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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

(Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2022

or

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-32729

PotlatchDeltic Corporation

(Exact name of registrant as specified in its charter)

 

Delaware

82-0156045

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

601 West First Avenue, Suite 1600

 

Spokane, Washington

99201

(Address of principal executive offices)

(Zip Code)

 

(509) 835-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock ($1 par value)

PCH

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-accelerated Filer

Smaller Reporting Company

Emerging Growth Company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act).

Yes No

The number of shares of common stock of the registrant outstanding as of October 25, 2022, was 80,776,600.

 

 


 

POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES

Table of Contents

 

 

 

 

 

 

Page
Number

PART I. - FINANCIAL INFORMATION

 

ITEM 1.

Financial Statements (unaudited)

 

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Comprehensive Income

4

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Condensed Consolidated Statements of Stockholders’ Equity

8

 

Index for the Notes to Condensed Consolidated Financial Statements

9

 

Notes to Condensed Consolidated Financial Statements

10

ITEM 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

23

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

39

ITEM 4.

Controls and Procedures

39

 

 

 

PART II. - OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

40

ITEM 1A.

Risk Factors

40

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

40

ITEM 6.

Exhibits

41

 

 

 

SIGNATURE

42

 

 

 

 

 

 


Table of Contents

 

Part I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended September 30,

 

 

 

Nine Months Ended September 30,

 

(in thousands, except per share amounts)

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Revenues

$

306,693

 

 

$

287,330

 

 

 

$

1,077,640

 

 

$

1,089,029

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

220,876

 

 

 

190,602

 

 

 

 

592,057

 

 

 

537,683

 

Selling, general and administrative expenses

 

18,878

 

 

 

18,512

 

 

 

 

55,584

 

 

 

54,782

 

CatchMark merger-related expenses

 

26,007

 

 

 

 

 

 

 

26,007

 

 

 

 

Gain on fire damage

 

(24,913

)

 

 

(4,394

)

 

 

 

(34,505

)

 

 

(4,394

)

 

 

240,848

 

 

 

204,720

 

 

 

 

639,143

 

 

 

588,071

 

Operating income

 

65,845

 

 

 

82,610

 

 

 

 

438,497

 

 

 

500,958

 

Interest expense, net

 

(8,280

)

 

 

(8,641

)

 

 

 

(18,593

)

 

 

(20,414

)

Pension settlement charge

 

 

 

 

 

 

 

 

(14,165

)

 

 

 

Non-operating pension and other postretirement employee benefit costs

 

(1,808

)

 

 

(3,271

)

 

 

 

(5,546

)

 

 

(9,956

)

Other

 

(1

)

 

 

 

 

 

 

(1

)

 

 

 

Income before income taxes

 

55,756

 

 

 

70,698

 

 

 

 

400,192

 

 

 

470,588

 

Income taxes

 

(9,801

)

 

 

(5,031

)

 

 

 

(70,135

)

 

 

(85,910

)

Net income

$

45,955

 

 

$

65,667

 

 

 

$

330,057

 

 

$

384,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.64

 

 

$

0.98

 

 

 

$

4.70

 

 

$

5.72

 

Diluted

$

0.64

 

 

$

0.97

 

 

 

$

4.69

 

 

$

5.69

 

Dividends per share

$

0.44

 

 

$

0.41

 

 

 

$

1.32

 

 

$

1.23

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

71,486

 

 

 

67,315

 

 

 

 

70,171

 

 

 

67,275

 

Diluted

 

71,632

 

 

 

67,648

 

 

 

 

70,308

 

 

 

67,588

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


Table of Contents

 

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

45,955

 

 

$

65,667

 

 

$

330,057

 

 

$

384,678

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement employee benefits:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period, net of tax benefit of $0, $0, $1,570 and $0

 

 

 

 

 

 

 

 

(4,587

)

 

 

 

Effect of pension settlement, net of tax expense of $0, $0, $3,612 and $0

 

 

 

 

 

 

 

 

10,553

 

 

 

 

Amortization of actuarial loss included in net income, net of tax expense of $270, $1,073, $1,012 and $3,254

 

 

784

 

 

 

3,050

 

 

 

2,954

 

 

 

9,258

 

Amortization of prior service cost (credit) included in net income, net of tax expense (benefit) of $44, $(73), $133 and $(217)

 

 

130

 

 

 

(204

)

 

 

389

 

 

 

(614

)

Cash flow hedges, net of tax (benefit) expense of $(4,093), $397, $973 and $2,249

 

 

32,725

 

 

 

6,636

 

 

 

118,530

 

 

 

39,580

 

Other comprehensive income, net of tax

 

 

33,639

 

 

 

9,482

 

 

 

127,839

 

 

 

48,224

 

Comprehensive income

 

$

79,594

 

 

$

75,149

 

 

$

457,896

 

 

$

432,902

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Table of Contents

 

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except per share amounts)

 

September 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

484,018

 

 

$

296,151

 

Customer receivables, net

 

 

37,224

 

 

 

31,028

 

Inventories, net

 

 

62,584

 

 

 

72,369

 

Other current assets

 

 

41,551

 

 

 

21,630

 

Total current assets

 

 

625,377

 

 

 

421,178

 

Property, plant and equipment, net

 

 

319,232

 

 

 

292,320

 

Investment in real estate held for development and sale

 

 

57,458

 

 

 

65,604

 

Timber and timberlands, net

 

 

2,520,505

 

 

 

1,682,671

 

Intangible assets, net

 

 

17,906

 

 

 

15,491

 

Other long-term assets

 

 

184,310

 

 

 

57,951

 

Total assets

 

$

3,724,788

 

 

$

2,535,215

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

111,607

 

 

$

78,209

 

Current portion of long-term debt

 

 

39,996

 

 

 

42,977

 

Current portion of pension and other postretirement employee benefits

 

 

4,993

 

 

 

4,993

 

Total current liabilities

 

 

156,596

 

 

 

126,179

 

Long-term debt

 

 

992,507

 

 

 

715,279

 

Pension and other postretirement employee benefits

 

 

92,990

 

 

 

83,674

 

Deferred tax liabilities, net

 

 

38,469

 

 

 

34,874

 

Other long-term obligations

 

 

38,807

 

 

 

49,076

 

Total liabilities

 

 

1,319,369

 

 

 

1,009,082

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, authorized 4,000 shares, no shares issued

 

 

 

 

 

 

Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 80,777 and 69,064 shares

 

 

80,777

 

 

 

69,064

 

Additional paid-in capital

 

 

2,292,130

 

 

 

1,781,217

 

Accumulated deficit

 

 

(52,089

)

 

 

(280,910

)

Accumulated other comprehensive income (loss)

 

 

84,601

 

 

 

(43,238

)

Total stockholders’ equity

 

 

2,405,419

 

 

 

1,526,133

 

Total liabilities and stockholders' equity

 

$

3,724,788

 

 

$

2,535,215

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

330,057

 

 

$

384,678

 

Adjustments to reconcile net income to net cash from operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

67,960

 

 

 

57,365

 

Basis of real estate sold

 

 

25,024

 

 

 

22,733

 

Change in deferred taxes

 

 

(1,359

)

 

 

3,221

 

Pension and other postretirement employee benefits

 

 

10,936

 

 

 

16,595

 

Pension settlement charge

 

 

14,165

 

 

 

Equity-based compensation expense

 

 

16,141

 

 

 

6,345

 

Gain on fire damage

 

 

(34,505

)

 

 

(4,394

)

Other, net

 

 

(455

)

 

 

633

 

Change in working capital and operating-related activities, net

 

 

14,071

 

 

 

(20,082

)

Real estate development expenditures

 

 

(6,986

)

 

 

(6,434

)

Funding of pension and other postretirement employee benefits

 

 

(3,290

)

 

 

(7,418

)

Proceeds from insurance recoveries

 

 

26,678

 

 

 

 

Net cash from operating activities

 

 

458,437

 

 

 

453,242

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Property, plant and equipment additions

 

 

(44,000

)

 

 

(26,291

)

Timberlands reforestation and roads

 

 

(12,220

)

 

 

(12,236

)

Acquisition of timber and timberlands

 

 

(96,081

)

 

 

(2,450

)

Proceeds from property insurance

 

 

 

 

13,250

 

Cash acquired in CatchMark merger

 

 

23,571

 

 

 

 

Other, net

 

 

935

 

 

 

993

 

Net cash from investing activities

 

 

(127,795

)

 

 

(26,734

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Distributions to common stockholders

 

 

(96,578

)

 

 

(82,462

)

Repurchase of common stock

 

 

(4,527

)

 

 

Proceeds from issuance of long-term debt

 

 

277,500

 

 

 

 

Repayment of long-term debt

 

 

(303,000

)

 

 

Other, net

 

 

(6,120

)

 

 

(3,619

)

Net cash from financing activities

 

 

(132,725

)

 

 

(86,081

)

Change in cash, cash equivalents and restricted cash

 

 

197,917

 

 

 

340,427

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

296,772

 

 

 

252,340

 

Cash, cash equivalents and restricted cash at end of period

 

$

494,689

 

 

$

592,767

 

 

 

 

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Accrued property, plant and equipment additions

 

$

4,429

 

 

$

2,695

 

Accrued timberlands reforestation and roads

 

$

2,749

 

 

$

1,590

 

Equity issued as consideration in the CatchMark merger

 

$

508,314

 

 

$

 

Long-term debt and other liabilities assumed in our merger with CatchMark

 

$

323,102

 

 

$

 

 

6


Table of Contents

 

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 amounts shown in the Condensed Consolidated Statements of Cash Flows.

 

(in thousands)

 

September 30, 2022

 

 

September 30, 2021

 

Cash and cash equivalents

 

$

484,018

 

 

$

592,767

 

Restricted cash included in other long-term assets1

 

 

10,671

 

 

 

 

Total cash, cash equivalents, and restricted cash

 

$

494,689

 

 

$

592,767

 

 

1

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

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


Table of Contents

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

Common Stock

 

 

Additional Paid-

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total Stockholders'

 

(in thousands, except per share amounts)

 

Shares

 

 

Amount

 

 

in Capital

 

 

Deficit

 

 

Income (Loss)

 

 

Equity

 

Balance, December 31, 2021

 

 

69,064

 

 

$

69,064

 

 

$

1,781,217

 

 

$

(280,910

)

 

$

(43,238

)

 

$

1,526,133

 

Net income

 

 

 

 

 

 

 

 

 

 

 

163,880

 

 

 

 

 

 

163,880

 

Shares issued for stock compensation

 

 

308

 

 

 

308

 

 

 

(308

)