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PotlatchDeltic Corporation Reports Third Quarter 2020 Results

PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $81.0 million, or $1.20 per diluted share, on revenues of $313.0 million for the quarter ended September 30, 2020. Net income was $20.6 million, or $0.30 per diluted share, on revenues of $226.3 million for the quarter ended September 30, 2019.

Third Quarter 2020 Highlights

  • Generated record quarterly Total Adjusted EBITDDA of $135.4 million and Total Adjusted EBITDDA margin of 43%
  • Historic lumber prices drove Wood Products record quarterly Adjusted EBITDDA performance
  • Timberlands set quarterly records for harvest volume and Adjusted EBITDDA
  • Expanded strong liquidity position to $528 million as of Q3 2020

“Our Timberlands and Wood Products businesses achieved record financial performance as outstanding operational execution by our employees capitalized on the historic run in lumber prices against the backdrop of a challenging COVID environment,” said Mike Covey, chairman and chief executive officer. “Looking to the fourth quarter of 2020, our financial results will continue to benefit from high lumber prices through an extended lumber order file and lagged index pricing on our Idaho sawlogs. Additionally, we expect that our Real Estate business will finish the year very strong by closing a large Minnesota transaction. PotlatchDeltic is well positioned to take advantage of favorable industry fundamentals and our strong liquidity provides a high degree of flexibility as we seek to maximize shareholder value,” stated Mr. Covey.

Financial Highlights

($ in millions, except per share data)

Q3 2020

Q2 2020

Q3 2019

Revenues

$

313.0

$

181.6

$

226.3

Net income

$

81.0

$

2.6

$

20.6

Weighted average shares outstanding, diluted (in thousands)

67,528

67,359

67,545

Net income per diluted share

$

1.20

$

0.04

$

0.30

Adjusted net income

$

81.0

$

2.6

$

20.6

Adjusted net income per diluted share

$

1.20

$

0.04

$

0.30

Total Adjusted EBITDDA

$

135.4

$

35.3

$

55.0

Dividends per share

$

0.40

$

0.40

$

0.40

Net cash from operations

$

102.9

$

39.8

$

37.9

Cash and cash equivalents

$

148.9

$

81.0

$

94.7

Business Performance: Q3 2020 vs. Q2 2020

Timberlands

Third Quarter 2020 Highlights

  • Timberlands Adjusted EBITDDA increased $34.1 million from Q2 levels
  • Northern and Southern harvest volumes increased seasonally
  • Northern sawlog prices increased 30% due primarily to higher prices on lumber-indexed volume

($ in millions)

Q3 2020

Q2 2020

$ Change

Timberlands Revenues

$

117.0

$

67.3

$

49.7

Timberlands Adjusted EBITDDA

$

59.7

$

25.6

$

34.1

Wood Products

Third Quarter 2020 Highlights

  • Wood Products Adjusted EBITDDA increased $70.8 million from Q2 2020 levels
  • Average lumber price was $637 per MBF Q3 2020, 55% higher than Q2 2020
  • Lumber shipments increased 17% in Q3 2020 driven by higher production hours
  • Wood Products positively impacted by plywood mill returning to normal operating level after Q2 2020 curtailment

($ in millions)

Q3 2020

Q2 2020

$ Change

Wood Products Revenues

$

218.3

$

126.2

$

92.1

Wood Products Adjusted EBITDDA

$

81.7

$

10.9

$

70.8

Real Estate

Third Quarter 2020 Highlights

  • Real Estate Adjusted EBITDDA increased $4.1 million from Q2 2020 levels
  • Sold 11,048 acres of rural land for $1,202/acre
  • Sold 26 residential lots at an average $83,000/lot in Q3 2020

($ in millions)

Q3 2020

Q2 2020

$ Change

Real Estate Revenues

$

18.2

$

13.0

$

5.2

Real Estate Adjusted EBITDDA

$

13.4

$

9.3

$

4.1

Non-GAAP Measures

This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP.

Management uses Adjusted EBITDDA to evaluate the performance of the company. This is a non-GAAP measure that represents EBITDDA before certain items that impact comparison of the performance of our business either period-over-period or with other businesses.

Adjusted Net Income and Adjusted Net Income Per Diluted Share are non-GAAP measures that represent GAAP net income and GAAP net earnings per diluted share before certain items that impact the ability of investors, securities analysts and other interested parties to compare the performance of our business, either period-over-period or with other businesses.

Reconciliations to GAAP are set forth in the accompanying schedules.

Conference Call Information

A live conference call and webcast will be held Tuesday, October 27, 2020, at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time). Investors may access the webcast at www.potlatchdeltic.com by clicking on the Investors link or by conference call at 1-833-968-2227 for U.S./Canada and 1-778-560-2697 for international callers. Participants will be asked to provide conference I.D. number 9171206. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available three hours following the call until November 3, 2020 by calling 1-800-585-8367 for U.S./Canada or 1-416-621-4642 for international callers. Callers must enter conference I.D. number 9171206 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns 1.8 million acres of timberlands in Alabama, Arkansas, Idaho, Louisiana, Minnesota and Mississippi. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest management, is committed to environmental and social responsibility and to responsible governance. More information can be found at www.potlatchdeltic.com.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended, including without limitation, our expectations regarding the company’s current and expected liquidity; the effects of COVID-19 on demand for our products and on our ability to continue operations; the success of the company’s business strategies; the company’s intent to refinance debt maturing in 2020 and beyond; the company’s capital allocation strategies, including share repurchases and dividend expectations; maintaining the company’s investment grade credit rating; favorable capital structure and strong balance sheet; interest rates and expenses; corporate expenses; pension expenses; taxes; fourth quarter 2020 outlook; the housing market and repair and remodel market; housing starts; lumber supply, demand and pricing; revenues, costs and expenses; lumber shipment volumes; expected sawlog demand and timber harvest volumes; sawlog mix and pricing; rural real estate and residential real estate development sales, including the closing of the sale of approximately 72,000 rural acres in the fourth quarter of 2020, and average price per acre and developed lot; planned capital expenditures and anticipated internal rate of return; business conditions; and similar 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. You should carefully read forward-looking statements, including statements that contain these words, because they discuss the future expectations or state other “forward-looking” information about PotlatchDeltic. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond PotlatchDeltic’s control, including impact of the COVID-19 outbreak on our business, suppliers, customers and employees; changes in the U.S. housing market; changes in timberland values; changes in timber harvest levels on the company's lands; changes in timber prices; changes in policy regarding governmental timber sales; availability of logging contractors and shipping capacity; changes in the United States and international economies and effects on our customers and suppliers; changes in interest rates; credit availability and homebuyers’ ability to qualify for mortgages; availability of labor and developable land; changes in the level of construction and remodeling activity; changes in foreign demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; changes in demand for our products and real estate; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; disruptions or inefficiencies in our supply chain and/or operations; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; fires and other catastrophic events; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; transportation disruptions; share price; the successful execution of the company’s strategic plans; the company’s ability to meet expectations; and the other factors described in PotlatchDeltic’s Annual Report on Form 10-K and in the company’s other filings with the SEC. PotlatchDeltic assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, all of which speak only as of the date hereof.

PotlatchDeltic Corporation

Condensed Consolidated Statements of Operations

Unaudited

 

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(in thousands, except per share amounts)

2020

2020

2019

2020

2019

Revenues

$

313,046

$

181,555

$

226,302

$

703,481

$

623,599

Costs and expenses:

Cost of goods sold

182,039

149,836

182,634

503,921

512,522

Selling, general and administrative expenses

21,046

16,811

12,472

52,064

43,994

Gain on sale of facility

(9,176

)

203,085

166,647

195,106

555,985

547,340

Operating income

109,961

14,908

31,196

147,496

76,259

Interest expense, net

(8,557

)

(8,339

)

(8,475

)

(20,594

)

(21,821

)

Loss on extinguishment of debt

(5,512

)

Pension settlement charge

(42,988

)

Non-operating pension and other postretirement employee benefit costs

(3,557

)

(3,478

)

(935

)

(10,670

)

(2,804

)

Income before income taxes

97,847

3,091

21,786

73,244

46,122

Income taxes

(16,840

)

(453

)

(1,221

)

(6,431

)

(1,860

)

Net income

$

81,007

$

2,638

$

20,565

$

66,813

$

44,262

Net income per share:

Basic

$

1.21

$

0.04

$

0.30

$

0.99

$

0.65

Diluted

$

1.20

$

0.04

$

0.30

$

0.99

$

0.65

Dividends per share

$

0.40

$

0.40

$

0.40

$

1.20

$

1.20

Weighted-average shares outstanding:

Basic

67,149

67,176

67,446

67,263

67,781

Diluted

67,528

67,359

67,545

67,535

67,848

PotlatchDeltic Corporation

Condensed Consolidated Balance Sheets

Unaudited

 

(in thousands, except per share amounts)

September 30, 2020

December 31, 2019

ASSETS

Current assets:

Cash and cash equivalents

$

148,919

$

83,310

Customer receivables, net

50,084

14,167

Inventories, net

58,572

65,781

Other current assets

21,090

20,183

Total current assets

278,665

183,441

Property, plant and equipment, net

289,305

286,383

Investment in real estate held for development and sale

74,216

74,233

Timber and timberlands, net

1,608,026

1,638,663

Intangible assets, net

16,465

17,049

Other long-term assets

31,236

35,290

Total assets

$

2,297,913

$

2,235,059

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

108,425

$

60,577

Current portion of long-term debt

45,995

45,974

Current portion of pension and other postretirement employee benefits

6,701

6,701

Total current liabilities

161,121

113,252

Long-term debt

711,254

710,495

Pension and other postretirement employee benefits

139,022

115,463

Deferred tax liabilities, net

12,202

20,165

Other long-term obligations

78,237

48,853

Total liabilities

1,101,836

1,008,228

Commitments and contingencies

Stockholders' equity:

Preferred stock, authorized 4,000 shares, no shares issued

Common stock, $1 par value, authorized 100,000 shares, issued 66,872 and 67,221 shares

66,872

67,221

Additional paid-in capital

1,672,351

1,666,299

Accumulated deficit

(388,000

)

(359,330

)

Accumulated other comprehensive loss

(155,146

)

(147,359

)

Total stockholders’ equity

1,196,077

1,226,831

Total liabilities and stockholders' equity

$

2,297,913

$

2,235,059

PotlatchDeltic Corporation

Condensed Consolidated Statements of Cash Flows

Unaudited

 

Three Months Ended

Nine Months Ended

(in thousands)

September 30, 2020

June 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

81,007

$

2,638

$

20,565

$

66,813

$

44,262

Adjustments:

Depreciation, depletion and amortization

20,594

18,171

19,178

57,809

52,589

Basis of real estate sold

5,249

2,693

5,228

14,440

14,211

Gain on sale of facility

(9,176

)

Loss on extinguishment of debt

5,512

Change in deferred taxes

(538

)

(1,466

)

295

(14,387

)

(16,943

)

Pension and other postretirement employee benefits

5,917

5,765

2,970

17,750

8,907

Pension settlement charge

42,988

Equity-based compensation expense

2,063

1,980

1,913

5,928

5,362

Other, net

(367

)

(414

)

(764

)

(544

)

(2,692

)

Change in working capital and operating-related activities, net

(3,691

)

13,840

(8,745

)

12,706

13,745

Real estate development expenditures

(1,713

)

(2,109

)

(1,257

)

(4,200

)

(5,738

)

Funding of pension and other postretirement employee benefits

(5,619

)

(1,293

)

(1,477

)

(8,458

)

(4,612

)

Net cash provided by operating activities

102,902

39,805

37,906

190,845

105,427

CASH FLOWS FROM INVESTING ACTIVITIES

Property, plant and equipment additions

(4,371

)

(5,256

)

(10,094

)

(14,666

)

(25,596

)

Timberlands reforestation and roads

(4,569

)

(3,466

)

(5,079

)

(12,345

)

(13,269

)

Acquisition of timber and timberlands

(8

)

(540

)

(4,738

)

(278

)

Proceeds on sale of facility

1,000

58,793

Proceeds on disposition of property, plant and equipment

335

2,017

335

2,017

Other, net

36

608

87

2,149

520

Net cash (used in) provided by investing activities

(8,577

)

(8,654

)

(13,069

)

(28,265

)

22,187

CASH FLOWS FROM FINANCING ACTIVITIES

Distributions to common stockholders

(26,749

)

(26,744

)

(26,888

)

(80,434

)

(80,834

)

Repurchase of common stock

(3,009

)

(15,364

)

(25,173

)

Proceeds from issuance of long-term debt

150,000

Repayment of long-term debt

(150,000

)

Premiums and fees on debt retirement

(4,865

)

Other, net

(506

)

(284

)

(129

)

(1,032

)

(393

)

Net cash used in financing activities

(27,255

)

(30,037

)

(27,017

)

(96,830

)

(111,265

)

Change in cash, cash equivalents and restricted cash

67,070

1,114

(2,180

)

65,750

16,349

Cash, cash equivalents and restricted cash, beginning

82,934

81,820

97,970

84,254

79,441

Cash, cash equivalents and restricted cash, ending

$

150,004

$

82,934

$

95,790

$

150,004

$

95,790

PotlatchDeltic Corporation

Segment Information

Unaudited

 

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(in thousands)

2020

2020

2019

2020

2019

Revenues

Timberlands

$

116,985

$

67,345

$

98,809

$

266,755

$

233,848

Wood Products

218,291

126,216

143,643

489,507

413,979

Real Estate

18,151

13,105

18,863

42,225

61,459

353,427

206,666

261,315

798,487

709,286

Intersegment Timberlands revenues

(40,381

)

(25,111

)

(35,013

)

(95,006

)

(85,687

)

Consolidated revenues

$

313,046

$

181,555

$

226,302

$

703,481

$

623,599

Adjusted EBITDDA1

Timberlands

$

59,649

$

25,659

$

42,996

$

120,290

$

95,977

Wood Products

81,644

10,907

5,903

105,780

11,058

Real Estate

13,466

9,256

14,678

30,062

48,697

Corporate

(15,361

)

(10,534

)

(6,930

)

(34,567

)

(26,930

)

Eliminations and adjustments

(4,012

)

85

(1,635

)

(3,235

)

3,542

Total Adjusted EBITDDA

135,386

35,373

55,012

218,330

132,344

Basis of real estate sold

(5,249

)

(2,693

)

(5,228

)

(14,440

)

(14,211

)

Depreciation, depletion and amortization

(20,187

)

(17,765

)

(18,786

)

(56,590

)

(51,310

)

Interest expense, net

(8,557

)

(8,339

)

(8,475

)

(20,594

)

(21,821

)

Loss on extinguishment of debt

(5,512

)

Pension settlement charge

(42,988

)

Non-operating pension and other postretirement employee benefits

(3,557

)

(3,478

)

(935

)

(10,670

)

(2,804

)

Gain (loss) on disposal of fixed assets

11

(7

)

198

196

260

Gain on sale of facility

9,176

Income before income taxes

$

97,847

$

3,091

$

21,786

$

73,244

$

46,122

Depreciation, depletion and amortization

Timberlands

$

13,821

$

11,566

$

12,627

$

37,978

$

33,361

Wood Products

5,983

5,798

5,763

17,411

16,666

Real Estate

149

156

152

465

508

Corporate

234

245

244

736

775

20,187

17,765

18,786

56,590

51,310

Bond discounts and deferred loan fees2

407

406

392

1,219

1,279

Total depreciation, depletion and amortization

$

20,594

$

18,171

$

19,178

$

57,809

$

52,589

Basis of real estate sold

Real Estate

$

5,257

$

3,212

$

5,283

$

14,973

$

14,326

Eliminations and adjustments

(8

)

(519

)

(55

)

(533

)

(115

)

Total basis of real estate sold

$

5,249

$

2,693

$

5,228

$

14,440

$

14,211

  1. Management uses Adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of Total Adjusted EBITDDA on page 8, Reconciliations.
  2. Bond discounts and deferred loan fees are included in interest expense, net in the Condensed Consolidated Statements of Operations.

PotlatchDeltic Corporation

Reconciliations

Unaudited

 

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,

(in thousands, except per share amount)

2020

2020

2019

2020

2019

Total Adjusted EBITDDA

Net income (GAAP)

$

81,007

$

2,638

$

20,565

$

66,813

$

44,262

Interest expense, net

8,557

8,339

8,475

20,594

21,821

Income taxes

16,840

453

1,221

6,431

1,860

Depreciation, depletion and amortization

20,187

17,765

18,786

56,590

51,310

Basis of real estate sold

5,249

2,693

5,228

14,440

14,211

Loss on extinguishment of debt

5,512

Pension settlement charge

42,988

Non-operating pension and other postretirement benefit costs

3,557

3,478

935

10,670

2,804

Gain on sale of facility

(9,176

)

(Gain) loss on disposal of fixed assets

(11

)

7

(198

)

(196

)

(260

)

Total Adjusted EBITDDA

$

135,386

$

35,373

$

55,012

$

218,330

$

132,344

Adjusted net income

Net income (GAAP)

$

81,007

$

2,638

$

20,565

$

66,813

$

44,262

Special items:

Loss on extinguishment of debt

5,512

Pension settlement charge, after tax

31,811

Gain on sale of facility, after tax

(6,790

)

Adjusted net income

$

81,007

$

2,638

$

20,565

$

98,624

$

42,984

Adjusted net income per diluted share

Net income per diluted share (GAAP)

$

1.20

$

0.04

$

0.30

$

0.99

$

0.65

Special items:

Loss on extinguishment of debt

0.08

Pension settlement charge, after tax

0.47

Gain on sale of facility, after tax

(0.10

)

Adjusted net income per diluted share

$

1.20

$

0.04

$

0.30

$

1.46

$

0.63

Contacts:

(Investors)
Jerry Richards
509.835.1521

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