UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended September 30, 20192020
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 1-32729
PotlatchDeltic Corporation
(Exact name of registrant as specified in its charter)
Delaware | 82-0156045 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
601 West First Avenue, Suite 1600 |
|
Spokane, Washington | 99201 |
(Address of principal executive offices) | (Zip Code) |
(509) 835-1500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock | PCH | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ |
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ |
|
|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
|
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act).
Yes ☐ No ☒
The number of shares of common stock of the registrant outstanding as of October 28, 20192020 was 67,221,086.66,873,051.
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
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| Page |
PART I. - FINANCIAL INFORMATION |
| ||
ITEM 1. | Financial Statements (unaudited) |
| |
| 2 | ||
| 3 | ||
| 4 | ||
| 5 | ||
| 7 | ||
| Index for the Notes to Condensed Consolidated Financial Statements | 9 | |
10 | |||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 23 | |
ITEM 3. |
| ||
ITEM 4. |
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| |
PART II. - OTHER INFORMATION |
| ||
ITEM 1. |
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ITEM 1A. |
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ITEM 2. | 39 | ||
ITEM 6. |
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Part I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of IncomeOperations
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
|
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||
(in thousands, except per share amounts) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
|
|
| 2019 |
|
|
|
| 2020 |
|
| 2019 |
| ||||||||
Revenues |
| $ | 226,302 |
|
| $ | 289,199 |
|
| $ | 623,599 |
|
| $ | 757,329 |
|
| $ | 313,046 |
|
|
|
| $ | 226,302 |
|
|
|
| $ | 703,481 |
|
| $ | 623,599 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
| 182,634 |
|
|
| 195,584 |
|
|
| 512,522 |
|
|
| 515,645 |
|
|
| 182,039 |
|
|
| 182,634 |
|
|
| 503,921 |
|
|
| 512,522 |
| ||||
Selling, general and administrative expenses |
|
| 12,472 |
|
|
| 14,901 |
|
|
| 43,994 |
|
|
| 45,449 |
|
|
| 21,046 |
|
|
| 12,472 |
|
|
| 52,064 |
|
|
| 43,994 |
| ||||
Gain on sale of facility |
|
| — |
|
|
| — |
|
|
| (9,176 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,176 | ) | ||||
Deltic merger-related costs |
|
| — |
|
|
| 972 |
|
|
| — |
|
|
| 21,245 |
| ||||||||||||||||||||
|
|
| 195,106 |
|
|
| 211,457 |
|
|
| 547,340 |
|
|
| 582,339 |
|
|
| 203,085 |
|
|
| 195,106 |
|
|
| 555,985 |
|
|
| 547,340 |
| ||||
Operating income |
|
| 31,196 |
|
|
| 77,742 |
|
|
| 76,259 |
|
|
| 174,990 |
|
|
| 109,961 |
|
|
| 31,196 |
|
|
| 147,496 |
|
|
| 76,259 |
| ||||
Interest expense, net |
|
| (8,475 | ) |
|
| (10,109 | ) |
|
| (21,821 | ) |
|
| (25,125 | ) |
|
| (8,557 | ) |
|
| (8,475 | ) |
|
| (20,594 | ) |
|
| (21,821 | ) | ||||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| (5,512 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,512 | ) | ||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| (42,988 | ) |
|
| — |
| ||||||||||||||||||||
Non-operating pension and other postretirement employee benefit costs |
|
| (935 | ) |
|
| (1,942 | ) |
|
| (2,804 | ) |
|
| (5,707 | ) |
|
| (3,557 | ) |
|
| (935 | ) |
|
| (10,670 | ) |
|
| (2,804 | ) | ||||
Income before income taxes |
|
| 21,786 |
|
|
| 65,691 |
|
|
| 46,122 |
|
|
| 144,158 |
|
|
| 97,847 |
|
|
| 21,786 |
|
|
| 73,244 |
|
|
| 46,122 |
| ||||
Income tax expense |
|
| (1,221 | ) |
|
| (5,355 | ) |
|
| (1,860 | ) |
|
| (23,077 | ) | ||||||||||||||||||||
Income taxes |
|
| (16,840 | ) |
|
| (1,221 | ) |
|
| (6,431 | ) |
|
| (1,860 | ) | ||||||||||||||||||||
Net income |
| $ | 20,565 |
|
| $ | 60,336 |
|
| $ | 44,262 |
|
| $ | 121,081 |
|
| $ | 81,007 |
|
|
|
| $ | 20,565 |
|
|
|
| $ | 66,813 |
|
| $ | 44,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Net income per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic |
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.65 |
|
| $ | 2.06 |
|
| $ | 1.21 |
|
|
| $ | 0.30 |
|
|
| $ | 0.99 |
|
| $ | 0.65 |
| ||
Diluted |
| $ | 0.30 |
|
| $ | 0.93 |
|
| $ | 0.65 |
|
| $ | 2.03 |
|
| $ | 1.20 |
|
|
| $ | 0.30 |
|
|
| $ | 0.99 |
|
| $ | 0.65 |
| ||
Dividends per share |
| $ | 0.40 |
|
| $ | 0.40 |
|
| $ | 1.20 |
|
| $ | 1.20 |
|
| $ | 0.40 |
|
|
| $ | 0.40 |
|
|
| $ | 1.20 |
|
| $ | 1.20 |
| ||
Weighted-average shares outstanding: |
|
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|
|
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|
|
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|
|
|
|
|
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|
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|
|
|
|
| ||||
Basic |
|
| 67,446 |
|
|
| 62,986 |
|
|
| 67,781 |
|
|
| 58,765 |
|
|
| 67,149 |
|
|
| 67,446 |
|
|
| 67,263 |
|
|
| 67,781 |
| ||||
Diluted |
|
| 67,545 |
|
|
| 64,722 |
|
|
| 67,848 |
|
|
| 59,542 |
|
|
| 67,528 |
|
|
| 67,545 |
|
|
| 67,535 |
|
|
| 67,848 |
| ||||
|
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|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income |
| $ | 20,565 |
|
| $ | 60,336 |
|
| $ | 44,262 |
|
| $ | 121,081 |
|
Other comprehensive (loss) income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement employee benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of prior service credit included in net income, net of tax benefit of $(562), $(565), $(1,684) and $(1,695) |
|
| (1,598 | ) |
|
| (1,608 | ) |
|
| (4,792 | ) |
|
| (4,824 | ) |
Amortization of actuarial loss included in net income, net of tax expense of $943, $1,164, $2,829 and $3,491 |
|
| 2,685 |
|
|
| 3,311 |
|
|
| 8,053 |
|
|
| 9,934 |
|
Cash flow hedges, net of tax (benefit) expense of $(387), $166, $(1,300) and $386 |
|
| (6,978 | ) |
|
| 1,591 |
|
|
| (25,908 | ) |
|
| 1,850 |
|
Other comprehensive (loss) income, net of tax |
|
| (5,891 | ) |
|
| 3,294 |
|
|
| (22,647 | ) |
|
| 6,960 |
|
Comprehensive income |
| $ | 14,674 |
|
| $ | 63,630 |
|
| $ | 21,615 |
|
| $ | 128,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Net income |
| $ | 81,007 |
|
| $ | 20,565 |
|
| $ | 66,813 |
|
| $ | 44,262 |
|
Other comprehensive income (loss), net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other postretirement employee benefits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss arising during the period, net of tax benefit of $0, $0, $6,817 and $0 |
|
| — |
|
|
| — |
|
|
| (19,402 | ) |
|
| — |
|
Effect of pension settlement, net of tax benefit of $0, $0, $11,177 and $0 |
|
| — |
|
|
| — |
|
|
| 31,811 |
|
|
| — |
|
Amortization of prior service credit included in net income, net of tax benefit of $75, $562, $227 and $1,684 |
|
| (215 | ) |
|
| (1,598 | ) |
|
| (645 | ) |
|
| (4,792 | ) |
Amortization of actuarial loss included in net income, net of tax expense of $1,111, $943, $3,334 and $2,829 |
|
| 3,163 |
|
|
| 2,685 |
|
|
| 9,489 |
|
|
| 8,053 |
|
Cash flow hedges, net of tax expense (benefit) of $763, $(387), $(1,043) and $(1,300) |
|
| 11,332 |
|
|
| (6,978 | ) |
|
| (29,040 | ) |
|
| (25,908 | ) |
Other comprehensive income (loss), net of tax |
|
| 14,280 |
|
|
| (5,891 | ) |
|
| (7,787 | ) |
|
| (22,647 | ) |
Comprehensive income |
| $ | 95,287 |
|
| $ | 14,674 |
|
| $ | 59,026 |
|
| $ | 21,615 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share amounts) |
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
ASSETS |
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Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 94,747 |
|
| $ | 76,639 |
|
| $ | 148,919 |
|
| $ | 83,310 |
|
Customer receivables, net |
|
| 27,214 |
|
|
| 21,405 |
|
|
| 50,084 |
|
|
| 14,167 |
|
Inventories, net |
|
| 54,202 |
|
|
| 60,805 |
|
|
| 58,572 |
|
|
| 65,781 |
|
Other current assets |
|
| 23,492 |
|
|
| 22,675 |
|
|
| 21,090 |
|
|
| 20,183 |
|
Assets held for sale |
|
| — |
|
|
| 80,674 |
| ||||||||
Total current assets |
|
| 199,655 |
|
|
| 262,198 |
|
|
| 278,665 |
|
|
| 183,441 |
|
Property, plant and equipment, net |
|
| 278,587 |
|
|
| 272,193 |
|
|
| 289,305 |
|
|
| 286,383 |
|
Investment in real estate held for development and sale |
|
| 76,924 |
|
|
| 79,537 |
|
|
| 74,216 |
|
|
| 74,233 |
|
Timber and timberlands, net |
|
| 1,649,196 |
|
|
| 1,672,815 |
|
|
| 1,608,026 |
|
|
| 1,638,663 |
|
Intangible assets, net |
|
| 17,244 |
|
|
| 17,828 |
|
|
| 16,465 |
|
|
| 17,049 |
|
Other long-term assets |
|
| 35,448 |
|
|
| 21,281 |
|
|
| 31,236 |
|
|
| 35,290 |
|
Total assets |
| $ | 2,257,054 |
|
| $ | 2,325,852 |
|
| $ | 2,297,913 |
|
| $ | 2,235,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
| $ | 78,274 |
|
| $ | 60,993 |
|
| $ | 108,425 |
|
| $ | 60,577 |
|
Current portion of long-term debt |
|
| 39,995 |
|
|
| 39,973 |
|
|
| 45,995 |
|
|
| 45,974 |
|
Current portion of pension and other postretirement employee benefits |
|
| 5,997 |
|
|
| 5,997 |
|
|
| 6,701 |
|
|
| 6,701 |
|
Liabilities held for sale |
|
| — |
|
|
| 29,321 |
| ||||||||
Total current liabilities |
|
| 124,266 |
|
|
| 136,284 |
|
|
| 161,121 |
|
|
| 113,252 |
|
Long-term debt |
|
| 716,350 |
|
|
| 715,391 |
|
|
| 711,254 |
|
|
| 710,495 |
|
Pension and other postretirement employee benefits |
|
| 110,548 |
|
|
| 110,659 |
|
|
| 139,022 |
|
|
| 115,463 |
|
Deferred tax liabilities, net |
|
| 14,913 |
|
|
| 32,009 |
|
|
| 12,202 |
|
|
| 20,165 |
|
Other long-term obligations |
|
| 55,248 |
|
|
| 16,730 |
|
|
| 78,237 |
|
|
| 48,853 |
|
Total liabilities |
|
| 1,021,325 |
|
|
| 1,011,073 |
|
|
| 1,101,836 |
|
|
| 1,008,228 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, authorized 4,000 shares, 0 shares issued |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 67,221 and 67,570 shares |
|
| 67,221 |
|
|
| 67,570 |
| ||||||||
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 66,872 and 67,221 shares |
|
| 66,872 |
|
|
| 67,221 |
| ||||||||
Additional paid-in capital |
|
| 1,664,333 |
|
|
| 1,659,031 |
|
|
| 1,672,351 |
|
|
| 1,666,299 |
|
Accumulated deficit |
|
| (343,747 | ) |
|
| (282,391 | ) |
|
| (388,000 | ) |
|
| (359,330 | ) |
Accumulated other comprehensive loss |
|
| (152,078 | ) |
|
| (129,431 | ) |
|
| (155,146 | ) |
|
| (147,359 | ) |
Total stockholders’ equity |
|
| 1,235,729 |
|
|
| 1,314,779 |
|
|
| 1,196,077 |
|
|
| 1,226,831 |
|
Total liabilities and stockholders' equity |
| $ | 2,257,054 |
|
| $ | 2,325,852 |
|
| $ | 2,297,913 |
|
| $ | 2,235,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 44,262 |
|
| $ | 121,081 |
|
| $ | 66,813 |
|
| $ | 44,262 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
| 52,589 |
|
|
| 53,685 |
|
|
| 57,809 |
|
|
| 52,589 |
|
Basis of real estate sold |
|
| 14,211 |
|
|
| 10,673 |
|
|
| 14,440 |
|
|
| 14,211 |
|
Gain on sale of facility |
|
| (9,176 | ) |
|
| — |
|
|
| — |
|
|
| (9,176 | ) |
Loss on extinguishment of debt |
|
| 5,512 |
|
|
| — |
|
|
| — |
|
|
| 5,512 |
|
Change in deferred taxes |
|
| (16,943 | ) |
|
| 13,879 |
|
|
| (14,387 | ) |
|
| (16,943 | ) |
Pension and other postretirement employee benefits |
|
| 8,907 |
|
|
| 12,221 |
|
|
| 17,750 |
|
|
| 8,907 |
|
Pension settlement charge |
|
| 42,988 |
|
|
| — |
| ||||||||
Equity-based compensation expense |
|
| 5,362 |
|
|
| 6,518 |
|
|
| 5,928 |
|
|
| 5,362 |
|
Other, net |
|
| (2,692 | ) |
|
| (1,220 | ) |
|
| (544 | ) |
|
| (2,692 | ) |
Change in working capital and operating-related activities, net |
|
| 13,745 |
|
|
| (9,429 | ) |
|
| 12,706 |
|
|
| 13,745 |
|
Real estate development expenditures |
|
| (5,738 | ) |
|
| (3,081 | ) |
|
| (4,200 | ) |
|
| (5,738 | ) |
Funding of pension and other postretirement employee benefits |
|
| (4,612 | ) |
|
| (55,959 | ) |
|
| (8,458 | ) |
|
| (4,612 | ) |
Net cash provided by operating activities |
|
| 105,427 |
|
|
| 148,368 |
|
|
| 190,845 |
|
|
| 105,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment additions |
|
| (25,596 | ) |
|
| (18,496 | ) |
|
| (14,666 | ) |
|
| (25,596 | ) |
Timberlands reforestation and roads |
|
| (13,269 | ) |
|
| (12,464 | ) |
|
| (12,345 | ) |
|
| (13,269 | ) |
Acquisition of timber and timberlands |
|
| (278 | ) |
|
| (166 | ) |
|
| (4,738 | ) |
|
| (278 | ) |
Proceeds on sale of facility |
|
| 58,793 |
|
|
| — |
|
|
| 1,000 |
|
|
| 58,793 |
|
Proceeds on disposition of property, plant and equipment |
|
| 2,017 |
|
|
| 11 |
|
|
| 335 |
|
|
| 2,017 |
|
Other, net |
|
| 520 |
|
|
| 644 |
|
|
| 2,149 |
|
|
| 520 |
|
Cash and cash equivalents acquired in Deltic merger |
|
| — |
|
|
| 3,419 |
| ||||||||
Net cash provided by (used in) investing activities |
|
| 22,187 |
|
|
| (27,052 | ) | ||||||||
Net cash (used in) provided by investing activities |
|
| (28,265 | ) |
|
| 22,187 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends to common stockholders |
|
| (80,834 | ) |
|
| (75,305 | ) | ||||||||
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 issue of long-term debt |
|
| 150,000 |
|
|
| 100,000 |
| ||||||||
Distributions to common stockholders |
|
| (80,434 | ) |
|
| (80,834 | ) | ||||||||
Repurchase of common stock |
|
| (15,364 | ) |
|
| (25,173 | ) | ||||||||
Proceeds from issuance of long-term debt |
|
| — |
|
|
| 150,000 |
| ||||||||
Repayment of long-term debt |
|
| (150,000 | ) |
|
| (14,250 | ) |
|
| — |
|
|
| (150,000 | ) |
Premiums and fees on debt retirement |
|
| (4,865 | ) |
|
| — |
|
|
| — |
|
|
| (4,865 | ) |
Repurchase of common stock |
|
| (25,173 | ) |
|
| — |
| ||||||||
Other, net |
|
| (393 | ) |
|
| (4,975 | ) |
|
| (1,032 | ) |
|
| (393 | ) |
Net cash used in financing activities |
|
| (111,265 | ) |
|
| (100,530 | ) |
|
| (96,830 | ) |
|
| (111,265 | ) |
Change in cash, cash equivalents and restricted cash |
|
| 16,349 |
|
|
| 20,786 |
|
|
| 65,750 |
|
|
| 16,349 |
|
Cash, cash equivalents and restricted cash at beginning of period |
|
| 79,441 |
|
|
| 120,457 |
|
|
| 84,254 |
|
|
| 79,441 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 95,790 |
|
| $ | 141,243 |
|
| $ | 150,004 |
|
| $ | 95,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt assumed by buyer in sale of facility |
| $ | 29,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 29,000 |
|
Accrued property, plant and equipment additions |
| $ | 453 |
|
| $ | 785 |
|
| $ | 3,785 |
|
| $ | 453 |
|
Accrued timberlands reforestation and roads |
| $ | 1,406 |
|
| $ | 1,034 |
|
| $ | 1,536 |
|
| $ | 1,406 |
|
Equity issued as consideration for our merger with Deltic |
| $ | — |
|
| $ | 1,142,775 |
| ||||||||
Earnings and profits distribution payable |
| $ | — |
|
| $ | 222,000 |
|
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.
(in thousands) |
| September 30, 2019 |
|
| September 30, 2018 |
|
| September 30, 2020 |
|
| September 30, 2019 |
| ||||
Cash and cash equivalents |
| $ | 94,747 |
|
| $ | 137,535 |
|
| $ | 148,919 |
|
| $ | 94,747 |
|
Restricted cash included in other short-term and long-term assets1 |
|
| 1,043 |
|
|
| 3,708 |
| ||||||||
Restricted cash included in other long-term assets1 |
|
| 1,085 |
|
|
| 1,043 |
| ||||||||
Total cash, cash equivalents, and restricted cash |
| $ | 95,790 |
|
| $ | 141,243 |
|
| $ | 150,004 |
|
| $ | 95,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Amounts included in restricted cash represent proceeds held by a qualified |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
| ||||||||||||||||||
(in thousands, except per share amounts) |
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2018 |
|
| 67,570 |
|
| $ | 67,570 |
|
| $ | 1,659,031 |
|
| $ | (282,391 | ) |
| $ | (129,431 | ) |
| $ | 1,314,779 |
| ||||||||||||||||||||||||
Balance, December 31, 2019 |
|
| 67,221 |
|
| $ | 67,221 |
|
| $ | 1,666,299 |
|
| $ | (359,330 | ) |
| $ | (147,359 | ) |
| $ | 1,226,831 |
| ||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,832 | ) |
|
| — |
|
|
| (16,832 | ) | ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 131 |
|
|
| 131 |
|
|
| (131 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,885 |
|
|
| — |
|
|
| — |
|
|
| 1,885 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,578 |
|
|
| 15,578 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (38,525 | ) |
|
| (38,525 | ) | ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,941 | ) |
|
| — |
|
|
| (26,941 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (401 | ) |
|
| (401 | ) |
|
| — |
|
|
| (11,954 | ) |
|
| — |
|
|
| (12,355 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| (96 | ) |
|
| — |
|
|
| (27 | ) | ||||||||||||||||||||||||
Balance, March 31, 2020 |
|
| 66,951 |
|
| $ | 66,951 |
|
| $ | 1,668,122 |
|
| $ | (415,153 | ) |
| $ | (170,306 | ) |
| $ | 1,149,614 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,560 |
|
|
| — |
|
|
| 6,560 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,638 |
|
|
| — |
|
|
| 2,638 |
|
Shares issued for stock compensation |
|
| 297 |
|
|
| 297 |
|
|
| (297 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9 |
|
|
| 9 |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,617 |
|
|
| — |
|
|
| — |
|
|
| 1,617 |
|
|
| — |
|
|
| — |
|
|
| 1,980 |
|
|
| — |
|
|
| — |
|
|
| 1,980 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,166 |
|
|
| 1,166 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,727 |
|
|
| 2,727 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,513 | ) |
|
| (8,513 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,847 | ) |
|
| (1,847 | ) |
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,065 | ) |
|
| — |
|
|
| (27,065 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,744 | ) |
|
| — |
|
|
| (26,744 | ) |
Repurchase of common stock |
|
| (279 | ) |
|
| (279 | ) |
|
| — |
|
|
| (9,879 | ) |
|
| — |
|
|
| (10,158 | ) |
|
| (89 | ) |
|
| (89 | ) |
|
| — |
|
|
| (2,920 | ) |
|
| — |
|
|
| (3,009 | ) |
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 99 |
|
|
| (99 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| 26 |
|
|
| — |
|
|
| 117 |
|
Balance, March 31, 2019 |
|
| 67,588 |
|
| $ | 67,588 |
|
| $ | 1,660,450 |
|
| $ | (312,874 | ) |
| $ | (136,778 | ) |
| $ | 1,278,386 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17,137 |
|
|
| — |
|
|
| 17,137 |
| ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 5 |
|
|
| 5 |
|
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,832 |
|
|
| — |
|
|
| — |
|
|
| 1,832 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,008 |
|
|
| 1,008 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,417 | ) |
|
| (10,417 | ) | ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,881 | ) |
|
| — |
|
|
| (26,881 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (407 | ) |
|
| (407 | ) |
|
| — |
|
|
| (14,608 | ) |
|
| — |
|
|
| (15,015 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 104 |
|
|
| (104 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Balance, June 30, 2019 |
|
| 67,186 |
|
| $ | 67,186 |
|
| $ | 1,662,381 |
|
| $ | (337,330 | ) |
| $ | (146,187 | ) |
| $ | 1,246,050 |
| ||||||||||||||||||||||||
Balance, June 30, 2020 |
|
| 66,871 |
|
| $ | 66,871 |
|
| $ | 1,670,184 |
|
| $ | (442,153 | ) |
| $ | (169,426 | ) |
| $ | 1,125,476 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,565 |
|
|
| — |
|
|
| 20,565 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 81,007 |
|
|
| — |
|
|
| 81,007 |
|
Shares issued for stock compensation |
|
| 35 |
|
|
| 35 |
|
|
| (35 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1 |
|
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,913 |
|
|
| — |
|
|
| — |
|
|
| 1,913 |
|
|
| — |
|
|
| — |
|
|
| 2,063 |
|
|
| — |
|
|
| — |
|
|
| 2,063 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,087 |
|
|
| 1,087 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,948 |
|
|
| 2,948 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,978 | ) |
|
| (6,978 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 11,332 |
|
|
| 11,332 |
|
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,888 | ) |
|
| — |
|
|
| (26,888 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,749 | ) |
|
| — |
|
|
| (26,749 | ) |
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 74 |
|
|
| (94 | ) |
|
| — |
|
|
| (20 | ) |
|
| — |
|
|
| — |
|
|
| 105 |
|
|
| (105 | ) |
|
| — |
|
|
| — |
|
Balance, September 30, 2019 |
|
| 67,221 |
|
| $ | 67,221 |
|
| $ | 1,664,333 |
|
| $ | (343,747 | ) |
| $ | (152,078 | ) |
| $ | 1,235,729 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance, September 30, 2020 |
|
| 66,872 |
|
| $ | 66,872 |
|
| $ | 1,672,351 |
|
| $ | (388,000 | ) |
| $ | (155,146 | ) |
| $ | 1,196,077 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
| ||||||||||||||||||
(in thousands, except per share amounts) |
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2017 |
|
| 40,612 |
|
| $ | 40,612 |
|
| $ | 359,144 |
|
| $ | (104,363 | ) |
| $ | (94,851 | ) |
| $ | 200,542 |
| ||||||||||||||||||||||||
Balance, December 31, 2018 |
|
| 67,570 |
|
| $ | 67,570 |
|
| $ | 1,659,031 |
|
| $ | (282,391 | ) |
| $ | (129,431 | ) |
| $ | 1,314,779 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 14,597 |
|
|
| — |
|
|
| 14,597 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,560 |
|
|
| — |
|
|
| 6,560 |
|
Shares issued for stock compensation |
|
| 162 |
|
|
| 162 |
|
|
| (162 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 297 |
|
|
| 297 |
|
|
| (297 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Common stock issued for Deltic merger |
|
| 21,981 |
|
|
| 21,981 |
|
|
| 1,120,794 |
|
|
| — |
|
|
| — |
|
|
| 1,142,775 |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 3,279 |
|
|
| — |
|
|
| — |
|
|
| 3,279 |
|
|
| — |
|
|
| — |
|
|
| 1,617 |
|
|
| — |
|
|
| — |
|
|
| 1,617 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,725 |
|
|
| 1,725 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,166 |
|
|
| 1,166 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (990 | ) |
|
| (990 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,513 | ) |
|
| (8,513 | ) |
Cumulative effects of adoption of accounting standards |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,564 |
|
|
| (23,265 | ) |
|
| 1,299 |
| ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,102 | ) |
|
| — |
|
|
| (25,102 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,065 | ) |
|
| — |
|
|
| (27,065 | ) |
Repurchase of common stock |
|
| (279 | ) |
|
| (279 | ) |
|
| — |
|
|
| (9,879 | ) |
|
| — |
|
|
| (10,158 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| (2,653 | ) |
|
| (30 | ) |
|
| — |
|
|
| (2,683 | ) |
|
| — |
|
|
| — |
|
|
| 99 |
|
|
| (99 | ) |
|
| — |
|
|
| — |
|
Balance, March 31, 2018 |
|
| 62,755 |
|
| $ | 62,755 |
|
| $ | 1,480,402 |
|
| $ | (90,334 | ) |
| $ | (117,381 | ) |
| $ | 1,335,442 |
| ||||||||||||||||||||||||
Balance, March 31, 2019 |
|
| 67,588 |
|
| $ | 67,588 |
|
| $ | 1,660,450 |
|
| $ | (312,874 | ) |
| $ | (136,778 | ) |
| $ | 1,278,386 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17,137 |
|
|
| — |
|
|
| 17,137 |
| ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 5 |
|
|
| 5 |
|
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,832 |
|
|
| — |
|
|
| — |
|
|
| 1,832 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,008 |
|
|
| 1,008 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,417 | ) |
|
| (10,417 | ) | ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,881 | ) |
|
| — |
|
|
| (26,881 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (407 | ) |
|
| (407 | ) |
|
| — |
|
|
| (14,608 | ) |
|
| — |
|
|
| (15,015 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 104 |
|
|
| (104 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Balance, June 30, 2019 |
|
| 67,186 |
|
| $ | 67,186 |
|
| $ | 1,662,381 |
|
| $ | (337,330 | ) |
| $ | (146,187 | ) |
| $ | 1,246,050 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46,148 |
|
|
| — |
|
|
| 46,148 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 20,565 |
|
|
| — |
|
|
| 20,565 |
|
Shares issued for stock compensation |
|
| (1 | ) |
|
| (1 | ) |
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| 35 |
|
|
| (35 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,610 |
|
|
| — |
|
|
| — |
|
|
| 1,610 |
|
|
| — |
|
|
| — |
|
|
| 1,913 |
|
|
| — |
|
|
| — |
|
|
| 1,913 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,682 |
|
|
| 1,682 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,087 |
|
|
| 1,087 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,249 |
|
|
| 1,249 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (6,978 | ) |
|
| (6,978 | ) |
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,101 | ) |
|
| — |
|
|
| (25,101 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,888 | ) |
|
| — |
|
|
| (26,888 | ) |
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 35 |
|
|
| (139 | ) |
|
| — |
|
|
| (104 | ) |
|
| — |
|
|
| — |
|
|
| 74 |
|
|
| (94 | ) |
|
| — |
|
|
| (20 | ) |
Balance, June 30, 2018 |
|
| 62,754 |
|
| $ | 62,754 |
|
| $ | 1,482,048 |
|
| $ | (69,426 | ) |
| $ | (114,450 | ) |
| $ | 1,360,926 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 60,336 |
|
|
| — |
|
|
| 60,336 |
| ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 1 |
|
|
| 1 |
|
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,629 |
|
|
| — |
|
|
| — |
|
|
| 1,629 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,703 |
|
|
| 1,703 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,591 |
|
|
| 1,591 |
| ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,102 | ) |
|
| — |
|
|
| (25,102 | ) | ||||||||||||||||||||||||
Deltic earnings and profits special distribution, $3.54 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (222,000 | ) |
|
| — |
|
|
| (222,000 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 74 |
|
|
| (88 | ) |
|
| — |
|
|
| (14 | ) | ||||||||||||||||||||||||
Balance, September 30, 2018 |
|
| 62,755 |
|
| $ | 62,755 |
|
| $ | 1,483,750 |
|
| $ | (256,280 | ) |
| $ | (111,156 | ) |
| $ | 1,179,069 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance, September 30, 2019 |
|
| 67,221 |
|
| $ | 67,221 |
|
| $ | 1,664,333 |
|
| $ | (343,747 | ) |
| $ | (152,078 | ) |
| $ | 1,235,729 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
INDEX FOR NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10 | |
11 | |
11 | |
12 | |
13 | |
15 | |
16 | |
16 | |
17 | |
18 | |
18 | |
19 | |
20 | |
21 | |
22 |
Notes to Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
For purposes of this report, any reference to “PotlatchDeltic,” “Potlatch,” “the company,” “we,” “us” and “our” means PotlatchDeltic Corporation and all of its wholly owned subsidiaries, except where the context indicates otherwise.
We are primarily engaged in activities associated with timberland management, including the sale of timber, the management of approximately 1.91.8 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacture and sale of wood products and the development of real estate.
Condensed Consolidated Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements provide an overall view of our results and financial condition and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Intercompany transactions and accounts have been eliminated in consolidation. Except as otherwise disclosed in these Notes to Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018,2019, as filed with the Securities and Exchange Commission on February 27, 2019.19, 2020. Results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the full year.
Use of Estimates
In March 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Shortly thereafter the United States declared a national emergency concerning the outbreak, and all states and several municipalities subsequently declared public health emergencies. These declarations resulted in a wide-range of government directives impacting individuals and businesses beginning in late March 2020 to contain and combat the outbreak and spread of COVID-19.
The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses. The full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are highly uncertain, including new information that may emerge concerning COVID-19, the additional actions taken to contain it or treat it, as well as the severity and duration of the economic impact on local, regional, and national customers, suppliers and markets.
Commitments and Contingencies
At any given time, we are subject to claims and actions incidental to the operations of our business. Based on information currently available, we do not expect that any sums we may receive or have to pay in connection with any legal proceeding would have a materially adverse effect on our consolidated financial position or net cash flow.
On June 21, 2020, we announced an agreement to sell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund for approximately $48.0 million in cash, subject to certain closing adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2020.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
New Accounting Standards Recently Adopted
In February 2016,August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). The objective of the new standard is to establish principles for lessees and lessors to report information about the amount, timing and uncertainty of cash flows arising from a lease and disclose key information about leasing arrangements. The new standard establishes a right-of-use model (ROU) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. For leases with a term of 12 months or less, the lessee is permitted to make an accounting policy election by class of underlying asset to not recognize lease assets and lease liabilities. The standard, along with subsequent amendments, was effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach was required, applying the new standard to all leases existing at the date of initial application. An entity may choose to use either (i) its effective date or (ii) the beginning of the earliest comparable period presented in the financial statements as its date of initial application.
We adopted ASU 2016-02, along with subsequent amendments, on January 1, 2019 and used the effective date as our date of initial application. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided, for dates and periods before January 1, 2019. The new standard provides several optional practical expedients in transition and for an entity’s ongoing accounting. We elected the following practical expedients as part of our adoption of the standard:
|
|
|
|
|
|
|
|
|
|
|
|
Upon adoption of this ASU we recorded $14.0 million for right of use assets and lease liabilities for our operating leases on our Condensed Consolidated Balance Sheet. The adoption of this ASU did not impact our Condensed Consolidated Statement of Income and our Condensed Consolidated Statement of Cash Flows. See Note 14: Leases for our expanded disclosures.
New Accounting Standards Being Evaluated
In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in software licensing arrangements under the internal-use software guidance. Additionally, ASU 2018-15 clarifies that all capitalized costs must be presented in the same financial statement line item as the cloud computing arrangement. The standard will bewas effective, on either a prospective or retrospective basis, for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. We are finalizing our evaluation of the impactThe prospective adoption of this standard on our consolidated financial statements and based on our assessment to date, we doJanuary 1, 2020 did not expecthave a material impact upon adoption.our Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 iswas effective for fiscal years ending after December 15, 2020, including interim periods within those years and requires retrospective adoption; early adoption is permitted. ASU 2018-14 will only impact our pension and other postretirement employee benefits disclosures, and we doThe adoption of this standard on January 1, 2020 did not believe there will behave a material impact on thoseour defined benefit pension plan and other postretirement plan disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies certain disclosure requirements related to fair value measurements including (i) requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements; and (ii) a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 iswas effective for fiscal years beginning after December 15, 2019, including interim periods within those years; earlyyears. The adoption is permitted. ASU 2018-13 will onlyof this standard on January 1, 2020 did not have a material impact on our fair value measurement disclosures,disclosures.
New Accounting Standards Being Evaluated
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients and we do not believe there will be a material impactexceptions to US GAAP guidance on those disclosures.
NOTE 3. MERGER WITH DELTIC
On February 20, 2018 Deltic Timber Corporation (Deltic) merged with a wholly owned subsidiary of PotlatchDeltic. Deltic owned approximately 530,000 acres of timberland, operated 2 sawmills, a medium density fiberboard facility (MDF)contract modifications and was engaged in real estate development primarily in Arkansas.
The acquisition of total assets of $1.4 billion was a noncash investing and financing activity comprised of $1.1 billion in equity consideration transferredhedge accounting to Deltic shareholders and $0.3 billion of liabilities assumed.
We expensed $1.0 million and $21.2 million of merger-related costs duringease the three and nine months ended September 30, 2018, respectively. Total merger-related costs consisted of:
|
|
|
|
These costs are included in Deltic merger-related costs in ourCondensed Consolidated Statements of Income.
The amount of revenue and income before income taxesfinancial reporting impacts related to the expected market transition from the acquired Deltic operations includedLondon Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. Companies can apply the ASU immediately. Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. We are currently evaluating the impact this guidance may have on our Condensed Consolidated Financial Statements of Income from February 21, 2018 to September 30, 2018 were as follows:
(in thousands, except per share amounts) |
| Three Months Ended, September 30, 2018 |
|
| Nine Months Ended, September 30, 2018 |
| ||
Net sales |
| $ | 83,385 |
|
| $ | 192,244 |
|
Income before income taxes |
| $ | 17,180 |
|
| $ | 25,869 |
|
|
|
|
|
|
|
|
|
|
The following presents the unaudited pro forma consolidated financial information of the company as if the merger with Deltic was completed on January 1, 2017:
|
|
|
|
|
|
|
|
|
(in thousands, except per share amounts) |
| Three Months Ended, September 30, 2018 |
|
| Nine Months Ended, September 30, 2018 |
| ||
Net sales |
| $ | 289,199 |
|
| $ | 795,992 |
|
Net earnings attributable to PotlatchDeltic common shareholders |
| $ | 61,327 |
|
| $ | 142,314 |
|
Basic earnings per share attributable to PotlatchDeltic common shareholders |
| $ | 0.91 |
|
| $ | 2.13 |
|
Diluted earnings per share attributable to PotlatchDeltic common shareholders |
| $ | 0.91 |
|
| $ | 2.12 |
|
Pro forma net earnings attributable to PotlatchDeltic common shareholders excludes $1.0 million and $26.7 million of non-recurring merger-related costs incurred by both companies during the three and nine months ended September 30, 2018, of which $5.4 million were incurred by Deltic prior to the merger. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.related disclosures.
NOTE 4.3. SALE OF DELTIC MDF FACILITY
On December 20, 2018, we entered into an Asset Purchase and Sale Agreement (the Agreement) with Roseburg Forest Products Co. to sell the Deltic MDF facility for $92.0 million, consisting of $63.0 million in cash and assumption of $29.0 million of revenue bonds. The purchase price was subject to post-closing adjustments for certain changes in working capital as defined in the Agreement. The transaction closed on February 12, 2019 resulting in a $9.2 million pre-tax gain on sale. CashNet proceeds received in February 2019 after working capital adjustments, closing costs and other expenses were approximately $58.8$60.0 million. The net proceeds were reduced by $1.2 million during the second quarter of 2019 following the finalization of the post-closing working capital adjustments. A portion of the purchase price iswas escrowed pending satisfaction of certain covenants as outlined in the Agreement. These funds were fully released to us during the three months ended March 31, 2020. In addition, we had a carryover tax basis in the facility from the Deltic merger, and as a result, we recorded a reduction to deferred tax liabilities and increase to income taxes payable of $15.8 million at the date of sale.
At December 31, 2018, the assets and liabilities to be disposed met the criteria to be classified as held for sale and were reflected as such at their carrying value. At December 31, 2018, assets held for sale on the Condensed Consolidated Balance Sheet of $80.7 million consists of $72.1 million of property, plant and equipment, $7.7 million related to inventories and $0.9 million of customer list intangibles. The related liabilities held for sale of $29.3 million on theDecember 31, 2018 Condensed Consolidated Balance Sheet include $29.0 million of revenue bonds. The sale of the MDF facility iswas not considered a strategic shift that has or will have a major effect on our operations or financial results and therefore doesdid not meet the requirements for presentation as discontinued operations.
NOTE 5.4. REVENUE RECOGNITION
The majority offollowing table represents our revenues are derived from the sale of delivered logs, manufacturedby major product. For additional information regarding our segments, see Note 5: Segment Information.
| Three Months Ended September 30, |
|
|
|
| Nine Months Ended September 30, |
| ||||||||||||||
(in thousands) | 2020 |
|
|
|
| 2019 |
|
|
|
| 2020 |
|
|
|
| 2019 |
| ||||
Timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs | $ | 72,815 |
|
|
|
| $ | 53,152 |
|
|
|
| $ | 144,860 |
|
|
|
| $ | 116,118 |
|
Pulpwood |
| 1,243 |
|
|
|
|
| 1,489 |
|
|
|
|
| 3,914 |
|
|
|
|
| 4,698 |
|
Stumpage |
| — |
|
|
|
|
| 3 |
|
|
|
|
| 316 |
|
|
|
|
| 109 |
|
Other |
| 855 |
|
|
|
|
| 1,085 |
|
|
|
|
| 1,450 |
|
|
|
|
| 1,649 |
|
Total Northern revenues |
| 74,913 |
|
|
|
|
| 55,729 |
|
|
|
|
| 150,540 |
|
|
|
|
| 122,574 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs |
| 25,462 |
|
|
|
|
| 24,053 |
|
|
|
|
| 70,606 |
|
|
|
|
| 63,469 |
|
Pulpwood |
| 13,413 |
|
|
|
|
| 15,754 |
|
|
|
|
| 35,486 |
|
|
|
|
| 38,847 |
|
Stumpage |
| 770 |
|
|
|
|
| 767 |
|
|
|
|
| 2,416 |
|
|
|
|
| 1,233 |
|
Other |
| 2,427 |
|
|
|
|
| 2,506 |
|
|
|
|
| 7,707 |
|
|
|
|
| 7,725 |
|
Total Southern revenues |
| 42,072 |
|
|
|
|
| 43,080 |
|
|
|
|
| 116,215 |
|
|
|
|
| 111,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Timberlands revenues |
| 116,985 |
|
|
|
|
| 98,809 |
|
|
|
|
| 266,755 |
|
|
|
|
| 233,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumber |
| 185,558 |
|
|
|
|
| 108,364 |
|
|
|
|
| 400,290 |
|
|
|
|
| 301,923 |
|
Residuals and Panels |
| 32,733 |
|
|
|
|
| 35,279 |
|
|
|
|
| 89,217 |
|
|
|
|
| 112,056 |
|
Total Wood Products revenues |
| 218,291 |
|
|
|
|
| 143,643 |
|
|
|
|
| 489,507 |
|
|
|
|
| 413,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural real estate |
| 13,284 |
|
|
|
|
| 9,689 |
|
|
|
|
| 30,455 |
|
|
|
|
| 44,223 |
|
Development real estate |
| 2,157 |
|
|
|
|
| 7,674 |
|
|
|
|
| 6,121 |
|
|
|
|
| 12,102 |
|
Other |
| 2,710 |
|
|
|
|
| 1,500 |
|
|
|
|
| 5,649 |
|
|
|
|
| 5,134 |
|
Total Real Estate revenues |
| 18,151 |
|
|
|
|
| 18,863 |
|
|
|
|
| 42,225 |
|
|
|
|
| 61,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenues |
| 353,427 |
|
|
|
|
| 261,315 |
|
|
|
|
| 798,487 |
|
|
|
|
| 709,286 |
|
Intersegment Timberlands revenues1 |
| (40,381 | ) |
|
|
|
| (35,013 | ) |
|
|
|
| (95,006 | ) |
|
|
|
| (85,687 | ) |
Total consolidated revenues | $ | 313,046 |
|
|
|
| $ | 226,302 |
|
|
|
| $ | 703,481 |
|
|
|
| $ | 623,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment. |
Contract Balances
In general, a customer receivable is recorded as we deliver wood products, residual wood by-productslogs and real estate.residuals. We recognize revenue in accordance with FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606). Performance obligations associated with real estate sales are generally satisfied at a point in time when all conditions of closingreceive payment shortly after products have been met and title transfers to the buyer. Real estate closings are generally facilitated through an escrow process.
received by our customers. At September 30, 20192020 and December 31, 2018,2019, we recorded $7.2deferred revenue of $10.5 million and $4.3$5.5 million, respectively, for contract liabilities recorded as deferred revenue.liabilities. These contract related liabilities predominately relate to hunting and other access rights on our timberlands and member related activities at the Chenal Country Club.a country club. These contract liabilities are recognized over the term of the contracts, which is typically twelve months or less, except membership initiation fees at the Chenal Country Clubcountry club which typically are recognized up to 10 years. Other contract asset and liability balances, such as prepayments, are immaterial. For real estate sales, we typically receive the entire consideration in cash at closing.
The following table represents our revenues by major product. For additional information regarding our segments, see Note 6: Segment Information.
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) | 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs | $ | 53,152 |
|
| $ | 69,658 |
|
| $ | 116,118 |
|
| $ | 168,869 |
|
Pulpwood |
| 1,489 |
|
|
| 1,575 |
|
|
| 4,698 |
|
|
| 4,654 |
|
Stumpage |
| 3 |
|
|
| 39 |
|
|
| 109 |
|
|
| 175 |
|
Other |
| 1,085 |
|
|
| 765 |
|
|
| 1,649 |
|
|
| 1,233 |
|
|
| 55,729 |
|
|
| 72,037 |
|
|
| 122,574 |
|
|
| 174,931 |
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs |
| 24,053 |
|
|
| 21,974 |
|
|
| 63,469 |
|
|
| 61,194 |
|
Pulpwood |
| 15,754 |
|
|
| 13,700 |
|
|
| 38,847 |
|
|
| 36,138 |
|
Stumpage |
| 767 |
|
|
| 653 |
|
|
| 1,233 |
|
|
| 2,106 |
|
Other |
| 2,506 |
|
|
| 3,057 |
|
|
| 7,725 |
|
|
| 6,069 |
|
|
| 43,080 |
|
|
| 39,384 |
|
|
| 111,274 |
|
|
| 105,507 |
|
Total Timberlands revenues |
| 98,809 |
|
|
| 111,421 |
|
|
| 233,848 |
|
|
| 280,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumber |
| 108,364 |
|
|
| 138,281 |
|
|
| 301,923 |
|
|
| 367,062 |
|
Residuals and Panels |
| 35,279 |
|
|
| 60,744 |
|
|
| 112,056 |
|
|
| 165,363 |
|
Total Wood Products revenues |
| 143,643 |
|
|
| 199,025 |
|
|
| 413,979 |
|
|
| 532,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural real estate |
| 9,689 |
|
|
| 8,238 |
|
|
| 44,223 |
|
|
| 29,740 |
|
Development real estate |
| 7,674 |
|
|
| 1,287 |
|
|
| 12,102 |
|
|
| 4,249 |
|
Other1 |
| 1,500 |
|
|
| 1,708 |
|
|
| 5,134 |
|
|
| 4,230 |
|
Total Real Estate revenues |
| 18,863 |
|
|
| 11,233 |
|
|
| 61,459 |
|
|
| 38,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Revenues |
| 261,315 |
|
|
| 321,679 |
|
|
| 709,286 |
|
|
| 851,082 |
|
Intersegment Timberlands revenues2 |
| (35,013 | ) |
|
| (32,480 | ) |
|
| (85,687 | ) |
|
| (93,753 | ) |
Total consolidated revenues | $ | 226,302 |
|
| $ | 289,199 |
|
| $ | 623,599 |
|
| $ | 757,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6.5. SEGMENT INFORMATION
During the second quarter of 2019, we changed the name of our Resource segment to Timberlands. There were no changes in the segment’s business activities, components or information provided to our chief operating decision makers as a result of the change.
Our businesses are organized into 3 reportable operating segments: Timberlands, Wood Products and Real Estate. Management activities in theThe Timberlands segment includeincludes planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts, oil and gas royalties biomass production and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. The business of our Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives. The Real Estate segment also engages inalternatives, master planned communities,community development activities and includesa country club.
Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizeable portion of the Chenal Country Club.Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. These intercompany transactions are eliminated in consolidation.
The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories. For most of our operations, we use the last-in, first-out (LIFO) method of valuing inventory. An actual valuation of inventory under the LIFO method can be made only at the end of each year based on the inventory levels and costs at that time. Interim LIFO calculations are based on management’s best estimates of expected year-end inventory levels and costs and are subject to the final year-end LIFO inventory valuation. Inventories not valued under LIFO are recorded at the lower of average cost or net realizable value. All segment inventories which are reported using the average cost method. The LIFO reserve and intersegment eliminations are recorded at the corporate level.method for purposes of reporting segment results.
Management primarily evaluates the performance of its segments and allocates resources to them based upon Adjusted EBITDDA. EBITDDA is calculated as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Management uses Adjusted EBITDDA to compare the operating performance of our segments on a consistent basis and to evaluate the performance and effectiveness of each segment’s operational strategies. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.
The following table summarizes information on revenues, intersegment eliminations, Adjusted EBITDDA, depreciation, depletion and amortization, basis of real estate sold and total assets for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
| |||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Timberlands |
| $ | 98,809 |
|
| $ | 111,421 |
|
| $ | 233,848 |
|
| $ | 280,438 |
|
| $ | 116,985 |
|
| $ | 98,809 |
| $ | 266,755 |
| $ | 233,848 |
| ||||||
Wood Products |
|
| 143,643 |
|
|
| 199,025 |
|
|
| 413,979 |
|
|
| 532,425 |
|
|
| 218,291 |
|
|
| 143,643 |
| 489,507 |
| 413,979 |
| ||||||||
Real Estate |
|
| 18,863 |
|
|
| 11,233 |
|
|
| 61,459 |
|
|
| 38,219 |
|
|
| 18,151 |
|
|
| 18,863 |
|
|
| 42,225 |
|
|
| 61,459 |
| ||||
|
|
| 261,315 |
|
|
| 321,679 |
|
|
| 709,286 |
|
|
| 851,082 |
|
|
| 353,427 |
|
|
| 261,315 |
|
|
| 798,487 |
|
|
| 709,286 |
| ||||
Intersegment Timberlands revenues1 |
|
| (35,013 | ) |
|
| (32,480 | ) |
|
| (85,687 | ) |
|
| (93,753 | ) |
|
| (40,381 | ) |
|
| (35,013 | ) |
|
| (95,006 | ) |
|
| (85,687 | ) | ||||
Consolidated revenues |
| $ | 226,302 |
|
| $ | 289,199 |
|
| $ | 623,599 |
|
| $ | 757,329 |
|
| $ | 313,046 |
|
| $ | 226,302 |
|
| $ | 703,481 |
|
| $ | 623,599 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Adjusted EBITDDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Timberlands |
| $ | 42,996 |
|
| $ | 58,680 |
|
| $ | 95,977 |
|
| $ | 140,068 |
|
| $ | 59,649 |
|
| $ | 42,996 |
| $ | 120,290 |
| $ | 95,977 |
| ||||||
Wood Products |
|
| 5,903 |
|
|
| 46,446 |
|
|
| 11,058 |
|
|
| 126,962 |
|
|
| 81,644 |
|
|
| 5,903 |
| 105,780 |
| 11,058 |
| ||||||||
Real Estate |
|
| 14,678 |
|
|
| 7,467 |
|
|
| 48,697 |
|
|
| 27,769 |
|
|
| 13,466 |
|
|
| 14,678 |
| 30,062 |
| 48,697 |
| ||||||||
Corporate |
|
| (6,930 | ) |
|
| (8,989 | ) |
|
| (26,930 | ) |
|
| (28,969 | ) |
|
| (15,361 | ) |
|
| (6,930 | ) |
| (34,567 | ) |
| (26,930 | ) | ||||||
Eliminations and adjustments |
|
| (1,635 | ) |
|
| (1,794 | ) |
|
| 3,542 |
|
|
| (5,080 | ) |
|
| (4,012 | ) |
|
| (1,635 | ) |
|
| (3,235 | ) |
|
| 3,542 |
| ||||
Total Adjusted EBITDDA |
|
| 55,012 |
|
|
| 101,810 |
|
|
| 132,344 |
|
|
| 260,750 |
|
|
| 135,386 |
|
|
| 55,012 |
|
|
| 218,330 |
|
|
| 132,344 |
| ||||
Interest expense, net2 |
|
| (8,557 | ) |
|
| (8,475 | ) |
| (20,594 | ) |
| (21,821 | ) | ||||||||||||||||||||||
Depreciation, depletion and amortization |
|
| (20,187 | ) |
|
| (18,786 | ) |
| (56,590 | ) |
| (51,310 | ) | ||||||||||||||||||||||
Basis of real estate sold |
|
| (5,228 | ) |
|
| (4,248 | ) |
|
| (14,211 | ) |
|
| (10,673 | ) |
|
| (5,249 | ) |
|
| (5,228 | ) |
| (14,440 | ) |
| (14,211 | ) | ||||||
Depreciation, depletion and amortization |
|
| (18,786 | ) |
|
| (18,836 | ) |
|
| (51,310 | ) |
|
| (51,982 | ) | ||||||||||||||||||||
Interest expense, net2 |
|
| (8,475 | ) |
|
| (10,109 | ) |
|
| (21,821 | ) |
|
| (25,125 | ) | ||||||||||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| (5,512 | ) |
|
| — |
|
|
| — |
|
|
| — |
| — |
| (5,512 | ) | ||||||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| (42,988 | ) |
|
|
| — |
| |||||||||||||||||||
Non-operating pension and other postretirement employee benefits |
|
| (935 | ) |
|
| (1,942 | ) |
|
| (2,804 | ) |
|
| (5,707 | ) |
|
| (3,557 | ) |
|
| (935 | ) |
| (10,670 | ) |
| (2,804 | ) | ||||||
Gain (loss) on fixed assets |
|
| 198 |
|
|
| (12 | ) |
|
| 260 |
|
|
| (11 | ) | ||||||||||||||||||||
Gain on sale of facility |
|
| — |
|
|
| — |
|
|
| 9,176 |
|
|
| — |
|
|
| — |
|
|
| — |
| — |
| 9,176 |
| ||||||||
Inventory purchase price adjustment in cost of goods sold3 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,849 | ) | ||||||||||||||||||||
Deltic merger-related costs4 |
|
| — |
|
|
| (972 | ) |
|
| — |
|
|
| (21,245 | ) | ||||||||||||||||||||
Gain on disposal of fixed assets |
|
| 11 |
|
|
| 198 |
|
|
| 196 |
|
|
| 260 |
| ||||||||||||||||||||
Income before income taxes |
| $ | 21,786 |
|
| $ | 65,691 |
|
| $ | 46,122 |
|
| $ | 144,158 |
|
| $ | 97,847 |
|
| $ | 21,786 |
|
|
|
| $ | 73,244 |
|
|
|
| $ | 46,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation, depletion and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Timberlands |
| $ | 12,627 |
|
| $ | 12,730 |
|
| $ | 33,361 |
|
| $ | 35,974 |
|
| $ | 13,821 |
|
| $ | 12,627 |
| $ | 37,978 |
| $ | 33,361 |
| ||||||
Wood Products |
|
| 5,763 |
|
|
| 5,827 |
|
|
| 16,666 |
|
|
| 15,250 |
|
|
| 5,983 |
|
|
| 5,763 |
| 17,411 |
| 16,666 |
| ||||||||
Real Estate |
|
| 152 |
|
|
| 81 |
|
|
| 508 |
|
|
| 198 |
|
|
| 149 |
|
|
| 152 |
|
|
| 465 |
|
|
| 508 |
| ||||
Corporate |
|
| 244 |
|
|
| 198 |
|
|
| 775 |
|
|
| 560 |
|
|
| 234 |
|
|
| 244 |
|
|
| 736 |
|
|
| 775 |
| ||||
|
|
| 18,786 |
|
|
| 18,836 |
|
|
| 51,310 |
|
|
| 51,982 |
|
|
| 20,187 |
|
|
| 18,786 |
|
|
| 56,590 |
|
|
| 51,310 |
| ||||
Bond discounts and deferred loan fees2 |
|
| 392 |
|
|
| 609 |
|
|
| 1,279 |
|
|
| 1,703 |
|
|
| 407 |
|
|
| 392 |
|
|
| 1,219 |
|
|
| 1,279 |
| ||||
Total depreciation, depletion and amortization |
| $ | 19,178 |
|
| $ | 19,445 |
|
| $ | 52,589 |
|
| $ | 53,685 |
|
| $ | 20,594 |
|
| $ | 19,178 |
|
| $ | 57,809 |
|
| $ | 52,589 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basis of real estate sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Real Estate |
| $ | 5,283 |
|
| $ | 4,267 |
|
| $ | 14,326 |
|
| $ | 10,886 |
|
| $ | 5,257 |
|
| $ | 5,283 |
| $ | 14,973 |
| $ | 14,326 |
| ||||||
Eliminations and adjustments |
|
| (55 | ) |
|
| (19 | ) |
|
| (115 | ) |
|
| (213 | ) |
|
| (8 | ) |
|
| (55 | ) |
|
| (533 | ) |
|
| (115 | ) | ||||
Total basis of real estate sold |
| $ | 5,228 |
|
| $ | 4,248 |
|
| $ | 14,211 |
|
| $ | 10,673 |
|
| $ | 5,249 |
|
| $ | 5,228 |
|
| $ | 14,440 |
|
| $ | 14,211 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment. |
2 | Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of |
|
|
|
|
A reconciliation of our business segment total assets to total assets in the CondensedConsolidatedBalance Sheets is as follows:
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Total assets: |
|
|
|
|
|
|
|
|
Timberlands1 |
| $ | 1,675,064 |
|
| $ | 1,693,162 |
|
Wood Products |
|
| 385,792 |
|
|
| 456,306 |
|
Real Estate2 |
|
| 95,804 |
|
|
| 93,208 |
|
|
|
| 2,156,660 |
|
|
| 2,242,676 |
|
Corporate |
|
| 100,394 |
|
|
| 83,176 |
|
Total consolidated assets |
| $ | 2,257,054 |
|
| $ | 2,325,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 7.6. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating basic and diluted earnings per share:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
(in thousands, except per share amounts) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Net income |
| $ | 20,565 |
|
| $ | 60,336 |
|
| $ | 44,262 |
|
| $ | 121,081 |
|
| $ | 81,007 |
|
| $ | 20,565 |
|
| $ | 66,813 |
|
| $ | 44,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding |
|
| 67,446 |
|
|
| 62,986 |
|
|
| 67,781 |
|
|
| 58,765 |
|
|
| 67,149 |
|
|
| 67,446 |
|
|
| 67,263 |
|
|
| 67,781 |
|
Incremental shares due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares |
|
| 65 |
|
|
| 270 |
|
|
| 50 |
|
|
| 263 |
|
|
| 320 |
|
|
| 65 |
|
|
| 238 |
|
|
| 50 |
|
Restricted stock units |
|
| 34 |
|
|
| 37 |
|
|
| 17 |
|
|
| 33 |
|
|
| 59 |
|
|
| 34 |
|
|
| 34 |
|
|
| 17 |
|
Stock portion of earnings and profits distribution |
|
| — |
|
|
| 1,429 |
|
|
| — |
|
|
| 481 |
| ||||||||||||||||
Diluted weighted-average shares outstanding |
|
| 67,545 |
|
|
| 64,722 |
|
|
| 67,848 |
|
|
| 59,542 |
|
|
| 67,528 |
|
|
| 67,545 |
|
|
| 67,535 |
|
|
| 67,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per share |
| $ | 0.30 |
|
| $ | 0.96 |
|
| $ | 0.65 |
|
| $ | 2.06 |
|
| $ | 1.21 |
|
| $ | 0.30 |
|
| $ | 0.99 |
|
| $ | 0.65 |
|
Diluted net income per share |
| $ | 0.30 |
|
| $ | 0.93 |
|
| $ | 0.65 |
|
| $ | 2.03 |
|
| $ | 1.20 |
|
| $ | 0.30 |
|
| $ | 0.99 |
|
| $ | 0.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include future compensation cost associated with the stock award.
For the three and nine months ended September 30, 2019,2020, there were 0 and approximately 25,000 and 134,00047,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three and nine months ended September 30, 2018,2019, there were approximately 16,00025,000 and 38,000134,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Anti-dilutive stock-based awards could be dilutive in future periods.
Share Issuances Related to the Deltic Merger
In February 2018 we issued 22.0 million shares in connection with the Deltic merger. Further, on August 30, 2018, the board of directors approved a special distribution of $222.0 million, or approximately $3.54 per share. The special distribution amount equaled our determination of the accumulated earnings and profits of Deltic as of the merger date and was distributed in order to maintain the company’s qualification as a REIT for U.S. federal income tax purposes. The special distribution was paid on November 15, 2018, to stockholders of record on September 27, 2018 through the issuance of 4.8 million shares of our common stock and distribution of $44.4 million in cash. The weighted average shares for the dilutive effect on earnings per share from the stock portion of the special distribution was based on the August 30, 2018 declaration date for the three and nine months ended September 30, 2018. See Note 3: Merger with Deltic for further discussion on the merger.
Share Repurchase Program
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common stock with no time limit set for the repurchase (the 2018 Repurchase Program). WeIn September 2020 we entered into a trading plan in accordance with the guidelines in Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, with an independent broker for the purpose of repurchasing a limited number of the Company’s common shares under the 2018 Repurchase Program. This trading plan became effective on October 29, 2020 and expires upon expenditure of the principal specified in the plan, an early termination event (as specified in the plan), or the close of business on October 26, 2022, whichever occurs first.
During the nine months ended September 30, 2020 we repurchased0.7 million 489,850 shares of common stock (at a total consideration of $15.4 million), and we repurchased 0 shares during the three months ended September 30, 2020, under the 2018 Repurchase Program. During the nine months ended September 30, 2019 we repurchased 686,240 shares of common stock (at a total consideration of $25.2 million) during the six months ended June 30, 2019,, and we repurchased 0 shares during the three months ended September 30, 2019 under the 2018 Repurchase Program. All common stock purchases under the 2018 Repurchase ProgramsProgram were made in open-market transactions. NaN shares were repurchased during the three and nine months ended September 30, 2018. At September 30, 2019,2020, we had remaining authorization of $74.8$59.5 million for future stock repurchases under the 2018 Repurchase Program.
We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability to account for repurchases that have not been cash settled. There were 0 unsettled repurchases as of September 30, 2019.2020. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.
NOTE 8.7. CERTAIN BALANCE SHEET COMPONENTS
Inventories
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Logs |
| $ | 26,657 |
|
| $ | 37,303 |
|
| $ | 24,592 |
|
| $ | 33,313 |
|
Lumber, panels and veneer |
|
| 30,390 |
|
|
| 27,420 |
|
|
| 31,730 |
|
|
| 31,639 |
|
Materials and supplies |
|
| 12,383 |
|
|
| 11,310 |
|
|
| 14,252 |
|
|
| 12,831 |
|
Total inventories |
|
| 69,430 |
|
|
| 76,033 |
|
|
| 70,574 |
|
|
| 77,783 |
|
Less: LIFO reserve |
|
| (15,228 | ) |
|
| (15,228 | ) |
|
| (12,002 | ) |
|
| (12,002 | ) |
Total inventories, net |
| $ | 54,202 |
|
| $ | 60,805 |
|
| $ | 58,572 |
|
| $ | 65,781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Property, plant and equipment |
| $ | 492,798 |
|
| $ | 472,695 |
|
| $ | 517,702 |
|
| $ | 498,113 |
|
Less: accumulated depreciation |
|
| (214,211 | ) |
|
| (200,502 | ) |
|
| (228,397 | ) |
|
| (211,730 | ) |
Total property, plant and equipment, net |
| $ | 278,587 |
|
| $ | 272,193 |
|
| $ | 289,305 |
|
| $ | 286,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timber and timberlands
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Timber and timberlands |
| $ | 1,565,890 |
|
| $ | 1,590,997 |
|
| $ | 1,524,562 |
|
| $ | 1,554,882 |
|
Logging roads |
|
| 83,306 |
|
|
| 81,818 |
|
|
| 83,464 |
|
|
| 83,781 |
|
Total timber and timberlands, net |
| $ | 1,649,196 |
|
| $ | 1,672,815 |
|
| $ | 1,608,026 |
|
| $ | 1,638,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
(in thousands) |
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Accrued payroll and benefits |
| $ | 16,004 |
|
| $ | 20,130 |
|
| $ | 28,055 |
|
| $ | 12,920 |
|
Accounts payable |
|
| 16,565 |
|
|
| 12,073 |
|
|
| 24,614 |
|
|
| 12,734 |
|
Deferred revenue |
|
| 10,517 |
|
|
| 5,514 |
| ||||||||
Accrued taxes |
|
| 23,697 |
|
|
| 6,638 |
| ||||||||
Accrued interest |
|
| 5,818 |
|
|
| 8,642 |
|
|
| 5,470 |
|
|
| 6,946 |
|
Accrued taxes |
|
| 18,902 |
|
|
| 7,389 |
| ||||||||
Deferred revenue |
|
| 7,242 |
|
|
| 4,282 |
| ||||||||
Operating lease liabilities |
|
| 4,883 |
|
|
| — |
|
|
| 4,538 |
|
|
| 4,998 |
|
Other current liabilities |
|
| 8,860 |
|
|
| 8,477 |
|
|
| 11,534 |
|
|
| 10,827 |
|
Total accounts payable and accrued liabilities |
| $ | 78,274 |
|
| $ | 60,993 |
|
| $ | 108,425 |
|
| $ | 60,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 9.8. DEBT
In January 2019, we refinanced $150.0At September 30, 2020, our total outstanding long-term debt included $693.5 million of 7.50% senior notes (Senior Notes) due in 2019 with a $150.0 million term loan that will mature in 2029. The new term loan carries a variable interest rate of one-month LIBOR plus 1.85%. We paid $0.5 million of lender fees on the new term loan. Concurrent with the new term loan, we entered into a $150.0 million interest rate swap to fix the rate at 4.56%. Upon the refinancing, we redeemed and paid all outstanding Senior Notes, including a redemption premium of $4.9 million which is included in the loss on extinguishment of debt in our Condensed Consolidated Statements of Income. Subsequent to the refinancing, $693.5 million was outstandingloans under our Second Amended and Restated Term Loan Agreement.Agreement (Amended Term Loan Agreement) with our primary lender, of which $46.0 million matures in December 2020. Certain borrowings under the Amended Term Loan Agreement are at variable rates of one or three-month LIBOR plus a spread between 1.85% and 2.15%. We have entered into interest rate swaps for these variable rate term loans to fix the interest rate. See Note: 9 Derivative Instruments for additional information.
As part of the Deltic merger, we assumed the obligations relating to the letterAt September 30, 2020, there were no borrowings under our $380.0 million revolving line of credit supporting Deltic’s $29.0and approximately $1.0 million Union County, Arkansas Taxable Industrial Revenue Bonds 1998 Series due October 1, 2027 associated with the Deltic MDF facility. As of December 31, 2018, the bonds were classified as held for sale as part of the sale of the Deltic MDF facility and excluded from long-term debt. As part of the sale of the MDF facility, the bonds were assumed by the buyer and the letterour revolving line of credit was terminated. See Note 4: Saleutilized for outstanding letters of Deltic MDF Facility.credit. As provided in the revolving line of credit agreement, borrowings may be increased by up to an additional $420.0 million. The revolving line of credit agreement also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of $25.0 million for swing line loans. Usage under either or both subfacilities reduces availability under the revolving line of credit. We may utilize borrowings under the credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.
As of September 30, 2019, weWe were in compliance with all debt and credit agreement covenants and approximately $1.0 million of our $380.0 million credit facility was utilized by outstanding letters of credit.at September 30, 2020.
NOTE 10.9. DERIVATIVE INSTRUMENTS
From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset or liability to a particular risk are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.
AtWe have a $40.0 million term loan that matures in December 2019. In September 2019, we entered into a $40.0 million interest rate swap, the objective which is to lock in the index component rate on an expected new term loan in December 2019. This cash flow hedge requires settlement in December 2019.
Additionally, at September 30, 2019,2020, we have 56 interest rate swaps associated with $357.5$397.5 million of term loan debt. These swaps are cash flow hedges that convert variable rates ranging from three-month and one-month LIBOR plus 1.85% to 2.15%, to fixed rates ranging from 3.88%3.17% to 4.82%. Our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedge. At September 30, 2019,hedges.
In March 2020, we entered into $653.5 million of forward starting interest rate swaps. These forward starting interest rate swaps effectively hedge the amountvariability in future benchmark interest payments attributable to changes in interest rates on future debt refinancing by converting the benchmark interest rates to fixed rates on our anticipated future refinancing of net losses expected$653.5 million of term loan debt maturing December 2020 through January 2029. The fixed interest rate components for these forward swaps range from 0.85% to be reclassified into earnings in1.17%. The variable rate component on these forward interest rate swaps is one-month LIBOR. Accordingly, the next 12 months is approximately $3.6 million.forward rate swaps were designated as cash flow hedges. In addition, these cash flow hedges require settlement on the stated maturity date for each respective term loan currently outstanding.
The following table presents the gross fair values of derivative instruments on our Condensed Consolidated Balance Sheets:
|
|
|
| Asset Derivatives |
|
|
|
| Liability Derivatives |
|
|
|
| Asset Derivatives |
|
|
|
| Liability Derivatives |
| ||||||||||||||||||||
(in thousands) |
| Location |
| September 30, 2019 |
|
| December 31, 2018 |
|
| Location |
| September 30, 2019 |
|
| December 31, 2018 |
|
| Location |
| September 30, 2020 |
|
| December 31, 2019 |
|
| Location |
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||
Derivatives designated in cash flow hedging relationships: | Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
| Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Interest rate contracts |
| Other assets, non-current |
| $ | 736 |
|
| $ | 1,510 |
|
| Other long-term obligations |
| $ | 29,322 |
|
| $ | 2,888 |
|
| Other assets, current1 |
| $ | — |
|
| $ | — |
|
| Accounts payable and accrued liabilities1 |
| $ | 1,356 |
|
| $ | — |
|
Interest rate contracts |
| Other assets, non-current |
|
| 3,282 |
|
|
| 1,601 |
|
| Other long-term obligations |
|
| 52,805 |
|
|
| 22,398 |
| ||||||||||||||||||||
|
|
|
| $ | 3,282 |
|
| $ | 1,601 |
|
|
|
| $ | 54,161 |
|
| $ | 22,398 |
| ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Derivative instruments that mature within one year, as a whole, are classified as current. |
The following table details the effect of derivatives on our Condensed Consolidated Statements of IncomeOperations:
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
(in thousands) |
| Location |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| Location |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Derivatives designated in fair value hedging relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Realized loss on interest rate contracts1 |
| Interest expense |
| $ | — |
|
| $ | (52 | ) |
| $ | (18 | ) |
| $ | (138 | ) | ||||||||||||||||||
Loss on hedged debt basis adjustment included in debt extinguishment |
|
|
|
| — |
|
|
| — |
|
|
| (165 | ) |
|
| — |
| ||||||||||||||||||
|
|
|
| $ | — |
|
| $ | (52 | ) |
| $ | (183 | ) |
| $ | (138 | ) | ||||||||||||||||||
Derivatives designated in cash flow hedging relationships: | Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
| Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income recognized in other comprehensive income, net of tax |
|
|
| $ | (7,384 | ) |
| $ | 1,330 |
|
| $ | (26,576 | ) |
| $ | 1,394 |
| ||||||||||||||||||
Loss reclassified from accumulated other comprehensive income1 |
| Interest expense |
| $ | (406 | ) |
| $ | (261 | ) |
| $ | (668 | ) |
| $ | (456 | ) | ||||||||||||||||||
Income (loss) recognized in other comprehensive income (loss), net of tax |
|
|
| $ | 8,920 |
|
| $ | (7,384 | ) |
| $ | (34,112 | ) |
| $ | (26,576 | ) | ||||||||||||||||||
Reclassifications from AOCL to earnings1 |
| Interest expense |
| $ | 2,412 |
|
| $ | 406 |
|
| $ | 5,072 |
|
| $ | 668 |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
| $ | 8,475 |
|
| $ | 10,109 |
|
| $ | 21,821 |
|
| $ | 25,125 |
|
|
|
| $ | 8,557 |
|
| $ | 8,475 |
|
| $ | 20,594 |
|
| $ | 21,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1Realized loss on hedging instruments consist of net swap cash payments and interest accruals on interest rate swaps during the periods.
At September 30, 2020, approximately $8.9 million of net losses are expected to be reclassified into earnings over the next 12 months. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate amount recognized in earnings is based on the market LIBOR rate at the time of net swap cash payments.
|
|
NOTE 11.10. FAIR VALUE MEASUREMENTS
The following table presents the estimated fair values of our financial instruments:
|
| September 30, 2019 |
|
| December 31, 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||||||||||||||||||
(in thousands) |
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
| ||||||||
Derivative assets related to interest rate swaps (Level 2) |
| $ | 736 |
|
| $ | 736 |
|
| $ | 1,510 |
|
| $ | 1,510 |
|
| $ | 3,282 |
|
| $ | 3,282 |
|
| $ | 1,601 |
|
| $ | 1,601 |
|
Derivative liabilities related to interest rate swaps (Level 2) |
| $ | (29,322 | ) |
| $ | (29,322 | ) |
| $ | (2,888 | ) |
| $ | (2,888 | ) |
| $ | (54,161 | ) |
| $ | (54,161 | ) |
| $ | (22,398 | ) |
| $ | (22,398 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion (Level 2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans |
| $ | (689,657 | ) |
| $ | (704,498 | ) |
| $ | (539,169 | ) |
| $ | (539,037 | ) |
| $ | (690,307 | ) |
| $ | (717,946 | ) |
| $ | (689,820 | ) |
| $ | (703,437 | ) |
Senior notes |
|
| — |
|
|
| — |
|
|
| (149,786 | ) |
|
| (154,328 | ) | ||||||||||||||||
Revenue bonds |
|
| (65,735 | ) |
|
| (68,384 | ) |
|
| (94,735 | ) |
|
| (93,144 | ) |
|
| (65,735 | ) |
|
| (66,885 | ) |
|
| (65,735 | ) |
|
| (68,200 | ) |
Medium-term notes |
|
| (3,000 | ) |
|
| (3,484 | ) |
|
| (3,000 | ) |
|
| (3,419 | ) |
|
| (3,000 | ) |
|
| (3,558 | ) |
|
| (3,000 | ) |
|
| (3,480 | ) |
Total long-term debt1 |
| $ | (758,392 | ) |
| $ | (776,366 | ) |
| $ | (786,690 | ) |
| $ | (789,928 | ) |
| $ | (759,042 | ) |
| $ | (788,389 | ) |
| $ | (758,555 | ) |
| $ | (775,117 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned life insurance asset (COLI) (Level 3) |
| $ | 4,073 |
|
| $ | 4,073 |
|
| $ | 3,104 |
|
| $ | 3,104 |
|
| $ | 3,028 |
|
| $ | 3,028 |
|
| $ | 4,157 |
|
| $ | 4,157 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The carrying amount of long-term debt includes principal and unamortized discounts. |
The fair value of interest rate swaps are determined using a discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs, including interest rate forward curves.
The fair value of our long-term debt is estimated based upon quoted market prices for similar debt issues or estimated based on average market prices for comparable debt when there is no quoted market price.
The contract value of our company owned life insurance is based on the amount at which it could be redeemed and, accordingly, approximates fair value.
We believe that our other financial instruments, including cash and cash equivalents, receivables and payables have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments and the allowance for doubtful accounts.instruments.
NOTE 12.11. EQUITY-BASED COMPENSATION
On May 6, 2019 (the Effective Date) the stockholders approved our 2019 Long-Term Incentive Plan (the 2019 Plan). The total amount of PotlatchDeltic common stock authorized for issuance under the 2019 Plan includes, in addition to 1.2 million new shares approved by our stockholders: (i) the total number of shares available for future awards under the Potlatch Corporation 2014 Long-Term Incentive Plan and its predecessor plans (the Prior Plans) as of the Effective Date and (ii) the number of undelivered shares subject to outstanding awards under the Prior Plans that will become available for future issuance as provided for under the 2019 Plan. At September 30, 2019,2020, approximately 1.41.2 million shares are available for future use under our long-term incentive plans.plan.
Share-based compensation activity during the nine months ended September 30, 20192020 included the following:
(Shares in thousands) |
| Granted |
|
| Vested |
|
| Forfeited |
|
| Granted |
|
| Vested |
|
| Forfeited |
| ||||||
Performance Share Awards (PSAs) |
|
| 142 |
|
|
| — |
|
|
| 6 |
|
|
| 125,001 |
|
|
| — |
|
|
| 4,286 |
|
Restricted Stock Units (RSUs) |
|
| 102 |
|
|
| 19 |
|
|
| 2 |
|
|
| 68,263 |
|
|
| 28,671 |
|
|
| 1,429 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A total of 0.3Approximately 0.1 million shares of common stock were issued during the nine months ended September 30, 2019.2020 as a result of PSA and RSU vesting during 2019 and 2020.
The following table details equity-based compensation expense and the related income tax benefit.benefit:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Equity-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards |
| $ | 1,186 |
|
| $ | 1,074 |
|
| $ | 3,417 |
|
| $ | 3,084 |
|
| $ | 1,315 |
|
| $ | 1,186 |
|
| $ | 3,716 |
|
| $ | 3,417 |
|
Restricted stock units |
|
| 705 |
|
|
| 536 |
|
|
| 1,892 |
|
|
| 1,470 |
|
|
| 729 |
|
|
| 705 |
|
|
| 2,155 |
|
|
| 1,892 |
|
Deferred compensation stock equivalent units expense |
|
| 22 |
|
|
| 16 |
|
|
| 53 |
|
|
| 197 |
|
|
| 19 |
|
|
| 22 |
|
|
| 57 |
|
|
| 53 |
|
Accelerated share-based termination benefits in connection with the merger |
|
| — |
|
|
| 3 |
|
|
| — |
|
|
| 1,767 |
| ||||||||||||||||
Total equity-based compensation expense |
| $ | 1,913 |
|
| $ | 1,629 |
|
| $ | 5,362 |
|
| $ | 6,518 |
|
| $ | 2,063 |
|
| $ | 1,913 |
|
| $ | 5,928 |
|
| $ | 5,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit recognized for equity-based expense |
| $ | 79 |
|
| $ | 74 |
|
| $ | 234 |
|
| $ | 258 |
|
| $ | 97 |
|
| $ | 79 |
|
| $ | 273 |
|
| $ | 234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Awards
PSAs granted under the stock incentive plans have a three-year performance period and shares are issued at the end of the period if the performance measures are met. The performance measures are based on the percentile ranking of our total shareholder return relative to the total shareholder return performance of both a selected peer group of companies and a larger group of indexed companies over the three-year performance period. The number of shares actually issued, as a percentage of the amount subject to the PSA, could range from 0% to 200%. PSAs granted under our stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of the three-year performance measurement period, the recipients will receive dividend equivalents in the form of additional shares at the time of payment equal to the dividends that would have been paid on the shares earned had the recipients owned the shares during the three-year period. Therefore, the shares are not considered participating securities. The fair value of performance shares granted in 20192020 was $37.87$45.04 per share.
The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards in 2019:2020:
Stock price as of valuation date |
| $ | 35.01 |
|
| $ | 42.16 |
|
Risk-free rate |
|
| 2.47 | % |
|
| 1.42 | % |
Expected volatility |
|
| 25.15 | % |
|
| 25.74 | % |
Expected dividend yield (assuming full reinvestment) |
|
| — |
|
|
| — |
|
Expected term (years) |
|
| 3.00 |
|
|
| 3.00 |
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units
RSU awards accrue dividend equivalents based on dividends paid during the RSU vesting period. The dividend equivalents will be converted into additional RSUs that will vest in the same manner as the underlying RSUs to which they relate. Therefore, the shares are not considered participating securities. The terms of the awards state that the RSUs will vest in a given time period of one to three years and the terms of certain awards follow a vesting schedule within the given time period. The fair value of RSUs granted equaled our common share price on the date of grant factoring in any required post-vesting holding periods. The weighted average fair value of all RSUs granted during the nine months ended September 30, 20192020 was $36.64.$38.77 per share.
NOTE 13.12. INCOME TAXES
As a real estate investment trust (REIT), we generally are not subject to federal and state corporate income taxes on income of the REIT that we distribute to our shareholders. We conduct certain activities through our taxable REIT subsidiaries (TRS), which are subject to corporate level federal and state income taxes. These taxable activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Therefore, income tax expense or benefit is primarily due to income or loss of the TRS, as well as permanent book versus tax differences. In addition,During the nine months ended September 30, 2020, we had carryoverrecorded income tax basisexpense of $6.4 million, which was net of an income tax benefit of approximately $11.2 million associated with the $43.0 million pension settlement charge recorded in the MDF facility fromfirst quarter of 2020. Additionally, during the Deltic mergerfirst quarter of 2020, we recorded an increase in deferred tax assets of $6.8 million associated with the $26.2 million remeasurement of our pension plan obligations. See Note 14: Pension and as a result, duringOther Postretirement Employee Benefitsfor further details. During the nine months ended September 30, 2019, we recorded a reduction to deferred tax liabilities and an increase to income taxes payable of $15.8 million atrelated to the datesale of sale.the Deltic MDF facility. See Note 4:3: Sale of Deltic MDF Facility for further details. In addition, during the third quarter of 2018, we recorded a tax benefit of $5.3 million primarily related to deducting contributions to our qualified pension plans at the higher 2017 income tax rate.
NOTE 14.13. LEASES
We lease certain equipment, office space and land. ROULease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating
The following table presents supplemental balance sheet information related to lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We consider our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates. Most leases include one or more options to renew, with renewal terms that can extend the lease term between one to five years. The exercise of lease renewal options is at our sole discretion. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. liabilities:
(in thousands) | Classification |
| September 30, 2020 |
|
| December 31, 2019 |
| ||
Assets |
|
|
|
|
|
|
|
|
|
Operating lease assets | Other long-term assets |
| $ | 12,159 |
|
| $ | 15,772 |
|
Finance lease assets1 | Property, plant and equipment, net |
|
| 7,086 |
|
|
| 2,360 |
|
Total lease assets |
|
| $ | 19,245 |
|
| $ | 18,132 |
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
Current: |
|
|
|
|
|
|
|
|
|
Operating lease liabilities | Accounts payable and accrued liabilities |
| $ | 4,538 |
|
| $ | 4,998 |
|
Finance lease liabilities | Accounts payable and accrued liabilities |
|
| 2,046 |
|
|
| 644 |
|
Noncurrent: |
|
|
|
|
|
|
|
|
|
Operating lease liabilities | Other long-term obligations |
|
| 7,651 |
|
|
| 10,775 |
|
Finance lease liabilities | Other long-term obligations |
|
| 4,963 |
|
|
| 1,703 |
|
Total lease liabilities |
|
| $ | 19,198 |
|
| $ | 18,120 |
|
|
|
|
|
|
|
|
|
|
|
1Finance lease assets are presented net of accumulated amortization of $1.2 million and liabilities were $1.9$0.3 million atas of September 30, 2019.2020 and December 31, 2019, respectively.
For certain equipment leases, we apply a portfolio approach to effectively account forThe following table presents the operatingcomponents of lease ROU assets and liabilities. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. Certain leases also include options to purchase the leased equipment. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants and we do not have any significant sublease income.
Balance Sheet Classificationexpense:
(in thousands) | Classification |
| September 30, 2019 |
| |
Assets |
|
|
|
|
|
Operating lease assets | Other long-term assets |
| $ | 16,241 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current operating lease liability | Accounts payable and accrued liabilities |
| $ | 4,883 |
|
Noncurrent operating lease liability | Other long-term obligations |
|
| 11,433 |
|
Total lease liabilities |
|
| $ | 16,316 |
|
|
|
|
|
|
|
Other Operating Lease Information
|
|
| Nine Months Ended |
| |
(in thousands) |
|
| September 30, 2019 |
| |
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
| |
Operating cash flows for operating leases |
| $ | 4,503 |
| |
Leased assets exchanged for new operating lease liabilities |
| $ | 6,317 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
| ||||
|
|
| |||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Operating lease costs1 |
| $ | 1,413 |
|
| $ | 1,576 |
|
| $ | 4,252 |
|
| $ | 4,497 |
|
Finance lease costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of leased assets |
|
| 432 |
|
| 80 |
|
|
| 905 |
|
| 126 |
| ||
Interest on lease liabilities |
|
| 44 |
|
| 12 |
|
|
| 103 |
|
| 22 |
| ||
Net lease costs |
| $ | 1,889 |
|
| $ | 1,668 |
|
| $ | 5,260 |
|
| $ | 4,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease costs (excluding1Excludes short-term leases and variable lease costs, which are immaterial) for the three and nine months ended September 30, 2019 were $1.6 million and $4.5 million, respectively.immaterial
Maturity of Operating Lease Liabilities
At September 30, 2019, the future minimum lease payment obligations under noncancelable operating leases were as follows:The following tables presents supplemental cash flow information related to leases:
(in thousands) |
|
|
|
|
2019 |
| $ | 1,432 |
|
2020 |
|
| 5,282 |
|
2021 |
|
| 4,263 |
|
2022 |
|
| 2,597 |
|
2023 |
|
| 1,662 |
|
After 2023 |
|
| 2,610 |
|
Total lease payments |
|
| 17,846 |
|
Less: interest1 |
|
| 1,530 |
|
Present value of lease liabilities |
| $ | 16,316 |
|
|
|
|
|
|
|
|
Disclosures Related to Periods Prior to Adoption of the New Lease Standard
We did not have any capital leases during 2018. Operating lease rent expense primarily for office space, machinery and equipment was $1.2 million and $3.6 million for the three and nine months ended September 30, 2018, respectively.
At December 31, 2018, future minimum lease payment obligations under noncancelable operating leases were as follows:
(in thousands) |
|
|
|
|
2019 |
| $ | 5,130 |
|
2020 |
|
| 4,135 |
|
2021 |
|
| 3,142 |
|
2022 |
|
| 1,538 |
|
2023 |
|
| 629 |
|
2024 and thereafter |
|
| 575 |
|
Total |
| $ | 15,149 |
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||
(in thousands) |
|
| 2020 |
|
| 2019 |
| ||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
| |
Operating cash flows for operating leases |
| $ | 4,244 |
|
| $ | 4,503 |
| |
Operating cash flows for finance leases |
| $ | 103 |
|
| $ | 22 |
| |
Financing cash flows for finance leases |
| $ | 968 |
|
| $ | 121 |
| |
Leased assets exchanged for new lease liabilities: |
|
|
|
|
|
|
|
| |
Operating leases |
| $ | 255 |
|
| $ | 6,317 |
| |
Finance leases |
| $ | 5,630 |
|
| $ | 2,067 |
| |
|
|
|
|
|
|
|
|
|
|
NOTE 15.14. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS
In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of our outstanding pension benefit obligation related to our qualified pension plans to the insurance company. This transaction was funded with plan assets. As a result of the transaction, the insurance company assumed responsibility for annuity administration and benefit payments to select retirees, with 0 change to their monthly retirement benefit payment amounts. In connection with this transaction we recorded a non-cash pretax settlement charge of $43.0 million during the three months ended March 31, 2020 in non-operating expense, net, accelerating the recognition of actuarial losses included in accumulated other comprehensive loss that would have been recognized in future periods.
The settlement triggered a remeasurement of plan assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the qualified pension plans as of February 29, 2020 and to calculate the related net periodic benefit cost for the remainder of 2020 to 2.95% from 3.40%. All other pension assumptions remain unchanged. The net effect of the remeasurement was a reduction in the funded status of our qualified pension plans of approximately $26.2 million, primarily driven by the decrease in the discount rate.
The following tables detail the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB):
|
| Three Months Ended September 30, |
| |||||||||||||||||||||||||||||
|
| Pension |
|
| OPEB |
| ||||||||||||||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
Service cost |
| $ | 2,233 |
|
| $ | 1,942 |
|
| $ | 127 |
|
| $ | 93 |
| ||||||||||||||||
Interest cost |
|
| 3,066 |
|
|
| 4,618 |
|
|
| 376 |
|
|
| 397 |
| ||||||||||||||||
Expected return on plan assets |
|
| (3,869 | ) |
|
| (5,548 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||
Amortization of prior service cost (credit) |
|
| 29 |
|
|
| 52 |
|
|
| (319 | ) |
|
| (2,211 | ) | ||||||||||||||||
Amortization of actuarial loss |
|
| 3,856 |
|
|
| 3,374 |
|
|
| 418 |
|
|
| 253 |
| ||||||||||||||||
Total net periodic cost (benefit) |
| $ | 5,315 |
|
| $ | 4,438 |
|
| $ | 602 |
|
| $ | (1,468 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| Pension |
|
| OPEB |
|
| Pension |
|
| OPEB |
| ||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||
Service cost |
| $ | 1,942 |
|
| $ | 2,181 |
|
| $ | 93 |
|
| $ | 99 |
|
| $ | 6,699 |
|
| $ | 5,825 |
|
| $ | 381 |
|
| $ | 278 |
|
Interest cost |
|
| 4,618 |
|
|
| 4,344 |
|
|
| 397 |
|
|
| 391 |
|
|
| 9,198 |
|
|
| 13,849 |
|
|
| 1,127 |
|
|
| 1,191 |
|
Expected return on plan assets |
|
| (5,548 | ) |
|
| (5,095 | ) |
|
| — |
|
|
| — |
|
|
| (11,606 | ) |
|
| (16,643 | ) |
|
| — |
|
|
| — |
|
Amortization of prior service cost (credit) |
|
| 52 |
|
|
| 46 |
|
|
| (2,211 | ) |
|
| (2,219 | ) |
|
| 85 |
|
|
| 158 |
|
|
| (957 | ) |
|
| (6,633 | ) |
Amortization of actuarial loss |
|
| 3,374 |
|
|
| 4,148 |
|
|
| 253 |
|
|
| 327 |
|
|
| 11,569 |
|
|
| 10,122 |
|
|
| 1,254 |
|
|
| 760 |
|
Net periodic cost (benefit) before pension settlement charge |
|
| 15,945 |
|
|
| 13,311 |
|
|
| 1,805 |
|
|
| (4,404 | ) | ||||||||||||||||
Pension settlement charge |
|
| 42,988 |
|
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||
Net periodic cost (benefit) |
| $ | 4,438 |
|
| $ | 5,624 |
|
| $ | (1,468 | ) |
| $ | (1,402 | ) |
| $ | 58,933 |
|
| $ | 13,311 |
|
| $ | 1,805 |
|
| $ | (4,404 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
| |||||||||||||||||||||||||||||
|
| Pension |
|
| OPEB |
| ||||||||||||||||||||||||||
(Dollars in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||||||||||||||||||
Service cost |
| $ | 5,825 |
|
| $ | 6,272 |
|
| $ | 278 |
|
| $ | 242 |
| ||||||||||||||||
Interest cost |
|
| 13,849 |
|
|
| 12,648 |
|
|
| 1,191 |
|
|
| 1,091 |
| ||||||||||||||||
Expected return on plan assets |
|
| (16,643 | ) |
|
| (14,938 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||
Amortization of prior service cost (credit) |
|
| 158 |
|
|
| 139 |
|
|
| (6,633 | ) |
|
| (6,658 | ) | ||||||||||||||||
Amortization of actuarial loss |
|
| 10,122 |
|
|
| 12,442 |
|
|
| 760 |
|
|
| 983 |
| ||||||||||||||||
Net periodic cost (benefit) |
| $ | 13,311 |
|
| $ | 16,563 |
|
| $ | (4,404 | ) |
| $ | (4,342 | ) |
During the nine months ended September 30, 20192020 and 2018,2019, funding of pension and other postretirement employee benefit plans was $8.5 million and $4.6 million, and $56.0 million, respectively. $52.1 million of qualified pension benefit contributions during the nine months ended September 30, 2018 were designated for and included as deductions on our 2017 income tax return which allowed us to deduct those payments at a higher rate.
NOTE 16.15. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
During 2019,The following table details changes in amounts included in our accumulated other comprehensive loss (AOCL) by component on our Condensed Consolidated Balance Sheets, net of tax, are:tax:
|
|
|
|
|
| Pension Plans |
|
| OPEB |
|
|
|
|
| ||||||||||
(in thousands) |
| Gains and losses on cash flow hedges |
|
| Actuarial Loss |
|
| Prior Service Cost |
|
| Actuarial Loss |
|
| Prior Service Credit |
|
| Total |
| ||||||
Balance at December 31, 2018 |
| $ | 1,560 |
|
| $ | 128,849 |
| �� | $ | 404 |
|
| $ | 7,269 |
|
| $ | (8,651 | ) |
| $ | 129,431 |
|
Amounts arising during the period |
|
| 26,576 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,576 |
|
Amounts reclassified from AOCL to earnings |
|
| (668 | ) |
|
| (7,490 | ) |
|
| (117 | ) |
|
| (563 | ) |
|
| 4,909 |
|
|
| (3,929 | ) |
Net change |
|
| 25,908 |
|
|
| (7,490 | ) |
|
| (117 | ) |
|
| (563 | ) |
|
| 4,909 |
|
|
| 22,647 |
|
Balance at September 30, 2019 |
| $ | 27,468 |
|
| $ | 121,359 |
|
| $ | 287 |
|
| $ | 6,706 |
|
| $ | (3,742 | ) |
| $ | 152,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Pension Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 98,870 |
|
| $ | 124,181 |
|
| $ | 117,028 |
|
| $ | 129,253 |
|
Net loss arising during the period |
|
| — |
|
|
| — |
|
|
| 19,402 |
|
|
| — |
|
Effect of pension settlement |
|
| — |
|
|
| — |
|
|
| (31,811 | ) |
|
| — |
|
Amounts reclassified from AOCL to earnings |
|
| (2,874 | ) |
|
| (2,535 | ) |
|
| (8,623 | ) |
|
| (7,607 | ) |
Balance at end of period |
| $ | 95,996 |
|
| $ | 121,646 |
|
| $ | 95,996 |
|
| $ | 121,646 |
|
Other Postretirement Benefit Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 10,184 |
|
| $ | 1,516 |
|
| $ | 10,331 |
|
| $ | (1,382 | ) |
Amounts reclassified from AOCL to earnings |
|
| (74 | ) |
|
| 1,448 |
|
|
| (221 | ) |
|
| 4,346 |
|
Balance at end of period |
| $ | 10,110 |
|
| $ | 2,964 |
|
| $ | 10,110 |
|
| $ | 2,964 |
|
Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 60,372 |
|
| $ | 20,490 |
|
| $ | 20,000 |
|
| $ | 1,560 |
|
Net (income) loss arising during the period |
|
| (8,920 | ) |
|
| 7,384 |
|
|
| 34,112 |
|
|
| 26,576 |
|
Amounts reclassified from AOCL to earnings |
|
| (2,412 | ) |
|
| (406 | ) |
|
| (5,072 | ) |
|
| (668 | ) |
Balance at end of period |
| $ | 49,040 |
|
| $ | 27,468 |
|
| $ | 49,040 |
|
| $ | 27,468 |
|
Accumulated other comprehensive loss, end of period |
| $ | 155,146 |
|
| $ | 152,078 |
|
| $ | 155,146 |
|
| $ | 152,078 |
|
Amortization of actuarial loss and prior service (cost) credit are components of net periodic benefit cost (credit), seeSee Note 15:14: Pension and Other Postretirement Employee Benefits and see Note 10:9: Derivative Instruments for additional information regarding amounts arising for cash flow hedges during the period.information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, expected impacts of COVID-19 on our business and our ability to continue operations during the pandemic, fair value of hedging instruments and swaps, expected return on pension assets, recognition of compensation costs relating to our performance share awards (PSAs) and RSUs,restricted stock units (RSUs), required contributions to pension plans, expected amortization of unrecognized compensation cost of performance share awardsPSAs and RSUs, amount of net losses on cash flow hedges expected to be reclassified into earnings in the next 12 months, expected tax payments and deferrals, anticipated share repurchases and dividend payments, anticipated cash balances, cash flows from operations and expected liquidity, potential uses of our credit facility, the U.S. housing market, home repair and remodeling activity, the lumber and log markets, expected harvest volumes, expected lumber shipments, expected rural real estate and residential real estate development sales, including the closing of the sale of approximately 72,000 rural acres in the fourth quarter of 2020, the average price per acre and developed lot, sufficiency of cash to meet operating requirements, 20192020 capital expenditures 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. These forward-looking statements reflect our current views regarding future events based on estimates and assumptions and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. Our actual results of operations could differ materially from our historical results or those expressed or implied by forward-looking statements contained in this report. Important factors that could cause or contribute to such differences include, but are not limited to, the following:
| • | changes in the United States and international economies; |
| • | changes in interest rates and discount rates; |
| • | credit availability including homebuyers’ ability to qualify for mortgages; |
• | availability of labor and developable land; |
• | changes in the level of residential and commercial construction and remodeling activity; |
| • | changes in tariffs, quotas and trade agreements involving wood products; |
| • | 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 the cost or availability of transportation; |
| • | changes in principle expenses; |
• | impact of the recent coronavirus (COVID-19) outbreak on our business, suppliers, consumers, customers and employees; and |
| • |
|
For a discussion of some of the factors that may affect our business, results and prospects and a nonexclusive listing of forward-looking statements, refer to Cautionary Statement Regarding Forward-Looking Information on page 1 and Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018.2019 and Risk Factors in Part II, Item 1A in this Form 10-Q.
Forward-looking statements contained in this report present our views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of our views to reflect events or circumstances occurring after the date of this report.
Our Company
We are a leading timberland real estate investment trust (REIT) with operations in seven states where we own approximately 1.91.8 million acres of timberland, six sawmills, an industrial grade plywood mill and real estate development projects.
Our business is organized into three business segments: Timberlands, Wood Products and Real Estate. The Timberlands segment includes planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts, oil and gas royalties and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. The Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives, master planned community development and a country club.
Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a significantsizeable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. In the discussion of our consolidated results of operations, our revenues and expenses are reported after elimination of intersegment revenues and expenses. In the business segment discussions, each segment’s revenues and expenses, as applicable, are presented before elimination of intersegment revenues and expenses.
The operating results of our Timberlands, Wood Products and Real Estate business segments have been and will continue to be influenced by a variety of factors, including the cyclical nature of the forest products industry, tariffs, quotas and trade agreements, changes in timber prices and in harvest levels from our timberlands, competition, timberland valuations, demand for our non-strategic timberland for higher and better use purposes, lumber prices, weather conditions, disruptions or inefficiencies in our supply chain including the availability of transportation, the efficiency and level of capacity utilization of our Wood Products manufacturing operations, changes in our principal expenses such as log costs, asset dispositions or acquisitions, impact of pandemics, fires, other natural disasters and other factors.
Non-GAAP Measures
To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), we use certain non-GAAP measures on a consolidated basis, including Adjusted EBITDDA and Cash Available for Distribution (CAD), which are defined and further explained and reconciled to the nearest GAAP measure in the Liquidity and Performance Measures section below. Our definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to and not a substitute for, financial information prepared in accordance with GAAP.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance, allocateallocating resources between segments, and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. This measure should not be considered in isolation from and is not intended to represent an alternative to, our results reported in accordance with GAAP. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business and the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.
Our definition of EBITDDA and Adjusted EBITDDA may be different from similarly titled measures reported by other companies. We define EBITDDA as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. See Note 6:5: Segment Information in the Notes to the Condensed Consolidated Financial Statements for information related to the use of segment Adjusted EBITDDA.
Business and Economic Trends
The demand for timber is directly affected by the underlying demand for lumber and other wood-products,wood products, as well as by the demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by demand for new homes in the United States and by repair and remodeling activity.
DuringThe actions taken by various state and municipalities to contain and combat the outbreak and spread of the COVID-19 pandemic has introduced significant economic and business uncertainty, along with volatile financial market conditions during the first halfnine months of 2019, U.S. single family housing starts remained tepid as a result of land and labor shortages and rising construction costs making it difficult for builders2020 which is expected to construct more affordable housing units. Further, extended inclement weather acrosscontinue into the country for a good portionfuture. Although the restrictions began to ease by the end of the first half of 2019 impacted building conditionssecond quarter, such directives are subject to change and may, depending on direction from governmental authorities and the pandemic’s effects on the public, require us, our suppliers or our customers to limit or suspend operations.
A housing construction slowdown in the spring due to social-distancing rules and delayed permits and inspections led to a massive destocking of lumber in the normal startsupply chain as well as significant curtailment of the building season. Building conditions have since improved as September 2019 wasNorth American lumber manufacturing capacity. The atypical early spring pullback in lumber production coupled with strong demand led to an acute shortage that underpinned a historic run in lumber prices that began in the second monthquarter and peaked in a row where seasonally adjusted annual rate of single-family starts were above 0.9 million units. Additionally, as property repair and remodel is often done soon after buying, repair and remodeling activity in 2019 has also seen modest growth.
LumberSeptember. While lumber prices are significantly below first half of 2018 levels but have seen modest increases since December 2018. Many buyers continue to maintain low inventories due to softening demand and readily available supply. However,declined the last few weeks, we believe the demand for wood products remains strong driven by favorable industry fundamentals including the improved seasonally adjusted annual ratedemand for new single-family homes, historically low mortgage rates, scarce re-sale housing inventory and old age housing stock.
In our Wood Products segment, we shipped 291 million board feet during the third quarter of single-family housing starts in August and September 2019, combined with industry production curtailments announced in 2019 will have a positive effect on2020. Our lumber pricing.order file extends into early November at strong prices. For the fourth quarter of 2020, we plan to ship 260 to 270 million board feet of lumber.
In our Timberlands segment, we index a significant portionharvest volumes were higher in the first nine months of 2020 due to favorable harvest conditions compared to the prior year. Approximately 70% of our Idaho sawlogs to the price of lumber under long-term supply agreements. The Northern region experienced a decline in sawlog pricing and volume because of the lower lumber pricing and decreased demanddeliveries in the first half of 2019. Since then, mills have continuedfourth quarter will benefit from being indexed to work through existing higher log cost log inventory.
high lumber prices on an approximate six-week lag. Southern region log supply has been affected by wet weather in the first half of 2019 restricting log supply and resulting in increasedpine sawlog prices. The onset of drier weather in the third quarter of 2019 resulted in an increase in sawlog supply in the Southern market to take advantage of attractive prices. This has resulted in Southern region mill log inventories shifting to higher levels. Consequently, we scaled back on planned harvest levels in the third quarter of 2019.prices remain stable. We expect ourtotal harvest volumes to returnbe between 1.3 and 1.4 million tons in the fourth quarter of 2020.
On June 21, 2020, we announced an agreement to normal, higher levelssell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund for approximately $48.0 million in cash, subject to certain adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2020.
Our Real Estate segment benefited from two large For the fourth quarter of 2020, we expect to sell 73,000 to 74,000 acres of rural land, sales inincluding the second quarter of 2019 and increased sales in Chenal Valley during the first three quarters of 2019 compared to the same period in 2018.72,000-acre Minnesota transaction. Residential and commercial sales in Chenal Valley mainly follow the national housing market trends but do experience microeconomic factors for the area including economic growth and the availability of builders, contractors and workforce to support development efforts.We anticipate selling 60 to 70 residential lots in the fourth quarter of 2020.
Finally, we anticipate our current cash balances, cash flows from operations and our available sources of liquidity will be more than adequate to meet our cash requirements and allow us flexibility as we continue to focus on building shareholder value. At September 30, 2020 we had approximately $149.0 million in cash and cash equivalents and availability of $379.0 million on our revolving line of credit.
Consolidated Results
The following table sets forth changes in our Condensed Consolidated Statements of IncomeOperations. Our Business Segment Results provide a more detailed discussion of our segments:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| |||||||||||||
Revenues |
| $ | 226,302 |
|
| $ | 289,199 |
|
| $ | (62,897 | ) |
| $ | 623,599 |
|
| $ | 757,329 |
|
| $ | (133,730 | ) |
| $ | 313,046 |
|
| $ | 226,302 |
|
| $ | 86,744 |
|
| $ | 703,481 |
|
| $ | 623,599 |
|
| $ | 79,882 |
| ||
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Cost of goods sold |
|
| 182,634 |
|
|
| 195,584 |
|
|
| (12,950 | ) |
|
| 512,522 |
|
|
| 515,645 |
|
|
| (3,123 | ) |
|
| 182,039 |
| 182,634 |
|
|
| (595 | ) |
|
| 503,921 |
|
|
| 512,522 |
|
|
| (8,601 | ) | ||||
Selling, general and administrative expenses |
|
| 12,472 |
|
|
| 14,901 |
|
|
| (2,429 | ) |
|
| 43,994 |
|
|
| 45,449 |
|
|
| (1,455 | ) |
|
| 21,046 |
| 12,472 |
|
|
| 8,574 |
|
|
| 52,064 |
|
|
| 43,994 |
|
|
| 8,070 |
| ||||
Gain on sale of facility |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,176 | ) |
|
| — |
|
|
| (9,176 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,176 | ) |
|
| 9,176 |
| ||
Deltic merger-related costs |
|
| — |
|
|
| 972 |
|
|
| (972 | ) |
|
| — |
|
|
| 21,245 |
|
|
| (21,245 | ) | ||||||||||||||||||||||||||
|
|
| 195,106 |
|
|
| 211,457 |
|
|
| (16,351 | ) |
|
| 547,340 |
|
|
| 582,339 |
|
|
| (34,999 | ) |
|
| 203,085 |
|
|
| 195,106 |
|
|
| 7,979 |
|
|
| 555,985 |
|
|
| 547,340 |
|
|
| 8,645 |
| ||
Operating income |
|
| 31,196 |
|
|
| 77,742 |
|
|
| (46,546 | ) |
|
| 76,259 |
|
|
| 174,990 |
|
|
| (98,731 | ) |
|
| 109,961 |
|
|
| 31,196 |
|
|
| 78,765 |
|
|
| 147,496 |
|
|
| 76,259 |
|
|
| 71,237 |
| ||
Interest expense, net |
|
| (8,475 | ) |
|
| (10,109 | ) |
|
| 1,634 |
|
|
| (21,821 | ) |
|
| (25,125 | ) |
|
| 3,304 |
|
|
| (8,557 | ) |
| (8,475 | ) |
|
| (82 | ) |
|
| (20,594 | ) |
|
| (21,821 | ) |
|
| 1,227 |
| |||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,512 | ) |
|
| — |
|
|
| (5,512 | ) |
|
| — |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,512 | ) |
|
| 5,512 |
| ||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (42,988 | ) |
|
| — |
|
|
| (42,988 | ) | ||||||||||||||||||||||||||
Non-operating pension and other postretirement benefit costs |
|
| (935 | ) |
|
| (1,942 | ) |
|
| 1,007 |
|
|
| (2,804 | ) |
|
| (5,707 | ) |
|
| 2,903 |
|
|
| (3,557 | ) |
|
| (935 | ) |
|
| (2,622 | ) |
|
| (10,670 | ) |
|
| (2,804 | ) |
|
| (7,866 | ) | ||
Income before income taxes |
|
| 21,786 |
|
|
| 65,691 |
|
|
| (43,905 | ) |
|
| 46,122 |
|
|
| 144,158 |
|
|
| (98,036 | ) |
|
| 97,847 |
|
|
| 21,786 |
|
|
| 76,061 |
|
|
| 73,244 |
|
|
| 46,122 |
|
|
| 27,122 |
| ||
Income tax expense |
|
| (1,221 | ) |
|
| (5,355 | ) |
|
| 4,134 |
|
|
| (1,860 | ) |
|
| (23,077 | ) |
|
| 21,217 |
| ||||||||||||||||||||||||||
Income taxes |
|
| (16,840 | ) |
|
| (1,221 | ) |
|
| (15,619 | ) |
|
| (6,431 | ) |
|
| (1,860 | ) |
|
| (4,571 | ) | ||||||||||||||||||||||||||
Net income |
| $ | 20,565 |
|
| $ | 60,336 |
|
| $ | (39,771 | ) |
| $ | 44,262 |
|
| $ | 121,081 |
|
| $ | (76,819 | ) |
| $ | 81,007 |
|
| $ | 20,565 |
|
| $ | 60,442 |
|
| $ | 66,813 |
|
| $ | 44,262 |
|
| $ | 22,551 |
| ||
Total Adjusted EBITDDA1 |
| $ | 55,012 |
|
| $ | 101,810 |
|
| $ | (46,798 | ) |
| $ | 132,344 |
|
| $ | 260,750 |
|
| $ | (128,406 | ) |
| $ | 135,386 |
|
| $ | 55,012 |
|
| $ | 80,374 |
|
| $ | 218,330 |
|
| $ | 132,344 |
|
| $ | 85,986 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP measure, for each of the periods presented. |
Third Quarter 20192020 Compared with Third Quarter 20182019
Revenues
Revenues were $226.3$313.0 million, a decreasean increase of $62.9$86.7 million compared with the same period in 2018. Revenues decreased as a result of lower lumber prices and lower sawlog prices in the Northern region indexed to lumber prices. In addition, the third quarter of 2018 included the operations of the Deltic MDF facility which was2019. Historically high lumber prices along with increased Northern sawlog prices and rural real estate acres sold in the first quarter of 2019. These decreases were partiallymore than offset by increaseddeclines in lumber shipments higher harvest volumes and increased rural and development real estate development lot sales.
Cost of goods sold
Cost of goods sold decreased $13.0$0.6 million compared with the third quarter of 2019 due primarily to lower lumber shipments and reduced repairs and maintenance costs. These decreases were mostly offset by higher logging and hauling costs.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $8.6 million compared with the third quarter of 2019 primarily as a result of a year-to-date adjustment to incentive compensation to reflect strong company performance. In addition, the third quarter of 2019 benefitted from the reversal of a workers’ compensation reserve.
Non-operating pension and other postretirement benefit costs
Non-operating pension and other postretirement benefit costs increased $2.6 million compared to the third quarter of 2019. This increase was primarily because prior service credits of $1.9 million per quarter were fully amortized at the end of 2019. Non-operating pension and other postretirement benefit costs in 2020 were also impacted by a decrease in expected return on plan assets and the discount rate used to determine the benefit obligations.
Income taxes
Income tax expense was $16.8 million for the third quarter of 2020 compared with $1.2 million for the third quarter of 2019. Income taxes are primarily due to income from our taxable REIT subsidiaries (TRS). For the three months ended September 30, 2020, the TRS’s pre-tax income was $65.2 million. For the same period in 2019, the TRS’s income before income tax was $4.7 million.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the third quarter of 2020 increased $80.4 million compared to the third quarter of 2019. The increase in Total Adjusted EBITDDA was driven primarily by historically high lumber prices. Refer to the Business Segment Results below for further discussions on activities for each of our segments.
Year to Date 2020 Compared with Year to Date 2019
Revenues
Revenues were $703.5 million, an increase of $79.9 million compared with the first nine months of 2019 primarily due to historically high lumber prices along with increased sawlog prices in the Northern region.
Cost of goods sold
Cost of goods sold decreased $8.6 million compared with the same period in 2018,2019 primarily due to the inclusion in 2018temporary curtailment and reduced operating posture at our plywood facility during the second quarter of costs2020 and because 2019 included approximately 1.5 months of activity related to the Deltic MDF facility. The decrease wasMedium Density Fiberboard (MDF) Facility. These decreases were partially offset by increasedhigher harvest activitiesvolume and increased lumber shipments.
Selling, general and administrative expenses
Selling, general and administrative expenses for the third quarter of 2019 were $12.5increased $8.1 million compared with $14.9 million during the same period in 2018. The decrease compared to the third quarter of 2018 was primarily due to lower estimated performance-based variable compensation, reductions in workers compensation provisions and lower consultant and professional service fees.
Deltic merger-related costs
Merger-related costs for the third quarter 2018 were $1.0 million. This included $0.9 million in merger costs for various professional fees including legal fees, accounting and appraisal fees. Restructuring costs were $0.1 million, consisting primarily of termination benefits and costs associated with systems integration.
Interest expense, net
Net interest expense was $8.5 million, compared with $10.1 million for the same period in 2018. The decline in interest expense resulted primarily from the refinancing $150.0 million of 7.5% Senior Notes with a new long-term loan and the entry into an interest rate swap to fix the rate at 4.56% in January 2019. See Note 9: Debtin theNotes to Condensed Consolidated Financial Statementsfor a more detailed discussion of our borrowings.
Income taxes
Income tax expense for the third quarter 2019 was $1.2 million compared with $5.4 million for the prior year period. Income taxes are primarily due to income or loss from our taxable REIT subsidiaries (TRS). For the three months ended September 30, 2019, the TRS’s income before income tax was $4.7 million. For the same period in 2018, the TRS’s income before income tax was $41.5 million. Also, during the third quarter of 2018, we recorded a tax benefit of $5.3 million primarily related to deducting contributions to our qualified pension plans at the higher 2017 income tax rate.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the third quarter of 2019 was $55.0 million compared to $101.8 million in the third quarter of 2018. The decrease in Total Adjusted EBITDDA was driven primarily by decreased lumber pricing and lower realizations on Idaho sawlogs indexed to lumber pricing. These decreases were partially offset by lower estimated performance-based variable compensation, lower consultant and professional services fees, increased harvest volumes, increased lumber shipments and increased residential and commercial sales at Chenal Valley in the third quarter of 2019 compared to the third quarter of 2018. Refer to the Business Segments Results below for further discussions on activities for each of our segments.
See Liquidity and Performance Measuresfor a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP measure, for each of the periods presented.
Year to Date 2019 Compared with Year to Date 2018
Revenues
Revenues were $623.6 million, a decrease of $133.7 million compared with the same period in 2018. Revenues decreased as a result of lower lumber prices and lower sawlog prices indexed to lumber prices in the Northern region. Revenues also declined as full sawmills in the Northern region and inclement weather in the Southern region during the first half of 2019 led to harvest activities shifting to later in 2019. Also, operations in 2019 only included 1.5 months of operations at the Deltic MDF facility compared to 7.5 months in 2018. These declines in revenue were partly offset by higher revenue from increased sawlog and pulpwood prices in the Southern region, increased lumber shipments, two large rural land sales and increased sales in Chenal Valley during the first three quarters of 2019 compared to the same period in 2018.
Cost of goods sold
Cost of goods sold decreased $3.1 million compared with the same period in 2018. This decrease was due to lower logging and hauling costs, lower log costs in the Northern region due to indexed log pricing declines and of operations at the Deltic MDF facility for 1.5 months in 2019 compared to 7.5 months in 2018. These decreases were partially offset by higher lumber shipments primarily as a result of a full nine months of the acquired Deltic sawmill operations and increased log costs in the Southern region.
Selling, general and administrative expenses
Selling, general and administrative expenses for the first nine months of 2019 were $44.0 million compared with $45.4 million during the same period in 2018. The decrease was primarily due to lower estimated performance-based variableas a result of higher incentive compensation and lower consultant and professional service fees.
Deltic merger-related costs
Merger-related costs for the nine months ended September 30, 2018 were $21.2 million. This included $11.5 million in merger costs for investment banking fees, legal fees, accounting and appraisal fees and other costs related to filing the joint proxy/prospectus for the merger. Also included were restructuring costs of $9.7 million, consisting primarily of termination benefits, which included accelerated share-based payment costs for qualifying terminations.strong company performance.
Gain on sale of facility
On December 20, 2018,In February 2019, we entered into an Asset Purchase and Sale Agreement withsold our Deltic MDF facility to Roseburg Forest Products Co. to sell the Deltic MDF facility for $92.0 million. The transaction closed on February 12, 2019million, before certain working capital adjustments, resulting in a $9.2 million pre-tax gain on sale. See Note 4: Sale of Deltic MDF Facility in theNotes to Condensed Consolidated Financial Statements.
Interest expense, net
Net interest expense was $21.8decreased $1.2 million forcompared with the first nine months ended September 30,of 2019 compared with $25.1 million for the same period in 2018. The decline in interest expense was primarily due to increased patronage dividends from our lenders and reduced interest costs from the refinancing of our $150.0 million of 7.5% Senior Notes in January(Senior Notes) during the first quarter of 2019 described above. These decreases were partly offset by a full nine months of interest expense in 2019 associated with $230.0 million of long-term debt assumed or refinanced in connection with the Deltic merger in 2018.and higher patronage dividends received during 2020.
Loss on extinguishment of debt
As part of the $150.0 million Senior Notes redemption in Januaryduring the first quarter of 2019 we incurred a redemption premium of $4.9 million and wrote off certain unamortized debt costs. See Note 9: Debtin theNotes to Condensed Consolidated Financial Statements.
Income taxesPension settlement charge
Income tax expense forIn February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of our outstanding pension benefit obligation related to our qualified pension plans. This transaction was funded with plan assets. In connection with this transaction, we recorded a non-cash pretax settlement charge of $43.0 million.
Non-operating pension and other postretirement benefit costs
Non-operating pension and other postretirement benefit costs increased $7.9 million compared with the first nine months of 20192019. This increase was primarily because prior service credits of $1.9 million compared with $23.1per quarter were fully amortized at the end of 2019. Non-operating pension and other postretirement benefit costs were also impacted by a decrease in expected return on plan assets and the discount rate used to determine the benefit obligations.
Income taxes
Income tax expense was $6.4 million for the prior year period. Income taxes are primarily due to income or loss from our taxable REIT subsidiaries (TRS).first nine months of 2020 compared with $1.9 million for the first nine months of 2019. For the nine months ended September 30, 2020, the TRS’s income before income tax was $23.9 million, which included the pension settlement charge recorded during the first quarter. For the same period in 2019, the TRS’s income before income tax was $5.3 million, which includesincluded the gain on sale of the Deltic MDF facility. For the same period last year, the TRS’s income before income tax was $110.6 million. Also, during the third quarter of 2018, we recorded a tax benefit of $5.3 million primarily related to deducting contributions to our qualified pension plans at the higher 2017 income tax rate.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the first nine months of 2019 was $132.32020 increased $86.0 million compared to $260.8 million for the same period in 2018.first nine months of 2019. The decreaseincrease in Total Adjusted EBITDDA was driven primarily by decreasedhistorically high lumber pricing year over year, lower realizations on Idaho sawlogs indexed to lumber pricing and decreased harvest volumes year on year. These decreases were partially offset by increased lumber shipments, increased sawlog prices induring the Southern region, two large rural land sales in Arkansas and increased residential and commercial sales at Chenal Valley.third quarter of 2020. Refer to the Business SegmentsSegment Results below for further discussions on activities for each of our segments.
See Liquidity and Performance Measuresfor a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP measure, for each of the periods presented.
Business Segment Results
Timberlands Segment
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||||||||
Revenues1 |
| $ | 98,809 |
|
| $ | 111,421 |
|
| $ | (12,612 | ) |
| $ | 233,848 |
|
| $ | 280,438 |
|
| $ | (46,590 | ) |
| $ | 116,985 |
|
| $ | 98,809 |
|
| $ | 18,176 |
|
| $ | 266,755 |
|
| $ | 233,848 |
|
| $ | 32,907 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Logging and hauling |
|
| 45,099 |
|
|
| 42,077 |
|
|
| 3,022 |
|
|
| 108,551 |
|
|
| 111,282 |
|
|
| (2,731 | ) |
|
| 47,158 |
|
|
| 45,099 |
|
|
| 2,059 |
|
|
| 117,417 |
|
|
| 108,551 |
|
|
| 8,866 |
|
Other |
|
| 9,063 |
|
|
| 8,497 |
|
|
| 566 |
|
|
| 24,257 |
|
|
| 23,222 |
|
|
| 1,035 |
|
|
| 8,539 |
|
|
| 9,063 |
|
|
| (524 | ) |
|
| 24,107 |
|
|
| 24,257 |
|
|
| (150 | ) |
Selling, general and administrative expenses |
|
| 1,651 |
|
|
| 2,167 |
|
|
| (516 | ) |
|
| 5,063 |
|
|
| 5,866 |
|
|
| (803 | ) |
|
| 1,639 |
|
|
| 1,651 |
|
|
| (12 | ) |
|
| 4,941 |
|
|
| 5,063 |
|
|
| (122 | ) |
Timberlands Adjusted EBITDDA2 |
| $ | 42,996 |
|
| $ | 58,680 |
|
| $ | (15,684 | ) |
| $ | 95,977 |
|
| $ | 140,068 |
|
| $ | (44,091 | ) |
| $ | 59,649 |
|
| $ | 42,996 |
|
| $ | 16,653 |
|
| $ | 120,290 |
|
| $ | 95,977 |
|
| $ | 24,313 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Prior to elimination of intersegment fiber revenues of |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the company. See Note |
Timberlands Segment Statistics
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||
Harvest Volumes (in tons) |
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||||||||
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
|
| 529,030 |
|
|
| 500,138 |
|
|
| 28,892 |
|
|
| 1,227,451 |
|
|
| 1,326,556 |
|
|
| (99,105 | ) |
|
| 554,845 |
|
|
| 529,030 |
|
|
| 25,815 |
|
|
| 1,291,632 |
|
|
| 1,227,451 |
|
|
| 64,181 |
|
Pulpwood |
|
| 39,371 |
|
|
| 37,953 |
|
|
| 1,418 |
|
|
| 118,534 |
|
|
| 114,770 |
|
|
| 3,764 |
|
|
| 29,910 |
|
|
| 39,371 |
|
|
| (9,461 | ) |
|
| 99,174 |
|
|
| 118,534 |
|
|
| (19,360 | ) |
Stumpage |
|
| 602 |
|
|
| 3,210 |
|
|
| (2,608 | ) |
|
| 7,978 |
|
|
| 13,268 |
|
|
| (5,290 | ) |
|
| — |
|
|
| 602 |
|
|
| (602 | ) |
|
| 23,178 |
|
|
| 7,978 |
|
|
| 15,200 |
|
Total |
|
| 569,003 |
|
|
| 541,301 |
|
|
| 27,702 |
|
|
| 1,353,963 |
|
|
| 1,454,594 |
|
|
| (100,631 | ) |
|
| 584,755 |
|
|
| 569,003 |
|
|
| 15,752 |
|
|
| 1,413,984 |
|
|
| 1,353,963 |
|
|
| 60,021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
|
| 496,388 |
|
|
| 469,336 |
|
|
| 27,052 |
|
|
| 1,358,140 |
|
|
| 1,399,216 |
|
|
| (41,076 | ) |
|
| 577,975 |
|
|
| 496,388 |
|
|
| 81,587 |
|
|
| 1,617,196 |
|
|
| 1,358,140 |
|
|
| 259,056 |
|
Pulpwood |
|
| 475,313 |
|
|
| 446,914 |
|
|
| 28,399 |
|
|
| 1,190,486 |
|
|
| 1,185,018 |
|
|
| 5,468 |
|
|
| 462,571 |
|
|
| 475,313 |
|
|
| (12,742 | ) |
|
| 1,201,904 |
|
|
| 1,190,486 |
|
|
| 11,418 |
|
Stumpage |
|
| 58,659 |
|
|
| 61,690 |
|
|
| (3,031 | ) |
|
| 123,815 |
|
|
| 187,010 |
|
|
| (63,195 | ) |
|
| 65,085 |
|
|
| 58,659 |
|
|
| 6,426 |
|
|
| 255,553 |
|
|
| 123,815 |
|
|
| 131,738 |
|
Total |
|
| 1,030,360 |
|
|
| 977,940 |
|
|
| 52,420 |
|
|
| 2,672,441 |
|
|
| 2,771,244 |
|
|
| (98,803 | ) |
|
| 1,105,631 |
|
|
| 1,030,360 |
|
|
| 75,271 |
|
|
| 3,074,653 |
|
|
| 2,672,441 |
|
|
| 402,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total harvest volume |
|
| 1,599,363 |
|
|
| 1,519,241 |
|
|
| 80,122 |
|
|
| 4,026,404 |
|
|
| 4,225,838 |
|
|
| (199,434 | ) |
|
| 1,690,386 |
|
|
| 1,599,363 |
|
|
| 91,023 |
|
|
| 4,488,637 |
|
|
| 4,026,404 |
|
|
| 462,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Price/Unit ($ per ton) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Northern region1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Sales Price/Unit ($ per ton)1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Sawlog |
| $ | 100 |
|
| $ | 139 |
|
| $ | (39 | ) |
| $ | 95 |
|
| $ | 127 |
|
| $ | (32 | ) |
| $ | 131 |
|
| $ | 100 |
|
| $ | 31 |
|
| $ | 112 |
|
| $ | 95 |
|
| $ | 17 |
|
Pulpwood |
| $ | 38 |
|
| $ | 42 |
|
| $ | (4 | ) |
| $ | 40 |
|
| $ | 41 |
|
| $ | (1 | ) |
| $ | 42 |
|
| $ | 38 |
|
| $ | 4 |
|
| $ | 39 |
|
| $ | 40 |
|
| $ | (1 | ) |
Stumpage |
| $ | 5 |
|
| $ | 12 |
|
| $ | (7 | ) |
| $ | 14 |
|
| $ | 13 |
|
| $ | 1 |
|
| $ | — |
|
| $ | 5 |
|
| $ | (5 | ) |
| $ | 14 |
|
| $ | 14 |
|
| $ | — |
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Southern region1 |
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Southern region |
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Sawlog |
| $ | 48 |
|
| $ | 47 |
|
| $ | 1 |
|
| $ | 47 |
|
| $ | 44 |
|
| $ | 3 |
|
| $ | 44 |
|
| $ | 48 |
|
| $ | (4 | ) |
| $ | 44 |
|
| $ | 47 |
|
| $ | (3 | ) |
Pulpwood |
| $ | 33 |
|
| $ | 31 |
|
| $ | 2 |
|
| $ | 33 |
|
| $ | 31 |
|
| $ | 2 |
|
| $ | 29 |
|
| $ | 33 |
|
| $ | (4 | ) |
| $ | 30 |
|
| $ | 33 |
|
| $ | (3 | ) |
Stumpage |
| $ | 13 |
|
| $ | 11 |
|
| $ | 2 |
|
| $ | 10 |
|
| $ | 11 |
|
| $ | (1 | ) |
| $ | 12 |
|
| $ | 13 |
|
| $ | (1 | ) |
| $ | 9 |
|
| $ | 10 |
|
| $ | (1 | ) |
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| - |
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1Sawlog and pulpwood sales prices are on a delivered basis, which includes logging and hauling costs. Stumpage sales provide our customers the right to harvest standing timber. As such, the customer contracts the logging and hauling and bears such costs.
Timberlands Adjusted EBITDDA
The following table summarizes Timberlands Adjusted EBITDDA variances for the three and nine months ended September 30, 20192020 compared with the three and nine months ended September 30, 2018:2019:
(in thousands) |
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months |
|
| Nine Months |
| ||||
Timberlands Adjusted EBITDDA September 30, 2018 |
| $ | 58,680 |
|
| $ | 140,068 |
| ||||||||
Timberlands 2019 Adjusted EBITDDA |
| $ | 42,996 |
|
| $ | 95,977 |
| ||||||||
Sales price and mix |
|
| (17,580 | ) |
|
| (39,766 | ) |
|
| 3,182 |
|
|
| 11,238 |
|
Harvest volume |
|
| 2,694 |
|
|
| (5,631 | ) |
|
| 12,843 |
|
|
| 13,107 |
|
Other revenue |
|
| (231 | ) |
|
| 2,071 |
|
|
| (309 | ) |
|
| (217 | ) |
Logging and hauling costs per unit |
|
| (501 | ) |
|
| (518 | ) |
|
| 411 |
|
|
| (78 | ) |
Forest management |
|
| (658 | ) |
|
| (899 | ) |
|
| 533 |
|
|
| 260 |
|
Administrative, indirect and overhead costs |
|
| 592 |
|
|
| 652 |
|
|
| (7 | ) |
|
| 3 |
|
Timberlands Adjusted EBITDDA September 30, 2019 |
| $ | 42,996 |
|
| $ | 95,977 |
| ||||||||
Timberlands 2020 Adjusted EBITDDA |
| $ | 59,649 |
|
| $ | 120,290 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 20192020 Compared with Third Quarter 20182019
Timberlands Adjusted EBITDDA for the third quarter of 2019 was $43.0 million, a decrease of $15.72020 increased $16.7 million compared with the same period in 2018. The change2019, primarily as a result of the following:
• | Sales Price and Mix:Sawlog prices in the Northern region increased 31.0%, to $131 per ton resulting from the effect of higher lumber price realizations on indexed sawlogs and an increase in cedar log prices in Idaho. Southern sawlog pricing decreased 8.3% compared to the third quarter of 2019 as timber supply constraints caused by wet weather drove up pricing during the third quarter of 2019. |
• | Harvest Volume: We harvested 1.1 million tons in the Southern region during the third quarter of 2020, which was up 7.3% compared to the third quarter of 2019. The increase was primarily due to scaled back harvesting during the third quarter of 2019 as Southern mill log inventories had shifted to high levels after mill operations were impacted by wet weather conditions earlier in 2019. |
Year to Date 2020 Compared with Year to Date 2019
Timberlands Adjusted EBITDDA wasfor the first nine months of 2020 increased $24.3 million compared with the same period in 2019, primarily theas a result of the following:
| • | Sales Price and Mix: Sawlog prices in the Northern region |
| • | Harvest Volume: We harvested |
|
|
Year to Date 2019 Compared with Year to Date 2018
Timberlands Adjusted EBITDDA for the first nine months of 2019 was $96.0 million, a decrease of $44.1 million compared with the same period in 2018. The change in Timberlands Adjusted EBITDDA was primarily the result of the following:
|
|
|
|
|
|
|
|
Wood Products Segment
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||||||||
Revenues |
| $ | 143,643 |
|
| $ | 199,025 |
|
| $ | (55,382 | ) |
| $ | 413,979 |
|
| $ | 532,425 |
|
| $ | (118,446 | ) |
| $ | 218,291 |
|
| $ | 143,643 |
|
| $ | 74,648 |
|
| $ | 489,507 |
|
| $ | 413,979 |
|
| $ | 75,528 |
|
Costs and expenses1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiber costs |
|
| 67,579 |
|
|
| 74,233 |
|
|
| (6,654 | ) |
|
| 205,594 |
|
|
| 208,197 |
|
|
| (2,603 | ) |
|
| 72,239 |
|
|
| 67,579 |
|
|
| 4,660 |
|
|
| 196,201 |
|
|
| 205,594 |
|
|
| (9,393 | ) |
Freight, logging and hauling |
|
| 19,769 |
|
|
| 25,664 |
|
|
| (5,895 | ) |
|
| 53,722 |
|
|
| 61,282 |
|
|
| (7,560 | ) |
|
| 17,677 |
|
|
| 19,769 |
|
|
| (2,092 | ) |
|
| 48,601 |
|
|
| 53,722 |
|
|
| (5,121 | ) |
Manufacturing costs |
|
| 45,224 |
|
|
| 50,902 |
|
|
| (5,678 | ) |
|
| 137,745 |
|
|
| 137,970 |
|
|
| (225 | ) |
|
| 45,893 |
|
|
| 45,224 |
|
|
| 669 |
|
|
| 132,848 |
|
|
| 137,745 |
|
|
| (4,897 | ) |
Finished goods inventory change |
|
| 3,426 |
|
|
| (368 | ) |
|
| 3,794 |
|
|
| (453 | ) |
|
| (8,318 | ) |
|
| 7,865 |
|
|
| (1,595 | ) |
|
| 3,426 |
|
|
| (5,021 | ) |
|
| (1,602 | ) |
|
| (453 | ) |
|
| (1,149 | ) |
Selling, general and administrative expenses |
|
| 2,082 |
|
|
| 2,160 |
|
|
| (78 | ) |
|
| 6,625 |
|
|
| 6,340 |
|
|
| 285 |
|
|
| 2,433 |
|
|
| 2,082 |
|
|
| 351 |
|
|
| 7,483 |
|
|
| 6,625 |
|
|
| 858 |
|
Other |
|
| (340 | ) |
|
| (12 | ) |
|
| (328 | ) |
|
| (312 | ) |
|
| (8 | ) |
|
| (304 | ) |
|
| — |
|
|
| (340 | ) |
|
| 340 |
|
|
| 196 |
|
|
| (312 | ) |
|
| 508 |
|
Wood Products Adjusted EBITDDA2 |
| $ | 5,903 |
|
| $ | 46,446 |
|
| $ | (40,543 | ) |
| $ | 11,058 |
|
| $ | 126,962 |
|
| $ | (115,904 | ) |
| $ | 81,644 |
|
| $ | 5,903 |
|
| $ | 75,741 |
|
| $ | 105,780 |
|
| $ | 11,058 |
|
| $ | 94,722 |
|
|
|
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1 | Prior to elimination of intersegment fiber costs of |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the company. See Note |
Wood Products Segment Statistics
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| ||||||||||||
Lumber shipments (MBF)1 |
|
| 298,807 |
|
|
| 284,566 |
|
|
| 14,241 |
|
|
| 809,733 |
|
|
| 747,960 |
|
|
| 61,773 |
|
|
| 291,391 |
|
|
| 298,807 |
|
|
| (7,416 | ) |
|
| 823,597 |
|
|
| 809,733 |
|
|
| 13,864 |
|
Lumber sales prices ($ per MBF) |
| $ | 363 |
|
| $ | 486 |
|
| $ | (123 | ) |
| $ | 373 |
|
| $ | 491 |
|
| $ | (118 | ) |
| $ | 637 |
|
| $ | 363 |
|
| $ | 274 |
|
| $ | 486 |
|
| $ | 373 |
|
| $ | 113 |
|
|
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1 | MBF stands for thousand board feet. |
Wood Products Adjusted EBITDDA
The following table summarizes Wood Products Adjusted EBITDDA variances for the three and nine months ended September 30, 20192020 compared with the three and nine months ended September 30, 2018:2019:
|
|
|
|
|
|
|
|
| ||||||||
(in thousands) |
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months |
|
| Nine Months |
| ||||
Wood Products Adjusted EBITDDA September 30, 2018 |
| $ | 46,446 |
|
| $ | 126,962 |
| ||||||||
Wood Products 2019 Adjusted EBITDDA |
| $ | 5,903 |
|
| $ | 11,058 |
| ||||||||
Lumber: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
| (34,185 | ) |
|
| (85,459 | ) |
|
| 79,493 |
|
|
| 92,678 |
|
Manufacturing costs per unit |
|
| 203 |
|
|
| (7,182 | ) |
|
| (2,420 | ) |
|
| (2,409 | ) |
Log costs per unit |
|
| 1,242 |
|
|
| (3,542 | ) |
|
| (4,486 | ) |
|
| 3,442 |
|
Inventory charge |
|
| (2,650 | ) |
|
| (2,650 | ) |
|
| 3,479 |
|
|
| 3,479 |
|
Residuals, panels and other |
|
| (5,373 | ) |
|
| (17,282 | ) |
|
| (325 | ) |
|
| (2,468 | ) |
Administrative, indirect and overhead costs |
|
| 220 |
|
|
| 211 |
| ||||||||
Wood Products Adjusted EBITDDA September 30, 2019 |
| $ | 5,903 |
|
| $ | 11,058 |
| ||||||||
Wood Products 2020 Adjusted EBITDDA |
| $ | 81,644 |
|
| $ | 105,780 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 20192020 Compared with Third Quarter 2018
Lumber shipments were 298.8 million board feet in the third quarter of 2019 an increase of 14.2 million board feet compared to the third quarter of 2018. This increase was primarily a result of increased production and timing of customer shipments.
Wood Products Adjusted EBITDDA for the third quarter 2019 was $5.9 million, a decrease of $40.52020 increased $75.7 million compared with the third quartersame period in 2019 primarily as a result of 2018the following:
• | Lumber Price: Average lumber sales prices increased to $637 per MBF during the third quarter of 2020 as a result of the historic run in lumber prices compared with $363 per MBF during the third quarter of 2019. |
• | Manufacturing Cost Per Unit: Reduced operating hours in the third quarter of 2020, particularly due to labor constraints, coupled with lower production led to higher manufacturing costs per unit during the third quarter of 2020 compared to 2019. |
• | Log Costs Per Unit: Log costs were higher per unit in Idaho in the third quarter of 2020 due to higher lumber-indexed log prices. |
• | Inventory Charge: Lumber inventory at the end of the third quarter of 2019 was written down $3.5 million to net realizable value. There were no inventory charges at the end of the third quarter of 2020. |
Year to Date 2020 Compared with Year to Date 2019
Wood Products Adjusted EBITDDA for the first nine months of 2020 increased $94.7 million compared with the same period in 2019 primarily due toas a result of the following:
| • | Lumber Price: Average lumber sales prices |
• | Manufacturing Cost Per Unit: Higher manufacturing costs per unit year over year was a result of reduced operating hours in 2020 due to labor related constraints and lost productivity in April at two Arkansas mills due to hurricane-caused power outages. |
| • | Log Costs Per Unit: |
| • | Inventory Charge: |
| • | Residual Sales, Panels and Other: |
Year to Date 2019 Compared with Year to Date 2018
Lumber shipments increased 61.8 million board feet to 809.7 million board feet during the first nine months of 2019 compared to 748.0 million board feet during the first nine months of 2018. This increase was primarily due to a full nine months of operations at the Deltic mills in 2019.
Wood Products Adjusted EBITDDA for the first nine months of 2019 was $11.1 million, a decrease of $115.9 million compared with the same period in 2018 primarily due to the following:
|
|
|
|
|
|
|
|
|
|
Real Estate Segment
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| Change |
|
| 2019 |
|
| 2018 |
|
| Change |
|
| 2020 |
|
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
| |||||||||||||
Revenues |
| $ | 18,863 |
|
| $ | 11,233 |
|
| $ | 7,630 |
|
| $ | 61,459 |
|
| $ | 38,219 |
|
| $ | 23,240 |
|
| $ | 18,151 |
|
| $ | 18,863 |
|
| $ | (712 | ) |
| $ | 42,225 |
|
| $ | 61,459 |
|
| $ | (19,234 | ) | ||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Costs of goods sold |
|
| 2,902 |
|
|
| 2,578 |
|
|
| 324 |
|
|
| 8,943 |
|
|
| 7,189 |
|
|
| 1,754 |
|
|
| 3,554 |
| 2,902 |
|
|
| 652 |
|
|
| 8,595 |
|
|
| 8,943 |
|
|
| (348 | ) | ||||
Selling, general and administrative expenses |
|
| 1,283 |
|
|
| 1,188 |
|
|
| 95 |
|
|
| 3,819 |
|
|
| 3,261 |
|
|
| 558 |
|
|
| 1,131 |
|
|
|
|
| 1,283 |
|
|
| (152 | ) |
|
| 3,568 |
|
|
| 3,819 |
|
|
| (251 | ) |
Real Estate Adjusted EBITDDA1 |
| $ | 14,678 |
|
| $ | 7,467 |
|
| $ | 7,211 |
|
| $ | 48,697 |
|
| $ | 27,769 |
|
| $ | 20,928 |
|
| $ | 13,466 |
|
| $ | 14,678 |
|
| $ | (1,212 | ) |
| $ | 30,062 |
|
| $ | 48,697 |
|
| $ | (18,635 | ) | ||
|
|
|
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|
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|
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|
|
1 | Management uses Adjusted EBITDDA to evaluate the performance of the company. See Note |
Real Estate Segment Statistics
Rural Real Estate |
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
| ||||||||
Higher and better use (HBU) |
|
| 975 |
|
| $ | 3,225 |
|
|
| 1,136 |
|
| $ | 4,615 |
|
|
| 1,599 |
|
| $ | 3,103 |
|
|
| 975 |
|
| $ | 3,225 |
|
Recreation real estate |
|
| 5,037 |
|
| $ | 1,261 |
|
|
| 2,024 |
|
| $ | 1,480 |
|
|
| 1,201 |
|
| $ | 1,366 |
|
|
| 5,037 |
|
| $ | 1,261 |
|
Non-strategic timberland |
|
| 213 |
|
| $ | 906 |
|
|
| — |
|
| $ | — |
|
|
| 8,248 |
|
| $ | 810 |
|
|
| 213 |
|
| $ | 906 |
|
Total |
|
| 6,225 |
|
| $ | 1,557 |
|
|
| 3,160 |
|
| $ | 2,608 |
|
|
| 11,048 |
|
| $ | 1,202 |
|
|
| 6,225 |
|
| $ | 1,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
| ||||||||
Higher and better use (HBU) |
|
| 4,231 |
|
| $ | 6,363 |
|
|
| 4,065 |
|
| $ | 2,937 |
|
|
| 4,486 |
|
| $ | 2,828 |
|
|
| 4,231 |
|
| $ | 6,363 |
|
Recreation real estate |
|
| 7,817 |
|
| $ | 1,281 |
|
|
| 7,765 |
|
| $ | 1,244 |
|
|
| 4,297 |
|
| $ | 1,394 |
|
|
| 7,817 |
|
| $ | 1,281 |
|
Non-strategic timberland |
|
| 8,894 |
|
| $ | 820 |
|
|
| 9,045 |
|
| $ | 900 |
|
|
| 12,241 |
|
| $ | 962 |
|
|
| 8,894 |
|
| $ | 820 |
|
Total |
|
| 20,942 |
|
| $ | 2,112 |
|
|
| 20,875 |
|
| $ | 1,425 |
|
|
| 21,024 |
|
| $ | 1,449 |
|
|
| 20,942 |
|
| $ | 2,112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
Development Real Estate |
| Three Months Ended September 30, |
|
| Three Months Ended September 30, |
| ||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||
|
| Lots or Acres Sold |
|
| Average $/ Lot or Acres |
|
| Lots or Acres Sold |
|
| Average $/ Lot or Acres |
|
| Lots or Acres Sold |
|
|
|
| Average Price/ Lot or Acre |
|
| Lots or Acres Sold |
|
| Average Price/ Lot or Acre |
| ||||||||
Residential lots |
| 42 |
|
| $ | 110,504 |
|
| 9 |
|
| $ | 143,000 |
|
|
| 26 |
|
| $ | 82,573 |
|
|
| 42 |
|
| $ | 110,504 |
| ||||
Commercial acres |
| 6 |
|
| $ | 512,506 |
|
|
| — |
|
| $ | — |
|
|
| — |
| $ | — |
|
|
| 6 |
|
| $ | 512,506 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| For the Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||||
|
| Lots or Acres Sold |
|
| Average $/ Lot or Acres |
|
| Lots or Acres Sold |
|
| Average $/ Lot or Acres |
|
| Lots or Acres Sold |
|
|
|
| Average Price/ Lot or Acre |
|
| Lots or Acres Sold |
|
| Average Price/ Lot or Acre |
| ||||||||
Residential lots |
|
| 93 |
|
| $ | 97,519 |
|
|
| 34 |
|
| $ | 101,100 |
|
|
| 66 |
|
|
|
|
| 92,256 |
|
|
| 93 |
|
| $ | 97,519 |
|
Commercial acres |
|
| 6 |
|
| $ | 512,506 |
|
|
| — |
|
| $ | — |
|
|
| — |
| $ | — |
|
|
| 6 |
|
| $ | 512,506 |
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Adjusted EBITDDA
The following table summarizes Real Estate Adjusted EBITDDA variances for the three and nine months ended September 30, 20192020 compared with the three and nine months ended September 30, 2018:2019:
|
|
|
|
|
|
|
|
| ||||||||
(in thousands) |
| Three Months Ended |
|
| Nine Months Ended |
|
| Three Months |
|
| Nine Months |
| ||||
Real Estate Adjusted EBITDDA September 30, 2018 |
| $ | 7,467 |
|
| $ | 27,769 |
| ||||||||
Real Estate 2019 Adjusted EBITDDA |
| $ | 14,678 |
|
| $ | 48,697 |
| ||||||||
Rural real estate sales |
|
| 5,788 |
|
|
| 18,821 |
|
|
| 3,596 |
|
|
| (13,767 | ) |
Development real estate sales |
|
| 1,773 |
|
|
| 4,351 |
|
|
| (4,307 | ) |
|
| (5,467 | ) |
Selling, general and administrative expenses |
|
| (95 | ) |
|
| (556 | ) |
|
| 151 |
|
|
| 252 |
|
Other costs, net |
|
| (255 | ) |
|
| (1,688 | ) |
|
| (652 | ) |
|
| 347 |
|
Real Estate Adjusted EBITDDA September 30, 2019 |
| $ | 14,678 |
|
| $ | 48,697 |
| ||||||||
Real Estate 2020 Adjusted EBITDDA |
| $ | 13,466 |
|
| $ | 30,062 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter 20192020 Compared with Third Quarter 20182019
Real Estate Adjusted EBITDDA for the third quarter of 2019 was $14.7 million, an increase of $7.22020 decreased $1.2 million compared with the same period in 2018. The increase in Real Estate Adjusted EBITDDA was2019 primarily theas a result of the following:
| • | Rural Real Estate Sales:The third quarter of 2020 included the sale of approximately 8,100 acres of non-strategic timberlands in Minnesota to a conservation entity representing the third year of a five-year option. There were no comparable transactions in the third quarter of 2019. Rural real estate sales can vary quarter-to-quarter with the average price per acre fluctuating based on both the geographic area of the real estate and product mix. |
| • | Development Real Estate Sales: |
Year to Date 20192020 Compared with Year to Date 20182019
Real Estate Adjusted EBITDDA for the first nine months of 2019 was $48.7 million, an increase of $20.92020 decreased $18.6 million compared with the same period in 2018. The increase in Real Estate Adjusted EBITDDA was2019 primarily theas a result of the following:
| • | Rural Real Estate Sales: |
| • | Development Real Estate Sales: |
Liquidity and Capital Resources
As of September 30, 2019, our cash and cash equivalents were $94.7 million, an increase of $18.1 million from December 31, 2018. Changes in significant sources of cash for the nine months ended September 30, 20192020 and 20182019 are presented by categories as follows:
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Net cash provided by operating activities |
| $ | 105,427 |
|
| $ | 148,368 |
|
| $ | 190,845 |
|
| $ | 105,427 |
|
Net cash provided by (used in) investing activities |
| $ | 22,187 |
|
| $ | (27,052 | ) | ||||||||
Net cash (used in) provided by investing activities |
| $ | (28,265 | ) |
| $ | 22,187 |
| ||||||||
Net cash used in financing activities |
| $ | (111,265 | ) |
| $ | (100,530 | ) |
| $ | (96,830 | ) |
| $ | (111,265 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from Operations
Net cash provided by operating activities was $105.4increased $85.4 million for the first nine months of 2019, a $43.0 million decrease compared to the first nine months of 2018.
2019. Changes in cash provided by operating activities was negatively impacted by:by the following:
| • |
|
| • |
|
| • | Net cash paid for interest decreased $3.6 million primarily due to increased patronage dividends from our lenders and lower net interest costs as a result of |
Changes in cash provided by operating activities was positively impacted by:
|
|
| • |
|
Net Cash Flows from Investing Activities
Changes in cash flows from investing activities were primarily a result of the following:
• | We spent $27.0 million on capital expenditures for property, plant and equipment, timberlands reforestation and road construction projects during the first nine months of 2020 compared to |
| • |
|
Net Cash Flows from Investing Activities
Net cash provided by investing activities was $22.2 million for the nine months ended September 30, 2019, compared with $27.1 million used in 2018.
|
|
| • | We received $58.8 million of net cash proceeds from the Deltic MDF facility sale in February 2019. |
|
|
Net Cash Flows from Financing Activities
NetChanges in cash used inflows from financing activities was $111.3 million and $100.5 million forwere primarily a result of the nine months ended September 30, 2019 and 2018, respectively.following:
| • |
|
| • | In January 2019, we refinanced $150.0 million of Senior Notes due in 2019 with a $150.0 million |
|
|
|
|
Future Sources and Uses of Cash Requirements
We invest cash in maintenance and discretionary capital expenditures for our facilities inat our Wood Product operations. We evaluate discretionary capital improvements based on an expected level of return on investment.Products facilities. We also invest cash in the reforestation of timberlands and construction of roads in our Timberlands operations and to develop land in our Real Estate development operations. InWe evaluate discretionary capital improvements based on an expected level of return on investment. We currently expect to spend a total we expect weof approximately $46.0 to $49.0 million for capital expenditures during 2020.
We are deferring payments of approximately $4.0 million for our 2020 employer portion of social security payroll tax as allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). These payments will spend approximately $65 to $70 millionbe funded in Woods Products, Timberlands2021 and Real Estate segments in 2019.2022 as required under the CARES Act.
On August 30, 2018, the board of directors authorized the repurchase of up to $100.0 million of common stock with no time limit set for the repurchase. At September 30, 2019,2020, we had remaining authorization of $74.8$59.5 million for future stock repurchase under the 2018 repurchase program.Repurchase Program. Stock repurchases in the future will depend on a variety of factors including our cash position, alternative investment opportunities, our desired level of liquidity, debt covenant restrictions and our stock price.
On June 21, 2020, we announced an agreement to sell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund for approximately $48.0 million in cash, subject to certain adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2020.
Capital Structure
|
| September 30, |
|
| December 31, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| September 30, 2020 |
|
| December 31, 2019 |
| ||||
Long-term debt |
| $ | 756,345 |
|
| $ | 755,364 |
|
| $ | 757,249 |
|
| $ | 756,469 |
|
Cash and cash equivalents |
|
| (94,747 | ) |
|
| (76,639 | ) |
|
| (148,919 | ) |
|
| (83,310 | ) |
Net debt |
|
| 661,598 |
|
|
| 678,725 |
|
|
| 608,330 |
|
|
| 673,159 |
|
Market capitalization1 |
|
| 2,762,111 |
|
|
| 2,137,915 |
|
|
| 2,815,311 |
|
|
| 2,908,653 |
|
Enterprise value |
| $ | 3,423,709 |
|
| $ | 2,816,640 |
|
| $ | 3,423,641 |
|
| $ | 3,581,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt to enterprise value |
|
| 19.3 | % |
|
| 24.1 | % |
|
| 17.8 | % |
|
| 18.8 | % |
Dividend yield2 |
|
| 3.9 | % |
|
| 5.1 | % |
|
| 3.8 | % |
|
| 3.7 | % |
Weighted-average cost of debt, after tax3 |
|
| 3.3 | % |
|
| 3.5 | % |
|
| 3.3 | % |
|
| 3.3 | % |
|
|
|
|
|
|
|
|
|
1 | Market capitalization is based on outstanding shares of |
2 | Dividend yield is based on annualized dividends per share of $1.60 and share prices of |
3 | Weighted-average cost of debt excludes deferred debt costs and credit facility fees and includes estimated annual patronage credit on term loan debt. |
Liquidity and Performance Measures
The discussion below is presented to enhance the reader’s understanding of our operating performance, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures: Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the discussion of Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures described herein.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance, to allocate resources between segments, and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. This measure should not be considered in isolation from and is not intended to represent an alternative to our results reported in accordance with GAAP. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business and the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.
Our definition of EBITDDA may be different from similarly titled measures reported by other companies. We define EBITDDA as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and
amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses.
We reconcile Total Adjusted EBITDDA to net income for the consolidated company as it is the most comparable GAAP measure.
The following table provides a reconciliation of net income to Total Adjusted EBITDDA for the respective periods:
|
| Three Months Ended September 30, | Nine Months Ended September 30, |
|
| Three Months Ended September 30, | Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
|
| 2020 |
|
|
| 2019 |
|
| 2020 |
|
| 2019 |
| |||||||||
Net income |
| $ | 20,565 |
|
| $ | 60,336 |
|
| $ | 44,262 |
|
| $ | 121,081 |
|
| $ | 81,007 |
|
| $ | 20,565 |
|
| $ | 66,813 |
|
| $ | 44,262 |
| ||
Interest expense, net |
|
| 8,475 |
|
|
| 10,109 |
|
|
| 21,821 |
|
|
| 25,125 |
|
|
| 8,557 |
| 8,475 |
|
|
| 20,594 |
|
|
| 21,821 |
| ||||
Income tax |
|
| 1,221 |
|
|
| 5,355 |
|
|
| 1,860 |
|
|
| 23,077 |
| ||||||||||||||||||
Income taxes |
|
| 16,840 |
| 1,221 |
|
|
| 6,431 |
|
|
| 1,860 |
| ||||||||||||||||||||
Depreciation, depletion and amortization |
|
| 18,786 |
|
|
| 18,836 |
|
|
| 51,310 |
|
|
| 51,982 |
|
|
| 20,187 |
| 18,786 |
|
|
| 56,590 |
|
|
| 51,310 |
| ||||
Basis of real estate sold |
|
| 5,228 |
|
|
| 4,248 |
|
|
| 14,211 |
|
|
| 10,673 |
|
|
| 5,249 |
| 5,228 |
|
|
| 14,440 |
|
|
| 14,211 |
| ||||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
|
|
| 5,512 |
|
|
| — |
|
|
| — |
| — |
|
|
| — |
|
|
| 5,512 |
| ||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| 42,988 |
|
|
| — |
| ||||||||||||||||||
Non-operating pension and other postretirement benefit costs |
|
| 935 |
|
|
| 1,942 |
|
|
| 2,804 |
|
|
| 5,707 |
|
|
| 3,557 |
| 935 |
|
|
| 10,670 |
|
|
| 2,804 |
| ||||
Deltic merger related costs |
|
| — |
|
|
| 972 |
|
|
| — |
|
|
| 21,245 |
| ||||||||||||||||||
Gain on sale of facility |
|
| — |
|
|
| — |
|
|
| (9,176 | ) |
|
| — |
|
|
| — |
| — |
|
|
| — |
|
|
| (9,176 | ) | ||||
Inventory purchase price adjustment in cost of goods sold |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,849 |
| ||||||||||||||||||
(Gain) loss on fixed assets |
|
| (198 | ) |
|
| 12 |
|
|
| (260 | ) |
|
| 11 |
| ||||||||||||||||||
Gain on disposal of fixed assets |
|
| (11 | ) |
|
| (198 | ) |
|
| (196 | ) |
|
| (260 | ) | ||||||||||||||||||
Total Adjusted EBITDDA |
| $ | 55,012 |
|
| $ | 101,810 |
|
| $ | 132,344 |
|
| $ | 260,750 |
|
| $ | 135,386 |
|
| $ | 55,012 |
|
| $ | 218,330 |
|
| $ | 132,344 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We define CAD as cash provided by operating activities adjusted for capital spending for purchases of property, plant and equipment, timberlands reforestation and roads and acquisition of timber and timberlands.timberland acquisitions not classified as strategic. Management believes CAD is a useful indicator of the company’s overall liquidity, as it provides a measure of cash generated that is available for dividends to common stockholders (an important factor in maintaining our REIT status), repurchase of the company’s common shares, debt repayment, acquisitions and other discretionary and nondiscretionary activities. Our definition of CAD is limited in that it does not solely represent residual cash flows available for discretionary expenditures since the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view CAD as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows. Our definition of CAD may be different from similarly titled measures reported by other companies, including those in our industry. CAD is not necessarily indicative of the CAD that may be generated in future periods.
The following table provides a reconciliation of cash provided by operating activities to CAD:
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2020 |
|
| 2019 |
| ||||
Cash provided by operating activities1 |
| $ | 105,427 |
|
| $ | 148,368 |
|
| $ | 190,845 |
|
| $ | 105,427 |
|
Capital expenditures |
|
| (39,143 | ) |
|
| (31,126 | ) |
|
| (31,749 | ) |
|
| (39,143 | ) |
CAD |
| $ | 66,284 |
|
| $ | 117,242 |
|
| $ | 159,096 |
|
| $ | 66,284 |
|
Net cash provided by (used in) investing activites2 |
| $ | 22,187 |
|
| $ | (27,052 | ) | ||||||||
Net cash (used in) provided by investing activities2 |
| $ | (28,265 | ) |
| $ | 22,187 |
| ||||||||
Net cash used in financing activities |
| $ | (111,265 | ) |
| $ | (100,530 | ) |
| $ | (96,830 | ) |
| $ | (111,265 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Cash from operating activities for the nine months ended September 30, 2020 and 2019 |
2 | Net cash from investing activities includes payments for capital expenditures and acquisition of timber and timberlands, which is also included in our reconciliation of CAD. |
Sources of Financing
Credit and Term Loan Agreements
In January 2019, we refinanced $150.0At September 30, 2020, our total outstanding net long-term debt was $757.0 million, of 7.50% Senior Notes duewhich $46.0 million matures in 2019 with a $150.0December 2020. We expect to refinance the $46.0 million term loan that will maturedebt at maturity. Included in 2029. The newtotal outstanding long-term debt was $693.5 million of term loan carries a variable interest rate of one-month LIBOR plus 1.85%. Concurrentprincipal balances under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with the new term loan, we entered into an interest rate swap to fix the rate at 4.56%. Upon the refinancing, we redeemed and paid all outstanding Senior Notes, including a redemption premium of $4.9 million, and paid $0.5 million of lender fees on the new term loan. Subsequent to the refinancing, $693.5 million was outstandingour primary lender. Certain borrowings under the Amended Term Loan Agreement.
We haveAgreement are at variable rates of one or three-month LIBOR plus a $40.0 million term loan that matures in December 2019.spread between 1.85% and 2.15%. We expect to refinance this term loan at maturity. In September 2019, we entered into a $40.0 million interest rate swapswaps for these variable rate term loans to fix the interest rates., the objective
At September 30, 2020 there were no borrowings under our $380.0 million revolving line of which is to lockcredit and approximately $1.0 million of the revolving line of credit was utilized for outstanding letters of credit. As provided in the index component rate onrevolving line of credit agreement, borrowings may be increased by up to an expected new term loan in December 2019. This cash flow hedge requires settlement in December 2019.additional $420.0 million. We may utilize borrowings under the credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.
A number of our debt instruments and associated interest rate derivative agreements have an interest rate tied to LIBOR. In July 2017, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. We are monitoring the developments with respect to the potential phasing out of LIBOR after 2021 and will work with our lenders and counter parties to identify a suitable replacement rate and amend our agreements to reflect this new reference rate accordingly. We do not believe that the discontinuation of LIBOR as a reference rate in our debt and interest rate derivative agreements will have a material adverse effect on our financial position or materially affect our interest expense.
As of September 30, 2019,2020, we were in compliance with all debt and credit agreement covenants,covenants. there were no borrowings under the revolving line of credit and approximately $1.0 million of the $380.0 million credit facility was utilized by outstanding letters of credit.
The following table sets forth the financial covenants in the credit and term loan agreements and our status with respect to these covenants as of September 30, 2019:2020:
|
| Covenant Requirement |
|
| Actual at September 30, 2019 |
|
| Covenant Requirement |
|
| Actual at September 30, 2020 |
| ||||||||
Interest coverage ratio |
| ≥ |
| 3.00 to 1.00 |
|
| 5.61 |
|
| ≥ |
| 3.00 to 1.00 |
|
| 8.93 |
| ||||
Leverage ratio |
| ≤ |
| 40% |
|
| 20% |
|
| ≤ |
| 40% |
|
| 21% |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
Other thanIn March 2020, we entered into $653.5 million of forward starting interest rate swaps. These forward starting interest rate swaps effectively hedge the $150.0variability in future benchmark interest payments attributable to changes in interest rates on future debt refinancing by converting the benchmark interest rates to fixed interest rates on our anticipated future refinancing of $653.5 million refinance of term loan debt maturing December 2020 through January 2029. The fixed interest rate components for these forward starting interest rate swaps range from 0.85% to 1.17%. The variable rate component on these forward starting interest rate swaps is one-month LIBOR. Accordingly, the 7.50% Senior Notes described in forward starting rate swaps were designated as cash flow hedges. In addition, these cash flow hedges require settlement on the stated maturity date for each respective term loan currently outstanding. See Note 9: DebtDerivatives in the Notes to Condensed Consolidated Financial Statements, which are incorporated herein by reference, for additional information.
Other than these new forward starting interest rate swaps, there have been no material changes to our contractual obligations during the nine months ended September 30, 20192020 outside the ordinary course of business.
Credit Ratings
Two major debt rating agencies routinely evaluate our debt and our cost of borrowing can increase or decrease depending on our credit rating. During 2018, bothBoth Moody’s and S&P Global upgradedrate our debt rating to investment grade. There have been no changes in our credit rating during the nine months ended September 30, 2019. In August 20192020, S&P Global revised their outlook on the company to negativestable from stable. negative.
Off-Balance Sheet Arrangements
We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.
Critical Accounting Policies and Estimates
There have been no significant changes during 20192020 to our critical accounting policies presented in our 20182019 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Other than the $150.0 million refinance of the Senior Notes described in Note 9: Debt in the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference, our exposures toOur market risk have not changed materially since December 31, 2018. For quantitativeexposure on financial instruments includes interest rate risk on our bank credit facility, term loans, interest rate swap agreements and qualitative disclosures about market risk, see Item 7A – Quantitativeforward starting interest rate swap agreements. We are exposed to interest rate volatility on existing variable rate debt instruments and Qualitative Disclosure about Market Riskfuture incurrences of fixed or variable rate debt, which exposure primarily relates to movements in our 2018 Annual Report on Form 10-K.
Quantitative Information about Market Risks
The table below provides information about our outstanding long-term debt, weighted-averagevarious interest rates andrates. We use interest rate swaps as of September 30, 2019. For debt obligations, the table presents principal cash flows and related weighted-average interest rates by expected maturity dates. Forforward starting interest rate swaps to hedge our exposure to the table presents notional amountsimpact of interest rate changes on existing debt and weighted-averagefuture debt issuances, respectively. All market risk sensitive instruments were entered into for purposes other than trading purposes.
At September 30, 2020, we have six interest rate swaps associated with $397.5 million of term loan debt. The cash flow hedges convert variable rates ranging from three-month and one-month LIBOR plus 1.85% to 2.15%, to fixed rates ranging from 3.17% to 4.82%. Our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedge.
In March 2020, we entered into $653.5 million of forward starting interest rate swaps. These forward starting interest rate swaps effectively hedge the variability in future benchmark interest payments attributable to changes in interest rates on future debt refinancing by expected (contractual)converting the benchmark interest rates to fixed interest rates on our anticipated future refinancing of $653.5 million of term loan debt maturing December 2020 through January 2029. The fixed interest rate components for these forward starting interest rate swaps range from 0.85% to 1.17%. The variable rate component on these forward starting interest rate swaps is one-month LIBOR. Accordingly, the forward starting rate swaps were designated as cash flow hedges. In addition, these cash flow hedges require settlement on the stated maturity dates. Notional amounts are used to calculatedate for each respective term loan currently outstanding.
At September 30, 2020, the contractual payments to be exchanged under the contract. Weighted-average variabletotal outstanding principal balance on our debt agreements was $762.2 million. Interest rates are based on implied forward rates in the yield curve.all outstanding debt is fixed, either through a fixed interest rate or corresponding interest rate swap.
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| EXPECTED MATURITY DATE |
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(in thousands) |
| 2019 |
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| 2020 |
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| 2021 |
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| 2022 |
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| 2023 |
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| THEREAFTER |
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| TOTAL |
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| FAIR VALUE |
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Variable rate debt: |
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Principal due |
| $ | 40,000 |
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| $ | 40,000 |
|
| $ | 40,000 |
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| $ | — |
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| $ | — |
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| $ | 277,500 |
|
| $ | 397,500 |
|
| $ | 397,500 |
|
Average interest rate |
|
| 3.61 | % |
|
| 3.44 | % |
|
| 3.28 | % |
|
| — |
|
|
| — |
|
|
| 3.21 | % |
|
| 3.28 | % |
|
|
|
|
Fixed rate debt: |
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|
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Principal due |
| $ | — |
|
| $ | 6,000 |
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| $ | — |
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| $ | 43,000 |
|
| $ | 40,000 |
|
| $ | 275,735 |
|
| $ | 364,735 |
|
| $ | 378,866 |
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Average interest rate |
|
| — |
|
|
| 3.70 | % |
|
| — |
|
|
| 4.60 | % |
|
| 4.49 | % |
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| 3.98 | % |
|
| 4.10 | % |
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|
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|
Interest rate swaps: |
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Variable to fixed |
| $ | 40,000 |
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| $ | 40,000 |
|
| $ | 40,000 |
|
| $ | — |
|
| $ | — |
|
| $ | 277,500 |
|
| $ | 397,500 |
|
| $ | (28,586 | ) |
Average pay rate |
|
| 1.23 | % |
|
| 2.84 | % |
|
| 2.92 | % |
|
| — |
|
|
| — |
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|
| 2.66 | % |
|
| 2.56 | % |
|
|
|
|
Average receive rate |
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| 1.87 | % |
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| 1.54 | % |
|
| 1.38 | % |
|
| — |
|
|
| — |
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|
| 1.29 | % |
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| 1.38 | % |
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act)), under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of September 30, 2019.2020. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO and CFO have concluded that these disclosure controls and procedures were effective as of September 30, 2019.2020.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Internal Control over Financial Reporting
No changes occurred in our internal control over financial reporting during the ninethree months ended September 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We believe there is no pending or threatened litigation that could have a material adverse effect on our financial position, operations or liquidity.
ITEM 1A. RISK FACTORS
There have been no material changes inOur business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control.The following discussion supplements and updates the risk factors previously disclosed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018.2019. The impacts of the COVID-19 pandemic on the economy is affecting and is expected to continue to affect our business and financial results andshould be considered carefully, in addition to the information set forth elsewhere in this Form 10-Q and the Annual Report on Form 10-K for the year-ended December 31, 2019, including under Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Events beyond our control such as pandemics (including the COVID-19 outbreak) could negatively impact our business.
We face risks related to health epidemics and other outbreaks, including the global outbreak of a novel strain of coronavirus (“COVID-19”). In March 2020 the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. Shortly thereafter, the United States declared a national emergency concerning the outbreak, and all states and several municipalities subsequently declared public health emergencies.These declarations have resulted in a wide-range of actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19.Such actions included quarantines, “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. Although many of the restrictions have eased across the United States, the pandemic has not shown substantial signs of decline and some jurisdictions are re-imposing certain restrictions due to increasing rates of COVID-19 cases. As a result, the pandemic has caused, and is likely to continue to cause significant economic disruption and volatility in capital markets.
Pandemics, such as COVID-19, that bring about widespread national or global economic disruption, have had and will have impacts on pricing and demand for our timber, lumber, and real estate businesses. We have experienced and expect to continue to experience unpredictable demand for certain of our products and continue to adjust production as necessary to match demand. There have been adverse effects on the demand for our products and disruptions to our supply chain, the manufacturing and distribution of our timber and wood products and demand for our real estate properties, all of which could worsen in the future. We are actively monitoring the COVID-19 outbreak and its potential impact on our operations, workforce, supply chain and our consolidated results of operations.
Our predictions about the impact that COVID-19 will have on our business, financial condition, or results of operations may not be accurate as they depend on future developments, which are highly uncertain and cannot be predicted with confidence. Such developments include, but are not limited to, the severity of the virus’s impact on the economy, the future geographic spread or mutation of COVID-19 or the outbreak of another virulent disease, continuation of or changes in governmental responses to disease outbreak, the duration of disease outbreak, the timing and effectiveness of treatment and testing options, including availability of a vaccine, and consequential restrictions, business disruptions, the effectiveness of responsive actions taken in the United States and other countries to contain the disease and actions that may be taken by our competitors, suppliers or customers. A recession, further market correction, or depression resulting from the spread of COVID-19 could materially affect our business, financial condition, results of operations, liquidity, our stock price and access to capital markets. The impact of COVID-19 or other virulent disease may also trigger the occurrence, or exacerbate, other risks discussed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material adverse effect on our business, results of operation, cash flows and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common stock with no time limit set for the repurchase (the 2018 Repurchase Program). No repurchases were made byIn September 2020 we entered into a trading plan with an independent broker for the Company duringpurpose of repurchasing a limited number of the third quarterCompany’s common shares under the 2018 Repurchase Program in accordance with the guidelines in Rule 10b5-1 of 2019.the Securities Exchange Act of 1934, as amended. This trading plan became effective on October 29, 2020 and expires upon expenditure of the principal specified in the plan, an early termination event (as specified in the plan), or the close of business on October 26, 2022, whichever occurs first.
During the nine months ended September 30, 2019,2020, we repurchased 686,240489,850 shares of common stock for $25.2$15.4 million (including transaction costs) under the 2018 Repurchase Program. There were no shares repurchased during the third quarter of 2020. At September 30, 2020, we had remaining authorization of $59.5 million for future stock repurchases under the 2018 Repurchase Program. Transaction costs are not counted against authorized funds. All common stock purchases wereare made in open-market transactions. At September 30, 2019, we had remaining authorization of $74.8 million for future stock repurchases under the 2018 Repurchase Program.
ITEM 6. EXHIBITS
EXHIBIT NUMBER | DESCRIPTION |
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(4) | See Exhibits (3)(a) and (3)(b). The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt. |
(101) | The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30 |
(104) | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
* Incorporated by referencereference.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| PotlatchDeltic Corporation | |
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| (Registrant) | |
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| By | /s/ WAYNE WASECHEK |
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| Wayne Wasechek |
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| Corporate Controller (Duly Authorized; Principal Accounting Officer) |
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Date: | October 30, |
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