Business Wire | Oct 26, 2020 04:13PM EDT

PotlatchDeltic Corporation Reports Third Quarter 2020 Results

Oct. 26, 2020

SPOKANE, Wash.--(BUSINESS WIRE)--Oct. 26, 2020--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, 67,528 67,359 67,545 diluted (in thousands)

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 June 30, September September 30, 30, 30,

(in thousands,except per 2020 2020 2019 2020 2019 share amounts)

Revenues $ 313,046 $ 181,555 $ 226,302 $ 703,481 $ 623,599

Costs and expenses:

Cost of goods 182,039 149,836 182,634 503,921 512,522 sold

Selling,general and 21,046 16,811 12,472 52,064 43,994 administrativeexpenses

Gain on sale - - - - (9,176 )of facility

203,085 166,647 195,106 555,985 547,340

Operating 109,961 14,908 31,196 147,496 76,259 income

Interest (8,557 ) (8,339 ) (8,475 ) (20,594 ) (21,821 )expense, net

Loss onextinguishment - - - - (5,512 )of debt

Pensionsettlement - - - (42,988 ) - charge

Non-operatingpension andother (3,557 ) (3,478 ) (935 ) (10,670 ) (2,804 )postretirementemployeebenefit costs

Income before 97,847 3,091 21,786 73,244 46,122 income taxes

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 $ 0.40 $ 0.40 $ 0.40 $ 1.20 $ 1.20 share

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 December 30, 2020 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 74,216 74,233 and sale

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 6,701 6,701 postretirement employee benefits

Total current liabilities 161,121 113,252

Long-term debt 711,254 710,495

Pension and other postretirement employee 139,022 115,463 benefits

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 66,872 67,221 shares, issued 66,872 and 67,221 shares

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 June 30, September September September 30, 2020 2020 30, 2019 30, 2020 30, 2019

CASH FLOWS FROMOPERATING ACTIVITIES

Net income $ 81,007 $ 2,638 $ 20,565 $ 66,813 $ 44,262

Adjustments:

Depreciation,depletion and 20,594 18,171 19,178 57,809 52,589 amortization

Basis of real 5,249 2,693 5,228 14,440 14,211 estate sold

Gain on sale of - - - - (9,176 )facility

Loss onextinguishment of - - - - 5,512 debt

Change in (538 ) (1,466 ) 295 (14,387 ) (16,943 )deferred taxes

Pension and otherpostretirement 5,917 5,765 2,970 17,750 8,907 employee benefits

Pension - - - 42,988 - settlement charge

Equity-basedcompensation 2,063 1,980 1,913 5,928 5,362 expense

Other, net (367 ) (414 ) (764 ) (544 ) (2,692 )

Change in workingcapital and (3,691 ) 13,840 (8,745 ) 12,706 13,745 operating-relatedactivities, net

Real estatedevelopment (1,713 ) (2,109 ) (1,257 ) (4,200 ) (5,738 )expenditures

Funding ofpension and other (5,619 ) (1,293 ) (1,477 ) (8,458 ) (4,612 )postretirementemployee benefits

Net cash providedby operating 102,902 39,805 37,906 190,845 105,427 activities



CASH FLOWS FROMINVESTING ACTIVITIES

Property, plantand equipment (4,371 ) (5,256 ) (10,094 ) (14,666 ) (25,596 )additions

Timberlandsreforestation and (4,569 ) (3,466 ) (5,079 ) (12,345 ) (13,269 )roads

Acquisition oftimber and (8 ) (540 ) - (4,738 ) (278 )timberlands

Proceeds on sale - - - 1,000 58,793 of facility

Proceeds ondisposition of 335 - 2,017 335 2,017 property, plantand equipment

Other, net 36 608 87 2,149 520

Net cash (usedin) provided by (8,577 ) (8,654 ) (13,069 ) (28,265 ) 22,187 investingactivities



CASH FLOWS FROMFINANCING ACTIVITIES

Distributions tocommon (26,749 ) (26,744 ) (26,888 ) (80,434 ) (80,834 )stockholders

Repurchase of - (3,009 ) - (15,364 ) (25,173 )common stock

Proceeds fromissuance of - - - - 150,000 long-term debt

Repayment of - - - - (150,000 )long-term debt

Premiums and feeson debt - - - - (4,865 )retirement

Other, net (506 ) (284 ) (129 ) (1,032 ) (393 )

Net cash used infinancing (27,255 ) (30,037 ) (27,017 ) (96,830 ) (111,265 )activities

Change in cash,cash equivalents 67,070 1,114 (2,180 ) 65,750 16,349 and restrictedcash

Cash, cashequivalents and 82,934 81,820 97,970 84,254 79,441 restricted cash,beginning

Cash, cashequivalents and $ 150,004 $ 82,934 $ 95,790 $ 150,004 $ 95,790 restricted cash,ending



PotlatchDeltic Corporation

Segment Information

Unaudited

Three Months Ended Nine Months Ended

September June 30, September September 30, 30, 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

IntersegmentTimberlands (40,381 ) (25,111 ) (35,013 ) (95,006 ) (85,687 )revenues

Consolidated $ 313,046 $ 181,555 $ 226,302 $ 703,481 $ 623,599 revenues



Adjusted EBITDDA^1

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 )

Eliminationsand (4,012 ) 85 (1,635 ) (3,235 ) 3,542 adjustments

Total Adjusted 135,386 35,373 55,012 218,330 132,344 EBITDDA

Basis of real (5,249 ) (2,693 ) (5,228 ) (14,440 ) (14,211 )estate sold

Depreciation,depletion and (20,187 ) (17,765 ) (18,786 ) (56,590 ) (51,310 )amortization

Interest (8,557 ) (8,339 ) (8,475 ) (20,594 ) (21,821 )expense, net

Loss onextinguishment - - - - (5,512 )of debt

Pensionsettlement - - - (42,988 ) - charge

Non-operatingpension andother (3,557 ) (3,478 ) (935 ) (10,670 ) (2,804 )postretirementemployeebenefits

Gain (loss) ondisposal of 11 (7 ) 198 196 260 fixed assets

Gain on sale - - - - 9,176 of facility

Income before $ 97,847 $ 3,091 $ 21,786 $ 73,244 $ 46,122 income taxes



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 discountsand deferred 407 406 392 1,219 1,279 loan fees^2

Totaldepreciation, $ 20,594 $ 18,171 $ 19,178 $ 57,809 $ 52,589 depletion andamortization



Basis of real estate sold

Real Estate $ 5,257 $ 3,212 $ 5,283 $ 14,973 $ 14,326

Eliminationsand (8 ) (519 ) (55 ) (533 ) (115 )adjustments

Total basis ofreal estate $ 5,249 $ 2,693 $ 5,228 $ 14,440 $ 14,211 sold



* Management uses Adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of Total Adjusted EBITDDA on page 8, Reconciliations. * 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 June 30, September September 30, 30, 30,

(in thousands,except per 2020 2020 2019 2020 2019 share amount)

Total Adjusted EBITDDA

Net income $ 81,007 $ 2,638 $ 20,565 $ 66,813 $ 44,262 (GAAP)

Interest 8,557 8,339 8,475 20,594 21,821 expense, net

Income taxes 16,840 453 1,221 6,431 1,860

Depreciation,depletion and 20,187 17,765 18,786 56,590 51,310 amortization

Basis of real 5,249 2,693 5,228 14,440 14,211 estate sold

Loss onextinguishment - - - - 5,512 of debt

Pensionsettlement - - - 42,988 - charge

Non-operatingpension andother 3,557 3,478 935 10,670 2,804 postretirementbenefit costs

Gain on sale - - - - (9,176 )of facility

(Gain) loss ondisposal of (11 ) 7 (198 ) (196 ) (260 )fixed assets

Total Adjusted $ 135,386 $ 35,373 $ 55,012 $ 218,330 $ 132,344 EBITDDA



Adjusted net income

Net income $ 81,007 $ 2,638 $ 20,565 $ 66,813 $ 44,262 (GAAP)

Special items:

Loss onextinguishment - - - - 5,512 of debt

Pensionsettlement - - - 31,811 - charge, aftertax

Gain on saleof facility, - - - - (6,790 )after tax

Adjusted net $ 81,007 $ 2,638 $ 20,565 $ 98,624 $ 42,984 income



Adjusted netincome per diluted share

Net income perdiluted share $ 1.20 $ 0.04 $ 0.30 $ 0.99 $ 0.65 (GAAP)

Special items:

Loss onextinguishment - - - - 0.08 of debt

Pensionsettlement - - - 0.47 - charge, aftertax

Gain on saleof facility, - - - - (0.10 )after tax

Adjusted netincome per $ 1.20 $ 0.04 $ 0.30 $ 1.46 $ 0.63 diluted share



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