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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 March 31, 2024

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 (in thousands) at April 30, 2024, was 79,508.

 

 


 

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 (Loss)

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

20

ITEM 3.

Quantitative and Qualitative Disclosures About Market Risk

31

ITEM 4.

Controls and Procedures

32

 

 

 

PART II. - OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

32

ITEM 1A.

Risk Factors

32

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

ITEM 5.

Other Information

33

ITEM 6.

Exhibits

34

 

 

 

SIGNATURE

35

 

 

 

 

 

 


Part I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended March 31,

 

(in thousands, except per share amounts)

2024

 

 

2023

 

Revenues

$

228,127

 

 

$

257,962

 

Costs and expenses:

 

 

 

Cost of goods sold

 

212,160

 

 

 

224,350

 

Selling, general and administrative expenses

 

20,727

 

 

 

18,230

 

CatchMark merger-related expenses

 

 

 

2,209

 

 

 

232,887

 

 

 

244,789

 

Operating income (loss)

 

(4,760

)

 

 

13,173

 

Interest expense, net

 

282

 

 

 

(199

)

Non-operating pension and other postretirement employee benefits

 

201

 

 

 

(228

)

Other

 

(145

)

 

 

10

 

Income (loss) before income taxes

 

(4,422

)

 

 

12,756

 

Income taxes

 

4,117

 

 

 

3,504

 

Net income (loss)

$

(305

)

 

$

16,260

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

Basic

$

 

 

$

0.20

 

Diluted

$

 

 

$

0.20

 

Dividends per share

$

0.45

 

 

$

0.45

 

Weighted-average shares outstanding

 

 

 

 

 

Basic

 

79,677

 

 

 

80,027

 

Diluted

 

79,677

 

 

 

80,167

 

 

 

 

 

 

 

 

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

3


 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Net income (loss)

 

$

(305

)

 

$

16,260

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

Pension and other postretirement employee benefits

 

 

(229

)

 

 

(131

)

Cash flow hedges

 

 

15,925

 

 

 

(17,335

)

Other comprehensive income (loss), net of tax

 

 

15,696

 

 

 

(17,466

)

Comprehensive income (loss)

 

$

15,391

 

 

$

(1,206

)

 

 

 

 

 

 

 

 

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

 

4


 

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

 

(in thousands, except per share amounts)

 

March 31, 2024

 

 

December 31, 2023

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

180,150

 

 

$

230,118

 

Customer receivables, net

 

 

27,132

 

 

 

21,892

 

Inventories, net

 

 

77,572

 

 

 

78,665

 

Other current assets

 

 

84,844

 

 

 

46,258

 

Total current assets

 

 

369,698

 

 

 

376,933

 

Property, plant and equipment, net

 

 

375,891

 

 

 

372,832

 

Investment in real estate held for development and sale

 

 

55,524

 

 

 

56,321

 

Timber and timberlands, net

 

 

2,415,818

 

 

 

2,440,398

 

Intangible assets, net

 

 

15,196

 

 

 

15,640

 

Other long-term assets

 

 

176,812

 

 

 

169,132

 

Total assets

 

$

3,408,939

 

 

$

3,431,256

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

80,697

 

 

$

82,383

 

Current portion of long-term debt

 

 

175,654

 

 

 

175,615

 

Current portion of pension and other postretirement employee benefits

 

 

4,535

 

 

 

4,535

 

Total current liabilities

 

 

260,886

 

 

 

262,533

 

Long-term debt

 

 

858,365

 

 

 

858,113

 

Pension and other postretirement employee benefits

 

 

68,391

 

 

 

67,856

 

Deferred tax liabilities, net

 

 

32,546

 

 

 

36,641

 

Other long-term obligations

 

 

35,479

 

 

 

35,015

 

Total liabilities

 

 

1,255,667

 

 

 

1,260,158

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $1 par value, 200,000 shares authorized, 79,508 and 79,365 shares issued and outstanding

 

 

79,508

 

 

 

79,365

 

Additional paid-in capital

 

 

2,306,499

 

 

 

2,303,992

 

Accumulated deficit

 

 

(351,463

)

 

 

(315,291

)

Accumulated other comprehensive income

 

 

118,728

 

 

 

103,032

 

Total stockholders’ equity

 

 

2,153,272

 

 

 

2,171,098

 

Total liabilities and stockholders' equity

 

$

3,408,939

 

 

$

3,431,256

 

 

 

 

 

 

 

 

 

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

 

5


PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income (loss)

 

$

(305

)

 

$

16,260

 

Adjustments to reconcile net income (loss) to net cash from operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

30,802

 

 

 

32,173

 

Basis of real estate sold

 

 

4,092

 

 

 

10,631

 

Change in deferred taxes

 

 

(4,145

)

 

 

394

 

Pension and other postretirement employee benefits

 

 

1,143

 

 

 

1,611

 

Equity-based compensation expense

 

 

2,560

 

 

 

2,279

 

Interest received under swaps with other-than-insignificant financing element

 

 

(7,458

)

 

 

(5,454

)

Other, net

 

 

2,961

 

 

 

1,945

 

Change in working capital and operating-related activities, net

 

 

(13,252

)

 

 

(17,205

)

Real estate development expenditures

 

 

(1,135

)

 

 

(2,408

)

Funding of pension and other postretirement employee benefits

 

 

(914

)

 

 

(1,087

)

Proceeds from insurance recoveries

 

 

1,680

 

 

 

 

Net cash from operating activities

 

 

16,029

 

 

 

39,139

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Property, plant and equipment additions

 

 

(4,995

)

 

 

(4,255

)

Timberlands reforestation and roads

 

 

(7,874

)

 

 

(6,118

)

Acquisition of timber and timberlands

 

 

(31,438

)

 

 

 

Interest received under swaps with other-than-insignificant financing element

 

 

6,938

 

 

 

5,055

 

Other, net

 

 

373

 

 

 

422

 

Net cash from investing activities

 

 

(36,996

)

 

 

(4,896

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Distributions to common stockholders

 

 

(35,779

)

 

 

(35,962

)

Other, net

 

 

(792

)

 

 

(838

)

Net cash from financing activities

 

 

(36,571

)

 

 

(36,800

)

Change in cash, cash equivalents and restricted cash

 

 

(57,538

)

 

 

(2,557

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

237,688

 

 

 

345,591

 

Cash, cash equivalents and restricted cash at end of period

 

$

180,150

 

 

$

343,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Accrued property, plant and equipment additions

 

$

10,401

 

 

$

1,835

 

Accrued timberlands reforestation and roads

 

$

1,028

 

 

$

1,041

 

 

6


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 above in the Condensed Consolidated Statements of Cash Flows.

 

(in thousands)

 

March 31, 2024

 

 

March 31, 2023

 

Cash and cash equivalents

 

$

180,150

 

 

$

325,632

 

Restricted cash included in other current and long-term assets1

 

 

 

 

 

17,402

 

Total cash, cash equivalents, and restricted cash

 

$

180,150

 

 

$

343,034

 

 

1

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

At March 31, 2024 and 2023, $0 and $14.0 million, respectively, was classified as Other current assets.

 

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

7


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

 

 

Equity

 

Balance, December 31, 2023

 

 

79,365

 

 

$

79,365

 

 

$

2,303,992

 

 

$

(315,291

)

 

$

103,032

 

 

$

2,171,098

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(305

)

 

 

 

 

 

(305

)

Shares issued for stock compensation

 

 

143

 

 

 

143

 

 

 

(143

)

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,560

 

 

 

 

 

 

 

 

 

2,560

 

Pension plans and OPEB obligations, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(229

)

 

 

(229

)

Cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,925

 

 

 

15,925

 

Common dividends, $0.45 per share

 

 

 

 

 

 

 

 

 

 

 

(35,779

)

 

 

 

 

 

(35,779

)

Other transactions, net

 

 

 

 

 

 

 

 

90

 

 

 

(88

)

 

 

 

 

 

2

 

Balance, March 31, 2024

 

 

79,508

 

 

$

79,508

 

 

$

2,306,499

 

 

$

(351,463

)

 

$

118,728

 

 

$

2,153,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional Paid-

 

 

Accumulated

 

 

Accumulated Other
Comprehensive

 

 

Total Stockholders'

 

(in thousands, except per share amounts)

 

Shares

 

 

Amount

 

 

in Capital

 

 

Deficit

 

 

Income

 

 

Equity

 

Balance, December 31, 2022

 

 

79,683

 

 

$

79,683

 

 

$

2,294,797

 

 

$

(208,979

)

 

$

97,652

 

 

$

2,263,153

 

Net income

 

 

 

 

 

 

 

 

 

 

 

16,260

 

 

 

 

 

 

16,260

 

Shares issued for stock compensation

 

 

233

 

 

 

233

 

 

 

(233

)

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,279

 

 

 

 

 

 

 

 

 

2,279

 

Pension plans and OPEB obligations, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(131

)

 

 

(131

)

Cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(17,335

)

 

 

(17,335

)

Common dividends, $0.45 per share

 

 

 

 

 

 

 

 

 

 

 

(35,962

)

 

 

 

 

 

(35,962

)

Other transactions, net

 

 

 

 

 

 

 

 

84

 

 

 

(85

)

 

 

 

 

 

(1

)

Balance, March 31, 2023

 

 

79,916

 

 

$

79,916

 

 

$

2,296,927

 

 

$

(228,766

)

 

$

80,186

 

 

$

2,228,263

 

 

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

8


INDEX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

 

Note 1: Basis of Presentation

10

Note 2: Segment Information

11

Note 3: Earnings Per Share

13

Note 4: Certain Balance Sheet Components

13

Note 5: Debt

14

Note 6: Derivative Instruments

14

Note 7: Fair Value Measurements

15

Note 8: Equity-Based Compensation

16

Note 9: Income Taxes

16

Note 10: Leases

17

Note 11: Pension and Other Postretirement Employee Benefits

18

Note 12: Components of Accumulated Other Comprehensive Income

18

Note 13: Commitments and Contingencies

19

 

9


Notes to Condensed Consolidated Financial Statements

NOTE 1. BASIS OF PRESENTATION

General

PotlatchDeltic Corporation and its subsidiaries (collectively referred to in this report as the company, us, we or our) is a leading timberland Real Estate Investment Trust (REIT) with operations in nine states. We are engaged in activities associated with timberland management, including the sale of timber, the management of nearly 2.2 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacturing and sale of wood products and the development of real estate. Our timberlands, real estate development projects and all of our wood products facilities are located within the continental United States. The primary market for our products is the United States. We converted to a REIT effective January 1, 2006.

Condensed Consolidated Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements provide an overall view of our results and financial condition and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on February 15, 2024. Results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the full year.

Use of Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and requires judgments affecting the amounts reported in the financial statements and the accompanying notes. Actual results may differ materially from our estimates.

Recently Adopted Accounting Standards

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expense categories that are regularly reported to the chief operating decision maker and included in each reported measure of a segment’s profit or loss and increased interim disclosure requirements, among others. The adoption of this ASU on January 1, 2024, including the required retrospective application for all periods presented in the financial statements, will be reflected in our annual financial statements for the year ended December 31, 2024, and interim financial statements beginning in 2025. Management is currently evaluating the impact of this ASU on the company's financial statement disclosures.

Recent Accounting Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. Management is currently evaluating this ASU to determine its impact on the company's financial statement disclosures.

Reclassifications

Certain prior period reclassifications were made to conform with the current period presentation. These reclassifications had no effect on reported net income (loss), net income (loss) per share, comprehensive income (loss), cash flows, total assets, total liabilities, or shareholders' equity as previously reported.

 

10


NOTE 2. SEGMENT INFORMATION

Our operations are organized into three reportable segments: Timberlands, Wood Products and Real Estate. Management activities in the Timberlands segment include planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts and carbon sequestration. The Wood Products segment manufactures and sells lumber and plywood. The Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives, a master planned community development and a country club.

Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. These intercompany transactions are eliminated in consolidation.

The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories, which are reported using the average cost method for purposes of reporting segment results.

The following table presents our revenues by major product:

 

 

Three Months Ended March 31,

 

(in thousands)

2024

 

 

2023

 

Timberlands

 

 

 

 

 

Northern region

 

 

 

 

 

Sawlogs

$

33,806

 

 

$

53,325

 

Pulpwood

 

65

 

 

 

403

 

Other

 

311

 

 

 

261

 

Total Northern revenues

 

34,182

 

 

 

53,989

 

 

 

 

 

 

 

Southern region

 

 

 

 

 

Sawlogs

 

31,216

 

 

 

31,754

 

Pulpwood

 

15,648

 

 

 

16,132

 

Stumpage

 

7,632

 

 

 

9,233

 

Other

 

4,272

 

 

 

4,130

 

Total Southern revenues

 

58,768

 

 

 

61,249

 

 

 

 

 

 

 

Total Timberlands revenues

 

92,950

 

 

 

115,238

 

 

 

 

 

 

 

Wood Products

 

 

 

 

 

Lumber

 

116,723

 

 

 

113,798

 

Residuals and Panels

 

31,875

 

 

 

38,997

 

Total Wood Products revenues

 

148,598

 

 

 

152,795

 

 

 

 

 

 

 

Real Estate

 

 

 

 

 

Rural real estate

 

5,526

 

 

 

17,819

 

Development real estate

 

2,874

 

 

 

2,800

 

Other

 

2,707

 

 

 

3,244

 

Total Real Estate revenues

 

11,107

 

 

 

23,863

 

 

 

 

 

 

 

Total segment revenues

 

252,655

 

 

 

291,896

 

Intersegment Timberlands revenues1

 

(24,528

)

 

 

(33,934

)

Total consolidated revenues

$

228,127

 

 

$

257,962

 

 

1

Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment.

 

11


Management uses Adjusted EBITDDA to evaluate the operating performance and effectiveness of operating strategies of our segments and allocation of resources to them. EBITDDA is calculated as net income (loss) before interest expense, net, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.

The following table summarizes information for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income (loss) before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Adjusted EBITDDA:

 

 

 

 

 

Timberlands

 

$

34,748

 

 

$

46,639

 

Wood Products

 

 

(139

)

 

 

(31

)

Real Estate

 

 

6,228

 

 

 

19,465

 

Corporate

 

 

(12,665

)

 

 

(10,741

)

Eliminations and adjustments

 

 

1,550

 

 

 

2,445

 

Total Adjusted EBITDDA

 

 

29,722

 

 

 

57,777

 

Interest expense, net1

 

 

282

 

 

 

(199

)

Depreciation, depletion and amortization

 

 

(30,395

)

 

 

(31,764

)

Basis of real estate sold

 

 

(4,092

)

 

 

(10,631

)

CatchMark merger-related expenses

 

 

 

 

 

(2,209

)

Non-operating pension and other postretirement employee benefits

 

 

201

 

 

 

(228

)

Gain on disposal of fixed assets

 

 

5

 

 

 

 

Other

 

 

(145

)

 

 

10

 

Income (loss) before income taxes

 

$

(4,422

)

 

$

12,756

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization:

 

 

 

 

 

 

Timberlands

 

$

17,625

 

 

$

20,461

 

Wood Products

 

 

12,516

 

 

 

11,035

 

Real Estate

 

 

138

 

 

 

156

 

Corporate

 

 

116

 

 

 

112

 

 

 

30,395

 

 

 

31,764

 

Bond discounts and deferred loan fees1

 

 

407

 

 

 

409

 

Total depreciation, depletion and amortization

 

$

30,802

 

 

$

32,173

 

 

 

 

 

 

 

Basis of real estate sold:

 

 

 

 

 

Real Estate

 

$

4,094

 

 

$

10,631

 

Eliminations and adjustments

 

 

(2

)

 

 

 

Total basis of real estate sold

 

$

4,092

 

 

$

10,631

 

 

1

Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations.

 

12


NOTE 3. EARNINGS PER SHARE

The following table reconciles the number of shares used in calculating basic and diluted earnings per share:

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

2024

 

 

2023

 

Basic weighted-average shares outstanding

 

 

79,677

 

 

 

80,027

 

Incremental shares due to:

 

 

 

 

 

 

Performance shares

 

 

 

 

 

97

 

Restricted stock units

 

 

 

 

 

43

 

Diluted weighted-average shares outstanding

 

 

79,677

 

 

 

80,167

 

 

For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include future compensation cost associated with the stock award.

For the three months ended March 31, 2024 and 2023, there were approximately 421,500 and 134,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share as they were anti-dilutive. Anti-dilutive stock-based awards could be dilutive in future periods.

Share Repurchase Program

On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). Shares under the 2022 Repurchase Program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan), or through privately negotiated transactions. The timing, manner, price and amount of repurchases will be determined according to, and subject to, the terms of the Trading Plan, and, subject to the terms of the Trading Plan, the 2022 Repurchase Program may be suspended, terminated or modified at any time for any reason. No shares were repurchased under the 2022 Repurchase Program during the three months ended March 31, 2024 and 2023. At March 31, 2024, we had remaining authorization of $125.0 million for future stock repurchases under the 2022 Repurchase Program. Transaction costs are not counted against authorized funds.

We record share repurchases upon trade date as opposed to the settlement date. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.

NOTE 4. CERTAIN BALANCE SHEET COMPONENTS

Inventories

 

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Logs

 

$

31,379

 

 

$

39,011

 

Lumber, panels and veneer

 

 

39,613

 

 

 

34,621

 

Materials and supplies

 

 

25,260

 

 

 

23,713

 

Total inventories

 

 

96,252

 

 

 

97,345

 

Less: LIFO reserve

 

 

(18,680

)

 

 

(18,680

)

Total inventories, net

 

$

77,572

 

 

$

78,665

 

Property, plant and equipment

 

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Property, plant and equipment

 

$

697,182

 

 

$

681,914

 

Less: accumulated depreciation

 

 

(321,291

)

 

 

(309,082

)

Total property, plant and equipment, net

 

$

375,891

 

 

$

372,832

 

Timber and timberlands

 

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Timber and timberlands

 

$

2,324,815

 

 

$

2,347,300

 

Logging roads

 

 

91,003

 

 

 

93,098

 

Total timber and timberlands, net

 

$

2,415,818

 

 

$

2,440,398

 

 

13


 

In January 2024, we entered into an agreement to sell approximately 34,000 acres of four-year average age Southern timberlands for approximately $58.0 million to Forest Investment Associates (FIA), subject to certain adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the second quarter of 2024. At March 31, 2024, $42.8 million of timber and timberlands basis associated with the pending sale to FIA was classified as real estate held for sale and is included in Other current assets on the Condensed Consolidated Balance Sheets. We generally consider assets to be held for sale at the point at which a sale contract is executed, the buyer has made a significant non-refundable earnest money deposit against the contracted purchase price, and there is a high degree of certainty a transaction will close. Additionally, in January 2024, we acquired 16,000 acres of timberlands in Arkansas for $31.4 million, including transaction costs. We funded the acquisition with cash on hand.

 

Accounts payable and accrued liabilities

 

(in thousands)

 

March 31, 2024

 

 

December 31, 2023

 

Accrued payroll and benefits

 

$

16,692

 

 

$

24,473

 

Accounts payable

 

 

11,258

 

 

 

12,521

 

Deferred revenue1

 

 

8,000

 

 

 

10,455

 

Accrued taxes

 

 

7,222

 

 

 

5,712

 

Accrued interest

 

 

6,836

 

 

 

8,344

 

Other current liabilities

 

 

30,689

 

 

 

20,878

 

Total accounts payable and accrued liabilities

 

$

80,697

 

 

$

82,383

 

 

1

Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for lumber shipments where control of goods has not transferred, member-related activities at an owned country club and any post-close obligations for real estate sales. These deferred revenues are recognized over the term of the respective contract, which is typically twelve months or less, except for country club initiation fees which are recognized over the average life of club membership.

 

NOTE 5. DEBT

TERM LOANS

At March 31, 2024 our total outstanding principal on our long-term debt of $1.0 billion included $971.0 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. Certain borrowings under the Amended Term Loan Agreement are at the one-month Secured Overnight Financing Rate (SOFR)-indexed variable rates, plus a spread between 1.61% and 2.30%. We have entered into SOFR-indexed interest rate swaps to fix the interest rate on these variable rate term loans. See Note: 6 Derivative Instruments for additional information. Approximately $175.7 million of our outstanding long-term debt was classified as current at March 31, 2024 on our accompanying Condensed Consolidated Balance Sheets, including a $110.0 million term loan and a $65.7 million revenue bond that mature during 2024.

CREDIT AGREEMENT

On May 18, 2023, we entered into a First Amendment to the Third Amended and Restated Credit Agreement (Amended Credit Agreement). The Amended Credit Agreement provides for loans based on SOFR instead of the London Inter-Bank Offered Rate, or LIBOR, provides us the option to borrow based on a daily SOFR or term SOFR basis, and provides mechanics relating to the transition from the use of SOFR to a replacement benchmark rate upon the occurrence of certain transition events.

The Amended Credit Agreement provides for a $300.0 million revolving line of credit that matures February 14, 2027. As provided in the Amended Credit Agreement, borrowing capacity may be increased by up to an additional $500.0 million. The revolving line of credit also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of $25.0 million for swing line loans. Usage under either or both sub facilities reduces availability under the revolving line of credit. We may utilize borrowings under the Amended Credit Agreement to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures. At March 31, 2024, there were no borrowings under the revolving line of credit and approximately $0.7 million of our revolving line of credit was utilized for outstanding letters of credit.

We were in compliance with all debt and credit agreement covenants at March 31, 2024.

NOTE 6. DERIVATIVE INSTRUMENTS

From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks. Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. All our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedges.

14


At March 31, 2024, we have interest rate swaps associated with $761.0 million of SOFR-indexed term loan debt. These cash flow hedges convert variable rates ranging from one-month SOFR plus 1.61% to 2.30%, to fixed rates ranging from 2.14% to 4.83% before patronage credits from lenders. At March 31, 2024, we also have $200.0 million of forward-starting interest rate swaps designated as cash flow hedges for expected future debt refinances that require settlement on the stated maturity date.

The gross fair values of derivative instruments at March 31, 2024 and December 31, 2023, were $142.6 million and $129.1 million, respectively, all of which were classified in Other assets, non-current on our Condensed Consolidated Balance Sheets. Derivative instruments that mature within one year, as a whole, are classified as current.

The following table details the effect of derivatives on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income (Loss):

 

 

 

 

 

Three Months Ended March 31,

 

(in thousands)

 

Location

 

2024

 

 

2023

 

Derivatives designated in cash flow hedging relationships:

 

 

 

 

Interest rate contracts

 

 

 

 

 

 

 

 

Income (loss) recognized in other comprehensive income (loss), net of tax

 

 

 

$

21,520

 

 

$

(13,591

)

Amounts reclassified from accumulated other comprehensive income to income, net of tax1

 

Interest expense, net

 

$

5,595

 

 

$

3,744

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 

$

282

 

 

$

(199

)

 

1

Realized gains and losses on interest rate contracts consist of realized net cash received or paid and interest accruals on the interest rate swaps during the periods in addition to amortization of amounts out of other comprehensive income (loss) related to certain terminated hedges and adjustments to interest expense resulting from amortization of inception value of certain off-market designated hedges. For the three months ended March 31, 2024 and 2023, we amortized approximately $2.6 million and $2.5 million, respectively, of the off-market designated hedges which is included in Other, net within operating activities in the Condensed Consolidated Statements of Cash Flows. Net cash received or paid is included within Interest expense, net in the Condensed Consolidated Statements of Operations.

At March 31, 2024, the amount of net gains expected to be reclassified into earnings in the next 12 months is approximately $19.6 million. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate amount recognized in earnings is based on the SOFR rates at the time of net swap cash payments.

NOTE 7. FAIR VALUE MEASUREMENTS

The following table presents the estimated fair values of our financial instruments:

 

 

 

March 31, 2024

 

 

December 31, 2023

 

(in thousands)

 

Carrying
Amount

 

 

Fair
Value

 

 

Carrying
Amount

 

 

Fair
Value

 

Derivative assets related to interest rate swaps (Level 2)

 

$

142,636

 

 

$

142,636

 

 

$

129,125

 

 

$