Business Wire | Jul 27, 2020 04:10PM EDT

PotlatchDeltic Corporation Reports Second Quarter 2020 Results

Jul. 27, 2020

SPOKANE, Wash.--(BUSINESS WIRE)--Jul. 27, 2020--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, 67,359 67,478 67,713 diluted (in thousands)

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, June 30, March 31, June 30, June 30,except pershare amounts) 2020 2020 2019 2020 2019

Revenues $ 181,555 $ 208,880 $ 215,581 $ 390,435 $ 397,297

Costs and expenses:

Cost of goods 149,836 172,046 175,673 321,882 329,888 sold

Selling,general and 16,811 14,207 14,952 31,018 31,522 administrativeexpenses

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

166,647 186,253 190,625 352,900 352,234

Operating 14,908 22,627 24,956 37,535 45,063 income

Interest (8,339 ) (3,698 ) (7,882 ) (12,037 ) (13,346 )expense, net

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

Pensionsettlement - (42,988 ) - (42,988 ) - charge

Non-operatingpension andother (3,478 ) (3,635 ) (889 ) (7,113 ) (1,869 )postretirementemployeebenefit costs

Income (loss)before income 3,091 (27,694 ) 16,185 (24,603 ) 24,336 taxes

Income taxes (453 ) 10,862 952 10,409 (639 )

Net income $ 2,638 $ (16,832 ) $ 17,137 $ (14,194 ) $ 23,697 (loss)



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 $ 0.40 $ 0.40 $ 0.40 $ 0.80 $ 0.80 share

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 73,541 74,233 and sale

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 6,701 6,701 postretirement employee benefits

Total current liabilities 128,626 113,252

Long-term debt 711,001 710,495

Pension and other postretirement employee 142,708 115,463 benefits

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 66,871 67,221 shares, issued 66,871 and 67,221 shares

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

June 30, March 31, June 30, June 30, June 30,(in thousands) 2020 2020 2019 2020 2019

CASH FLOWS FROMOPERATING ACTIVITIES

Net income (loss) $ 2,638 $ (16,832 ) $ 17,137 $ (14,194 ) $ 23,697

Adjustments:

Depreciation,depletion and 18,171 19,044 17,137 37,215 33,411 amortization

Basis of real 2,693 6,498 7,427 9,191 8,983 estate sold

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

Loss onextinguishment of - - - - 5,512 debt

Change in (1,466 ) (12,383 ) (1,139 ) (13,849 ) (17,238 )deferred taxes

Pension and otherpostretirement 5,765 6,068 2,831 11,833 5,937 employee benefits

Pension - 42,988 - 42,988 - settlement charge

Equity-basedcompensation 1,980 1,885 1,832 3,865 3,449 expense

Other, net (414 ) 237 (1,142 ) (177 ) (1,928 )

Change in workingcapital and 13,840 2,557 8,507 16,397 22,490 operating-relatedactivities, net

Real estatedevelopment (2,109 ) (378 ) (2,715 ) (2,487 ) (4,481 )expenditures

Funding ofpension and other (1,293 ) (1,546 ) (1,421 ) (2,839 ) (3,135 )postretirementemployee benefits

Net cash providedby operating 39,805 48,138 48,454 87,943 67,521 activities



CASH FLOWS FROMINVESTING ACTIVITIES

Property, plantand equipment (5,256 ) (5,039 ) (11,742 ) (10,295 ) (15,502 )additions

Timberlandsreforestation and (3,466 ) (4,310 ) (3,948 ) (7,776 ) (8,190 )roads

Acquisition oftimber and (540 ) (4,190 ) (278 ) (4,730 ) (278 )timberlands

Proceeds on sale - 1,000 (1,252 ) 1,000 58,793 of facility

Other, net 608 1,505 303 2,113 433

Net cash (usedin) provided by (8,654 ) (11,034 ) (16,917 ) (19,688 ) 35,256 investingactivities



CASH FLOWS FROMFINANCING ACTIVITIES

Distributions tocommon (26,744 ) (26,941 ) (26,881 ) (53,685 ) (53,946 )stockholders

Repurchase of (3,009 ) (12,355 ) (15,015 ) (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 (284 ) (242 ) (51 ) (526 ) (264 )

Net cash used infinancing (30,037 ) (39,538 ) (41,947 ) (69,575 ) (84,248 )activities

Change in cash,cash equivalents 1,114 (2,434 ) (10,410 ) (1,320 ) 18,529 and restrictedcash

Cash, cashequivalents and 81,820 84,254 108,380 84,254 79,441 restricted cash,beginning

Cash, cashequivalents and $ 82,934 $ 81,820 $ 97,970 $ 82,934 $ 97,970 restricted cash,ending

PotlatchDeltic Corporation

Segment Information

Unaudited

Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30,(in thousands) 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

IntersegmentTimberlands (25,111 ) (29,514 ) (25,762 ) (54,625 ) (50,674 )revenues

Consolidated $ 181,555 $ 208,880 $ 215,581 $ 390,435 $ 397,297 revenues



Adjusted EBITDDA^1

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 )

Eliminationsand 85 692 3,050 777 5,177 adjustments

Total Adjusted 35,373 47,571 49,080 82,944 77,332 EBITDDA

Basis of real (2,693 ) (6,498 ) (7,427 ) (9,191 ) (8,983 )estate sold

Depreciation,depletion and (17,765 ) (18,638 ) (16,727 ) (36,403 ) (32,524 )amortization

Interest (8,339 ) (3,698 ) (7,882 ) (12,037 ) (13,346 )expense, net

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

Pensionsettlement - (42,988 ) - (42,988 ) - charge

Non-operatingpension andother (3,478 ) (3,635 ) (889 ) (7,113 ) (1,869 )postretirementemployeebenefits

Gain (loss) ondisposal of (7 ) 192 30 185 62 fixed assets

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

Income (loss)before income $ 3,091 $ (27,694 ) $ 16,185 $ (24,603 ) $ 24,336 taxes



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 discountsand deferred 406 406 410 812 887 loan fees^2

Totaldepreciation, $ 18,171 $ 19,044 $ 17,137 $ 37,215 $ 33,411 depletion andamortization



Basis of real estate sold

Real Estate $ 3,212 $ 6,504 $ 7,455 $ 9,716 $ 9,043

Eliminationsand (519 ) (6 ) (28 ) (525 ) (60 )adjustments

Total basis ofreal estate $ 2,693 $ 6,498 $ 7,427 $ 9,191 $ 8,983 sold

^ Management uses Adjusted EBITDDA to evaluate company and segment1 performance. See the reconciliation of Total Adjusted EBITDDA on page 8, Reconciliations.

^ Bond discounts and deferred loan fees are included in interest expense, net2 in the Condensed Consolidated Statements of Operations.

PotlatchDeltic Corporation

Reconciliations

Unaudited

Three Months Ended Six Months Ended

(in thousands, June 30, March 31, June 30, June 30,except pershare amount) 2020 2020 2019 2020 2019

Total Adjusted EBITDDA

Net income $ 2,638 $ (16,832 ) $ 17,137 $ (14,194 ) $ 23,697 (loss) (GAAP)

Interest 8,339 3,698 7,882 12,037 13,346 expense, net

Income taxes 453 (10,862 ) (952 ) (10,409 ) 639

Depreciation,depletion and 17,765 18,638 16,727 36,403 32,524 amortization

Basis of real 2,693 6,498 7,427 9,191 8,983 estate sold

Loss onextinguishment - - - - 5,512 of debt

Pensionsettlement - 42,988 - 42,988 - charge

Non-operatingpension andother 3,478 3,635 889 7,113 1,869 postretirementbenefit costs

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

(Gain) loss ondisposal of 7 (192 ) (30 ) (185 ) (62 )fixed assets

Total Adjusted $ 35,373 $ 47,571 $ 49,080 $ 82,944 $ 77,332 EBITDDA



Adjusted net income

Net income $ 2,638 $ (16,832 ) $ 17,137 $ (14,194 ) $ 23,697 (loss) (GAAP)

Special items:

Loss onextinguishment - - - - 5,512 of debt

Pensionsettlement - 31,811 - 31,811 - charge, aftertax

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

Adjusted net $ 2,638 $ 14,979 $ 17,137 $ 17,617 $ 22,419 income



Adjusted netincome per diluted share

Net income(loss) per $ 0.04 $ (0.25 ) $ 0.25 $ (0.21 ) $ 0.35 diluted share(GAAP)

Special items:

Loss onextinguishment - - - - 0.08 of debt

Pensionsettlement - 0.47 - 0.47 - charge, aftertax

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

Adjusted netincome per $ 0.04 $ 0.22 $ 0.25 $ 0.26 $ 0.33 diluted share

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