PotlatchDeltic Corporation Reports Fourth Quarter and Full Year 2020 Results

Rhea-AI Summary

PotlatchDeltic Corporation (Nasdaq:PCH) reported a strong financial performance for Q4 2020, with net income at $100 million ($1.48 per diluted share) on revenues of $337.4 million, a significant increase from $11.4 million in Q4 2019. For the full year, net income reached $166.8 million ($2.47 per diluted share), up from $55.7 million in 2019. Key highlights include record Total Adjusted EBITDDA of $382.2 million and a strong liquidity position of $631 million. Despite a decline in Wood Products EBITDDA, the strong demand for lumber and successful real estate transactions contributed positively to the overall results.

Positive

• Q4 2020 net income of $100 million, a substantial increase from $11.4 million in Q4 2019.
• Full year 2020 net income of $166.8 million, compared to $55.7 million in 2019.
• Record Total Adjusted EBITDDA of $382.2 million with a 37% margin.
• Returned $123 million to shareholders through dividends and share repurchases.
• Expanded liquidity position to $631 million as of December 31, 2020.

Negative

• Wood Products Adjusted EBITDDA decreased by $11.4 million from Q3 2020.
• Average lumber price realizations declined by 1% to $629 per MBF in Q4 2020.
• Timberlands segment revenues decreased by $7.2 million from Q3 2020 levels.

PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $100.0 million, or $1.48 per diluted share, on revenues of $337.4 million for the quarter ended December 31, 2020. Net income was $11.4 million, or $0.17 per diluted share, on revenues of $203.5 million for the quarter ended December 31, 2019.

Net income for the full year 2020 was $166.8 million, or $2.47 per diluted share, on revenues of $1.0 billion. Excluding an after-tax pension settlement charge, adjusted net income was $198.6 million, or $2.94 per diluted share for 2020. Net income for the full year 2019 was $55.7 million, or $0.82 per diluted share, on revenues of $827.1 million. Excluding after-tax special items consisting of a gain on the sale of legacy Deltic MDF facility and loss on the extinguishment of debt, adjusted net income was $54.4 million, or $0.80 per diluted share for 2019.

2020 Highlights

• Generated record Total Adjusted EBITDDA of $382.2 million and Total Adjusted EBITDDA margin of 37%
• Timberlands, Wood Products and Real Estate all had record years
• Returned $123 million to shareholders through dividends and share repurchases
• Sold 72,440 acres in Minnesota to The Conservation Fund for nearly $48 million
• Refinanced $46 million in debt during 2020 and locked in historically low rates on $608 million of future refinances
• Expanded strong liquidity position to $631 million as of December 31, 2020

“2020 was a phenomenal year with all three of our businesses achieving record financial performance,” said Eric Cremers, president and chief executive officer. “Our employees’ strong resolve and focus on operating safely allowed us to take advantage of strong demand and historic lumber prices. In addition, our Real Estate team completed a large land sale to The Conservation Fund for nearly $48 million. We are well positioned to continue to execute our disciplined capital allocation strategy and maximize shareholder value given our strong liquidity position,” stated Mr. Cremers.

Financial Highlights

(in millions, except per share data - unaudited)	Q4 2020			Q3 2020			Q4 2019
Revenues	$	337.4		$	313.0		$	203.5
Net income	$	100.0		$	81.0		$	11.4
Weighted average shares outstanding, diluted (in thousands)		67,607			67,528			67,695
Net income per diluted share	$	1.48		$	1.20		$	0.17
Adjusted EBITDDA	$	163.9		$	135.4		$	46.6
Distributions per share	$	0.41		$	0.40		$	0.40
Net cash from operations	$	144.4		$	102.9		$	33.6
Cash and cash equivalents	$	252.3		$	148.9		$	83.3

Business Performance: Q4 2020 vs. Q3 2020

Timberlands

Fourth Quarter 2020 Highlights

• Timberlands Adjusted EBITDDA increased $2.8 million from Q3 2020 levels
• Northern harvest volumes were seasonally lower
• Northern sawlog prices increased 37% due primarily to higher prices on lumber-indexed volume
• Log & haul costs reflect lower Northern harvest volume and seasonally lower rates

(in millions - unaudited)		Q4 2020				Q3 2020				$ Change
Segment Revenues		$	109.8			$	117.0			$	(7.2	)
Adjusted EBITDDA		$	62.5			$	59.7			$	2.8

Wood Products

Fourth Quarter 2020 Highlights

• Wood Products Adjusted EBITDDA decreased $11.4 million from Q3 2020 levels
• Average lumber price realizations declined 1% to $629 per MBF in Q4 2020
• Log costs increased due to higher index pricing in Idaho
• Lumber production decreased in Q4 2020 leading to lower fixed cost absorption

(in millions - unaudited)		Q4 2020				Q3 2020				$ Change
Segment Revenues		$	208.9			$	218.3			$	(9.4	)
Adjusted EBITDDA		$	70.3			$	81.7			$	(11.4	)

Real Estate

Fourth Quarter 2020 Highlights

• Real Estate Adjusted EBITDDA increased $43.1 million from Q3 2020 levels
• Sold 73,573 acres of rural land for $700/acre, including sale of 72,440 acres to The Conservation Fund for nearly $48 million
• Sold 72 residential lots at an average $80,000/lot in Q4 2020
• Sold 4 commercial acres for $818,000/acre

(in millions - unaudited)		Q4 2020				Q3 2020				$ Change
Segment Revenues		$	62.2			$	18.2			$	44.0
Adjusted EBITDDA		$	56.5			$	13.4			$	43.1

Outlook

“We expect housing fundamentals and lumber demand to remain strong in 2021. While lumber prices will likely moderate this year, we expect lumber prices to remain higher than long-term averages. This is particularly important to PotlatchDeltic given our leverage to lumber prices. We continue to keep an eye on the pandemic and its potential impact on the economy and our business. During 2021, we expect to harvest approximately 6 million tons in our Timberlands segment, ship around 1.1 billion board feet of lumber, and sell about 20,000 acres and 145 residential lots in our Real Estate segment,” stated Mr. Cremers.

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, February 2, 2021, 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 Investors link or by conference call at 1-833-968-2227 for U.S./Canada and 1-778-560-2697 for international callers. Participants will be asked to provide conference I.D. number 7785927. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available three hours following the call until February 9, 2021 by calling 1-800-585-8367 for U.S./Canada or 1-416-621-4642 for international callers. Callers must enter conference I.D. number 7785927 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns approximately 1.8 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 residential and commercial real estate development business and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest management, is committed to environmental and social responsibility and to responsible governance. 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 Securities Litigation Reform Act of 1995 as amended, including without limitation, our expectations regarding the company’s current and expected liquidity; the effects of COVID-19 on demand for our products and on our ability to continue operations; the success of the company’s business strategies; the company’s intent to refinance debt maturing in the future; the company’s capital allocation strategies, including share repurchases and dividend expectations; maintaining the company’s investment grade credit rating; favorable capital structure and strong balance sheet; interest rates and expenses; corporate expenses; pension expenses; taxes; 2021 outlook; the housing market and repair and remodel market; housing starts; lumber supply, demand and pricing; revenues, costs and expenses; lumber shipment volumes; expected sawlog demand and timber harvest volumes; sawlog mix and pricing; rural real estate and development real estate sales; land basis and average price per acre and developed lot; planned capital expenditures and anticipated internal rate of return; number of seedlings planted; amount of CO2e sequestered; expected release of 2020 ESG Report; business conditions; and similar matters. Words such as “anticipate,” “expect,” “will,” “intend,” “plan,” “target,” “project,” “believe,” “seek,” “schedule,” “estimate,” “could,” “can,” “may,” and similar expressions are intended to identify such forward-looking statements. 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 PotlatchDeltic. 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 impact of the COVID-19 outbreak on our business, suppliers, customers and employees; changes in 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 and effects on our customers and suppliers; changes in interest rates; credit availability and homebuyers’ ability to qualify for mortgages; availability of labor and developable land; changes in the level of construction and remodeling activity; changes in foreign demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; changes in demand for our products and real estate; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; disruptions or inefficiencies in our supply chain and/or operations; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; fires and other catastrophic events; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; transportation disruptions; share price; the successful execution of the company’s strategic plans; the company’s ability to meet expectations; and the other factors described in PotlatchDeltic’s Annual Report on Form 10-K and in the company’s other filings with the SEC. PotlatchDeltic 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 Operations Unaudited
	Three Months Ended												Year Ended
	December 31,				September 30,				December 31,				December 31,
(in thousands, except per share amounts)	2020				2020				2019				2020				2019
Revenues	$	337,449			$	313,046			$	203,499			$	1,040,930			$	827,098
Costs and expenses:
Cost of goods sold		183,860				182,039				169,544				687,781				682,066
Selling, general and administrative expenses		20,455				21,046				13,931				72,519				57,925
Gain on sale of facility		—				—				—				—				(9,176	)
		204,315				203,085				183,475				760,300				730,815
Operating income		133,134				109,961				20,024				280,630				96,283
Interest expense, net		(8,869	)			(8,557	)			(8,540	)			(29,463	)			(30,361	)
Loss on extinguishment of debt		—				—				—				—				(5,512	)
Pension settlement charge		—				—				—				(42,988	)			—
Non-operating pension and other postretirement costs		(3,556	)			(3,557	)			(935	)			(14,226	)			(3,739	)
Income before income taxes		120,709				97,847				10,549				193,953				56,671
Income taxes		(20,692	)			(16,840	)			850				(27,123	)			(1,010	)
Net income	$	100,017			$	81,007			$	11,399			$	166,830			$	55,661
Net income per share:
Basic	$	1.49			$	1.21			$	0.17			$	2.48			$	0.82
Diluted	$	1.48			$	1.20			$	0.17			$	2.47			$	0.82
Dividends per share	$	0.41			$	0.40			$	0.40			$	1.61			$	1.60
Weighted-average shares outstanding (in thousands):
Basic		67,159				67,149				67,476				67,237				67,608
Diluted		67,607				67,528				67,695				67,568				67,743

PotlatchDeltic Corporation Condensed Consolidated Balance Sheets Unaudited
		At December 31,
(in thousands, except per share amounts)		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	252,340			$	83,310
Customer receivables, net			26,606				14,167
Inventories, net			62,036				65,781
Other current assets			16,136				20,183
Total current assets			357,118				183,441
Property, plant and equipment, net			288,544				286,383
Investment in real estate held for development and sale			72,355				74,233
Timber and timberlands, net			1,600,061				1,638,663
Intangible assets, net			16,270				17,049
Other long-term assets			46,717				35,290
Total assets		$	2,381,065			$	2,235,059
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	93,279			$	60,577
Current portion of long-term debt			39,981				45,974
Current portion of pension and other postretirement employee benefits			6,574				6,701
Total current liabilities			139,834				113,252
Long-term debt			717,366				710,495
Pension and other postretirement employee benefits			128,807				115,463
Deferred tax liabilities, net			17,740				20,165
Other long-term obligations			72,365				48,853
Total liabilities			1,076,112				1,008,228
Commitments and contingencies
Stockholders’ equity:
Common stock, $1 par value			66,876				67,221
Additional paid-in capital			1,674,576				1,666,299
Accumulated deficit			(315,510	)			(359,330	)
Accumulated other comprehensive loss			(120,989	)			(147,359	)
Total stockholders’ equity			1,304,953				1,226,831
Total liabilities and stockholders' equity		$	2,381,065			$	2,235,059

PotlatchDeltic Corporation Condensed Consolidated Statements of Cash Flows Unaudited
		Three Months Ended												Year Ended
(in thousands)		December 31, 2020				September 30, 2020				December 31, 2019				December 31, 2020				December 31, 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	100,017			$	81,007			$	11,399			$	166,830			$	55,661
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization			20,076				20,594				19,516				77,885				72,105
Basis of real estate sold			10,908				5,249				6,343				25,348				20,554
Gain on sale of facility			—				—				—				—				(9,176	)
Loss on extinguishment of debt			—				—				—				—				5,512
Change in deferred taxes			(223	)			(538	)			5,898				(14,610	)			(11,045	)
Employee benefit plans			5,916				5,917				2,970				23,666				11,877
Pension settlement charge			—				—				—				42,988				—
Equity-based compensation expense			2,135				2,063				1,910				8,063				7,272
Other, net			(725	)			(367	)			368				(1,269	)			(2,324	)
Change in:
Receivables, net			23,478				(25,496	)			13,047				(12,439	)			7,238
Inventories, net			(3,464	)			(6,357	)			(11,579	)			3,745				(3,519	)
Other assets			6,315				711				5,648				4,591				5,305
Accounts payable and accrued liabilities			(18,920	)			29,127				(20,231	)			25,848				(11,415	)
Other liabilities			2,957				(1,676	)			934				1,327				3,955
Real estate development expenditures			(2,506	)			(1,713	)			(1,516	)			(6,706	)			(7,254	)
Funding of pension and other postretirement employee benefits			(1,546	)			(5,619	)			(1,066	)			(10,004	)			(5,678	)
Net cash provided by operating activities			144,418				102,902				33,641				335,263				139,068
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment			(8,027	)

FAQ

What were PotlatchDeltic's earnings for Q4 2020?

PotlatchDeltic reported net income of $100 million, or $1.48 per diluted share, for Q4 2020.

How did PotlatchDeltic perform in 2020 compared to 2019?

In 2020, PotlatchDeltic's net income was $166.8 million, up from $55.7 million in 2019.

What were the total revenues for PotlatchDeltic in Q4 2020?

PotlatchDeltic's revenues for Q4 2020 were $337.4 million.

What is the outlook for PotlatchDeltic in 2021?

PotlatchDeltic expects strong housing fundamentals and lumber demand to continue in 2021.

How much liquidity does PotlatchDeltic have as of December 31, 2020?

PotlatchDeltic expanded its liquidity position to $631 million as of December 31, 2020.