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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