PotlatchDeltic Corporation Reports Second Quarter 2022 Results

Rhea-AI Summary

PotlatchDeltic Corporation (Nasdaq: PCH) reported a net income of $120.2 million for Q2 2022, translating to $1.72 per diluted share, down from $187.9 million or $2.77 per share in Q2 2021. Revenue for the quarter was $359.6 million, a decrease from $447.5 million year-over-year. Key highlights include an adjusted EBITDDA of $175.1 million and a liquidity position of $810 million. The company announced a $131 million expansion of its Waldo sawmill and plans for a merger with CatchMark. Despite strong pricing, timberland adjusted EBITDDA saw a decrease influenced by wet weather.

Positive

• Net income of $120.2 million for Q2 2022.
• Entering a merger agreement with CatchMark.
• Announced $131 million investment in sawmill expansion.
• Strong liquidity position of $810 million.

Negative

• Revenue decreased from $447.5 million in Q2 2021 to $359.6 million.
• Adjusted EBITDDA down $70 million year-over-year.
• Timberlands adjusted EBITDDA decreased by $18.5 million from Q1 2022.
• Wood Products adjusted EBITDDA decreased by $42.8 million from Q1 2022.

SPOKANE, Wash.--(BUSINESS WIRE)-- PotlatchDeltic Corporation (Nasdaq: PCH) today reported net income of $120.2 million, or $1.72 per diluted share, on revenues of $359.6 million for the quarter ended June 30, 2022. Excluding an after-tax gain on insurance recoveries, adjusted net income was $112.9 million, or $1.61 per diluted share for the second quarter of 2022. Net income was $187.9 million, or $2.77 per diluted share, on revenues of $447.5 million for the quarter ended June 30, 2021.

Second Quarter 2022 Highlights

• Generated Total Adjusted EBITDDA of $175.1 million and Total Adjusted EBITDDA margin of 49%
• Entered into definitive merger agreement with CatchMark to create leading integrated timber REIT
• Announced $131 million expansion and modernization of Waldo, Arkansas sawmill
• Closed or pending timberland bolt-on acquisitions were $101 million
• Widened strong liquidity position to $810 million as of June 30, 2022

“Our second quarter 2022 financial results reflect strong performance across all of our businesses,” said Eric Cremers, president and chief executive officer. “We continue to capitalize on attractive lumber prices, which we expect to remain higher than long-term averages for the rest of 2022. Key recent accomplishments include the announcement of our pending merger with CatchMark, a decision to spend $131 million to modernize and expand our Waldo, Arkansas sawmill, and returning cash of $35 million to shareholders, including $5 million of share repurchases. I am very excited about our growth opportunities and we are well-positioned with our strong balance sheet and liquidity to deliver exceptional shareholder value over the long-term,” stated Mr. Cremers.

Financial Highlights

($ in millions, except per share data)		Q2 2022				Q1 2022				Q2 2021
Revenues		$	359.6			$	411.4			$	447.5
Net income		$	120.2			$	163.9			$	187.9
Weighted average shares outstanding, diluted (in thousands)			69,791				69,623				67,732
Net income per diluted share		$	1.72			$	2.35			$	2.77
Adjusted Net Income		$	112.9			$	174.6			$	187.9
Adjusted Net Income Per Diluted Share		$	1.61			$	2.50			$	2.77
Total Adjusted EBITDDA		$	175.1			$	245.6			$	275.0
Dividends per share		$	0.44			$	0.44			$	0.41
Net cash from operations		$	147.9			$	230.3			$	171.4
Cash and cash equivalents		$	511.2			$	470.9			$	512.0

Business Performance: Q2 2022 vs. Q1 2022

Timberlands

Second Quarter 2022 Highlights

• Timberlands Adjusted EBITDDA decreased $18.5 million from Q1 2022
• Northern harvest volumes decreased due to spring break-up and unseasonably wet weather in June
• Northern sawlog prices increased 7.5% primarily due to higher indexed sawlog prices and seasonally lighter logs
• Southern sawlog harvest volumes were slightly lower and saw log prices were relatively flat
• Higher log & haul costs were primarily driven by increased fuel costs
• Forest management costs increased due to seasonally higher activities

($ in millions)		Q2 2022				Q1 2022				$ Change
Timberlands Revenues		$	105.5			$	123.7			$	(18.2	)
Timberlands Adjusted EBITDDA		$	57.9			$	76.4			$	(18.5	)

Wood Products

Second Quarter 2022 Highlights

• Wood Products Adjusted EBITDDA decreased $42.8 million from Q1 2022
• Average lumber price decreased 20% to $865 per MBF in Q2 2022
• Log costs increased primarily due to higher indexed pricing in Idaho
• Lumber shipments increased 9% to 254 MMBF in Q2 2022

($ in millions)		Q2 2022				Q1 2022				$ Change
Wood Products Revenues		$	266.6			$	295.7			$	(29.1	)
Wood Products Adjusted EBITDDA		$	107.2			$	150.0			$	(42.8	)

Real Estate

Second Quarter 2022 Highlights

• Real Estate Adjusted EBITDDA decreased $8.3 million from Q1 2022
• Sold 12,749 acres of rural land at an average price of $1,290 / acre
• Sold 45 residential lots at an average price of $134,373 / lot
• Sold 3 commercial acres for $685,713 / acre

($ in millions)		Q2 2022				Q1 2022				$ Change
Real Estate Revenues		$	26.7			$	34.1			$	(7.4	)
Real Estate Adjusted EBITDDA		$	21.8			$	30.1			$	(8.3	)

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 income 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 26, 2022, 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 1-888-510-2008 for U.S./Canada and 1-646-960-0306 for international callers. Participants will be asked to provide conference I.D. number 7281983. 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 2, 2022, by calling 1-800-770-2030 for U.S./Canada or 1-647-362-9199 for international callers. Callers must enter conference I.D. number 7281983 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 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 revenues, costs and expenses; favorable housing market fundamentals and demand for lumber and lumber prices; disciplined capital allocation strategy; pending merger transaction with CatchMark Timber Trust, Inc., modernization of the Waldo, Arkansas sawmill, business conditions and strategies; 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 the impact of COVID-19 and its variants, governmental responses to such outbreaks, and anticipated recovery from the pandemic 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 at our facilities and on our timberland 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 failure of CatchMark’s shareholders to approve the merger transaction, or the occurrence of any event, change, or other circumstance that could give rise to a termination of the definitive agreement relating to the proposed merger transaction, the company’s ability and its contractors’ ability to implement the modernization plan for the Waldo, Arkansas sawmill, 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												Six Months Ended
	June 30,				March 31,				June 30,				June 30,				June 30,
(in thousands, except per share amounts)	2022				2022				2021				2022				2021
Revenues	$	359,597			$	411,350			$	447,506			$	770,947			$	801,699
Costs and expenses:
Cost of goods sold		191,334				179,847				177,779				371,181				347,081
Selling, general and administrative expenses		20,412				16,294				19,512				36,706				36,270
(Gain) loss on fire damage		(9,868	)			276				—				(9,592	)			—
		201,878				196,417				197,291				398,295				383,351
Operating income		157,719				214,933				250,215				372,652				418,348
Interest expense, net		(7,419	)			(2,894	)			(8,199	)			(10,313	)			(11,773	)
Pension settlement charge		—				(14,165	)			—				(14,165	)			—
Non-operating pension and other postretirement employee benefit costs		(1,809	)			(1,929	)			(3,271	)			(3,738	)			(6,685	)
Income before income taxes		148,491				195,945				238,745				344,436				399,890
Income taxes		(28,269	)			(32,065	)			(50,840	)			(60,334	)			(80,879	)
Net income	$	120,222			$	163,880			$	187,905			$	284,102			$	319,011
Net income per share:
Basic	$	1.73			$	2.36			$	2.79			$	4.09			$	4.74
Diluted	$	1.72			$	2.35			$	2.77			$	4.07			$	4.71
Dividends per share	$	0.44			$	0.44			$	0.41			$	0.88			$	0.82
Weighted-average shares outstanding:
Basic		69,580				69,419				67,316				69,502				67,265
Diluted		69,791				69,623				67,732				69,731				67,664

PotlatchDeltic Corporation Condensed Consolidated Balance Sheet Unaudited
(in thousands, except per share amounts)		June 30, 2022				December 31, 2021
ASSETS
Current assets:
Cash and cash equivalents		$	511,157			$	296,151
Customer receivables, net			43,989				31,028
Inventories, net			64,247				72,369
Other current assets			31,833				21,630
Total current assets			651,226				421,178
Property, plant and equipment, net			314,840				292,320
Investment in real estate held for development and sale			60,143				65,604
Timber and timberlands, net			1,704,256				1,682,671
Intangible assets, net			15,101				15,491
Other long-term assets			126,353				57,951
Total assets		$	2,871,919			$	2,535,215
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	110,184			$	78,209
Current portion of long-term debt			39,989				42,977
Current portion of pension and other postretirement employee benefits			4,993				4,993
Total current liabilities			155,166				126,179
Long-term debt			715,748				715,279
Pension and other postretirement employee benefits			91,703				83,674
Deferred tax liabilities, net			40,725				34,874
Other long-term obligations			25,026				49,076
Total liabilities			1,028,368				1,009,082
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 69,280 and 69,064 shares			69,280				69,064
Additional paid-in capital			1,785,383				1,781,217
Accumulated deficit			(62,074	)			(280,910	)
Accumulated other comprehensive income (loss)			50,962				(43,238	)
Total stockholders’ equity			1,843,551				1,526,133
Total liabilities and stockholders' equity		$	2,871,919			$	2,535,215

PotlatchDeltic Corporation Condensed Consolidated Statements of Cash Flows Unaudited
	Three Months Ended												Six Months Ended
(in thousands)	June 30, 2022				March 31, 2022				June 30, 2021				June 30, 2022				June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	120,222			$	163,880			$	187,905			$	284,102			$	319,011
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization		20,379				19,874				17,432				40,253				35,831
Basis of real estate sold		7,325				10,854				7,213				18,179				16,036
Change in deferred taxes		34				(2,123	)			(928	)			(2,089	)			562
Pension and other postretirement employee benefits		3,540				3,857				5,484				7,397				11,111
Pension settlement charge		—				14,165				—				14,165				—
Equity-based compensation expense		2,368				2,056				2,140				4,424				4,070
(Gain) loss on fire damage		(9,868	)			276				—				(9,592	)			—
Other, net		(308	)			(291	)			92				(599	)			(295	)
Change in working capital and operating-related activities, net		(1,236	)			21,208				(43,867	)			19,972				(37,154	)
Real estate development expenditures		(3,029	)			(2,161	)			(1,684	)			(5,190	)			(3,999	)
Funding of pension and other postretirement employee benefits		(968	)			(1,296	)			(2,412	)			(2,264	)			(3,833	)
Proceeds from insurance recoveries		9,428				—				—				9,428				—
Net cash from operating activities		147,887				230,299				171,375				378,186				341,340
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions		(24,211	)			(12,566	)			(8,181	)			(36,777	)			(15,943	)
Timberlands reforestation and roads		(3,740	)			(4,648	)			(3,998	)			(8,388	)			(7,954	)
Acquisition of timber and timberlands		(42,218	)			—				(2,192	)			(42,218	)			(2,192	)
Other, net		(1,475	)			92				446				(1,383	)			635
Net cash from investing activities		(71,644	)			(17,122	)			(13,925	)			(88,766	)			(25,454	)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders		(30,524	)			(30,524	)			(27,489	)			(61,048	)			(54,973	)
Repurchase of common stock		(4,156	)			—				—				(4,156	)			—
Repayment of long-term debt		—				(3,000	)			—				(3,000	)			—
Other, net		(1,023	)			(1,071	)			(632	)			(2,094	)			(1,223	)
Net cash from financing activities		(35,703	)			(34,595	)			(28,121	)			(70,298	)			(56,196	)
Change in cash, cash equivalents and restricted cash		40,540				178,582				129,329				219,122				259,690
Cash, cash equivalents and restricted cash, beginning		475,354				296,772				382,701				296,772				252,340
Cash, cash equivalents and restricted cash, ending	$	515,894			$	475,354			$	512,030			$	515,894			$	512,030

PotlatchDeltic Corporation Segment Information Unaudited
	Three Months Ended												Six Months Ended
	June 30,				March 31,				June 30,				June 30,				June 30,
(in thousands)	2022				2022				2021				2022				2021
Revenues
Timberlands	$	105,486			$	123,657			$	121,216			$	229,143			$	233,132
Wood Products		266,633				295,742				357,673				562,375				626,969
Real Estate		26,736				34,065				15,998				60,801				36,311
		398,855				453,464				494,887				852,319				896,412
Intersegment Timberlands revenues		(39,258	)			(42,114	)			(47,381	)			(81,372	)			(94,713	)
Consolidated revenues	$	359,597			$	411,350			$	447,506			$	770,947			$	801,699
Adjusted EBITDDA1
Timberlands	$	57,890			$	76,434			$	77,259			$	134,324			$	145,117
Wood Products		107,256				149,951				204,533				257,207				330,088
Real Estate		21,816				30,124				11,788				51,940				28,381
Corporate		(13,912	)			(9,584	)			(12,822	)			(23,496	)			(23,532	)
Eliminations and adjustments		2,120				(1,363	)			(5,774	)			757				(10,084	)
Total Adjusted EBITDDA		175,170				245,562				274,984				420,732				469,970
Interest expense, net		(7,419	)			(2,894	)			(8,199	)			(10,313	)			(11,773	)
Depreciation, depletion and amortization		(20,007	)			(19,502	)			(17,029	)			(39,509	)			(35,025	)
Basis of real estate sold		(7,325	)			(10,854	)			(7,213	)			(18,179	)			(16,036	)
Gain (loss) on fire damage		9,868				(276	)			—				9,592				—
Pension settlement charge		—				(14,165	)			—				(14,165	)			—
Non-operating pension and other postretirement employee benefits		(1,809	)			(1,929	)			(3,271	)			(3,738	)			(6,685	)
Gain (loss) on disposal of fixed assets		13				3				(527	)			16				(561	)
Income before income taxes	$	148,491			$	195,945			$	238,745			$	344,436			$	399,890
Depreciation, depletion and amortization
Timberlands	$	11,563			$	12,161			$	10,482			$	23,724			$	21,899
Wood Products		8,136				7,021				6,179				15,157				12,382
Real Estate		173				170				160				343				315
Corporate		135				150				208				285				429
		20,007				19,502				17,029				39,509				35,025
Bond discounts and deferred loan fees2		372				372				403				744				806
Total depreciation, depletion and amortization	$	20,379			$	19,874			$	17,432			$	40,253			$	35,831
Basis of real estate sold
Real Estate	$	7,328			$	10,860			$	7,219			$	18,188			$	16,048
Eliminations and adjustments		(3	)			(6	)			(6	)			(9	)			(12	)
Total basis of real estate sold	$	7,325			$	10,854			$	7,213			$	18,179			$	16,036
1 Management uses Adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of Total Adjusted EBITDDA below.
2 Bond discounts and deferred loan fees are included in interest expense, net in the Condensed Consolidated Statements of Operations.

PotlatchDeltic Corporation Reconciliations Unaudited
		Three Months Ended												Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
(in thousands, except per share amount)		2022				2022				2021				2022				2021
Total Adjusted EBITDDA
Net income (GAAP)		$	120,222			$	163,880			$	187,905			$	284,102			$	319,011
Interest expense, net			7,419				2,894				8,199				10,313				11,773
Income taxes			28,269				32,065				50,840				60,334				80,879
Depreciation, depletion and amortization			20,007				19,502				17,029				39,509				35,025
Basis of real estate sold			7,325				10,854				7,213				18,179				16,036
(Gain) loss on fire damage			(9,868	)			276				—				(9,592	)			—
Pension settlement charge			—				14,165				—				14,165				—
Non-operating pension and other postretirement benefit costs			1,809				1,929				3,271				3,738				6,685
(Gain) loss on disposal of fixed assets			(13	)			(3	)			527				(16	)			561
Total Adjusted EBITDDA		$	175,170			$	245,562			$	274,984			$	420,732			$	469,970
Adjusted Net Income
Net income (GAAP)		$	120,222			$	163,880			$	187,905			$	284,102			$	319,011
Special items:
(Gain) loss on fire damage, after tax			(7,351	)			205				—				(7,146	)			—
Pension settlement charge, after tax			—				10,553				—				10,553				—
Adjusted net income		$	112,871			$	174,638			$	187,905			$	287,509			$	319,011
Adjusted Net Income Per Diluted Share
Net income per diluted share (GAAP)		$	1.72			$	2.35			$	2.77			$	4.07			$	4.71
Special items:
(Gain) loss on fire damage, after tax			(0.11	)			—				—				(0.10	)			—
Pension settlement charge, after tax			—				0.15				—				0.15				—
Adjusted net income per diluted share		$	1.61			$	2.50			$	2.77			$	4.12			$	4.71

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220725005675/en/

(Investors)

Jerry Richards

509.835.1521

(Media)

Anna Torma

509.835.1558

Source: PotlatchDeltic Corporation

FAQ

What were PotlatchDeltic's financial results for Q2 2022?

PotlatchDeltic reported a net income of $120.2 million, or $1.72 per diluted share, on revenues of $359.6 million.

How did PotlatchDeltic perform compared to Q2 2021?

In Q2 2021, the company reported net income of $187.9 million, indicating a decline in profitability year-over-year.

What is the adjusted EBITDDA for PotlatchDeltic in Q2 2022?

The adjusted EBITDDA for Q2 2022 was $175.1 million.

What major investments did PotlatchDeltic announce?

The company announced a $131 million expansion and modernization project for its Waldo, Arkansas sawmill.

What changes happened in PotlatchDeltic's timberland revenues in Q2 2022?

Timberlands revenues decreased from $123.7 million in Q1 2022 to $105.5 million in Q2 2022.