrary, the Program shall be interpreted, operated and administered in a manner consistent with such intentions. Notwithstanding any other provision of the Program to the contrary, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Program so that any payment qualifies for exemption from or complies with Section 409A; provided, however, that the Company makes no representations that payments under the Program shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to payments under the Program.

(b) Payment Periods; Release . Whenever the Program specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company; provided that if the timing of the payment is contingent on the lapse or expiration of the revocation period for the release required under Section 5(c)(iv) and such revocation period could, as of an Eligible Employee’s Separation from Service, lapse either in the same year as the date of such Separation from Service or in the following year, the actual date of payment within the specified period shall be in such following year.

(c) Reimbursements . All reimbursements provided under the Program shall be made or provided in accordance with the requirements of Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the Eligible Employee’s lifetime (or during a shorter period of time specified in the Program), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the taxable year following the year in which the expense is incurred, and (iv) the right to reimbursement is not subject to liquidation or exchange for another benefit.


Section 13	BASIS OF PAYMENTS TO AND FROM PROGRAM .

All benefits under the Program shall be paid by the Participating Company. The Program shall be unfunded and benefits hereunder shall be paid only from the general assets of the Participating Company. Nothing contained in the Program shall be deemed to create a trust of any kind for the benefit of Eligible Employees or create any fiduciary relationship between the Participating Company and the Eligible Employees with respect to any assets of the Participating Company. The Participating Company is under no obligation to fund the benefits provided herein prior to payment, although it may do so if it chooses. Any assets which the Participating Company chooses to use for advance funding shall not cause the Program to be a funded plan within the meaning of ERISA.


Section 14	NO EMPLOYMENT RIGHTS .

Nothing in the Program shall be deemed to give any individual the right to remain in the employ of a Participating Company or to limit in any way the right of a Participating Company to terminate an individual’s employment, which right is hereby reserved.


Section 15	NON-ALIENATION OF BENEFITS .

No benefit payable under the Program shall be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to make it so shall be void.


Section 16	SUCCESSORS AND ASSIGNS .

The Program shall be binding on the Company, its successors and assigns, and any parent corporation of the Company’s successors or assigns. Notwithstanding that the Program may be binding upon a successor or assign by operation of law, the Company shall require any successor or assign to expressly assume and agree to be bound by the Program in the same manner and to the same extent that the Company would be if no succession or assignment had taken place.


Section 17	NOTICES .

All notices pertaining to the Program shall be in writing and shall be deemed given if delivered by hand or mailed with postage prepaid and addressed, in the case of the Company to the address set forth in Section 9(a), attention of its Corporate Secretary, and in the case of the Eligible Employee to his or her last known address as reflected in the records of the Company.


Section 18	CHOICE OF LAW AND VENUE .

The Program and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Washington without giving effect to principles of conflicts of law. Employees irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Washington.

Exhibit (10h)

POTLATCH CORPORATION

BENEFITS PROTECTION TRUST AGREEMENT

(As Amended and Restated Effective February 14, 2014

TABLE OF CONTENTS

Page


DEFINITIONS	1


CREATION OF TRUST; CONTRIBUTIONS	4


PAYMENTS FROM THE TRUST	5


MANAGEMENT OF TRUST ASSETS	8


POWERS OF TRUSTEE	9


TAXES, EXPENSES AND COMPENSATION OF TRUSTEE	11


RECORDS AND ACCOUNTING	12


INDEMNIFICATION AND LIMITATION OF LIABILITY	12


ADMINISTRATION OF THE PLANS; COMMUNICATIONS	13


RESIGNATION OR REMOVAL OF TRUSTEE	13


AMENDMENT OF AGREEMENT; TERMINATION OF TRUST	14


GOVERNING LAW; SEVERABILITY	15

POTLATCH CORPORATION
BENEFITS PROTECTION TRUST AGREEMENT

As Amended and Restated Effective February 14, 2014

This amended and restated Trust Agreement, originally made as of the first day of January, 1990 and most recently amended and restated as of December 5, 2008, by and between POTLATCH CORPORATION, a Delaware corporation (the “ Company ”) and U.S. Bank National Association (formerly First Trust National Association) (the “ Trustee ”), is hereby amended and restated to read as follows, effective as of February 14, 2014.

WITNESSETH:

Whereas the Company has adopted the nonqualified deferred compensation plans, programs and policies and has entered into the contracts listed on Schedule 1 (collectively, the “ Plans ”) and may adopt or enter into other such plans, programs, policies and contracts which will be listed from time to time on Schedule 1; and

Whereas the Company’s obligations pursuant to the Plans are not funded or otherwise secured and the Company desires to take steps to assure that, subject to the claims of the Company’s general creditors, the future payment of amounts under the Plans will not be improperly withheld in the event that a Change of Control (as hereinafter defined) of the Company should occur;

Whereas the Company wishes to establish a trust (hereinafter called a “Trust”) and to contribute to the Trust assets that shall be held therein, subject to the claims of the Company’s creditors in the event of the Company’s Insolvency, as defined herein, until paid to participants and beneficiaries of the Plans in such manner and at such times as specified in the Plans;

Whereas , it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plans as unfunded plans maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”);

Whereas , it is the intention of the Company to make contributions to the Trust to provide itself with a source of funds to assist it in the meeting of its liabilities under the Plans;

Now, Therefore , the Company and the Trustee hereby establish the Trust and agree that the Trust shall be comprised, held, and disposed of as follows:

SECTION 1. DEFINITIONS

(a) “Benefit Commitments” means:

(i) all benefits that are accrued or payable (whether on a current or deferred basis) under the Plans as of the date of the Change of Control and

(ii) all benefits that may become payable under the Plans as in effect on the date of the Change of Control as a result of termination of a participant’s employment after such Change of Control, as described in Section 2(d).

(b) “Change of Control” means the occurrence of any of the following events:

(i) The consummation of a merger or consolidation involving the Company (a “Business Combination”), in each case, unless, following such Business Combination,

(A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity which as a result of such transaction owns the Company either directly or through one (1) or more subsidiaries),

or threatened election contest with respect to the election or removal of directors of the Company, an actual or threatened solicitation of proxies or consents or any other actual or threatened action by, or on behalf of any Person other than the Board; or

(iii) The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either:

(A) the then Outstanding Common Stock, or

(B) the combined voting power of the Outstanding Voting Securities,

provided, however, that the following acquisitions shall not be deemed to be covered by this paragraph:

(I) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company;

(II) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company; and

(iv) The consummation of the sale, lease or exchange of all or substantially all of the assets of the Company.

(d) “Independent Administrator” means an independent professional benefits consulting or administrative firm appointed pursuant to Section 3(b).

(e) “Insolvent” and “Insolvency” means that the Company is unable to pay its debts as they become due or is subject to a pending proceeding as a debtor under the United States Bankruptcy Code.

(f) “Participants” mean the active and former directors and employees of the Company or its subsidiaries or affiliates who are entitled to benefits under the Plans.

(g) “Plans” mean the nonqualified plans, programs, policies and contracts listed on Schedule 1 adopted or maintained by the Company or a subsidiary or affiliate of the Company. The Company may from time to time add to or delete items from Schedule 1 by notifying the Trustee in writing; provided, however, that no such change to Schedule 1 may be made after a Change of Control has occurred. The Company shall provide the Trustee with a current copy of each Plan and any amendments thereto.

(h) “Trust” means the Potlatch Corporation Benefits Protection Trust established pursuant to this Agreement.

(i) “Trustee” means U.S. Bank National Association, or any successor trustee appointed pursuant to Section 10.

(j) “Trust Fund” means all moneys, securities and other property held by the Trustee under the Trust.

SECTION 2. CREATION OF TRUST; CONTRIBUTIONS

(a) Concurrently with the execution of this Agreement, the Company hereby deposits with the Trustee in trust $100 in cash, which shall become the principal of the Trust to be held, administered, and disposed of by the Trustee as provided in this Agreement. From time to time the Company shall also deposit with the Trustee such contributions as may be permitted or required pursuant to Sections 2(c) and 2(d) of this Agreement. All such contributions and all accumulations and accruals, and the income (net of expenses and taxes) with respect thereto, shall be held by the Trustee in trust pursuant to this Agreement and shall be invested, reinvested and applied as provided herein. The Trustee hereby accepts being named as Trustee under this Agreement and agrees to hold the Trust Fund subject to all of the terms and conditions hereof.

(b) The Trust established hereunder shall be revocable by the Company at any time before a Change of Control, but shall be irrevocable upon and after a Change of Control. The Trust is intended to be a grantor trust within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, (more commonly known as a “rabbi trust”) and shall be construed accordingly. All income earned on the assets of the Trust Fund shall be taxable to the Company, whether before or after the Trust becomes irrevocable. All taxes with respect to the Trust shall be payable by the Company from its separate funds and shall not be charged against the Trust Fund. The principal of the Trust, and any earnings thereon, shall be held separate and apart from other funds of the Company and shall be used exclusively for the uses and purposes of Participants and general creditors as set forth herein. Participants and their beneficiaries shall have no preferred claim on, or beneficial ownership interest in, any assets of the Trust. Any rights created under the Plans and this Agreement shall be mere unsecured contractual rights of participants of the Plans and their beneficiaries against the Company. Any assets held by the Trust will be subject to the claims of the Company’s general creditors under federal and state law in the event of Insolvency.

(c) The Company, with the concurrence of the Trustee, may at any time deposit with the Trustee additional cash or marketable securities to be credited to the Trust Fund. Neither the Trustee nor any participant or beneficiary of the Plans shall have any right to compel such additional deposits.

(d) Within 30 days after a Change of Control has occurred, the Company shall irrevocably deposit with the Trustee cash or marketable securities (other than stock or debt obligations of the Company) to be credited to the Trust Fund in an amount which, when added to any funds already credited to the Trust Fund, the Company reasonably determines will be at least sufficient to pay:

(i) the Benefit Commitments, and

(ii) all anticipated future expenses of the Trust Fund, including the fees and expenses of the Trustee described in Section 6(b).

(e) At least annually after a Change of Control, the Independent Administrator shall retain an actuary to re-determine the amount determined pursuant to (d) above. Such re-determination shall be performed using the factors and assumptions set forth in Schedule 2. If the current fair market value of the assets of the Trust Fund does not equal or exceed 110% of the amount so re-determined, the Independent Administrator shall so advise the Company and the Company shall, within 30 days after receiving such notice, make an irrevocable contribution to the Trust equal to the excess of the re-determined amount over the current fair market value of the assets of the Trust Fund.

(f) The Trustee shall not be responsible for the computation or collection of any contribution to the Trust Fund.

(g) Notwithstanding the provision of the Trust to the contrary, in order to comply with Section 409A(b) of the Internal Revenue Code of 1986 as amended (the “Code”), the following rules shall apply:

No assets will become restricted to the provision of benefits in connection with a change in the Company’s financial health or the occurrence of a “restricted period” as defined in Section 409A(b)(3)(B), and the Company shall not make contributions to the Trust for the purpose of paying deferred compensation to an “applicable covered employee” as defined in Section 409A(b)(3)(D) of the Code under a nonqualified deferred compensation plan during such restricted period. In the event that contributions are made during a restricted period for the benefit of persons other than “applicable covered employees,” the Company will thereafter direct the Trustee to establish such sub-accounts as necessary to separate funding contributed for the benefit of “applicable covered employees” and other persons.

SECTION 3. PAYMENTS FROM THE TRUST

(a) Upon the effective date of this Agreement, the Company shall furnish the Trustee with written information regarding the Participants and their beneficiaries under the Plans and the dates of distribution and amounts of benefits under the Plans and shall update such information on a regular basis. The entitlement of a Participant or beneficiary of the Plans to benefits under the Plans shall be determined by the Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plans.

(b) The Company shall have the duty to notify the Trustee if a Change of Control occurs. After a Change of Control, the Company shall: (i) within 30 days furnish to the Trustee the information described in (a) above with respect to the Benefit Commitments which are then payable under the Plans; (ii) update such information with respect to all Plans not less frequently than annually; (iii) furnish the Trustee with any other information the Trustee may reasonably request within 30 days after such request; and (iv) within 30 days following the Change of Control, appoint an Independent Administrator which shall assume responsibility for the administration of the Plans and provide such information and assistance as may be necessary or appropriate to assist the Independent Administrator to carry out its duties in connection with the Plans.

(c) Before a Change of Control, the Trustee shall make payments from the Trust Fund to Participants and their beneficiaries under the Plans if so directed by the Company. The Company shall deliver to the Trustee a schedule (a “Payment Schedule”) that indicates the amounts payable in respect of each Participant and beneficiary of the Plans, that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to participants and beneficiaries of the Plans in accordance with the Payment Schedule. The Company may withdraw funds from the Trust Fund for any purpose at any time before a Change of Control.

(d) After a Change of Control the Trustee shall pay the Benefit Commitments to the Participants and their beneficiaries in the amounts and at the time directed by the Independent Administrator. The Independent Administrator shall deliver to the Trustee a schedule (a “Payment Schedule”) that indicates the amounts payable in respect of each Participant and beneficiary of the Plans, that provides a formula or other instructions acceptable to the Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plans), and the time of commencement for payment of such amounts. Except as otherwise provided herein, the Trustee shall make payments to Participants and their beneficiaries in accordance with the Payment Schedule.

(e) Except as provided in Section 11(d), no funds shall be paid to the Company after a Change of Control.

(f) After a Change of Control, the Trustee shall pay benefits (including, without limitation, benefits accruing on account of services rendered after the date of the applicable event or on account of a period of employment after the applicable event) under the Plans in excess of the Benefit Commitments only if the Company deposits additional cash or marketable securities sufficient to pay such excess benefits.

(g) Payments to Participants and their beneficiaries pursuant to Sections 3(c) and 3(d) shall be made by the Trustee to the extent that funds in the Trust Fund are sufficient for such purpose. The Company may make payment of benefits directly to Participants and their beneficiaries as they become due under the terms of the Plans. The Company shall notify the Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to Participants or their beneficiaries. In addition, if the principal of the Trust, and any earnings thereon, are not sufficient to make payments of benefits in

accordance with the terms of the Plans, the Company shall make the balance of each such payment as it falls due or shall direct the Trustee as to modifications required to the then-current Payment Schedule. After a Change of Control, the Independent Administrator shall instead provide such direction. The Trustee shall notify the Company where principal and earnings are not sufficient. However, after a Change of Control, any payments in excess of the Benefit Commitments shall be reduced as necessary or completely terminated before payment of any Benefit Commitments shall be reduced.

(h) Notwithstanding any other provisions of this Agreement, before or after a Change of Control, the Trustee shall cease payment of benefits to participants and beneficiaries of the Plans if the Company is Insolvent. At all times during the continuance of this Trust, the principal and income of the Trust shall be subject to the claims of the general creditors of the Company under federal and state law as set forth herein. For this purpose, the knowledge of any of its affiliates shall not be imputed to the Trustee. The Trustee shall resume benefit payments only after determining that the Company is not Insolvent or as directed by a court of competent jurisdiction.

(i) The Board of Directors and the Chief Executive Officer of the Company shall have the duty to notify the Trustee in writing of the Company’s Insolvency. Except as provided in the next sentence or to the extent the Trustee has actual knowledge of Insolvency, the Trustee shall have no duty to inquire whether the Company is Insolvent. If a person claiming to be a creditor of the Company alleges in writing to the Trustee that the Company is Insolvent, the Trustee shall independently determine or, within 30 days after receipt of such notice, shall petition a court to determine whether the Company is Insolvent and shall suspend benefit payments pending such determination. The Company shall promptly provide all information reasonably requested by the Trustee to enable the Trustee or the court to make such determination. The Trustee may in all events rely on such evidence concerning the Company’s solvency as may be furnished to the Trustee and that provides the Trustee a reasonable basis for making a determination concerning the Company’s solvency. If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall discontinue payments to Plan Participants or their beneficiaries and shall hold the assets of the Trust for the benefit of the Company’s general creditors. Nothing in this Agreement shall in any way diminish the rights of Participants and their beneficiaries to pursue their rights as general creditors of the Company with respect to benefits due under the Plans or otherwise.

(j) The Trustee shall resume the payment of benefits to Participants and their beneficiaries only after the Trustee has determined that the Company is not Insolvent (or is no longer Insolvent.) Provided that there are sufficient assets, if the Trustee discontinues or suspends benefit payments under Section 3(h) or 3(i) and subsequently resumes such payments, the first payment following such discontinuance or suspension shall include the aggregate amount of all payments that would have been made under the Plans during the period of discontinuance or suspension, less the aggregate amount of any payments made by the Company to the Participant or beneficiary pursuant to the Plans during such period, together with interest equal to 120% of the long-term applicable federal rate, with quarterly compounding, as published under Section 1274(d) of the Code for the first month of each calendar quarter. The Company or the Independent Administrator, as the case may be, will direct the Trustee as to the amount of such first payment following discontinuance or suspension.

(k) No Participant or beneficiary shall have any claim on or beneficial ownership interest in any assets of the Trust Fund before such assets are paid to the Participant or beneficiary, and all rights created under the Plans shall be unsecured contractual rights against the Company.

(l) Except as otherwise provided hereunder, after the Trust has become irrevocable, the Company shall have no right or power to direct the Trustee to return to the Company or to divert to others any of the Trust assets before all payment of benefits have been made to Participants and their beneficiaries pursuant to the terms of the Plans.

SECTION 4. MANAGEMENT OF TRUST ASSETS

(a) Prior to a Change of Control, the Trust Fund shall be held, invested and reinvested by the Trustee only as directed in writing by the Company from time to time. To the extent the Company has not so directed the Trustee as to the investment of any portion of Trust assets before they are contributed to the Trust, the Company hereby directs the investment of such assets in the default investment fund indicated in Schedule 3 attached hereto. If the Company delegates its investment authority hereunder to any third party, the Company will remain liable hereunder as if the Company had acted directly.

(b) After a Change of Control, the Trustee shall have exclusive authority and discretion to manage and control the Trust Fund and may employ investment managers (including affiliates of the Trustee) to manage the investment of the Trust Fund. In exercising such authority and discretion, the Trustee shall be guided by the investment policy guidelines established by the Company for this purpose, a copy of which guidelines shall be delivered to the Trustee.

The Trustee shall discharge its investment duties with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that the Trustee shall incur no liability to any person for any action taken pursuant to a direction, request, or approval given by the Company or the Independent Administrator which is contemplated by, and in conformity with, the terms of the Plans or this Agreement and is given in writing by the Company or the Independent Administrator. In the event of a dispute between the Company (or Independent Administrator) and a party, the Trustee may apply to a court of competent jurisdiction to resolve the dispute.

(c) In no event shall assets of the Trust Fund be invested in securities (including stock or rights to acquire stock) or obligations of the Company, other than a de minimis amount held in common investment vehicles in which the Trustee invests. All rights associated with Trust assets shall be exercised by the Trustee or the person designated by the Trustee and shall in no event be exercisable by or rest with Participants.

(d) To the fullest extent permitted by law, the Trustee is expressly authorized to:

(i) retain the services of a registered broker-dealer organization hereafter affiliated with U.S. Bank National Association, and any future successors in interest thereto (collectively for the purposes of this paragraph referred to as the “Affiliated Entities”), to provide services to assist in or facilitate the purchase or sale of investment securities in the Trust,

(ii) acquire as assets of the Trust shares of mutual funds to which Affiliated Entities provides, for a fee, services in any capacity and

(iii) acquire in the Trust any other services or products of any kind or nature from the Affiliated Entities regardless of whether the same or similar services or products are available from other institutions.

The Trust may directly or indirectly (through mutual funds fees and charges, for example) pay management fees, transaction fees and other commissions to the Affiliated Entities for the services or products provided to the Trust and such mutual funds at such Affiliated Entities’ standard or published rates without offset (unless required by law) from any fees charged by the Trustee for its services as Trustee.

The Trustee may also deal directly with the Affiliated Entities regardless of the capacity in which it is then acting, to purchase, sell, exchange or transfer assets of the Trust even though the Affiliated Entities are receiving compensation or otherwise profiting from such transaction or are acting as a principal in such transaction.

(e) Each of the Affiliated Entities is authorized to

(i) effect transactions on national securities exchanges for the Trust as directed by the Trustee, and

(ii) retain any transactional fees related thereto, consistent with Section 11(a)(1) of the Exchange Act, as amended, and related Rule 11a2-2(T).

(iii) Included specifically, but not by way of limitation, in the transactions authorized by this provision are transactions in which any of the Affiliated Entities are serving as an underwriter or member of an underwriting syndicate for a security being purchased or are purchasing or selling a security for its own account. In the event the Trustee is directed by the Company or any designated investment manager, as applicable hereunder (collectively referred to for purposes of this paragraph as the “Directing Party”), the Directing Party shall be authorized, and expressly retains the right hereunder, to direct the Trustee to retain the services of, and conduct transactions with, Affiliated Entities fully in the manner described above.

SECTION 5. POWERS OF TRUSTEE

Subject to Sections 3 and 4, the Trustee shall have full power and authority with respect to any and all moneys, securities and other property at any time received or held in the Trust Fund to do all such acts, take all such proceedings and exercise all such rights and privileges, whether herein specifically referred to or not, as could be done, taken or exercised by the absolute owner thereof, including, without in any way limiting the generality of the foregoing, the following:

(a) To collect and receive the income of the Trust Fund and to invest and reinvest the Trust Fund in investments of any kind, including but not limited to investments administered, advised, custodied, issued, offered, sponsored, underwritten, or otherwise serviced by the Trustee or any of the Trustee’s affiliates; The Company hereby acknowledges (i) that the Trustee’s affiliate is the investment advisor for the First American Funds, Inc.; the First American Investment Funds, Inc.; and the First American Strategy Funds, Inc. (collectively, the “ Affiliated Funds ”); (ii) that the Trustee is the sub-administrator, securities lending agent, and custodian for the Affiliated Funds; (iii) that the Trustee receives compensation from the Affiliated Funds as detailed in the prospectuses for the Affiliated Funds; (iv) that the Trustee has received such prospectuses; (v) that the Affiliated Funds are neither insured by the Federal Deposit Insurance Company or any other governmental agency nor guaranteed by the Trustee or by any Affiliated Entity; and (vi) that any mutual fund investment involves risks (including but not limited to the possible loss of principal);

(b) To pay the expenses of the Trust (excluding any taxes payable by the Company under Section 2(b)) out of the Trust Fund, including the fees and reasonable expenses of the Independent Administrator and including reasonable compensation for its services as Trustee (if and to the extent that the Company does not pay such expenses and compensation);

(c) To employ suitable agents and counsel, and pay their reasonable expenses and compensation out of the Trust Fund (if and to the extent that the Company does not pay such expenses and compensation);

(d) To sell, convey, exchange or otherwise dispose of any property at any time held in trust hereunder;

(e) To hold uninvested any cash contributions to the Trust Fund and to create reserves of cash or other assets of the Trust Fund in the banking department of any affiliate of the Trustee, without liability for interest thereon, for the payment of expenses, or for distributions pursuant to the Plans, or for any other purpose in connection with the Plans, notwithstanding the affiliate’s receipt of “float” from such uninvested cash;

(f) To deposit any moneys at any time held in the Trust Fund in any savings bank, in the savings department of any bank or in a banking affiliate of the Trustee;

(g) To invest assets of the Trust Fund in any mutual funds advised by the Trustee or any of its affiliates or for which an affiliate of the Trustee acts as a custodian or other service provider and to receive management fees from such mutual funds for services performed for such funds;

(h) To have, respecting bonds, shares of corporate stock and other securities, all the rights, powers and privileges of an owner, including holding securities in the name of the Trustee or in the name of a nominee securities depository with or without disclosure of the Trust, voting any corporate stock either in person or by proxy, with or without power of substitution, making payment of calls, assessments or other sums deemed by the Trustee expedient for the protection of the Trust Fund, exchanging securities, selling or exercising stock subscriptions or conversion rights, participating in foreclosures, reorganizations, consolidations, mergers, liquidations, pooling agreements, voting trusts, and assenting to corporate sales, leases and encumbrances. The Trustee may provide to the Company (or, after a Change

of Control, to the Independent Administrator) the proxy of any security when in the Trustee’s judgment the Trustee or one of its affiliates may have a conflict of interest;

(i) To enter into any contracts with, or purchase any annuities from, any insurance company or insurance companies for the purpose of providing for distributions under the Plans; and

(j) To settle, compromise or submit to arbitration any claims, debts or damages due or owing to or from the Trust or the Trust Fund; to commence or defend legal proceedings for or against the Trust; and to represent the Trust in all proceedings in any court of law or equity or before any other body or tribunal.

(k) The Trustee shall have, without exclusion, all powers conferred on trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, the Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee, or to loan to any person the proceeds of any borrowing against such policy.

(l) Notwithstanding any powers granted to the Trustee pursuant to this Agreement or to applicable law, the Trustee shall not have any power and shall not take any action that could result in this Trust being classified as a corporation or a partnership under U.S. federal income tax laws, pursuant to section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code.

SECTION 6. TAXES, EXPENSES AND COMPENSATION OF TRUSTEE

(a) The Company shall pay any federal, state, local or other taxes imposed with respect to the assets or income of the Trust Fund. The Company (or, following a Change of Control, the Independent Administrator) will perform any tax calculation, withholding, reporting, and remitting to the appropriate taxing authorities of any federal, state, or local income, wage, or other taxes that may be required to be calculated, withheld, reported, or remitted with respect to any payments made to Participants or their beneficiaries from the Trust Fund. The Trustee will have no responsibility for the same, except as directed in every detail by the Company or the Independent Administrator, as the case may be.

(b) The fees and expenses of the Trustee may be revised from time to time as agreed to by the parties. A schedule of the Trustee’s fees and expenses shall be agreed upon by the parties hereto. The Trustee’s reasonable expenses, including but not limited to the retention of legal counsel, accountants and actuaries and such other professionals as the Trustee determines are necessary or appropriate to enable it to perform its services as Trustee, shall be charged to and payable from the Trust Fund on a monthly basis, or on such other basis as the Trustee deems reasonable, except to the extent that such fees and expenses are paid by the Company.

SECTION 7. RECORDS AND ACCOUNTING

(a) The Trustee shall keep accurate and detailed records and accounts with respect to all assets included in the Trust Fund and all investments, receipts and disbursements and other transactions involving the Trust, except that the Company shall maintain all accounts for Participants and their beneficiaries as provided in the Plans. All accounts, books and records maintained by the Trustee shall be open to inspection by any person designated by the Company at all reasonable times.

(b) Within 60 days following the close of each calendar year or the date of removal or resignation of the Trustee or termination of the Trust, the Trustee shall file with the Company a written report setting forth all investments, receipts, disbursements and other transactions effected by it during the calendar year or part thereof for which the report is filed, in such form as the Company and the Trustee shall agree. The Trustee also shall render such additional statements or reports to the Company as the Company may reasonably request from time to time.

SECTION 8. INDEMNIFICATION AND LIMITATION OF LIABILITY

The Company shall indemnify and hold the Trustee harmless from and against any liability, and the Trustee will incur no liability to any person for, any claims, liabilities, losses, costs, taxes, penalties, interest, and expenses (including reasonable attorneys’ fees) that may be imposed on, incurred by, or asserted against the Trustee by reason of the Trustee’s actions or omissions in connection with this Agreement or the Trust, including but not limited to actions or omissions consistent with directions provided hereunder, unless arising from the Trustee’s own gross negligence, willful misconduct, or willful breach of the provisions of or its obligations under this Agreement. The Trustee shall not be required to give any bond or any other security for the faithful performance of its duties under this trust agreement, except as required by law. All indemnifications and releases provided in this Agreement will survive any Change of Control and the termination of this Agreement.

The Trustee will have no duty to (i) apply for or obtain a ruling from the Internal Revenue Service as to, or otherwise determine, the tax consequences of the Plans, the Plan documents, the Trust, or this Agreement, as to the Company, Participants, beneficiaries, or otherwise, including but not limited to whether the arrangement created hereunder is a safe harbor rabbi trust and whether any action hereunder complies with Code Section 409A; (ii) construe the terms of the Plans; determine eligibility under the Plans (including eligibility for participation, vesting, and distribution, as well as the timing, amount, and form thereof); resolve benefit claims or claim appeals; maintain participant-level records; or otherwise function as the administrator of the Plans; (iii) unless otherwise required by law, give notices or make filings required by applicable statutes or regulations for any plan; (iv) determine, monitor, or collect contributions; (v) inquire whether the Company has timely filed a top-hat exemption letter or has otherwise satisfied the reporting and disclosure obligations of Part I of Title I of ERISA; (vi) determine, conduct a review of, make recommendations with respect to, or otherwise question the investment policy guidelines, the classes of permissible investments under this Agreement; buying, holding, or selling Trust assets with respect to any portion of the Trust over which anyone other than the Trustee has investment authority; and the compliance of such buying, holding, and selling with the investment policy guidelines; (vii) monitor service providers hired by the Company, including any Independent Administrator; or (ix) make a distribution to the extent that Trust assets, when reduced by taxes applicable to such distribution, when further reduced by expenses payable by the Trust, are less than the amount of the payment.

SECTION 9. ADMINISTRATION OF THE PLANS; COMMUNICATIONS

(a) The Company shall administer the Plans as provided therein and subject to Section 3(d), the Trustee shall not be responsible in any respect for administering the Plans. The Trustee shall not be responsible for the adequacy of the Trust Fund to meet and discharge all payments and liabilities under the Plans.

(b) Any action of the Company, or if applicable, the Independent Administrator under any provision of this Agreement shall be evidenced by a written instrument signed by an authorized agent of the Company or if applicable, the Independent Administrator. The Company, or if applicable, the Independent Administrator shall furnish the Trustee from time to time with evidence satisfactory to the Trustee as to the agents authorized to sign such instruments.

SECTION 10. RESIGNATION OR REMOVAL OF TRUSTEE

(a) The Trustee may resign at any time and for any reason before a Change of Control upon written notice to the Company. After receipt of such written notice, the Company shall appoint a successor trustee that will become Trustee upon its acceptance of the Trust. The Trustee’s resignation shall become effective upon the earlier of the date six months after such written notice is provided or the date the successor trustee is appointed by the Company and accepts the Trust. If the Company fails to deliver to the Trustee a successor’s written acceptance of trusteeship within six months of received notice of the Trustee’s resignation, the Trustee may immediately petition a court of competent jurisdiction at Trust expense for the appointment of a successor. Even so, the Trustee shall have no duty to find or secure the appointment of a successor upon its resignation pursuant to this Section 10(a).

(b) After a Change of Control, the Trustee may resign at any time and for any reason upon written notice to the Company, and, if applicable, the Independent Administrator. Such resignation shall become effective only if:

(i) The Trustee has obtained the agreement of a bank to act as successor trustee which bank is among the 100 largest banks in the United States, as measured by deposits; or

(ii) A court of competent jurisdiction has appointed a successor trustee, but only after the Trustee has used reasonable efforts to find a successor pursuant to (i) above.

The Trustee shall continue to be trustee of the Trust Fund until the new trustee is in place, and the Trustee shall be entitled to expenses and fees (including expenses incurred in finding a successor trustee or petitioning a court to name a successor trustee) through the later of the effective date of its resignation as Trustee or the end of its custodianship of the Trust Fund.

(c) Prior to a Change of Control, the Company may remove the Trustee upon 30 days written notice to the Trustee, or upon such shorter period as is acceptable to the Trustee. Such removal shall become effective, however, only upon the occurrence of all of the following events:

(i) The appointment by the Company of a successor trustee;

(ii) The acceptance of the Trust by the successor trustee; and

(iii) The delivery of the Trust Fund to the successor trustee.

(d) Following a Change of Control, the Independent Administrator, if it agrees to assume such power and responsibility, may remove the Trustee by following the steps prescribed for the Company in (c) above.

(e) Upon designation or appointment of a successor trustee, the Trustee shall transfer the Trust Fund to the successor trustee reserving such reasonable sums as the Trustee shall deem necessary to defray its expenses in settling its accounts and to pay any of its compensation due and unpaid. If the sums so reserved are not sufficient for these purposes, the Trustee shall be entitled to recover the amount of any deficiency from either the Company or the Trust Fund held by the successor trustee, or both.

SECTION 11. AMENDMENT OF AGREEMENT; TERMINATION OF TRUST

(a) At any time prior to a Change of Control, this Trust Agreement may be amended by a written instrument executed by the Trustee and the Company. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable after it has become irrevocable in accordance with Section 2(b) hereof.

(b) The provisions of this Agreement and the Trust created hereby may not be amended or terminated after a Change of Control, except to the extent required by applicable law, but no such amendment shall conflict with the terms of the Plans or shall make the Trust revocable.

(c) In the event the Company terminates the Trust prior to the occurrence of a Change of Control, the Trustee shall reserve such sums as it deems necessary to pay its fees and expenses, and shall distribute all remaining assets of the Trust Fund in accordance with the written directions of the Company.

(d) The Trust shall be terminated upon the earlier of the exhaustion of the Trust Fund or the final payment of all amounts payable to all of the Participants and their beneficiaries pursuant to the Plans, and the payment of all amounts due to the Trustee and all costs and expenses chargeable to the Trust. Promptly upon termination of this Trust, and after payment of all fees, expenses and indemnities due to or incurred by the Trustee hereunder, any remaining portion of the Trust Fund shall be paid to the Company.

SECTION 12. GOVERNING LAW; SEVERABILITY

(a) This Agreement shall be construed and enforced in accordance with the laws of the State of Washington.

(b) Any provision of this Agreement that is determined to be invalid or unenforceable shall be ineffective without invalidating the remaining provisions hereof.

(c) This Agreement shall have binding effect on the successors and assigns of the Company and on all parent and subsidiary companies related to any such successor or assign.

(d) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by and delivered to each of the parties hereto.

(e) Benefits payable to Participants and their beneficiaries may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered, or subjected to attachment, garnishment, levy, execution, or other legal or equitable process.

IN WITNESS WHEREOF , the parties hereto have caused this amended and restated Agreement to be executed by their duly authorized officers as of this 11 ^th day of December 2008.

POTLATCH CORPORATION

By:

Its:

U.S. BANK NATIONAL ASSOCIATION

By:

Its:

Schedule 1

The Plans

Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan

Potlatch Corporation Salaried Supplemental Benefit Plan II

Potlatch Corporation Management Performance Award Plan

Potlatch Corporation Management Performance Award Plan II

Potlatch Corporation Annual Incentive Plan

Potlatch Corporation Management Deferred Compensation Plan *

Potlatch Corporation Severance Program for Executive Employees

Potlatch Corporation Deferred Compensation Plan for Directors

Potlatch Corporation Deferred Compensation Plan for Directors II

Potlatch Salaried Severance Plan **

Supplemental Retirement Benefit and Life Insurance Agreement Between Potlatch Corporation and Richard B. Madden dated as of February 19, 1988

___________________________________


*	The contributions made to the Trust Fund by the Company with respect to Directed Investment Accounts under the Management Deferred Compensation Plan shall be held in separate sub-accounts and the provisions of Section 3 shall apply separately to such sub-accounts.


**	The contributions made to the Trust Fund by the Company with respect to the Salaried Severance Plan shall be held in a separate sub-account and the provisions of Section 3 shall apply separately to such sub-account.

Severance and/or Employment Agreements:

Akerman, Jr., Emory S.

Bacon, Susan C. (Beneficiary of John W. Bacon)

Biazzo, Thomas A.

Black, Douglas L.

Brenner, Richard J.

Bullard, Richard W.

Cheek, George C.

Clark, Kenneth L.

Covey, Michael J.

Crane, Jane E.

Davis, Brian W.

Deward, Carl

Durand, Daniel J

Hanby, Jr, John E.

Hawley Jr, Robert J.

Kosloski, Ervin D.

Madden, Richard B:

Martin, F. Lynn

McAdoo, James C.

Nordholm, Richard C.

Norha, Patrick R.

Page, Gordon R.

Palkie, Thomas G.

Powell, Sandra T.

Robison, John G.

Rosenbaum, Lester G.

Scott, Lorrie D.

Smrekar, Thomas J.

Stinnett, Brent L.

Warner, Richard V.

Schedule 2

Summary of Funding Methods and Assumptions for
Severance Contracts, Employment Agreements and
Supplement Defined Benefit Plan

Discount Rate

Discount rate will be determined using the discount rate to determine Potlatch Salaried Retirement Plan benefits for the fiscal year in which a Change of Control occurs.

Termination and Retirement

All active participants terminate two years after the valuation date, or immediately, if that produces a higher liability. Benefit payments begin at the earliest retirement date following termination.

Mortality

No mortality before retirement. Post-retirement mortality using RP-2000 mortality table.

Trust Expenses

5% of liabilities.

Schedule 3

Default Investment Fund

First American Funds – Prime Obligations Fund (Share Class Y)

Exhibit (10t)

POTLATCH CORPORATION

SALARIED SUPPLEMENTAL BENEFIT PLAN II

Effective December 5, 2008
Amended and Restated as of February 14, 2014

POTLATCH CORPORATION

SALARIED SUPPLEMENTAL BENEFIT PLAN II

Effective December 5, 2008
Amended and Restated as of February 14, 2014

SECTION 1. INTRODUCTION.

(a) The Potlatch Corporation Salaried Supplemental Benefit Plan II (the “Plan”) was established effective December 5, 2008. This amendment and restatement incorporates changes to the Plan effective February 14, 2014. The purposes of the Plan include:

(i) to supplement benefits provided under the Retirement Plan to the extent such benefits are reduced due to the limits of Section 401(a)(17) or 415 of the Code;

(ii) to provide retirement benefits that take into account deferred Incentive Plan awards;

(iii) to provide retirement benefits to certain executives calculated as if they received a standard bonus award under the Incentive Plan; and

(iv) to supplement benefits provided under the 401(k) Plan to the extent that a participant’s allocations of Company Contributions or Allocable Forfeitures are reduced due to the limits of Section 401(a)(17), 401(k)(3), 401(m) or 415 of the Code or because the participant has deferred an Incentive Plan award.

(b) This Plan is a successor plan to the Potlatch Forest Products Salaried Employees’ Supplemental Benefit Plan II (the “PFPC Plan”), with respect to those individuals identified as “Potlatch Employees” pursuant to the Employee Matters Agreement by and between Potlatch Corporation and Clearwater Paper Corporation (the “EMA”). Pursuant to the EMA, all accrued benefit liabilities under the PFPC Plan with respect to Potlatch Employees have been transferred to and assumed by this Plan.

(c) This Plan also is a successor plan to the Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan (the “Prior Plan”). Effective December 31, 2004, the Prior Plan was frozen and no new benefits are to accrue under it; provided, however, that any benefits accrued and vested under the Prior Plan before January 1, 2005 continue to be governed by the terms and conditions of the Prior Plan as in effect on December 31, 2004 or on the date of any later amendment, provided that such amendment is not a material modification of the Prior Plan under Section 409A.

(d) Any benefits that accrued under the Prior Plan with respect to Potlatch Employees before January 1, 2005 but that were unvested after December 31, 2004 and any benefits that accrued under the Prior Plan after December 31, 2004 are deemed to have accrued under this Plan and all such accruals are governed by the terms and conditions of this Plan as it may be amended from time to time.

(e) This Plan is intended to be a deferred compensation plan, for the benefit of a select group of management or highly compensated employees of the Company, and, as such, to be exempt from all of the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Company intends that the existence of a trust, if any, will not alter the characterization of the Plan as “unfunded” for purposes of ERISA, and will not be construed to provide income to the Participants under the Plan prior to actual payment of the vested accrued benefits hereunder.

(f) The Plan is intended to comply with the requirements of Section 409A. Notwithstanding any other provision of the Plan to the contrary, the Plan shall be interpreted, operated and administered in a manner consistent with such intentions. Notwithstanding any other provision of the Plan to the contrary, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan so that any payment qualifies for exemption from or complies with Section 409A; provided, however, that the Committee makes no representations that payments under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to payments under the Plan.

(g) Capitalized terms used in the Plan (other than those defined in Section 2) shall have the same meanings given to such terms in the Retirement Plan or the 401(k) Plan, as the context may require.

SECTION 2. DEFINITIONS

(a) “ Actuarial Equivalent ” shall mean “actuarial equivalent” as defined in the Retirement Plan.

(b) “ Affiliate ” means any other entity which would be treated as a single employer with Potlatch under Section 414(b) or (c) of the Code, provided that, for purposes of determining whether a Separation from Service has occurred, in applying such Sections and in accordance with the rules of Treasury Regulations Section 1.409A-1(h)(3), the language “at least 50 percent” shall be used instead of “at least 80 percent.”

(c) “ Beneficiary ” means the person or persons who become entitled to receive payment of the Plan Benefits as a result of the death of the Participant. A Participant may designate a Beneficiary under the Plan in a form provided by the Committee.

(d) “ Benefits Committee ” means the Potlatch Corporation Benefits Committee and any successor committee thereto.

(e) “ Board of Directors ” or “ Board ” shall mean the Board of Directors of the Company.

(f) “ Change in Control ” shall mean the occurrence of any of the following events:

(i) The consummation of a merger or consolidation involving the Company (a “Business Combination”), in each case, unless, following such Business Combination,

(A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity which as a result of such transaction owns the Company either directly or through one (1) or more subsidiaries),

resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock or common equity of the corporation or other entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation or other entity except to the extent that such ownership is based on the beneficial ownership, directly or indirectly, of Outstanding Common Stock or Outstanding Voting Securities immediately prior to the Business Combination, or

(iii) The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either:

(A) the then Outstanding Common Stock, or

(B) the combined voting power of the Outstanding Voting Securities,

provided, however, that the following acquisitions shall not be deemed to be covered by this paragraph:

(I) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company;

(II) any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company; and

(iv) The consummation of the sale, lease or exchange of all or substantially all of the assets of the Company.

(g) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(h) “ Committee ” shall mean the Executive Compensation and Personnel Policies Committee of the Board of Directors.

(i) “ Company ” shall mean Potlatch Corporation.

(j) “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

(k) “ 401(k) Plan ” shall mean the Potlatch Salaried 401(k) Plan.

(l) “ Identification Date ” means each December 31.

(m) “ Incentive Plan ” means the Potlatch Corporation Management Performance Award Plan, Management Performance Award Plan II, Annual Incentive Plan or any successor plan.

(n) “ Key Employee ” means a Participant who, on an Identification Date, is:

(i) An officer (a person holding the title of Vice President or higher, the Corporate Secretary, the Corporate Treasurer, the Controller, or other person designated as an officer by the Company or an Affiliate in its sole discretion) of the Company or an Affiliate having annual compensation greater than the compensation limit in Section 416(i)(1)(A)(i) of the Code, provided that no more than fifty officers of the Company and its Affiliates shall be determined to be Key Employees as of any Identification Date;

(ii) A five percent owner of the Company; or

(iii) A one percent owner of the Company having annual compensation from the Company and its Affiliates of more than $150,000.

If a Participant is identified as a Key Employee on an Identification Date, then such Participant shall be considered a Key Employee for purposes of the Plan during the period beginning on the first April 1 following the Identification Date and ending on the next March 31.

(o) “ Plan ” shall mean this Potlatch Corporation Salaried Supplemental Benefit Plan II.

(p) “ Prior Plan ” shall mean the Potlatch Corporation Salaried Employees’ Supplemental Benefit Plan.

(q) “ Retirement Plan ” shall mean the Potlatch Salaried Retirement Plan.

(r) “ Section 409A ” ” means Section 409A of the Code, including regulations and guidance promulgated thereunder.

(s) “ Separation from Service ” or “ Separates from Service ” shall mean termination of an Employee’s service as an Employee consistent with the requirements of Section 409A. For purposes of the Plan, “Separation from Service” generally means termination of an Employee’s employment as a common-law employee of the Corporation and each Affiliate.

SECTION 3. ELIGIBILITY AND PARTICIPATION.

Participation in the Plan shall be limited to:

(a) All participants in the Retirement Plan whose benefits thereunder are reduced due to the limits of Section 401(a)(17) of the Code (limiting the amount of compensation that may be taken into account under the Retirement Plan) or Section 415 of the Code (limiting the annual benefits payable under the Retirement Plan);

(b) All participants in the Retirement Plan who are credited with deferred Incentive Plan awards;

(c) All participants in the Retirement Plan who otherwise participate in the Incentive Plan, who are officers of the Company and who are required by company policy to retire no later than the Normal Retirement Date; and

(d) All participants in the 401(k) Plan whose allocations of the Company Contributions or Allocable Forfeitures are reduced because the participant has deferred an Incentive Plan award or because of the limits of one or more of the following sections of the Code:

(i) Section 401(a)(17) (limiting the amount of compensation that may be taken into account under the 401(k) Plan);

(ii) Section 401(k)(3) (limiting participants’ Deferred Contributions to the 401(k) Plan);

(iii) Section 401(m) (limiting participants’ Non-deferred Contributions and matching Company Contributions under the 401(k) Plan); or

(iv) Section 415 (limiting overall annual allocations under the 401(k) Plan).

Any Employee with whom the Company has entered into a contract that provides benefits equivalent to any of the benefits described in this Plan shall not be eligible to participate in or receive benefits under this Plan to the extent of such equivalent benefits.

SECTION 4. AMOUNT OF PLAN BENEFITS .

A Participant’s Plan Benefit shall consist of (to the extent applicable to the Participant) (i) the Retirement Plan Supplemental Benefit and (ii) the 401(k) Plan Supplemental Benefit. All Plan Benefits shall accrue as of the last day of each Plan Year or as of the date, if earlier, on which the Participant Separates from Service.

(a) Retirement Plan Supplemental Benefit . A Participant’s Retirement Plan Supplemental Benefit shall be the amount determined under Section 4(a)(i) minus the amount determined under Section 4(a)(ii).

(i) All Participants. A Participant’s Retirement Plan Supplemental Benefit shall be the difference between

(A) the actual vested benefits payable under the Retirement Plan to the Participant and his or her joint annuitant (if any) and

(B) the vested benefits that would be payable under the Retirement Plan if (i) the limitations imposed by sections 401(a)(17) and 415 of the Code did not apply, (ii) any deferred Incentive Plan award credited to the Participant had been paid to the Participant in the year it was deferred and (iii) any benefits payable under Appendix H of the Retirement Plan were not included.

In the case of any Participant who is an officer of the Company and who is required by the corporate mandatory retirement policy to retire no later than the mandatory retirement date, the Retirement Plan Supplemental Benefit also shall include the difference, if any, between the amount determined in Section 4(a)(i)(B) and the vested benefits that would be payable under the Retirement Plan if modified as in Section 4(a)(i)(B) and also

modified so that the Incentive Plan awards credited to the Participant (both deferred and not deferred) which were recognized by the Retirement Plan in the Participant’s Final Average Earnings had been 100% of the Standard Bonus (as defined in the Incentive Plan), considering for this purpose, only those years during which the Participant was an officer of the corporation and was required to retire not later than the mandatory retirement date under the corporate mandatory retirement policy; provided, however, that for individuals who retire in an Award Year beginning on or after January 1, 2007, the Standard Bonus will be used to calculate Final Average Earnings only with respect to periods prior to January 1, 2007.

(ii) Prior Plan Offsets . A Participant’s Retirement Plan Supplemental Benefit shall be reduced by the Participant’s retirement plan supplemental benefit accrued under the Prior Plan.

The Participant shall become vested in the Participant’s Retirement Plan Supplemental Benefit upon the completion of five Years of Vesting Service.

(b) 401(k) Plan Supplemental Benefit . A Participant’s 401(k) Plan Supplemental Benefit shall be the vested amount credited to a bookkeeping account established pursuant to this Section 4(b). As of the last day of each Plan Year commencing after December 31, 2004, each Participant whose allocations for such Plan Year under the 401(k) Plan are reduced as described in Section 3(d) and who has made the maximum Participating Deferred and Participating Non-deferred Contributions permitted under the 401(k) Plan for such Plan Year shall have an amount credited to such bookkeeping account. The amount so credited shall be the difference between the amount of Company Contributions and Allocable Forfeitures actually allocated to the Participant under the 401(k) Plan for such Plan Year and the amount of Company Contributions and Allocable Forfeitures that would have been allocated to the Participant under the 401(k) Plan for such Plan Year if the Participant had made Participating Contributions equal to six percent of the Participant’s Earnings (determined without regarding to Section 401(a)(17) of the Code and without regard to the deferral of any Incentive Plan award otherwise payable).

Through December 31 of the Plan Year preceding the Plan Year in which payment of the Participant’s entire 401(k) Plan Supplemental Benefit is made, the amount credited to such bookkeeping account shall be credited with earnings and losses based on the following:

(i) For periods prior to January 1, 2009, earnings shall be calculated using an interest rate equal to 70% of the higher of the following averages, compounded annually: (i) the prime rate charged by the major commercial banks as of the first business day of each month (as reported in an official publication of the Federal Reserve System) or (ii) the average monthly long-term rate of A-rated corporate bonds (as published in Moody’s Bond Record).

(ii) For periods on and after January 1, 2009 and prior to the date determined under Section 4(b)(iii), earnings shall be calculated using an interest rate equal to 120% of the long-term applicable federal rate, with quarterly compounding, as published under Section 1274(d) of the Code for the first month of each calendar quarter.

(iii) Effective as soon as practicable after January 1, 2009 as determined by the Committee, for Participant groups identified by the Committee, earnings and losses shall be calculated by reference to the rate of return on one or more of the investment alternatives that are available under the 401(k) Plan and which are designated by the Committee as available under this Plan. Each Participant may select (in ten percent (10%) increments) which investment alternative(s) will be used for this purpose with respect to his or her bookkeeping account, and the alternative(s) selected need not be

the same as the Participant has selected under the 401(k) Plan, but any such selection will apply only prospectively. The Committee shall determine how frequently such selections may be changed.

The Participant shall become vested in the Participant’s 401(k) Plan Supplemental Benefit upon the earliest of completion of two Years of Vesting Service, attainment of age 65 while an Employee, death while an Employee or Total and Permanent Disability.

SECTION 5. DISTRIBUTIONS OF PLAN BENEFITS .

Distributions of Plan Benefits shall be made after the Participant Separates from Service pursuant to the following procedures.

(a) Retirement Plan Supplemental Benefit . The Retirement Plan Supplemental Benefits shall be distributed beginning no later than 90 days following the Participant’s attainment of age 55 or Separation from Service, whichever is later (the “Beginning Date”). If the Participant’s benefit is less than or equal to $50,000 (calculated as an Actuarial Equivalent lump sum of the amount payable at Normal Retirement) on the Beginning Date, the Participant’s benefit shall be paid in a lump sum. If the Participant’s benefit is greater than $50,000 (calculated as an Actuarial Equivalent lump sum of the amount payable at Normal Retirement) on the Beginning Date, the Participant’s benefit shall be paid in the form of an annuity. The Participant may elect the form of annuity payment from the forms available under the Retirement Plan, excluding the Social Security Adjustment option, not more than 30 days after the Beginning Date. A Participant’s Retirement Plan Supplemental Benefit which is paid in the form of annuity shall be subject to the same actuarial adjustments for form of payment applicable to Retirement Plan benefits. If a Participant’s Retirement Plan Supplemental Benefit is payable before the Participant is first eligible to receive benefits under the Retirement Plan, the Retirement Plan Supplemental Benefit will be calculated to be the Actual Equivalent of the amount payable at Normal Retirement.

If the Participant fails to make an annuity election pursuant to this Section 5(a), the vested Retirement Supplemental Benefit shall be distributed in the form of Joint & Survivor 50% Annuity or Single Life Annuity if the Participant is unmarried.

(b) 401(k) Plan Supplemental Benefit . By the later of (i) January 31st of the calendar year immediately following the first calendar year in which the Participant first accrues a benefit under this Plan (or if earlier, thirty 30 days after first becoming eligible to participate in the Potlatch Corporation Management Deferred Compensation Plan), or (ii) to the extent authorized by the Committee, December 31, 2008, each Participant shall elect to receive distribution of the Participant’s vested 401(k) Plan Supplemental Benefit in ten or fewer annual installments or in a lump sum beginning in the Plan Year (but no later than March 15 ^th of such Plan Year) following the Plan Year in which the Participant Separates from Service by filing the prescribed form with the Company. This election shall be irrevocable. Distribution will be made in accordance with the Participant’s election except as provided below. The amount of any annual installment shall be determined by dividing the amount credited to the Participant’s bookkeeping account as of the last day of the Plan Year preceding the date of distribution of such installment by the total number of installments elected by the Participant less the number of installments already paid. For purposes of the Plan, installment payments shall be treated as a single distribution under Section 409A. All annual installment payments shall be payable no later than March 15 ^th of the payment year.

If the Participant fails to make an election pursuant to this Section 5(b), the vested 401(k) Plan Supplemental Benefit shall be distributed in a lump sum in the Plan Year (but no later than March 15 ^th of such Plan Year) following the Plan Year in which the Participant Separates from Service.

If a Participant dies before the Participant’s 401(k) Plan Supplemental Benefit has been completely distributed, such remaining benefit shall be distributed in a lump sum as soon as practicable thereafter to the Beneficiary. If the designated Beneficiary does not survive the Participant or dies before receiving payment in full of the Participant’s Deferred Compensation Account, payment shall be made to the estate of the last to die of the Participant or the designated Beneficiary.

Notwithstanding the foregoing, a lump sum distribution shall be made in the Committee’s (or its delegate’s) discretion to clear out a small balance held for the benefit of the Participant (or his or her Beneficiary) provided that the Committee’s (or its delegate’s) decision is evidenced in writing prior to the date of the distribution, the distribution is not greater than the applicable dollar amount under Section 402(g)(1)(B) of the Code and the payment results in the termination of all benefits due under the plan and all other “account balance plans” treated as a single nonqualified deferred compensation plan with this Plan under Treasury Regulation Section 1.409A-1(c)(2).

To the extent that no bookkeeping account has previously been established for a Participant and if the amount to be credited to the Participant’s account is less than $1,000 in a Plan year, then no 401(k) Plan Supplement Benefit bookkeeping account shall be established for the Participant in such Plan Year and the deferred amount shall be distributed to the Participant in cash not later than the end of the Plan Year following the Plan Year in which such amount was deferred.

(c) Delayed Distribution to Key Employees . Notwithstanding any other provision of this Section 5, distributions of the Retirement Plan Supplemental Benefit and the 401(k) Plan Supplemental Benefit accounts made to a Participant who is identified as a Key Employee at the time of his or her Separation from Service will be delayed for a minimum of six months if the Participant’s distribution is triggered by his or her Separation from Service. Any payment that otherwise would have been made pursuant to this Section 5 during such six-month period will be made in one lump sum payment, without adjustment for interest, not later than the last day of the second month following the month that is six months from the date the Participant Separates from Service. The determination of which Participants are Key Employees will be made by the Company in its sole discretion in accordance with this Section 5(c) and section 416(i) of the Code, including regulations and guidance promulgated thereunder (defining key employees), and Section 409A.

(d) No Acceleration of Benefits . Notwithstanding any other provision of the Plan to the contrary, no distribution shall be made from the Plan that would constitute an impermissible acceleration of payment as defined in Section 409A(a)(3).

SECTION 6. MISCELLANEOUS

(a) Forfeitures . Plan Benefits shall be forfeited under the following circumstances:

(i) If the Participant is not vested in the Retirement Plan Supplemental Benefit or 401(k) Plan Supplemental Benefit when the Participant Separates from Service; or

(ii) If the Participant is indebted to the Company or any affiliate at the time the Participant or the Participant’s joint annuitant or other Beneficiary becomes entitled to payment of a Plan Benefit. In such a case, to the extent that the amount of the Plan Benefit does not exceed such indebtedness, the amount of such Plan Benefit shall be forfeited and the Participant’s indebtedness shall be extinguished to the extent of such forfeiture.

(b) Funding . The interest under the Plan of any Participant and such Participant’s right to receive a distribution from the Plan shall be an unsecured claim against the general assets of the Company. Until distributed, Plan Benefits shall be bookkeeping entries only and no Participant shall have an interest in or claim against any specific asset of the Company pursuant to the Plan. Notwithstanding the foregoing, the Company may, in its discretion, choose to contribute to the Potlatch Corporation Benefits Protection Trust Agreement to assist with the payment of benefits under the Plan.

(c) Tax Withholding . The Company shall make or cause to be made appropriate arrangements for satisfaction of any federal or state income tax or other payroll-based withholding tax required to be paid by the Participant upon the accrual or payment of any Plan Benefits.

(d) No Employment Rights . Nothing in the Plan shall be deemed to give any individual a right to remain in the employ of the Company or any subsidiary or to limit in any way the right of the Company or a subsidiary to terminate any individual’s employment with or without case, which right is hereby reserved.


(e)	No Assignment of Rights .

(i) Except as otherwise provided in Section 6(a)(ii) with respect to a Participant’s indebtedness to the Company or an Affiliate or in Section 6(e)(ii), the interest or rights of any person in the Plan or in any distribution to be made hereunder shall not be assigned (either at law or in equity), alienated, anticipated or subject to the attachment, bankruptcy, garnishment, levy, execution or other legal or equitable process. Any act in violation of this Section 6(e)(i) shall be void.

(ii) All or any portion of a Participant’s Plan Benefit hereunder shall be subject to the creation, assignment or recognition of a right under a state domestic relations order that is determined to be a “qualified domestic relations order” (within the meaning of Section 414(p) of the Code) under the procedures established by the Company for the determination of the qualified status of domestic relations orders and for making distributions under qualified domestic relations orders.

(f) Administration . The Plan shall be administered by the Committee. The Committee (or its delegate) shall make such rules, interpretations and computations as it may deem appropriate, and any decision of the Committee (or its delegate) with respect to the Plan, including (without limitation) any determination of eligibility to participate in the Plan and any calculation of Plan Benefits, shall be conclusive and binding on all persons.


(g)	Amendment and Termination .

(i) The Company expects to continue the Plan indefinitely. Future conditions, however, cannot be foreseen, and the Committee shall have the authority to amend or to terminate the Plan at any time. Notwithstanding the foregoing, the Vice President, Human Resources, of the Company shall have the power and authority to amend the Plan provided that such amendment (i) does not materially increase the cost of the Plan to the Company or (ii) is required to comply with new or changed legal requirements applicable to the Plan, including, but not limited to, Section 409A.

(ii) In the event of an amendment of the Plan, a Participant’s Plan Benefits shall not be less than the Plan Benefits to which the Participant would be entitled if the Participant had Separated from Service immediately prior to such amendment. In addition to the foregoing, the Plan may not be amended (including any amendment to this Section 6(g))

or terminated during the three-year period following a Change in Control if such amendment or termination would alter the provisions of this Section 6(g) or adversely affect a Participant’s accrued Plan Benefits.

(iii) Except as provided in Section 6(g)(iv), in the event of termination of the Plan, the Participants’ Plan Benefits may, in the Committee’s discretion, be distributed within the period beginning 12 months after the date the Plan was terminated and ending 24 months after the date the Plan was terminated, or pursuant to Section 5, if earlier. If the Plan is terminated and the Plan Benefits are distributed, the Company, in compliance with Section 409A shall terminate all account and non-account balance non-qualified deferred compensation plans with respect to all Participants and shall not adopt a new account or non-account balance non-qualified deferred compensation plan for at least five years after the date the Plan was terminated.

(iv) The Committee may terminate the Plan upon a corporate dissolution of the Company that is taxed under section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1(A), provided that the Plan Benefits are distributed and included in the gross income of the Participants by the latest of (A) the Plan Year in which the Plan terminates or (B) the first Plan Year in which payment of the Plan Benefits is administratively practicable.

(h) Successors and Assigns . The Plan shall be binding upon the Company, its successors and assigns, and any parent corporation of the Company’s successors or assigns. Notwithstanding that the Plan may be binding upon a successor or assign by operation of law, the Company shall require any successor or assign to expressly assume and agree to be bound by the Plan in the same manner and to the same extent that the Company would be if no succession or assignment had taken place.


(i)	Claims and Review Procedure .

(i) Informal Resolution of Questions . Any Participant who has questions or concerns about his or her benefits under the Plan is encouraged to communicate with the Vice President, Human Resources, of the Company. If this discussion does not give the Participant satisfactory results, a formal claim for benefits may be made within one year of the event giving rise to the claim in accordance with the procedures of this Section 6(i). If a Participant fails to file a formal claim within the preceding limitation period, the Participant shall not be entitled to bring any legal or equitable action for benefits under the Plan.

(ii) Formal Benefits Claim – Review by Benefits Committee . A Participant may make a written request for review of any matter concerning his or her benefits under the Plan. The claim must be addressed to the Benefits Committee, Salaried Supplemental Benefit Plan II, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee shall decide the action to be taken with respect to any such request and may require additional information if necessary to process the request. The Benefits Committee shall review the request and shall issue its decision, in writing, no later than 90 days after the date the request is received, unless the circumstances require an extension of time. If such an extension is required, written notice of the extension shall be furnished to the person making the request within the initial 90-day period, and the notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the request. In no event shall the extension exceed a period of 90 days from the end of the initial period.

(iii) Notice of Denied Request . If the Benefits Committee denies a request in whole or in part, he shall provide the person making the request with written notice of the denial within the period specified in Section6(i)(ii). The notice shall set forth the specific reason for the denial, reference to the specific Plan provisions upon which the denial is based, a description of any additional material or information necessary to perfect the request, an explanation of why such information is required, and an explanation of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination to review.

(iv) Appeal to Benefits Committee .

(A) A person whose request has been denied in whole or in part (or such person’s authorized representative) may file an appeal of the decision in writing with the Benefits Committee within 60 days of receipt of the notification of denial. The appeal must be addressed to the Benefits Committee, Salaried Employees’ Supplemental Benefit Plan II, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee, for good cause shown, may extend the period during which the appeal may be filed for another 60 days. The appellant and his or her authorized representative shall be permitted to submit written comments, documents, records and other information relating to the claim for benefits. Upon request and free of charge, the applicant should be provided reasonable access to and copies of, all documents, records or other information relevant to the appellant’s claim.

(B) The Benefits Committee’s review shall take into account all comments, documents, records and other information submitted by the appellant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination. The Benefits Committee’s review shall not be restricted to those provisions of the Plan cited in the original denial of the claim.

(C) The Benefits Committee shall issue a written decision within a reasonable period of time but not later than 60 days after receipt of the appeal, unless special circumstances require an extension of time for processing, in which case the written decision shall be issued as soon as possible, but not later than 120 days after receipt of an appeal. If such an extension is required, written notice shall be furnished to the appellant with the initial 60-day period. This notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the appeal.

(D) If the decision on the appeal denies the claim in whole or in part written notice shall be furnished to the appellant. Such notice shall state the reason(s) for the denial, including references to specific Plan provisions upon which the denial was based. The notice shall state that the appellant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records and other information relevant to the claim for benefits. The notice shall describe any voluntary appeal procedures offered by the Plan and the appellant’s right to obtain the information about such procedures. The notice shall also include a statement of the appellant’s right to bring an action under section 502(a) of ERISA.

(E) The decision of the Benefits Committee on the appeal shall be final, conclusive and binding upon all persons and shall be given the maximum possible deference allowed by law.

(v) Exhaustion of Remedies . No legal or equitable action for benefits under the Plan shall be brought unless and until the claimant has submitted a written claim for benefits in accordance with Section 6(i)(ii), has been notified that the claim is denied in accordance with Section 6(i)(iii), has filed a written request for a review of the claim in accordance with Section 6(i)(iv), and has been notified in writing that the Benefits Committee has affirmed the denial of the claim in accordance with Section 6(i)(iv); provided, however, that an action for benefits may be brought after the Benefits Committee has failed to act on the claim within the time prescribed in Section 6(i)(ii) and Section 6(i)(iv), respectively.

(j) Choice of Law and Venue . The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Washington without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Washington.

ADDENDUM A

AMENDMENT AND RESTATEMENT OF THE

ADDITIONAL BENEFITS PROVIDED TO MICHAEL J. COVEY

Except as provided in this amendment and restatement to Addendum A, all of the terms and conditions of the Potlatch Corporation Salaried Supplemental Benefits Plan II, or successor plan (the “Plan”), shall apply to any benefit payable under the Plan to Michael J. Covey. Potlatch Corporation (“Potlatch”) provided to Mr. Covey a minimum pension benefit guaranteed in his Employment Agreement dated February 6, 2006, as amended (the “Agreement”), which term ends on February 6, 2009, if he retires at or after age 55. The Agreement provides that Potlatch is obligated to continue to honor the retirement benefits set forth in Section 5(b)(iv) of the Agreement described below after the term of the Agreement ends. In addition, the amendment to the Agreement provides that Mr. Covey is fully vested in his Plan benefits, but not the minimum pension benefit provided in Section 5(b)(iv) of his Agreement, as of his first day of employment, which is consistent with the vesting of benefits provided to other Potlatch executives; provided, however, in the event of a Change in Control, as defined in the Plan, he will be vested in the minimum pension benefit immediately. This amended and restated Addendum A describes the benefits that will be provided to Mr. Covey under the Plan.

Michael J. Covey shall be fully vested in the Plan, except for the “Minimum Benefit” described below, on the first day of employment with Potlatch. Furthermore, if Mr. Covey Separates from Service, as defined in the Plan, at or after age 55, he will receive a Minimum Benefit under the Plan, determined as follows:

(a) The positive amount equal to $26,800 minus the Total Monthly Pension Benefits, as defined below (the “Difference”), shall be paid to Mr. Covey as provided herein.

(i) The “Total Monthly Pension Benefits” shall be the sum of the monthly vested benefit under the Company’s Plan and qualified pension plan, as described in Section 4(a)(i)(B) of the Plan (the “Company Pension Benefits”), plus the monthly benefit under Mr. Covey’s former employer’s supplemental pension plan and qualified pension plan that would have been provided to Executive, taking into consideration his termination date with his former employer (the “Former Company Pension Benefits”); provided that the Company Pension Benefits and the Former Company Pension Benefits shall be calculated as the actuarial equivalent of a single life annuity.

(b) The payment of the Difference as a monthly single life annuity shall be converted at the Beginning Date, as defined in the Plan, into the actuarial equivalent form that Executive has validly elected to receive his Retirement Plan Supplemental Benefit under the Plan, which amount shall be paid at the same time and in the same form as his Retirement Plan Supplemental Benefit.

Notwithstanding the foregoing, if there is a Change in Control, as defined in the Plan, then Mr. Covey shall immediately vest in his Minimum Benefit and he shall receive his Minimum Benefit upon his Separation from Service without regard to attainment of age 55.

ADDENDUM B

ADDITIONAL BENEFITS PROVIDED TO BRENT STINNETT

Except as provided in this Addendum B, all of the terms and conditions of the Potlatch Corporation Salaried Supplemental Benefits Plan II (the “Plan”) shall apply to any benefit payable under the Plan to Brent Stinnett. In accordance with the foregoing, the retirement benefits guaranteed to Mr. Stinnett in his Offer Letter, dated July 18, 2006 and accepted by Mr. Stinnett on July 21, 2006 will be provided under this Addendum B to the Plan to the extent that such minimum retirement benefit are not provided by any other section of the Plan or under any other section of the Potlatch Salaried Retirement Plan or the Potlatch Salaried 401(k) Plan. The relevant section of Mr. Stinnett’s Offer Letter is reproduced below (references below to the Potlatch Forest Products Corporation Salaried Retirement Plan and Salaried Savings Plan shall be deemed to include references to the Potlatch Salaried Retirement Plan and Potlatch Salaried 401(k) Plan):

You will be considered 100% vested immediately in any benefit you accrue under the terms of the Potlatch Forest Products Corporation Salaried Retirement Plan and Potlatch Forest Products Corporation Salaried Savings Plan (“Qualified Plans”) and the Potlatch Corporation Supplemental Retirement Plan (“Non Qualified Plan”). Additionally, you will be treated as eligible for early retirement, death and disability benefits under the terms of both the Qualified and Non-Qualified Plans without meeting the Years of Service requirements that normally apply within these plans. The effect of this provision is to assure that you begin accruing non-forfeitable pension and 401(k) benefits immediately upon joining Potlatch, and that you may receive plan benefits earlier than age 65 if you should, die, become disabled or choose to retire early (“Qualifying Events”).

While considered as 100% vested under the terms of the Qualified Plans, no benefits will be payable under the Qualified Plan unless you meet the requirements contained within these plans. Rather, the Non Qualified Plan will provide and pay all benefits that accrue under the Qualified Plans, as well as, any benefits that accrue under the Non-Qualified Plan, as the case may be, upon the occurrence of a Qualifying Event.

ADDENDUM C

ADDITIONAL BENEFITS PROVIDED TO JANE CRANE

Except as provided in this Addendum C, all of the terms and conditions of the Potlatch Corporation Salaried Supplemental Benefits Plan II (the “Plan”) shall apply to any benefit payable under the Plan to Jane Crane. In accordance with the foregoing, the retirement benefits guaranteed to Ms. Crane in her Offer Letter, dated January 5, 2007 and accepted by Ms. Crane on January 8, 2007, will be provided under this Addendum C to the Plan to the extent that such minimum retirement benefits are not provided by any other section of the Plan or under any other section of the Potlatch Salaried Retirement Plan or the Potlatch Salaried 401(k) Plan. The relevant section of Ms. Crane's Offer Letter is reproduced below(references below to the Potlatch Forest Products Corporation Salaried Retirement Plan and Salaried Savings Plan shall be deemed to include references to the Potlatch Salaried Retirement Plan and Potlatch Salaried 401(k) Plan):

You will be considered 100% vested immediately in any benefit you accrue under the terms of the Potlatch Forest Products Corporation Salaried Retirement Plan and Potlatch Forest Products Corporation Salaried Savings Plan ("Qualified Plans") and the Potlatch Corporation Supplemental Retirement Plan ("Non Qualified Plan"). Additionally, you will be treated as eligible for early retirement, death and disability benefits under the terms of both the Qualified and Non-Qualified Plans without meeting the Years of Service requirements that normally apply within these plans. The effect of this provision is to assure that you begin accruing non-forfeitable pension and 401(k) benefits immediately upon joining Potlatch, and that you may receive plan benefits earlier than age 65 if you should, die, become disabled or choose to retire early ("Qualifying Events").

While considered as 100 % vested under the terms of the Qualified Plans, no benefits will be payable under the Qualified Plans unless you meet the requirements contained within these plans. Rather, the Non Qualified Plan will provide and pay all benefits that accrue under the Qualified Plans, as well as, any benefits that accrue under the Non-Qualified Plan, as the case may be, upon the occurrence of a Qualifying Event.

ADDENDUM D

ADDITIONAL BENEFITS PROVIDED TO LORRIE SCOTT

Except as provided in this Addendum D, all of the terms and conditions of the Potlatch Corporation Salaried Supplemental Benefits Plan II (the “Plan”) shall apply to any benefit payable under the Plan to Lorrie Scott. In accordance with the foregoing, the retirement benefits guaranteed to Ms. Scott in her Offer Letter, dated June 3, 2010 and accepted by Ms. Scott on June 16, 2010, will be provided under this Addendum D to the Plan to the extent that such minimum retirement benefits are not provided by any other section of the Plan or under any other section of the Potlatch Salaried Retirement Plan or the Potlatch Salaried 401(k) Plan. These retirement benefits consist of the following (references below to the defined benefit plan shall be deemed to include references to the Potlatch Salaried Retirement Plan and Potlatch Salaried 401(k) Plan):

You will be considered 100% vested immediately in any benefit you accrue under the terms of the Potlatch Corporation Salaried Retirement Plan and Potlatch Corporation Salaried 401(k) Plan ("Qualified Plans") and the Potlatch Corporation Supplemental Retirement Plan ("Non Qualified Plan"). Additionally, you will be treated as eligible for early retirement, death and disability benefits under the terms of both the Qualified and Non-Qualified Plans without meeting the Years of Service requirements that normally apply within these plans. The effect of this provision is to assure that you begin accruing non-forfeitable pension and 401(k) benefits immediately upon joining Potlatch, and that you may receive plan benefits earlier than age 65 if you should, die, become disabled or choose to retire early ("Qualifying Events").

While considered as 100 % vested under the terms of the Qualified Plans, no benefits will be payable under the Qualified Plans unless all requirements contained within these plans are met. Rather, the Non Qualified Plan will provide and pay all benefits that accrue under the Qualified Plans, as well as, any benefits that accrue under the Non-Qualified Plan, as the case may be, upon the occurrence of a Qualifying Event.

Exhibit (10wi)

POTLATCH CORPORATION

ANNUAL INCENTIVE PLAN

Amended and Restated Effective January 1, 2014

POTLATCH CORPORATION

ANNUAL INCENTIVE PLAN

Amended and Restated Effective January 1, 2014


1.	ESTABLISHMENT AND PURPOSE

(a)

The Potlatch Corporation Annual Incentive Plan (the “Plan”) was originally adopted effective January 1, 2009. This amendment and restatement is effective January 1, 2014 and is approved by the Board of Directors of the Company to provide meaningful financial rewards to those employees of the Company and its subsidiaries who are in a position to contribute to the Company’s and its subsidiaries’ achievement of significant improvements in profit performance and growth.


(b)	The Plan is intended to comply with the requirements of Section 409A, to the extent applicable.


2.	DEFINITIONS


(a)	“Actual Funded bonus Pool” has the meaning set forth in Section 6(b).


(b)	“Affiliate” means any other entity which would be treated as a single employer with the Company under Section 414(b) or (c) of the Code, provided that in applying such Sections and in accordance with the rules of Treasury Regulation Section 1.409A-1(h)(3), the language “at least 50 percent” shall be used instead of “at least 80 percent.”


(c)	“Award” means an award under the Plan.


(d)	“Award Year” means a Year with respect to which Awards are made.


(e)	“Beneficiary” means the person or persons who become entitled to receive payment as a result of the death of a Participant. The Participant may designate a beneficiary under the Plan in a form provided by the Committee.


(f)	“Board of Directors” or “Board” means the Board of Directors of the Company.

(g)

“Cause” means dishonesty, fraud, serious or willful misconduct, conduct prohibited by law (except minor violations), or the Eligible Employee’s material breach of any of his or her obligations regarding noncompetition, nonsolicitation or the protection of confidential or proprietary information and trade secrets, as those obligations are set forth in any written agreement executed between the Employee and the Company, in each case as determined by the CEO or, for participating Officers and individuals who are subject to Section 16 of the Exchange Act, by the Committee.


(h)	“CEO” means the Chief Executive Officer of the Company.


(i)	“Change in Control” means the occurrence of any of the following events:


(i)	The consummation of a merger or consolidation involving the Company (a “Business Combination”), in each case, unless, following such Business Combination,

(A)

all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the then outstanding shares of common stock of the Company (the “Outstanding Common Stock”) and the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation or other entity resulting from such Business Combination (including, without limitation, a corporation or other entity which as a result of such transaction owns the Company either directly or through one (1) or more subsidiaries),

(B)

no individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) (excluding any corporation or other entity resulting from such Business Combination or any employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiaries or such other corporation or other entity resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then outstanding shares of common stock or common equity of the corporation or other entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation or other entity except to the extent that such ownership is based on the beneficial ownership, directly or indirectly, of Outstanding Common Stock or Outstanding Voting Securities immediately prior to the Business Combination, or


(C)	at least a majority of the members of the board of directors or similar governing body of the corporation or other entity resulting from such Business Combination were members of the Board at the time of the execution of the initial agreement providing for, or of the action of the Board to approve, such Business Combination; or

(ii)

Individuals who, as of May 6, 2013 constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director of the Company subsequent to May 6, 2013 whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors of the Company then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors of the Company, an actual or threatened solicitation of proxies or consents or any other actual or threatened action by, or on behalf of any Person other than the Board; or


(iii)	The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of either:


(A)	the then Outstanding Common Stock, or

(B) the combined voting power of the Outstanding Voting Securities,

provided, however, that the following acquisitions shall not be deemed to be covered by this paragraph:


(1)	any acquisition of Outstanding Common Stock or Outstanding Voting Securities by the Company;


(2)	any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any employee benefit plan (or related trust) sponsored or maintained by the Company; and


(3)	any acquisition of Outstanding Common Stock or Outstanding Voting Securities by any corporation pursuant to a transaction that complies with clauses (A), (B) and (C) of paragraph (i) of this definition; or

(iv) The consummation of the sale, lease or exchange of all or substantially all of the assets of the Company.


(j)	“Code” means the Internal Revenue Code of 1986, as amended.


(k)	“Committee” means the committee which shall administer the Plan in accordance with Section 3.


(l)	“Company” means Potlatch Corporation, a Delaware corporation.

(m)

“Corporate Performance Modifier” means a modifier percentage amount based on the Company’s performance during the Award Year against an increase in funds from operations equal to net income plus non-cash charges for depletion, depreciation and amortization and the cost basis in real property sold (“FFO”). The Committee shall determine the FFO target, in writing, at the beginning of the Award Year based on the Company’s internal financial plan and forecasts and a review of industry and stockholder expectations. Performance against the FFO target shall determine the Corporate Performance Modifier as follows:



Performance	Corporate Performance Modifier
Superior	200%
Target	100%
Threshold	25%
Below Threshold	0%

For performance that is intermediate between Threshold Performance and Target Performance, or intermediate between Target Performance and Superior Performance, the Corporate Performance Modifier shall be interpolated consistent with the foregoing percentages.

“Superior Performance” shall be defined as FFO equal to 126% or higher of the FFO target, “Target Performance” shall be defined as FFO equal to 100% of the FFO target, “Threshold Performance” shall be defined as FFO equal to 80% of the FFO target, and “Below Threshold Performance” shall be defined as FFO below 80% of the FFO target.


(n)	“Covered Employee” means an Employee who is a “covered employee” within the meaning of Section 162(m) of the Code for an Award Year.

(o)

“Disability” means an Employee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, in each case as determined by the Vice President, Human Resources, of the Company or, for any such participating Officer or individual who is subject to Section 16 of the Exchange Act, the Committee, whose determination shall be conclusive and binding.


(p)	“Employee” means a full-time salaried employee (including any Officer) of the Company or any of its subsidiaries.


(q)	“Exchange Act” means the Securities Exchange Act of 1934, as amended.


(r)	“Guidelines” means the Potlatch Corporation Officer Stock Ownership Guidelines.


(s)	“Officer” means any Employee who is an elected officer of the Company or any of its subsidiaries and who is the chief manager of an Organization Unit.


(t)	“Organization Unit” means a major organizational component or profit center of the Company or any of its subsidiaries as determined under Section 4.


(u)	“Participant” means any Officer and any Employee actively employed by the Company or any of its subsidiaries during an Award Year in an Organization Unit in a position designated as a participating position under Section 4.


(v)	“Plan” means the Potlatch Corporation Annual Incentive Plan, originally adopted effective January 1, 2009 and most recently amended and restated effective January 1, 2014.


(w)	“Section 409A” means Section 409A of the Code, including regulations and guidance promulgated thereunder.


(x)	“Section 409A Change in Control” has the meaning set forth in Section 17.


(y)	“Separates from Service” means termination of a Participant’s service as an Employee consistent with the requirements of Section 409A. For purposes of the Plan, “Separation from Service” generally means termination of a Participant’s employment as a common-law Employee of the Company and each Affiliate.


(z)	“Special Awards Fund” has the meaning set forth in Section 10(a).


(aa)	“Target Bonus” has the meaning set forth in Section 6(a).


(bb)	“Target Bonus Pool” has the meaning set forth in Section 6(a).


(cc)	“Year” means the calendar year.


3.	ADMINISTRATION OF THE PLAN

(a)

The Plan shall be administered by the Executive Compensation and Personnel Policies Committee of the Board of Directors, or such other committee as may be designated and appointed by the Board of Directors, which shall consist of at least three (3) members of the Board of Directors. No member of the Committee shall be eligible to participate and receive Awards under the Plan while serving as a member of the Committee.

(b)

In addition to the powers and duties otherwise set forth in the Plan, the Committee shall have full power and authority to administer and interpret the Plan, to establish procedures for administering the Plan, to adopt and periodically review such rules consistent with the terms of the Plan as the Committee deems necessary or advisable in order to properly carry out the provisions of the Plan, and to take any and all necessary action in connection therewith. The Committee’s interpretation and construction of the Plan and its determination of eligibility for and the amount of any Award hereunder shall be conclusive and binding on all persons.


4.	ELIGIBILITY AND PARTICIPATION

Covered Employees, Officers and individuals who are subject to the Section 16 of the Exchange Act shall not participate in the Plan, except to the extent determined by the Committee for an Award Year. The CEO or, for eligible Officers and any eligible individual who is subject to Section 16 of the Exchange Act, the Committee shall designate the Organization Units and the CEO shall designate such other Employees who will participate in the Plan for an Award Year. A Participant who becomes subject to a Disability or dies during an Award Year shall be considered a Participant for the period during the Award Year the Participant was actively at work. A Participant who (a) is granted an authorized leave of absence during an Award Year shall be considered a Participant for the period of authorized leave of absence not exceeding six (6) months, or (b) retires during an Award Year shall be considered a Participant for the period during the Award Year the Participant was actively at work.


5.	AWARDS

Awards shall be determined in accordance with Sections 6, 7 and 8 and announced to Participants by March 1 following the close of the Award Year and, unless deferred in accordance with the terms of the Potlatch Corporation Management Deferred Compensation Plan, shall be paid no later than March 15 following the close of the Award Year.


6.	DETERMINING THE ACTUAL FUNDED BONUS POOL

The total amount of Awards made to all Participants with respect to any Award Year shall be determined pursuant to this Section 6.

(a)

The Target Bonus Pool for an Award Year shall be the sum of the Target Bonuses for all Participants for the Award Year. A Participant’s “Target Bonus” shall be an amount equal to a percentage of the Participant’s base salary, based on the position to which the Participant is assigned, as determined by the CEO or, for participating Officers and individuals who are subject to Section 16 of the Exchange Act, by the Committee. If a Participant does not qualify as a Participant for the entire period of an Award Year, the Target Bonus will be prorated to reflect the portion of the Award Year that the Employee was a Participant. If a Participant is in more than one bonus-eligible salary grade during an Award Year, the total Target Bonus in that Award Year will be the sum of the Target Bonuses applicable to each position in each Organization Unit.


(b)	The “Actual Funded Bonus Pool” for each Award Year shall equal the product of the Target Bonus Pool for an Award Year and the Corporate Performance Modifier. The Actual Funded Bonus Pool shall be represented by a bookkeeping entry only and no Employee shall have any vested right therein.


7.	ALLOCATING THE ACTUAL FUNDED BONUS POOL AMONG ORGANIZATION UNITS

The Actual Funded Bonus Pool for each Award Year shall be allocated among the Organization Units. In the case of the Organization Unit that includes corporate management Employees (including the CEO), this allocation shall equal one hundred percent (100%) of the Target Bonus Pool that was attributable to the Employees in that Organization Unit. In the case of Organization Units that include operating division Employees, this allocation shall be based on what portion of the Target Bonus Pool was attributable to the employees in each Organization Unit (twenty-five percent (25%) weight), and on the extent to which the division met its earnings before interest, taxes, depreciation, depletion and amortization (also known as “EBITDDA”) target determined by the CEO and the Committee, as applicable (seventy-five percent (75%) weight). The resulting allocations may be adjusted up or down at the discretion of the CEO or the Committee, as applicable.


8.	DETERMINING INDIVIDUAL AWARDS

Each Officer shall determine the amount of the Award to each Participant who is assigned to such Officer’s Organization Unit by allocating such Organization Unit’s portion of the Actual Funded Bonus Pool among the Participants employed in such Organization Unit in proportion to the product of the Participant’s Target Bonus and the Participant’s individual performance modifier. Each Participant’s Award shall be subject to review by and approval of the CEO or, for participating Officers and individuals who are subject to Section 16 of the Exchange Act, the Committee, with the discretion to decrease the individual performance modifier to zero or increase the individual performance modifier up to 200% when approving such Participant’s actual Award.


9.	FORM AND TIME OF PAYMENT OF AWARDS

(a)

All Awards under the Plan shall be paid in cash to all Participants other than those subject to the Guidelines. For a Participant subject to the Guidelines, the Award shall be paid in a combination of 50% cash and 50% common stock of the Company if the Participant has not incrementally reached the required ownership level at the end of each of his or her first five years under the Guidelines or has not maintained 100% of the applicable guideline amount in subsequent years. The number of shares of common stock shall be determined by dividing the dollar value of the portion of the Award allocated as stock by the closing price of the Company’s common stock on the date of the Committee meeting at which the Award payments are approved. Award amounts shall be prorated for the portion of the Award Year the Employee was an eligible Participant. A Participant whose employment is terminated before the payment of an Award for any reason other than death, Disability or early, normal or deferred retirement under the Potlatch Salaried Retirement Plan shall not be entitled to payment of an Award.


(b)	Upon the death of a Participant, any payment then due to the Participant shall be paid to the Beneficiary in full in cash no later than March 15 following the close of the Award Year. If no designated Beneficiary survives the Participant or the Beneficiary dies before receiving payment, payment shall be made to the estate of the last to die of the Participant or the designated Beneficiary.

(c)

Notwithstanding any other provision of the Plan to the contrary and to the maximum extent allowed by law, Awards paid under the Plan shall be subject to (i) the requirements of the Potlatch Corporation Incentive Compensation Recovery Policy as it may be amended from time to time, and (ii) any other compensation recovery policies as may be adopted from time to time by the Company to comply with applicable law and/or stock exchange requirements, or otherwise, to the extent determined by the CEO or, for participating

Officers and individuals who are subject to Section 16 of the Exchange Act, by the Committee to be applicable to a Participant.


10.	SPECIAL AWARDS FUND

(a)

A “Special Awards Fund” shall be established with respect to each Award Year in an amount determined by the Committee but not to exceed ten percent (10%) of the Target Bonus Pool for such Award Year. The Special Awards Fund shall be represented by a bookkeeping entry only and no Employee of the Company shall have any vested right therein. The Special Awards Fund shall be in addition to the Actual Funded Bonus Pool.


(b)	Awards may be made in a total amount equal to the Special Awards Fund to those Employees of the Company who are not Participants with respect to such Award Year but who in the judgment of an Officer have made outstanding contributions to the success of the Company.

(c)

After the close of the Award Year, recipients of Awards under the Special Awards Fund shall be selected by the CEO upon the recommendation of an Officer. The amount of each individual’s Award under the Special Awards Fund shall be determined by the CEO upon the recommendation of an Officer and shall fall within a range set forth in rules adopted by the Committee, expressed as minimum and maximum percentages of annualized salary at the end of the year. Awards under the Special Awards Fund shall be announced by March 1 following the close of the Award Year.


(d)	Awards under the Special Awards Fund shall be paid in full in cash no later than March 15 following the close of the Award Year.


11.	NO ASSIGNMENT OF INTEREST

The interest of any person in the Plan or in payments to be received pursuant to it shall not be subject to option or assignable either by voluntary or involuntary assignment or by operation of law, and any act in violation of this Section 11 shall be void.


12.	EMPLOYMENT RIGHTS

The selection of an Employee as a Participant shall not confer any right on such Employee to receive an Award under the Plan or to continue in the employ of the Company or limit in any way the right of the Company to terminate such Participant’s employment at any time.


13.	AMENDMENT OR TERMINATION OF THE PLAN

The Board of Directors may amend, suspend or terminate the Plan at any time; provided, however, that any amendment adopted or effective on or after July 1 in any Award Year which would adversely affect the calculation of a Participant’s Award or the Participant’s eligibility for an Award for such Award Year shall be applied prospectively from the date the amendment was adopted or effective, whichever is later. The foregoing notwithstanding, no amendment adopted or termination of the Plan following the occurrence of a Change in Control shall be effective if it (a) would reduce a Participant’s Target Bonus for the Award Year in which the Change in Control occurs, (b) would reduce an Award earned and payable to a Participant in respect of the Award Year that ended immediately before the Award Year in which the Change in Control occurs, or (c) would modify the provisions of this sentence.

Notwithstanding the foregoing, the Vice President, Human Resources, of the Company shall have the power and authority to amend the Plan with respect to any amendment that (i) does not

materially increase the cost of the Plan to the Company or (ii) is required to comply with new or changed legal requirements applicable to the Plan, including, but not limited to, Section 409A.


14.	SUCCESSORS AND ASSIGNS

The Plan shall be binding upon the Company, its successors and assigns, and any parent corporation of the Company’s successors or assigns. Notwithstanding that the Plan may be binding upon a successor or assign by operation of law, the Company shall require any successor or assign to expressly assume and agree to be bound by the Plan in the same manner and to the same extent that the Company would be if no succession or assignment had taken place.


15.	CHANGE OF CONTROL

Notwithstanding any other provision of the Plan to the contrary, this Section 15 shall apply with respect to the determination of Awards and the payment of Awards following a Change in Control. In the event that the employment of a Participant terminates following a Change in Control, such Participant shall be guaranteed payment of a prorated Award for the Award Year in which the Change in Control occurs, determined in accordance with Section 8 based on the Participant’s Target Bonus. A prorated Target Bonus shall be calculated by multiplying the Participant’s Target Bonus for the applicable Award Year by a fraction, the numerator of which is the number of full months in the Award Year completed at the effective time of the Change in Control, and the denominator of which is twelve (12). With respect to any Award earned but not yet paid in respect of the Award Year that ended immediately before the Award Year in which occurs a Change in Control that also is a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company as defined under Section 409A (a “Section 409A Change in Control”), each Participant shall be guaranteed payment of his or her Award determined in accordance with Section 8 based on the performance results for the applicable Award Year. Awards paid pursuant to this Section 15 shall be paid in a lump sum in cash upon the earliest of (a) the time prescribed in Sections 5 and 9, and (b) the date the Participant Separates from Service for any reason other than Cause following the Section 409A Change in Control. A Participant who Separates from Service due to Cause shall not be entitled to payment of any Award.


16.	CHOICE OF LAW AND VENUE

The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Washington without giving effect to principles of conflicts of law. Employees irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Washington.


17.	SECTION 409A

The Plan and payments hereunder are intended to be exempt from the requirements of Section 409A to the maximum extent possible, whether pursuant to the short-term deferral exception described in Treasury Regulation Section 1.409A-1(b)(4) or otherwise. To the extent Section 409A is applicable to the Plan or any payments under the Plan, it is intended that the Plan and such payments comply with the deferral, payout and other limitations and restrictions imposed under Section 409A. Notwithstanding any other provision of the Plan to the contrary, the Plan shall be interpreted, operated and administered in a manner consistent with such intentions. If a Participant is a “specified employee,” within the meaning of Section 409A, then to the extent necessary to avoid subjecting the Participant to the imposition of any additional tax under Section 409A, amounts that would otherwise be payable under the Plan during the six (6)-month period immediately following the Participant’s “separation from service,” within the meaning of Section

409A(a)(2)(A)(i) of the Code, shall not be paid to the Participant during such period, but shall instead be accumulated and paid to the Participant (or, in the event of the Participant’s death, the Beneficiary) in a lump sum on the first business day after the earlier of the date that is six (6) months following the Participant’s separation from service or the Participant’s death. Notwithstanding any other provision of the Plan to the contrary, the Committee, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan so that any payment qualifies for exemption from or complies with Section 409A; provided, however, that the Committee makes no representations that payments under the Plan shall be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to payments under the Plan.

Exhibit (10x)

POTLATCH CORPORATION

MANAGEMENT DEFERRED COMPENSATION PLAN

Effective June 1, 2008
Amended and Restated as of February 14, 2014

POTLATCH CORPORATION

MANAGEMENT DEFERRED COMPENSATION PLAN

Effective June 1, 2008
Amended and Restated as of February 14, 2014

1. ESTABLISHMENT AND PURPOSE

(a) The Potlatch Corporation Management Deferred Compensation Plan was adopted on May 16, 2008, by the Board of Directors of Potlatch Corporation to provide an opportunity for senior management who have made the maximum elective contributions permitted under the 401(k) Plan to elect to defer additional compensation and to invest and accumulate such compensation on a tax-deferred basis. The Plan was most recently restated effective May 1, 2009. This amendment and restatement incorporates additional changes to the Plan effective February 14, 2014.

(b) This Plan is also intended to provide for deferral of awards under the MPAP II for the 2008 performance period and under the AIP beginning with the 2009 performance period.

(c) Effective as of October 1, 2008, this Plan also provides for the administration of deferrals previously made under the MPAP II. For avoidance of doubt, deferrals made under the Potlatch Corporation Management Performance Award Plan, which are not subject to Section 409A, continue to be subject to the rules of that plan and the administrative rules and regulations applicable thereto.

(d) The provisions of this Plan for elections to defer base salary are effective for base salary earned on or after January 1, 2009.

(e) The Plan is intended to constitute a deferred compensation plan, for the benefit of a select group of management or highly compensated employees of the Company, and, as such, to be exempt from all of the provisions of Parts 2, 3, and 4 of Title I of ERISA. The Company intends that the existence of a trust, if any, will not alter the characterization of the Plan as “unfunded” for purposes of ERISA, and will not be construed to provide income to the Participants under the Plan prior to actual payment of the vested accrued benefits hereunder.

2. DEFINITIONS

(a) “Affiliate” means any other entity which would be treated as a single employer with the Company under Section 414(b) or (c) of the Code, provided that in applying such Sections and in accordance with the rules of Treasury Regulations Section 1.409A-1(h)(3), the language “at least 50 percent” shall be used instead of “at least 80 percent.”

(b) “AIP” means the Potlatch Corporation Annual Incentive Plan and any successor plan thereto.

(c) “Beneficiary” means the person or persons who become entitled to receive payment of the Participant’s Deferred Compensation Account as a result of the death of the Participant. A Participant may designate a beneficiary under the Plan in a form provided by the Committee.

(d) “Benefits Committee” means the Potlatch Corporation Benefits Committee and any successor committee thereto.

(e) “Board” and “Board of Directors” means the board of directors of the Company.

(f) “Code” means the Internal Revenue Code of 1986, as amended.

(g) “Committee” means the Executive Compensation and Personnel Policies Committee of the Board.

(h) “Company” means Potlatch Corporation, a Delaware corporation.

(i) “Compensation” means the amount of compensation due by the Company to an Employee for his or her services as an Employee as either (i) annual base salary or (ii) an award under the MPAP II or AIP.

(j) “Deferred Compensation Account” means the bookkeeping account established pursuant to Section 6 on behalf of each Employee who elects to participate in the Plan. Within a Participant’s Deferred Compensation Account, a Directed Investment Account, Stock Unit Account, Holding Account, and appropriate sub-accounts shall be maintained as are necessary for the proper administration of a Participant’s Deferred Compensation Account. An Employee who has made a deferral under the MPAP II shall be deemed to have elected to participate in this Plan.

(k) “Disabled” means an Employee’s inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.

(l) “Dividend Equivalent” means an amount equal to the cash distribution paid on an outstanding share of the Company’s common stock. Dividend Equivalents shall be credited with respect to Stock Units as if each Stock Unit were an outstanding share of the Company’s common stock, except that Dividend Equivalents shall also be credited with respect to fractional Stock Units.

(m) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

(n) “Employee” means a full-time salaried employee of the Company or any subsidiary thereof.

(o) “401(k) Plan” means the Potlatch Salaried 401(k) Plan, as amended.

(p) “Holding Account” means the bookkeeping account established pursuant to Section 6 on behalf of an Employee who elects to have Compensation deferred under the Plan deemed to be invested in Stock Units. Such deferrals shall be temporarily credited to the Holding Account until the date they are converted to Stock Units.

(q) “MPAP II” means the Potlatch Corporation Management Performance Award Plan II, as amended.

(r) “Participant” means an Employee who has deferred Compensation credited to a Deferred Compensation Account under the Plan.

(s) “Performance-Based Compensation” means compensation the amount of which, or the entitlement to which, is contingent on the satisfaction of preestablished organizational or individual performance criteria relating to a performance period of at least twelve (12) consecutive months. Organizational or individual performance criteria are considered preestablished if established in writing by not later than ninety (90) days after the commencement of the period of service to which the criteria relates, provided that the outcome is substantially uncertain at the time the criteria are established. Performance-Based Compensation does not include any amount or portion of any amount that will be paid either regardless of performance, or based upon a level of performance that is substantially certain to be met at the time the criteria is established. Compensation may be Performance-Based Compensation where the amount will be paid regardless of satisfaction of the performance criteria due to the Employee’s death, disability, or a Change in Control Event (as defined in Treasury Regulation Section 1.409A-3(i)(5)), provided that a payment made under such circumstances without regard to the satisfaction of the performance criteria will not constitute performance-based compensation. For this purpose, a disability refers to any medically determinable physical or mental impairment resulting in the Employee’s inability to perform the duties of his or her position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months. Performance-Based Compensation may include payments based upon subjective performance criteria, provided that: (i) the subjective performance criteria are bona fide and relate to the performance of the Employee, a group of service providers that includes the Employee, or a business unit for which the Employee provides services (which may include the entire organization); and (ii) the determination that any subjective performance criteria have been met is not made by the Employee or a family member of the Employee (as defined in Code Section 267(c)(4) applied as if the family of an individual includes the spouse of any member of the family), or a person under the effective control of the Employee or such a family member, and no amount of the compensation of the person making such determination is effectively controlled in whole or in part by the Employee or such a family member.

(t) “Plan” means the Potlatch Corporation Management Deferred Compensation Plan.

(u) “Plan Year” means the 12-month period beginning January 1 and ending December 31.

(v) “Section 409A” means Section 409A of the Code, including regulations and guidance promulgated thereunder.

(w) “Separation from Service” means termination of an Employee’s service as an Employee consistent with the requirements of Section 409A . For purposes of the Plan, “Separation from Service” generally means termination of an Employee’s employment as a common-law employee of the Company and each Affiliate.

(x) “Stock Units” means the deferred portion of Compensation which is converted into a unit denominated in shares of the Company’s common stock.

(y) “Value” means the closing price of the Company’s common stock as reported in the New York Stock Exchange, Inc., composite transactions reports for the relevant date.

(z) “Variable Fractions Method” is a distribution method for amounts payable in installments. The amount of the first installment is determined by dividing the Participant’s account balance by the total number of installments due. Each subsequent annual installment is equal to the Participant’s account balance as adjusted for earnings or losses since the last distribution date divided by a denominator equal to the total number of installments due minus the number of installments previously paid.

(aa) “Year” shall mean the calendar year.

3. ELIGIBILITY TO MAKE DEFERRALS

(a) Each Employee who is in a position that is eligible for awards under the Potlatch Corporation 2014 Long-Term Incentive Plan (an “Eligible Employee”) shall be eligible to elect to defer base salary under the Plan.

(b) Each Eligible Employee who is eligible to receive an award under the AIP (other than an award under an AIP Special Awards Fund) shall be eligible to defer such award under the Plan; provided that an Employee who is required to defer his or her award shall automatically become a Participant in this Plan.

4. PARTICIPATION

(a) Each Employee who is eligible to participate in the Plan pursuant to Section 3 above shall, prior to the beginning of each Year and in accordance with the applicable deadline established by the Committee, have the option to make an irrevocable election to defer a percentage of his or her Compensation earned during the following Year before the beginning of each such Year. Compensation paid after December 31 of a Plan Year for services performed by the Employee during the final payroll period of the calendar year and which payroll period includes the last day of such calendar year shall be treated as earned for services performed in the year paid.

(b) Notwithstanding the foregoing, an Employee may make an irrevocable election to participate during a Year with respect to Compensation earned during that Year and subsequent to the filing of such election, provided such election is made within thirty (30) days of the Employee’s initial eligibility to participate in this Plan and any other nonqualified deferred compensation plans treated as a single plan with this Plan under Section 409A. Any such initial election shall apply only to Compensation earned for services performed after the date of the election. If compensation is due for services performed over a period of time which includes the period both before and the period after the date of the election, the election will apply to an amount equal to the total amount of the compensation paid for such performance period multiplied by the ratio of the number of days remaining in the performance period after the election over the total number of days in the performance period.

(c) Notwithstanding the preceding rules, a deferral election for an award of Compensation under the AIP, which constitutes Performance-Based Compensation, may be made no later than six (6) months before the end of such performance period. This special election rule is available only if (i) the Employee performs services for the Company or its Affiliate continuously from the later of the beginning of the performance period or the date the performance criteria are established through the date an election is made with respect to such payment, (ii) the election is made before the amount of the Performance-Based Compensation to be received becomes reasonably ascertainable or, if the Performance-Based Compensation is a specified or calculable amount, when the amount is substantially certain to be paid, and (iii) the performance period is at least twelve (12) months in duration.

(d) The Committee may also adopt such additional or alternative election rules provided that such rules comply with the rules of Section 409A.

5. DEFERRAL ELECTIONS

(a) An Employee who elects to participate in the Plan with respect to annual base salary or an award under the AIP for a Year shall file a deferral election with respect to each type of Compensation on such form as the Committee shall prescribe, which shall indicate:

(i) The amount or percentage of each type of Compensation that such Employee elects to defer pursuant to the terms of the Plan. The percentage must be in increments of ten percent (10%) and may not exceed fifty percent (50%) in the case of annual base salary. An election to voluntarily

defer an award under the AIP must be in increments of ten percent (10%) and shall be for not less than fifty percent (50%) of such award. Notwithstanding the foregoing, an election to defer Compensation may not reduce the Employee’s remaining compensation below the amount necessary to satisfy applicable employment tax withholding, income tax withholding, and benefit plan withholding. This election shall be irrevocable with respect to each type of Compensation for that Year to which it applies after the applicable deadline for making such election as provided in Section 4 for that Year.

(ii) The percentage of the Compensation deferred pursuant to the election that is to be converted into Stock Units or deemed invested in any other investment account available under Section 7.

(b) An Employee who elects to participate in the Plan shall have only one form of payment election in effect for all amounts deferred under the Plan. Subject to Section 5(c), at the time of an Employee’s initial election to defer base salary or an award under the AIP, the Employee shall file an election and shall indicate whether the deferred Compensation shall be paid in a lump sum or paid in annual installments over a period of fifteen (15) or fewer years. For purposes of the Plan, installment payments shall be treated as a single distribution for purposes of Section 409A. Deferred Compensation shall be distributed in a single lump sum payment unless the Employee elects otherwise.

(c) An Employee’s election as to the time and form of payment of deferred Compensation shall be irrevocable and binding on all deferred Compensation under the Plan. For avoidance of doubt it is intended that a Participant shall have only one method of payment in effect.

(d) For purposes of determining the payment election in effect for a Participant with existing deferrals under this Plan prior to May 1, 2009 or under the MPAP II, the payment election in effect as of April 30, 2009 shall remain in effect for all existing and future deferrals under the Plan.

6. ESTABLISHMENT OF DEFERRED ACCOUNTS

(a) For each Employee who has deferred compensation under the AIP or who has elected to defer base salary, the Company shall establish a Deferred Compensation Account to which shall be credited an amount equal to that portion of the Compensation which would have been payable currently to the Employee but for the terms of the deferral election.

(b) Any amount of base salary or AIP award that is deferred under this Plan and with respect to which the Employee has elected to allocate to Stock Units shall be accumulated in the Holding Account. The balance of the Holding Account shall be converted into full and fractional Stock Units and transferred to a Stock Unit Account on a quarterly basis as of the last trading day of each calendar quarter by dividing the balance of the Holding Account by the Value of the Company’s common stock on such crediting date.

7. TREATMENT OF DEFERRED COMPENSATION ACCOUNT AND STOCK UNITS DURING DEFERRAL PERIOD

(a) Directed Investment Account . The balance of each Participant’s Directed Investment Account shall be adjusted, for earnings and losses commencing with the date as of which any amount is credited to the Directed Investment Account. Such earnings or losses during the deferral period for amounts credited to a Participant’s Directed Investment Account shall be computed by reference to the rate of return on one or more of the investment alternatives that are available under the 401(k) Plan and which are designated by the Committee as available under this Plan, which shall include a stable value fixed income fund (the “Stable Value Fund”). Each participating Employee may select (in ten percent

(10%) increments) which investment alternative(s) will be used for this purpose with respect to his or her deferred Compensation, and the alternative(s) selected need not be the same as the Employee has selected under the 401(k) Plan, but any such selection will apply only prospectively. The Committee shall determine how frequently such selections may be changed.

(b) Stock Unit Account . Amounts deemed invested in the Stock Unit Account may not be transferred to any other investment and must remain in the Stock Unit Account until distributed to the Participant. On each dividend payment date, Dividend Equivalents shall be credited to each full and fractional Stock Unit to the extent such Stock Unit was in the Participant’s Stock Unit Account on the dividend record date immediately preceding the applicable dividend payment date. As of the dividend payment date, the value of such Dividend Equivalents shall be credited to the Participant’s Directed Investment Account and initially shall be deemed invested in the Stable Value Fund described in Section 7(a), subject to the Participant’s ability to subsequently change such investment in accordance with Section 7(a).

(c) Holding Account . The Holding Account shall be available only for the temporary holding of amounts pending conversion into Stock Units in accordance with Section 6, and during such temporary holding period shall be deemed invested in the Stable Value Fund. Participants shall not be permitted to select the Holding Account as a deemed investment for their deferrals.

(d) Effect of Certain Transactions . In the event that there occurs a dividend or other distribution of shares of the Company’s common stock (“Shares”), a dividend in the form of cash or other property that materially affects the fair market value of the Shares, a stock split, a reverse stock split, a split-up, a split-off, a spin-off, a combination or subdivision of Shares or other securities of the Company, an exchange of Shares for other securities of the Company, or a similar transaction or event that materially affects the fair market value of the Shares, the Committee, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Plan, shall make appropriate adjustments in the number of each Participant’s Stock Units determined as of the date of such occurrence.

8. FORM AND TIME OF PAYMENT OF DEFERRED COMPENSATION ACCOUNT

Subject to Section 8(b), payment of a Participant’s Deferred Compensation Account shall commence on, or within the thirty (30)-day period that begins on, the March 15 ^th of the year following the year in which Separation from Service occurs. A Participant may request an earlier distribution of an amount credited to his or her Deferred Compensation Account upon the occurrence of an unforeseeable emergency within the meaning of Section 409A as determined by the Committee, but only to the extent necessary to alleviate the emergency. Payment of a Participant’s Stock Units shall also be made at such time except that, within the six-month period beginning on the last date on which Compensation has been converted into Stock Units on behalf of the Participant, to the extent that the Committee reasonably determines that earlier payment would result in a violation of Federal securities laws, payment of the Participant’s Stock Units shall be made on, or within the 30-day period that begins on, the last day of the month in which such six-month period expires. Notwithstanding the previous sentence, Stock Unit payments shall be made following the Participant’s death, Disability or the date of the Participant’s Separation from Service, without regard to whether such six-month period has expired. For the purpose of payment, Stock Units shall be converted to cash based on the Value of the Company’s common stock on the last trading day of the month preceding the month during which the distribution is due to be made. In no event shall distributions be paid in shares of the Company’s stock.

The amount of each installment payment due for a Deferred Compensation Account shall be determined by application of the Variable Fractions Method. Each annual installment for Years subsequent to the Year in which payment commences shall be made on, or within the thirty (30)-day period that begins on, March 15 ^th .

In the case of a Participant who has both Stock Units and other deemed investment accounts available under Section 7, if a partial distribution of a deferred portion of Compensation is to be made and if the Participant’s Stock Units are immediately payable in accordance with the first paragraph of this Section, payment shall be made partially from the Participant’s Stock Units and partially from such other deemed investment accounts, in proportion to the relative value of the Participant’s Stock Units and such other accounts. If the Participant’s Stock Units are not immediately payable in accordance with the previous paragraph, the partial payment shall be made entirely from such other deemed investment accounts, in proportion to the relative value of such accounts.

Notwithstanding any other provision of the Plan to the contrary:

(a) No distribution shall be made from the Plan that would constitute an impermissible acceleration of payment as defined in Section 409A(a)(3); and

(b) A distribution made to a Participant who is identified as a Key Employee at the time of his or her Separation from Service will be delayed for a minimum of six (6) months if the Participant’s distribution is triggered by his or her Separation from Service. Any payment that otherwise would have been made except for the application of this Section 8(b) during such six (6)-month period will be made in one (1) lump sum payment no later than the last day of the second month following the month that is six (6) months from the date of the Participant’s Separation from Service. The Participant’s Deferred Compensation Account shall continue to be adjusted for earnings and losses and Dividend Equivalents during the delay. The determination of which Participants are Key Employees will be made by the Company in its sole discretion in accordance with this Section 8(b) and Section 416(i) of the Code, including regulations and guidance promulgated thereunder, and Section 409A.

(i) “Identification Date” means each December 31.

(ii) “Key Employee” means an Employee who, on an Identification Date, is:

(A) An officer of the Company having annual compensation greater than the compensation limit in Section 416(i)(1)(A) (i) of the Code, provided that no more than fifty (50) officers of the Company shall be determined to be Key Employees as of any Identification Date;

(B) A five percent (5%) owner of the Company; or

If an Employee is identified as a Key Employee on an Identification Date, then such Employee shall be considered a Key Employee for purposes of the Plan during the period beginning on the first April 1 following the Identification Date and ending on the next March 31.

(c) Notwithstanding the foregoing, a lump sum distribution shall be made in the Committee’s discretion to clear out a small balance held for the benefit of the Participant (or his or her Beneficiary) provided that the Committee’s decision is evidenced in-writing prior to the date of the distribution, the distribution is not greater than the applicable dollar amount under Section 402(g)(1)(B) of the Code and the payment results in the termination of all benefits due under the plan and all other “account balance plans” treated as a single nonqualified deferred compensation plan with this Plan under Treasury Regulation Section 1.409A-1(c)(2).

(d) If a Plan benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of property, the Committee may direct payment to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Administrator may require proof of incompetency, minority, incapability or guardianship as it may deem

appropriate prior to distribution. Such distribution shall completely discharge the Committee, the trustees of any trusts, and the Company from all liability with respect to such benefit.

(e) Notwithstanding any other provision of the Plan to the contrary and to the maximum extent allowed by law, payment of a Participant’s Deferred Compensation Account shall be subject to (i) the requirements of the Potlatch Corporation Incentive Compensation Recovery Policy as it may be amended from time to time, and (ii) any other compensation recovery policies as may be adopted from time to time by the Company to comply with applicable law and/or stock exchange requirements, or otherwise, to the extent determined by the Committee in its discretion to be applicable to a Participant.

9. EFFECT OF DEATH OF PARTICIPANT

Upon the death of a Participant, all amounts, if any, remaining in his or her Deferred Compensation Account shall be distributed to the Beneficiary designated by the Participant. Such distribution shall be made at the time or times specified in the Participant’s deferral election. If the designated Beneficiary does not survive the Participant or dies before receiving payment in full of the Participant’s Deferred Compensation Account, payment shall be made to the estate of the last to die of the Participant or the designated Beneficiary.

10. CLAIMS AND REVIEW PROCEDURE

(a) Informal Resolution of Questions . Any Participant who has questions or concerns about his or her deferred compensation under the Plan is encouraged to communicate with the Vice President, Human Resources, of the Company. If this discussion does not give the Participant satisfactory results, a formal claim for benefits may be made within one (1) year of the event giving rise to the claim in accordance with the procedures of this Section 10. If a Participant fails to file a formal claim within the preceding limitation period, the Participant shall not be entitled to bring any legal or equitable action for benefits under the Plan.

(b) Formal Benefits Claim - Review by Benefits Committee . A Participant may make a written request for review of any matter concerning his or her deferred Compensation under the Plan. The claim must be addressed to the Benefits Committee, Management Deferred Compensation Plan, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee shall decide the action to be taken with respect to any such request and may require additional information, if necessary, to process the request. The Benefits Committee shall review the request and shall issue its decision, in writing, no later than ninety (90) days after the date the request is received, unless the circumstances require an extension of time. If such an extension is required, written notice of the extension shall be furnished to the person making the request within the initial ninety (90)-day period, and the notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the request. In no event shall the extension exceed a period of ninety (90) days from the end of the initial period.

(c) Notice of Denied Request . If the Benefits Committee denies a request in whole or in part, it shall provide the person making the request with written notice of the denial within the period specified in Section 10(b). The notice shall set forth the specific reason for the denial, reference to the specific Plan provisions upon which the denial is based, a description of any additional material or information necessary to perfect the request, an explanation of why such information is required, and an explanation of the Plan’s appeal procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an adverse benefit determination on review.

(d) Appeal to Benefits Committee .

(i) A person whose request has been denied in whole or in part (or such person’s authorized representative) may file an appeal of the decision in writing with the Benefits Committee within sixty (60) days of receipt of the notification of denial. The appeal must be addressed to the Benefits Committee, Management Deferred Compensation Plan, Potlatch Corporation, 601 W. First Avenue, Suite 1600, Spokane, Washington 99201. The Benefits Committee, for good cause shown, may extend the period during which the appeal may be filed for another sixty (60) days. The appellant and his or her authorized representative shall be permitted to submit written comments, documents, records and other information relating to the claim for benefits. Upon request and free of charge, the appellant should be provided reasonable access to and copies of, all documents, records or other information relevant to the appellant’s claim.

(iii) The Benefits Committee shall issue a written decision within a reasonable period of time but not later than sixty (60) days after receipt of the appeal, unless special circumstances require an extension of time for processing, in which case the written decision shall be issued as soon as possible, but not later than one-hundred twenty (120) days after receipt of an appeal. If such an extension is required, written notice shall be furnished to the appellant within the initial sixty (60)-day period. This notice shall state the circumstances requiring the extension and the date by which the Benefits Committee expects to reach a decision on the appeal.

(iv) If the decision on the appeal denies the claim in whole or in part written notice shall be furnished to the appellant. Such notice shall state the reason(s) for the denial, including references to specific Plan provisions upon which the denial was based. The notice shall state that the appellant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits. The notice shall describe any voluntary appeal procedures offered by the Plan and the appellant’s right to obtain the information about such procedures. The notice shall also include a statement of the appellant’s right to bring an action under Section 502(a) of ERISA.

(v) The decision of the Benefits Committee on the appeal shall be final, conclusive and binding upon all persons and shall be given the maximum possible deference allowed by law.

(e) Exhaustion of Remedies . No legal or equitable action for benefits under the Plan shall be brought unless and until the claimant has submitted a written claim for benefits in accordance with Section 10(a) above, has been notified that the claim is denied in accordance with Section 10(c) above, has filed a written request for a review of the claim in accordance with Section 10(d) above, and has been notified in writing that the Benefits Committee has affirmed the denial of the claim in accordance with Section 10(d) above; provided, however, that an action for benefits may be brought after the Benefits Committee has failed to act on the claim within the time prescribed in Section 10(b) and Section 10(d), respectively.

11. PARTICIPANT’S RIGHTS UNSECURED

The interest under the Plan of any Participant and such Participant’s right to receive a distribution from the Plan shall be an unsecured claim against the general assets of the Company. The Deferred Compensation Account and all deemed investment accounts available under Section 7 shall be bookkeeping entries only and no Participant shall have an interest in or claim against any specific asset of

the Company pursuant to the Plan. Notwithstanding the foregoing, the Company may, in its discretion, choose to contribute to the Potlatch Corporation Benefits Protection Trust Agreement to assist with the payment of benefits under the Plan.

12. STATEMENT OF DEFERRED COMPENSATION ACCOUNT

The Committee shall provide periodic statements of each Participant’s Deferred Compensation Account.

13. NONASSIGNABILITY OF INTERESTS

The interest and property rights of any Employee under the Plan shall not be subject to option nor be assignable either by voluntary or involuntary assignment or by operation of law, including (without limitation) bankruptcy, garnishment, attachment or other creditor’s process, and any act in violation of this Section 13 shall be void.

14. ADMINISTRATION OF THE PLAN

The Plan shall be administered by the Committee. In addition to the powers and duties otherwise set forth in the Plan, the Committee shall have full power and authority to administer and interpret the Plan, to establish procedures for administering the Plan and to take any and all necessary action in connection therewith, including retaining outside managers to assist with the administration of the Plan. The Committee’s interpretation and construction of the Plan shall be conclusive and binding on all persons. In its discretion, the Committee may delegate to the Vice President, Human Resources, of the Company the authority for the effective administration of the Plan and for assigning responsibility to designated managers to carry out such duties.

15. AMENDMENT OR TERMINATION OF THE PLAN

(a) The Board or the Committee may amend, suspend or terminate the Plan at any time. The foregoing notwithstanding, the Plan may not be amended (including any amendment to this Section 15) or terminated by the Board or the Committee if such amendment or termination would or adversely affect or impair the Employee’s right to receive amounts credited to his or her Deferred Compensation Account.

(b) Except as provided in Section 15(c) or as otherwise permitted under Section 409A, in the event of termination of the Plan, the Participants’ Deferred Compensation Accounts may, in the Board’s or the Committee’s discretion, be distributed within the period beginning twelve (12) months after the date the Plan was terminated and ending twenty-four (24) months after the date the Plan was terminated, or pursuant to Section 8, if earlier. If the Plan is terminated and Deferred Compensation Accounts are distributed, the Board or the Committee shall terminate all account balance non-qualified deferred compensation plans with respect to all Employees and shall not adopt a new account balance non-qualified deferred compensation plan for at least three (3) years after the date the Plan was terminated. A termination and liquidation of the Plan under this Section 15(b) shall be made only in compliance with Treasury Regulation Section 1.409A-3(j)(4)(ix)(c).

(c) The Board or the Committee may terminate the Plan upon a corporate dissolution of the Company that is taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A), provided that the Participants’ Deferred Compensation Accounts are distributed and included in the gross income of the Participants by the latest of (i) the Year in which the Plan terminates or (ii) the first Year in which payment of the Deferred Compensation Accounts is administratively practicable.

(d) Notwithstanding the foregoing, the Vice President, Human Resources, of the Company shall have the power and authority to amend the Plan with respect to any amendment that (i) does not

materially increase the cost of the Plan to the Company or (ii) is intended to comply with new or changed legal requirements applicable to the Plan, including, but not limited to, Section 409A.

16. TAX WITHHOLDING

The Company shall make or cause to be made appropriate arrangements for satisfaction of any federal or state income tax or other payroll-based withholding tax required to be paid by a Participant upon any deferral made to or distribution made from the Plan.

17. NO EMPLOYMENT RIGHTS

Nothing in the Plan shall be deemed to give any individual a right to remain in the employ of the Company or any subsidiary or to limit in any way the right of the Company or a subsidiary to terminate any individual’s employment with or without case, which right is hereby reserved.

18. SUCCESSORS AND ASSIGNS

19. CHOICE OF LAW AND VENUE

The Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of Washington without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of Washington.

Exhibit (12)

POTLATCH CORPORATION

Computation of Ratio of Earnings to Fixed Charges

(In thousands)



	2013		2012		2011		2010		2009
Income from continuing operations before income taxes	$	84,466	$	59,403	$	44,411	$	44,871	$	64,783
Add:
Interest expense	21,885		23,727		25,216		26,070		20,778
Interest portion of rental expense	1,191		1,024		822		651		631
Discount and debt expense amortization	1,498		1,974		2,817		1,836		1,214
Earnings available for fixed charges	109,040		86,128		73,266		73,428		87,406
Fixed charges:
Interest expense	21,885		23,727		25,216		26,070		20,778
Capitalized interest	—		—		—		—		—
Interest portion of rental expense	1,191		1,024		822		651		631
Discount and debt expense amortization	1,498		1,974		2,817		1,836		1,214
Total fixed charges	24,574		26,725		28,855		28,557		22,623
Ratio of earnings to fixed charges	4.4		3.2		2.5		2.6		3.9

Exhibit (21)

Subsidiaries of Potlatch Corporation

as of December 31, 2013 ⁽¹⁾



Name	State in Which Organized
PFHI Idaho Investment LLC	Delaware
PFPC McCall Investment LLC	Delaware
Potlatch Forest Holdings, Inc.	Delaware
Potlatch Land & Lumber, LLC	Delaware
Potlatch Timberlands LLC	Delaware
Potlatch Minnesota Timberlands, LLC	Delaware
Potlatch Lake States Timberlands, LLC	Delaware
Potlatch TRS Arkansas, LLC	Delaware
Potlatch TRS Idaho, LLC	Delaware
Potlatch TRS Minnesota, LLC	Delaware

⁽¹⁾ All of the subsidiaries in the above list are wholly owned, either directly or indirectly, by Potlatch Corporation.

Exhibit (23)

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Potlatch Corporation:

We consent to the incorporation by reference in the registration statements (Nos. 333-17145, 333-42808, 33-54515, 333-28079, 333-74956, 333-12017, 333-42806, 333-130507, 33-30836, 333-156130, and 333-156127) on Form S-8, registration statement (No. 333-191886) on Form S-3, and registration statement (No. 333-165919) on Form S-4 of Potlatch Corporation of our reports dated February 14, 2014, with respect to the consolidated balance sheets of Potlatch Corporation as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, cash flows and stockholders' equity for each of the years in the three-year period ended December 31, 2013, and the effectiveness of internal control over financial reporting as of December 31, 2013, which reports appear in the December 31, 2013 annual report on Form 10-K of Potlatch Corporation.

/s/ KPMG LLP

Portland, Oregon

February 14, 2014

Exhibit (24)

POWER OF ATTORNEY

I, the undersigned, appoint Lorrie Scott or, in her absence or inability to act, Michael J. Covey or Jerald W. Richards, my attorney ‑ in‑fact for me and in my name, place and stead to execute for me on my behalf in my capacity as a Director of Potlatch Corporation, the Annual Report on Form 10-K of Potlatch Corporation for the fiscal year ended December 31, 2013 to be filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, and any and all amendments thereto, hereby ratifying, approving and confirming all that any such attorney‑in‑fact may do by virtue of this Power of Attorney.

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ BOH A. DICKEY DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ WILLIAM L. DRISCOLL DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ CHARLES P. GRENIER DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ JEROME C. KNOLL

DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ JOHN S. MOODY

DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ LAWRENCE S. PEIROS

DIRECTOR

POWER OF ATTORNEY

IN WITNESS WHEREOF, I have executed this Power of Attorney as of February 14, 2014.

/S/ GREGORY L. QUESNEL

DIRECTOR

Exhibit (31)

CERTIFICATIONS

I, Michael J. Covey, certify that:

1. I have reviewed this report on Form 10-K of Potlatch Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	February 14, 2014	/S/ MICHAEL J. COVEY
		Michael J. Covey
		Chairman and Chief Executive Officer

CERTIFICATIONS

I, Jerald W. Richards, certify that:

1. I have reviewed this report on Form 10-K of Potlatch Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	February 14, 2014	/S/ JERALD W. RICHARDS
		Jerald W. Richards
		Vice President and Chief Financial Officer

Exhibit (32)

STATEMENT OF CHIEF EXECUTIVE OFFICER UNDER 18 U.S.C. § 1350

I, Michael J. Covey, Chief Executive Officer of Potlatch Corporation (the “Company”), certify pursuant to section 1350 of Chapter 63 of Title 18 of the United States Code that, to my knowledge:


(1)	the Annual Report of the Company on Form 10-K for the period ended December 31, 2013 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ MICHAEL J. COVEY

Michael J. Covey

Chairman and Chief Executive Officer

February 14, 2014

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

STATEMENT OF CHIEF FINANCIAL OFFICER UNDER 18 U.S.C. § 1350

I, Jerald W. Richards, Vice President and Chief Financial Officer of Potlatch Corporation (the “Company”), certify pursuant to section 1350 of Chapter 63 of Title 18 of the United States Code that, to my knowledge:


(1)	the Annual Report of the Company on Form 10-K for the period ended December 31, 2013 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JERALD W. RICHARDS

Jerald W. Richards

Vice President and Chief Financial Officer

February 14, 2014