Market Overview

PotlatchDeltic Corporation Reports First Quarter 2019 Results

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PotlatchDeltic Corporation (NASDAQ:PCH) today reported net income of
$6.6 million, or $0.10 per diluted share, on revenues of $181.7 million
for the quarter ended March 31, 2019. Excluding after-tax special items
consisting of a gain on the sale of the legacy Deltic MDF facility and a
loss on the extinguishment of debt, adjusted net income was $5.3
million, or $0.08 per diluted share for the first quarter of 2019.

First Quarter 2019 Highlights

  • Generated $28.3 million of Total Adjusted EBITDDA
  • Closed the sale of legacy Deltic MDF facility for $92 million,
    generating $43 million in cash, after taxes
  • Refinanced $150.0 million of 7.5% debt, reducing annual interest
    expense run rate by over $5 million
  • Repurchased 278,947 shares for $10.2 million

"Our first quarter results reflect seasonally lower activity and
challenging operating conditions," said Mike Covey, chairman and chief
executive officer. "We continue to expect improvement in lumber prices
as the building season gets underway in earnest. Meanwhile, our balance
sheet remains strong and provides the flexibility to drive shareholder
value," stated Mr. Covey.

Financial Highlights

($ in millions, except per share data)     Q1 2019     Q4 2018     Q1 2018
Revenues $ 181.7 $ 217.3 $ 199.9
Net income $ 6.6 $ 1.8 $ 14.6
Weighted average shares outstanding, diluted (in thousands) 67,916 68,110 50,786
Net income per diluted share $ 0.10 $ 0.03 $ 0.29
 
Adjusted net income $ 5.3 $ 2.7 $ 35.2
Adjusted net income per diluted share $ 0.08 $ 0.04 $ 0.69
 
Total Adjusted EBITDDA $ 28.3 $ 36.4 $ 64.7
Distributions per share $ 0.40 $ 3.94 $ 0.40
Net cash from operations $ 19.1 $ 30.5 $ 34.9
Cash and cash equivalents $ 104.8 $ 76.6 $ 102.3
 

Consolidated results include Deltic Timber beginning February 21, 2018.
The financial statements included within this release do not include
Deltic Timber's financial results for any period prior to the merger
date.

Business Performance: Q1 2019 vs. Q4 2018

Resource

First Quarter 2019 Highlights

  • Northern sawlog prices decreased 9% due to lower lumber index pricing
    and seasonally heavier logs
  • Northern sawlog volumes decreased seasonally
  • Southern sawlog and pulpwood prices increased due to constrained log
    supply as a result of wet weather
($ in millions)     Q1 2019     Q4 2018    

$ Change

Resource Revenues $ 68.2 $ 74.5 $ (6.3 )
 
Resource Adjusted EBITDDA $ 26.9 $ 29.8 $ (2.9 )
 

Wood Products

First Quarter 2019 Highlights

  • Lumber price realizations increased approximately 4% to $380 per MBF
    in Q1 2019
  • Lumber shipments declined 10% due to operational and transportation
    issues
($ in millions)     Q1 2019     Q4 2018    

$ Change

Wood Products Revenues $ 132.3 $ 148.5 $ (16.2 )
 
Wood Products Adjusted EBITDDA $ 7.2 $ 3.6 $ 3.6
 

Real Estate

First Quarter 2019 Highlights

  • Sold 2,342 acres of rural real estate at an average price of $1,801
    per acre
  • Sold 7 residential lots at an average of $96,129 per lot
  • Q4 2018 included a commercial real estate sale and 67 residential lots
($ in millions)     Q1 2019     Q4 2018    

$ Change

Real Estate Revenues $ 6.2 $ 16.4 $ (10.2 )
 
Real Estate Adjusted EBITDDA $ 2.7 $ 12.6 $ (9.9 )
 

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, April 30, 2019,
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 Investor Resources link or by conference call at
1-877-823-6919 for U.S./Canada and 1-647-689-5576 for international
callers. Participants will be asked to provide conference I.D. number
6367747. 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 7, 2019 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 6367747 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust
(REIT) that owns nearly 1.9 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 Litigation Reform Act of 1995 as amended,
including without limitation, our expectations regarding the U.S.
housing market; strong repair and remodel market; lumber demand and
pricing; 2019 lumber shipments; effect on annual adjusted EBITDDA of $10
per thousand board foot change in price; Northern and Southern log and
pulpwood sales and pricing; Q2 2019 timber harvest; real estate sales
and cost basis; the direction of our business markets; business
conditions; Reduction of interest expense as a result of Farm Credit
patronage; 2019 capital expenditures; Q2 2019 interest expense; Q2 2019
corporate expense; Q2 2019 income tax; dividend payout ratio; and
similar matters. 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 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; changes in interest
rates; changes in the level of construction activity; changes in Asia
demand; changes in tariffs, quotas and trade agreements involving wood
products; currency fluctuation; changes in demand for our products;
changes in production and production capacity in the forest products
industry; competitive pricing pressures for our products; unanticipated
manufacturing disruptions; changes in general and industry-specific
environmental laws and regulations; unforeseen environmental liabilities
or expenditures; weather conditions; restrictions on harvesting due to
fire danger; changes in raw material, fuel and other costs; 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 Income
Unaudited

 

    Three Months Ended
March 31,     December 31,     March 31,
(in thousands, except per share amounts) 2019 2018 2018
Revenues $ 181,716   $ 217,250   $ 199,897  
Costs and expenses:
Cost of goods sold 154,215 192,000 139,155
Selling, general and administrative expenses 16,570 14,412 13,656
Gain on sale of facility (9,176 )
Deltic merger-related costs       874     19,255  
  161,609     207,286     172,066  
Operating income 20,107 9,964 27,831
Interest expense, net (5,464 ) (10,102 ) (5,660 )
Loss on extinguishment of debt (5,512 )
Non-operating pension and other postretirement costs   (980 )   (1,941 )   (1,857 )
Income (loss) before income taxes 8,151 (2,079 ) 20,314
Income taxes   (1,591 )   3,878     (5,717 )
Net income $ 6,560   $ 1,799   $ 14,597  
 
Net income per share:
Basic $ 0.10 $ 0.03 $ 0.29
Diluted $ 0.10 $ 0.03 $ 0.29
Dividends per share $ 0.40 $ 0.40 $ 0.40
Special distribution per share1 $ $ 3.54 $
Weighted-average shares outstanding (in thousands):
Basic 67,860 65,486 50,425
Diluted 67,916 68,110 50,786

1

    Deltic earnings and profit special distribution of $222 million,
paid on November 15, 2018.
 
 
PotlatchDeltic Corporation
Condensed Consolidated Balance Sheets
Unaudited
 
(in thousands, except share amounts)     March 31, 2019     December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 104,787 $ 76,639
Customer receivables, net 18,009 21,405
Inventories, net 62,408 60,805
Other current assets 18,625 22,675
Assets held for sale       80,674  
Total current assets 203,829 262,198
Property, plant and equipment, net 273,118 272,193
Investment in real estate held for development and sale 80,675 79,537
Timber and timberlands, net 1,666,168 1,672,815
Intangible assets, net 17,634 17,828
Other long-term assets   31,790     21,281  
Total assets $ 2,273,214   $ 2,325,852  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 72,565 $ 60,993
Current portion of long-term debt 39,981 39,973
Current portion of pension and other postretirement employee benefits 5,997 5,997
Liabilities held for sale       29,321  
Total current liabilities 118,543 136,284
Long-term debt 715,837 715,391
Pension and other postretirement employee benefits 110,476 110,659
Deferred tax liabilities, net 15,956 32,009
Other long-term obligations   34,016     16,730  
Total liabilities   994,828     1,011,073  
Commitments and contingencies
Stockholders' equity:
Preferred stock, authorized 4,000 shares, no shares issued
Common stock, $1 par value, authorized 100,000 shares, issued 67,588
and 67,570 shares
67,588 67,570
Additional paid-in capital 1,660,450 1,659,031
Accumulated deficit (312,874 ) (282,391 )
Accumulated other comprehensive loss   (136,778 )   (129,431 )
Total stockholders' equity   1,278,386     1,314,779  
Total liabilities and stockholders' equity $ 2,273,214   $ 2,325,852  
 
 
PotlatchDeltic Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited

 

    For the three months ended
(in thousands) March 31, 2019     December 31, 2018     March 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,560 $ 1,799 $ 14,597
Adjustments:
Depreciation, depletion and amortization 16,274 19,476 12,635
Basis of real estate sold 1,556 6,025 3,605
Gain on sale of facility (9,176 )
Loss on extinguishment of debt 5,512
Change in deferred taxes (16,099 ) (1,718 ) (1,058 )
Pension and other postretirement employee benefits 3,106 4,222 3,814
Equity-based compensation expense 1,617 1,688 3,279
Other, net (786 ) (542 )
Change in working capital and operating-related activities, net 13,983 2,621 8,394
Real estate development expenditures (1,766 ) (1,968 ) (608 )
Funding of pension and other postretirement employee benefits   (1,714 )   (1,620 )   (9,202 )
Net cash provided by operating activities   19,067     30,525     34,914  
 
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions (3,760 ) (11,384 ) (3,632 )
Timberlands reforestation and roads (4,242 ) (4,914 ) (2,860 )
Acquisition of timber and timberlands (4,712 )
Cash and cash equivalents acquired in merger 3,419
Proceeds on sale of facility 60,045
Other, net   130     153     232  
Net cash provided by (used in) investing activities   52,173     (20,857 )   (2,841 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders1 (27,065 ) (71,462 ) (25,102 )
Proceeds from Potlatch revolving line of credit 100,000
Repayment of Potlatch revolving line of credit (100,000 )
Repayment of Deltic revolving line of credit (106,000 )
Proceeds from long-term debt 150,000 100,000
Repayment of long-term debt (150,000 ) (14,250 )
Premiums and fees on debt retirement (4,865 )
Repurchase of common stock (10,158 )
Other, net   (213 )   (8 )   (4,838 )
Net cash used in financing activities   (42,301 )   (71,470 )   (50,190 )
Change in cash, cash equivalents and restricted cash 28,939 (61,802 ) (18,117 )
Cash, cash equivalents and restricted cash, beginning   79,441     141,243     120,457  
Cash, cash equivalents and restricted cash, ending $ 108,380   $ 79,441   $ 102,340  
1     A special distribution of $222 million was paid on November 15,
2018, representing the accumulated earnings and profits of Deltic
Timber Corporation. $44.4 million of the special distribution was
paid in cash, while the remaining balance was paid in shares of
PotlatchDeltic's common stock.
 
 
PotlatchDeltic Corporation
Segment Information
Unaudited
 
    For the three months ended
March 31,     December 31,     March 31,
(in thousands) 2019 2018 2018
Revenues
Resource $ 68,158 $ 74,512 $ 76,506
Wood Products 132,306 148,506 139,815
Real Estate   6,164     16,347     10,555  
206,628 239,365 226,876
Intersegment Resource revenues   (24,912 )   (22,115 )   (26,979 )
Consolidated revenues $ 181,716   $ 217,250   $ 199,897  
 
Adjusted EBITDDA1
Resource $ 26,850 $ 29,766 $ 37,697
Wood Products 7,226 3,621 28,950
Real Estate 2,703 12,535 8,002
Corporate (10,654 ) (8,816 ) (8,716 )
Eliminations and adjustments   2,127     (663 )   (1,201 )
Total Adjusted EBITDDA 28,252 36,443 64,732
Basis of real estate sold (1,556 ) (6,025 ) (3,605 )
Depreciation, depletion and amortization (15,797 ) (18,866 ) (12,196 )
Interest expense, net (5,464 ) (10,102 ) (5,660 )
Loss on extinguishment of debt (5,512 )
Non-operating pension and other postretirement employee benefits (980 ) (1,941 ) (1,857 )
Gain (loss) on fixed assets 32 (714 ) 4
Gain on sale of facility 9,176
Inventory purchase price adjustment in cost of goods sold (1,849 )
Deltic merger-related costs       (874 )   (19,255 )
Income before income taxes $ 8,151   $ (2,079 ) $ 20,314  
 
Depreciation, depletion and amortization
Resource $ 10,265 $ 12,227 $ 8,646
Wood Products 5,042 6,166 3,354
Real Estate 209 220 40
Corporate   281     253     156  
15,797 18,866 12,196
Bond discounts and deferred loan fees2   477     610     439  
Total depreciation, depletion and amortization $ 16,274   $ 19,476   $ 12,635  
 
Basis of real estate sold
Real Estate $ 1,588 $ 6,068 $ 3,723
Eliminations and adjustments   (32 )   (43 )   (118 )
Total basis of real estate sold $ 1,556   $ 6,025   $ 3,605  

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 Income
.

 
 
PotlatchDeltic Corporation
Reconciliations
Unaudited
 
    For the three months ended
March 31,     December 31,     March 31,
(in thousands, except per share amount) 2019 2018 2018
Total Adjusted EBITDDA
Net income (GAAP) $ 6,560 $ 1,799 $ 14,597
Interest, net 5,464 10,102 5,660
Income taxes 1,591 (3,878 ) 5,717
Depreciation, depletion and amortization 15,797 18,866 12,196
Basis of real estate sold 1,556 6,025 3,605
Loss on extinguishment of debt 5,512
Non-operating pension and other postretirement benefit costs 980 1,941 1,857
Deltic merger-related costs 874 19,255
Gain on sale of facility (9,176 )
Inventory purchase price adjustment in cost of goods sold 1,849
(Gain) loss on fixed assets   (32 )   714     (4 )
Total Adjusted EBITDDA $ 28,252   $ 36,443   $ 64,732  
 
Adjusted net income
Net income (GAAP) $ 6,560 $ 1,799 $ 14,597
Special items:
Loss on extinguishment of debt 5,512
Gain on sale of facility, after tax (6,790 )
Deltic merger-related costs 874 19,255
Inventory purchase price adjustment in cost of goods sold, after tax           1,368  
Adjusted net income $ 5,282   $ 2,673   $ 35,220  
 
Adjusted net income per diluted share
Net income per diluted share (GAAP) 0.10 0.03 0.29
Special items:
Loss on extinguishment of debt 0.08
Gain on sale of facility, after tax (0.10 )
Deltic merger-related costs 0.01 0.38
Inventory purchase price adjustment in cost of goods sold, after tax           0.02  
Adjusted net income per diluted share $ 0.08   $ 0.04   $ 0.69  

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