PotlatchDeltic Corporation Reports Fourth Quarter and Full Year 2019 Results
PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $11.4 million, or $0.17 per diluted share, on revenues of $203.5 million for the quarter ended December 31, 2019. Net income was $1.8 million, or $0.03 per diluted share, on revenues of $217.3 million for the quarter ended December 31, 2018. Excluding after-tax special items consisting of Deltic merger-related costs, adjusted net income was $2.7 million, or $0.04 per diluted share for the fourth quarter of 2018.
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. Net income was $122.9 million, or $1.99 per diluted share, on revenues of $974.6 million for the full year 2018. Excluding after-tax special items, consisting primarily of a tax benefit related to contributions made to our qualified pension plans and Deltic merger-related costs, adjusted net income was $141.4 million, or $2.28 per diluted share for 2018.
2019 Highlights
Generated $178.9 million of Total Adjusted EBITDDA and Adjusted EBITDDA margin of 22% in 2019 Repurchased $25.2 million of shares in 2019 at an average of $36.65/share Refinanced $190 million of debt during 2019, lowering weighted average interest rate 80 basis points Sold legacy Deltic MDF facility for $92 million in Q1 2019 Completed $19.6 million rural land sale of former Deltic timberlands for $11,000 per acre in Q2 2019"2019 was an active year marked by particularly strong performance by our Real Estate business," said Mike Covey, chairman and chief executive officer. "Real Estate generated EBITDDA of $63 million this year, including the sale of former Deltic timberlands for $11,000 per acre. We also returned cash of $133 million to shareholders, sold the legacy Deltic MDF facility and completed an elevated capital expenditure program in our mills in 2019. Our balance sheet remains strong, providing flexibility to continue growing shareholder value," stated Mr. Covey.
Financial Highlights
(in millions, except per share data - unaudited)
Q4 2019
Q3 2019
Q4 2018
Revenues
$
203.5
$
226.3
$
217.3
Net income
$
11.4
$
20.6
$
1.8
Weighted average shares outstanding, diluted (in thousands)
67,695
67,545
68,110
Net income per diluted share
$
0.17
$
0.30
$
0.03
Adjusted net income
$
11.4
$
20.6
$
2.7
Adjusted net income per diluted share
$
0.17
$
0.30
$
0.04
Adjusted EBITDDA
$
46.6
$
55.0
$
36.4
Distributions per share
$
0.40
$
0.40
$
3.94
Net cash from operations
$
33.6
$
37.9
$
30.5
Cash and cash equivalents
$
83.3
$
94.7
$
76.6
Business Performance: Q4 2019 vs. Q3 2019
Timberlands
Fourth Quarter 2019 Highlights
Timberlands Adjusted EBITDDA decreased $5.0 million from Q3 2019 levels Northern harvest volumes were seasonally lower Northern sawlog prices decreased 4%, mostly the effect of seasonally heavier logs Southern sawlog prices decreased 7% due to seasonally lower hardwood volumes and normalization of pine prices Decreased log & haul costs driven by lower Northern harvest volumes and seasonally lower rates(in millions - unaudited)
Q4 2019
Q3 2019
$ Change
Segment Revenues
$
88.8
$
98.8
$
(10.0
)
Adjusted EBITDDA
$
38.0
$
43.0
$
(5.0
)
Wood Products
Fourth Quarter 2019 Highlights
Wood Products Adjusted EBITDDA decreased $4.1 million from Q3 2019 levels Average lumber prices were up slightly in Q4 2019 Lumber production was lower in Q4 2019, which negatively affected fixed cost absorption Log costs increased due to higher index pricing in Idaho(in millions - unaudited)
Q4 2019
Q3 2019
$ Change
Segment Revenues
$
126.4
$
143.7
$
(17.3
)
Adjusted EBITDDA
$
1.8
$
5.9
$
(4.1
)
Real Estate
Fourth Quarter 2019 Highlights
Real Estate Adjusted EBITDDA decreased $0.7 million as a decline in rural land sales was mostly offset by increased commercial land sales Sold 55 residential lots at an average $70,000/lot in Q4 2019 Completed sale of 32 acres of commercial land for $200,000/acre in Q4 2019(in millions - unaudited)
Q4 2019
Q3 2019
$ Change
Segment Revenues
$
17.4
$
18.9
$
(1.5
)
Adjusted EBITDDA
$
14.0
$
14.7
$
(0.7
)
Outlook
“We are encouraged by the increased pace of U.S. housing starts during the second half of 2019 along with robust levels of housing permits and homebuilder order files entering 2020. We expect this to translate into stronger demand and higher prices for lumber this year, which is meaningful given our leverage to lumber prices. During 2020, we expect to harvest approximately 6 million tons in our Timberlands segment, ship over 1.1 billion board feet of lumber, and sell 20,000 to 25,000 rural acres and approximately 140 residential lots in our Real Estate segment,” stated 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 Tuesday, February 4, 2020, 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 1-877-823-6919 for U.S./Canada and 1-647-689-5576 for international callers. Participants will be asked to provide conference I.D. number 1553635. 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 February 11, 2020 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 1553635 to access the replay.
About PotlatchDeltic
PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 1.9 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 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 Securities Litigation Reform Act of 1995 as amended, including without limitation, our expectations regarding the U.S. housing market and repair and remodel market; U.S. housing starts; lumber demand, pricing, revenues, costs and expenses; lumber shipments; expected timber harvest volumes; real estate sales; the direction of our business markets; 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 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 and real estate; 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; 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
Consolidated Statements of Income
Unaudited
Three Months Ended
Year Ended
December 31,
September 30,
December 31,
December 31,
(in thousands, except per share amounts)
2019
2019
2018
2019
2018
Revenues
$
203,499
$
226,302
$
217,250
$
827,098
$
974,579
Costs and expenses:
Cost of goods sold
169,544
182,634
192,000
682,066
707,645
Selling, general and administrative expenses
13,931
12,472
14,412
57,925
59,861
Gain on sale of facility
—
—
—
(9,176
)
—
Deltic merger-related costs
—
—
874
—
22,119
183,475
195,106
207,286
730,815
789,625
Operating income
20,024
31,196
9,964
96,283
184,954
Interest expense, net
(8,540
)
(8,475
)
(10,102
)
(30,361
)
(35,227
)
Loss on extinguishment of debt
—
—
—
(5,512
)
—
Non-operating pension and other postretirement costs
(935
)
(935
)
(1,941
)
(3,739
)
(7,648
)
Income (loss) before income taxes
10,549
21,786
(2,079
)
56,671
142,079
Income taxes
850
(1,221
)
3,878
(1,010
)
(19,199
)
Net income
$
11,399
$
20,565
$
1,799
$
55,661
$
122,880
Net income per share:
Basic
$
0.17
$
0.30
$
0.03
$
0.82
$
2.03
Diluted
$
0.17
$
0.30
$
0.03
$
0.82
$
1.99
Regular dividends per share
$
0.40
$
0.40
$
0.40
$
1.60
$
1.60
Special distribution per share1
$
—
$
—
$
3.54
$
—
$
3.54
Weighted-average shares outstanding (in thousands):
Basic
67,476
67,446
65,486
67,608
60,534
Diluted
67,695
67,545
68,110
67,743
61,814
1 Deltic earnings and profit special distribution of $222 million, paid on November 15, 2018.
PotlatchDeltic Corporation
Consolidated Balance Sheets
Unaudited
At December 31,
(in thousands, except per share amounts)
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
83,310
$
76,639
Customer receivables, net
14,167
21,405
Inventories, net
65,781
60,805
Other current assets
20,183
22,675
Assets held for sale
—
80,674
Total current assets
183,441
262,198
Property, plant and equipment, net
286,383
272,193
Investment in real estate held for development and sale
74,233
79,537
Timber and timberlands, net
1,638,663
1,672,815
Intangible assets, net
17,049
17,828
Other long-term assets
35,290
21,281
Total assets
$
2,235,059
$
2,325,852
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
60,577
$
60,993
Current portion of long-term debt
45,974
39,973
Current portion of pension and other postretirement employee benefits
6,701
5,997
Liabilities held for sale
—
29,321
Total current liabilities
113,252
136,284
Long-term debt
710,495
715,391
Pension and other postretirement employee benefits
115,463
110,659
Deferred tax liabilities, net
20,165
32,009
Other long-term obligations
48,853
16,730
Total liabilities
1,008,228
1,011,073
Commitments and contingencies
Stockholders’ equity:
Common stock, $1 par value
67,221
67,570
Additional paid-in capital
1,666,299
1,659,031
Accumulated deficit
(359,330
)
(282,391
)
Accumulated other comprehensive loss
(147,359
)
(129,431
)
Total stockholders’ equity
1,226,831
1,314,779
Total liabilities and stockholders' equity
$
2,235,059
$
2,325,852
PotlatchDeltic Corporation
Consolidated Statements of Cash Flows
Unaudited
Three Months Ended
Year Ended
(in thousands)
December 31,
2019
September 30,
2019
December 31,
2018
December 31,
2019
December 31,
2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
11,399
$
20,565
$
1,799
$
55,661
$
122,880
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization
19,516
19,178
19,476
72,105
73,161
Basis of real estate sold
6,343
5,228
6,025
20,554
16,698
Gain on sale of facility
—
—
—
(9,176
)
—
Loss on extinguishment of debt
—
—
—
5,512
—
Change in deferred taxes
5,898
295
(1,718
)
(11,045
)
12,161
Employee benefit plans
2,970
2,970
4,222
11,877
16,443
Equity-based compensation expense
1,910
1,913
1,688
7,272
8,206
Other, net
368
(764
)
—
(2,324
)
(1,221
)
Change in:
Receivables, net
13,047
(2,735
)
17,893
7,238
2,822
Inventories, net
(11,579
)
(81
)
5,595
(3,519
)
273
Other assets
5,648
(4,444
)
(5,739
)
5,305
(3,996
)
Accounts payable and accrued liabilities
(20,231
)
(1,620
)
(12,992
)
(11,415
)
(5,212
)
Other liabilities
934
135
(2,135
)
3,955
(692
)
Real estate development expenditures
(1,516
)
(1,257
)
(1,968
)
(7,254
)
(5,049
)
Funding of pension and other postretirement employee benefits
(1,066
)
(1,477
)
(1,621
)
(5,678
)
(57,580
)
Net cash provided by operating activities
33,641
37,906
30,525
139,068
178,894
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment
(13,557
)
(10,094
)
(11,384
)
(39,153
)
(29,880
)
Timberlands reforestation and roads
(4,426
)
(5,079
)
(4,914
)
(17,695
)
(17,378
)
Acquisition of timber and timberlands
(348
)
—
(4,712
)
(626
)
(4,877
)
Proceeds on sale of facility
—
—
—
58,793
—
Cash and cash equivalents acquired in merger
—
—
—
—
3,419
Transfer from company owned life insurance (COLI)
977
191
226
1,968
1,796
Transfer to COLI
(569
)
(124
)
(114
)
(1,148
)
(1,027
)
Other, net
253
2,037
41
2,378
38
Net cash (used in) provided by investing activities
(17,670
)
(13,069
)
(20,857
)
4,517
(47,909
)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to common stockholders
(26,888
)
(26,888
)
(71,462
)
(107,722
)
(146,768
)
Repurchase of common stock
—
—
—
(25,173
)
—
Proceeds from Potlatch revolving line of credit
—
—
—
—
100,000
Repayment of Potlatch revolving line of credit
—
—
—
—
(100,000
)
Repayment of Deltic revolving line of credit
—
—
—
—
(106,000
)
Proceeds from long-term debt
40,000
—
—
190,000
100,000
Repayment of long-term debt
(40,000
)
—
—
(190,000
)
(14,250
)
Premiums and fees on debt retirement
—
—
—
(4,865
)
—
Other, net
(619
)
(129
)
(8
)
(1,012
)
(4,983
)
Net cash used in financing activities
(27,507
)
(27,017
)
(71,470
)
(138,772
)
(172,001
)
Change in cash, cash equivalents and restricted cash
(11,536
)
(2,180
)
(61,802
)
4,813
(41,016
)
Cash, cash equivalents and restricted cash at beginning of period
95,790
97,970
141,243
79,441
120,457
Cash, cash equivalents and restricted cash at end of period
$
84,254
$
95,790
$
79,441
$
84,254
$
79,441
PotlatchDeltic Corporation
Segment Information
Unaudited
Three months ended
Year Ended
December 31,
September 30,
December 31,
December 31,
(in thousands)
2019
2019
2018
2019
2018
Revenues
Timberlands
$
88,845
$
98,809
$
74,512
$
322,693
$
354,950
Wood Products
126,429
143,643
148,506
540,408
680,931
Real Estate
17,413
18,863
16,347
78,872
54,566
232,687
261,315
239,365
941,973
1,090,447
Intersegment Timberlands revenues
(29,188
)
(35,013
)
(22,115
)
(114,875
)
(115,868
)
Consolidated revenues
$
203,499
$
226,302
$
217,250
$
827,098
$
974,579
Adjusted EBITDDA1
Timberlands
$
38,010
$
42,996
$
29,766
$
133,987
$
169,834
Wood Products
1,843
5,903
3,621
12,901
130,583
Real Estate
13,953
14,678
12,535
62,650
40,304
Corporate
(9,327
)
(6,930
)
(8,816
)
(36,257
)
(37,785
)
Eliminations and adjustments
2,120
(1,635
)
(663
)
5,662
(5,743
)
Total Adjusted EBITDDA
46,599
55,012
36,443
178,943
297,193
Basis of real estate sold
(6,343
)
(5,228
)
(6,025
)
(20,554
)
(16,698
)
Depreciation, depletion and amortization
(19,107
)
(18,786
)
(18,866
)
(70,417
)
(70,848
)
Interest expense, net
(8,540
)
(8,475
)
(10,102
)
(30,361
)
(35,227
)
Loss on extinguishment of debt
—
—
—
(5,512
)
—
Non-operating pension and other postretirement employee benefits
(935
)
(935
)
(1,941
)
(3,739
)
(7,648
)
(Loss) gain on fixed assets
(1,125
)
198
(714
)
(865
)
(725
)
Gain on sale of facility
—
—
—
9,176
—
Inventory purchase price adjustment in cost of goods sold
—
—
—
—
(1,849
)
Deltic merger-related costs
—
—
(874
)
—
(22,119
)
Income (loss) before income taxes
$
10,549
$
21,786
$
(2,079
)
$
56,671
$
142,079
Depreciation, depletion and amortization
Timberlands
$
13,240
$
12,627
$
12,227
$
46,601
$
48,201
Wood Products
5,393
5,763
6,166
22,059
21,416
Real Estate
170
152
220
678
418
Corporate
304
244
253
1,079
813
19,107
18,786
18,866
70,417
70,848
Bond discounts and deferred loan fees2
409
392
610
1,688
2,313
Total depreciation, depletion and amortization
$
19,516
$
19,178
$
19,476
$
72,105
$
73,161
Basis of real estate sold
Real Estate
$
6,423
$
5,283
$
6,068
$
20,749
$
16,954
Eliminations and adjustments
(80
)
(55
)
(43
)
(195
)
(256
)
Total basis of real estate sold
$
6,343
$
5,228
$
6,025
$
20,554
$
16,698
1 Management uses Adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of Total 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
Unaudited
Three months ended
Year ended
December 31,
September 30,
December 31,
December 31,
(in thousands, except per share amounts)
2019
2019
2018
2019
2018
Adjusted EBITDDA
Net income (GAAP)
$
11,399
$
20,565
$
1,799
$
55,661
$
122,880
Interest, net
8,540
8,475
10,102
30,361
35,227
Income taxes
(850
)
1,221
(3,878
)
1,010
19,199
Depreciation, depletion and amortization
19,107
18,786
18,866
70,417
70,848
Basis of real estate sold
6,343
5,228
6,025
20,554
16,698
Loss on extinguishment of debt
—
—
—
5,512
—
Non-operating pension and other postretirement benefit costs
935
935
1,941
3,739
7,648
Deltic merger-related costs
—
—
874
—
22,119
Gain on sale of facility
—
—
—
(9,176
)
—
Inventory purchase price adjustment in cost of goods sold
—
—
—
—
1,849
(Gain) loss on fixed assets
1,125
(198
)
714
865
725
Adjusted EBITDDA
$
46,599
$
55,012
$
36,443
$
178,943
$
297,193
Adjusted net income
Net income (GAAP)
$
11,399
$
20,565
$
1,799
$
55,661
$
122,880
Special items:
Loss on extinguishment of debt
—
—
—
5,512
—
Gain on sale of facility, after tax
—
—
—
(6,790
)
—
Deltic merger-related costs
—
—
874
—
22,119
Inventory purchase price adjustment in cost of goods sold, after tax
—
—
—
—
1,368
Tax adjustments1
—
—
—
—
(5,015
)
Adjusted net income
$
11,399
$
20,565
$
2,673
$
54,383
$
141,352
Adjusted net income per diluted share
Net income per diluted share (GAAP)
$
0.17
$
0.30
$
0.03
$
0.82
$
1.99
Special items:
Loss on extinguishment of debt
—
—
—
0.08
—
Gain on sale of facility, after tax
.
—
—
(0.10
)
—
Deltic merger-related costs
—
—
0.01
—
0.36
Inventory purchase price adjustment in cost of goods sold, after tax
—
—
—
—
0.02
Tax adjustments1
—
—
—
—
(0.09
)
Adjusted net income per diluted share
$
0.17
$
0.30
$
0.04
$
0.80
$
2.28
1 During the third quarter of 2018, we recorded a tax benefit primarily related to deducting contributions to our qualified pension plans at the higher 2017 income tax rate.
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