SPOKANE, Wash., Oct. 29, 2018 (GLOBE NEWSWIRE) -- PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $60.4 million, or $0.93 per diluted share, on revenues of $289.2 million for the quarter ended September 30, 2018.

Third Quarter 2018 Highlights

  • Consolidated Adjusted EBITDDA of $101.8 million and Adjusted EBITDDA margin of 35%

  • Wood Products Adjusted EBITDDA of $46.5 million and Adjusted EBITDDA margin of 23%

  • Achieved $51 million in after-tax annual cash synergy run rate target as of September 30, 2018 and ahead of schedule

“All three of our business segments delivered strong results in the third quarter and the financial objectives of the Deltic merger have exceeded our expectations,” said Mike Covey, chairman and chief executive officer. “In the fourth quarter we will pay a special distribution of $3.54 per share. Lumber market fundamentals remain strong despite the recent decline in lumber prices,” stated Mr. Covey.

Financial Highlights

 ($ in millions, except per share data) Q3 2018  Q2 2018  Q3 2017  
Revenues $289.2  $268.2  $190.4  
Net income $60.4  $46.1  $33.7  
Weighted average shares outstanding, diluted (in thousands)  64,722   63,316   41,250  
Net income per diluted share $0.93  $0.73  $0.82  
              
Adjusted net income $56.0  $47.2  $38.7  
Adjusted net income per diluted share $0.87  $0.75  $0.94  
              
Adjusted EBITDDA $101.8  $94.2  $62.2  
Distribution per share $0.40  $0.40  $0.375  
Net cash from operations $53.0  $60.5  $50.0  
Cash and cash equivalents $137.5  $125.7  $116.8  

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: Q3 2018 vs. Q2 2018

Resource

Third Quarter 2018 Highlights

  • Northern harvest volume increased due to more operating days
  • Northern sawlog prices increased 6% mostly due to seasonally lighter logs
  • Southern harvest operations were hampered by unseasonably wet weather
  • Log & haul costs increased due to higher Northern harvest volume
 ($ in millions) Q3 2018  Q2 2018  $ Change 
Segment Revenues $111.4  $92.5  $18.9 
             
Adjusted EBITDDA $58.7  $43.7  $15.0 
             

Wood Products

Third Quarter 2018 Highlights

  • Lumber shipments increased 25 MMBF; reflects progress on shortfall caused by Q2 2018 transportation issues
  • Lumber pricing declined 6%
  • Net decrease in panel EBITDDA due to annual maintenance shutdown at the MDF plant
 ($ in millions) Q3 2018  Q2 2018  $ Change 
Segment Revenues $199.0  $193.6  $5.4 
             
Adjusted EBITDDA $46.5  $51.5  $(5.0)
             

Real Estate

Third Quarter 2018 Highlights

  • Sold 3,160 acres of rural real estate at an average price of $2,600 per acre
  • No commercial acreage sales in Chenal Valley; expect higher rooftop density to spur interest
          
 ($ in millions) Q3 2018  Q2 2018  $ Change 
Segment Revenues $11.2  $16.4  $(5.2)
             
Adjusted EBITDDA $7.4  $12.3  $(4.9)
             

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 Monday, October 29, 2018, at 8:00 a.m. Pacific Time (11:00 a.m. Eastern Time). Investors may access the webcast at www.potlatchdeltic.com by clicking on the Investor Resources link or by conference call at 1-866-393-8403 for U.S./Canada and 1-706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 5245998. 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 November 5, 2018 by calling
1-800-585-8367 for U.S./Canada or 1-404-537-3406 for international callers. Callers must enter conference I.D. number 5245998 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 2 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 medium density fiberboard plant, 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; the direction of our business markets, business conditions, pricing; the expected synergies and operational efficiencies from the Deltic merger; the estimated distribution of Deltic’s accumulated earnings and profits; and the integration of Deltic’s operations 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 Potlatch. 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; the possibility that any of the anticipated benefits of the merger will not be realized or will not be realized within the expected time period; the risk that integration of Deltic’s operations with those of Potlatch will be materially delayed or will be more costly or difficult than expected; the effect of the merger on customer relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); the estimation of Deltic’s accumulated earnings and profits is preliminary and may change with further due diligence; and the other factors described in Potlatch’s Annual Report on Form 10-K and in the company’s other filings with the SEC. Potlatch 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  Nine Months Ended 
  September 30,  June 30,  September 30,  September 30, 
(Dollars in thousands, except per share amounts) 2018  2018  2017  2018  2017 
Revenues $289,199  $268,233  $190,441  $757,329  $503,351 
Costs and expenses:                    
Cost of goods sold1  195,584   180,906   124,727   515,645   348,581 
Selling, general and administrative expenses1  14,901   16,892   13,240   45,449   37,687 
Deltic merger-related costs  972   1,018   27   21,245   27 
Environmental charges for Avery Landing        4,978      4,978 
Loss (gain) on lumber price swap        2,080      (1,185)
   211,457   198,816   145,052   582,339   390,088 
Operating income  77,742   69,417   45,389   174,990   113,263 
Interest expense, net  (10,109)  (9,356)  (7,336)  (25,125)  (19,654)
Non-operating pension and other postretirement costs1  (1,942)  (1,908)  (1,596)  (5,707)  (4,788)
Income before income taxes  65,691   58,153   36,457   144,158   88,821 
Income taxes  (5,355)  (12,005)  (2,757)  (23,077)  (13,956)
Net income $60,336  $46,148  $33,700  $121,081  $74,865 
                     
Net income per share:                    
Basic $0.96  $0.73  $0.83  $2.06  $1.83 
Diluted $0.93  $0.73  $0.82  $2.03  $1.82 
Dividends per share $0.40  $0.40  $0.375  $1.20  $1.13 
Weighted-average shares outstanding (in thousands):                 
Basic  62,986   62,980   40,829   58,765   40,814 
Diluted  64,722   63,316   41,250   59,542   41,183 

We adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, retrospectively on January 1, 2018 and have reclassified non-service costs from operating expenses to non-operating costs. There was no change to income before income taxes.


PotlatchDeltic Corporation
Condensed Consolidated Balance Sheets
Unaudited

(Dollars in thousands) September 30, 2018  December 31, 2017 
ASSETS        
Current assets:        
Cash and cash equivalents $137,535  $120,457 
Customer receivables, net  39,029   11,240 
Inventories  73,864   50,132 
Other current assets  18,988   11,478 
Total current assets  269,416   193,307 
Property, plant and equipment, net  340,146   77,229 
Investment in real estate held for development and sale  76,523    
Timber and timberlands, net  1,684,049   654,476 
Deferred tax assets, net     19,796 
Trade name and customer relationships intangibles  19,241    
Other long-term assets  23,696   8,271 
Total assets $2,413,071  $953,079 
         
LIABILITIES AND STOCKHOLDERS EQUITY        
Current liabilities:        
Distribution payable1 $222,000  $ 
Accounts payable and accrued liabilities  80,258   55,201 
Current portion of long-term debt     14,263 
Current portion of pension and other postretirement employee benefits  6,088   5,334 
Total current liabilities  308,346   74,798 
Long-term debt  783,899   559,056 
Pension and other postretirement employee benefits  89,035   103,524 
Deferred tax liabilities, net  38,575    
Other long-term obligations  14,147   15,159 
Total liabilities  1,234,002   752,537 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  62,755   40,612 
Additional paid-in capital  1,483,750   359,144 
Accumulated deficit1  (256,280)  (104,363)
Accumulated other comprehensive loss  (111,156)  (94,851)
Total stockholders’ equity  1,179,069   200,542 
Total liabilities and stockholders' equity $2,413,071  $953,079 
         

A special distribution of $222 million was declared August 30, 2018 and is payable November 15, 2018.  The special distribution represents the accumulated earnings and profits of Deltic Timber Corporation as of February 20, 2018, the date Deltic merged into a wholly-owned subsidiary of PotlatchDeltic.  Up to 20%, or $44.4 million, of the special distribution will be paid in cash with the balance of the special distribution to be paid in shares of PotlatchDeltic’s common stock.

 

PotlatchDeltic Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited

  For the three months ended  For the nine months ended 
(Dollars in thousands) September 30, 2018  June 30, 2018  September 30, 2017  September 30, 2018  September 30, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES                    
Net income $60,336  $46,148  $33,700  $121,081  $74,865 
Adjustments: 
Depreciation, depletion and amortization  19,445   21,605   8,565   53,685   21,908 
Basis of real estate sold  4,248   2,820   579   10,673   6,351 
Change in deferred taxes  11,081   3,856   (2,169)  13,879   (925)
Pension and other postretirement employee benefits  4,222   4,185   3,288   12,221   9,863 
Equity-based compensation expense  1,629   1,795   1,188   6,518   3,536 
Other, net  (549)  (129)  (484)  (1,220)  (1,467)
Change in working capital and operating-related activities, net  (1,982)  (18,782)  10,570   (13,289)  20,489 
Real estate development expenditures  (1,416)  (1,057)     (3,081)   
Funding of qualified pension plans  (44,001)     (5,275)  (52,099)  (5,275)
Net cash from operating activities  53,013   60,441   49,962   148,368   129,345 
                     
CASH FLOWS FROM INVESTING ACTIVITIES                    
Purchase of property, plant and equipment  (7,123)  (7,741)  (3,506)  (18,496)  (9,445)
Timberlands reforestation and roads  (5,345)  (4,259)  (5,785)  (12,464)  (11,577)
Acquisition of timber and timberlands  (3)  (163)  (18,901)  (166)  (22,033)
Other, net  124   299   (32)  655   (106)
Cash and cash equivalents acquired in merger           3,419    
Net cash from investing activities  (12,347)  (11,864)  (28,224)  (27,052)  (43,161)
                     
CASH FLOWS FROM FINANCING ACTIVITIES                    
Dividends to common stockholders  (25,102)  (25,101)  (15,229)  (75,305)  (45,686)
Proceeds from Potlatch revolving line of credit           100,000    
Repayment of Potlatch revolving line of credit           (100,000)   
Revolving line of credit repayment attributable to Deltic           (106,000)   
Proceeds from issue of long-term debt           100,000    
Repayment of long-term debt           (14,250)  (5,000)
Debt issuance costs  (25)        (2,434)   
Other, net  (15)  (97)  (30)  (2,541)  (1,279)
Net cash from financing activities  (25,142)  (25,198)  (15,259)  (100,530)  (51,965)
Change in cash, cash equivalents and restricted cash  15,524   23,379   6,479   20,786   34,219 
Cash, cash equivalents and restricted cash, beginning  125,719   102,340   110,324   120,457   82,584 
Cash, cash equivalents and restricted cash, ending $141,243  $125,719  $116,803  $141,243  $116,803 
                     

 

PotlatchDeltic Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the condensed consolidated statements of cash flows.

  Nine Months Ended September 30, 
(Dollars in thousands) 2018  2017 
Cash and cash equivalents $137,535  $116,803 
Restricted cash included in other long-term assets1  3,708    
Total cash, cash equivalents, and restricted cash $141,243  $116,803 
         

1 Amounts included in restricted cash represent proceeds held by a qualified intermediary that are intended to be reinvested in timber and timberlands.

 

PotlatchDeltic Corporation
Segment Information
Unaudited

  For the three months ended  Nine Months Ended 
  September 30,  June 30,  September 30,  June 30, 
(Dollars in thousands) 2018  2018  2017  2018  2017 
Revenues                    
Resource $111,421  $92,511  $94,705  $280,438  $202,397 
Wood Products  199,025   193,585   116,487   532,425   326,608 
Real Estate  11,233   16,431   3,282   38,219   25,922 
   321,679   302,527   214,474   851,082   554,927 
Intersegment Resource revenues  (32,480)  (34,294)  (24,033)  (93,753)  (51,576)
Consolidated revenues $289,199  $268,233  $190,441  $757,329  $503,351 
                     
 Adjusted EBITDDA1                    
Resource $58,680  $43,691  $48,034  $140,068  $91,200 
Wood Products  46,446   51,566   24,395   126,962   58,660 
Real Estate  7,467   12,300   2,094   27,769   22,333 
Corporate  (8,989)  (11,264)  (9,108)  (28,969)  (25,809)
Eliminations and adjustments  (1,794)  (2,085)  (3,180)  (5,080)  (1,152)
Total Adjusted EBITDDA  101,810   94,208   62,235   260,750   145,232 
Basis of real estate sold  (4,248)  (2,820)  (579)  (10,673)  (6,351)
Depreciation, depletion and amortization  (18,836)  (20,950)  (8,196)  (51,982)  (20,796)
Interest expense, net  (10,109)  (9,356)  (7,336)  (25,125)  (19,654)
Non-operating pension and other postretirement employee benefits  (1,942)  (1,908)  (1,596)  (5,707)  (4,788)
Gain (loss) on fixed assets  (12)  (3)     (11)  (16)
Lumber price swap2        (3,066)     199 
Environmental charges for Avery Landing        (4,978)     (4,978)
Inventory purchase price adjustment in cost of goods sold           (1,849)   
Deltic merger-related costs  (972)  (1,018)  (27)  (21,245)  (27)
Income before income taxes $65,691  $58,153  $36,457  $144,158  $88,821 
                     
Depreciation, depletion and amortization             
Resource $12,730  $14,598  $6,207  $35,974  $14,865 
Wood Products  5,827   6,069   1,821   15,250   5,487 
Real Estate  81   77      198   1 
Corporate  198   206   168   560   443 
   18,836   20,950   8,196   51,982   20,796 
Bond discounts and deferred loan fees3  609   655   369   1,703   1,112 
Total depreciation, depletion and amortization $19,445  $21,605  $8,565  $53,685  $21,908 
                     
Basis of real estate sold                    
Real Estate $4,267  $2,896  $618  $10,886  $6,474 
Eliminations and adjustments  (19)  (76)  (39)  (213)  (123)
Total basis of real estate sold $4,248  $2,820  $579  $10,673  $6,351 

Management uses adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of consolidated Adjusted EBITDDA on page 9, Reconciliations.
Includes change in unrealized (gain) loss and $1 million in cash settlements.
3  Bond discounts and deferred loan fees are included in interest expense, net in the Consolidated Statements of Income.

 

PotlatchDeltic Corporation
Reconciliations

  For the three months ended  For the nine months ended 
  September 30,  June 30,  September 30,  September 30, 
(Dollars in thousands) 2018  2018  2017  2018  2017 
Adjusted EBITDDA                    
Net income (GAAP) $60,336  $46,148  $33,700  $121,081  $74,865 
Interest, net  10,109   9,356   7,336   25,125   19,654 
Income tax provision  5,355   12,005   2,757   23,077   13,956 
Depreciation, depletion and amortization  18,836   20,950   8,196   51,982   20,796 
Basis of real estate sold  4,248   2,820   579   10,673   6,351 
Non-operating pension and other postretirement benefit costs  1,942   1,908   1,596   5,707   4,788 
Deltic merger-related costs  972   1,018   27   21,245   27 
Inventory purchase price adjustment in cost of goods sold           1,849    
Lumber price swap1        3,066      (199)
Environmental charge for Avery Landing   —      4,978      4,978 
Loss on fixed assets  12   3      11   16 
Adjusted EBITDDA $101,810  $94,208  $62,235  $260,750  $145,232 
                     
Adjusted net income                    
Net income (GAAP) $60,336  $46,148  $33,700  $121,081  $74,865 
Special items:                    
Deltic merger-related costs  972   1,018   27   21,245   27 
Lumber price swap, after tax1        1,870      (121)
Environmental charge for Avery Landing, after tax        3,037      3,037 
Tax adustments2  (5,327)        (5,327)   
Inventory purchase price adjustment in cost of goods sold, after tax           1,368    
Adjusted net income $55,981  $47,166  $38,634  $138,367  $77,808 
                     
Adjusted net income per share                    
Net income per diluted share (GAAP) $0.93  $0.73  $0.82  $2.03  $1.82 
Special items:                    
Deltic merger-related costs  0.02   0.02      0.36    
Environmental charge for Avery Landing, after tax        0.07      0.07 
Tax adjustments2  (0.08)        (0.09)   
Inventory purchase price adjustment in cost of goods sold, after tax           0.02    
Lumber price swap, after tax        0.05       
Adjusted net income per diluted share $0.87  $0.75  $0.94  $2.32  $1.89 
                     

Adjustment includes change in unrealized (gain) loss and $1 million in cash settlements.
During the third quarter 2018, we recorded a tax benefit primarily related to deducting contributions to our qualified pension plans at the higher 2017 income tax rate.

Contact:(Investors)(Media)  
 Jerry RichardsMark Benson  
 509.835.1521509.835.1513