PotlatchDeltic Corporation Reports Second Quarter 2020 Results

SPOKANE, Wash.--(BUSINESS WIRE)--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 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	)
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 fees^2		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