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

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

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.

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).

The number of shares of common stock of the registrant outstanding as of ~~July 26, 2022~~April 25, 2023, was ~~69,271,822~~79,915,922.

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

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.

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

We were in compliance with all debt and credit agreement covenants at ~~June 30, 2022.~~March 31, 2023.

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 June 30, 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 ~~June 30,~~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 gains expected to be reclassified into earnings in the next 12 months is approximately $~~4.5~~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 June 30, 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~~ ~~by 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

June 30, 2022

December 31, 2021

Location

June 30, 2022

December 31, 2021

Derivatives designated in cash flow hedging relationships:

Interest rate contracts

Other assets, current1

$
6,739

$
2,191

Accounts payable and accrued liabilities1

$
0

$
0

Interest rate contracts

Other assets, non-current

93,570

31,306

Other long-term obligations

0

24,060

$
100,309

$
33,497

$
0

$
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 June 30,

Six Months Ended June 30,

(in thousands)

Location

2022

2021

2022

2021

Derivatives designated in cash flow hedging relationships:

Interest rate contracts

Income (loss) recognized in other comprehensive income (loss), net of tax

$
41,118

$
(33,444
)

$
82,361

$
28,431

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

Interest expense

$
(1,411
)

$
(2,281
)

$
(3,444
)

$
(4,513
)

Interest expense, net

$
7,419

$
8,199

$
10,313

$
11,773

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1	Realized gains and 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~~.

NOTE 7. FAIR VALUE MEASUREMENTS

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


	June 30, 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)	$	100,309		$	100,309		$	33,497		$	33,497		$	124,328		$	124,328		$	144,583		$	144,583
Derivative liabilities related to interest rate swaps (Level 2)	$	0		$	0		$	(24,060	)	$	(24,060	)

Long-term debt, including current portion (Level 2):
Term loans	$	(691,444	)	$	(690,240	)	$	(691,119	)	$	(705,135	)	$	(969,432	)	$	(963,277	)	$	(969,269	)	$	(961,632	)
Revenue bonds		(65,735	)		(65,166	)		(65,735	)		(69,278	)		(65,735	)		(64,788	)		(65,735	)		(64,602	)
Medium-term notes		0			0			(3,000	)		(3,007	)
Total long-term debt1	$	(757,179	)	$	(755,406	)	$	(759,854	)	$	(777,420	)	$	(1,035,167	)	$	(1,028,065	)	$	(1,035,004	)	$	(1,026,234	)

Company owned life insurance asset (COLI) (Level 3)	$	4,259		$	4,259		$	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

~~On May 2, 2022, our stockholders approved the PotlatchDeltic Corporation Amended~~We issue new shares of common stock to settle performance stock awards (PSAs), restricted stock units (RSUs) and ~~Restated 2019 Long-Term Incentive Plan to increase the number of shares available for issuance by~~ ~~1.4~~ ~~million shares.~~deferred compensation stock equivalent units. At ~~June 30, 2022,~~March 31, 2023, approximately ~~2.1~~1.9 million shares are available for future use under our long-term incentive plans.

Share-based compensation activity during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023, included the following:


(Shares in thousands)	Granted		Vested		Forfeited
							Granted		Vested		Forfeited
Performance Share Awards (PSAs)		92,490		0		971		106,342		—		751
Restricted Stock Units (RSUs)		37,824		13,627		1,323		70,901		—		250

Approximately ~~0.3~~0.2 million shares of common stock ~~were issued to employees during the six months ended June 30, 2022~~ as a result of PSA and RSU vesting during ~~2021 and 2022.~~2022 were issued to employees during the three months ended March 31, 2023.

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


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in thousands)	2022		2021		2022		2021		2023		2022
Equity-based compensation expense:
Performance share awards	$	1,518	$	1,372	$	2,816	$	2,596	$	1,421	$	1,298
Restricted stock units		801		727		1,510		1,392		809		709
Deferred compensation stock equivalent units expense		49		41		98		82		49		49
Total equity-based compensation expense	$	2,368	$	2,140	$	4,424	$	4,070	$	2,279	$	2,056

Total tax benefit recognized for equity-based expense	$	119	$	107	$	219	$	196	$	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		0			—
Expected term (years)		3.00			3.00


1	1 Full dividend reinvestment assumed.

Restricted Stock Units

The weighted average fair value of all RSUs granted during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023, was $~~54.47~~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	June 30, 2022		December 31, 2021		Classification	March 31, 2023		December 31, 2022
Assets
Operating lease assets	Other long-term assets	$	8,142	$	8,514	Other long-term assets	$	8,497	$	9,306
Finance lease assets1	Property, plant and equipment, net		11,070		10,663	Property, plant and equipment, net		12,416		13,213
Total lease assets		$	19,212	$	19,177		$	20,913	$	22,519

Liabilities
Current:
Operating lease liabilities	Accounts payable and accrued liabilities	$	2,682	$	3,021	Accounts payable and accrued liabilities	$	2,293	$	2,570
Finance lease liabilities	Accounts payable and accrued liabilities		4,336		3,577	Accounts payable and accrued liabilities		4,559		4,834
Noncurrent:
Operating lease liabilities	Other long-term obligations		5,551		5,598	Other long-term obligations		6,199		6,716
Finance lease liabilities	Other long-term obligations		6,622		6,972	Other long-term obligations		7,626		8,179
Total lease liabilities		$	19,191	$	19,168		$	20,677	$	22,299


1	Finance lease assets are presented net of accumulated amortization of $~~6.5~~9.0 million and $~~4.5~~7.9 million as of ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

The following table presents the components of lease expense:


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
(in thousands)	2022		2021		2022		2021		2023		2022
Operating lease costs1	$	881	$	1,285	$	1,828	$	2,613	$	886	$	947
Finance lease costs:
Amortization of leased assets		995		633		1,924		1,222		1,231		929
Interest on lease liabilities		69		51		136		102
Interest expense										111		67
Net lease costs	$	1,945	$	1,969	$	3,888	$	3,937	$	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:


		Six Months Ended June 30,					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	$	1,822	$	2,590	Operating cash flows for operating leases	$	891	$	994
Operating cash flows for finance leases	Operating cash flows for finance leases	$	136	$	102	Operating cash flows for finance leases	$	111	$	67
Financing cash flows for finance leases	Financing cash flows for finance leases	$	1,961	$	1,208	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	$	1,279	$	213	Operating leases	$	—	$	154
Finance leases	Finance leases	$	2,331	$	3,093	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. 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.~~

~~The following table details the components~~ of ~~net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB):~~

Three Months Ended June 30,

Pension

OPEB

(in thousands)

2022

2021

2022

2021

Service cost

$
1,652

$
2,045

$
79

$
168

Interest cost

2,611

2,633

229

317

Expected return on plan assets

(2,258
)

(3,525
)

0

0

Amortization of prior service cost (credit)

18

21

156

(298
)
Amortization of actuarial loss (gain)

1,148

3,578

(95
)

545

Total net periodic cost

$
3,171

$
4,752

$
369

$
732

Six Months Ended June 30,

Pension

OPEB

(in thousands)

2022

2021

2022

2021

Service cost

$
3,501

$
4,090

$
158

$
336

Interest cost

5,423

5,266

458

634

Expected return on plan assets

(5,403
)

(7,050
)

0

0

Amortization of prior service cost (credit)

36

42

312

(596
)
Amortization of actuarial loss (gain)

3,102

7,299

(190
)

1,090

Net periodic cost before pension settlement charge

6,659

9,647

738

1,464

Pension settlement charge

14,165

0

0

0

Net periodic cost

$
20,824

$
9,647

$
738

$
1,464

~~During the six months ended June 30, 2022 and 2021, funding of pension and other postretirement employee benefit plans was~~approximately $~~2.3~~6.2 million ~~and $~~during the first quarter of 2022.~~3.8~~ ~~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 June 30,

Six Months Ended June 30,

(in thousands)

2022

2021

2022

2021

Pension Plans

Balance at beginning of period

$
42,144

$
76,255

$
49,579

$
79,025

Net loss arising during the period

0

0

4,587

0

Effect of pension settlement

0

0

(10,553
)

0

Amounts reclassified from AOCI to earnings

(870
)

(2,663
)

(2,339
)

(5,433
)
Balance at end of period

41,274

73,592

41,274

73,592

Other Postretirement Benefit Plans

Balance at beginning of period

1,745

14,600

1,790

14,783

Amounts reclassified from AOCI to earnings

(45
)

(182
)

(90
)

(365
)
Balance at end of period

1,700

14,418

1,700

14,418

Cash Flow Hedges

Balance at beginning of period

(51,407
)

(36,926
)

(8,131
)

27,181

Amounts arising during the period

(41,118
)

33,444

(82,361
)

(28,431
)
Amounts reclassified from AOCI to earnings

(1,411
)

(2,281
)

(3,444
)

(4,513
)
Balance at end of period

(93,936
)

(5,763
)

(93,936
)

(5,763
)
Accumulated other comprehensive (income) loss, end of period

$
(50,962
)

$
82,247

$
(50,962
)

$
82,247


	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. ~~PENDING~~CATCHMARK MERGER ~~WITH CATCHMARK~~

On ~~May 29,~~September 14, 2022, ~~we entered into an Agreement and Plan of Merger (merger agreement) with~~ CatchMark Timber Trust, Inc. (CatchMark) and CatchMark Timber Operating Partnership, LPL.P. (the Partnership), merged into a wholly owned subsidiary (Merger Sub) of PotlatchDeltic, pursuant to ~~which CatchMark and the Partnership will merge into a wholly-owned subsidiary of PotlatchDeltic, with the subsidiary continuing as the surviving company. Under~~ the terms of ~~the~~a merger agreement dated May 29, 2022, with the Merger Sub surviving the mergers. CatchMark ~~stockholders and the holders of common partnership units of the Partnership (Partnership OP Units) will have the right to receive~~ ~~0.230~~ shares of PotlatchDeltic common stock for each share of CatchMark common stock and for each Partnership OP Unit and cash in lieu of fractional shares at the effective time of the merger. CatchMark ownsowned approximately ~~350,000~~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.

~~Because the exchange ratio was fixed at the time~~As a result of the merger, agreement and the market value of our common stock will continue to fluctuate, the total value of the consideration exchanged will not be determinable until the closing date. The number of shares to bewe issued ~~with respect to CatchMark stock awards will not be determinable until the closing of the transaction.~~

~~We estimate that~~ approximately ~~11.4~~11.5 million shares of ~~our~~PotlatchDeltic common stock, ~~will be issued to~~including: (i) 11.3 million shares in exchange for the outstanding shares of CatchMark ~~stockholders~~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 ~~Unit holders~~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 ~~0.230~~ ~~exchange ratio.~~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 ~~merger agreement has been~~project is still pending EPA approval and, if approved, ~~by both companies' boards~~negotiation of ~~directors. The closing~~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 ~~the merger is subject to approval by the stockholders of CatchMark and other conditions specified~~additional charges, if any, which may be required for this matter in the ~~merger agreement. The merger is expected to close in the third quarter of 2022.~~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; expected seasonal fluctuations in our business segments; expected effectiveness of our hedging instruments and swaps; amount of net earnings on cash flow hedges expected to be reclassified into earnings in the next 12 months; expected return on pension assets; anticipated share repurchases and ~~regular and special~~ 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 ~~pending merger with CatchMark Timber Trust, Inc. (CatchMark);~~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; ~~anticipated closing~~expectations regarding our ability to participate in the development of ~~bolt-on timberland transactions;~~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;~~

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•

~~our ability to close the pending merger with CatchMark and our ability to successfully realize the expected benefits from the merger;~~or other human health threats; and

•

our ability and our ~~contractors'~~contractors’ ability to implement the modernization plan for the Waldo, Arkansas sawmill.

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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, Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2021 and~~ ~~Risk Factors~~ ~~in Part II, Item 1A of this Form 10-Q.~~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.

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 and by repair and remodeling activity, both of which were very strong up until recently.~~States. Higher interest rates and inflation have caused consumer confidence and the pace of housing starts to ~~decline~~decline. The average 30-year fixed mortgage rate increased during the ~~last couple~~past twelve months from approximately 4.7% at the end of ~~months. In July~~March 2022 to approximately 6.3% at the end of March 2023. On a positive note, the National Association of Home Builders (NAHB) reported the NAHB/Wells Fargo Housing Market Index (HMI) was ~~at 55,~~45 in April 2023, the ~~seventh~~fourth straight month ~~of decline and the lowest reading since May 2020.~~builder confidence has increased. The repair and remodel sector, which ~~has experienced 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 continue to grow in 2023, but at a slower ~~rate. Rising construction costs, a persistently tight labor pool, supply chain challenges and consumer concerns about rising mortgage rates could negatively impact the pace of~~rate than recent years.

While housing starts ~~and repair and remodel projects.~~

~~Despite some negative factors that~~ have ~~resulted in housing starts moderating~~declined in recent months, we believe long-term housing fundamentals remain favorable, due to a shortage of homes, ~~low~~lower than historical average existing inventory for sale, a large millennial demographic in their prime home-buying years, ~~interest rates remaining below long-term historical averages, the continued remote work evolution,~~ 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 for the rest of 2022.~~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. Over~~costs. The annual inflation rate in the ~~last twelve months, the Consumer Price Index (all items) increased by 9.1 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 11.3 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, ~~sawlogs pricing benefitted from demand for Southern pine sawlogs.~~a significant portion of our Idaho sawlog prices ~~continue to benefit from being~~are indexed on a four-week lag to lumber prices and experienced a decline in pricing during the quarter due to lower lumber prices. Our ~~Southern~~ harvest volume of ~~1.0~~2.1 million tons in the ~~second~~first quarter of 2023 was considerably higher than the first quarter of 2022, ~~was higher than~~primarily due to the addition of the CatchMark timberlands in mid-September 2022, strong log demand in Arkansas and Mississippi, and favorable harvest conditions in Idaho. We expect to harvest approximately 1.6 million tons during the second quarter of ~~2021, primarily due to favorable harvest conditions. We expect to harvest between 1.7 and 1.9 million tons during the third quarter of 2022,~~2023, with approximately ~~65% 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. 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. The new equipment has been ~~installed. We expect to wrap up~~installed and the ~~project~~large log line restarted in ~~the third quarter and we are targeting to complete the start-up phase by the end~~September 2022. The sawmill's operating run rate has reached its expected annual capacity of ~~the year.~~150 million board feet.

In our Wood Products segment, lumber shipments ~~continue to be impacted by the~~benefitted from increased shipments at our Ola, ~~sawmill fire.~~Arkansas sawmill. We shipped ~~approximately 254~~262 million board feet of lumber during the first quarter of 2023 and expect to ship between 270 and 280 million board feet of lumber during the second quarter of ~~2022~~2023.

Our Real Estate segment first quarter 2023 results benefitted from rural land sales, including a conservation land sale in Alabama and land acquired in the CatchMark merger. We expect to ~~ship between 250~~sell approximately 2,600 acres of rural land and ~~265 million board feet of lumber~~approximately 35 residential lots during the ~~third~~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.

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Our Real Estate segment benefitted from strong Chenal Valley residential lot and commercial acre sales in the second quarter of 2022, and a 10,700 acre rural land sale in Minnesota to a conservation entity that effectively completed our long-term strategy to sell our Minnesota land holdings. We expect to sell approximately 3,000 acres of rural land and 45 residential lots during the third quarter of 2022. For 2022, we expect to sell approximately 22,000 acres of rural land and 180 residential lots.

~~CatchMark Merger~~

On May 29, 2022, we entered into an Agreement and Plan of Merger (merger agreement) with CatchMark Timber Trust, Inc. (CatchMark) and CatchMark Timber Operating Partnership, LP (the Partnership), pursuant to which CatchMark and the Partnership will merge into a wholly-owned subsidiary of PotlatchDeltic, with the subsidiary continuing as the surviving company. Under the terms of the merger agreement, CatchMark stockholders and the holders of common partnership units of the Partnership (Partnership OP Units) will have the right to receive 0.230 shares of PotlatchDeltic common stock for each share of CatchMark common stock and for each Partnership OP Unit and cash in lieu of fractional shares at the effective time of the merger. CatchMark owns approximately 350,000 acres of superior site index timberlands located in Alabama, Georgia and South Carolina.

The exchange ratio is fixed and will not be adjusted to reflect changes in our stock price. We estimate that approximately 11.4 million shares of our common stock will be issued to CatchMark stockholders and Partnership OP Unit holders in the merger based on the 0.230 exchange ratio. The closing of the merger is subject to approval by the stockholders of CatchMark and other conditions specified in the merger agreement. The merger is expected to close in the third quarter of 2022.

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 June 30,									Six Months Ended June 30,									Three Months Ended March 31,
(in thousands)	2022			2021			Change			2022			2021			Change			2023			2022			Change
Revenues	$	359,597		$	447,506		$	(87,909	)	$	770,947		$	801,699		$	(30,752	)	$	257,962		$	411,350		$	(153,388	)
Costs and expenses:
Cost of goods sold		191,334			177,779			13,555			371,181			347,081			24,100			224,350			179,847			44,503
Selling, general and administrative expenses		20,412			19,512			900			36,706			36,270			436			18,230			16,294			1,936
Gain on fire damage		(9,868	)		—			(9,868	)		(9,592	)		—			(9,592	)
CatchMark merger-related expenses																				2,209			—			2,209
Loss on fire damage																				—			276			(276	)
		201,878			197,291			4,587			398,295			383,351			14,944			244,789			196,417			48,372
Operating income		157,719			250,215			(92,496	)		372,652			418,348			(45,696	)		13,173			214,933			(201,760	)
Interest expense, net		(7,419	)		(8,199	)		780			(10,313	)		(11,773	)		1,460			(199	)		(2,894	)		2,695
Pension settlement charge		—			—			—			(14,165	)		—			(14,165	)		—			(14,165	)		14,165
Non-operating pension and other postretirement benefit costs		(1,809	)		(3,271	)		1,462			(3,738	)		(6,685	)		2,947
Non-operating pension and other postretirement employee benefit costs																				(228	)		(1,929	)		1,701
Other																				10			—			10
Income before income taxes		148,491			238,745			(90,254	)		344,436			399,890			(55,454	)		12,756			195,945			(183,189	)
Income taxes		(28,269	)		(50,840	)		22,571			(60,334	)		(80,879	)		20,545			3,504			(32,065	)		35,569
Net income	$	120,222		$	187,905		$	(67,683	)	$	284,102		$	319,011		$	(34,909	)	$	16,260		$	163,880		$	(147,620	)
Total Adjusted EBITDDA1	$	175,170		$	274,984		$	(99,814	)	$	420,732		$	469,970		$	(49,238	)	$	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.

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

Revenues

Revenues were ~~$359.6~~$258.0 million, a decrease of ~~$87.9~~$153.4 million compared with the ~~second~~first quarter of ~~2021~~2022 primarily due to lower lumber prices, lower Northern sawlog prices, and ~~shipments~~fewer residential lot and ~~decreased Northern harvest volume and sawlog prices. Lumber shipments~~commercial acre sales in ~~the second quarter of 2022 were impacted by the loss of production at our Ola, Arkansas sawmill following a fire in June 2021.~~Chenal Valley. These decreases were partially offset by ~~higher~~increased harvest volumes and ~~sawlog prices~~increased lumber shipments primarily at our Ola, Arkansas sawmill which restarted late in the ~~Southern region and increases~~third quarter of 2022 after a fire in ~~development real estate sales and rural acres sold.~~June 2021.

Cost of goods sold

Cost of goods sold increased ~~$13.6~~$44.5 million compared with the ~~second~~first quarter of ~~2021~~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.~~

~~Gain on fire damage~~

~~In June 2021,~~maintenance, and increased harvest volumes. Cost of goods sold also increased in the first quarter of 2023 as a ~~fire occurred~~result of increased shipments at our Ola, Arkansas sawmill. ~~During the second quarter of 2022, we recognized insurance recoveries of $10.0 million and disposal costs of $0.1 million.~~

~~Income taxes~~Selling, general and administrative expenses

Income taxes are primarily due to income from our PotlatchDeltic taxable REIT subsidiaries (TRS). For the three months ended June 30, 2022, we recorded income tax expense of $28.3 million on TRS income before tax of $110.9 million. For the three months ended June 30, 2021, we recorded income tax expense of $50.8 million on TRS income before tax of $195.4 million.

~~Total Adjusted EBITDDA~~

~~Total Adjusted EBITDDA for the second quarter of 2022 decreased $99.8~~Selling, general and administrative expenses increased $1.9 million compared to the ~~second~~first quarter of ~~2021~~2022, primarily due to ~~lower lumber prices~~inflationary price increases and ~~shipment volumes~~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 ~~manufacturing and log and haul costs. These decreases were~~short-term interest rates, partially offset by increased ~~rural~~net interest expense associated with $277.5 million in long-term debt assumed and ~~development real estate sales. Refer to the~~ ~~Business Segment Results~~ ~~below for further discussions on activities for each of our segments. See~~ ~~Liquidity and Performance Measuresfor a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP measure, for each of the periods presented.~~

~~Year to Date 2022 Compared with Year to Date 2021~~

~~Revenues~~

~~Revenues were $770.9 million, a decrease of $30.8 million compared~~refinanced at attractive interest rates in connection with the ~~first half of 2021 primarily due to lower lumber prices and shipments and decreased Northern harvest volumes. Lumber shipments~~CatchMark merger in the first half of 2022 were impacted by the loss of production at our Ola, Arkansas sawmill following a fire in June 2021. These decreases were partially offset by higher harvest volumes and sawlog prices in the Southern region and increases in development real estate sales and rural acres sold.September 2022.

~~Cost~~24

Table of ~~goods sold~~Contents

Cost of goods sold increased $24.1 million compared with the first half of 2021 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.

~~Gain on fire damage~~

In June 2021, a fire occurred at our Ola, Arkansas sawmill. During the first half of 2022, we recognized insurance recoveries of $10.4 million for Ola and timberlands fire damage and incurred $0.8 million of disposal costs at the Ola mill.

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.

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~~Non-operating pension and other postretirement benefit costs~~

Non-operating pension and other postretirement benefit costs decreased $2.9 million compared to the first half of 2021. This decrease is primarily a result of an increase in the discount rate used to determine the benefit obligation partially offset by a decrease in expected return on plan assets.

Income taxes

Income taxes are primarily due to income or loss from our ~~TRS.~~PotlatchDeltic taxable REIT subsidiaries (TRS). For the ~~six~~three months ended ~~June 30,~~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 ~~$60.3~~$32.1 million on TRS income before tax of ~~$238.2~~$127.3 million, which included the $14.2 million pension settlement charge. ~~For the six months ended June 30, 2021, we recorded an income tax expense of $80.9 million on TRS income before tax of $311.2 million.~~

Total Adjusted EBITDDA

Total Adjusted EBITDDA for the first ~~half~~quarter of ~~2022~~2023 decreased ~~$49.2~~$187.8 million compared to the first ~~half~~quarter of ~~2021~~2022 primarily due to lower lumber and Idaho sawlog prices, ~~and shipments~~fewer development sales in Chenal Valley and higher manufacturing and log and haul costs. ~~These decreases were~~The decrease in Adjusted EBITDDA was partially offset by ~~higher~~increased lumber shipments and harvest ~~activity and sawlog prices in the Southern region and increases in development real estate sales and rural acres sold.~~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 June 30,							Six Months Ended June 30,							Three Months Ended March 31,
(in thousands)	2022		2021		Change			2022		2021		Change			2023		2022		Change
Revenues1	$	105,486	$	121,216	$	(15,730	)	$	229,143	$	233,132	$	(3,989	)	$	115,238	$	123,657	$	(8,419	)
Costs and expenses:
Logging and hauling		37,123		33,303		3,820			77,205		69,771		7,434			59,209		40,082		19,127
Other		8,658		8,796		(138	)		14,061		14,684		(623	)		7,536		5,403		2,133
Selling, general and administrative expenses		1,815		1,858		(43	)		3,553		3,560		(7	)		1,854		1,738		116
Timberlands Adjusted EBITDDA2	$	57,890	$	77,259	$	(19,369	)	$	134,324	$	145,117	$	(10,793	)	$	46,639	$	76,434	$	(29,795	)


1	Prior to elimination of intersegment fiber revenues of ~~$39.3~~$33.9 million and ~~$47.4~~$42.1 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, and $81.4 million and $94.7 million for the six months ended June 30, 2022 and 2021,~~ 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.

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Timberlands Segment Statistics


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31,
Harvest Volumes (in tons)	2022		2021		Change			2022		2021		Change			2023		2022		Change
Northern region
Sawlog		276,347		353,792		(77,445	)		661,637		781,047		(119,410	)		470,790		385,290		85,500
Pulpwood		11,383		6,813		4,570			19,642		20,697		(1,055	)		8,029		8,259		(230	)
Total		287,730		360,605		(72,875	)		681,279		801,744		(120,465	)		478,819		393,549		85,270

Southern region
Sawlog		507,679		480,193		27,486			997,772		988,266		9,506			661,588		490,093		171,495
Pulpwood		376,843		352,005		24,838			756,494		678,434		78,060			492,405		379,651		112,754
Stumpage		117,618		43,352		74,266			314,131		101,765		212,366			444,279		196,513		247,766
Total		1,002,140		875,550		126,590			2,068,397		1,768,465		299,932			1,598,272		1,066,257		532,015

Total harvest volume		1,289,870		1,236,155		53,715			2,749,676		2,570,209		179,467			2,077,091		1,459,806		617,285

Sales Price/Unit ($ per ton)1
Northern region
Sawlog	$	228	$	245	$	(17	)	$	218	$	209	$	9		$	113	$	212	$	(99	)
Pulpwood	$	52	$	29	$	23		$	50	$	34	$	16		$	50	$	47	$	3

Southern region
Sawlog	$	48	$	44	$	4		$	48	$	44	$	4		$	48	$	48	$	—
Pulpwood	$	32	$	29	$	3		$	32	$	28	$	4		$	33	$	31	$	2
Stumpage	$	18	$	6	$	12		$	17	$	10	$	7		$	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.

Timberlands Adjusted EBITDDA

The following table summarizes Timberlands Adjusted EBITDDA variances for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, compared with the three ~~and six~~ months ended ~~June 30, 2021:~~March 31, 2022:


(in thousands)	Three Months			Six Months			Three Months
Timberlands Adjusted EBITDDA - prior year	$	77,259		$	145,117		$	76,434
Harvest volume								14,202
Sales price and mix		(2,334	)		13,720			(35,292	)
Harvest volume		(11,956	)		(15,463	)
Logging and hauling costs per unit		(5,735	)		(10,656	)		(7,457	)
Forest management, indirect and other		656			1,606			(1,248	)
Timberlands Adjusted EBITDDA - current year	$	57,890		$	134,324		$	46,639

~~Table of Contents~~

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

Timberlands Adjusted EBITDDA for the ~~second~~first quarter of ~~2022~~2023 decreased ~~$19.4~~$29.8 million compared with the ~~second~~first quarter of ~~2021,~~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 decreased ~~6.9%~~46.7%, to ~~$228~~$113 per ton, primarily ~~from~~due to the effect of lower ~~lumber price realizations on~~ indexed ~~sawlogs~~sawlog prices in Idaho. Southern sawlog prices ~~increased 9.1%, to $48 per ton, compared to~~remained consistent with the ~~second~~first quarter of ~~2021, primarily as a result of stronger demand.~~

•

~~Harvest Volume:~~ In the Northern region hauling conditions were favorable in the second quarter of 2021 as compared to the second quarter of 2022, where hauling conditions were impacted by unseasonably wet weather in June 2022, resulting in a 20.2% decrease in harvest volume. We harvested 1.0 million tons in the Southern region during the second quarter of 2022, which was 14.5% higher than the second quarter of 2021, primarily due to favorable harvest conditions and increased stumpage sales.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.

~~Year to Date 2022 Compared with Year to Date 2021~~26

Table of Contents

~~Timberlands Adjusted EBITDDA for the first half of 2022 decreased $10.8 million compared to the first half of 2021, primarily as a result of the following:~~

•

~~Sales Price and Mix:~~ Sawlog prices in the Northern region increased 4.3%, to $218 per ton, primarily from the effect of high lumber price realizations on indexed sawlogs in Idaho. Southern sawlog prices increased 9.1%, to $48 per ton, compared to the first half of 2021, primarily as a result of stronger demand.

•

~~Harvest Volume:~~ In the Northern region hauling conditions were more favorable in the first half of 2021 as compared to the first half of 2022 resulting in a 15.0% decrease in harvest volume. We harvested 2.1 million tons in the Southern region during the first half of 2022, which was 17.0% higher than the first half of 2021, primarily due to favorable harvest conditions and increased stumpage sales.

•

~~Logging and Hauling Cost per Unit:~~ ~~Log and hauling costs per unit were higher primarily due to increased diesel costs.~~

Wood Products Segment


	Three Months Ended June 30,									Six Months Ended June 30,									Three Months Ended March 31,
(in thousands)	2022			2021			Change			2022			2021			Change			2023			2022			Change
Revenues	$	266,633		$	357,673		$	(91,040	)	$	562,375		$	626,969		$	(64,594	)	$	152,795		$	295,742		$	(142,947	)
Costs and expenses1
Fiber costs		88,915			87,621			1,294			166,588			167,090			(502	)		77,197			77,673			(476	)
Freight, logging and hauling		19,606			20,266			(660	)		37,973			38,463			(490	)		20,170			18,367			1,803
Manufacturing costs		55,573			51,617			3,956			106,366			99,219			7,147			52,890			50,793			2,097
Finished goods inventory change		(7,952	)		(8,572	)		620			(12,531	)		(12,591	)		60			(962	)		(4,579	)		3,617
Selling, general and administrative expenses		3,110			2,948			162			6,518			5,470			1,048			3,436			3,408			28
Other		125			(740	)		865			254			(770	)		1,024			95			129			(34	)
Wood Products Adjusted EBITDDA2	$	107,256		$	204,533		$	(97,277	)	$	257,207		$	330,088		$	(72,881	)	$	(31	)	$	149,951		$	(149,982	)


1	Prior to elimination of intersegment fiber costs of ~~$39.3~~$33.9 million and ~~$47.4~~$42.1 million for the three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021, and $81.4 million and $94.7 million for the six months ended June 30, 2022 and 2021,~~ 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~~

Wood Products Segment Statistics


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31,
	2022		2021		Change			2022		2021		Change			2023		2022		Change
Lumber shipments (MBF)1		254,225		260,311		(6,086	)		487,413		518,380		(30,967	)		261,633		233,188		28,445
Lumber sales prices ($ per MBF)	$	865	$	1,185	$	(320	)	$	966	$	1,038	$	(72	)	$	435	$	1,075	$	(640	)


1	MBF stands for thousand board feet.

Wood Products Adjusted EBITDDA

The following table summarizes Wood Products Adjusted EBITDDA variances for the three ~~and six~~ months ended ~~June 30, 2022,~~March 31, 2023, compared with the three ~~and six~~ months ended ~~June 30, 2021:~~March 31, 2022:


(in thousands)	Three Months			Six Months			Three Months
Wood Products Adjusted EBITDDA - prior year	$	204,533		$	330,088		$	149,951
Lumber:
Price		(83,228	)		(39,431	)		(147,893	)
Volume		(3,420	)		(17,103	)
Manufacturing costs per unit		(4,716	)		(11,953	)		3,786
Log costs per unit		(4,889	)		(7,184	)		678
Volume								(805	)
Residuals, panels and other		(1,024	)		2,790			(5,748	)
Wood Products Adjusted EBITDDA - current year	$	107,256		$	257,207		$	(31	)

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

Wood Products Adjusted EBITDDA for the ~~second~~first quarter of ~~2022~~2023 decreased ~~$97.3~~$150.0 million compared with the ~~second~~first quarter of ~~2021,~~2022, primarily as a result of the following:

•

Lumber Price: Average lumber sales prices decreased to ~~$865~~$435 per MBF during the ~~second~~first quarter of ~~2022~~2023 compared to ~~$1,185~~$1,075 per MBF during the ~~second~~first quarter of ~~2021.~~

•

~~Lumber Volume:~~ Lumber shipments decreased 6.1 million board feet during the second quarter of 2022 compared to the second 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 manufacturing costs per unit quarter over quarter was primarily a result of lost production at our Ola, Arkansas sawmill and inflationary price increases in areas such as energy and repair and maintenance.

•

~~Log Costs Per Unit:~~ ~~Log costs per unit were higher primarily as a result of increased indexed log costs at our Idaho sawmill.~~

~~Year to Date 2022 Compared with Year to Date 2021~~

~~Wood Products Adjusted EBITDDA for the first half of 2022 decreased $72.9 million compared with the first half of 2021, primarily as a result of the following:~~

•

~~Lumber Price:~~ ~~Average lumber sales prices decreased to $966 per MBF during the first half of 2022 compared to $1,038 per MBF during the first half of 2021.~~

•

~~Lumber Volume:~~ Lumber shipments decreased 31.0 million board feet during the first half of 2022 compared to the first half of 2021, primarily as a result of decreased shipments from our Ola, Arkansas sawmill following the fire in June 2021.

•

~~Manufacturing Cost Per Unit:~~ ~~Higher~~Lower manufacturing ~~costs~~cost per unit 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: ~~Increased plywood~~Plywood price ~~realizations~~realization and shipments ~~due to strong demand and product mix early in the year benefitted~~were lower during the first ~~half~~quarter of 2023 compared to the first quarter of 2022.

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Real Estate Segment


	Three Months Ended June 30,							Six Months Ended June 30,							Three Months Ended March 31,
(in thousands)	2022		2021		Change			2022		2021		Change			2023		2022		Change
Revenues	$	26,736	$	15,998	$	10,738		$	60,801	$	36,311	$	24,490		$	23,863	$	34,065	$	(10,202	)
Costs and expenses
Costs of goods sold		3,831		2,881		950			6,710		5,349		1,361			2,865		2,879		(14	)
Selling, general and administrative expenses		1,089		1,329		(240	)		2,151		2,581		(430	)		1,533		1,062		471
Real Estate Adjusted EBITDDA1	$	21,816	$	11,788	$	10,028		$	51,940	$	28,381	$	23,559		$	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.

Real Estate Segment Statistics


Rural Real Estate	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Acres sold		12,749		2,605		17,500		9,688		6,939		4,751
Average price per acre	$	1,290	$	4,416	$	2,176	$	2,222	$	2,568	$	4,556


Development Real Estate	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
Residential lots		45		19		109		70		24		64
Average price per lot	$	134,373	$	90,874	$	121,662	$	96,524	$	116,429	$	112,725

Commercial acres		3		—		6		11		—		3
Average price per acre	$	685,713	$	—	$	815,993	$	277,425	$	—	$	917,236

Real Estate Adjusted EBITDDA

The following table summarizes Real Estate Adjusted EBITDDA variances for the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023, compared with the three ~~and six~~ months ended ~~June 30, 2021:~~March 31, 2022:


(in thousands)	Three Months			Six Months			Three Months
Real Estate Adjusted EBITDDA - prior year	$	11,788		$	28,381		$	30,124
Rural real estate sales		4,733			16,545			(3,482	)
Real estate development sales		6,005			7,945			(7,052	)
Selling, general and administrative expenses		241			430			(472	)
Other costs, net		(951	)		(1,361	)		347
Real Estate Adjusted EBITDDA - current year	$	21,816		$	51,940		$	19,465

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

Real Estate Adjusted EBITDDA for the ~~second~~first quarter of ~~2022~~2023 was ~~$21.8~~$19.5 million, ~~an increase~~a decrease of ~~$10.0~~$10.7 million compared with the ~~second~~first quarter of ~~2021,~~2022, primarily as a result of the following:

•

Rural Sales: ~~Rural real estate sales~~The first quarter of 2023 included a 2,240-acre conservation sale in Alabama and a 2,700-acre land sale on acquired CatchMark timberlands, compared to a 1,760-acre sale in the ~~second~~South for $7,500 per acre in the first quarter of 2022 ~~included~~to an energy provider for a 10,700 acre timberland sale in Minnesota to a conservation entity representing its final option under a multi-year option arrangement. There were no comparable size land sales during the second quarter of 2021.planned commercial solar 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 ~~second~~first quarter of ~~2022,~~2023, we sold 4524 residential lots at an average lot price of ~~$134,373~~$116,429 compared to 1964 lots at an average lot price of ~~$90,874~~$112,725 during the ~~second~~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 $685,713 per acre~~sales during the ~~second~~first quarter of ~~2022.~~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.

Table of Contents

~~Year to Date 2022 Compared with Year to Date 2021~~

~~Real Estate Adjusted EBITDDA for the first half of 2022 was $51.9 million, an increase of $23.6 million compared with the first half of 2021, primarily as a result of the following:~~

•

~~Rural Sales:~~ The increase in rural real estate sales is primarily a result of 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 and the 10,700 acre timberland sale in Minnesota in the second quarter of 2022, which were not matched by similarly-sized land sale during the first half of 2021.

•

~~Development Sales:~~ During the first half of 2022, we sold 109 residential lots at an average lot price of $121,662 compared to 70 lots at an average lot price of $96,524 during the first half of 2021. In addition, we sold 6 acres of commercial land in Chenal Valley for $815,993 per acre compared to 11 acres of commercial land in Chenal Valley for $277,425 per acre in the first half of 2021.

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 ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022 ~~and 2021~~ are presented by category as follows:


	Six Months Ended June 30,									Three Months Ended March 31,
(in thousands)	2022			2021			Change			2023			2022			Change
Net cash from operating activities	$	378,186		$	341,340		$	36,846		$	39,139		$	230,299		$	(191,160	)
Net cash from investing activities	$	(88,766	)	$	(25,454	)	$	(63,312	)	$	(4,896	)	$	(17,122	)	$	12,226
Net cash from financing activities	$	(70,298	)	$	(56,196	)	$	(14,102	)	$	(36,800	)	$	(34,595	)	$	(2,205	)

Net Cash Flows from Operating Activities

Net cash from operating activities ~~increased $36.8~~decreased $191.2 million in the first ~~half~~quarter of ~~2022,~~2023, compared to the first ~~half~~quarter of ~~2021~~2022 primarily as a result of the following:

•

Cash received from customers decreased ~~$13.6~~$151.1 million primarily due to lower ~~average~~ lumber and Idaho sawlog prices and ~~reduced lumber shipments at our Ola, Arkansas sawmill following the fire~~fewer residential lot and commercial land sales in ~~June 2021.~~Chenal Valley. These decreases were partially offset by increased ~~harvest volume and sawlog prices~~shipments at our Ola, Arkansas sawmill which restarted late in the ~~Southern region, increased residential lot sales,~~third quarter of 2022 after a fire in June 2021, and increased ~~rural land sales, including a 1,760 acre rural land sale~~harvest activity which also benefitted from the addition of the CatchMark timberlands in ~~the South and a 10,700 acre timberland sale in Minnesota.~~mid-September 2022.

•

Cash payments increased ~~$12.0~~$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.

•

~~During the first half of 2022, we received $9.4 million in insurance proceeds as a result of the fire at our Ola, Arkansas sawmill and timberlands fire damage.~~

•

~~Net tax payments decreased $50.4 million as a result of lower taxable income generated from our TRS~~ operations.

Net Cash Flows from Investing Activities

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

•

We spent ~~$45.2~~$10.4 million on capital expenditures for property, plant and equipment, timberlands reforestation and road construction projects during the first ~~half~~quarter of ~~2022~~2023 compared to ~~$23.9~~$17.2 million during the first ~~half~~quarter of ~~2021. Capital expenditures in 2022 includes $12.2 million for the Waldo, Arkansas sawmill expansion and modernization project.~~2022.

•

~~Cash expenditures for timberland acquisitions during the first half of 2022 was $42.2 million compared to $2.2~~We received $5.1 million during the first ~~half~~quarter of ~~2021.~~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 ~~$61.0~~$36.0 million during the first ~~half~~quarter of ~~2022~~2023 compared to ~~$55.0~~$30.5 million during the first ~~half~~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.

~~Table of Contents~~

•

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

•

~~During the first half of 2022 we repurchased 94,566 shares of our common stock totaling $4.2 million compared to no shares repurchased during the first half of 2021.~~2023.

Future Sources and Uses of Cash

At ~~June 30, 2022,~~March 31, 2023, we had cash and cash equivalents of ~~$511.2~~$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 ~~June 30, 2022,~~March 31, 2023 there were no significant changes in our cash commitments arising in the normal course of business ~~except as noted below,~~ 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.

~~Returning cash to shareholders through a secure regular dividend and opportunistic share repurchases is an important and durable part~~29

Table of our disciplined capital allocation strategy. Our board of directors, in its sole discretion, determines the actual amount of dividends to be made to stockholders based on consideration of a number of factors, including, but not limited to, our results of operations, cash flow and capital requirements, economic conditions in our industry and in the markets for our products, borrowing capacity, debt covenant restrictions, future acquisitions and dispositions, and REIT requirements. Generally, a REIT must distribute its taxable income each year and there is a 20% limit on the value of our TRS, including cash, that can be retained. Our strong financial performance during the first half of 2022, continues to generate large cash balances in both our REIT and TRS. Based on our strong results in the first half of the year, we expect to pay a special dividend to stockholders in December 2022.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 ~~$85~~$135 million to ~~$90~~$145 million for capital expenditures during ~~2022.~~2023, including capital expenditures for the Waldo sawmill expansion and modernization project discussed below.

In June 2022, we announced a project to expand and modernize our Waldo, Arkansas sawmill. The project is expected to increase the mill’s annual capacity from 190 million board feet of dimensional lumber to approximately 275 million board feet. The investment is also expected to reduce the mill’s operating costs significantly. The Waldo investment includes upgrades to the log yard and planer, a new saw line, and a new continuous dry kiln. The existing mill will continue to operate during the project and completion is expected by the end of 2024. We expect to spend approximately $131.0 million on the project, ~~including a $12~~of which $12.2 million ~~deposit paid~~was spent in ~~2022.~~2022 and approximately $74.0 million is expected to be spent in 2023.

~~Our~~During 2022, ~~planned capital spend also includes approximately $15.0 million~~we completed the installation of ~~capital expenditures for the reconstruction of our fire-damaged Ola sawmill, which is largely covered by insurance. The~~ new equipment ~~has been installed. We expect to wrap up~~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 ~~project in the third quarter of 2022 and are targeting to complete the start-up phase by the end of 2022. 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.~~

~~Timberland Acquisitions~~

~~During~~claim and expect to receive the ~~six months ended June 30, 2022, we were the successful bidder on three bolt-on timberland transactions, aggregating approximately $101 million, covering approximately 46,000 acres~~remaining insurance proceeds in ~~Mississippi and Arkansas. We are using cash to pay for the acquisitions.~~2023.

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 ~~June 30, 2022,~~March 31, 2023, we had remaining authorization of ~~$55.3~~$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.

~~Table of Contents~~

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

At ~~June 30, 2022,~~March 31, 2023, our total outstanding net long-term debt was ~~$755.7 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 ~~June 30, 2022,~~March 31, 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 LIBOR, 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.

CatchMark has outstanding term loans of $300.0 million. We intend to refinance $277.5 million of CatchMark’s outstanding long-term debt and repay the remaining $22.5 million with cash on hand, effective with the close of the CatchMark merger. Additionally, we plan to dedesignate and restructure $277.5 million of our forward starting interest rate swaps to hedge the variability in future benchmark interest payments attributable to changes on $277.5 million of CatchMark debt.

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 ~~June 30, 2022:~~March 31, 2023:


(in thousands)
Estimated timberland fair value	$	4,010,593	$	4,835,534
Wood Products manufacturing facilities book basis (limited to 10% of TAV)		300,744		284,149
Cash and cash equivalents		511,157		325,632
Company owned life insurance (COLI) (limited to 5% of TAV)		4,259
Total Asset Value1	$	4,826,753
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 ~~June 30, 2022,~~March 31, 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 ~~June 30, 2022:~~March 31, 2023:

Covenant Requirement

Actual at
June 30, 2022

Covenant Requirement

Actual at
March 31, 2023

Interest coverage ratio

≥

3.00 to 1.00

22.08

≥

3.00 to 1.00

16.1

Leverage ratio

≤

40%

16%

≤

40%

19%

See Note 5: Debt in the Notes to the Condensed Consolidated Financial Statements for additional information on our debt and credit agreements.

~~Table of Contents~~

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, 2023			December 31, 2022
Long-term debt (including current portion)	$	1,032,973		$	1,032,680
Cash and cash equivalents		(325,632	)		(343,809	)
Net debt		707,341			688,871
Market capitalization1		3,955,838			3,505,255
Enterprise value	$	4,663,179		$	4,194,126

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

(in thousands)

June 30, 2022

December 31, 2021

Long-term debt (including current portion)

$
755,737

$
758,256

Cash and cash equivalents

(511,157
)

(296,151
)
Net debt

244,580

462,105

Market capitalization1

3,061,483

4,159,034

Enterprise value

$
3,306,063

$
4,621,139

Net debt to enterprise value

7.4
%

10.0
%
Dividend yield2

4.0
%

2.9
%
Weighted-average cost of debt, after tax3

3.1
%

3.1
%


1	Market capitalization is based on outstanding shares of ~~69.3~~79.9 million and ~~69.1~~79.7 million times closing share prices of ~~$44.19~~$49.50 and ~~$60.22 as of June 30, 2022,~~$43.99 at March 31, 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 ~~$44.19~~$49.50 and ~~$60.22 as of June 30, 2022,~~$43.99 at March 31, 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.

Table of Contents

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.

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.

~~Table of Contents~~

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


	Three Months Ended June 30,					Six Months Ended June 30,					Three Months Ended March 31,
(in thousands)	2022			2021		2022			2021		2023			2022
Net income	$	120,222		$	187,905	$	284,102		$	319,011	$	16,260		$	163,880
Interest expense, net		7,419			8,199		10,313			11,773		199			2,894
Income taxes		28,269			50,840		60,334			80,879		(3,504	)		32,065
Depreciation, depletion and amortization		20,007			17,029		39,509			35,025		31,764			19,502
Basis of real estate sold		7,325			7,213		18,179			16,036		10,631			10,854
Gain on fire damage		(9,868	)		—		(9,592	)		—
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		1,809			3,271		3,738			6,685
(Gain) loss on disposal of fixed assets		(13	)		527		(16	)		561
Non-operating pension and other postretirement employee benefit costs												228			1,929
Gain on disposal of fixed assets												—			(3	)
Other												(10	)		—
Total Adjusted EBITDDA	$	175,170		$	274,984	$	420,732		$	469,970	$	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:


	Six Months Ended June 30,						Twelve Months Ended June 30,						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	$	378,186		$	341,340		$	541,732		$	588,660		$	39,139		$	230,299		$	300,741		$	565,220
Capital expenditures2		(87,383	)		(26,089	)		(136,708	)		(49,073	)		(10,373	)		(17,214	)		(177,963	)		(80,910	)
CAD	$	290,803		$	315,251		$	405,024		$	539,587		$	28,766		$	213,085		$	122,778		$	484,310
Net cash from investing activities3	$	(88,766	)	$	(25,454	)	$	(122,457	)	$	(47,959	)	$	(4,896	)	$	(17,122	)	$	(135,294	)	$	(64,738	)
Net cash from financing activities	$	(70,298	)	$	(56,196	)	$	(415,411	)	$	(111,605	)	$	(36,800	)	$	(34,595	)	$	(297,767	)	$	(407,829	)


1	Net cash from operating activities for the ~~six~~three and twelve months ended ~~June 30,~~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 ~~$5.2~~$2.2 million and ~~$4.0 million, respectively. Net cash from operating activities for the twelve months ended June 30, 2022 and 2021 includes cash paid for real estate development expenditures of $10.4 million and $8.2~~$9.1 million, respectively.
2	The ~~six~~three and twelve months ended ~~June 30, 2022 includes~~March 31, 2023 include fire related capital expenditures for the Ola, Arkansas sawmill of ~~$9.2 million~~$0 and ~~$14.8~~$13.1 million, respectively, and ~~excludes~~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 include fire related capital expenditures for the Ola, Arkansas sawmill of $5.1 million and $12.4 million, respectively, and 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.

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

~~Table of Contents~~

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 ~~June 30, 2022.~~March 31, 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 ~~June 30, 2022.~~March 31, 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 ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3633

Table of Contents

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, except the following:~~2022.

~~Our Pending Merger With CatchMark Timber Trust~~

On May 29, 2022, we entered into an Agreement and Plan of Merger (merger agreement) with CatchMark Timber Trust, Inc. (CatchMark) and CatchMark Timber Operating Partnership, LP (the Partnership), pursuant to which CatchMark and the Partnership will merge into a wholly-owned subsidiary of PotlatchDeltic, with the subsidiary continuing as the surviving corporation. If the merger is not completed, our businesses may be adversely affected and we may be subject to various risks without realizing any of the benefits of having the merger completed, including negative reactions from the financial markets or from our customers, suppliers or employees. In addition, we may be subject to litigation related to failing to complete the merger or enforcement proceedings to perform our obligations under the merger agreement.

~~A delay in completing the merger, which is subject to a number of conditions, some of which are outside our control, may reduce or eliminate the expected benefits from the merger.~~

The merger is subject to a number of conditions, some of which are beyond our control, that could prevent, delay or otherwise materially adversely affect the completion of the transaction. We cannot predict whether and when the conditions will be satisfied. Furthermore, the requirement to obtain the required CatchMark stockholder approval could delay the completion of the merger for a significant period of time or prevent the transaction from occurring. A delay in completing the merger could cause the combined company not to realize some or all of the synergies and other benefits that it expects to achieve if the merger is successfully completed within its expected time frame. The merger agreement contains certain restrictions on the conduct of the parties’ business. If the merger is delayed, these restrictions could adversely affect our ability to execute business strategies or pursue attractive business opportunities. In addition, a delay could cause management to focus on completion of the merger instead of on other opportunities that could be beneficial to the company.

~~The merger will involve substantial costs, and the combined company may be unable to successfully integrate the businesses of the two companies and realize the anticipated benefits of the merger.~~

We have incurred and expect to continue to incur substantial costs, fees and expenses relating directly to the merger and the issuance of our shares in connection with the merger, including fees and expenses payable to financial and other professional advisors, SEC filing fees, printing and mailing costs and other transaction-related costs, fees and expenses. We expect to incur substantial expenses in connection with formulating and implementing integration plans, including facilities and systems consolidation costs, employment-related costs, and a cash gross-up payment, subject to a cap, to the holders of Partnership OP Units to satisfy income tax liabilities associated with receiving shares of our common stock as consideration in connection with the merger if elected by us.

Expenses related to integration are by their nature difficult to estimate accurately. These expenses could, particularly in the near term, exceed the savings that we expect to achieve from the realization of economies of scale and cost savings and synergies related to the integration of the businesses. These integration expenses likely will result in significant charges against earnings following the completion of the merger, but the amount and timing of such charges are uncertain.

The merger involves the combination of two independently operated public companies. The merger will require management to devote significant attention and resources to integrating business practices and operations. The combined company may fail to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is costlier than expected.

~~Table of Contents~~

~~Uncertainty associated with the merger may adversely affect our business and operations.~~

Uncertainties associated with the merger could cause some customers, suppliers, or other entities with whom we have a business relationship to delay or defer decisions, which could negatively impact our revenues, earnings, and cash flows, as well as the market price of our common stock, regardless of whether the merger is completed. In addition, customers or suppliers may cease doing business with us or the combined company in anticipation of or following the merger or may change the terms and conditions upon which they are willing to continue to do business. In addition, current or prospective competitors may seek to take advantage of potential uncertainty or disruption resulting from the merger to interfere with relationships with customers, suppliers, or employees.

~~The market price and trading volume of our common stock may be volatile in the future as a result of the merger.~~

The market price of our common stock may decline in the future as a result of the merger for a number of reasons, including our inability to successfully integrate the two companies or our failure to achieve the perceived benefits of the merger, including financial results, as rapidly as or to the extent anticipated by financial or industry analysts. Failure to successfully integrate the two companies could negatively impact our revenues, earnings and cash flows, and could materially adversely affect our ability to pay dividends at historical levels, or at all.

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy and our ability to make distributions to our stockholders.

~~The merger may not be accretive and may cause dilution to our cash available for distribution, which may negatively affect the market price of shares of our common stock.~~

The merger is expected to deliver accretion to our cash available for distribution in the first full year after the merger is completed, including cost synergies and excluding integration and restructuring activities. This expectation is based on preliminary estimates which may materially change, including the currently expected timing of the closing of the merger or the failure to realize all of the benefits anticipated from the merger. We could also encounter additional transaction-related costs or other factors such as a delay in the closing of the merger or the failure to realize all of the benefits anticipated from the merger. Any of these factors could cause dilution to our cash available for distribution or decrease or delay the expected accretive effect of the merger and cause a decrease in the market price of our common stock.

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~~a previously approved share repurchase plan. There were no shares 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.

During the six months ended June 30, 2022, we repurchased 94,566 shares of our common stock at a total consideration of $4.2 million (including transaction costs) under the Repurchase Program. Transaction costs are not counted against authorized funds. All common stock purchases were made in open-market transactions. We did not repurchase any shares during the ~~six months ended June 30, 2021.~~first quarter of 2023. At ~~June 30, 2022,~~March 31, 2023, we had remaining authorization of ~~$55.3~~$150.0 million for future stock repurchases under the 2022 Repurchase Program.

~~The following table provides information with respect to purchases of common stock made by the company during the second quarter of 2022:~~

Common Share Purchases

Total Number of Shares Purchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of a Publicly Announced Plan

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan

April 1 - April 30

—

$
—

—

$
59,496,899

May 1 - May 31

—

$
—

—

$
59,496,899

June 1 - June 30

94,566

$
43.92

94,566

$
55,343,272

Total

94,566

94,566

38We 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.

~~Table of Contents~~

ITEM 6. EXHIBITS


EXHIBIT NUMBER	DESCRIPTION
(2)(a)*	Agreement and Plan of Merger, dated as of May 29, 2022, by and among PotlatchDeltic Corporation, Horizon Merger Sub 2022, LLC, CatchMark Timber Trust, Inc. and CatchMark Timber Operating Partnership, L.P., filed as Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant on May 31, 2022.
(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)*	~~PotlatchDeltic Corporation Amended and Restated 2019 Long-Term Incentive Plan, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on May 4, 2022.~~
(10)(b)*	Engineering, Procurement and Construction Agreement, dated as of June 3, 2022, between PotlatchDeltic Manufacturing, LLC and BID Group Construction US Inc., filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on June 6, 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 ~~June 30, 2022,~~March 31, 2023, filed on ~~July 29, 2022~~April 28, 2023, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (ii) the Condensed Consolidated Statements of Comprehensive (Loss) Income for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (iii) the Condensed Consolidated Balance Sheets at ~~June 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, (iv) the Condensed Consolidated Statements of Cash Flows for the ~~six~~three months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021,~~ (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2023 and 2022, ~~and 2021~~ and (vi) the Notes to Condensed Consolidated Financial Statements.
~~(104)~~104	Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

* Incorporated by reference.

3934

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

4035


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


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


	Three Months Ended June 30,					Six Months Ended June 30,
(in thousands)	2022		2021			2022			2021
Net income	$	120,222	$	187,905		$	284,102		$	319,011
Other comprehensive income (loss):
Pension and other postretirement employee benefits:
Net loss arising during the period, net of tax benefit of $0, $0, $1,570 and $0		0		0			(4,587	)		0
Effect of pension settlement, net of tax expense of $0, $0, $3,612 and $0		0		0			10,553			0
Amortization of actuarial loss included in net income, net of tax expense of $267, $1,073, $742 and $2,182		786		3,050			2,170			6,207
Amortization of prior service cost (credit) included in net income, net of tax expense (benefit) of $45, $(72), $89 and $(145)		129		(205	)		259			(409	)
Cash flow hedges, net of tax expense (benefit) of $2,817, $(2,179), $5,066 and $1,853		42,529		(31,163	)		85,805			32,944
Other comprehensive income (loss), net of tax		43,444		(28,318	)		94,200			38,742
Comprehensive income	$	163,666	$	159,587		$	378,302		$	357,753


(in thousands, except per share amounts)	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	511,157		$	296,151		$	325,632		$	343,809
Customer receivables, net		43,989			31,028			29,565			22,813
Inventories, net		64,247			72,369			66,189			67,958
Other current assets		31,833			21,630			44,698			36,955
Total current assets		651,226			421,178			466,084			471,535
Property, plant and equipment, net		314,840			292,320			312,791			318,184
Investment in real estate held for development and sale		60,143			65,604			54,945			55,490
Timber and timberlands, net		1,704,256			1,682,671			2,488,956			2,508,372
Intangible assets, net		15,101			15,491			16,975			17,420
Other long-term assets		126,353			57,951			160,019			179,554
Total assets	$	2,871,919		$	2,535,215		$	3,499,770		$	3,550,555

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	110,184		$	78,209		$	78,268		$	94,861
Current portion of long-term debt		39,989			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		155,166			126,179			123,179			139,766
Long-term debt		715,748			715,279			992,988			992,701
Pension and other postretirement employee benefits		91,703			83,674			78,096			77,396
Deferred tax liabilities, net		40,725			34,874			41,756			41,790
Other long-term obligations		25,026			49,076			35,488			35,749
Total liabilities		1,028,368			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 69,280 and 69,064 shares		69,280			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		1,785,383			1,781,217			2,296,927			2,294,797
Accumulated deficit		(62,074	)		(280,910	)		(228,766	)		(208,979	)
Accumulated other comprehensive income (loss)		50,962			(43,238	)
Accumulated other comprehensive income								80,186			97,652
Total stockholders’ equity		1,843,551			1,526,133			2,228,263			2,263,153
Total liabilities and stockholders' equity	$	2,871,919		$	2,535,215		$	3,499,770		$	3,550,555


	Six Months Ended June 30,						Three Months Ended March 31,
(in thousands)	2022			2021			2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	284,102		$	319,011		$	16,260		$	163,880
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization		40,253			35,831			32,173			19,874
Basis of real estate sold		18,179			16,036			10,631			10,854
Change in deferred taxes		(2,089	)		562			394			(2,123	)
Pension and other postretirement employee benefits		7,397			11,111			1,611			3,857
Pension settlement charge		14,165			0			—			14,165
Equity-based compensation expense		4,424			4,070			2,279			2,056
Gain on fire damage		(9,592	)		0
Loss on fire damage								—			276
Other, net		(599	)		(295	)		(3,509	)		(291	)
Change in working capital and operating-related activities, net		19,972			(37,154	)		(17,205	)		21,208
Real estate development expenditures		(5,190	)		(3,999	)		(2,408	)		(2,161	)
Funding of pension and other postretirement employee benefits		(2,264	)		(3,833	)		(1,087	)		(1,296	)
Proceeds from insurance recoveries		9,428			0
Net cash from operating activities		378,186			341,340			39,139			230,299

CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions		(36,777	)		(15,943	)		(4,255	)		(12,566	)
Timberlands reforestation and roads		(8,388	)		(7,954	)		(6,118	)		(4,648	)
Acquisition of timber and timberlands		(42,218	)		(2,192	)
Interest received under swaps with other-than-insignificant financing element								5,055			—
Other, net		(1,383	)		635			422			92
Net cash from investing activities		(88,766	)		(25,454	)		(4,896	)		(17,122	)

CASH FLOWS FROM FINANCING ACTIVITIES									��
Distributions to common stockholders		(61,048	)		(54,973	)		(35,962	)		(30,524	)
Repurchase of common stock		(4,156	)		0
Repayment of long-term debt		(3,000	)		0			—			(3,000	)
Other, net		(2,094	)		(1,223	)		(838	)		(1,071	)
Net cash from financing activities		(70,298	)		(56,196	)		(36,800	)		(34,595	)
Change in cash, cash equivalents and restricted cash		219,122			259,690			(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	$	515,894		$	512,030		$	343,034		$	475,354

NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued property, plant and equipment additions	$	946		$	1,474		$	1,835		$	1,516
Accrued timberlands reforestation and roads	$	614		$	1,170		$	1,041		$	98


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



		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	21
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3533
ITEM 4.	Controls and Procedures	3633

PART II. - OTHER INFORMATION
ITEM 1.	Legal Proceedings	3734
ITEM 1A.	Risk Factors	3734
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3834
ITEM 6.	Exhibits	3934

SIGNATURE		4035


(in thousands)	June 30, 2022		June 30, 2021		March 31, 2023		March 31, 2022
Cash and cash equivalents	$	511,157	$	512,030	$	325,632	$	470,918
Restricted cash included in other long-term assets1		4,737		0
Restricted cash included in other current and long-term assets1						17,402		4,436
Total cash, cash equivalents, and restricted cash	$	515,894	$	512,030	$	343,034	$	475,354


	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
Net income		—			—			—			120,222			—			120,222
Shares issued for stock compensation		3			3			(3	)		—			—			—
Equity-based compensation expense		—			—			2,368			—			—			2,368
Repurchase of common stock		(95	)		(95	)		—			(4,061	)		—			(4,156	)
Pension plans and OPEB obligations, net of tax		—			—			—			—			915			915
Cash flow hedges, net of tax		—			—			—			—			42,529			42,529
Dividends on common stock, $0.44 per share		—			—			—			(30,524	)		—			(30,524	)
Other transactions, net		—			—			78			(79	)		—			(1	)
Balance, June 30, 2022		69,280		$	69,280		$	1,785,383		$	(62,074	)	$	50,962		$	1,843,551
Balance, March 31, 2023																				79,916	$	79,916	$	2,296,927		$	(228,766	)	$	80,186		$	2,228,263



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	1514
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)~~	2019
Note 13: ~~Pending~~CatchMark Merger ~~With CatchMark~~	19
Note 14: Commitments and Contingencies	20


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


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


		Asset Derivatives					Liability Derivatives
(in thousands)	Location	June 30, 2022		December 31, 2021		Location	June 30, 2022		December 31, 2021
Derivatives designated in cash flow hedging relationships:
Interest rate contracts	Other assets, current1	$	6,739	$	2,191	Accounts payable and accrued liabilities1	$	0	$	0
Interest rate contracts	Other assets, non-current		93,570		31,306	Other long-term obligations		0		24,060
		$	100,309	$	33,497		$	0	$	24,060


Common Share Purchases	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plan
April 1 - April 30		—	$	—		—	$	59,496,899
May 1 - May 31		—	$	—		—	$	59,496,899
June 1 - June 30		94,566	$	43.92		94,566	$	55,343,272
Total		94,566				94,566


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
(in thousands)	2022			2021			2022			2021			2023			2022
Timberlands
Northern region
Sawlogs	$	62,930		$	86,773		$	144,434		$	162,954		$	53,325		$	81,504
Pulpwood		587			197			979			696			403			392
Other		213			235			516			535			261			303
Total Northern revenues		63,730			87,205			145,929			164,185			53,989			82,199

Southern region
Sawlogs		24,365			21,013			47,746			43,429			31,754			23,381
Pulpwood		12,221			10,163			23,848			19,324			16,132			11,627
Stumpage		2,108			271			5,466			1,035			9,233			3,358
Other		3,062			2,564			6,154			5,159			4,130			3,092
Total Southern revenues		41,756			34,011			83,214			68,947			61,249			41,458

Total Timberlands revenues		105,486			121,216			229,143			233,132			115,238			123,657

Wood Products
Lumber		219,924			308,480			470,688			538,162			113,798			250,764
Residuals and Panels		46,709			49,193			91,687			88,807			38,997			44,978
Total Wood Products revenues		266,633			357,673			562,375			626,969			152,795			295,742

Real Estate
Rural real estate		16,440			11,505			38,086			21,530			17,819			21,646
Development real estate		7,946			1,774			18,224			9,827			2,800			10,278
Other		2,350			2,719			4,491			4,954			3,244			2,141
Total Real Estate revenues		26,736			15,998			60,801			36,311			23,863			34,065

Total segment revenues		398,855			494,887			852,319			896,412			291,896			453,464
Intersegment Timberlands revenues1		(39,258	)		(47,381	)		(81,372	)		(94,713	)		(33,934	)		(42,114	)
Total consolidated revenues	$	359,597		$	447,506		$	770,947		$	801,699		$	257,962		$	411,350


(in thousands)	June 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Logs	$	25,613		$	41,199		$	24,428		$	30,586
Lumber, panels and veneer		40,207			34,528			38,526			35,888
Materials and supplies		19,565			17,780			23,013			21,262
Total inventories		85,385			93,507			85,967			87,736
Less: LIFO reserve		(21,138	)		(21,138	)		(19,778	)		(19,778	)
Total inventories, net	$	64,247		$	72,369		$	66,189		$	67,958