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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, 2021

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 27, 2021 was 67,100,706.

 

 

 

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

21

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

36

ITEM 4.

Controls and Procedures

36

 

 

 

PART II. - OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

37

ITEM 1A.

Risk Factors

37

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

ITEM 6.

Exhibits

37

 

 

 

SIGNATURE

38

 

 

 

 

 

 

 

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)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues

 

$

287,330

 

 

$

313,046

 

 

$

1,089,029

 

 

$

703,481

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

190,602

 

 

 

182,039

 

 

 

537,683

 

 

 

503,921

 

Selling, general and administrative expenses

 

 

18,512

 

 

 

21,046

 

 

 

54,782

 

 

 

52,064

 

Net gain on insurance recoveries

 

 

(4,394

)

 

 

—

 

 

 

(4,394

)

 

 

—

 

 

 

 

204,720

 

 

 

203,085

 

 

 

588,071

 

 

 

555,985

 

Operating income

 

 

82,610

 

 

 

109,961

 

 

 

500,958

 

 

 

147,496

 

Interest expense, net

 

 

(8,641

)

 

 

(8,557

)

 

 

(20,414

)

 

 

(20,594

)

Pension settlement charge

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(42,988

)

Non-operating pension and other postretirement employee
benefit costs

 

 

(3,271

)

 

 

(3,557

)

 

 

(9,956

)

 

 

(10,670

)

Income before income taxes

 

 

70,698

 

 

 

97,847

 

 

 

470,588

 

 

 

73,244

 

Income taxes

 

 

(5,031

)

 

 

(16,840

)

 

 

(85,910

)

 

 

(6,431

)

Net income

 

$

65,667

 

 

$

81,007

 

 

$

384,678

 

 

$

66,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

$

1.21

 

 

$

5.72

 

 

$

0.99

 

Diluted

 

$

0.97

 

 

$

1.20

 

 

$

5.69

 

 

$

0.99

 

Dividends per share

 

$

0.41

 

 

$

0.40

 

 

$

1.23

 

 

$

1.20

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

67,315

 

 

 

67,149

 

 

 

67,275

 

 

 

67,263

 

Diluted

 

 

67,648

 

 

 

67,528

 

 

 

67,588

 

 

 

67,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

65,667

 

 

$

81,007

 

 

$

384,678

 

 

$

66,813

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement employee benefits:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss arising during the period, net of tax benefit of $0, $0, $0 and $6,817

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(19,402

)

Effect of pension settlement, net of tax benefit of $0, $0, $0 and $11,177

 

 

—

 

 

 

—

 

 

 

—

 

 

 

31,811

 

Amortization of prior service credit included in net income, net of tax benefit of $73, $75, $217 and $227

 

 

(204

)

 

 

(215

)

 

 

(614

)

 

 

(645

)

Amortization of actuarial loss included in net income, net of tax expense of $1,073, $1,111, $3,254, and $3,334

 

 

3,050

 

 

 

3,163

 

 

 

9,258

 

 

 

9,489

 

Cash flow hedges, net of tax expense (benefit) of $397, $763, $2,249 and $(1,043)

 

 

6,636

 

 

 

11,332

 

 

 

39,580

 

 

 

(29,040

)

Other comprehensive income (loss), net of tax

 

 

9,482

 

 

 

14,280

 

 

 

48,224

 

 

 

(7,787

)

Comprehensive income

 

$

75,149

 

 

$

95,287

 

 

$

432,902

 

 

$

59,026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

592,767

 

 

$

252,340

 

Customer receivables, net

 

 

27,789

 

 

 

26,606

 

Inventories, net

 

 

69,862

 

 

 

62,036

 

Other current assets

 

 

24,460

 

 

 

16,136

 

Total current assets

 

 

714,878

 

 

 

357,118

 

Property, plant and equipment, net

 

 

286,034

 

 

 

288,544

 

Investment in real estate held for development and sale

 

 

65,048

 

 

 

72,355

 

Timber and timberlands, net

 

 

1,572,475

 

 

 

1,600,061

 

Intangible assets, net

 

 

15,685

 

 

 

16,270

 

Other long-term assets

 

 

63,747

 

 

 

46,717

 

Total assets

 

$

2,717,867

 

 

$

2,381,065

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

87,819

 

 

$

93,279

 

Current portion of long-term debt

 

 

42,996

 

 

 

39,981

 

Current portion of pension and other postretirement employee benefits

 

 

6,574

 

 

 

6,574

 

Total current liabilities

 

 

137,389

 

 

 

139,834

 

Long-term debt

 

 

715,122

 

 

 

717,366

 

Pension and other postretirement employee benefits

 

 

126,154

 

 

 

128,807

 

Deferred tax liabilities, net

 

 

26,247

 

 

 

17,740

 

Other long-term obligations

 

 

52,849

 

 

 

72,365

 

Total liabilities

 

 

1,057,761

 

 

 

1,076,112

 

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 67,100 and 66,876 shares

 

 

67,100

 

 

 

66,876

 

Additional paid-in capital

 

 

1,679,332

 

 

 

1,674,576

 

Accumulated deficit

 

 

(13,561

)

 

 

(315,510

)

Accumulated other comprehensive loss

 

 

(72,765

)

 

 

(120,989

)

Total stockholders’ equity

 

 

1,660,106

 

 

 

1,304,953

 

Total liabilities and stockholders' equity

 

$

2,717,867

 

 

$

2,381,065

 

 

 

 

 

 

 

 

 

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)

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

384,678

 

 

$

66,813

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

57,365

 

 

 

57,809

 

Basis of real estate sold

 

 

22,733

 

 

 

14,440

 

Change in deferred taxes

 

 

3,221

 

 

 

(14,387

)

Pension and other postretirement employee benefits

 

 

16,595

 

 

 

17,750

 

Pension settlement charge

 

 

—

 

 

 

42,988

 

Equity-based compensation expense

 

 

6,345

 

 

 

5,928

 

Net gain on insurance recoveries

 

 

(4,394

)

 

 

—

 

Other, net

 

 

633

 

 

 

(544

)

Change in working capital and operating-related activities, net

 

 

(20,082

)

 

 

12,706

 

Real estate development expenditures

 

 

(6,434

)

 

 

(4,200

)

Funding of pension and other postretirement employee benefits

 

 

(7,418

)

 

 

(8,458

)

Net cash provided by operating activities

 

 

453,242

 

 

 

190,845

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Property, plant and equipment additions

 

 

(26,291

)

 

 

(14,666

)

Timberlands reforestation and roads

 

 

(12,236

)

 

 

(12,345

)

Acquisition of timber and timberlands

 

 

(2,450

)

 

 

(4,738

)

Proceeds from insurance recoveries - property, plant & equipment

 

 

13,250

 

 

 

—

 

Other, net

 

 

993

 

 

 

3,484

 

Net cash used in investing activities

 

 

(26,734

)

 

 

(28,265

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Distributions to common stockholders

 

 

(82,462

)

 

 

(80,434

)

Repurchase of common stock

 

 

—

 

 

 

(15,364

)

Other, net

 

 

(3,619

)

 

 

(1,032

)

Net cash used in financing activities

 

 

(86,081

)

 

 

(96,830

)

Change in cash, cash equivalents and restricted cash

 

 

340,427

 

 

 

65,750

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

252,340

 

 

 

84,254

 

Cash, cash equivalents and restricted cash at end of period

 

$

592,767

 

 

$

150,004

 

 

 

 

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Accrued property, plant and equipment additions

 

$

2,695

 

 

$

3,785

 

Accrued timberlands reforestation and roads

 

$

1,590

 

 

$

1,536

 

 

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, 2021

 

 

September 30, 2020

 

Cash and cash equivalents

 

$

592,767

 

 

$

148,919

 

Restricted cash included in other long-term assets1

 

 

—

 

 

 

1,085

 

Total cash, cash equivalents, and restricted cash

 

$

592,767

 

 

$

150,004

 

 

 

 

 

 

 

 

 

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

 

 

Loss

 

 

Equity

 

Balance, December 31, 2020

 

 

66,876

 

 

$

66,876

 

 

$

1,674,576

 

 

$

(315,510

)

 

$

(120,989

)

 

$

1,304,953

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

131,106

 

 

 

—

 

 

 

131,106

 

Shares issued for stock compensation

 

 

166

 

 

 

166

 

 

 

(166

)

 

 

—

 

 

 

—

 

 

 

—

 

Equity-based compensation expense

 

 

—

 

 

 

—

 

 

 

1,930

 

 

 

—

 

 

 

—

 

 

 

1,930

 

Pension plans and OPEB obligations, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,953

 

 

 

2,953

 

Cash flow hedges, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

64,107

 

 

 

64,107

 

Dividends on common stock, $0.41 per share

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(27,484

)

 

 

—

 

 

 

(27,484

)

Other transactions, net

 

 

—

 

 

 

—

 

 

 

81

 

 

 

(97

)

 

 

—

 

 

 

(16

)

Balance, March 31, 2021

 

 

67,042

 

 

$

67,042

 

 

$

1,676,421

 

 

$

(211,985

)

 

$

(53,929

)

 

$

1,477,549

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

187,905

 

 

 

—

 

 

 

187,905

 

Shares issued for stock compensation

 

 

3

 

 

 

3

 

 

 

(3

)

 

 

—

 

 

 

—

 

 

 

—

 

Equity-based compensation expense

 

 

—

 

 

 

—

 

 

 

2,140

 

 

 

—

 

 

 

—

 

 

 

2,140

 

Pension plans and OPEB obligations, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2,845

 

 

 

2,845

 

Cash flow hedges, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(31,163

)

 

 

(31,163

)

Dividends on common stock, $0.41 per share

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(27,489

)

 

 

—

 

 

 

(27,489

)

Other transactions, net

 

 

—

 

 

 

—

 

 

 

103

 

 

 

(101

)

 

 

—

 

 

 

2

 

Balance, June 30, 2021

 

 

67,045

 

 

$

67,045

 

 

$

1,678,661

 

 

$

(51,670

)

 

$

(82,247

)

 

$

1,611,789

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

65,667

 

 

 

—

 

 

 

65,667

 

Shares issued for stock compensation

 

 

55

 

 

 

55

 

 

 

(55

)

 

 

—

 

 

 

—

 

 

 

—

 

Equity-based compensation expense

 

 

—

 

 

 

—

 

 

 

2,275

 

 

 

—

 

 

 

—

 

 

 

2,275