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10/29/18
PotlatchDeltic Corporation Reports Third Quarter 2018 Results

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 Richards Mark Benson    
  509.835.1521 509.835.1513    

 

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Source: PotlatchDeltic Corporation