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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 June 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 July 26, 2022 was 69,271,822.

 

 


 

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

35

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

38

ITEM 6.

Exhibits

39

 

 

 

SIGNATURE

40

 

 

 

 

 

 


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 June 30,

 

 

 

Six Months Ended June 30,

 

(in thousands, except per share amounts)

2022

 

 

2021

 

 

 

2022

 

 

2021

 

Revenues

$

359,597

 

 

$

447,506

 

 

 

$

770,947

 

 

$

801,699

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

191,334

 

 

 

177,779

 

 

 

 

371,181

 

 

 

347,081

 

Selling, general and administrative expenses

 

20,412

 

 

 

19,512

 

 

 

 

36,706

 

 

 

36,270

 

Gain on fire damage

 

(9,868

)

 

 

 

 

 

 

(9,592

)

 

 

 

 

 

201,878

 

 

 

197,291

 

 

 

 

398,295

 

 

 

383,351

 

Operating income

 

157,719

 

 

 

250,215

 

 

 

 

372,652

 

 

 

418,348

 

Interest expense, net

 

(7,419

)

 

 

(8,199

)

 

 

 

(10,313

)

 

 

(11,773

)

Pension settlement charge

 

 

 

 

 

 

 

 

(14,165

)

 

 

 

Non-operating pension and other postretirement employee
benefit costs

 

(1,809

)

 

 

(3,271

)

 

 

 

(3,738

)

 

 

(6,685

)

Income before income taxes

 

148,491

 

 

 

238,745

 

 

 

 

344,436

 

 

 

399,890

 

Income taxes

 

(28,269

)

 

 

(50,840

)

 

 

 

(60,334

)

 

 

(80,879

)

Net income

$

120,222

 

 

$

187,905

 

 

 

$

284,102

 

 

$

319,011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

1.73

 

 

$

2.79

 

 

 

$

4.09

 

 

$

4.74

 

Diluted

$

1.72

 

 

$

2.77

 

 

 

$

4.07

 

 

$

4.71

 

Dividends per share

$

0.44

 

 

$

0.41

 

 

 

$

0.88

 

 

$

0.82

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

69,580

 

 

 

67,316

 

 

 

 

69,502

 

 

 

67,265

 

Diluted

 

69,791

 

 

 

67,732

 

 

 

 

69,731

 

 

 

67,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30,

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

120,222

 

 

$

187,905

 

 

$

284,102

 

 

$

319,011

 

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 $267, $1,073, $742 and $2,182

 

 

786

 

 

 

3,050

 

 

 

2,170

 

 

 

6,207

 

Amortization of prior service cost (credit) included in net income, net of tax expense (benefit) of $45, $(72), $89 and $(145)

 

 

129

 

 

 

(205

)

 

 

259

 

 

 

(409

)

Cash flow hedges, net of tax expense (benefit) of $2,817, $(2,179), $5,066 and $1,853

 

 

42,529

 

 

 

(31,163

)

 

 

85,805

 

 

 

32,944

 

Other comprehensive income (loss), net of tax

 

 

43,444

 

 

 

(28,318

)

 

 

94,200

 

 

 

38,742

 

Comprehensive income

 

$

163,666

 

 

$

159,587

 

 

$

378,302

 

 

$

357,753

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

June 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

511,157

 

 

$

296,151

 

Customer receivables, net

 

 

43,989

 

 

 

31,028

 

Inventories, net

 

 

64,247

 

 

 

72,369

 

Other current assets

 

 

31,833

 

 

 

21,630

 

Total current assets

 

 

651,226

 

 

 

421,178

 

Property, plant and equipment, net

 

 

314,840

 

 

 

292,320

 

Investment in real estate held for development and sale

 

 

60,143

 

 

 

65,604

 

Timber and timberlands, net

 

 

1,704,256

 

 

 

1,682,671

 

Intangible assets, net

 

 

15,101

 

 

 

15,491

 

Other long-term assets

 

 

126,353

 

 

 

57,951

 

Total assets

 

$

2,871,919

 

 

$

2,535,215

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

110,184

 

 

$

78,209

 

Current portion of long-term debt

 

 

39,989

 

 

 

42,977

 

Current portion of pension and other postretirement employee benefits

 

 

4,993

 

 

 

4,993

 

Total current liabilities

 

 

155,166

 

 

 

126,179

 

Long-term debt

 

 

715,748

 

 

 

715,279

 

Pension and other postretirement employee benefits

 

 

91,703

 

 

 

83,674

 

Deferred tax liabilities, net

 

 

40,725

 

 

 

34,874

 

Other long-term obligations

 

 

25,026

 

 

 

49,076

 

Total liabilities

 

 

1,028,368

 

 

 

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 69,280 and 69,064 shares

 

 

69,280

 

 

 

69,064

 

Additional paid-in capital

 

 

1,785,383

 

 

 

1,781,217

 

Accumulated deficit

 

 

(62,074

)

 

 

(280,910

)

Accumulated other comprehensive income (loss)

 

 

50,962

 

 

 

(43,238

)

Total stockholders’ equity

 

 

1,843,551

 

 

 

1,526,133

 

Total liabilities and stockholders' equity

 

$

2,871,919

 

 

$

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)

 

 

 

Six Months Ended June 30,

 

(in thousands)

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

284,102

 

 

$

319,011

 

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

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

40,253

 

 

 

35,831

 

Basis of real estate sold

 

 

18,179

 

 

 

16,036

 

Change in deferred taxes

 

 

(2,089

)

 

 

562

 

Pension and other postretirement employee benefits

 

 

7,397

 

 

 

11,111

 

Pension settlement charge

 

 

14,165

 

 

 

 

Equity-based compensation expense

 

 

4,424

 

 

 

4,070

 

Gain on fire damage

 

 

(9,592

)

 

 

 

Other, net

 

 

(599

)

 

 

(295

)

Change in working capital and operating-related activities, net

 

 

19,972

 

 

 

(37,154

)

Real estate development expenditures

 

 

(5,190

)

 

 

(3,999

)

Funding of pension and other postretirement employee benefits

 

 

(2,264

)

 

 

(3,833

)

Proceeds from insurance recoveries

 

 

9,428

 

 

 

 

Net cash from operating activities

 

 

378,186

 

 

 

341,340

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Property, plant and equipment additions

 

 

(36,777

)

 

 

(15,943

)

Timberlands reforestation and roads

 

 

(8,388

)

 

 

(7,954

)

Acquisition of timber and timberlands

 

 

(42,218

)

 

 

(2,192

)

Other, net

 

 

(1,383

)

 

 

635

 

Net cash from investing activities

 

 

(88,766

)

 

 

(25,454

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Distributions to common stockholders

 

 

(61,048

)

 

 

(54,973

)

Repurchase of common stock

 

 

(4,156

)

 

 

 

Repayment of long-term debt

 

 

(3,000

)

 

 

 

Other, net

 

 

(2,094

)

 

 

(1,223

)

Net cash from financing activities

 

 

(70,298

)

 

 

(56,196

)

Change in cash, cash equivalents and restricted cash

 

 

219,122

 

 

 

259,690

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

296,772

 

 

 

252,340

 

Cash, cash equivalents and restricted cash at end of period

 

$

515,894

 

 

$

512,030

 

 

 

 

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Accrued property, plant and equipment additions

 

$

946

 

 

$

1,474

 

Accrued timberlands reforestation and roads

 

$

614

 

 

$

1,170

 

 

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)

 

June 30, 2022

 

 

June 30, 2021

 

Cash and cash equivalents

 

$

511,157

 

 

$

512,030

 

Restricted cash included in other long-term assets1

 

 

4,737

 

 

 

 

Total cash, cash equivalents, and restricted cash

 

$

515,894

 

 

$

512,030

 

 

 

 

 

 

 

 

 

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

)

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,056

 

 

 

 

 

 

 

 

 

2,056

 

Pension plans and OPEB obligations, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,480

 

 

 

7,480

 

Cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,276

 

 

 

43,276

 

Dividends on common stock, $0.44 per share

 

 

 

 

 

 

 

 

 

 

 

(30,524

)

 

 

 

 

 

(30,524

)

Other transactions, net

 

 

 

 

 

 

 

 

(25

)

 

 

(78

)

 

 

 

 

 

(103

)

Balance, March 31, 2022

 

 

69,372

 

 

 

69,372

 

 

 

1,782,940

 

 

 

(147,632

)

 

 

7,518

 

 

 

1,712,198

 

Net income

 

 

 

 

 

 

 

 

 

 

 

120,222

 

 

 

 

 

 

120,222

 

Shares issued for stock compensation

 

 

3

 

 

 

3

 

 

 

(3

)

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,368

 

 

 

 

 

 

 

 

 

2,368

 

Repurchase of common stock

 

 

(95

)

 

 

(95

)

 

 

 

 

 

(4,061

)

 

 

 

 

 

(4,156

)

Pension plans and OPEB obligations, net of tax