PotlatchDeltic Corporation Reports Second Quarter 2020 Results

PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $2.6 million, or $0.04 per diluted share, on revenues of $181.6 million for the quarter ended June 30, 2020. Net income was $17.1 million, or $0.25 per diluted share, on revenues of $215.6 million for the quarter ended June 30, 2019.

Second Quarter 2020 Highlights

• Generated $35.3 million of Total Adjusted EBITDDA and Total Adjusted EBITDDA margin of 19%
• Announced agreement to sell ~72,000 acres in Minnesota for ~$48 million
• Maintained strong liquidity of $460 million as of Q2 2020

"Our employees did an excellent job managing through the constraints and challenges imposed by the COVID pandemic and our three business segments performed well during what is typically our seasonally lightest quarter,” said Mike Covey, chairman and chief executive officer. "Lumber markets are in the midst of a historic run and we are focused on safely meeting customer demand. Cash generated from operations, along with proceeds from the Minnesota transaction that we announced in the second quarter, will further enhance our strong liquidity and provide additional flexibility to maximize shareholder value," stated Mr. Covey.

Financial Highlights

($ in millions, except per share data)		Q2 2020				Q1 2020				Q2 2019
Revenues		$	181.6			$	208.9			$	215.6
Net income (loss)		$	2.6			$	(16.8	)		$	17.1
Weighted average shares outstanding, diluted (in thousands)			67,359				67,478				67,713
Net income (loss) per diluted share		$	0.04			$	(0.25	)		$	0.25
Adjusted net income		$	2.6			$	15.0			$	17.1
Adjusted net income per diluted share		$	0.04			$	0.22			$	0.25
Total Adjusted EBITDDA		$	35.3			$	47.6			$	49.0
Dividends per share		$	0.40			$	0.40			$	0.40
Net cash from operations		$	39.8			$	48.1			$	48.5
Cash and cash equivalents		$	81.0			$	79.5			$	98.0

Business Performance: Q2 2020 vs. Q1 2020

Timberlands

Second Quarter 2020 Highlights

• Timberlands Adjusted EBITDDA decreased $9.4 million from Q1 2020 levels
• Northern sawlog volumes decreased seasonally during spring breakup
• Northern sawlog prices slightly higher due to seasonally lighter logs and slightly higher index pricing
• Southern harvest volumes decreased because of customer mill curtailments
• Southern sawlog prices were slightly lower due to weaker demand

($ in millions)		Q2 2020				Q1 2020				$ Change
Timberlands Revenues		$	67.3			$	82.4			$	(15.1	)
Timberlands Adjusted EBITDDA		$	25.6			$	35.0			$	(9.4	)

Wood Products

Second Quarter 2020 Highlights

• Wood Products Adjusted EBITDDA decreased $2.3 million from Q1 2020 levels
• Average lumber price was $412 per MBF Q2 2020, 4% higher than Q1 2020
• Lumber shipments decreased 12% in Q2 2020 driven by lower production hours
• Wood Products results were also negatively impacted by Q2 2020 temporary plywood mill curtailment and reduced operating posture

($ in millions)		Q2 2020				Q1 2020				$ Change
Wood Products Revenues		$	126.2			$	145.0			$	(18.8	)
Wood Products Adjusted EBITDDA		$	10.9			$	13.2			$	(2.3	)

Real Estate

Second Quarter 2020 Highlights

• Real Estate Adjusted EBITDDA increased $2.0 million from Q1 2020 levels
• Sold 17 residential lots at an average $97,000/lot in Q2 2020
• Sold 5,537 acres of rural land for $1,784/acre

($ in millions)		Q2 2020				Q1 2020				$ Change
Real Estate Revenues		$	13.0			$	11.0			$	2.0
Real Estate Adjusted EBITDDA		$	9.3			$	7.3			$	2.0

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, July 28, 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 4488976. 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 August 4, 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 4488976 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 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 practices, is dedicated to long-term stewardship and sustainable management of its timber resources. 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; ability to manage 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; maintaining the company’s investment grade credit rating; favorable capital structure and strong balance sheet; interest rates and expenses; corporate expenses; pension expenses; taxes; third quarter 2020 outlook; U.S. housing market and repair and remodel market; U.S. housing starts; lumber 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 in 2020; 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 recent coronavirus (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 Asia 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												Six Months Ended
(in thousands, except per share amounts)		June 30,				March 31,				June 30,				June 30,
		2020				2020				2019				2020				2019
Revenues		$	181,555			$	208,880			$	215,581			$	390,435			$	397,297
Costs and expenses:
Cost of goods sold			149,836				172,046				175,673				321,882				329,888
Selling, general and administrative expenses			16,811				14,207				14,952				31,018				31,522
Gain on sale of facility			—				—				—				—				(9,176	)
			166,647				186,253				190,625				352,900				352,234
Operating income			14,908				22,627				24,956				37,535				45,063
Interest expense, net			(8,339	)			(3,698	)			(7,882	)			(12,037	)			(13,346	)
Loss on extinguishment of debt			—				—				—				—				(5,512	)
Pension settlement charge			—				(42,988	)			—				(42,988	)			—
Non-operating pension and other postretirement employee benefit costs			(3,478	)			(3,635	)			(889	)			(7,113	)			(1,869	)
Income (loss) before income taxes			3,091				(27,694	)			16,185				(24,603	)			24,336
Income taxes			(453	)			10,862				952				10,409				(639	)
Net income (loss)		$	2,638			$	(16,832	)		$	17,137			$	(14,194	)		$	23,697
Net income (loss) per share:
Basic		$	0.04			$	(0.25	)		$	0.25			$	(0.21	)		$	0.35
Diluted		$	0.04			$	(0.25	)		$	0.25			$	(0.21	)		$	0.35
Dividends per share		$	0.40			$	0.40			$	0.40			$	0.80			$	0.80
Weighted-average shares outstanding:
Basic			67,176				67,478				67,664				67,321				67,774
Diluted			67,359				67,478				67,713				67,321				67,866

PotlatchDeltic Corporation Condensed Consolidated Balance Sheets Unaudited
(in thousands, except per share amounts)		June 30, 2020				December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents		$	80,987			$	83,310
Customer receivables, net			24,588				14,167
Inventories, net			52,215				65,781
Other current assets			22,107				20,183
Total current assets			179,897				183,441
Property, plant and equipment, net			286,169				286,383
Investment in real estate held for development and sale			73,541				74,233
Timber and timberlands, net			1,618,975				1,638,663
Intangible assets, net			16,660				17,049
Other long-term assets			29,928				35,290
Total assets		$	2,205,170			$	2,235,059
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	75,937			$	60,577
Current portion of long-term debt			45,988				45,974
Current portion of pension and other postretirement employee benefits			6,701				6,701
Total current liabilities			128,626				113,252
Long-term debt			711,001				710,495
Pension and other postretirement employee benefits			142,708				115,463
Deferred tax liabilities, net			10,942				20,165
Other long-term obligations			86,417				48,853
Total liabilities			1,079,694				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 66,871 and 67,221 shares			66,871				67,221
Additional paid-in capital			1,670,184				1,666,299
Accumulated deficit			(442,153	)			(359,330	)
Accumulated other comprehensive loss			(169,426	)			(147,359	)
Total stockholders’ equity			1,125,476				1,226,831
Total liabilities and stockholders' equity		$	2,205,170			$	2,235,059

PotlatchDeltic Corporation Condensed Consolidated Statements of Cash Flows Unaudited
		Three Months Ended												Six Months Ended
(in thousands)		June 30, 2020				March 31, 2020				June 30, 2019				June 30, 2020				June 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	2,638			$	(16,832	)		$	17,137			$	(14,194	)		$	23,697
Adjustments:
Depreciation, depletion and amortization			18,171				19,044				17,137				37,215				33,411
Basis of real estate sold			2,693				6,498				7,427				9,191				8,983
Gain on sale of facility			—				—				—				—				(9,176	)
Loss on extinguishment of debt			—				—				—				—				5,512
Change in deferred taxes			(1,466	)			(12,383	)			(1,139	)			(13,849	)			(17,238	)
Pension and other postretirement employee benefits			5,765				6,068				2,831				11,833				5,937
Pension settlement charge			—				42,988				—				42,988				—
Equity-based compensation expense			1,980				1,885				1,832				3,865				3,449
Other, net			(414	)			237				(1,142	)			(177	)			(1,928	)
Change in working capital and operating-related activities, net			13,840				2,557				8,507				16,397				22,490
Real estate development expenditures			(2,109	)			(378	)			(2,715	)			(2,487	)			(4,481	)
Funding of pension and other postretirement employee benefits			(1,293	)			(1,546	)			(1,421	)			(2,839	)			(3,135	)
Net cash provided by operating activities			39,805				48,138				48,454				87,943				67,521
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions			(5,256	)			(5,039	)			(11,742	)			(10,295	)			(15,502	)
Timberlands reforestation and roads			(3,466	)			(4,310	)			(3,948	)			(7,776	)			(8,190	)
Acquisition of timber and timberlands			(540	)			(4,190	)			(278	)			(4,730	)			(278	)
Proceeds on sale of facility			—				1,000				(1,252	)			1,000				58,793
Other, net			608				1,505				303				2,113				433
Net cash (used in) provided by investing activities			(8,654	)			(11,034	)			(16,917	)			(19,688	)			35,256
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders			(26,744	)			(26,941	)			(26,881	)			(53,685	)			(53,946	)
Repurchase of common stock			(3,009	)			(12,355	)			(15,015	)			(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			(284	)			(242	)			(51	)			(526	)			(264	)
Net cash used in financing activities			(30,037	)			(39,538	)			(41,947	)			(69,575	)			(84,248	)
Change in cash, cash equivalents and restricted cash			1,114				(2,434	)			(10,410	)			(1,320	)			18,529
Cash, cash equivalents and restricted cash, beginning			81,820				84,254				108,380				84,254				79,441
Cash, cash equivalents and restricted cash, ending		$	82,934			$	81,820			$	97,970			$	82,934			$	97,970

PotlatchDeltic Corporation Segment Information Unaudited
		Three Months Ended												Six Months Ended
(in thousands)		June 30,				March 31,				June 30,				June 30,
		2020				2020				2019				2020				2019
Revenues
Timberlands		$	67,345			$	82,425			$	66,881			$	149,770			$	135,039
Wood Products			126,216				145,000				138,030				271,216				270,336
Real Estate			13,105				10,969				36,432				24,074				42,596
			206,666				238,394				241,343				445,060				447,971
Intersegment Timberlands revenues			(25,111	)			(29,514	)			(25,762	)			(54,625	)			(50,674	)
Consolidated revenues		$	181,555			$	208,880			$	215,581			$	390,435			$	397,297
Adjusted EBITDDA1
Timberlands		$	25,659			$	34,982			$	26,131			$	60,641			$	52,981
Wood Products			10,907				13,229				(2,071	)			24,136				5,155
Real Estate			9,256				7,340				31,316				16,596				34,019
Corporate			(10,534	)			(8,672	)			(9,346	)			(19,206	)			(20,000	)
Eliminations and adjustments			85				692				3,050				777				5,177
Total Adjusted EBITDDA			35,373				47,571				49,080				82,944				77,332
Basis of real estate sold			(2,693	)			(6,498	)			(7,427	)			(9,191	)			(8,983	)
Depreciation, depletion and amortization			(17,765	)			(18,638	)			(16,727	)			(36,403	)			(32,524	)
Interest expense, net			(8,339	)			(3,698	)			(7,882	)			(12,037	)			(13,346	)
Loss on extinguishment of debt			—				—				—				—				(5,512	)
Pension settlement charge			—				(42,988	)			—				(42,988	)			—
Non-operating pension and other postretirement employee benefits			(3,478	)			(3,635	)			(889	)			(7,113	)			(1,869	)
Gain (loss) on disposal of fixed assets			(7	)			192				30				185				62
Gain on sale of facility			—				—				—				—				9,176
Income (loss) before income taxes		$	3,091			$	(27,694	)		$	16,185			$	(24,603	)		$	24,336
Depreciation, depletion and amortization
Timberlands		$	11,566			$	12,591			$	10,469			$	24,157			$	20,734
Wood Products			5,798				5,630				5,861				11,428				10,903
Real Estate			156				160				147				316				356
Corporate			245				257				250				502				531
			17,765				18,638				16,727				36,403				32,524
Bond discounts and deferred loan fees2			406				406				410				812				887
Total depreciation, depletion and amortization		$	18,171			$	19,044			$	17,137			$	37,215			$	33,411
Basis of real estate sold
Real Estate		$	3,212			$	6,504			$	7,455			$	9,716			$	9,043
Eliminations and adjustments			(519	)			(6	)			(28	)			(525	)			(60	)
Total basis of real estate sold		$	2,693			$	6,498			$	7,427			$	9,191			$	8,983

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												Six Months Ended
(in thousands, except per share amount)		June 30,				March 31,				June 30,				June 30,
		2020				2020				2019				2020				2019
Total Adjusted EBITDDA
Net income (loss) (GAAP)		$	2,638			$	(16,832	)		$	17,137			$	(14,194	)		$	23,697
Interest expense, net			8,339				3,698				7,882				12,037				13,346
Income taxes			453				(10,862	)			(952	)			(10,409	)			639
Depreciation, depletion and amortization			17,765				18,638				16,727				36,403				32,524
Basis of real estate sold			2,693				6,498				7,427				9,191				8,983
Loss on extinguishment of debt			—				—				—				—				5,512
Pension settlement charge			—				42,988				—				42,988				—
Non-operating pension and other postretirement benefit costs			3,478				3,635				889				7,113				1,869
Gain on sale of facility			—				—				—				—				(9,176	)
(Gain) loss on disposal of fixed assets			7				(192	)			(30	)			(185	)			(62	)
Total Adjusted EBITDDA		$	35,373			$	47,571			$	49,080			$	82,944			$	77,332
Adjusted net income
Net income (loss) (GAAP)		$	2,638			$	(16,832	)		$	17,137			$	(14,194	)		$	23,697
Special items:
Loss on extinguishment of debt			—				—				—				—				5,512
Pension settlement charge, after tax			—				31,811				—				31,811				—
Gain on sale of facility, after tax			—				—				—				—				(6,790	)
Adjusted net income		$	2,638			$	14,979			$	17,137			$	17,617			$	22,419
Adjusted net income per diluted share
Net income (loss) per diluted share (GAAP)		$	0.04			$	(0.25	)		$	0.25			$	(0.21	)		$	0.35
Special items:
Loss on extinguishment of debt			—				—				—				—				0.08
Pension settlement charge, after tax			—				0.47				—				0.47				—
Gain on sale of facility, after tax			—				—				—				—				(0.10	)
Adjusted net income per diluted share		$	0.04			$	0.22			$	0.25			$	0.26			$	0.33

 

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