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05/03/18
PotlatchDeltic Corporation Reports First Quarter 2018 Results

SPOKANE, Wash., May 03, 2018 (GLOBE NEWSWIRE) -- PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $14.6 million, or $0.29 per diluted share, on revenues of $199.9 million for the quarter ended March 31, 2018.

First Quarter 2018 Highlights

  • Merged with Deltic Timber on February 20, 2018 to form PotlatchDeltic

  • On track with $50 million in after-tax annual cash synergy run rate in year two; achieved $30 million run rate as of March 31, 2018

  • Adjusted EBITDDA of $64.7 million and Adjusted EBITDDA margin of 32.4%

  • Closed new $380 million revolver with $420 million accordion

  • Moody’s upgraded PotlatchDeltic to Baa3 (investment grade)

“First quarter 2018 marked a key milestone in our company history as we successfully closed our merger and began a new chapter as PotlatchDeltic,” said Mike Covey, chairman and chief executive officer. “Significant work has been accomplished toward integrating the two companies and we have made meaningful progress capturing $30 million of our $50 million annual synergy target on a run-rate basis. Our employees have also done a tremendous job this quarter achieving excellent operating results, taking advantage of strong market conditions in lumber and favorable sawlog demand,” stated Mr. Covey.

 
Financial Highlights
 ($ in millions, except per share data)   Q1 2018    Q4 2017    Q1 2017
Revenues   $ 199.9     $ 175.2     $ 149.7  
Net income   $ 14.6     $ 11.6     $ 16.9  
Weighted average shares outstanding, diluted (in thousands)     50,786       41,301       41,071  
Net income per diluted share   $ 0.29     $ 0.28     $ 0.41  
                         
Adjusted net income   $ 35.2     $ 25.7     $ 16.9  
Adjusted net income per diluted share   $ 0.69     $ 0.62     $ 0.41  
                         
Adjusted EBITDDA   $ 64.7     $ 50.5     $ 36.9  
Distribution per share   $ 0.40     $ 0.40     $ 0.375  
Net cash from operations   $ 34.9     $ 33.3     $ 41.9  
Cash and cash equivalents   $ 102.3     $ 120.5     $ 101.7  
 

Consolidated results for first quarter of 2018 as presented include the results of Deltic Timber for the period February 21, 2018 through March 31, 2018. The financial statements included within this release do not include Deltic Timber’s financial results for any period prior to the merger date.

Excluding $8.8 million attributable to Deltic Timber, first quarter 2018 Adjusted EBITDDA was $55.9 million, a $5.4 million increase from fourth quarter 2017.

Business Performance: Q1 2018 vs. Q4 2017

Resource

First Quarter 2018 Highlights

  • Harvest volumes increased 9%; southern sawlog volumes up nearly 45% due to the addition of Deltic operations
  • Forestry costs declined due to accelerated southern fertilization in Q4 2017 and seasonally lower activity in Idaho
  • Partially offset by lower southern sawlog pricing due to mix and seasonally lower northern sawlog volumes
  • Northern sawlog pricing remained relatively flat
 
 ($ in millions)   Q1 2018    Q4 2017    $ Change 
Segment Revenues   $ 76.5     $ 75.8     $ 0.7  
                         
Adjusted EBITDDA   $ 37.7     $ 35.5     $ 2.2  
                         

Excluding $4.7 million attributable to Deltic Timber operations, first quarter 2018 Resource segment Adjusted EBITDDA was $33.0 million, a $2.5 million decrease from fourth quarter 2017.

Wood Products

First Quarter 2018 Highlights

  • Lumber shipments increased nearly 11% due to solid demand and the addition of Deltic operations
  • Lumber pricing increased 4% with strong markets supported by improving housing demand and transportation disruptions
  • Adjusted EBITDDA benefitted from the addition of El Dorado MDF and higher industrial plywood shipments and realizations
 
 ($ in millions)   Q1 2018    Q4 2017    $ Change 
Segment Revenues   $ 139.8     $ 114.6     $ 25.2  
                         
Adjusted EBITDDA   $ 29.0     $ 21.8     $ 7.2  
                         

Excluding $5.7 million attributable to Deltic Timber operations, first quarter 2018 Wood Products segment Adjusted EBITDDA was $23.3 million, a $1.5 million increase from fourth quarter 2017.

Real Estate

First Quarter 2018 Highlights

  • Sold 6,144 acres of rural real estate; average pricing of $1,438 per acre
  • Sold 12 residential lots in Chenal with average pricing of $99,000 per lot
  • No commercial acreage sales in Chenal; several indications of interest
 
 ($ in millions)   Q1 2018    Q4 2017    $ Change 
Segment Revenues   $ 10.6     $ 4.8     $ 5.8  
                         
Adjusted EBITDDA   $ 8.0     $ 3.4     $ 4.6  
                         

Excluding $0.5 million attributable to acquired Deltic Timber operations, first quarter 2018 Real Estate segment Adjusted EBITDDA was $7.5 million, a $4.1 million increase from fourth quarter 2017.

Outlook

“We remain optimistic that improving U.S. housing starts and strong repair and remodel activity will continue to support favorable fundamentals for our resource and wood products businesses. The merger with Deltic is off to a very successful start, we are confident that our synergies and operational efficiencies are attainable, and we continue to identify additional opportunities. We are well positioned with a strong balance sheet, significant financial flexibility and a conservative dividend payout ratio,” concluded Mr. Covey.

Non-GAAP Measures

This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP.

Management uses Adjusted EBITDDA to evaluate the performance of the company. This is a non-GAAP measure that represents EBITDDA before certain items that impact comparison of the performance of our business either period-over-period or with other businesses.

Adjusted Net Income and Adjusted Net Income Per Diluted Share are non-GAAP measures that represent GAAP net income and GAAP net earnings per diluted share before certain items that impact the ability of investors, securities analysts and other interested parties to compare the performance of our business, either period-over-period or with other businesses.

Reconciliations to GAAP are set forth in the accompanying schedules.

Conference Call Information

A live conference call and webcast will be held Friday, May 4, 2018, at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time). Investors may access the webcast at www.potlatchdeltic.com by clicking on the Investor Resources link or by conference call at 1-866-393-8403 for U.S./Canada and 1-706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 5047548. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available two hours following the call until May 11, 2018 by calling 1-800-585-8367 for U.S./Canada or 1-404-537-3406 for international callers. Callers must enter conference I.D. number 5047548 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 2 million acres of timberlands in Alabama, Arkansas, Idaho, Louisiana, Minnesota and Mississippi. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a medium density fiberboard plant, a residential and commercial real estate development business and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest practices, is dedicated to long-term stewardship and sustainable management of its timber resources. More information can be found at www.potlatchdeltic.com.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, our expectations regarding the U.S. housing market; strong repair and remodel market; lumber demand and pricing; increased capital investment in manufacturing in the U.S. South; the expected synergies and operational efficiencies from the Deltic merger; the estimated distribution of Deltic’s accumulated earnings and profits; and the integration of Deltic’s operations. You should carefully read forward-looking statements, including statements that contain these words, because they discuss the future expectations or state other “forward-looking” information about Potlatch. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond PotlatchDeltic’s control, including the U.S. housing market; changes in timberland values; changes in timber harvest levels on the company's lands; changes in timber prices; changes in policy regarding governmental timber sales; availability of logging contractors and shipping capacity; changes in the United States and international economies; changes in interest rates; changes in the level of construction activity; changes in Asia demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; changes in demand for our products; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; changes in share price; the successful execution of the company’s strategic plans; the company’s ability to meet expectations regarding the accounting and tax treatments of the merger transaction; the possibility that any of the anticipated benefits of the merger will not be realized or will not be realized within the expected time period; the risk that integration of Deltic’s operations with those of Potlatch will be materially delayed or will be more costly or difficult than expected; the effect of the merger on customer relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); the estimation of Deltic’s accumulated earnings and profits is preliminary and may change with further due diligence; and the other factors described in Potlatch’s Annual Report on Form 10-K and in the company’s other filings with the SEC. Potlatch assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, all of which speak only as of the date hereof.

 
 
 
PotlatchDeltic Corporation
Consolidated Statements of Income
Unaudited

 
    Three Months Ended 
    March 31,    December 31,    March 31, 
(Dollars in thousands, except per share amounts)   2018    2017    2017 
Revenues   $ 199,897     $ 175,244     $ 149,681  
Costs and expenses:                        
Cost of goods sold1     139,155       120,817       112,498  
Selling, general and administrative expenses1     13,656       12,304       11,368  
Deltic merger-related costs     19,255       3,382        
Loss on lumber price swap           97        
      172,066       136,600       123,866  
Operating income     27,831       38,644       25,815  
Interest expense, net     (5,660 )     (7,395 )     (4,970 )
Non-operating pension and other postretirement costs1     (1,857 )     (1,596 )     (1,906 )
Income before income taxes     20,314       29,653       18,939  
Income tax     (5,717 )     (18,065 )     (2,018 )
Net income   $ 14,597     $ 11,588     $ 16,921  
                         
Net income per share:                        
Basic   $ 0.29     $ 0.28     $ 0.41  
Diluted   $ 0.29     $ 0.28     $ 0.41  
Dividends per share   $ 0.40     $ 0.40     $ 0.375  
Weighted-average shares outstanding (in thousands):                  
Basic     50,425       40,839       40,778  
Diluted     50,786       41,301       41,071  
  1. We adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, retrospectively on January 1, 2018 and have reclassified non-service costs from operating expenses to non-operating costs. There was no change to income before income taxes.
 
 
PotlatchDeltic Corporation
Condensed Consolidated Balance Sheets
Unaudited

 
 (Dollars in thousands)   March 31, 2018    December 31, 2017 
ASSETS                
Current assets:                
Cash and cash equivalents   $ 102,340     $ 120,457  
Customer receivables, net     28,212       11,240  
Inventories     62,153       50,132  
Other current assets     21,824       11,478  
Total current assets     214,529       193,307  
Property, plant and equipment, net     343,176       77,229  
Investment in real estate held for development and sale     78,454        
Timber and timberlands, net     1,704,341       654,476  
Deferred tax assets, net           19,796  
Trade name and customer relationships intangibles     19,000        
Other long-term assets     12,853       8,271  
Total assets   $ 2,372,353     $ 953,079  
                 
LIABILITIES AND STOCKHOLDERS EQUITY                
Current liabilities:                
Accounts payable and accrued liabilities   $ 75,241     $ 55,201  
Current portion of long-term debt           14,263  
Current portion of pension and other postretirement employee benefits     6,057       5,334  
Total current liabilities     81,298       74,798  
Long-term debt     782,974       559,056  
Pension and other postretirement employee benefits     131,959       103,524  
Deferred tax liabilities, net     22,927        
Other long-term obligations     17,753       15,159  
Total liabilities     1,036,911       752,537  
Commitments and contingencies                
Stockholders' equity:                
Common stock, $1 par value     62,755       40,612  
Additional paid-in capital     1,480,402       359,144  
Accumulated deficit     (90,334 )     (104,363 )
Accumulated other comprehensive loss     (117,381 )     (94,851 )
Total stockholders’ equity     1,335,442       200,542  
Total liabilities and stockholders' equity   $ 2,372,353     $ 953,079  
                 


 
PotlatchDeltic Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited

 
    For the three months ended 
(Dollars in thousands)   March 31, 2018    December 31,
2017
 
  March 31, 2017 
CASH FLOWS FROM OPERATING ACTIVITIES                        
Net income   $ 14,597     $ 11,588     $ 16,921  
Adjustments to reconcile net income to net cash from operating activities:                        
Depreciation, depletion and amortization     12,635       8,004       6,702  
Basis of real estate sold     3,605       476       4,790  
Real estate development expenditures     (608 )            
Change in deferred taxes     (1,058 )     16,289       (351 )
Pension and other postretirement employee benefits     3,814       3,288       3,771  
Equity-based compensation expense     3,094       1,186       1,157  
Other, net     (542 )     (405 )     (1,007 )
Funding of qualified pension plans     (8,098 )            
Change in working capital and operating-related activities, net     7,475       (7,112 )     9,966  
Net cash from operating activities     34,914       33,314       41,949  
                         
CASH FLOWS FROM INVESTING ACTIVITIES                        
Purchase of property, plant and equipment     (3,632 )     (3,410 )     (3,636 )
Timberlands reforestation and roads     (2,860 )     (3,630 )     (2,645 )
Acquisition of timber and timberlands           (10 )      
Other, net     232       191       (102 )
Cash and cash equivalents acquired in Deltic merger     3,419              
Net cash from investing activities     (2,841 )     (6,859 )     (6,383 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Dividends to common stockholders     (25,102 )     (16,245 )     (15,228 )
Revolving line of credit repayment     (106,000 )            
Proceeds from issue of long-term debt     100,000              
Repayment of long-term debt     (14,250 )     (6,000 )      
Debt issuance costs     (2,409 )            
Other, net     (2,429 )     (556 )     (1,258 )
Net cash from financing activities     (50,190 )     (22,801 )     (16,486 )
Change in cash and cash equivalents     (18,117 )     3,654       19,080  
Cash and cash equivalents at beginning of period     120,457       116,803       82,584  
Cash and cash equivalents at end of period   $ 102,340     $ 120,457     $ 101,664  
                         

 

 
PotlatchDeltic Corporation
Segment Information
Unaudited

 
    For the three months ended 
    March 31,    December 31,    March 31, 
(Dollars in thousands)   2018    2017    2017 
Revenues                        
Resource   $ 76,506     $ 75,802     $ 51,768  
Wood Products     139,815       114,549       95,592  
Real Estate     10,555       4,733       14,504  
      226,876       195,084       161,864  
Intersegment Resource revenues     (26,979 )     (19,840 )     (12,183 )
Consolidated revenues   $ 199,897     $ 175,244     $ 149,681  
                         
 Adjusted EBITDDA1                        
Resource   $ 37,697     $ 35,507     $ 19,343  
Wood Products     28,950       21,862       10,769  
Real Estate     8,002       3,387       13,460  
Corporate     (8,716 )     (8,493 )     (7,692 )
Eliminations and adjustments     (1,201 )     (1,840 )     1,040  
Total Adjusted EBITDDA     64,732       50,423       36,920  
Basis of real estate sold     (3,605 )     (476 )     (4,790 )
Depreciation, depletion and amortization     (12,196 )     (7,636 )     (6,329 )
Interest expense, net     (5,660 )     (7,395 )     (4,970 )
Non-operating pension and other postretirement employee benefits     (1,857 )     (1,596 )     (1,906 )
Gain (loss) on fixed assets     4       (188 )     14  
Loss on lumber price swap           (97 )      
Inventory purchase price adjustment in cost of goods sold     (1,849 )            
Deltic merger-related costs     (19,255 )     (3,382 )      
Income before income taxes   $ 20,314     $ 29,653     $ 18,939  
                         
Depreciation, depletion and amortization          
Resource   $ 8,646     $ 5,611     $ 4,384  
Wood Products     3,354       1,860       1,827  
Real Estate     40       1       1  
Corporate     156       164       117  
      12,196       7,636       6,329  
Bond discounts and deferred loan fees2     439       368       373  
Total depreciation, depletion and amortization   $ 12,635     $ 8,004     $ 6,702  
                         
Basis of real estate sold                        
Real Estate   $ 3,723     $ 640     $ 4,809  
Eliminations and adjustments     (118 )     (164 )     (19 )
Total basis of real estate sold   $ 3,605     $ 476     $ 4,790  
  1. Management uses adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of consolidated Adjusted EBITDDA on page 9, Reconciliations.
  2. Bond discounts and deferred loan fees are included in the computation of interest expense, net in the Consolidated Statements of Income.
 
 
PotlatchDeltic Corporation
Reconciliations

 
    For the three months ended 
(Dollars in thousands)   March 31,
2018
 
  December 31,
2017
 
  March 31,
2017
 
Adjusted EBITDDA                        
Net income (GAAP)   $ 14,597     $ 11,588     $ 16,921  
Interest, net     5,660       7,395       4,970  
Income tax provision     5,717       18,065       2,018  
Depreciation, depletion and amortization     12,196       7,636       6,329  
Basis of real estate sold     3,605       476       4,790  
Non-operating pension and other postretirement benefit costs     1,857       1,596       1,906  
Deltic merger-related costs     19,255       3,382        
Inventory purchase price adjustment in cost of goods sold     1,849              
Loss on lumber hedge           97        
(Gain) loss on fixed assets     (4 )     188       (14 )
Adjusted EBITDDA   $ 64,732     $ 50,423     $ 36,920  
                         
Adjusted net income                        
Net income (GAAP)   $ 14,597     $ 11,588     $ 16,921  
Special items:                        
Impact of tax legislation           10,668        
Deltic merger-related costs     19,255       3,382        
Inventory purchase price adjustment in cost of goods sold, after tax     1,368              
Adjusted net income   $ 35,220     $ 25,638     $ 16,921  
                         
Adjusted net income per share                        
Net income per diluted share (GAAP)   $ 0.29     $ 0.28     $ 0.41  
Special items:                        
Impact of tax legislation           0.26        
Deltic merger-related costs     0.38       0.08        
Inventory purchase price adjustment in cost of goods sold, after tax     0.02              
Adjusted net income per diluted share   $ 0.69     $ 0.62     $ 0.41  
                         


       
Contact: (Investors) (Media)  
  Jerry Richards Mark Benson  
  509.835.1521 509.835.1513  

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Source: PotlatchDeltic Corporation