UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For the quarterly period ended
or
For the transition period from to
Commission File Number
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(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
(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 |
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.
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).
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.
☒ |
Accelerated Filer |
☐ |
Non-accelerated Filer |
☐ |
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Smaller Reporting Company |
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Emerging Growth Company |
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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 (in thousands) at April 30, 2024, was
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
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PART I. - FINANCIAL INFORMATION |
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ITEM 1. |
Financial Statements (unaudited) |
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3 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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5 |
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6 |
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8 |
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Index for the Notes to Condensed Consolidated Financial Statements |
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10 |
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ITEM 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
20 |
ITEM 3. |
31 |
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ITEM 4. |
32 |
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PART II. - OTHER INFORMATION |
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ITEM 1. |
32 |
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ITEM 1A. |
32 |
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ITEM 2. |
32 |
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ITEM 5. |
33 |
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ITEM 6. |
34 |
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35 |
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Part I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
2024 |
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2023 |
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Revenues |
$ |
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$ |
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Costs and expenses: |
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Cost of goods sold |
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Selling, general and administrative expenses |
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CatchMark merger-related expenses |
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Operating income (loss) |
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Interest expense, net |
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( |
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Non-operating pension and other postretirement employee benefits |
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( |
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Other |
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( |
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Income (loss) before income taxes |
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( |
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Income taxes |
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Net income (loss) |
$ |
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$ |
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Net income (loss) per share: |
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Basic |
$ |
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$ |
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Diluted |
$ |
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$ |
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Dividends per share |
$ |
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$ |
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Weighted-average shares outstanding |
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Basic |
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Diluted |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2024 |
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2023 |
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Net income (loss) |
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$ |
( |
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$ |
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Other comprehensive income (loss), net of tax: |
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Pension and other postretirement employee benefits |
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( |
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( |
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Cash flow hedges |
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( |
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Other comprehensive income (loss), net of tax |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
( |
) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share amounts) |
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March 31, 2024 |
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December 31, 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Customer receivables, net |
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Inventories, net |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Investment in real estate held for development and sale |
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Timber and timberlands, net |
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Intangible assets, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Current portion of long-term debt |
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Current portion of pension and other postretirement employee benefits |
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Total current liabilities |
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Long-term debt |
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Pension and other postretirement employee benefits |
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Deferred tax liabilities, net |
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Other long-term obligations |
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Total liabilities |
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Stockholders' equity: |
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Preferred stock, authorized |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Three Months Ended March 31, |
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(in thousands) |
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2024 |
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2023 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income (loss) |
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$ |
( |
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$ |
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Adjustments to reconcile net income (loss) to net cash from operating activities: |
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Depreciation, depletion and amortization |
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Basis of real estate sold |
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Change in deferred taxes |
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( |
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Pension and other postretirement employee benefits |
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Equity-based compensation expense |
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Interest received under swaps with other-than-insignificant financing element |
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( |
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( |
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Other, net |
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Change in working capital and operating-related activities, net |
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( |
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( |
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Real estate development expenditures |
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( |
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( |
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Funding of pension and other postretirement employee benefits |
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( |
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( |
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Proceeds from insurance recoveries |
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Net cash from operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Property, plant and equipment additions |
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( |
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( |
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Timberlands reforestation and roads |
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( |
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( |
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Acquisition of timber and timberlands |
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( |
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Interest received under swaps with other-than-insignificant financing element |
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Other, net |
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Net cash from investing activities |
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( |
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( |
) |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Distributions to common stockholders |
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( |
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( |
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Other, net |
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( |
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( |
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Net cash from financing activities |
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( |
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( |
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Change in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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NONCASH INVESTING AND FINANCING ACTIVITIES |
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Accrued property, plant and equipment additions |
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$ |
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$ |
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Accrued timberlands reforestation and roads |
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$ |
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$ |
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6
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 amounts shown above in the Condensed Consolidated Statements of Cash Flows.
(in thousands) |
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March 31, 2024 |
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March 31, 2023 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash included in long-term assets1 |
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Total cash, cash equivalents, and restricted cash |
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$ |
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$ |
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1 |
Amounts included in restricted cash represent proceeds held by a qualified intermediary that were or are intended to be reinvested in timber and timberlands. At March 31, 2024 and 2023, $ |
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
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Common Stock |
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Additional Paid- |
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Accumulated |
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Accumulated Other |
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Total Stockholders' |
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(in thousands, except per share amounts) |
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Shares |
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Amount |
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in Capital |
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Deficit |
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Income |
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Equity |
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Balance, December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Shares issued for stock compensation |
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( |
) |
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— |
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— |
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— |
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Equity-based compensation expense |
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— |
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— |
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— |
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— |
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Pension plans and OPEB obligations, net of tax |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Cash flow hedges, net of tax |
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— |
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— |
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— |
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— |
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Common dividends, $ |
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— |
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— |
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— |
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( |
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— |
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( |
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Other transactions, net |
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— |
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— |
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( |
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— |
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Balance, March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Additional Paid- |
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Accumulated |
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Accumulated Other |
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Total Stockholders' |
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(in thousands, except per share amounts) |
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Shares |
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Amount |
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in Capital |
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Deficit |
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Income |
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Equity |
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Balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Shares issued for stock compensation |
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( |
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— |
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— |
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— |
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Equity-based compensation expense |
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— |
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— |
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— |
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— |
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Pension plans and OPEB obligations, net of tax |
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— |
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— |
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— |
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— |
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( |
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( |
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Cash flow hedges, net of tax |
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— |
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— |
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— |
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— |
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( |
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( |
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Common dividends, $ |
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— |
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— |
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— |
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( |
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— |
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( |
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Other transactions, net |
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— |
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— |
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( |
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— |
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( |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
INDEX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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10 |
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11 |
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13 |
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13 |
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14 |
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14 |
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15 |
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16 |
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16 |
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17 |
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18 |
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Note 12: Components of Accumulated Other Comprehensive Income |
18 |
19 |
9
Notes to Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
General
PotlatchDeltic Corporation and its subsidiaries (collectively referred to in this report as the company, us, we or our) is a leading timberland Real Estate Investment Trust (REIT) with operations in nine states. We are engaged in activities associated with timberland management, including the sale of timber, the management of nearly
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. 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, 2023, as filed with the Securities and Exchange Commission on February 15, 2024. 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
The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and requires judgments affecting the amounts reported in the financial statements and the accompanying notes. Actual results may differ materially from our estimates.
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expense categories that are regularly reported to the chief operating decision maker and included in each reported measure of a segment’s profit or loss and increased interim disclosure requirements, among others. The adoption of this ASU on January 1, 2024, including the required retrospective application for all periods presented in the financial statements, will be reflected in our annual financial statements for the year ended December 31, 2024, and interim financial statements beginning in 2025. Management is currently evaluating the impact of this ASU on the company's financial statement disclosures.
Recent Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024. The amendments may be applied prospectively or retrospectively, and early adoption is permitted. Management is currently evaluating this ASU to determine its impact on the company's financial statement disclosures.
Reclassifications
Certain prior period reclassifications were made to conform with the current period presentation. These reclassifications had no effect on reported net income (loss), net income (loss) per share, comprehensive income (loss), cash flows, total assets, total liabilities, or shareholders' equity as previously reported.
10
NOTE 2. SEGMENT INFORMATION
Our operations are organized into
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 sizable portion of the 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, which are reported using the average cost method for purposes of reporting segment results.
The following table presents our revenues by major product:
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Three Months Ended March 31, |
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(in thousands) |
2024 |
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2023 |
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Timberlands |
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Northern region |
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Sawlogs |
$ |
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$ |
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Pulpwood |
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Other |
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Total Northern revenues |
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Southern region |
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Sawlogs |
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Pulpwood |
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Stumpage |
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Other |
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Total Southern revenues |
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Total Timberlands revenues |
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Wood Products |
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|
||
Lumber |
|
|
|
|
|
||
Residuals and Panels |
|
|
|
|
|
||
Total Wood Products revenues |
|
|
|
|
|
||
|
|
|
|
|
|
||
Real Estate |
|
|
|
|
|
||
Rural real estate |
|
|
|
|
|
||
Development real estate |
|
|
|
|
|
||
Other |
|
|
|
|
|
||
Total Real Estate revenues |
|
|
|
|
|
||
|
|
|
|
|
|
||
Total segment revenues |
|
|
|
|
|
||
Intersegment Timberlands revenues1 |
|
( |
) |
|
|
( |
) |
Total consolidated revenues |
$ |
|
|
$ |
|
||
1 |
Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment. |
11
Management uses Adjusted EBITDDA to evaluate the operating performance and effectiveness of operating strategies of our segments and allocation of resources to them. EBITDDA is calculated as net income (loss) before interest expense, net, 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. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.
The following table summarizes information for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income (loss) before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Adjusted EBITDDA: |
|
|
|
|
|
|
||
Timberlands |
|
$ |
|
|
$ |
|
||
Wood Products |
|
|
( |
) |
|
|
( |
) |
Real Estate |
|
|
|
|
|
|
||
Corporate |
|
|
( |
) |
|
|
( |
) |
Eliminations and adjustments |
|
|
|
|
|
|
||
Total Adjusted EBITDDA |
|
|
|
|
|
|
||
Interest expense, net1 |
|
|
|
|
|
( |
) |
|
Depreciation, depletion and amortization |
|
|
( |
) |
|
|
( |
) |
Basis of real estate sold |
|
|
( |
) |
|
|
( |
) |
CatchMark merger-related expenses |
|
|
|
|
|
( |
) |
|
Non-operating pension and other postretirement employee benefits |
|
|
|
|
|
( |
) |
|
Gain on disposal of fixed assets |
|
|
|
|
|
|
||
Other |
|
|
( |
) |
|
|
|
|
Income (loss) before income taxes |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
Depreciation, depletion and amortization: |
|
|
|
|
|
|
||
Timberlands |
|
$ |
|
|
$ |
|
||
Wood Products |
|
|
|
|
|
|
||
Real Estate |
|
|
|
|
|
|
||
Corporate |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Bond discounts and deferred loan fees1 |
|
|
|
|
|
|
||
Total depreciation, depletion and amortization |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Basis of real estate sold: |
|
|
|
|
|
|
||
Real Estate |
|
$ |
|
|
$ |
|
||
Eliminations and adjustments |
|
|
( |
) |
|
|
|
|
Total basis of real estate sold |
|
$ |
|
|
$ |
|
||
1 |
Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations. |
12
NOTE 3. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating basic and diluted earnings per share:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Basic weighted-average shares outstanding |
|
|
|
|
|
|
||
Incremental shares due to: |
|
|
|
|
|
|
||
Performance shares |
|
|
|
|
|
|
||
Restricted stock units |
|
|
|
|
|
|
||
Diluted weighted-average shares outstanding |
|
|
|
|
|
|
||
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 months ended March 31, 2024 and 2023, there were approximately
Share Repurchase Program
On August 31, 2022, our board of directors authorized management to repurchase up to $
We record share repurchases upon trade date as opposed to the settlement date. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.
NOTE 4. CERTAIN BALANCE SHEET COMPONENTS
Inventories
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Logs |
|
$ |
|
|
$ |
|
||
Lumber, panels and veneer |
|
|
|
|
|
|
||
Materials and supplies |
|
|
|
|
|
|
||
Total inventories |
|
|
|
|
|
|
||
Less: LIFO reserve |
|
|
( |
) |
|
|
( |
) |
Total inventories, net |
|
$ |
|
|
$ |
|
||
Property, plant and equipment
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Property, plant and equipment |
|
$ |
|
|
$ |
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
Timber and timberlands
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Timber and timberlands |
|
$ |
|
|
$ |
|
||
Logging roads |
|
|
|
|
|
|
||
Total timber and timberlands, net |
|
$ |
|
|
$ |
|
||
13
In January 2024, we entered into an agreement to sell approximately
Accounts payable and accrued liabilities
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Accrued payroll and benefits |
|
$ |
|
|
$ |
|
||
Accounts payable |
|
|
|
|
|
|
||
Deferred revenue1 |
|
|
|
|
|
|
||
Accrued taxes |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Other current liabilities |
|
|
|
|
|
|
||
Total accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
1 |
Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for lumber shipments where control of goods has not transferred, member-related activities at an owned country club and any post-close obligations for real estate sales. These deferred revenues are recognized over the term of the respective contract, which is typically twelve months or less, except for country club initiation fees which are recognized over the average life of club membership. |
NOTE 5. DEBT
TERM LOANS
At March 31, 2024 our total outstanding principal on our long-term debt of $
CREDIT AGREEMENT
On May 18, 2023, we entered into a First Amendment to the Third Amended and Restated Credit Agreement (Amended Credit Agreement). The Amended Credit Agreement provides for loans based on SOFR instead of the London Inter-Bank Offered Rate, or LIBOR, provides us the option to borrow based on a daily SOFR or term SOFR basis, and provides mechanics relating to the transition from the use of SOFR to a replacement benchmark rate upon the occurrence of certain transition events.
The Amended Credit Agreement provides for a $
NOTE 6. 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 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. All 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 hedges.
14
At March 31, 2024, we have interest rate swaps associated with $
The gross fair values of derivative instruments at March 31, 2024 and December 31, 2023, were $
The following table details the effect of derivatives on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income (Loss):
|
|
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
Location |
|
2024 |
|
|
2023 |
|
||
Derivatives designated in cash flow hedging relationships: |
|
|
|
|
||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
||
Income (loss) recognized in other comprehensive income (loss), net of tax |
|
|
|
$ |
|
|
$ |
( |
) |
|
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
||
Interest expense, net |
|
|
|
$ |
|
|
$ |
( |
) |
|
1 |
Realized gains and losses on interest rate contracts consist of realized net cash received or paid and interest accruals on the interest rate swaps during the periods in addition to amortization of amounts out of other comprehensive income (loss) related to certain terminated hedges and adjustments to interest expense resulting from amortization of inception value of certain off-market designated hedges. For the three months ended March 31, 2024 and 2023, we amortized approximately $ |
At March 31, 2024, the amount of net gains expected to be reclassified into earnings in the next 12 months is approximately $
NOTE 7. FAIR VALUE MEASUREMENTS
The following table presents the estimated fair values of our financial instruments:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
(in thousands) |
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
||||
Derivative assets related to interest rate swaps (Level 2) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt, including current portion (Level 2): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term loans |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Revenue bonds |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total long-term debt1 |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Company owned life insurance asset (COLI) (Level 3) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
1 |
The carrying amount of long-term debt includes principal and unamortized discounts. |
The fair value of interest rate swaps is determined using a discounted cash flow analysis, based on third-party sources, 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, restricted cash, 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.
15
NOTE 8. EQUITY-BASED COMPENSATION
We issue new shares of common stock to settle performance stock awards (PSAs), restricted stock units (RSUs) and deferred compensation stock equivalent units. At March 31, 2024, approximately
Share-based compensation activity during the three months ended March 31, 2024, included the following:
|
|
Granted |
|
|
Vested |
|
|
Forfeited |
|
|||
Performance Share Awards (PSAs) |
|
|
|
|
|
|
|
|
|
|||
Restricted Stock Units (RSUs) |
|
|
|
|
|
|
|
|
|
|||
Approximately
The following table details compensation expense and the related income tax benefit for company specific equity-based awards:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Equity-based compensation expense: |
|
|
|
|
|
|
||
Performance share awards |
|
$ |
|
|
$ |
|
||
Restricted stock units |
|
|
|
|
|
|
||
Deferred compensation stock equivalent units expense |
|
|
|
|
|
|
||
Total equity-based compensation expense |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Total tax benefit recognized for equity-based expense |
|
$ |
|
|
$ |
|
||
Performance Share Awards
The weighted-average grant date fair value of PSAs granted during the three months ended March 31, 2024, was $
The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards granted in 2024:
Stock price as of valuation date |
|
$ |
|
|
Risk-free rate |
|
|
% |
|
Expected volatility |
|
|
% |
|
Expected dividend yield1 |
|
|
|
|
Expected term (years) |
|
|
|
1 |
Full dividend reinvestment assumed. |
Restricted Stock Units
The weighted-average fair value of all RSUs granted during the three months ended March 31, 2024, was $
NOTE 9. INCOME TAXES
As a REIT, we generally are not subject to federal and state corporate income taxes on income from investments in real estate, including our timberlands, that we distribute to our stockholders. We conduct certain activities through our PotlatchDeltic taxable REIT subsidiaries (TRS) which are subject to corporate level federal and state income taxes. These 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 pre-tax book income or loss of the TRS, as well as permanent book versus tax differences and discrete items.
16
NOTE 10. LEASES
We lease certain equipment, office space and land. Lease 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.
The following table presents supplemental balance sheet information related to lease assets and liabilities:
(in thousands) |
Classification |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Assets |
|
|
|
|
|
|
|
||
Operating lease assets |
|
$ |
|
|
$ |
|
|||
Finance lease assets1 |
|
|
|
|
|
|
|||
Total lease assets |
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
|
||
Current: |
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
$ |
|
|
$ |
|
|||
Finance lease liabilities |
|
|
|
|
|
|
|||
Noncurrent: |
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
|||
Finance lease liabilities |
|
|
|
|
|
|
|||
Total lease liabilities |
|
|
$ |
|
|
$ |
|
||
1 |
Finance lease assets are presented net of accumulated amortization of $ |
The following table presents the components of lease expense:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Operating lease costs1 |
|
$ |
|
|
$ |
|
||
Finance lease costs: |
|
|
|
|
|
|
||
Amortization of leased assets |
|
|
|
|
|
|
||
Interest expense |
|
|
|
|
|
|
||
Net lease costs |
|
$ |
|
|
$ |
|
||
1 |
Excludes short-term leases and variable lease costs, which are immaterial. |
The following table presents supplemental cash flow information related to leases:
|
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
|
2024 |
|
|
2023 |
|
||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
|
|||
Operating cash flows for operating leases |
|
$ |
|
|
$ |
|
|||
Operating cash flows for finance leases |
|
$ |
|
|
$ |
|
|||
Financing cash flows for finance leases |
|
$ |
|
|
$ |
|
|||
Leased assets exchanged for new lease liabilities: |
|
|
|
|
|
|
|||
Operating leases |
|
$ |
|
|
$ |
|
|||
Finance leases |
|
$ |
|
|
$ |
|
|||
|
|
17
NOTE 11. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS
The following table details the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB):
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
Pension |
|
|
OPEB |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Service cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Interest cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expected return on plan assets |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
||
Amortization of prior service cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of actuarial (gain) loss |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total net periodic cost |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
During the three months ended March 31, 2024 and 2023, funding of pension and other postretirement employee benefit plans was $
NOTE 12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table details changes in amounts included in our Accumulated Other Comprehensive Income (AOCI) by component on our Condensed Consolidated Balance Sheets, net of tax:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Pension and Other Postretirement Employee Benefits |
|
|
|
|
|
|
||
Balance at beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
Unrecognized losses arising in AOCI during the period: |
|
|
|
|
|
|
||
Gross |
|
|
|
|
|
|
||
Tax effect |
|
|
|
|
|
|
||
Reclassifications from AOCI to earnings: |
|
|
|
|
|
|
||
Other1 |
|
|
( |
) |
|
|
( |
) |
Tax effect |
|
|
|
|
|
|
||
Net of tax amount |
|
|
( |
) |
|
|
( |
) |
Balance at end of period |
|
|
( |
) |
|
|
( |
) |
Cash Flow Hedges |
|
|
|
|
|
|
||
Balance at beginning of period |
|
|
|
|
|
|
||
Unrecognized gains (losses) arising in AOCI during the period: |
|
|
|
|
|
|
||
Gross |
|
|
|
|
|
( |
) |
|
Tax effect |
|
|
( |
) |
|
|
|
|
Reclassifications from AOCI to earnings: |
|
|
|
|
|
|
||
Gross2 |
|
|
( |
) |
|
|
( |
) |
Tax effect |
|
|
|
|
|
|
||
Net of tax amount |
|
|
|
|
|
( |
) |
|
Balance at end of period |
|
|
|
|
|
|
||
Accumulated other comprehensive income, end of period |
|
$ |
|
|
$ |
|
||
1
2
See Note 11: Pension and Other Postretirement Employee Benefits and Note 6: Derivative Instruments for additional information.
18
NOTE 13. 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 have to pay in connection with any legal proceeding would have a materially adverse effect on our consolidated financial position, operating results or net cash flow.
ENVIRONMENTAL MATTER
Pursuant to the 2002 Asset Purchase Agreement under which Sappi Cloquet LLC (Sappi) purchased our Cloquet, Minnesota pulp and paper mill (the Plant), we agreed to indemnify Sappi from certain environmental liabilities accruing from the pre-sale operations of the Plant. In February 2021, we were notified by Sappi that the Environmental Protection Agency (EPA) contacted Sappi about the opportunity to participate with the Minnesota Pollution Control Agency (MPCA) and the EPA in a voluntary federal sediment remediation program under the Great Lakes Legacy Act (GLLA) for a project in the St. Louis River Area of Concern, which runs from Cloquet, Minnesota to Lake Superior. The EPA’s invitation to Sappi made no demands on or claims against Sappi, nor have EPA or MPCA made any demands or claims against PotlatchDeltic.
After multiple discussions with the MPCA and completion of our extensive due diligence on this matter, we informed the MPCA in January 2023 that we were interested in voluntarily participating in the remediation project at Thomson Reservoir (Project), and as a result, accrued $
In October 2023 we executed a Project agreement with the EPA and the MPCA and made a $
19
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, expectations regarding economic conditions, including interest rates and our ability to offset the impact of inflation; expected seasonal fluctuations in our business segments; expected effectiveness of our hedging instruments and swaps; amount of net earnings on cash flow hedges expected to be reclassified into earnings in the next 12 months; expected return on pension assets; anticipated share repurchases and dividend payments; anticipated cash balances, cash flows from operations and expected liquidity; potential uses of our credit facility; expectations regarding debt obligations, interest payments and debt refinancing; maintenance of our investment grade credit rating; expectations regarding the United States (U.S.) housing market and home repair and remodeling activity; the lumber and log markets and pricing; lumber shipment volumes; timber harvest volumes; rural real estate and real estate development sales; including the closing of a sale of approximately 34,000 acres of timberland in 2024 sufficiency of cash and any necessary borrowings to meet operating requirements; expected 2024 and future capital expenditures; costs associated with the expansion and modernization of our Waldo, Arkansas sawmill, the expected timing of completion of the project, and expected increases in productivity and reduction in operating costs resulting from the project; the expected dollar amount of our share of the total sediment remediation project costs related to the Thomson Reservoir; expectations regarding our ability to participate in the development of the natural climate solutions and forest carbon sequestration markets; and similar matters. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as anticipates, approximately, believes, continue, could, estimates, expects, future, intends, long-term, may, should, will, or similar words or terminology. 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. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to:
20
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, 2023. Investors should not interpret the disclosure of a risk to imply that the risk has not already materialized. 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 REIT with ownership of nearly 2.2 million acres of timberland. We also own six sawmills and an industrial grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program. Our operations are organized into three business segments: Timberlands, Wood Products and Real Estate. 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 sizable 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 Results discussion below, each segment’s revenues and expenses, as applicable, are presented before elimination of intersegment revenues and expenses.
Our business segments have been and will continue to be influenced by a variety of factors, including 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, inflation, asset dispositions or acquisitions, impact of pandemics (such as COVID-19 and its variants), fires at our Wood Products facilities or on our timberlands, other natural disasters and other factors.
Additionally, governments and businesses across the globe are taking action on climate change and are making significant commitments towards reducing greenhouse gas emissions to net zero. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and purchase offsets to reduce environmental impacts. We believe we are well positioned to help entities achieve these commitments through natural climate solutions, including forest carbon offsets, carbon capture and storage projects, selling or leasing timberlands to third parties for renewable energy projects such as solar for power generation facilities, selling pulpwood and sawmill residuals for green energy production, and other emerging technologies that allows wood fiber to be used in applications ranging from biofuels to bioplastics.
Non-GAAP Measures
To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), we present certain non-GAAP measures on a consolidated basis, including Total 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. The presentation of these non-GAAP financial measures should be considered only as supplemental to, and are not intended to be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Our definitions of these non-GAAP measures may differ from similarly titled measures and may not be comparable to other similarly titled non-GAAP measures presented by other companies due to potential inconsistencies in methods of calculation.
See Note 2: Segment Information in the Notes to the Condensed Consolidated Financial Statements for information related to the use of Adjusted EBITDDA for our segments.
Business and Economic Trends Affecting Our Operations
The operating results of our Timberlands, Wood Products and Real Estate business segments have been and will continue to be affected by the cyclical nature of the forest products industry. Log and pulpwood sales volumes in our Timberlands segment are typically lower in the first half of each year as winter rains in the Southern region and spring thaw in the Northern region limit timber harvesting operations due to softened roadbeds and wet logging conditions that restrict access to logging sites. The third quarter is typically our Timberland's segments strongest production quarter. Demand for our manufactured wood products typically decreases in the winter months when construction activity is slower, while demand typically increases during the spring, summer and fall when construction activity is generally higher.
21
The demand for timber is directly affected by the underlying demand for lumber and other wood products, as well as by the demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by both demand for new homes and home improvement and repair of existing homes in the United States. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, our Idaho log market is typically in balance but can be tensioned from time to time, while Southern log markets have more available supply. However, additional mill capacity being added in the U.S. South has led to tightening of markets in certain geographies.
Rural real estate dispositions and acquisitions can also be adversely affected when access to any properties to be sold or considered for acquisition is limited due to adverse weather conditions. Development real estate sales occur throughout the year and are dependent upon when our development of residential neighborhoods and commercial lots are substantially completed. The timing of these sales can also be impacted by contractor availability to complete the necessary infrastructure and other improvements.
Interest rates impact our business primarily through their effect on mortgage rates and the broader U.S. economy, and their influence on our capital allocation activities. Speculation on the timing, number, and amount of interest rate reductions by the U.S. Federal Reserve during 2024 along with the overall condition of the economy, and fluctuations in financial markets are all factors that have influenced long-term interest rates. Over the past decade, the average 30-year fixed mortgage rate was below 4.0% and began rising above this rate late in the first quarter of 2022 before peaking at approximately 7.8% in October 2023, and ending 2023 at approximately 6.6%. Rates have increased since the end of 2023, averaging nearly 6.8% during the first quarter of 2024. Inflation, which has remained persistently elevated so far in 2024, is expected to have a significant impact on the U.S. Federal Reserve’s decision to adjust interest rates.
The number of existing homes on the market remains historically low and housing affordability remains a barrier to home ownership. In April 2024, the U.S. Census Bureau reported total housing starts for March 2024 were over 1.3 million on a seasonally-adjusted annual basis, which was down 15.6% from December 2023. However, single-family housing starts were above 1.0 million units on a seasonally-adjusted annual basis for March 2024, the fifth month in a row above 1.0 million units. Additionally, authorized building permits for single-family housing were above 970,000 units on a seasonally-adjusted annual basis for March 2024, the eleventh month in a row above 900,000 units. The new single-family housing market has provided a critical alternative for home buyers and has remained resilient into 2024, supported by homebuilders' ability to construct smaller, more affordable home designs and offer mortgage rate buy-down incentives.
Further, the National Association of Home Builders (NAHB) reported the NAHB/Wells Fargo Housing Market Index (HMI) was 51 in April 2024, up from 37 in December 2023, and the second consecutive month above the key breakeven point of 50. Even though there has been pent-up demand for new construction, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, along with higher material costs that continue to increase the cost of building homes. Overall, we believe long-term underlying housing fundamentals remain favorable due to a shortage of homes, lower than historical-average existing inventory for sale, the ongoing shift toward remote work, and a large millennial demographic in their prime home-buying years.
The repair and remodel sector is the largest market segment for lumber demand. In the current high-interest rate environment, prospective home buyers with lower mortgage rates on their existing home are more likely to stay and undertake remodeling projects versus move into a new home. While spending in the sector for owner-occupied homes has moderated, we believe long-term favorable underlying fundamentals, including solid household balance sheets, strong levels of home equity and an aging existing housing stock, will continue to support repair and remodel demand for our products.
In our Timberlands segment, a significant portion of our Idaho sawlog prices are indexed on a four-week lag to lumber prices. The Northern region experienced a decrease in sawlog prices during the first quarter of 2024 compared to the first quarter of 2023 because of lower indexed lumber prices. In the Southern region, sawlog and pulpwood prices remained relatively stable. Our total harvest volume of 1.9 million tons in the first quarter of 2024 was lower than the first quarter of 2023, primarily due to less favorable operating conditions in the Northern region during the first quarter of 2024. We expect to harvest between 1.7 and 1.8 million tons during the second quarter of 2024, with approximately 82% of the volume in the Southern region.
In our Wood Products segment, lumber shipments increased compared to the first quarter of the prior year primarily due to increased lumber production at our Southern sawmills. We shipped 271 million board feet of lumber during the first quarter of 2024, and expect to ship between 275 and 285 million board feet of lumber during the second quarter of 2024.
We expect to sell approximately 43,000 rural acres, and 24 residential lots in Chenal Valley during the second quarter of 2024. Included in the expected rural acres to be sold in the second quarter are approximately 34,000 acres of four-year average age Southern timberlands for approximately $58.0 million to Forest Investment Associates. This transaction is subject to certain adjustments and customary closing conditions as defined in the purchase agreement.
22
Consolidated Results
The following table sets forth changes in our Condensed Consolidated Statements of Operations. Our Business Segment Results provide a more detailed discussion of our segments:
|
|
Three Months Ended March 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenues |
|
$ |
228,127 |
|
|
$ |
257,962 |
|
|
$ |
(29,835 |
) |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|||
Cost of goods sold |
|
|
212,160 |
|
|
|
224,350 |
|
|
|
(12,190 |
) |
Selling, general and administrative expenses |
|
|
20,727 |
|
|
|
18,230 |
|
|
|
2,497 |
|
CatchMark merger-related expenses |
|
|
— |
|
|
|
2,209 |
|
|
|
(2,209 |
) |
|
|
|
232,887 |
|
|
|
244,789 |
|
|
|
(11,902 |
) |
Operating income (loss) |
|
|
(4,760 |
) |
|
|
13,173 |
|
|
|
(17,933 |
) |
Interest expense, net |
|
|
282 |
|
|
|
(199 |
) |
|
|
481 |
|
Non-operating pension and other postretirement employee benefits |
|
|
201 |
|
|
|
(228 |
) |
|
|
429 |
|
Other |
|
|
(145 |
) |
|
|
10 |
|
|
|
(155 |
) |
Income (loss) before income taxes |
|
|
(4,422 |
) |
|
|
12,756 |
|
|
|
(17,178 |
) |
Income taxes |
|
|
4,117 |
|
|
|
3,504 |
|
|
|
613 |
|
Net income (loss) |
|
$ |
(305 |
) |
|
$ |
16,260 |
|
|
$ |
(16,565 |
) |
Total Adjusted EBITDDA1 |
|
$ |
29,722 |
|
|
$ |
57,777 |
|
|
$ |
(28,055 |
) |
1 |
See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income (loss), the closest comparable GAAP measure, for each of the periods presented. |
First Quarter 2024 Compared with First Quarter 2023
Revenues
Revenues were $228.1 million, a decrease of $29.8 million compared with the first quarter of 2023 primarily due to lower Northern sawlog prices and harvest volume, along with fewer rural real estate acres sold.
Cost of goods sold
Cost of goods sold decreased $12.2 million compared with the first quarter of 2023 mainly due to lower logging and hauling costs in the Northern region and fewer rural real estate acres sold. These decreases were partially offset by increased manufacturing costs as a result of increased lumber shipments.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $2.5 million compared to the first quarter of 2023 primarily due to employee and employee-related costs and increased professional service fees.
CatchMark merger-related expenses
There were no CatchMark merger-related expenses for the three months ended March 31, 2024. CatchMark merger-related expenses for the three months ended March 31, 2023 of $2.2 million primarily related to professional service fees.
Income taxes
Income taxes are primarily due to income or loss from our PotlatchDeltic taxable REIT subsidiaries (TRS). For the three months ended March 31, 2024, we recorded an income tax benefit of $4.1 million on TRS loss before tax of $16.3 million. For the three months ended March 31, 2023, we recorded an income tax benefit of $3.5 million on TRS loss before tax of $13.6 million.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the first quarter of 2024 decreased $28.1 million compared to the first quarter of 2023 primarily due to fewer rural real estate acres sold, lower Northern sawlog prices and harvest volume, and increased general and administrative expenses. The decrease in Total Adjusted EBITDDA was partially offset by lower logging and hauling costs. Refer to the Business Segment Results below for further discussions on activities for each of our segments. See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income (loss), the closest comparable GAAP measure, for each of the periods presented.
23
Business Segment Results
Timberlands Segment
|
|
Three Months Ended March 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenues1 |
|
$ |
92,950 |
|
|
$ |
115,238 |
|
|
$ |
(22,288 |
) |
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|||
Logging and hauling |
|
|
48,337 |
|
|
|
59,209 |
|
|
|
(10,872 |
) |
Other |
|
|
7,774 |
|
|
|
7,536 |
|
|
|
238 |
|
Selling, general and administrative expenses |
|
|
2,091 |
|
|
|
1,854 |
|
|
|
237 |
|
Timberlands Adjusted EBITDDA2 |
|
$ |
34,748 |
|
|
$ |
46,639 |
|
|
$ |
(11,891 |
) |
1 |
Prior to elimination of intersegment fiber revenues of $24.5 million and $33.9 million for the three months ended March 31, 2024 and 2023, respectively. |
2 |
Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Timberlands Segment Statistics
|
|
Three Months Ended March 31, |
|
|||||||||
Harvest Volumes (in tons) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Northern region |
|
|
|
|
|
|
|
|
|
|||
Sawlog |
|
|
327,423 |
|
|
|
470,790 |
|
|
|
(143,367 |
) |
Pulpwood |
|
|
1,863 |
|
|
|
8,029 |
|
|
|
(6,166 |
) |
Total |
|
|
329,286 |
|
|
|
478,819 |
|
|
|
(149,533 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Southern region |
|
|
|
|
|
|
|
|
|
|||
Sawlog |
|
|
654,623 |
|
|
|
661,588 |
|
|
|
(6,965 |
) |
Pulpwood |
|
|
505,296 |
|
|
|
492,405 |
|
|
|
12,891 |
|
Stumpage |
|
|
433,895 |
|
|
|
444,279 |
|
|
|
(10,384 |
) |
Total |
|
|
1,593,814 |
|
|
|
1,598,272 |
|
|
|
(4,458 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Total harvest volume |
|
|
1,923,100 |
|
|
|
2,077,091 |
|
|
|
(153,991 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Sales Price/Unit ($ per ton)1 |
|
|
|
|
|
|
|
|
|
|||
Northern region |
|
|
|
|
|
|
|
|
|
|||
Sawlog |
|
$ |
103 |
|
|
$ |
113 |
|
|
$ |
(10 |
) |
Pulpwood |
|
$ |
35 |
|
|
$ |
50 |
|
|
$ |
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|||
Southern region |
|
|
|
|
|
|
|
|
|
|||
Sawlog |
|
$ |
48 |
|
|
$ |
48 |
|
|
$ |
— |
|
Pulpwood |
|
$ |
31 |
|
|
$ |
33 |
|
|
$ |
(2 |
) |
Stumpage |
|
$ |
18 |
|
|
$ |
21 |
|
|
$ |
(3 |
) |
1 |
Sawlog 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 months ended March 31, 2024 compared with the three months ended March 31, 2023:
(in thousands) |
|
Three Months |
|
|
Timberlands Adjusted EBITDDA - prior year |
|
$ |
46,639 |
|
Sales price and mix |
|
|
(6,439 |
) |
Harvest volume |
|
|
(6,872 |
) |
Logging and hauling costs per unit |
|
|
1,710 |
|
Forest management, indirect and other |
|
|
(290 |
) |
Timberlands Adjusted EBITDDA - current year |
|
$ |
34,748 |
|
24
First Quarter 2024 Compared with First Quarter 2023
Timberlands Adjusted EBITDDA for the first quarter of 2024 decreased $11.9 million compared with the first quarter of 2023 primarily as a result of the following:
Wood Products Segment
|
|
Three Months Ended March 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenues |
|
$ |
148,598 |
|
|
$ |
152,795 |
|
|
$ |
(4,197 |
) |
Costs and expenses1 |
|
|
|
|
|
|
|
|
|
|||
Fiber costs |
|
|
73,460 |
|
|
|
77,197 |
|
|
|
(3,737 |
) |
Freight, logging and hauling |
|
|
18,101 |
|
|
|
20,170 |
|
|
|
(2,069 |
) |
Manufacturing costs |
|
|
57,709 |
|
|
|
52,890 |
|
|
|
4,819 |
|
Finished goods inventory change |
|
|
(4,333 |
) |
|
|
(962 |
) |
|
|
(3,371 |
) |
Selling, general and administrative expenses |
|
|
3,709 |
|
|
|
3,436 |
|
|
|
273 |
|
Other |
|
|
91 |
|
|
|
95 |
|
|
|
(4 |
) |
Wood Products Adjusted EBITDDA2 |
|
$ |
(139 |
) |
|
$ |
(31 |
) |
|
$ |
(108 |
) |
1 |
Prior to elimination of intersegment fiber costs of $24.5 million and $33.9 million for the three months ended March 31, 2024 and 2023, respectively. |
2 |
Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Wood Products Segment Statistics
|
|
Three Months Ended March 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Lumber shipments (MBF)1 |
|
|
271,148 |
|
|
|
261,633 |
|
|
|
9,515 |
|
Lumber sales prices ($ per MBF) |
|
$ |
430 |
|
|
$ |
435 |
|
|
$ |
(5 |
) |
1 |
MBF stands for thousand board feet. |
Wood Products Adjusted EBITDDA
The following table summarizes Wood Products Adjusted EBITDDA variances for the three months ended March 31, 2024 compared with the three months ended March 31, 2023:
(in thousands) |
|
Three Months |
|
|
Wood Products Adjusted EBITDDA - prior year |
|
$ |
(31 |
) |
Lumber: |
|
|
|
|
Price |
|
|
(1,542 |
) |
Log costs per unit |
|
|
5,538 |
|
Manufacturing costs per unit |
|
|
(734 |
) |
Volume |
|
|
(125 |
) |
Residuals, panels and other |
|
|
(3,245 |
) |
Wood Products Adjusted EBITDDA - current year |
|
$ |
(139 |
) |
First Quarter 2024 Compared with First Quarter 2023
Wood Products Adjusted EBITDDA for the first quarter of 2024 was consistent with the first quarter of 2023, primarily as a result of the following:
25
Real Estate Segment
|
|
Three Months Ended March 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Revenues |
|
$ |
11,107 |
|
|
$ |
23,863 |
|
|
$ |
(12,756 |
) |
Costs and expenses |
|
|
|
|
|
|
|
|
|
|||
Costs of goods sold |
|
|
3,191 |
|
|
|
2,865 |
|
|
|
326 |
|
Selling, general and administrative expenses |
|
|
1,688 |
|
|
|
1,533 |
|
|
|
155 |
|
Real Estate Adjusted EBITDDA1 |
|
$ |
6,228 |
|
|
$ |
19,465 |
|
|
$ |
(13,237 |
) |
1 |
Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Real Estate Segment Statistics
Rural Real Estate |
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Acres sold |
|
|
1,801 |
|
|
|
6,939 |
|
Average price per acre |
|
$ |
3,069 |
|
|
$ |
2,568 |
|
Development Real Estate |
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Residential lots |
|
|
24 |
|
|
|
24 |
|
Average price per lot |
|
$ |
119,750 |
|
|
$ |
116,429 |
|
Real Estate Adjusted EBITDDA
The following table summarizes Real Estate Adjusted EBITDDA variances for the three months ended March 31, 2024 compared with the three months ended March 31, 2023:
(in thousands) |
|
Three Months |
|
|
Real Estate Adjusted EBITDDA - prior year |
|
$ |
19,465 |
|
Rural real estate sales |
|
|
(12,703 |
) |
Real estate development sales |
|
|
(378 |
) |
Selling, general and administrative expenses |
|
|
(154 |
) |
Other costs, net |
|
|
(2 |
) |
Real Estate Adjusted EBITDDA - current year |
|
$ |
6,228 |
|
First Quarter 2024 Compared with First Quarter 2023
Real Estate Adjusted EBITDDA for the first quarter of 2024 was $6.2 million, a decrease of $13.2 million compared to the first quarter of 2023 primarily as a result of the following:
26
Liquidity and Capital Resources
Cash generated by our operations is highly dependent on the selling prices of our products and can vary from period to period. Changes in significant sources and uses of cash for the three months ended March 31, 2024 and 2023 are presented by category as follows:
|
|
Three Months Ended March 31, |
|
|||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Net cash from operating activities |
|
$ |
16,029 |
|
|
$ |
39,139 |
|
|
$ |
(23,110 |
) |
Net cash from investing activities |
|
$ |
(36,996 |
) |
|
$ |
(4,896 |
) |
|
$ |
(32,100 |
) |
Net cash from financing activities |
|
$ |
(36,571 |
) |
|
$ |
(36,800 |
) |
|
$ |
229 |
|
Net Cash Flows from Operating Activities
Net cash from operating activities decreased $23.1 million in the first quarter of 2024 compared to the first quarter of 2023 primarily as a result of the following:
Net Cash Flows from Investing Activities
Changes in cash flows from investing activities were primarily a result of the following:
Net Cash Flows from Financing Activities
Changes in cash flows from financing activities was primarily due to dividend payments of $35.8 million during the first quarter of 2024 compared to $36.0 million during the first quarter of 2023.
Future Sources and Uses of Cash
At March 31, 2024, we had cash and cash equivalents of $180.2 million. We expect cash and cash equivalents on hand, cash generated from our operating activities, and available borrowing capacity under our credit agreement, if needed, to be adequate to meet our future cash requirements. At March 31, 2024, there were no significant changes in our cash commitments arising in the normal course of business under our known contractual and other obligations as described in our Annual Report on Form 10-K for the year ended December 31, 2023.
27
Capital Expenditures
We invest cash in maintenance and discretionary capital expenditures at our Wood 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. We evaluate discretionary capital improvements based on an expected level of return on investment. We expect to spend a total of approximately $100 million to $110 million for capital expenditures during 2024, including capital expenditures for the Waldo sawmill expansion and modernization project discussed below.
In June 2022, we announced a project to expand and modernize our Waldo, Arkansas sawmill. The project is expected to increase the mill’s annual capacity from 190 million board feet of dimensional lumber to approximately 275 million board feet. The investment is also expected to reduce the mill’s operating costs significantly. The Waldo investment includes upgrades to the log yard and planer, a new saw line, and a new continuous dry kiln. The existing mill will continue to operate during the project and completion is expected by the end of 2024. We expect to spend approximately $131.0 million on the project, of which a total of $87.0 million has been spent through March 31, 2024, and approximately $44.0 million is expected to be spent during the remainder of 2024.
Share Repurchase Program
On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). Shares under the 2022 Repurchase Program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan), or through privately negotiated transactions. At March 31, 2024, we had remaining authorization of $125.0 million for future stock repurchases under the 2022 Repurchase Program. The timing, manner, price and amount of repurchases will be determined according to the Trading Plan, and, subject to the terms of the Trading Plan, the Repurchase Program may be suspended, terminated or modified at any time for any reason.
Term Loans and Credit Agreement
At March 31, 2024, our total outstanding net long-term debt was $1.0 billion. All interest rates on our outstanding long-term debt are fixed either under fixed-rate loans or variable-rate loans with an associated interest rate swap that fixes the variable benchmark interest rate component. Approximately $175.7 million of our outstanding long-term debt was classified as current at March 31, 2024 on our accompanying Condensed Consolidated Balance Sheets, including a $110.0 million term loan and a $65.7 million revenue bond that mature during 2024. We are currently evaluating options to refinance all or a portion of the maturing term loan and revenue bond. We also have $200.0 million notional of forward-starting interest rate swaps available to reduce the interest rate on any future debt refinancings.
Of our total long-term debt outstanding at March 31, 2024, $971.0 million was drawn under an amended and restated credit agreement dated March 22, 2018 (Amended Term Loan Agreement) with our primary lender.
We have a $300.0 million revolving line of credit with a syndicate of lenders, that matures February 14, 2027 (Amended Credit Agreement). Under the terms of the Amended Credit Agreement, the amount of available principal may be increased up to an additional $500.0 million. We may also utilize borrowings under the Amended Credit Agreement to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions, and other general corporate expenditures. At March 31, 2024, there were no borrowings under the revolving line of credit and approximately $0.7 million of the credit facility was utilized by outstanding letters of credit.
Financial Covenants
The Amended Term Loan Agreement and Amended Credit Agreement (collectively referred to as the Agreements) contain certain covenants that limit our ability and that of our subsidiaries to create liens, merge or consolidate, dispose of assets, incur indebtedness and guarantees, repurchase or redeem capital stock and indebtedness, make certain investments or acquisitions, enter into certain transactions with affiliates or change the nature of our business. The Agreements also contain financial maintenance covenants including the maintenance of a minimum interest coverage ratio and a maximum leverage ratio. We are permitted to pay dividends to our stockholders under the terms of the Agreements so long as we expect to remain in compliance with the financial maintenance covenants.
28
The following table presents the components and applicable limits of Total Asset Value (TAV), a component of the Leverage Ratio, at March 31, 2024:
(in thousands) |
|
|
|
|
Estimated timberland fair value |
|
$ |
5,333,835 |
|
Wood Products manufacturing facilities book basis (limited to 10% of TAV) |
|
|
263,507 |
|
Cash and cash equivalents |
|
|
180,150 |
|
Other1 |
|
|
106,376 |
|
Total Asset Value |
|
$ |
5,883,868 |
|
1 |
Includes, as applicable, Company Owned Life Insurance (limited to 5% of TAV), Construction in Progress (limited to 10% of TAV) and Investments in Affiliates (limited to 15% TAV) as defined in the Agreements. |
At March 31, 2024, we were in compliance with all covenants under the Agreements. The following table sets forth the financial covenants for the Agreements and our status with respect to these covenants at March 31, 2024:
|
|
Covenant Requirement |
|
Actual |
||
Interest coverage ratio |
|
≥ |
|
3.00 to 1.00 |
|
9.3 |
Leverage ratio |
|
≤ |
|
40% |
|
18% |
See Note 5: Debt in the Notes to the Condensed Consolidated Financial Statements for additional information on our debt and credit agreements.
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. Both Moody’s and S&P rate our debt as investment grade.
Capital Structure
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Long-term debt (including current portion) |
|
$ |
1,034,019 |
|
|
$ |
1,033,728 |
|
Cash and cash equivalents |
|
|
(180,150 |
) |
|
|
(230,118 |
) |
Net debt |
|
|
853,869 |
|
|
|
803,610 |
|
Market capitalization1 |
|
|
3,738,466 |
|
|
|
3,896,822 |
|
Enterprise value |
|
$ |
4,592,335 |
|
|
$ |
4,700,432 |
|
|
|
|
|
|
|
|
||
Net debt to enterprise value |
|
|
18.6 |
% |
|
|
17.1 |
% |
Dividend yield2 |
|
|
3.8 |
% |
|
|
3.7 |
% |
Weighted-average cost of debt, after tax3 |
|
|
2.3 |
% |
|
|
2.3 |
% |
1 |
Market capitalization is based on outstanding shares of 79.5 million and 79.4 million times closing share prices of $47.02 and $49.10 at March 28, 2024 and December 29, 2023, respectively. |
2 |
Dividend yield is based on annualized dividends per share of $1.80 and share prices of $47.02 and $49.10 at March 28, 2024 and December 29, 2023, respectively. |
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: Total Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the discussion of Total Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures described herein. These non-GAAP financial measures should be considered only as supplemental to, are not intended to be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may not be the same as or comparable to other similarly titled non-GAAP financial measures presented by other companies due to potential inconsistencies in methods of calculation.
Total Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and to allocate resources between segments. Total Adjusted EBITDDA removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors and other interested parties by facilitating the comparability of our ongoing operating results over the periods presented and the identification of trends in our underlying business. It also can be used to evaluate the operational performance of the assets under management and to compare of our operating results against analyst financial models and against the operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.
29
We define EBITDDA as net income (loss) before interest expense, net, 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 (loss) for the consolidated company as it is the most comparable GAAP measure.
The following table provides a reconciliation of net income (loss) to Total Adjusted EBITDDA for the respective periods:
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Net income (loss) |
|
$ |
(305 |
) |
|
$ |
16,260 |
|
Interest expense, net |
|
|
(282 |
) |
|
|
199 |
|
Income taxes |
|
|
(4,117 |
) |
|
|
(3,504 |
) |
Depreciation, depletion and amortization |
|
|
30,395 |
|
|
|
31,764 |
|
Basis of real estate sold |
|
|
4,092 |
|
|
|
10,631 |
|
CatchMark merger-related expenses |
|
|
— |
|
|
|
2,209 |
|
Non-operating pension and other postretirement employee benefit costs |
|
|
(201 |
) |
|
|
228 |
|
Gain on disposal of fixed assets |
|
|
(5 |
) |
|
|
— |
|
Other |
|
|
145 |
|
|
|
(10 |
) |
Total Adjusted EBITDDA |
|
$ |
29,722 |
|
|
$ |
57,777 |
|
We define CAD as cash from operating activities adjusted for capital spending for purchases of property, plant and equipment, timberlands reforestation and roads and 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.
30
The following table provides a reconciliation of cash from operating activities to CAD:
|
|
Three Months Ended March 31, |
|
|
Twelve Months Ended March 31, |
|
||||||||||
(in thousands) |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net cash from operating activities1, 2 |
|
$ |
16,029 |
|
|
$ |
39,139 |
|
|
$ |
136,001 |
|
|
$ |
300,741 |
|
Capital expenditures3 |
|
|
(44,307 |
) |
|
|
(10,373 |
) |
|
|
(155,547 |
) |
|
|
(177,963 |
) |
CAD |
|
$ |
(28,278 |
) |
|
$ |
28,766 |
|
|
$ |
(19,546 |
) |
|
$ |
122,778 |
|
Net cash from investing activities4 |
|
$ |
(36,996 |
) |
|
$ |
(4,896 |
) |
|
$ |
(127,404 |
) |
|
$ |
(135,294 |
) |
Net cash from financing activities |
|
$ |
(36,571 |
) |
|
$ |
(36,800 |
) |
|
$ |
(171,481 |
) |
|
$ |
(297,767 |
) |
1 |
Net cash from operating activities for the three and twelve months ended March 31, 2024, includes cash paid for CatchMark merger-related expenses of $0 and $0.4 million, respectively, and cash paid for real estate development expenditures of $1.1 million and $10.2 million, respectively. Net cash from operating activities for the three and twelve months ended March 31, 2023, includes cash paid for CatchMark merger-related expenses of $0.5 million and $18.3 million, respectively, and cash paid for real estate development expenditures of $2.4 million and $8.3 million, respectively. |
2 |
Net cash from operating activities for the three and twelve months ended March 31, 2024, excludes $7.5 million and $27.7 million, respectively, of interest rate swap proceeds classified as investing and financing activities. Net cash from operating activities for the three and twelve months ended March 31, 2023, excludes $5.5 million and $8.8 million, respectively, of interest rate swap proceeds classified as investing and financing activities. |
3 |
The three and twelve months ended March 31, 2024, includes Waldo, Arkansas sawmill expansion and modernization related capital expenditures of $0.6 million and $74.8 million, respectively. Additionally, the three and twelve months ended March 31, 2024 includes fire-related capital expenditures for the Ola, Arkansas sawmill of $0 and $0.1 million, respectively, and excludes $0 and $1.4 million, respectively, of insurance proceeds for the Ola, Arkansas sawmill property losses. The three and twelve months ended March 31, 2023 include fire-related capital expenditures for the Ola, Arkansas sawmill of $0.5 and $13.6 million, respectively, and exclude $0 and $8.8 million, respectively, of insurance proceeds for the Ola, Arkansas sawmill property losses. |
4 |
Net cash from investing activities includes payment for capital expenditures and acquisition of non-strategic timber and timberlands, which is also included in our reconciliation of CAD. |
Critical Accounting Policies and Estimates
There have been no significant changes during 2024 to our critical accounting policies or estimates as presented in our 2023 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure on financial instruments includes interest rate risk on our bank credit facility, term loans and interest rate swap agreements and forward starting interest rate swap agreements. We are exposed to interest rate volatility on existing variable rate debt instruments and future incurrences of fixed or variable rate debt, which exposure primarily relates to movements in various interest rates. We use interest rate swaps and forward starting swaps to hedge our exposure to the impact of interest rate changes on existing debt and future debt issuances, respectively. All market risk sensitive instruments were entered into for purposes other than for trading purposes.
For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposures to market risk have not changed materially since December 31, 2023.
31
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 March 31, 2024. 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 March 31, 2024.
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 three months ended March 31, 2024 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 in 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, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). There were no shares repurchased during the first quarter of 2024. At March 31, 2024, we had remaining authorization of $125.0 million for future stock repurchases under the 2022 Repurchase Program. We record share repurchases upon trade date as opposed to settlement date when cash is disbursed.
32
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended March 31, 2024, the following company officers
Name & Title |
|
Date of Adoption |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
ITEM 6. EXHIBITS
EXHIBIT NUMBER |
DESCRIPTION |
3.1*
|
|
3.2* |
|
4 |
See Exhibits 3.1 and 3.2. The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt. |
31 |
|
32 |
|
101 |
The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024, filed on May 3, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheets at March 31, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023, and (vi) the Notes to Condensed Consolidated Financial Statements. |
104 |
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
* Incorporated by reference.
34
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.
|
|
PotlatchDeltic Corporation |
|
|
|
(Registrant) |
|
|
|
|
|
|
|
By |
/s/ GLEN F. SMITH |
|
|
|
Glen F. Smith |
|
|
|
Chief Accounting Officer (Duly Authorized; Principal Accounting Officer) |
|
|
|
|
|
|
|
|
Date: |
May 3, 2024 |
|
|
35