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07/30/18
PotlatchDeltic Corporation Reports Second Quarter 2018 Results

SPOKANE, Wash., July 30, 2018 (GLOBE NEWSWIRE) -- PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $46.1 million, or $0.73 per diluted share, on revenues of $268.2 million for the quarter ended June 30, 2018.

Second Quarter 2018 Highlights

  • Consolidated Adjusted EBITDDA of $94.2 million and Adjusted EBITDDA margin of 35.1%
  • Wood Products Adjusted EBITDDA of $51.5 million and Wood Products Adjusted EBITDDA margin of 26.6%
  • On track with $50 million in after-tax annual cash synergy run rate in year two after the merger with Deltic Timber; achieved $40 million annual run rate as of June 30, 2018
  • Standard and Poor’s Global Rating (S&P) upgraded PotlatchDeltic to BBB- (investment grade); PotlatchDeltic is investment grade rated by both S&P and Moody’s Investor Services

“Our merger with Deltic Timber was perfectly timed as the combined set of assets benefitted from the historic run in lumber prices in the second quarter,” said Mike Covey, chairman and chief executive officer. “This was reflected by the significant increase in Adjusted EBITDDA for Wood Products and the total company. Lumber prices are pulling back from an all-time peak but are still robust. This is shaping up to be an extremely strong year for PotlatchDeltic by many measures,” stated Mr. Covey.

Financial Highlights

($ in millions, except per share data)     Q2 2018     Q1 2018     Q2 2017
Revenues   $ 268.2   $ 199.9   $ 163.2
Net income   $ 46.1   $ 14.6   $ 24.3
Weighted average shares outstanding, diluted (in thousands)     63,316     50,786     41,219
Net income per diluted share   $ 0.73   $ 0.29   $ 0.59
                   
Adjusted net income   $ 47.2   $ 35.2   $ 22.3
Adjusted net income per diluted share   $ 0.75   $ 0.69   $ 0.54
                   
Adjusted EBITDDA   $ 94.2   $ 64.7   $ 46.1
Distribution per share   $ 0.40   $ 0.40   $ 0.375
Net cash from operations   $ 60.5   $ 34.9   $ 37.5
Cash and cash equivalents   $ 125.7   $ 102.3   $ 110.3
                   

Consolidated results include Deltic Timber beginning February 21, 2018. The financial statements included within this release do not include Deltic Timber’s financial results for any period prior to the merger date.

Business Performance: Q2 2018 vs. Q1 2018

Resource

Second Quarter 2018 Highlights

  • Northern sawlog prices increased 19% as indexed volumes benefitted from higher lumber prices and seasonally lighter logs
  • Northern sawlog harvest volume declined seasonally resulting from spring break up
  • Southern sawlog volumes increased 66%; this was the first time Deltic operations are included for a full quarter
  • Average Southern sawlog prices increased 7% due primarily to higher mix of larger diameter logs from Deltic timberlands
  • Forestry costs increased seasonally             
($ in millions)   Q2 2018     Q1 2018     $ Change  
Segment Revenues   $ 92.5     $ 76.5     $ 16.0  
                         
Adjusted EBITDDA   $ 43.7     $ 37.7     $ 6.0  
                         

Wood Products

Second Quarter 2018 Highlights

  • Lumber pricing increased 11% with strong markets supported by improving housing demand and the ongoing effect of transportation disruptions
  • Lumber shipments increased nearly 27% due to solid demand and a full quarter of Deltic operations
  • Adjusted EBITDDA benefitted from inclusion of El Dorado MDF for a full quarter and higher industrial plywood realizations    
($ in millions)   Q2 2018   Q1 2018   $ Change
Segment Revenues   $ 193.6   $ 139.8   $ 53.8
                   
Adjusted EBITDDA   $ 51.5   $ 29.0   $ 22.5
                   

Real Estate

Second Quarter 2018 Highlights

  • Sold 11,571 acres of rural real estate; average pricing of $1,095 per acre; 70% of acres were nonstrategic timberlands at $899 per acre
  • Sold 13 residential lots in Chenal Valley; average pricing of $74,000 per lot due to mix
  • No commercial acreage sales in Chenal Valley; several indications of interest
($ in millions)   Q2 2018     Q1 2018     $ Change  
Segment Revenues   $ 16.4     $ 10.6     $ 5.8  
                         
Adjusted EBITDDA   $ 12.3     $ 8.0     $ 4.3  
                         

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 Tuesday, July 31, 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 6696837. 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 August 7, 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 6696837 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; the direction of our business markets, business conditions, pricing; earnings in our Resource, Wood Products and Real Estate businesses in the third quarter 2018; 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; share price; the successful execution of the company’s strategic plans; the company’s ability to meet expectations; 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
Condensed Consolidated Statements of Income
Unaudited 

  Three Months Ended     Six Months Ended  
  June 30,     March 31,       June 30,       June 30,  
(Dollars in thousands, except per share amounts) 2018     2018     2017     2018     2017  
Revenues $ 268,233     $ 199,897     $ 163,229     $ 468,130     $ 312,910  
Costs and expenses:                                      
Cost of goods sold1   180,906       139,155       111,356       320,061       223,854  
Selling, general and administrative expenses1   16,892       13,656       13,079       30,548       24,447  
Deltic merger-related costs   1,018       19,255             20,273        
Gain on lumber price swap               (3,265 )           (3,265 )
    198,816       172,066       121,170       370,882       245,036  
Operating income   69,417       27,831       42,059       97,248       67,874  
Interest expense, net   (9,356 )     (5,660 )     (7,348 )     (15,016 )     (12,318 )
Non-operating pension and other postretirement costs1   (1,908 )     (1,857 )     (1,286 )     (3,765 )     (3,192 )
Income before income taxes   58,153       20,314       33,425       78,467       52,364  
Income taxes   (12,005 )     (5,717 )     (9,181 )     (17,722 )     (11,199 )
Net income $ 46,148     $ 14,597     $ 24,244     $ 60,745     $ 41,165  
                                       
Net income per share:                                      
Basic $ 0.73     $ 0.29     $ 0.59     $ 1.07     $ 1.01  
Diluted $ 0.73     $ 0.29     $ 0.59     $ 1.06     $ 1.00  
Dividends per share $ 0.40     $ 0.40     $ 0.375     $ 0.80     $ 0.75  
Weighted-average shares outstanding (in thousands):                                  
Basic   62,980       50,425       40,823       56,739       40,802  
Diluted   63,316       50,786       41,219       57,128       41,144  

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) June 30, 2018     December 31, 2017  
ASSETS              
Current assets:              
Cash and cash equivalents $ 125,719     $ 120,457  
Customer receivables, net   43,322       11,240  
Inventories   63,384       50,132  
Other current assets   18,025       11,478  
Total current assets   250,450       193,307  
Property, plant and equipment, net   339,704       77,229  
Investment in real estate held for development and sale   75,578        
Timber and timberlands, net   1,691,785       654,476  
Deferred tax assets, net         19,796  
Trade name and customer relationships intangibles   19,344        
Other long-term assets   20,288       8,271  
Total assets $ 2,397,149     $ 953,079  
               
LIABILITIES AND STOCKHOLDERS EQUITY              
Current liabilities:              
Accounts payable and accrued liabilities $ 71,852     $ 55,201  
Current portion of long-term debt         14,263  
Current portion of pension and other postretirement employee benefits   6,088       5,334  
Total current liabilities   77,940       74,798  
Long-term debt   783,436       559,056  
Pension and other postretirement employee benefits   132,677       103,524  
Deferred tax liabilities, net   27,040          
Other long-term obligations   15,130       15,159  
Total liabilities   1,036,223       752,537  
Commitments and contingencies              
Stockholders' equity:              
Common stock, $1 par value   62,754       40,612  
Additional paid-in capital   1,482,048       359,144  
Accumulated deficit   (69,426 )     (104,363 )
Accumulated other comprehensive loss   (114,450 )     (94,851 )
Total stockholders’ equity   1,360,926       200,542  
Total liabilities and stockholders' equity $ 2,397,149     $ 953,079  
               
               
               

PotlatchDeltic Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited 

  For the three months ended     For the six months ended  
(Dollars in thousands) June 30, 2018     March 31, 2018     June 30, 2017     June 30, 2018     June 30, 2017  
CASH FLOWS FROM OPERATING ACTIVITIES                                      
Net income $ 46,148     $ 14,597     $ 24,244     $ 60,745     $ 41,165  
Adjustments to reconcile net income to net cash from operating activities:                          
Depreciation, depletion and amortization   21,605       12,635       6,641       34,240       13,343  
Basis of real estate sold   2,820       3,605       982       6,425       5,772  
Change in deferred taxes   3,856       (1,058 )     1,595       2,798       1,244  
Pension and other postretirement employee benefits   4,185       3,814       3,283       7,999       6,575  
Equity-based compensation expense   1,795       3,094       1,191       4,889       2,348  
Other, net   (129 )     (542 )     (455 )     (671 )     (983 )
Change in working capital and operating-related activities, net   (18,782 )     7,475       (47 )     (11,307 )     9,919  
Real estate development expenditures   (1,057 )     (608 )           (1,665 )      
Funding of qualified pension plans         (8,098 )           (8,098 )      
Net cash from operating activities   60,441       34,914       37,434       95,355       79,383  
                                       
CASH FLOWS FROM INVESTING ACTIVITIES                                      
Purchase of property, plant and equipment   (7,741 )     (3,632 )     (2,303 )     (11,373 )     (5,939 )
Timberlands reforestation and roads   (4,259 )     (2,860 )     (3,147 )     (7,119 )     (5,792 )
Acquisition of timber and timberlands   (163 )           (3,132 )     (163 )     (3,132 )
Other, net   299       232       28       531       (74 )
Cash and cash equivalents acquired in Deltic merger         3,419             3,419        
Net cash from investing activities   (11,864 )     (2,841 )     (8,554 )     (14,705 )     (14,937 )
                                       
CASH FLOWS FROM FINANCING ACTIVITIES                                      
Dividends to common stockholders   (25,101 )     (25,102 )     (15,229 )     (50,203 )     (30,457 )
Proceeds from Potlatch revolving line of credit         100,000             100,000        
Repayment of Potlatch revolving line of credit         (100,000 )           (100,000 )      
Revolving line of credit repayment attributable to Deltic         (106,000 )           (106,000 )      
Proceeds from issue of long-term debt         100,000             100,000        
Repayment of long-term debt         (14,250 )     (5,000 )     (14,250 )     (5,000 )
Debt issuance costs         (2,409 )           (2,409 )      
Other, net   (97 )     (2,429 )     9       (2,526 )     (1,249 )
Net cash from financing activities   (25,198 )     (50,190 )     (20,220 )     (75,388 )     (36,706 )
Change in cash and cash equivalents   23,379       (18,117 )     8,660       5,262       27,740  
Cash and cash equivalents at beginning of period   102,340       120,457       101,664       120,457       82,584  
Cash and cash equivalents at end of period $ 125,719     $ 102,340     $ 110,324     $ 125,719     $ 110,324  
                                       
                                       
                                       

PotlatchDeltic Corporation
Segment Information
Unaudited 

  For the three months ended       Six Months Ended  
  June 30,     March 31,     June 30,     June 30,  
(Dollars in thousands) 2018     2018     2017     2018     2017  
Revenues                                      
Resource $ 92,511     $ 76,506     $ 55,924     $ 169,017     $ 107,692  
Wood Products   193,585       139,815       114,529       333,400       210,121  
Real Estate   16,431       10,555       8,136       26,986       22,640  
    302,527       226,876       178,589       529,403       340,453  
Intersegment Resource revenues   (34,294 )     (26,979 )     (15,360 )     (61,273 )     (27,543 )
Consolidated revenues $ 268,233     $ 199,897     $ 163,229     $ 468,130     $ 312,910  
                                       
 Adjusted EBITDDA1                                      
Resource $ 43,691     $ 37,697     $ 23,823     $ 81,388     $ 43,166  
Wood Products   51,566       28,950       23,496       80,516       34,265  
Real Estate   12,300       8,002       6,779       20,302       20,239  
Corporate   (11,264 )     (8,716 )     (9,009 )     (19,980 )     (16,701 )
Eliminations and adjustments   (2,085 )     (1,201 )     988       (3,286 )     2,028  
Total Adjusted EBITDDA   94,208       64,732       46,077       158,940       82,997  
Basis of real estate sold   (2,820 )     (3,605 )     (982 )     (6,425 )     (5,772 )
Depreciation, depletion and amortization   (20,950 )     (12,196 )     (6,271 )     (33,146 )     (12,600 )
Interest expense, net   (9,356 )     (5,660 )     (7,348 )     (15,016 )     (12,318 )
Non-operating pension and other postretirement employee benefits   (1,908 )     (1,857 )     (1,286 )     (3,765 )     (3,192 )
Gain (loss) on fixed assets   (3 )     4       (30 )     1       (16 )
Gain on lumber price swap               3,265             3,265  
Inventory purchase price adjustment in cost of goods sold         (1,849 )           (1,849 )      
Deltic merger-related costs   (1,018 )     (19,255 )           (20,273 )      
Income before income taxes $ 58,153     $ 20,314     $ 33,425     $ 78,467     $ 52,364  
                                       
Depreciation, depletion and amortization                          
Resource $ 14,598     $ 8,646     $ 4,274     $ 23,244     $ 8,658  
Wood Products   6,069       3,354       1,839       9,423       3,666  
Real Estate   77       40             117       1  
Corporate   206       156       158       362       275  
    20,950       12,196       6,271       33,146       12,600  
Bond discounts and deferred loan fees2   655       439       370       1,094       743  
Total depreciation, depletion and amortization $ 21,605     $ 12,635     $ 6,641     $ 34,240     $ 13,343  
                                       
Basis of real estate sold                                      
Real Estate $ 2,896     $ 3,723     $ 1,047     $ 6,619     $ 5,856  
Eliminations and adjustments   (76 )     (118 )     (65 )     (194 )     (84 )
Total basis of real estate sold $ 2,820     $ 3,605     $ 982     $ 6,425     $ 5,772  

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 interest expense, net in the Consolidated Statements of Income.




PotlatchDeltic Corporation
Reconciliations

  For the three months ended     For the six months ended  
  June 30,     March 31,     June 30,     June 30,  
(Dollars in thousands) 2018     2018     2017     2018     2017  
Adjusted EBITDDA                                      
Net income (GAAP) $ 46,148     $ 14,597     $ 24,244     $ 60,745     $ 41,165  
Interest, net   9,356       5,660       7,348       15,016       12,318  
Income tax provision   12,005       5,717       9,181       17,722       11,199  
Depreciation, depletion and amortization   20,950       12,196       6,271       33,146       12,600  
Basis of real estate sold   2,820       3,605       982       6,425       5,772  
Non-operating pension and other postretirement benefit costs   1,908       1,857       1,286       3,765       3,192  
Deltic merger-related costs   1,018       19,255             20,273        
Inventory purchase price adjustment in cost of goods sold         1,849             1,849        
Gain on lumber price swap               (3,265 )           (3,265 )
(Gain) loss on fixed assets   3       (4 )     30       (1 )     16  
Adjusted EBITDDA $ 94,208     $ 64,732     $ 46,077     $ 158,940     $ 82,997  
                                       
Adjusted net income                                      
Net income (GAAP) $ 46,148     $ 14,597     $ 24,244     $ 60,745     $ 41,165  
Special items:                                      
Deltic merger-related costs   1,018       19,255             20,273        
Gain on lumber price swap, after tax               (1,992 )           (1,992 )
Inventory purchase price adjustment in cost of goods sold, after tax         1,368             1,368        
Adjusted net income $ 47,166     $ 35,220     $ 22,252     $ 82,386     $ 39,173  
                                       
Adjusted net income per share                                      
Net income per diluted share (GAAP) $ 0.73     $ 0.29     $ 0.59     $ 1.06     $ 1.00  
Special items:                                      
Deltic merger-related costs   0.02       0.38             0.36        
Inventory purchase price adjustment in cost of goods sold, after tax         0.02             0.02        
Gain on lumber price swap, after tax               (0.05 )             (0.05 )
Adjusted net income per diluted share $ 0.75     $ 0.69     $ 0.54     $ 1.44     $ 0.95  
                                       


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

 

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Source: PotlatchDeltic Corporation