UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, ~~2022~~2023

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-32729

PotlatchDeltic Corporation

(Exact name of registrant as specified in its charter)

Delaware

82-0156045

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)


601 West First Avenue, Suite 1600
Spokane, Washington	99201
(Address of principal executive offices)	(Zip Code)

(509) 835-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock ($1 par value)	PCH	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐	Non-accelerated Filer	☐
Smaller Reporting Company	☐	Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act).

Yes ☐ No ☒

The number of shares of common stock of the registrant outstanding as of April ~~26, 2022~~25, 2023, was ~~69,372,304~~79,915,922.

POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES

Table of Contents



			Page Number
PART I. - FINANCIAL INFORMATION
ITEM 1.	Financial Statements (unaudited)
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive (Loss) Income	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Stockholders’ Equity	8
	Index for the Notes to Condensed Consolidated Financial Statements	9
	Notes to Condensed Consolidated Financial Statements	10
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2021
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3233
ITEM 4.	Controls and Procedures	3233

PART II. - OTHER INFORMATION
ITEM 1.	Legal Proceedings	3334
ITEM 1A.	Risk Factors	3334
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3334
ITEM 6.	Exhibits	3334

SIGNATURE		3435

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Part I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
(in thousands, except per share amounts)	2022			2021			2023			2022
Revenues	$	411,350		$	354,193		$	257,962		$	411,350
Costs and expenses:
Cost of goods sold		179,847			169,302			224,350			179,847
Selling, general and administrative expenses		16,294			16,758			18,230			16,294
Net loss on fire damage		276			—
CatchMark merger-related expenses								2,209			—
Loss on fire damage								—			276
		196,417			186,060			244,789			196,417
Operating income		214,933			168,133			13,173			214,933
Interest expense, net		(2,894	)		(3,574	)		(199	)		(2,894	)
Pension settlement charge		(14,165	)		—			—			(14,165	)
Non-operating pension and other postretirement employee benefit costs		(1,929	)		(3,414	)		(228	)		(1,929	)
Other								10			—
Income before income taxes		195,945			161,145			12,756			195,945
Income taxes		(32,065	)		(30,039	)		3,504			(32,065	)
Net income	$	163,880		$	131,106		$	16,260		$	163,880

Net income per share:
Basic	$	2.36		$	1.95		$	0.20		$	2.36
Diluted	$	2.35		$	1.94		$	0.20		$	2.35
Dividends per share	$	0.44		$	0.41		$	0.45		$	0.44
Weighted-average shares outstanding (in thousands)
Weighted-average shares outstanding
Basic		69,419			67,207			80,027			69,419
Diluted		69,623			67,607			80,167			69,623

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

Three Months Ended March 31,

(in thousands)

2022

2021

Net income

$
163,880

$
131,106

Other comprehensive income (loss):

Pension and other postretirement employee benefits:

Net loss arising during the period, net of tax benefit of $1,570 and $0

(4,587
)

0

Effect of pension settlement, net of tax expense of $3,612 and $0

10,553

0

Amortization of actuarial loss included in net income, net of tax expense of $475 and $1,109

1,384

3,157

Amortization of prior service cost (credit) included in net income, net of tax expense (benefit) of $44 and $(73)

130

(204
)
Cash flow hedges, net of tax expense of $2,249 and $4,031

43,276

64,107

Other comprehensive income, net of tax

50,756

67,060

Comprehensive income

$
214,636

$
198,166


	Three Months Ended March 31,
(in thousands)	2023			2022
Net income	$	16,260		$	163,880
Other comprehensive (loss) income, net of tax:
Pension and other postretirement employee benefits		(131	)		7,480
Cash flow hedges		(17,335	)		43,276
Other comprehensive (loss) income, net of tax		(17,466	)		50,756
Comprehensive (loss) income	$	(1,206	)	$	214,636

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)


(in thousands, except per share amounts)	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	470,918		$	296,151		$	325,632		$	343,809
Customer receivables, net		40,094			31,028			29,565			22,813
Inventories, net		67,673			72,369			66,189			67,958
Other current assets		21,938			21,630			44,698			36,955
Total current assets		600,623			421,178			466,084			471,535
Property, plant and equipment, net		297,710			292,320			312,791			318,184
Investment in real estate held for development and sale		61,562			65,604			54,945			55,490
Timber and timberlands, net		1,671,330			1,682,671			2,488,956			2,508,372
Intangible assets, net		15,296			15,491			16,975			17,420
Other long-term assets		87,095			57,951			160,019			179,554
Total assets	$	2,733,616		$	2,535,215		$	3,499,770		$	3,550,555

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	101,589		$	78,209		$	78,268		$	94,861
Current portion of long-term debt		39,983			42,977			39,985			39,979
Current portion of pension and other postretirement employee benefits		4,993			4,993			4,926			4,926
Total current liabilities		146,565			126,179			123,179			139,766
Long-term debt		715,499			715,279			992,988			992,701
Pension and other postretirement employee benefits		90,359			83,674			78,096			77,396
Deferred tax liabilities, net		37,642			34,874			41,756			41,790
Other long-term obligations		31,353			49,076			35,488			35,749
Total liabilities		1,021,418			1,009,082			1,271,507			1,287,402
Commitments and contingencies
Stockholders' equity:
Preferred stock, authorized 4,000 shares, 0 shares issued		—			—
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 69,372 and 69,064 shares		69,372			69,064
Preferred stock, authorized 4,000 shares, no shares issued								—			—
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 79,916 and 79,683 shares								79,916			79,683
Additional paid-in capital		1,782,940			1,781,217			2,296,927			2,294,797
Accumulated deficit		(147,632	)		(280,910	)		(228,766	)		(208,979	)
Accumulated other comprehensive income (loss)		7,518			(43,238	)
Accumulated other comprehensive income								80,186			97,652
Total stockholders’ equity		1,712,198			1,526,133			2,228,263			2,263,153
Total liabilities and stockholders' equity	$	2,733,616		$	2,535,215		$	3,499,770		$	3,550,555

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
(in thousands)	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	163,880		$	131,106		$	16,260		$	163,880
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization		19,874			18,399			32,173			19,874
Basis of real estate sold		10,854			8,823			10,631			10,854
Change in deferred taxes		(2,123	)		1,490			394			(2,123	)
Pension and other postretirement employee benefits		3,857			5,627			1,611			3,857
Pension settlement charge		14,165			—			—			14,165
Equity-based compensation expense		2,056			1,930			2,279			2,056
Net loss on fire damage		276			—
Loss on fire damage								—			276
Other, net		(291	)		(387	)		(3,509	)		(291	)
Change in working capital and operating-related activities, net		21,208			6,713			(17,205	)		21,208
Real estate development expenditures		(2,161	)		(2,315	)		(2,408	)		(2,161	)
Funding of pension and other postretirement employee benefits		(1,296	)		(1,421	)		(1,087	)		(1,296	)
Net cash from operating activities		230,299			169,965			39,139			230,299

CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions		(12,566	)		(7,762	)		(4,255	)		(12,566	)
Timberlands reforestation and roads		(4,648	)		(3,956	)		(6,118	)		(4,648	)
Interest received under swaps with other-than-insignificant financing element								5,055			—
Other, net		92			189			422			92
Net cash from investing activities		(17,122	)		(11,529	)		(4,896	)		(17,122	)

CASH FLOWS FROM FINANCING ACTIVITIES									��
Distributions to common stockholders		(30,524	)		(27,484	)		(35,962	)		(30,524	)
Repayment of long-term debt		(3,000	)		—			—			(3,000	)
Other, net		(1,071	)		(591	)		(838	)		(1,071	)
Net cash from financing activities		(34,595	)		(28,075	)		(36,800	)		(34,595	)
Change in cash, cash equivalents and restricted cash		178,582			130,361			(2,557	)		178,582
Cash, cash equivalents and restricted cash at beginning of period		296,772			252,340			345,591			296,772
Cash, cash equivalents and restricted cash at end of period	$	475,354		$	382,701		$	343,034		$	475,354

NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued property, plant and equipment additions	$	1,516		$	2,263		$	1,835		$	1,516
Accrued timberlands reforestation and roads	$	98		$	813		$	1,041		$	98

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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)	March 31, 2022		March 31, 2021		March 31, 2023		March 31, 2022
Cash and cash equivalents	$	470,918	$	382,032	$	325,632	$	470,918
Restricted cash included in other long-term assets1		4,436		669
Restricted cash included in other current and long-term assets1						17,402		4,436
Total cash, cash equivalents, and restricted cash	$	475,354	$	382,701	$	343,034	$	475,354

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, 2023 and 2022, $14.0 million and $0, respectively, was classified in Other current assets.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)


	Common Stock				Additional Paid-			Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Common Stock				Additional Paid-			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands, except per share amounts)	Shares		Amount		in Capital			Deficit			Income (Loss)			Equity			Shares		Amount		in Capital			Deficit			Income (Loss)			Equity
Balance, December 31, 2021		69,064	$	69,064	$	1,781,217		$	(280,910	)	$	(43,238	)	$	1,526,133
Balance, December 31, 2022																		79,683	$	79,683	$	2,294,797		$	(208,979	)	$	97,652		$	2,263,153
Net income		—		—		—			163,880			—			163,880			—		—		—			16,260			—			16,260
Shares issued for stock compensation		308		308		(308	)		—			—			—			233		233		(233	)		—			—			—
Equity-based compensation expense		—		—		2,056			—			—			2,056			—		—		2,279			—			—			2,279
Pension plans and OPEB obligations, net of tax		—		—		—			—			7,480			7,480			—		—		—			—			(131	)		(131	)
Cash flow hedges, net of tax		—		—		—			—			43,276			43,276			—		—		—			—			(17,335	)		(17,335	)
Dividends on common stock, $0.44 per share		—		—		—			(30,524	)		—			(30,524	)
Common dividends, $0.45 per share																		—		—		—			(35,962	)		—			(35,962	)
Other transactions, net		—		—		(25	)		(78	)		—			(103	)		—		—		84			(85	)		—			(1	)
Balance, March 31, 2022		69,372	$	69,372	$	1,782,940		$	(147,632	)	$	7,518		$	1,712,198
Balance, March 31, 2023																		79,916	$	79,916	$	2,296,927		$	(228,766	)	$	80,186		$	2,228,263


	Common Stock				Additional Paid-			Accumulated			Accumulated Other Comprehensive			Total Stockholders'			Common Stock				Additional Paid-			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
(in thousands, except per share amounts)	Shares		Amount		in Capital			Deficit			Loss			Equity			Shares		Amount		in Capital			Deficit			Income (Loss)			Equity
Balance, December 31, 2020		66,876	$	66,876	$	1,674,576		$	(315,510	)	$	(120,989	)	$	1,304,953
Balance, December 31, 2021																		69,064	$	69,064	$	1,781,217		$	(280,910	)	$	(43,238	)	$	1,526,133
Net income		—		—		—			131,106			—			131,106			—		—		—			163,880			—			163,880
Shares issued for stock compensation		166		166		(166	)		—			—			—			308		308		(308	)		—			—			—
Equity-based compensation expense		—		—		1,930			—			—			1,930			—		—		2,056			—			—			2,056
Pension plans and OPEB obligations, net of tax		—		—		—			—			2,953			2,953			—		—		—			—			7,480			7,480
Cash flow hedges, net of tax		—		—		—			—			64,107			64,107			—		—		—			—			43,276			43,276
Dividends on common stock, $0.41 per share		—		—		—			(27,484	)		—			(27,484	)
Common dividends, $0.44 per share																		—		—		—			(30,524	)		—			(30,524	)
Other transactions, net		—		—		81			(97	)		—			(16	)		—		—		(25	)		(78	)		—			(103	)
Balance, March 31, 2021		67,042	$	67,042	$	1,676,421		$	(211,985	)	$	(53,929	)	$	1,477,549

Balance, March 31, 2022																		69,372	$	69,372	$	1,782,940		$	(147,632	)	$	7,518		$	1,712,198

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INDEX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



Note 1: Basis of Presentation	10
Note 2: Segment Information	11
Note 3: Earnings Per Share	13
Note 4: Certain Balance Sheet Components	13
Note 5: Debt	14
Note 6: Derivative Instruments	15
Note 7: Fair Value Measurements	1615
Note 8: Equity-Based Compensation	16
Note 9: Income Taxes	17
Note 10: Leases	1817
Note 11: Pension and Other Postretirement Employee Benefits	1918
Note 12: Components of Accumulated Other Comprehensive (Loss) Income ~~(Loss)~~	19
Note 13: CatchMark Merger	19
Note 14: Commitments and Contingencies	20

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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 ~~seven~~nine states. We are engaged in activities associated with timberland management, including the sale of timber, the management of ~~approximately~~nearly ~~1.8~~2.2 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacturing and sale of wood products and the development of real estate. Our timberlands, real estate development projects and all of our wood products facilities are located within the continental United States. The primary market for our products is the United States. We converted to a REIT effective January 1, 2006.

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, ~~2021,~~2022, as filed with the Securities and Exchange Commission on February ~~17, 2022.~~16, 2023. 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.

~~Commitments and Contingencies~~Recent Accounting Standards

~~At any given~~From time weto time, new accounting pronouncements are ~~subject to claims and actions incidental to~~issued by the operations of our business. Based on information currently available, we do not expect that any sums we may receive or have to pay in connection with any legal proceeding would have a material adverse effect on our consolidated financial position, operating results or net cash flow.

~~New~~Financial Accounting Standards ~~Being Evaluated~~

~~In March 2020,~~Board or other standard setting bodies and are adopted by the ~~FASB issued ASU 2020-04,~~ ~~Reference Rate Reform (Topic 848) Facilitation~~company as of the ~~Effects~~specified effective date. For the three months ended March 31, 2023, there were no new accounting pronouncements that management believes materially affect the company’s present or future results of ~~Reference Rate Reform on Financial Reporting~~. ASU 2020-04 contains practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The expedients and exceptions provided by this guidance apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR)operations, overall financial condition, liquidity or another reference rate expected to be discontinued as a result of reference rate reform. The guidance in ASU 2020-04, which can be applied immediately, is optional and may be elected over time as reference rate reform activities occur. This guidance is not applicable to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022. Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity was expected to be completed. Our credit agreement, variable rate term loans with $~~403.5~~ ~~million in principal, and interest rate derivative agreements have an interest rate tied to LIBOR. We continue to evaluate the impact of th~~e guidance, are monitoring the developments regarding the alternative rates, will work with our lenders and counterparties to identify a suitable replacement rate, may amend certain debt and interest rate derivative agreements to accommodate those rates, and may apply elections allowed under the standard as applicable as additional changes in the market occur.disclosures.

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NOTE 2. SEGMENT INFORMATION

Our operations are organized into 3three reportable segments: Timberlands, Wood Products and Real Estate. Management activities in the Timberlands segment include planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts, oil and gas royalties and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. ~~Activities in the~~The Real Estate segment ~~include our rural timberland-holdings sales program,~~includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives, a master planned community development and a country club.

Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizeable 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:


	Three Months Ended March 31,						Three Months Ended March 31,
(in thousands)	2022			2021			2023			2022
Timberlands
Northern region
Sawlogs	$	81,504		$	76,181		$	53,325		$	81,504
Pulpwood		392			499			403			392
Other		303			300			261			303
Total Northern revenues		82,199			76,980			53,989			82,199

Southern region
Sawlogs		23,381			22,416			31,754			23,381
Pulpwood		11,627			9,161			16,132			11,627
Stumpage		3,358			764			9,233			3,358
Other		3,092			2,595			4,130			3,092
Total Southern revenues		41,458			34,936			61,249			41,458

Total Timberlands revenues		123,657			111,916			115,238			123,657

Wood Products
Lumber		250,764			229,682			113,798			250,764
Residuals and Panels		44,978			39,614			38,997			44,978
Total Wood Products revenues		295,742			269,296			152,795			295,742

Real Estate
Rural real estate		21,646			10,025			17,819			21,646
Development real estate		10,278			8,053			2,800			10,278
Other		2,141			2,235			3,244			2,141
Total Real Estate revenues		34,065			20,313			23,863			34,065

Total segment revenues		453,464			401,525			291,896			453,464
Intersegment Timberlands revenues1		(42,114	)		(47,332	)		(33,934	)		(42,114	)
Total consolidated revenues	$	411,350		$	354,193		$	257,962		$	411,350


1	Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment.

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Management uses Adjusted EBITDDA to evaluate the operating performance and effectiveness of operating strategies of our segments and allocation of resources to them. ~~Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.~~ EBITDDA is calculated as net income before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. 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 before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.


	Three Months Ended March 31,						Three Months Ended March 31,
(in thousands)	2022			2021			2023			2022
Adjusted EBITDDA:
Timberlands	$	76,434		$	67,858		$	46,639		$	76,434
Wood Products		149,951			125,555			(31	)		149,951
Real Estate		30,124			16,593			19,465			30,124
Corporate		(9,584	)		(10,710	)		(10,741	)		(9,584	)
Eliminations and adjustments		(1,363	)		(4,310	)		2,445			(1,363	)
Total Adjusted EBITDDA		245,562			194,986			57,777			245,562
Interest expense, net1		(2,894	)		(3,574	)		(199	)		(2,894	)
Depreciation, depletion and amortization		(19,502	)		(17,996	)		(31,764	)		(19,502	)
Basis of real estate sold		(10,854	)		(8,823	)		(10,631	)		(10,854	)
Net loss on fire damage		(276	)		—
CatchMark merger-related expenses								(2,209	)		—
Loss on fire damage								—			(276	)
Pension settlement charge		(14,165	)		—			—			(14,165	)
Non-operating pension and other postretirement employee benefits		(1,929	)		(3,414	)
Gain (loss) on disposal of fixed assets		3			(34	)
Non-operating pension and other postretirement employee benefit costs								(228	)		(1,929	)
Gain on disposal of fixed assets								—			3
Other								10			—
Income before income taxes	$	195,945		$	161,145		$	12,756		$	195,945

Depreciation, depletion and amortization:
Timberlands	$	12,161		$	11,417		$	20,461		$	12,161
Wood Products		7,021			6,203			11,035			7,021
Real Estate		170			155			156			170
Corporate		150			221			112			150
		19,502			17,996			31,764			19,502
Bond discounts and deferred loan fees1		372			403			409			372
Total depreciation, depletion and amortization	$	19,874		$	18,399		$	32,173		$	19,874

Basis of real estate sold:
Real Estate	$	10,860		$	8,829		$	10,631		$	10,860
Eliminations and adjustments		(6	)		(6	)		—			(6	)
Total basis of real estate sold	$	10,854		$	8,823		$	10,631		$	10,854


1	Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations.

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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,				Three Months Ended March 31,
(in thousands)	2022		2021		2023		2022
Basic weighted-average shares outstanding		69,419		67,207		80,027		69,419
Incremental shares due to:
Performance shares		140		326		97		140
Restricted stock units		64		74		43		64
Diluted weighted-average shares outstanding		69,623		67,607		80,167		69,623

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, ~~2022~~2023 and ~~2021,~~2022, there were approximately ~~114,400~~134,000 and ~~63,000~~114,400 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share as they were anti-dilutive. ~~Anti-dilutive stock-based awards could be dilutive in future periods.~~

Share Repurchase Program

On August ~~30, 2018,~~31, 2022, our board of directors authorized management to repurchase up to $~~100.0~~200.0 million of our common stock with no set time limit ~~set~~ for the repurchase (the 2022 Repurchase Program). Concurrently, the board of directors terminated the remaining repurchase authorization under a previously approved share repurchase plan.

Shares under the 2022 Repurchase Program may be repurchased ~~under the Repurchase Program~~ 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). The timing, manner, price and amount of repurchases will be determined according to, and, subject to the terms of the Trading Plan, ~~and, subject to~~ the ~~terms of the Trading Plan, the~~2022 Repurchase Program may be suspended, terminated or modified at any time for any reason.

~~We did~~ 0No~~t repurchase any~~ shares were repurchased during the three months ended March 31, ~~2022 or 2021.~~2023 and 2022. At March 31, ~~2022,~~2023, we had remaining authorization of $~~59.5~~150.0 million for future stock repurchases under the 2022 Repurchase Program. Transaction costs are not counted against authorized funds.

We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability to account for repurchases that have not been cash settled. 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, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Logs	$	32,794		$	41,199		$	24,428		$	30,586
Lumber, panels and veneer		37,539			34,528			38,526			35,888
Materials and supplies		18,478			17,780			23,013			21,262
Total inventories		88,811			93,507			85,967			87,736
Less: LIFO reserve		(21,138	)		(21,138	)		(19,778	)		(19,778	)
Total inventories, net	$	67,673		$	72,369		$	66,189		$	67,958

Property, plant and equipment


(in thousands)	March 31, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Property, plant and equipment	$	545,163		$	532,324		$	594,574		$	588,935
Less: accumulated depreciation		(247,453	)		(240,004	)		(281,783	)		(270,751	)
Total property, plant and equipment, net	$	297,710		$	292,320		$	312,791		$	318,184

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Ola, Arkansas sawmill fire

On June 13, 2021, a fire occurred at our Ola, Arkansas sawmill. There were no injuries or environmental issues from the fire. The damage was principally limited to the large log primary breakdown area of the mill. The planer mill, kiln, and shipping department were not affected. The new equipment has been installed and the large log line restarted in September 2022. We have adequate property damage and business interruption insurance and expect to be reimbursed for both property damage and business interruption losses by our insurance carriers, subject to ~~an applicable deductible. We recognized~~a $2.0 million deductible, under which we filed a claim with the insurance carriers. Through December 31, 2022, we received a total of $~~15.0~~50.0 million ~~in initial~~from the insurance ~~recoveries~~carriers for both property damage ~~associated with the fire~~and business interruption proceeds at the ~~sawmill during the third quarter of 2021.~~Ola sawmill. ~~NaN~~No insurance ~~recoveries for property damage or business interruption losses~~proceeds were received for the ~~fire at the sawmill were recorded~~claim during the three months ended March 31, ~~2022 as discussions with~~2023. We are in the process of finalizing our insurance ~~carriers are ongoing.~~claim and expect to receive the remaining insurance proceeds in 2023. Insurance recoveries ~~will be~~are recorded when deemed probable and reasonably estimable.

Timber and timberlands


(in thousands)	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Timber and timberlands	$	1,586,628	$	1,597,011	$	2,397,681	$	2,416,134
Logging roads		84,702		85,660		91,275		92,238
Total timber and timberlands, net	$	1,671,330	$	1,682,671	$	2,488,956	$	2,508,372

Accounts payable and accrued liabilities


(in thousands)	March 31, 2022		December 31, 2021		March 31, 2023		December 31, 2022
Income taxes payable	$	35,421	$	1,134
Accrued payroll and benefits		19,084		28,944	$	15,920	$	29,051
Accounts payable		10,419		12,749		11,510		12,241
Deferred revenue1		9,671		8,392		8,606		10,860
Other accrued taxes		7,310		5,714
Accrued interest		4,468		6,046		6,603		7,778
Accrued taxes						8,629		7,161
Other current liabilities		15,216		15,230		27,000		27,770
Total accounts payable and accrued liabilities	$	101,589	$	78,209	$	78,268	$	94,861

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 certain post-close obligations for real estate sales. These contract liabilities are recognized over the term of the contracts, 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, ~~2022,~~2023, our total outstanding principal on our long-term debt of $1.0 billion included $~~693.5~~971.0 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. ~~Included in the Amended Term Loan Agreement is a $40.0~~ ~~million term loan that we expect to refinance upon its maturity in~~ ~~December 2022~~. Certain borrowings under the Amended Term Loan Agreement are at one-month SOFR-indexed variable rates, ~~of one or three-month LIBOR~~ plus a spread between ~~1.68~~1.66% and ~~2.10~~2.30%. We have entered into SOFR-indexed interest rate swaps ~~for~~to fix the interest rate on these variable rate term ~~loans to fix the interest rate.~~loans. See Note: 6 Derivative Instruments for additional information.

CREDIT AGREEMENT

At March 31, ~~2022,~~2023, there were no borrowings under our $300.0 million revolving line of credit andapproximately $~~1.0~~0.9 million of our revolving line of credit was utilized for outstanding letters of credit. As provided in the revolving line of credit agreement, borrowings may be increased by up to an additional $500.0 million. The revolving line of credit agreement also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of $25.0 million for swing line loans. Usage under either or both ~~subfacilities~~sub facilities reduces availability under the revolving line of credit. We may utilize borrowings under the credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.

We were in compliance with all debt and credit agreement covenants at March 31, ~~2022.~~2023.

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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. ~~As of~~ ~~March 31, 2022, we have interest rate swaps associated with $403.5~~ ~~million of term loan debt. These swaps are cash flow hedges that convert variable rates ranging from one-month and three-month LIBOR plus~~ ~~1.68% to~~ ~~2.10%, to fixed rates ranging from~~ ~~3.04% to~~ ~~4.75%. Our~~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.

At March 31, 2023, we have interest rate swaps associated with $721.0 million of SOFR-indexed term loan debt. These cash flow hedges convert variable rates ranging from one-month SOFR plus 1.66% to 2.30%, to fixed rates ranging from 2.19% to 4.79% before patronage credits from lenders. At March 31, 2023, we also have $250.0 million of forward-starting interest rate swaps designated as cash flow hedges for expected future debt refinances that require settlement on the stated maturity date.

The gross fair values of derivative instruments at March 31, 2023 and December 31, 2022, were $124.3 million and $144.6 million, respectively, all of which were classified in Other assets, non-current on our Condensed Consolidated Balance Sheets. Derivative instruments that mature within one year, as a whole, are classified as current.

The following table details the effect of derivatives on our Condensed Consolidated Statements of Operations:


		Three Months Ended March 31,
(in thousands)	Location	2023			2022
Derivatives designated in cash flow hedging relationships:
Interest rate contracts
(Loss) income recognized in other comprehensive (loss) income, net of tax		$	(13,591	)	$	41,330
Amounts reclassified from accumulated other comprehensive income (loss), net of tax1	Interest expense, net	$	3,744		$	(1,946	)

Interest expense, net		$	199		$	2,894

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 (loss) income related to certain terminated hedges and adjustments to interest expense resulting from amortization of inception value of certain off-market designated hedges. Net cash received or paid is included within Interest expense, net in the Condensed Consolidated Statements of Operations.

At March 31, 2023, the amount of net ~~losses~~gains expected to be reclassified into earnings in the next 12 months is approximately $~~1.4~~15.6 million. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate amount recognized in earnings is based on the ~~LIBOR rate~~SOFR rates at the time of net swap cash payments.

~~As of March 31, 2022, we have $567.5~~ million of forward starting interest rate swaps designated as cash flow hedges. These forward starting interest rate swaps effectively hedge the variability in future benchmark interest payments attributable to changes in interest rates on $~~567.5~~ ~~million of future debt refinances through~~ ~~January 2029~~ b~~y converting the benchmark interest rates to fixed interest rates. In addition, the cash flow hedges for future debt refinances require settlement on the stated maturity date.~~

~~The gross fair values of derivative instruments on our~~ ~~Condensed Consolidated Balance Sheets~~ ~~are as follows:~~

Asset Derivatives

Liability Derivatives

(in thousands)

Location

March 31, 2022

December 31, 2021

Location

March 31, 2022

December 31, 2021

Derivatives designated in cash flow hedging relationships:

Interest rate contracts

Other assets, current1

$
4,673

$
2,191

Accounts payable and accrued liabilities1

$
0

$
—

Interest rate contracts

Other assets, non-current

57,487

31,306

Other long-term obligations

7,197

24,060

$
62,160

$
33,497

$
7,197

$
24,060


1	~~Derivative instruments that mature within one year, as a whole, are classified as current.~~

~~The following table details the effect of derivatives on our~~ ~~Condensed Consolidated Statements of Operations~~:

Three Months Ended March 31,

(in thousands)

Location

2022

2021

Derivatives designated in cash flow hedging relationships:

Interest rate contracts

Income recognized in other comprehensive income, net of tax

$
41,243

$
61,875

Amounts reclassified from accumulated other comprehensive income (loss), net of tax1

Interest expense

$
(2,033
)

$
(2,232
)

Interest expense, net

$
2,894

$
3,574


1	Realized losses on interest rate contracts consist of net cash received or paid and interest accruals on the interest rate swaps during the periods. Net cash received or paid is included in the supplemental cash flow information within interest, net of amounts capitalized in the ~~Condensed Consolidated Statements of Cash Flows~~.

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NOTE 7. FAIR VALUE MEASUREMENTS

The following table presents the estimated fair values of our financial instruments:


	March 31, 2022						December 31, 2021						March 31, 2023						December 31, 2022
(in thousands)	Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value			Carrying Amount			Fair Value
Derivative assets related to interest rate swaps (Level 2)	$	62,160		$	62,160		$	33,497		$	33,497		$	124,328		$	124,328		$	144,583		$	144,583
Derivative liabilities related to interest rate swaps (Level 2)	$	(7,197	)	$	(7,197	)	$	(24,060	)	$	(24,060	)

Long-term debt, including current portion (Level 2):
Term loans	$	(691,282	)	$	(694,353	)	$	(691,119	)	$	(705,135	)	$	(969,432	)	$	(963,277	)	$	(969,269	)	$	(961,632	)
Revenue bonds		(65,735	)		(66,754	)		(65,735	)		(69,278	)		(65,735	)		(64,788	)		(65,735	)		(64,602	)
Medium-term notes		—			—			(3,000	)		(3,007	)
Total long-term debt1	$	(757,017	)	$	(761,107	)	$	(759,854	)	$	(777,420	)	$	(1,035,167	)	$	(1,028,065	)	$	(1,035,004	)	$	(1,026,234	)

Company owned life insurance asset (COLI) (Level 3)	$	4,002		$	4,002		$	3,923		$	3,923		$	4,512		$	4,512		$	4,311		$	4,311


1	The carrying amount of long-term debt includes principal and unamortized discounts.

The fair value of interest rate swaps ~~are~~is determined using a discounted cash flow analysis, based on ~~third party~~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.

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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.

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, ~~2022,~~2023, approximately ~~0.7~~1.9 million shares are available for future use under our long-term incentive plans.

Share-based compensation activity during the three months ended March 31, ~~2022~~2023, included the following:


(Shares in thousands)	Granted		Vested		Forfeited
							Granted		Vested		Forfeited
Performance Share Awards (PSAs)		92,490		—		971		106,342		—		751
Restricted Stock Units (RSUs)		34,324		500		1,323		70,901		—		250

Approximately ~~0.3~~0.2 million shares of common stock as a result of PSA and RSU vesting during 2022 were issued to employees during the three months ended March 31, ~~2022 as a result of PSA and RSU vesting during 2021 and 2022.~~2023.

The following ~~table~~ details ~~equity-based~~ compensation expense and the related income tax ~~benefit:~~benefit for company specific equity-based awards:

Three Months Ended March 31,

(in thousands)

2022

2021

Equity-based compensation expense:

Performance share awards

$
1,298

$
1,224

Restricted stock units

709

665

Deferred compensation stock equivalent units expense

49

41

Total equity-based compensation expense

$
2,056

$
1,930

Total tax benefit recognized for equity-based expense

$
100

$
89

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	Three Months Ended March 31,
(in thousands)	2023		2022
Equity-based compensation expense:
Performance share awards	$	1,421	$	1,298
Restricted stock units		809		709
Deferred compensation stock equivalent units expense		49		49
Total equity-based compensation expense	$	2,279	$	2,056

Total tax benefit recognized for equity-based expense	$	122	$	100

Performance Share Awards

The weighted average grant date fair value of PSAs granted in ~~2022~~2023 was $~~76.18~~61.21 per share. PSAs granted under the stock incentive plans have a three-year performance period and shares are issued at the end of the period if the performance measures are met. The number of shares actually issued, as a percentage of the amount subject to the PSA, could range from 0% to 200%. PSAs granted under the stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of the performance measurement period, the recipients will receive dividend equivalents in the form of additional shares of common stock at the ~~time~~date of ~~payment~~settlement equal to the dividends that would have been paid on the shares earned had the recipients owned the shares during the three-year period. Therefore, the shares are not considered participating securities.

The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards granted in ~~2022:~~2023:


Stock price as of valuation date	$	55.02		$	47.55
Risk-free rate		1.79	%		4.14	%
Expected volatility		45.69	%		36.24	%
Expected dividend yield1		—			—
Expected term (years)		3.00			3.00


1	Full dividend reinvestment assumed.

Restricted Stock Units

The weighted average fair value of all RSUs granted during the three months ended March 31, ~~2022~~2023, was $~~54.79~~47.55 per share. The fair value of RSUs granted equaled our common share price on the date of grant factoring in any required post-vesting holding periods. The RSU awards granted accrue dividend equivalents based on dividends paid during the RSU vesting period. Recipients will receive dividend equivalents in the form of additional shares of common stock at the date the vested RSUs are settled. Any forfeited RSUs will not receive dividends. Therefore, the shares are not considered participating securities.

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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 shareholders. 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.~~differences and discrete items.

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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, 2022		December 31, 2021		Classification	March 31, 2023		December 31, 2022
Assets
Operating lease assets	Other long-term assets	$	7,794	$	8,514	Other long-term assets	$	8,497	$	9,306
Finance lease assets1	Property, plant and equipment, net		10,012		10,663	Property, plant and equipment, net		12,416		13,213
Total lease assets		$	17,806	$	19,177		$	20,913	$	22,519

Liabilities
Current:
Operating lease liabilities	Accounts payable and accrued liabilities	$	2,845	$	3,021	Accounts payable and accrued liabilities	$	2,293	$	2,570
Finance lease liabilities	Accounts payable and accrued liabilities		3,550		3,577	Accounts payable and accrued liabilities		4,559		4,834
Noncurrent:
Operating lease liabilities	Other long-term obligations		5,013		5,598	Other long-term obligations		6,199		6,716
Finance lease liabilities	Other long-term obligations		6,342		6,972	Other long-term obligations		7,626		8,179
Total lease liabilities		$	17,750	$	19,168		$	20,677	$	22,299


1	Finance lease assets are presented net of accumulated amortization of $~~5.5~~9.0 million and $~~4.5~~7.9 million as of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

The following table presents the components of lease expense:


	Three Months Ended March 31,				Three Months Ended March 31,
(in thousands)	2022		2021		2023		2022
Operating lease costs1	$	947	$	1,328	$	886	$	947
Finance lease costs:
Amortization of leased assets		929		589		1,231		929
Interest on lease liabilities		67		51
Interest expense						111		67
Net lease costs	$	1,943	$	1,968	$	2,228	$	1,943


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,					Three Months Ended March 31,
(in thousands)		2022		2021			2023		2022
Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:					Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	Operating cash flows for operating leases	$	994	$	1,368	Operating cash flows for operating leases	$	891	$	994
Operating cash flows for finance leases	Operating cash flows for finance leases	$	67	$	51	Operating cash flows for finance leases	$	111	$	67
Financing cash flows for finance leases	Financing cash flows for finance leases	$	938	$	577	Financing cash flows for finance leases	$	1,237	$	938
Leased assets exchanged for new lease liabilities:	Leased assets exchanged for new lease liabilities:					Leased assets exchanged for new lease liabilities:
Operating leases	Operating leases	$	154	$	124	Operating leases	$	—	$	154
Finance leases	Finance leases	$	281	$	801	Finance leases	$	526	$	281

1817

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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)	2023			2022			2023			2022
Service cost	$	1,356		$	1,849		$	27		$	79
Interest cost		3,138			2,812			294			229
Expected return on plan assets		(3,028	)		(3,145	)		—			—
Amortization of prior service cost		11			18			—			156
Amortization of actuarial (gain) loss		(21	)		1,954			(166	)		(95	)
Net periodic cost before pension settlement charge		1,456			3,488			155			369
Pension settlement charge		—			14,165			—			—
Total net periodic cost	$	1,456		$	17,653		$	155		$	369

During the three months ended March 31, 2023 and 2022, funding of pension and other postretirement employee benefit plans was $1.1 million and $1.3 million,respectively.

Pension Annuitization

In March 2022, we transferred $75.6 million of our qualified pension plan (the Plan) assets to an insurance company for the purchase of a group annuity contract. As a result of the transaction, the insurance company assumed responsibility for annuity administration and benefit payments to select retirees and terminated vested participants, with 0no change to participants' pension benefits. ~~In connection with this transaction we~~We recorded a non-cash pretax settlement charge of $14.2 million in non-operating expense, net, as a result of accelerating the recognition of actuarial losses included in Accumulated Other Comprehensive Income (Loss) that would have been recognized in future periods.

The settlement triggered a remeasurement of ~~the Plan's~~plan assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the Plan as of March 31, 2022, and to calculate the related net periodic benefit cost for the remainder of 2022 to ~~3.95% from~~ ~~3.00%. All other pension assumptions remain unchanged. The net effect of the remeasurement was~~liabilities resulting in a $~~6.2~~ ~~million~~ reduction in the funded status of the Plan ~~primarily driven by lower returns on Plan assets. This change in funded status was reflected in our~~ ~~Condensed Consolidated Balance Sheets~~ as of ~~March 31, 2022.~~

~~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)

2022

2021

2022

2021

Service cost

$
1,849

$
2,045

$
79

$
168

Interest cost

2,812

2,633

229

317

Expected return on plan assets

(3,145
)

(3,382
)

—

—

Amortization of prior service cost (credit)

18

21

156

(298
)
Amortization of actuarial loss (gain)

1,954

3,578

(95
)

545

Net periodic cost before pension settlement charge

3,488

4,895

369

732

Pension settlement charge

14,165

—

—

—

Total net periodic cost

$
17,653

$
4,895

$
369

$
732

~~During the three months ended March 31, 2022 and 2021, funding of pension and other postretirement employee benefit plans was~~approximately $~~1.3~~6.2 million ~~and $~~during the first quarter of 2022.~~1.4~~ ~~million, respectively.~~

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NOTE 12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME ~~(LOSS)~~

The following table details changes in amounts included in our Accumulated Other Comprehensive Income (Loss) (AOCI) by component on our Condensed Consolidated Balance Sheets, net of tax:

Three Months Ended March 31,

(in thousands)

2022

2021

Pension Plans

Balance at beginning of period

$
49,579

$
79,025

Net loss arising during the period

4,587

—

Effect of pension settlement

(10,553
)

—

Amounts reclassified from AOCI to earnings

(1,469
)

(2,770
)
Balance at end of period

42,144

76,255

Other Postretirement Benefit Plans

Balance at beginning of period

1,790

14,783

Amounts reclassified from AOCI to earnings

(45
)

(183
)
Balance at end of period

1,745

14,600

Cash Flow Hedges

Balance at beginning of period

(8,131
)

27,181

Amounts arising during the period

(41,243
)

(61,875
)
Amounts reclassified from AOCI to earnings

(2,033
)

(2,232
)
Balance at end of period

(51,407
)

(36,926
)
Accumulated other comprehensive (income) loss, end of period

$
(7,518
)

$
53,929


	Three Months Ended March 31,
(in thousands)	2023			2022
Pension and Other Postretirement Employee Benefits
Balance at beginning of period	$	(28,494	)	$	(51,369	)
Unrecognized (losses) gains arising in AOCI during the period:
Gross		—			(6,157	)
Tax effect		—			1,570
Reclassifications from AOCI to earnings:
Pension settlement1		—			14,165
Other1		(176	)		2,033
Tax effect		45			(4,131	)
Net of tax amount		(131	)		7,480
Balance at end of period		(28,625	)		(43,889	)
Cash Flow Hedges
Balance at beginning of period		126,146			8,131
Unrecognized (losses) gains arising in AOCI during the period:
Gross		(13,881	)		43,492
Tax effect		290			(2,162	)
Reclassifications from AOCI to earnings:
Gross2		(3,837	)		2,033
Tax effect		93			(87	)
Net of tax amount		(17,335	)		43,276
Balance at end of period		108,811			51,407
Accumulated other comprehensive income, end of period	$	80,186		$	7,518

1 Included in the computation of net periodic pension costs.

2 Included in Interest expense, net on the Condensed Consolidated Statement of Operations.

See Note 11: Pension and Other Postretirement Employee Benefits and Note 6: Derivative Instruments for additional information.

NOTE 13. CATCHMARK MERGER

On September 14, 2022, CatchMark Timber Trust, Inc. (CatchMark) and CatchMark Timber Operating Partnership, L.P. (the Partnership) merged into a wholly owned subsidiary (Merger Sub) of PotlatchDeltic, pursuant to the terms of a merger agreement dated May 29, 2022, with the Merger Sub surviving the mergers. CatchMark owned approximately 348,000 acres of superior site index timberlands located in Alabama, Georgia and South Carolina. The CatchMark timber and timberlands assets and operations are included in our Timberlands segment within the Southern region.

As a result of the merger, we issued approximately 11.5 million shares of PotlatchDeltic common stock, including: (i) 11.3 million shares in exchange for the outstanding shares of CatchMark common stock, which included unvested CatchMark share-based awards that fully vested upon closing of the merger; and (ii) 0.2 million shares in exchange for the Partnership OP Units. We capitalized transaction costs of $9.3 million for items such as investment banking fees, legal services, and other professional fees directly attributable to the merger.

We accounted for the transaction as an asset acquisition as substantially all the value of the acquisition was concentrated in the acquired timber and timberlands. We allocated the cost of the acquisition to the net assets acquired based on their relative estimated fair value on the acquisition date. This resulted in an allocation of $782.3 million to timber and timberlands, $3.0 million to intangible assets, $32.0 million to other assets and $23.6 million for cash acquired in the merger. Additionally, we assumed $323.1 million of liabilities including $300.0 million of outstanding long-term debt. Immediately following the merger, we refinanced $277.5 million of the long-term debt assumed in the merger and repaid the remaining $22.5 million with cash on hand. We also entered into $277.5 million of interest rate swaps to fix the interest rates on the refinanced long-term debt.

During the three months ended March 31, 2023, we incurred non-capitalizable merger costs in connection with the CatchMark merger of approximately $2.2 million. These fees consisted primarily of post-merger period fees for professional services and are included in CatchMark merger-related expenses in our Condensed Consolidated Statements of Operations.

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NOTE 14. COMMITMENTS AND CONTINGENCIES

At any given time, we are subject to claims and actions incidental to the operations of our business. Based on information currently available, we do not expect that any sums we may receive or have to pay in connection with any legal proceeding would have a materially adverse effect on our consolidated financial position, 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 GLLA is a sediment remediation program administered by EPA that provides up to 65% federal funding for the remediation of contaminated sediments in the Great Lakes region. The GLLA program requires at least 35% cash or in-kind contributions from non-federal sponsors (NFS). 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.

The identified sediment remediation project at Thomson Reservoir is downstream from the Plant. The Plant was identified for potential partnership with EPA and MPCA on this project based on the Plant’s historic direct discharges of wastewater and leachate from the Plant’s landfill into the St. Louis River prior to the re-routing of the discharges in 1979 to a public wastewater treatment facility. 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 program, subject to an equitable division with the MPCA of the NFS share of the costs. In March 2023, we reached an agreement in principle with MPCA on the division of NFS share of costs.

We accrued $5.6 million at December 31, 2022, for our estimated contribution to the remediation project. The project is still pending EPA approval and, if approved, negotiation of a Project Agreement between the EPA, the MPCA, and us will be required. While it is reasonably possible that we may incur an additional liability as this project develops, we are unable to estimate at this time the amount of additional charges, if any, which may be required for this matter in the future.

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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,~~inflation; expected seasonal fluctuations in our business ~~segments,~~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; ~~the expected impact from~~anticipated insurance coverage for the Ola, Arkansas sawmill fire ~~anticipated insurance coverage,~~ and expected timing to ~~complete reconstruction and installation activities and return to full operation;~~receive the remaining insurance proceeds; expectations regarding debt obligations, interest payments and debt refinancing; ~~expectations regarding the market transition away from LIBOR and our ability to identify a suitable replacement rate;~~ maintenance of our investment grade credit rating; expectations regarding the 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 ~~residential and commercial~~ real estate development sales; sufficiency of cash and any necessary borrowings to meet operating requirements; expected ~~2022~~2023 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 resulting from the project; 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 expects, may, could, should, will, believes, anticipates, estimates, projects, intends, plans, targets or approximately, 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:

•

the effect of general economic conditions, including employment rates, interest rate levels, discount rates, housing starts and the general availability of financing for home mortgages;

•

availability of labor and developable land;

•

changes in the level of residential and commercial construction and remodeling activity;

•

changes in tariffs, quotas and trade agreements involving wood products;

•

changes in demand for our products and real estate;

•

changes in timber prices, harvest levels, and timberland values;

•

changes in silviculture, production and production capacity in the forest products industry;

•

competitive pricing pressures for our products;

•

disruptions or inefficiencies in our supply chain and/or operations and unanticipated manufacturing disruptions;

•

the effect of weather on our harvesting and manufacturing activities;

•

the risk of loss from fire (such as the Ola, Arkansas sawmill fire and fires on our timberland), floods, windstorms, hurricanes, pest infestation or other natural disasters;

•

changes in the cost or availability of shipping and transportation;

•

changes in principal ~~expenses;~~

•

expenses, recent increases in inflation and the extent to which such increases will continue;

•

unforeseen environmental liabilities or expenditures;

•

changes in general and industry-specific environmental laws and regulations, and interpretations thereof by regulatory agencies;

•

impact of ~~the coronavirus (COVID-19 and its variants)~~disease outbreaks ~~governmental responses to such outbreaks, and anticipated recovery from the pandemic on our business, suppliers, consumers, customers and employees;~~or other human health threats; and

•

~~disruptions or inefficiencies in~~ our ~~supply chain and/or operations.~~ability and our contractors’ ability to implement the modernization plan for the Waldo, Arkansas sawmill.

2021

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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, ~~2021.~~2022. 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 ~~approximately 1.8~~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 sizeable 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.

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 Timberlands segment's 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. Rural real estate dispositions and acquisitions can be adversely affected when access to any properties to be sold or considered for acquisition are limited due to adverse weather conditions. Development real estate sales at Chenal Valley occur throughout the year, though historically most sales take place in the second half of the year as builders prepare for the following year's spring and summer traditional home building and buying season. The timing of development real estate sales can also be impacted by contractor availability needed to complete infrastructure and other improvements prior to bringing developed real estate to market.

~~Additionally, our~~Our business segments have been and will continue to be influenced by a variety of other 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 (such as the Ola, Arkansas sawmill fire and fires 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 sequestration and carbon capture and storage activities.

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 Adjusted EBITDDA and Cash Available for Distribution (CAD), which are defined and further explained and reconciled to the nearest GAAP measure in the Liquidity and Performance Measures section below. Our definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to and not a substitute for financial information prepared in accordance with GAAP.

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Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and allocating resources between segments, and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. This measure should not be considered in isolation from and is not intended to represent an alternative to our results reported in accordance with GAAP. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business and the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.

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Our definition of EBITDDA and Adjusted EBITDDA may be different from similarly titled measures reported by other companies. We define EBITDDA as net income 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. See Note 2: Segment Information in the Notes to the Condensed Consolidated Financial Statements for information related to the use of segment Adjusted EBITDDA.

Business and Economic Trends Affecting Our Operations

The demand for timber is directly affected by the underlying demand for lumber and other ~~wood-products,~~wood products, as well as by the demand for pulp, paper and packaging. Rising construction costs, a persistently tight labor pool, supply chain challenges and higher mortgage rates negatively impact the pace of housing starts and repair and remodel projects. Our Timberlands and Wood Products segments are impacted by demand for new homes in the United ~~States~~States. Higher interest rates and ~~by repair~~inflation have caused consumer confidence and ~~remodeling activity. In April 2022,~~ the ~~U.S. Census Bureau reported~~pace of housing starts ~~for~~to decline. The average 30-year fixed mortgage rate increased during the past twelve months from approximately 4.7% at the end of March 2022 ~~were 1.8 million on~~to approximately 6.3% at the end of March 2023. On a ~~seasonally adjusted annual basis, which was up 3.9% from March 2021. In April 2022,~~positive note, the National Association of Home Builders (NAHB) reported the NAHB/Wells Fargo Housing Market Index (HMI) was ~~at 77. While~~45 in April 2023, the ~~HMI continues to indicate homebuilder~~fourth straight month builder confidence ~~in the market for newly built single-family homes remains strong, the HMI~~ has ~~experienced four straight months of decline and is the lowest level since last summer.~~increased. The repair and remodel sector, which ~~has experienced steady growth during~~is the ~~pandemic-driven home improvement movement that began in early 2020,~~largest market segment for lumber demand, continues to exhibit favorable underlying fundamentals and is expected to ~~return~~continue to grow in 2023, but at a ~~more stable growth~~slower rate ~~in 2022.~~than recent years.

~~Overall,~~While housing starts have declined in recent months, we believe long-term housing fundamentals remain ~~strong, driven by~~favorable, due to a shortage of homes, ~~low~~lower than historical average existing inventory for sale, a large millennial demographic ~~entering~~in their prime home-buying years, ~~interest rates remaining below long-term historical averages, the continued remote work evolution, high home equity levels~~ and an aging existing housing stock supporting repair and remodel demand. These fundamentals are key drivers for our business, and we continue to expect that lumber prices will remain structurally higher than long-term historical averages due to continued lumber demand and tight supply. Rising construction costs, a persistently tight labor pool, supply chain challenges and consumer concerns about rising mortgage rates could negatively impact the pace of housing starts and repair and remodel projects.business.

Inflation, which appears to have peaked in 2022, has impacted our business, especially for fuel, energy, and repair and maintenance ~~costs, although we believe there are offsetting impacts including wood product prices and our timberland’s effectiveness as an~~costs. The annual inflation ~~hedge. Over~~rate in the ~~last twelve months, the Consumer Price Index (all items) increased by 8.5 percent before seasonal adjustments,~~U.S. slowed for a ninth consecutive period to 5.0% in March 2023, while the Producer Price Index (final demand) ~~increased by 11.2 percent~~slowed to 2.7% on an unadjusted ~~basis. Additionally, transportation challenges rising from shortage~~basis compared to 6.2% at the end of ~~truck and railcar availability linger in certain markets. These transportation issues could lead to higher freight costs and shipping challenges through the foreseeable future.~~December 2022.

In our Timberlands segment, ~~sawlog prices benefitted from~~a significant portion of our Idaho sawlog prices ~~being~~are indexed on a four-week lag to lumber prices ~~continued strong Northern cedar sawlog prices, increased demand for Southern pine sawlogs~~ and experienced a ~~higher mix of prime sawlogs harvested on recently acquired timberlands.~~decline in pricing during the quarter due to lower lumber prices. Our ~~Southern~~ harvest volume of ~~1.1~~2.1 million tons in the first quarter of ~~2022~~2023 was considerably higher than the first quarter of ~~2021,~~2022, primarily due to the addition of the CatchMark timberlands in mid-September 2022, strong log demand in Arkansas and Mississippi, and favorable harvest ~~conditions.~~conditions in Idaho. We expect to harvest ~~between 1.1 and 1.3~~approximately 1.6 million tons during the second quarter of 2023, with approximately ~~73% of the volume in the Southern region. For 2022, we expect to harvest approximately 6.1 million tons, with approximately 70%~~82% of the volume in the Southern region.

During the second quarter of 2021 we experienced a fire at our Ola, Arkansas ~~sawmill, which had an annual capacity of 150 million board feet prior to the fire.~~sawmill. The damage was principally limited to the large log primary breakdown machine center. The planer mill, kiln, and shipping department were not affected. We have adequate property damage and business interruption insurance, subject to an applicable ~~deductible,~~deductible. The new equipment has been installed and ~~have begun~~ the ~~reconstruction process at the sawmill. We expect to install the new large-log~~large log line restarted in ~~the third quarter~~September 2022. The sawmill's operating run rate has reached its expected annual capacity of ~~2022 and complete the start-up phase by early 2023.~~150 million board feet.

~~For the first quarter of 2022~~In our Wood Products segment, ~~benefited~~lumber shipments benefitted from increased ~~price realizations. Lumber~~ shipments ~~continue to be impacted by the~~at our Ola, ~~sawmill fire.~~Arkansas sawmill. We shipped ~~approximately 233~~262 million board feet of lumber during the first quarter of ~~2022~~2023 and expect to ship between ~~250~~270 and ~~260~~280 million board feet of lumber during the second quarter of ~~2022. For 2022, we expect to ship approximately 1.0 billion board feet of lumber. This estimate reflects the expected timing of the start-up of the large-log line at our Ola, Arkansas sawmill.~~2023.

Our Real Estate segment first quarter ~~2022~~2023 results ~~reflect strong Chenal Valley development sales and higher~~benefitted from rural land sales, ~~prices.~~including a conservation land sale in Alabama and land acquired in the CatchMark merger. We expect to sell approximately ~~12,000~~2,600 acres of rural land and 40approximately 35 residential lots during the second quarter of ~~2022. For 2022, we expect to sell approximately 20,000 acres of rural land and 165 residential lots.~~2023.

2223

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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,									Three Months Ended March 31,
(in thousands)	2022			2021			Change			2023			2022			Change
Revenues	$	411,350		$	354,193		$	57,157		$	257,962		$	411,350		$	(153,388	)
Costs and expenses:
Cost of goods sold		179,847			169,302			10,545			224,350			179,847			44,503
Selling, general and administrative expenses		16,294			16,758			(464	)		18,230			16,294			1,936
Net loss on fire damage		276			—			276
CatchMark merger-related expenses											2,209			—			2,209
Loss on fire damage											—			276			(276	)
		196,417			186,060			10,357			244,789			196,417			48,372
Operating income		214,933			168,133			46,800			13,173			214,933			(201,760	)
Interest expense, net		(2,894	)		(3,574	)		680			(199	)		(2,894	)		2,695
Pension settlement charge		(14,165	)		—			(14,165	)		—			(14,165	)		14,165
Non-operating pension and other postretirement benefit costs		(1,929	)		(3,414	)		1,485
Non-operating pension and other postretirement employee benefit costs											(228	)		(1,929	)		1,701
Other											10			—			10
Income before income taxes		195,945			161,145			34,800			12,756			195,945			(183,189	)
Income taxes		(32,065	)		(30,039	)		(2,026	)		3,504			(32,065	)		35,569
Net income	$	163,880		$	131,106		$	32,774		$	16,260		$	163,880		$	(147,620	)
Total Adjusted EBITDDA1	$	245,562		$	194,986		$	50,576		$	57,777		$	245,562		$	(187,785	)


1	See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP measure, for each of the periods presented.

First Quarter ~~2022~~2023 Compared with First Quarter ~~2021~~2022

Revenues

Revenues were ~~$411.4~~$258.0 million, ~~an increase~~a decrease of ~~$57.2~~$153.4 million compared with the first quarter of ~~2021~~2022 primarily due to ~~higher~~lower lumber ~~and~~prices, lower Northern sawlog prices, ~~increased harvest volumes~~and fewer residential lot and commercial acre sales in ~~the Southern region and a 1,760-acre rural land sale in the South for $7,500 per acre to an energy provider for a planned commercial solar farm.~~Chenal Valley. These ~~increases~~decreases were partially offset by ~~lower~~increased harvest volumes and increased lumber shipments ~~in the first quarter of 2022, which was impacted by the loss of production~~primarily at our Ola, Arkansas sawmill ~~following~~which restarted late in the third quarter of 2022 after a fire in June 2021.

Cost of goods sold

Cost of goods sold increased ~~$10.5~~$44.5 million compared with the first quarter of ~~2021 primarily~~2022 mainly due to higher manufacturing and log and haul costs primarily from inflationary price increases in areas such as diesel fuel, energy, ~~and~~ repair and ~~maintenance.~~maintenance, and increased harvest volumes. Cost of goods sold also increased in the first quarter of 2023 as a result of increased shipments at our Ola, Arkansas sawmill.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $1.9 million compared to the first quarter of 2022, primarily due to inflationary price increases and incremental administrative activities following the CatchMark merger.

CatchMark merger-related expenses

Merger-related expenses during the first quarter of 2023 were $2.2 million primarily related to post-merger fees for professional services.

Interest expense

Interest expense, net, decreased $2.7 million compared to the first quarter of 2022, primarily due to higher interest income earned on cash and cash equivalents as a result of higher short-term interest rates, partially offset by increased net interest expense associated with $277.5 million in long-term debt assumed and refinanced at attractive interest rates in connection with the CatchMark merger in September 2022.

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Pension settlement charge

In March 2022, we transferred $75.6 million of our qualified pension plan ~~(the Plan)~~ assets to an insurance company for the purchase of a group annuity contract. In connection with this transaction, we recorded a non-cash pretax settlement charge of $14.2 million.

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, 2023, we recorded income tax benefit of $3.5 million on TRS loss before tax of $13.6 million. For the three months ended March 31, 2022, we recorded income tax expense of $32.1 million on TRS income before tax of $127.3 million, which included the $14.2 million pension settlement charge. ~~For the three months ended March 31, 2021, we recorded an income tax expense of $30.0 million on TRS income before tax of $115.8 million.~~

~~Table of Contents~~

Total Adjusted EBITDDA

Total Adjusted EBITDDA for the first quarter of ~~2022 increased $50.6~~2023 decreased $187.8 million compared to the first quarter of ~~2021. The increase in Total Adjusted EBITDDA was~~2022 primarily ~~driven by higher~~due to lower lumber and Idaho sawlog prices, ~~increased harvest volumes~~fewer development sales in ~~the Southern region and the~~ ~~1,760-acre rural land sale in the South. These increases were~~ ~~partially offset by lower lumber shipments~~Chenal Valley and higher manufacturing and log and haul costs. The decrease in Adjusted EBITDDA was partially offset by increased lumber shipments and harvest activity. 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, the closest comparable GAAP measure, for each of the periods presented.

Business Segment Results

Timberlands Segment


	Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	2022		2021		Change			2023		2022		Change
Revenues1	$	123,657	$	111,916	$	11,741		$	115,238	$	123,657	$	(8,419	)
Costs and expenses:
Logging and hauling		40,082		36,468		3,614			59,209		40,082		19,127
Other		5,403		5,888		(485	)		7,536		5,403		2,133
Selling, general and administrative expenses		1,738		1,702		36			1,854		1,738		116
Timberlands Adjusted EBITDDA2	$	76,434	$	67,858	$	8,576		$	46,639	$	76,434	$	(29,795	)


1	Prior to elimination of intersegment fiber revenues of ~~$42.1~~$33.9 million and ~~$47.3~~$42.1 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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.

Table of Contents

Timberlands Segment Statistics


	Three Months Ended March 31,							Three Months Ended March 31,
Harvest Volumes (in tons)	2022		2021		Change			2023		2022		Change
Northern region
Sawlog		385,290		427,255		(41,965	)		470,790		385,290		85,500
Pulpwood		8,259		13,884		(5,625	)		8,029		8,259		(230	)
Total		393,549		441,139		(47,590	)		478,819		393,549		85,270

Southern region
Sawlog		490,093		508,073		(17,980	)		661,588		490,093		171,495
Pulpwood		379,651		326,429		53,222			492,405		379,651		112,754
Stumpage		196,513		58,413		138,100			444,279		196,513		247,766
Total		1,066,257		892,915		173,342			1,598,272		1,066,257		532,015

Total harvest volume		1,459,806		1,334,054		125,752			2,077,091		1,459,806		617,285

Sales Price/Unit ($ per ton)1
Northern region
Sawlog	$	212	$	178	$	34		$	113	$	212	$	(99	)
Pulpwood	$	47	$	36	$	11		$	50	$	47	$	3

Southern region
Sawlog	$	48	$	44	$	4		$	48	$	48	$	—
Pulpwood	$	31	$	28	$	3		$	33	$	31	$	2
Stumpage	$	17	$	13	$	4		$	21	$	17	$	4


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.

~~Table of Contents~~

Timberlands Adjusted EBITDDA

The following table summarizes Timberlands Adjusted EBITDDA variances for the three months ended March 31, ~~2022,~~2023, compared with the three months ended March 31, ~~2021:~~2022:


(in thousands)	Three Months			Three Months
Adjusted EBITDDA - prior year	$	67,858
Timberlands Adjusted EBITDDA - prior year				$	76,434
Harvest volume					14,202
Sales price and mix		10,205			(35,292	)
Harvest volume		1,388
Logging and hauling costs per unit		(3,968	)		(7,457	)
Forest management, indirect and other		951			(1,248	)
Timberlands Adjusted EBITDDA - current year	$	76,434		$	46,639

First Quarter ~~2022~~2023 Compared with First Quarter ~~2021~~2022

Timberlands Adjusted EBITDDA for the first quarter of ~~2022 increased $8.6~~2023 decreased $29.8 million compared with the ~~same period in 2021,~~first quarter of 2022, primarily as a result of the following:

•

Harvest Volume: We harvested 1.6 million tons in the Southern region during the first quarter of 2023, which was 49.9% higher than the first quarter of 2022, primarily due to harvest activity on the CatchMark timberlands acquired in mid-September 2022 and strong log demand in Arkansas and Mississippi. Northern harvest volumes increased in the first quarter of 2023 from more favorable logging and hauling conditions compared to the first quarter of 2022.

•

Sales Price and Mix: Sawlog prices in the Northern region ~~increased 19.1%~~decreased 46.7%, to ~~$212~~$113 per ton, primarily ~~from~~due to the effect of ~~higher lumber price realizations on~~lower indexed ~~sawlogs and increased cedar log~~sawlog prices in Idaho. Southern sawlog prices ~~increased 9.1%, to $48 per ton, compared to~~remained consistent with the first quarter of ~~2021, as a result of a higher mix~~ ~~of prime grade sawlogs harvested on recently acquired timberlands and~~ ~~strong demand.~~

•

~~Harvest Volume:~~ We harvested 1.1 million tons in the Southern region during the first quarter of 2022, which was 19.4% higher than the first quarter of 2021, primarily due to a severe winter storm that impacted harvest conditions in 2021. In the Northern region hauling conditions were favorable throughout the first quarter of 2021 as compared to the first quarter of 2022, where hauling conditions were more seasonally limited, resulting in a 10.8% decrease in harvest volume.2022.

•

Logging and Hauling Cost per Unit: Log and hauling costs per unit were higher primarily due to ~~increased diesel costs.~~higher log and haul rates due to capacity constraints and longer hauling distances in the South.

Table of Contents

Wood Products Segment


	Three Months Ended March 31,									Three Months Ended March 31,
(in thousands)	2022			2021			Change			2023			2022			Change
Revenues	$	295,742		$	269,296		$	26,446		$	152,795		$	295,742		$	(142,947	)
Costs and expenses1
Fiber costs		77,673			79,469			(1,796	)		77,197			77,673			(476	)
Freight, logging and hauling		18,367			18,197			170			20,170			18,367			1,803
Manufacturing costs		50,793			47,602			3,191			52,890			50,793			2,097
Finished goods inventory change		(4,579	)		(4,019	)		(560	)		(962	)		(4,579	)		3,617
Selling, general and administrative expenses		3,408			2,522			886			3,436			3,408			28
Other		129			(30	)		159			95			129			(34	)
Wood Products Adjusted EBITDDA2	$	149,951		$	125,555		$	24,396		$	(31	)	$	149,951		$	(149,982	)


1	Prior to elimination of intersegment fiber costs of ~~$42.1~~$33.9 million and ~~$47.3~~$42.1 million for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, 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,							Three Months Ended March 31,
	2022		2021		Change			2023		2022		Change
Lumber shipments (MBF)1		233,188		258,069		(24,881	)		261,633		233,188		28,445
Lumber sales prices ($ per MBF)	$	1,075	$	890	$	185		$	435	$	1,075	$	(640	)


1	MBF stands for thousand board feet.

~~Table of Contents~~

Wood Products Adjusted EBITDDA

The following table summarizes Wood Products Adjusted EBITDDA variances for the three months ended March 31, ~~2022,~~2023, compared with the three months ended March 31, ~~2021:~~2022:


(in thousands)	Three Months			Three Months
Wood Products Adjusted EBITDDA - prior year	$	125,555		$	149,951
Lumber:
Price		41,212			(147,893	)
Volume		(11,195	)
Manufacturing costs per unit		(7,081	)		3,786
Log costs per unit		(2,305	)		678
Volume					(805	)
Residuals, panels and other		3,765			(5,748	)
Wood Products Adjusted EBITDDA - current year	$	149,951		$	(31	)

First Quarter ~~2022~~2023 Compared with First Quarter ~~2021~~2022

Wood Products Adjusted EBITDDA for the first quarter of ~~2022 increased $24.4~~2023 decreased $150.0 million compared with the ~~same period in 2021,~~first quarter of 2022, primarily as a result of the following:

•

Lumber Price: Average lumber sales prices ~~increased~~decreased to $435 per MBF during the first quarter of 2023 compared to $1,075 per MBF during the first quarter of ~~2022 compared to $890 during the first quarter of 2021.~~

•

~~Lumber Volume:~~ Lumber shipments decreased 24.9 million board feet during the first quarter of 2022 compared to the first quarter of 2021, primarily as a result of decreased shipments from our Ola, Arkansas sawmill following the fire in June 2021.2022.

•

Manufacturing Cost Per Unit:~~Higher~~ Lower manufacturing ~~costs~~cost per unit ~~quarter over quarter~~ was primarily a result of ~~lost~~increased production at our Ola, Arkansas sawmill ~~and inflationary price increases~~which restarted late in ~~areas such as energy and repair and maintenance.~~

•

~~Log Costs Per Unit:~~ ~~Log costs per unit were higher primarily as~~the third quarter of 2022 after a ~~result of increased indexed log costs at our Idaho sawmill.~~fire in June 2021.

•

Residual Sales, Panels and Other: ~~The~~Plywood price realization and shipments were lower during the first quarter of ~~2022 benefitted from increased plywood price realizations and shipments due~~2023 compared to ~~strong demand and product mix.~~the first quarter of 2022.

Table of Contents

Real Estate Segment


	Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	2022		2021		Change			2023		2022		Change
Revenues	$	34,065	$	20,313	$	13,752		$	23,863	$	34,065	$	(10,202	)
Costs and expenses
Costs of goods sold		2,879		2,468		411			2,865		2,879		(14	)
Selling, general and administrative expenses		1,062		1,252		(190	)		1,533		1,062		471
Real Estate Adjusted EBITDDA1	$	30,124	$	16,593	$	13,531		$	19,465	$	30,124	$	(10,659	)


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.

~~Table of Contents~~

Real Estate Segment Statistics


Rural Real Estate	Three Months Ended March 31,				Three Months Ended March 31,
	2022		2021		2023		2022
Acres sold		4,751		7,083		6,939		4,751
Average price per acre	$	4,556	$	1,415	$	2,568	$	4,556


Development Real Estate	Three Months Ended March 31,				Three Months Ended March 31,
	2022		2021		2023		2022
Residential lots		64		51		24		64
Average price per lot	$	112,725	$	98,629	$	116,429	$	112,725

Commercial acres		3		11		—		3
Average price per acre	$	917,236	$	277,425	$	—	$	917,236

Real Estate Adjusted EBITDDA

The following table summarizes Real Estate Adjusted EBITDDA variances for the three months ended March 31, ~~2022~~2023, compared with the three months ended March 31, ~~2021:~~2022:


(in thousands)	Three Months			Three Months
Real Estate Adjusted EBITDDA - prior year	$	16,593		$	30,124
Rural real estate sales		11,812			(3,482	)
Real estate development sales		1,940			(7,052	)
Selling, general and administrative expenses		190			(472	)
Other costs, net		(411	)		347
Real Estate Adjusted EBITDDA - current year	$	30,124		$	19,465

First Quarter ~~2022~~2023 Compared with First Quarter ~~2021~~2022

Real Estate Adjusted EBITDDA for the first quarter of ~~2022~~2023 was ~~$30.1~~$19.5 million, ~~an increase~~a decrease of ~~$13.5~~$10.7 million compared with the first quarter of ~~2021,~~2022, primarily as a result of the following:

•

Rural Sales: The ~~increase~~first quarter of 2023 included a 2,240-acre conservation sale in ~~rural real estate sales is primarily~~Alabama and a ~~result of~~2,700-acre land sale on acquired CatchMark timberlands, compared to a 1,760-acre sale in the South for $7,500 per acre in the first quarter of 2022 to an energy provider for a planned commercial solar ~~farm, which was not matched by a similarly-sized sale during the first quarter of 2021.~~farm. Rural real estate sales can vary quarter-to-quarter with the average price per acre fluctuating based on both the geographic area of the real estate and product mix.

•

Development Sales: During the first quarter of ~~2022,~~2023, we sold 6424 residential lots at an average lot price of ~~$112,725~~$116,429 compared to 5164 lots at an average lot price of ~~$98,629~~$112,725 during the first quarter of ~~2021.~~2022. In addition, ~~we sold~~there were no commercial land sales in Chenal Valley during the first quarter of 2023 compared to 3 acres of commercial land ~~in Chenal Valley for $917,236 per acre compared to 11 acres of commercial land in Chenal Valley for $277,425 per acre in~~sales during the first quarter of ~~2021.~~2022 for $917,236 per acre. The average price per lot or acre fluctuates based on a variety of factors including size, location and ~~location~~planned end use within the ~~development.~~developments.

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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, ~~2022~~2023 and ~~2021~~2022 are presented by category as follows:

Three Months Ended March 31,

(in thousands)

2022

2021

Change

Net cash from operating activities

$
230,299

$
169,965

$
60,334

Net cash from investing activities

$
(17,122
)

$
(11,529
)

$
(5,593
)
Net cash from financing activities

$
(34,595
)

$
(28,075
)

$
(6,520
)


	Three Months Ended March 31,
(in thousands)	2023			2022			Change
Net cash from operating activities	$	39,139		$	230,299		$	(191,160	)
Net cash from investing activities	$	(4,896	)	$	(17,122	)	$	12,226
Net cash from financing activities	$	(36,800	)	$	(34,595	)	$	(2,205	)

Net Cash Flows from Operating Activities

Net cash from operating activities ~~increased $60.3~~decreased $191.2 million in the first quarter of ~~2022,~~2023, compared to the first quarter of ~~2021~~2022 primarily as a result of the following:

•

Cash received from customers ~~increased $63.4~~decreased $151.1 million primarily due to ~~higher average~~lower lumber and Idaho sawlog prices ~~increased Southern harvest volumes~~ and ~~the 1,760-acre rural~~fewer residential lot and commercial land ~~sale~~sales in ~~the South.~~Chenal Valley. These ~~increases~~decreases were partially offset by ~~lower Northern harvest volumes and reduced~~increased shipments at our Ola, Arkansas sawmill ~~following~~which restarted late in the third quarter of 2022 after a fire in June ~~2021.~~2021, and increased harvest activity which also benefitted from the addition of the CatchMark timberlands in mid-September 2022.

•

Cash payments increased ~~$4.8~~$40.3 million primarily due to increased harvest activity and increased vendor payments at our Ola, Arkansas sawmill, along with inflationary cost increases in areas such as diesel fuel, energy and repair and maintenance in our manufacturing and harvest operations. These increases were partially offset by reduced vendor payments as a result of lower production at our Ola, Arkansas sawmill following the fire in June 2021 and lower harvest activities in the Northern region.

Net Cash Flows from Investing Activities

Changes in cash flows from investing activities were primarily a result of the following:

•

We spent ~~$17.2~~$10.4 million on capital expenditures for property, plant and equipment, timberlands reforestation and road construction projects during the first quarter of ~~2022~~2023 compared to ~~$11.7~~$17.2 million during the first quarter of ~~2021.~~2022.

•

We received $5.1 million during the first quarter of 2023 from certain interest rate swaps that contained an other-than-insignificant financing element at inception.

Net Cash Flows from Financing Activities

Changes in cash flows from financing activities were primarily a result of the following:

•

We paid dividends of ~~$30.5~~$36.0 million induring the first quarter of ~~2022~~2023 compared to ~~$27.5~~$30.5 million induring the first quarter of ~~2021.~~2022. In addition to increasing our quarterly dividend from $0.44 per share to $0.45 per share in the fourth quarter of 2022, our quarterly dividend payment also increased due to the issuance of 11.5 million shares to complete the CatchMark merger in September 2022.

•

We repaid $3.0 million inof long-term debt during the first quarter of 2022 and had no similar ~~payment~~payments in the first quarter of ~~2021.~~2023.

Future Sources and Uses of Cash

At March 31, ~~2022,~~2023, we had cash and cash equivalents of ~~$470.9~~$325.6 million. We expect cash and cash equivalents on hand, cash generated from our operating activities, and supplemented by borrowings under our credit agreement, if needed, to be adequate to meet our future cash requirements. At March 31, ~~2022,~~2023 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, ~~2021.~~2022.

Table of Contents

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 ~~$70~~$135 million to ~~$75~~$145 million for capital expenditures during ~~2022.~~

~~Our 2022 planned capital spend includes approximately $15 million of~~2023, including capital expenditures for the ~~reconstruction~~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 ~~our fire-damaged Ola sawmill, which~~dimensional lumber to approximately 275 million board feet. The investment is ~~largely covered~~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 ~~insurance.~~the end of 2024. We expect to ~~install~~spend approximately $131.0 million on the ~~new large-log line~~project, of which $12.2 million was spent in ~~the third quarter of~~ 2022 and ~~complete~~approximately $74.0 million is expected to be spent in 2023.

During 2022, we completed the ~~start-up phase by early 2023. A determination regarding~~installation of new equipment at our fire damaged Ola, Arkansas sawmill. The large log line restarted in September 2022. Through December 31, 2022, we received a total of $50.0 million from the ~~extent of downtime and costs to repair the Ola sawmill is on-going as the reconstruction progresses. We have adequate~~insurance carriers for both property damage and business interruption ~~insurance, subject to an applicable deductible. The timing~~proceeds at the Ola sawmill. We are in the process of ~~expenditures incurred for the sawmill rebuild and economic losses is expected to vary based on when we receive proceeds from~~finalizing our insurance ~~carriers.~~claim and expect to receive the remaining insurance proceeds in 2023.

~~Table of Contents~~

Share Repurchase Program

On August ~~30, 2018,~~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). Concurrently, the board of directors ~~authorized~~terminated the remaining repurchase ~~of up to $100.0 million of common stock with no time limit set for the~~authorization under a repurchase ~~(the Repurchase Program).~~program approved in August 2018. At March 31, ~~2022,~~2023, we had remaining authorization of ~~$59.5~~$150.0 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 adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (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.

~~Long-Term Debt~~Term Loans and Credit Agreement

At March 31, ~~2022,~~2023, our total outstanding net long-term debt was ~~$755.5 million.~~ ~~We expect to refinance a $40.0~~$1.0 billion, including $971.0 million of term loan expiring in December 2022 at maturity, which is covered by a forward starting interest rate swap that hedges the variability in future benchmark interest payments attributable to changes in interest rates.loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. All interest rates on our outstanding long-term debt are fixed rates under fixed rate loans or variable rate loans with an associated interest rate swap that fixes the variable benchmark interest rate component.

We have a $300.0 million revolving line of credit with a syndicate of lenders that matures February 14, 2027. Under the terms of ~~the~~our Third Amended and Restated Credit Agreement (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, ~~2022,~~2023, there were no borrowings under the revolving line of credit and approximately ~~$1.0~~$0.9 million of the credit facility was utilized by outstanding letters of credit.

~~Our credit agreement, variable rate term loans with~~ ~~$403.5~~ ~~million in principal and our interest rate derivative agreements have an interest rate tied to LIBOR. On March 5, 2021, the United Kingdom’s Financial Conduct Authority, which regulates L~~IBOR, announced that the US Dollar LIBOR will no longer be published after June 30, 2023. The market transition away from LIBOR to an alternative reference rate is complex. While we expect LIBOR to be available in substantially its current form until at least through June 30, 2023, it is possible that LIBOR will become unavailable prior to that point. We continue to evaluate and monitor market developments regarding the alternative rates, will work with our lenders and counterparties to identify a suitable replacement rate, and may amend certain debt and interest rate derivative agreements to accommodate those rates.

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.

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The following table presents the components and applicable limits of Total Asset Value (TAV), a component of the Leverage Ratio, at March 31, ~~2022:~~2023:

(in thousands)

Estimated timberland fair value

$
3,974,991

Wood Products manufacturing facilities book basis (limited to 10% of TAV)

283,361

Cash and cash equivalents

470,918

Company owned life insurance (COLI) (limited to 5% of TAV)

4,002

Total Asset Value1

$
4,733,272


(in thousands)
Estimated timberland fair value	$	4,835,534
Wood Products manufacturing facilities book basis (limited to 10% of TAV)		284,149
Cash and cash equivalents		325,632
Other1		21,789
Total Asset Value	$	5,467,104


1	~~TAV also includes,~~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, ~~2022,~~2023, 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, ~~2022:~~2023:

Covenant Requirement

Actual at
March 31, 2022
Interest coverage ratio

≥

3.00 to 1.00

24.5
Leverage ratio

≤

40%

16%


	Covenant Requirement		Actual at March 31, 2023
Interest coverage ratio	≥	3.00 to 1.00	16.1
Leverage ratio	≤	40%	19%

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, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Long-term debt (including current portion)	$	755,482		$	758,256		$	1,032,973		$	1,032,680
Cash and cash equivalents		(470,918	)		(296,151	)		(325,632	)		(343,809	)
Net debt		284,564			462,105			707,341			688,871
Market capitalization1		3,657,986			4,159,034			3,955,838			3,505,255
Enterprise value	$	3,942,550		$	4,621,139		$	4,663,179		$	4,194,126

Net debt to enterprise value		7.2	%		10.0	%		15.2	%		16.4	%
Dividend yield2		3.3	%		2.9	%		3.6	%		4.1	%
Weighted-average cost of debt, after tax3		3.1	%		3.1	%		2.4	%		2.4	%


1	Market capitalization is based on outstanding shares of ~~69.4~~79.9 million and ~~67.0~~79.7 million times closing share prices of ~~$52.73~~$49.50 and ~~$60.22 as of~~$43.99 at March 31, ~~2022,~~2023 and December ~~31, 2021,~~30, 2022, respectively.
2	Dividend yield is based on annualized dividends per share of ~~$1.76~~$1.80 and share prices of ~~$52.73~~$49.50 and ~~$60.22 as of~~$43.99 at March 31, ~~2022,~~2023 and December ~~31, 2021,~~30, 2022, 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.

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Liquidity and Performance Measures

The discussion below is presented to enhance the reader’s understanding of our operating performance, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures: Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the discussion of Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures described herein.

Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and to allocate resources between segments, and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. This measure should not be considered in isolation from and is not intended to represent an alternative to our results reported in accordance with GAAP. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business, and the comparison of our operating results against analyst financial models and the operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.

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Our definition of EBITDDA may be different from similarly titled measures reported by other companies. We define EBITDDA as net income 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 for the consolidated company as it is the most comparable GAAP measure.

The following table provides a reconciliation of net income to Total Adjusted EBITDDA for the respective periods:


	Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	2022			2021		2023			2022
Net income	$	163,880		$	131,106	$	16,260		$	163,880
Interest expense, net		2,894			3,574		199			2,894
Income taxes		32,065			30,039		(3,504	)		32,065
Depreciation, depletion and amortization		19,502			17,996		31,764			19,502
Basis of real estate sold		10,854			8,823		10,631			10,854
Net loss on fire damage		276			—
CatchMark merger-related expenses							2,209			—
Loss on fire damage							—			276
Pension settlement charge		14,165			—		—			14,165
Non-operating pension and other postretirement benefit costs		1,929			3,414
(Gain) loss on disposal of fixed assets		(3	)		34
Non-operating pension and other postretirement employee benefit costs							228			1,929
Gain on disposal of fixed assets							—			(3	)
Other							(10	)		—
Total Adjusted EBITDDA	$	245,562		$	194,986	$	57,777		$	245,562

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.

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The following table provides a reconciliation of cash from operating activities to CAD:


	Three Months Ended March 31,						Twelve Months Ended March 31,						Three Months Ended March 31,						Twelve Months Ended March 31,
(in thousands)	2022			2021			2022			2021			2023			2022			2023			2022
Net cash from operating activities1	$	230,299		$	169,965		$	565,220		$	457,090		$	39,139		$	230,299		$	300,741		$	565,220
Capital expenditures2		(17,214	)		(11,718	)		(80,910	)		(43,964	)		(10,373	)		(17,214	)		(177,963	)		(80,910	)
CAD	$	213,085		$	158,247		$	484,310		$	413,126		$	28,766		$	213,085		$	122,778		$	484,310
Net cash from investing activities3	$	(17,122	)	$	(11,529	)	$	(64,738	)	$	(42,688	)	$	(4,896	)	$	(17,122	)	$	(135,294	)	$	(64,738	)
Net cash from financing activities	$	(34,595	)	$	(28,075	)	$	(407,829	)	$	(113,521	)	$	(36,800	)	$	(34,595	)	$	(297,767	)	$	(407,829	)


1	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. Net cash from operating activities for the three and twelve months ended March 31, 2022 ~~and 2021~~ includes cash paid for real estate development expenditures of $2.2 million and ~~$2.3~~$9.1 million, respectively. ~~Net cash from operating activities for the twelve months ended March 31, 2022 and 2021 includes cash paid for real estate development expenditures of $8.8 million and $8.6 million, respectively.~~
2	The three and twelve months ended March 31, 2023 include fire related capital expenditures for the Ola, Arkansas sawmill of $0 and $13.1 million, respectively, and exclude $0 and $8.8 million, respectively, of insurance proceeds for the Ola, Arkansas sawmill property losses. The three and twelve months ended March 31, 2022 ~~includes~~include fire related capital expenditures for the Ola, Arkansas sawmill of $5.1 million and $12.4 million, respectively, and ~~excludes of~~exclude $0 and $15.0 million, respectively, of insurance proceeds for the Ola, Arkansas sawmill property losses.
3	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

In March 2022, we transferred $75.6 million of our qualified pension plan (the Plan) assets to an insurance company for the purchase of a group annuity contract. This transaction triggered a remeasurement of the Plan's assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the Plan as of March 31, 2022. All other pension assumptions remain unchanged. See ~~Note 11: Pension and Other Postretirement Employee Benefits~~ ~~for further information on the pension settlement and change to the projected benefit obligation.~~ There have been no ~~other~~ significant changes during ~~2022~~2023 to our critical accounting policies or estimates as presented in our ~~2021~~2022 Annual Report on Form 10-K.

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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, ~~2021.~~2022. Our exposures to market risk have not changed materially since December 31, ~~2021.~~2022.

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, ~~2022.~~2023. 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, ~~2022.~~2023.

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, ~~2022,~~2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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, ~~2021.~~2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

On August ~~30, 2018,~~31, 2022, our board of directors authorized management to repurchase up to ~~$100.0~~$200.0 million of our common stock with no set time limit ~~set~~ for the repurchase (the 2022 Repurchase Program). ~~Shares~~Concurrently, the board of directors terminated the remaining repurchase authorization under ~~the 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). The timing, manner, price and amount of repurchases will be determined according to, and subject to, the terms of 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.

previously approved share repurchase plan. There were no shares repurchased during the first quarter of ~~2022 under the Repurchase Program.~~2023. At March 31, ~~2022,~~2023, we had remaining authorization of ~~$59.5~~$150.0 million for future stock repurchases under the 2022 Repurchase Program. ~~Transaction costs are~~

We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability to account for repurchases that have not ~~counted against authorized funds. All common stock purchases are made~~been cash settled. We retire shares upon repurchase. Any excess repurchase price over par is recorded in ~~open-market transactions.~~accumulated deficit.

ITEM 6. EXHIBITS


EXHIBIT NUMBER	DESCRIPTION
(3)(a)3.1	Third Restated Certificate of Incorporation of the Registrant, effective February 20, 2018, filed as Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on February 21, 2018.
(3)(b)3.2	Bylaws of the Registrant, as amended through February 18, 2009, filed as Exhibit (3)(b) to the Current Report on Form 8-K filed by the Registrant on February 20, 2009.
~~(4)~~4	See Exhibits ~~(3)(a)~~3.1 and ~~(3)(b)~~3.2. The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt.
10(a)*	Sixth Amendment to Second Amended and Restated Term Loan Agreement dated as of February 14, 2022 among the Registrant and its wholly-owned subsidiaries, as borrowers, Northwest Credit Services, PCA, as administrative agent, the guarantors party thereto, the lenders party thereto, and the voting participants party thereto, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on February 14, 2022.
~~(31)~~31	Rule 13a-14(a)/15d-14(a) Certifications.
~~(32)~~32	Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350.
~~(101)~~101	The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, ~~2022,~~2023, filed on April ~~29, 2022~~28, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) theCondensed Consolidated Statements of Operationsfor the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, (ii) the Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, (iii) the Condensed Consolidated Balance Sheets at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, (iv) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022, and (vi) the Notes to Condensed Consolidated Financial ~~Statements.~~Statements.
~~(104)~~104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

* Incorporated by reference.

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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/ WAYNE WASECHEK
			Wayne Wasechek
			~~Corporate Controller~~Interim Vice President, Chief Financial Officer and Chief Accounting Officer (Duly Authorized; Principal Accounting Officer)


Date:	April ~~29, 2022~~28, 2023

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		Asset Derivatives					Liability Derivatives
(in thousands)	Location	March 31, 2022		December 31, 2021		Location	March 31, 2022		December 31, 2021
Derivatives designated in cash flow hedging relationships:
Interest rate contracts	Other assets, current1	$	4,673	$	2,191	Accounts payable and accrued liabilities1	$	0	$	—
Interest rate contracts	Other assets, non-current		57,487		31,306	Other long-term obligations		7,197		24,060
		$	62,160	$	33,497		$	7,197	$	24,060


(in thousands)
Estimated timberland fair value	$	3,974,991
Wood Products manufacturing facilities book basis (limited to 10% of TAV)		283,361
Cash and cash equivalents		470,918
Company owned life insurance (COLI) (limited to 5% of TAV)		4,002
Total Asset Value1	$	4,733,272

Covenant Requirement

Actual at
March 31, 2022

Interest coverage ratio

3.00 to 1.00

Leverage ratio