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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, 2023

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) as of October 31, 2023, was 79,364.

 

 


 

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

22

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 5.

Other Information

37

ITEM 6.

Exhibits

38

 

 

 

SIGNATURE

39

 

 

 

 

 

 


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)

2023

 

 

2022

 

 

2023

 

 

2022

 

Revenues

$

265,509

 

 

$

306,693

 

 

$

769,572

 

 

$

1,077,640

 

Costs and expenses:

 

 

 

 

 

 

 

Cost of goods sold

 

226,303

 

 

 

220,876

 

 

 

665,716

 

 

 

592,057

 

Selling, general and administrative expenses

 

19,303

 

 

 

18,878

 

 

 

55,118

 

 

 

55,584

 

CatchMark merger-related expenses

 

 

 

26,007

 

 

 

2,453

 

 

 

26,007

 

Gain on fire damage

 

(16,326

)

 

 

(24,913

)

 

 

(39,436

)

 

 

(34,505

)

 

 

229,280

 

 

 

240,848

 

 

 

683,851

 

 

 

639,143

 

Operating income

 

36,229

 

 

 

65,845

 

 

 

85,721

 

 

 

438,497

 

Interest expense, net

 

(7,971

)

 

 

(8,280

)

 

 

(15,783

)

 

 

(18,593

)

Pension settlement charge

 

 

 

 

 

 

 

 

 

 

(14,165

)

Non-operating pension and other postretirement employee benefit costs

 

(228

)

 

 

(1,808

)

 

 

(685

)

 

 

(5,546

)

Other

 

370

 

 

 

(1

)

 

 

638

 

 

 

(1

)

Income before income taxes

 

28,400

 

 

 

55,756

 

 

 

69,891

 

 

 

400,192

 

Income taxes

 

(4,725

)

 

 

(9,801

)

 

 

(7,650

)

 

 

(70,135

)

Net income

$

23,675

 

 

$

45,955

 

 

$

62,241

 

 

$

330,057

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.30

 

 

$

0.64

 

 

$

0.78

 

 

$

4.70

 

Diluted

$

0.29

 

 

$

0.64

 

 

$

0.78

 

 

$

4.69

 

Dividends per share

$

0.45

 

 

$

0.44

 

 

$

1.35

 

 

$

1.32

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

80,132

 

 

 

71,486

 

 

 

80,102

 

 

 

70,171

 

Diluted

 

80,379

 

 

 

71,632

 

 

 

80,279

 

 

 

70,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

23,675

 

 

$

45,955

 

 

$

62,241

 

 

$

330,057

 

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Pension and other postretirement employee benefits

 

 

(132

)

 

 

914

 

 

 

(607

)

 

 

9,309

 

Cash flow hedges

 

 

28,464

 

 

 

32,725

 

 

 

28,848

 

 

 

118,530

 

Other comprehensive income, net of tax

 

 

28,332

 

 

 

33,639

 

 

 

28,241

 

 

 

127,839

 

Comprehensive income

 

$

52,007

 

 

$

79,594

 

 

$

90,482

 

 

$

457,896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

302,799

 

 

$

343,809

 

Customer receivables, net

 

 

30,762

 

 

 

22,813

 

Inventories, net

 

 

82,537

 

 

 

67,958

 

Other current assets

 

 

56,606

 

 

 

36,955

 

Total current assets

 

 

472,704

 

 

 

471,535

 

Property, plant and equipment, net

 

 

334,350

 

 

 

318,184

 

Investment in real estate held for development and sale

 

 

55,928

 

 

 

55,490

 

Timber and timberlands, net

 

 

2,459,508

 

 

 

2,508,372

 

Intangible assets, net

 

 

16,085

 

 

 

17,420

 

Other long-term assets

 

 

209,703

 

 

 

179,554

 

Total assets

 

$

3,548,278

 

 

$

3,550,555

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

115,334

 

 

$

94,861

 

Current portion of long-term debt

 

 

39,996

 

 

 

39,979

 

Current portion of pension and other postretirement employee benefits

 

 

4,926

 

 

 

4,926

 

Total current liabilities

 

 

160,256

 

 

 

139,766

 

Long-term debt

 

 

993,562

 

 

 

992,701

 

Pension and other postretirement employee benefits

 

 

80,581

 

 

 

77,396

 

Deferred tax liabilities, net

 

 

38,419

 

 

 

41,790

 

Other long-term obligations

 

 

36,363

 

 

 

35,749

 

Total liabilities

 

 

1,309,181

 

 

 

1,287,402

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

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

 

 

 

 

 

 

Common stock, $1 par value, 200,000 and 100,000 shares authorized and 79,628 and 79,683 shares issued and outstanding

 

 

79,628

 

 

 

79,683

 

Additional paid-in capital

 

 

2,301,301

 

 

 

2,294,797

 

Accumulated deficit

 

 

(267,725

)

 

 

(208,979

)

Accumulated other comprehensive income

 

 

125,893

 

 

 

97,652

 

Total stockholders’ equity

 

 

2,239,097

 

 

 

2,263,153

 

Total liabilities and stockholders' equity

 

$

3,548,278

 

 

$

3,550,555

 

 

 

 

 

 

 

 

 

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)

 

2023

 

 

2022

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net income

 

$

62,241

 

 

$

330,057

 

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

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

90,327

 

 

 

67,960

 

Basis of real estate sold

 

 

21,624

 

 

 

25,024

 

Change in deferred taxes

 

 

(3,979

)

 

 

(1,359

)

Pension and other postretirement employee benefits

 

 

4,833

 

 

 

10,936

 

Pension settlement charge

 

 

 

 

 

14,165

 

Equity-based compensation expense

 

 

6,472

 

 

 

16,141

 

Gain on fire damage

 

 

(39,436

)

 

 

(34,505

)

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

 

 

(18,651

)

 

 

 

Other, net

 

 

5,648

 

 

 

(455

)

Change in working capital and operating-related activities, net

 

 

(24,107

)

 

 

14,071

 

Real estate development expenditures

 

 

(7,243

)

 

 

(6,986

)

Funding of pension and other postretirement employee benefits

 

 

(2,176

)

 

 

(3,290

)

Proceeds from insurance recoveries

 

 

21,755

 

 

 

26,678

 

Net cash from operating activities

 

 

117,308

 

 

 

458,437

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Property, plant and equipment additions

 

 

(28,068

)

 

 

(44,000

)

Timberlands reforestation and roads

 

 

(17,013

)

 

 

(12,220

)

Acquisition of timber and timberlands

 

 

(1,676

)

 

 

(96,081

)

Proceeds from property insurance

 

 

1,356

 

 

 

 

Cash acquired in CatchMark merger

 

 

 

 

 

23,571

 

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

 

 

17,279

 

 

 

 

Other, net

 

 

700

 

 

 

935

 

Net cash from investing activities

 

 

(27,422

)

 

 

(127,795

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Distributions to common stockholders

 

 

(107,880

)

 

 

(96,578

)

Repurchase of common stock

 

 

(11,406

)

 

 

(4,527

)

Proceeds from issuance of long-term debt

 

 

 

 

 

277,500

 

Repayment of long-term debt

 

 

 

 

 

(303,000

)

Other, net

 

 

(2,315

)

 

 

(6,120

)

Net cash from financing activities

 

 

(121,601

)

 

 

(132,725

)

Change in cash, cash equivalents and restricted cash

 

 

(31,715

)

 

 

197,917

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

345,591

 

 

 

296,772

 

Cash, cash equivalents and restricted cash at end of period

 

$

313,876

 

 

$

494,689

 

 

 

 

 

 

 

 

NONCASH INVESTING AND FINANCING ACTIVITIES

 

 

 

 

 

 

Accrued property, plant and equipment additions

 

$

20,141

 

 

$

4,429

 

Accrued timberlands reforestation and roads

 

$

2,834

 

 

$

2,749

 

Repurchase of common stock pending settlement

 

$

1,723

 

 

$

 

Equity issued as consideration in the CatchMark merger

 

$

 

 

$

508,314

 

Long-term debt and other liabilities assumed in 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 above in the Condensed Consolidated Statements of Cash Flows.

 

(in thousands)

 

September 30, 2023

 

 

September 30, 2022

 

Cash and cash equivalents

 

$

302,799

 

 

$

484,018

 

Restricted cash included in other current and long-term assets1

 

 

11,077

 

 

 

10,671

 

Total cash, cash equivalents, and restricted cash

 

$

313,876

 

 

$

494,689

 

 

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 September 30, 2023 and 2022, $1.8 million and $0, respectively, was classified as Other current assets.

 

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

 

 

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

 

Net income

 

 

 

 

 

 

 

 

 

 

 

22,306

 

 

 

 

 

 

22,306

 

Shares issued for stock compensation

 

 

4

 

 

 

4

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

1,577

 

 

 

 

 

 

 

 

 

1,577

 

Repurchase of common stock

 

 

(9

)

 

 

(9

)

 

 

 

 

 

(385

)

 

 

 

 

 

(394

)

Pension plans and OPEB obligations, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(344

)

 

 

(344

)

Cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,719

 

 

 

17,719

 

Dividends on common stock, $0.45 per share

 

 

 

 

 

 

 

 

 

 

 

(35,958

)

 

 

 

 

 

(35,958

)

Other transactions, net

 

 

 

 

 

 

 

 

93

 

 

 

(93

)

 

 

 

 

 

 

Balance, June 30, 2023

 

 

79,911

 

 

 

79,911

 

 

 

2,298,593

 

 

 

(242,896

)

 

 

97,561

 

 

 

2,233,169

 

Net income

 

 

 

 

 

 

 

 

 

 

 

23,675

 

 

 

 

 

 

23,675

 

Equity-based compensation expense

 

 

 

 

 

 

 

 

2,616

 

 

 

 

 

 

 

 

 

2,616

 

Repurchase of common stock

 

 

(283

)

 

 

(283

)

 

 

 

 

 

(12,452

)

 

 

 

 

 

(12,735

)

Pension plans and OPEB obligations, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

(132

)

Cash flow hedges, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,464

 

 

 

28,464

 

Dividends on common stock, $0.45 per share

 

 

 

 

 

 

 

 

 

 

 

(35,960

)

 

 

 

 

 

(35,960

)

Other transactions, net