PotlatchDeltic Corporation Reports First Quarter 2022 Results

SPOKANE, Wash.--(BUSINESS WIRE)--PotlatchDeltic Corporation (Nasdaq: PCH) today reported net income of $163.9 million, or $2.35 per diluted share, on revenues of $411.4 million for the quarter ended March 31, 2022. Excluding after tax special items consisting of a non-cash pension settlement charge and a net loss on fire damage, adjusted net income was $174.6 million, or $2.50 per diluted share for the first quarter of 2022. Net income was $131.1 million, or $1.94 per diluted share, on revenues of $354.2 million for the quarter ended March 31, 2021.

First Quarter 2022 Highlights

• Generated Total Adjusted EBITDDA of $245.6 million and Total Adjusted EBITDDA margin of 60%
• Highest first quarter Adjusted EBITDDA on record and second highest quarterly Adjusted EBITDDA in our history
• Transferred $70 million in pension obligations to American General Life
• Expanded strong liquidity position to $770 million as of March 31, 2022

“2022 is off to a phenomenal start with each of our businesses delivering exceptional results leading to our highest first quarter financial performance on record," said Eric Cremers, president and chief executive officer. "Our operating results reflect our integrated operating model and leverage-to-lumber strategy combined with strong execution by our teams across all of our operations. Looking forward, we remain upbeat on lumber demand fundamentals despite the current rising interest rate environment. Our commitment to a disciplined capital allocation strategy and our strong balance sheet position us to continue to enhance shareholder value," stated Mr. Cremers.

Financial Highlights
($ in millions, except per share data)	Q1 2022		Q4 2021		Q1 2021
Revenues	$	411.4	$	248.4	$	354.2
Net income	$	163.9	$	39.2	$	131.1
Weighted average shares outstanding, diluted (in thousands)		69,623		67,974		67,607
Net income per diluted share	$	2.35	$	0.58	$	1.94
Adjusted Net Income	$	174.6	$	39.9	$	131.1
Adjusted Net Income Per Diluted Share	$	2.50	$	0.59	$	1.94
Total Adjusted EBITDDA	$	245.6	$	75.7	$	195.0
Dividends per share^1	$	0.44	$	4.44	$	0.41
Net cash from operations	$	230.3	$	51.6	$	169.9
Cash and cash equivalents	$	470.9	$	296.2	$	382.0

^1The regular dividend was increased 7.3% to $0.44 per quarter and a special dividend of $4 per share was paid Q4 2021.

Business Performance: Q1 2022 vs. Q4 2021

Timberlands

First Quarter 2022 Highlights

• Timberlands Adjusted EBITDDA increased $34.6 million from Q4 2021
• Increased Northern harvest volumes driven by favorable logging conditions
• Northern sawlog price increased 54% primarily due to higher indexed sawlog prices
• Southern sawlog prices increased 2% as higher pine sawlog prices partially offset the effect of seasonally lower hardwood volumes
• Higher log & haul costs were primarily driven by increased fuel costs
• Forest management costs declined due to seasonally lower Northern activity

($ in millions)	Q1 2022		Q4 2021		$ Change
Timberlands Revenues	$	123.7	$	86.8	$	36.9
Timberlands Adjusted EBITDDA	$	76.4	$	41.8	$	34.6

Wood Products

First Quarter 2022 Highlights

• Wood Products Adjusted EBITDDA increased $112.8 million from Q4 2021
• Average lumber price increased 91% to $1,075 per MBF in Q1 2022
• Higher manufacturing cost reflects inflationary cost increases and planned mill maintenance
• Log costs increased due to higher index pricing in Idaho
• Plywood shipments and price realizations increased due to strong demand and mix

($ in millions)	Q1 2022		Q4 2021		$ Change
Wood Products Revenues	$	295.7	$	174.2	$	121.5
Wood Products Adjusted EBITDDA	$	150.0	$	37.2	$	112.8

Real Estate

First Quarter 2022 Highlights

• Real Estate Adjusted EBITDDA increased $20.1 million from Q4 2021
• Sold 4,751 acres of rural land at an average price of $4,556/acre, including a tract for $13.2 million
• Sold 64 residential lots at an average price of $112,725/lot
• Sold 3 commercial acres for $917,236/acre

($ in millions)	Q1 2022		Q4 2021		$ Change
Real Estate Revenues	$	34.1	$	14.0	$	20.1
Real Estate Adjusted EBITDDA	$	30.1	$	10.0	$	20.1

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 income 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, April 26, 2022, 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 1-888-510-2008 for U.S./Canada and 1-646-960-0306 for international callers. Participants will be asked to provide conference I.D. number 7281983. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available two hours following the call until May 3, 2022, by calling 1-800-770-2030 for U.S./Canada or 1-647-362-9199 for international callers. Callers must enter conference I.D. number 7281983 to access the replay.

About PotlatchDeltic

PotlatchDeltic (Nasdaq: PCH) is a leading Real Estate Investment Trust (REIT) that owns approximately 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 revenues, costs and expenses; favorable housing market fundamentals and demand for lumber; disciplined capital allocation strategy; business conditions and strategies; 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 the impact of COVID-19 and its variants, governmental responses to such outbreaks, and anticipated recovery from the pandemic 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 at our facilities and on our timberland 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
	March 31,			December 31,			March 31,
(in thousands, except per share amounts)	2022			2021			2021
Revenues	$	411,350		$	248,406		$	354,193
Costs and expenses:
Cost of goods sold		179,847			178,163			169,302
Selling, general and administrative expenses		16,294			18,650			16,758
Net loss on fire damage		276			1,033			—
		196,417			197,846			186,060
Operating income		214,933			50,560			168,133
Interest expense, net		(2,894	)		(8,861	)		(3,574	)
Pension settlement charge		(14,165	)		—			—
Non-operating pension and other postretirement employee benefit costs		(1,929	)		(3,271	)		(3,414	)
Income before income taxes		195,945			38,428			161,145
Income taxes		(32,065	)		754			(30,039	)
Net income	$	163,880		$	39,182		$	131,106
Net income per share:
Basic	$	2.36		$	0.58		$	1.95
Diluted	$	2.35		$	0.58		$	1.94
Dividends per share^1	$	0.44		$	4.44		$	0.41
Weighted-average shares outstanding:
Basic		69,419			67,572			67,207
Diluted		69,623			67,974			67,607

^1The regular dividend was increased 7.3% to $0.44 per quarter and a special dividend of $4 per share was paid Q4 2021.

PotlatchDeltic Corporation Condensed Consolidated Balance Sheet Unaudited
(in thousands, except per share amounts)	March 31, 2022			December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	470,918		$	296,151
Customer receivables, net		40,094			31,028
Inventories, net		67,673			72,369
Other current assets		21,938			21,630
Total current assets		600,623			421,178
Property, plant and equipment, net		297,710			292,320
Investment in real estate held for development and sale		61,562			65,604
Timber and timberlands, net		1,671,330			1,682,671
Intangible assets, net		15,296			15,491
Other long-term assets		87,095			57,951
Total assets	$	2,733,616		$	2,535,215
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	101,589		$	78,209
Current portion of long-term debt		39,983			42,977
Current portion of pension and other postretirement employee benefits		4,993			4,993
Total current liabilities		146,565			126,179
Long-term debt		715,499			715,279
Pension and other postretirement employee benefits		90,359			83,674
Deferred tax liabilities, net		37,642			34,874
Other long-term obligations		31,353			49,076
Total liabilities		1,021,418			1,009,082
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 69,372 and 69,064 shares		69,372			69,064
Additional paid-in capital		1,782,940			1,781,217
Accumulated deficit		(147,632	)		(280,910	)
Accumulated other comprehensive income (loss)		7,518			(43,238	)
Total stockholders’ equity		1,712,198			1,526,133
Total liabilities and stockholders' equity	$	2,733,616		$	2,535,215

PotlatchDeltic Corporation Condensed Consolidated Statements of Cash Flows Unaudited
	Three Months Ended
(in thousands)	March 31, 2022			December 31, 2021			March 31, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	163,880		$	39,182		$	131,106
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization		19,874			20,060			18,399
Basis of real estate sold		10,854			4,627			8,823
Change in deferred taxes		(2,123	)		(3,196	)		1,490
Pension and other postretirement employee benefits		3,857			5,484			5,627
Pension settlement charge		14,165			—			—
Equity-based compensation expense		2,056			2,262			1,930
Net loss on fire damage		276			1,033			—
Other, net		(291	)		(270	)		(387	)
Change in working capital and operating-related activities, net		21,208			(13,117	)		6,713
Real estate development expenditures		(2,161	)		(2,795	)		(2,315	)
Funding of pension and other postretirement employee benefits		(1,296	)		(1,626	)		(1,421	)
Net cash from operating activities		230,299			51,644			169,965
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions		(12,566	)		(12,656	)		(7,762	)
Timberlands reforestation and roads		(4,648	)		(4,165	)		(3,956	)
Acquisition of timber and timberlands		—			(17,616	)		—
Proceeds from property insurance		—			1,750			—
Other, net		92			276			189
Net cash from investing activities		(17,122	)		(32,411	)		(11,529	)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders		(30,524	)		(305,779	)		(27,484	)
Proceeds from issuance of long-term debt		—			40,000			—
Repayment of long-term debt		(3,000	)		(46,366	)		—
Other, net		(1,071	)		(3,083	)		(591	)
Net cash from financing activities		(34,595	)		(315,228	)		(28,075	)
Change in cash, cash equivalents and restricted cash		178,582			(295,995	)		130,361
Cash, cash equivalents and restricted cash, beginning		296,772			592,767			252,340
Cash, cash equivalents and restricted cash, ending	$	475,354		$	296,772		$	382,701

Note: PotlatchDeltic issued 1.96 million shares of common stock and assumed debt of $6.6 million to acquire Loutre Land and Timber Company in December 2021. The debt was paid off after the transaction closed.

PotlatchDeltic Corporation Segment Information Unaudited
	Three Months Ended
	March 31,			December 31,			March 31,
(in thousands)	2022			2021			2021
Revenues
Timberlands	$	123,657		$	86,772		$	111,916
Wood Products		295,742			174,158			269,296
Real Estate		34,065			14,005			20,313
		453,464			274,935			401,525
Intersegment Timberlands revenues		(42,114	)		(26,529	)		(47,332	)
Consolidated revenues	$	411,350		$	248,406		$	354,193
Adjusted EBITDDA^1
Timberlands	$	76,434		$	41,804		$	67,858
Wood Products		149,951			37,204			125,555
Real Estate		30,124			10,007			16,593
Corporate		(9,584	)		(12,365	)		(10,710	)
Eliminations and adjustments		(1,363	)		(932	)		(4,310	)
Total Adjusted EBITDDA		245,562			75,718			194,986
Interest expense, net		(2,894	)		(8,861	)		(3,574	)
Depreciation, depletion and amortization		(19,502	)		(19,477	)		(17,996	)
Basis of real estate sold		(10,854	)		(4,627	)		(8,823	)
Net loss on fire damage		(276	)		(1,033	)		—
Pension settlement charge		(14,165	)		—			—
Non-operating pension and other postretirement employee benefits		(1,929	)		(3,271	)		(3,414	)
Gain (loss) on disposal of fixed assets		3			(21	)		(34	)
Income before income taxes	$	195,945		$	38,428		$	161,145
Depreciation, depletion and amortization
Timberlands	$	12,161		$	11,611		$	11,417
Wood Products		7,021			7,541			6,203
Real Estate		170			163			155
Corporate		150			162			221
		19,502			19,477			17,996
Bond discounts and deferred loan fees^2		372			583			403
Total depreciation, depletion and amortization	$	19,874		$	20,060		$	18,399
Basis of real estate sold
Real Estate	$	10,860		$	4,630		$	8,829
Eliminations and adjustments		(6	)		(3	)		(6	)
Total basis of real estate sold	$	10,854		$	4,627		$	8,823

^1 Management uses Adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of Total Adjusted EBITDDA below.

^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
	March 31,			December 31,			March 31,
(in thousands, except per share amount)	2022			2021			2021
Total Adjusted EBITDDA
Net income (GAAP)	$	163,880		$	39,182		$	131,106
Interest expense, net		2,894			8,861			3,574
Income taxes		32,065			(754	)		30,039
Depreciation, depletion and amortization		19,502			19,477			17,996
Basis of real estate sold		10,854			4,627			8,823
Net loss on fire damage		276			1,033			—
Pension settlement charge		14,165			—			—
Non-operating pension and other postretirement benefit costs		1,929			3,271			3,414
(Gain) loss on disposal of fixed assets		(3	)		21			34
Total Adjusted EBITDDA	$	245,562		$	75,718		$	194,986
Adjusted Net Income
Net income (GAAP)	$	163,880		$	39,182		$	131,106
Special items:
Net loss on fire damage, after tax		205			748			—
Pension settlement charge, after tax		10,553			—			—
Adjusted net income	$	174,638		$	39,930		$	131,106
Adjusted Net Income Per Diluted Share
Net income per diluted share (GAAP)	$	2.35		$	0.58		$	1.94
Special items:
Net loss on fire damage, after tax		—			0.01			—
Pension settlement charge, after tax		0.15			—			—
Adjusted net income per diluted share	$	2.50		$	0.59		$	1.94