UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2020March 31, 2021
or
☐ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 1-32729
PotlatchDeltic Corporation
(Exact name of registrant as specified in its charter)
Delaware | 82-0156045 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
601 West First Avenue, Suite 1600 |
|
Spokane, Washington | 99201 |
(Address of principal executive offices) | (Zip Code) |
(509) 835-1500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol(s) | Name of each exchange on which registered |
Common Stock | PCH | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ |
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act).
Yes ☐ No ☒
The number of shares of common stock of the registrant outstanding as of July 29, 2020April 28, 2021 was 66,871,281.67,042,259.
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
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PART I. - FINANCIAL INFORMATION |
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ITEM 1. | Financial Statements (unaudited) |
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| 2 | ||
| Condensed Consolidated Statements of Comprehensive Income (Loss) | 3 | |
| 4 | ||
| 5 | ||
| 7 | ||
| Index for the Notes to Condensed Consolidated Financial Statements | 8 | |
| 9 | ||
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
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ITEM 3. |
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ITEM 4. |
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PART II. - OTHER INFORMATION |
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ITEM 1. |
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ITEM 1A. |
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ITEM 2. |
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ITEM 6. |
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Part I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
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| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| Three Months Ended March 31, |
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(in thousands, except per share amounts) |
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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Revenues |
| $ | 181,555 |
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| $ | 215,581 |
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| $ | 390,435 |
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| $ | 397,297 |
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| $ | 354,193 |
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| $ | 208,880 |
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Costs and expenses: |
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Cost of goods sold |
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| 149,836 |
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| 175,673 |
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| 321,882 |
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| 329,888 |
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| 169,302 |
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| 172,046 |
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Selling, general and administrative expenses |
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| 16,811 |
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| 14,952 |
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| 31,018 |
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| 31,522 |
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| 16,758 |
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| 14,207 |
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Gain on sale of facility |
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| — |
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| — |
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| — |
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| (9,176 | ) | ||||||||||||||
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| 166,647 |
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| 190,625 |
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| 352,900 |
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| 352,234 |
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| 186,060 |
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| 186,253 |
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Operating income |
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| 14,908 |
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| 24,956 |
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| 37,535 |
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| 45,063 |
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| 168,133 |
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| 22,627 |
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Interest expense, net |
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| (8,339 | ) |
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| (7,882 | ) |
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| (12,037 | ) |
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| (13,346 | ) |
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| (3,574 | ) |
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| (3,698 | ) | ||||||
Loss on extinguishment of debt |
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| — |
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| — |
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| — |
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| (5,512 | ) | ||||||||||||||
Pension settlement charge |
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| — |
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| — |
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| (42,988 | ) |
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| — |
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| — |
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| (42,988 | ) | |||||
Non-operating pension and other postretirement employee benefit costs |
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| (3,478 | ) |
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| (889 | ) |
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| (7,113 | ) |
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| (1,869 | ) |
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| (3,414 | ) |
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| (3,635 | ) | ||||||
Income (loss) before income taxes |
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| 3,091 |
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| 16,185 |
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| (24,603 | ) |
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| 24,336 |
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| 161,145 |
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| (27,694 | ) | ||||||
Income taxes |
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| (453 | ) |
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| 952 |
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| 10,409 |
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| (639 | ) |
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| (30,039 | ) |
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| 10,862 |
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Net income (loss) |
| $ | 2,638 |
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| $ | 17,137 |
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| $ | (14,194 | ) |
| $ | 23,697 |
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| $ | 131,106 |
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| $ | (16,832 | ) |
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Net income (loss) per share: |
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Basic |
| $ | 0.04 |
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| $ | 0.25 |
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| $ | (0.21 | ) |
| $ | 0.35 |
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| $ | 1.95 |
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| $ | (0.25 | ) | ||
Diluted |
| $ | 0.04 |
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| $ | 0.25 |
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| $ | (0.21 | ) |
| $ | 0.35 |
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| $ | 1.94 |
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| $ | (0.25 | ) | ||
Dividends per share |
| $ | 0.40 |
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| $ | 0.40 |
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| $ | 0.80 |
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| $ | 0.80 |
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| $ | 0.41 |
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| $ | 0.40 |
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Weighted-average shares outstanding: |
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Basic |
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| 67,176 |
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| 67,664 |
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| 67,321 |
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| 67,774 |
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| 67,207 |
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| 67,478 |
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Diluted |
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| 67,359 |
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| 67,713 |
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| 67,321 |
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| 67,866 |
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| 67,607 |
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| 67,478 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
|
| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| Three Months Ended March 31, |
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(in thousands) |
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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Net income (loss) |
| $ | 2,638 |
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| $ | 17,137 |
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| $ | (14,194 | ) |
| $ | 23,697 |
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| $ | 131,106 |
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| $ | (16,832 | ) |
Other comprehensive income (loss), net of tax: |
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Pension and other postretirement employee benefits: |
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Net loss arising during the period, net of tax benefit of $0, $0, $6,817 and $0 |
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| — |
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| (19,402 | ) |
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| — |
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Effect of pension settlement, net of tax benefit of $0, $0, $11,177 and $0 |
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| — |
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| — |
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| 31,811 |
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Amortization of prior service credit included in net income (loss), net of tax benefit of $75, $561, $152 and $1,122 |
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| (215 | ) |
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| (1,597 | ) |
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| (430 | ) |
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| (3,194 | ) | ||||||||
Amortization of actuarial loss included in net income (loss), net of tax expense of $1,034, $915, $2,223 and $1,886 |
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| 2,942 |
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| 2,605 |
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| 6,326 |
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| 5,368 |
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Cash flow hedges, net of tax expense (benefit) of $4, $(549), $(1,806) and $(913) |
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| (1,847 | ) |
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| (10,417 | ) |
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| (40,372 | ) |
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| (18,930 | ) | ||||||||
Net loss arising during the period, net of tax benefit of $0 and $6,817 |
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| — |
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| (19,402 | ) | ||||||||||||||||
Effect of pension settlement, net of tax benefit of $0 and $11,177 |
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| — |
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| 31,811 |
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Amortization of prior service credit included in net income (loss), net of tax benefit of $73 and $76 |
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| (204 | ) |
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| (215 | ) | ||||||||||||||||
Amortization of actuarial loss included in net income (loss), net of tax expense of $1,109 and $1,189 |
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| 3,157 |
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| 3,384 |
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Cash flow hedges, net of tax expense (benefit) of $4,031 and $(1,810) |
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| 64,107 |
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| (38,525 | ) | ||||||||||||||||
Other comprehensive income (loss), net of tax |
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| 880 |
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| (9,409 | ) |
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| (22,067 | ) |
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| (16,756 | ) |
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| 67,060 |
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| (22,947 | ) |
Comprehensive income (loss) |
| $ | 3,518 |
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| $ | 7,728 |
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| $ | (36,261 | ) |
| $ | 6,941 |
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| $ | 198,166 |
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| $ | (39,779 | ) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands, except per share amounts) |
| June 30, 2020 |
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| December 31, 2019 |
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| March 31, 2021 |
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| December 31, 2020 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 80,987 |
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| $ | 83,310 |
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| $ | 382,032 |
| $ | 252,340 |
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Customer receivables, net |
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| 24,588 |
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| 14,167 |
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| 41,920 |
| 26,606 |
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Inventories, net |
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| 52,215 |
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| 65,781 |
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| 62,663 |
| 62,036 |
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Other current assets |
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| 22,107 |
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| 20,183 |
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| 20,959 |
| 16,136 |
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Total current assets |
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| 179,897 |
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| 183,441 |
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| 507,574 |
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| 357,118 |
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Property, plant and equipment, net |
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| 286,169 |
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| 286,383 |
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| 291,483 |
| 288,544 |
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Investment in real estate held for development and sale |
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| 73,541 |
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| 74,233 |
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| 69,057 |
| 72,355 |
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Timber and timberlands, net |
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| 1,618,975 |
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| 1,638,663 |
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| 1,587,593 |
| 1,600,061 |
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Intangible assets, net |
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| 16,660 |
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| 17,049 |
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| 16,075 |
| 16,270 |
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Other long-term assets |
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| 29,928 |
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| 35,290 |
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| 91,847 |
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| 46,717 |
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Total assets |
| $ | 2,205,170 |
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| $ | 2,235,059 |
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| $ | 2,563,629 |
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| $ | 2,381,065 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
| $ | 75,937 |
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| $ | 60,577 |
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| $ | 114,849 |
| $ | 93,279 |
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Current portion of long-term debt |
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| 45,988 |
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| 45,974 |
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| 42,985 |
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| 39,981 |
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Current portion of pension and other postretirement employee benefits |
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| 6,701 |
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| 6,701 |
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| 6,574 |
| 6,574 |
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Total current liabilities |
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| 128,626 |
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| 113,252 |
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| 164,408 |
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| 139,834 |
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Long-term debt |
|
| 711,001 |
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| 710,495 |
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| 714,619 |
| 717,366 |
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Pension and other postretirement employee benefits |
|
| 142,708 |
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| 115,463 |
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| 129,025 |
| 128,807 |
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Deferred tax liabilities, net |
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| 10,942 |
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| 20,165 |
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| 24,298 |
| 17,740 |
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Other long-term obligations |
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| 86,417 |
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| 48,853 |
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| 53,730 |
| 72,365 |
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Total liabilities |
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| 1,079,694 |
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| 1,008,228 |
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| 1,086,080 |
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| 1,076,112 |
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Commitments and contingencies |
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Stockholders' equity: |
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Preferred stock, authorized 4,000 shares, 0 shares issued |
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| — |
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| — |
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| — |
| — |
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Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 66,871 and 67,221 shares |
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| 66,871 |
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| 67,221 |
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Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 67,042 and 66,876 shares |
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| 67,042 |
| 66,876 |
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Additional paid-in capital |
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| 1,670,184 |
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| 1,666,299 |
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| 1,676,421 |
| 1,674,576 |
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Accumulated deficit |
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| (442,153 | ) |
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| (359,330 | ) |
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| (211,985 | ) |
| (315,510 | ) | |||
Accumulated other comprehensive loss |
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| (169,426 | ) |
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| (147,359 | ) |
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| (53,929 | ) |
| (120,989 | ) | |||
Total stockholders’ equity |
|
| 1,125,476 |
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|
| 1,226,831 |
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| 1,477,549 |
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| 1,304,953 |
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Total liabilities and stockholders' equity |
| $ | 2,205,170 |
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| $ | 2,235,059 |
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| $ | 2,563,629 |
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| $ | 2,381,065 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| Six Months Ended June 30, |
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| Three Months Ended March 31, |
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(in thousands) |
| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net (loss) income |
| $ | (14,194 | ) |
| $ | 23,697 |
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Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
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Net income (loss) |
| $ | 131,106 |
|
| $ | (16,832 | ) | ||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
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Depreciation, depletion and amortization |
|
| 37,215 |
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|
| 33,411 |
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|
| 18,399 |
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| 19,044 |
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Basis of real estate sold |
|
| 9,191 |
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|
| 8,983 |
|
|
| 8,823 |
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|
| 6,498 |
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Gain on sale of facility |
|
| — |
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| (9,176 | ) | ||||||||
Loss on extinguishment of debt |
|
| — |
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|
| 5,512 |
| ||||||||
Change in deferred taxes |
|
| (13,849 | ) |
|
| (17,238 | ) |
|
| 1,490 |
|
|
| (12,383 | ) |
Pension and other postretirement employee benefits |
|
| 11,833 |
|
|
| 5,937 |
|
|
| 5,627 |
|
|
| 6,068 |
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Pension settlement charge |
|
| 42,988 |
|
|
| — |
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|
| — |
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|
| 42,988 |
|
Equity-based compensation expense |
|
| 3,865 |
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|
| 3,449 |
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|
| 1,930 |
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|
| 1,885 |
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Other, net |
|
| (177 | ) |
|
| (1,928 | ) |
|
| (387 | ) |
|
| 237 |
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Change in working capital and operating-related activities, net |
|
| 16,397 |
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|
| 22,490 |
|
|
| 6,713 |
|
|
| 2,557 |
|
Real estate development expenditures |
|
| (2,487 | ) |
|
| (4,481 | ) |
|
| (2,315 | ) |
|
| (378 | ) |
Funding of pension and other postretirement employee benefits |
|
| (2,839 | ) |
|
| (3,135 | ) |
|
| (1,421 | ) |
|
| (1,546 | ) |
Net cash provided by operating activities |
|
| 87,943 |
|
|
| 67,521 |
|
|
| 169,965 |
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|
| 48,138 |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Property, plant and equipment additions |
|
| (10,295 | ) |
|
| (15,502 | ) |
|
| (7,762 | ) |
|
| (5,039 | ) |
Timberlands reforestation and roads |
|
| (7,776 | ) |
|
| (8,190 | ) |
|
| (3,956 | ) |
|
| (4,310 | ) |
Acquisition of timber and timberlands |
|
| (4,730 | ) |
|
| (278 | ) |
|
| — |
|
|
| (4,190 | ) |
Proceeds on sale of facility |
|
| 1,000 |
|
|
| 58,793 |
|
|
| — |
|
|
| 1,000 |
|
Other, net |
|
| 2,113 |
|
|
| 433 |
|
|
| 189 |
|
|
| 1,505 |
|
Net cash (used in) provided by investing activities |
|
| (19,688 | ) |
|
| 35,256 |
| ||||||||
Net cash used in investing activities |
|
| (11,529 | ) |
|
| (11,034 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions to common stockholders |
|
| (53,685 | ) |
|
| (53,946 | ) |
|
| (27,484 | ) |
|
| (26,941 | ) |
Repurchase of common stock |
|
| (15,364 | ) |
|
| (25,173 | ) |
|
| — |
|
|
| (12,355 | ) |
Proceeds from issuance of long-term debt |
|
| — |
|
|
| 150,000 |
| ||||||||
Repayment of long-term debt |
|
| — |
|
|
| (150,000 | ) | ||||||||
Premiums and fees on debt retirement |
|
| — |
|
|
| (4,865 | ) | ||||||||
Other, net |
|
| (526 | ) |
|
| (264 | ) |
|
| (591 | ) |
|
| (242 | ) |
Net cash used in financing activities |
|
| (69,575 | ) |
|
| (84,248 | ) |
|
| (28,075 | ) |
|
| (39,538 | ) |
Change in cash, cash equivalents and restricted cash |
|
| (1,320 | ) |
|
| 18,529 |
|
|
| 130,361 |
|
|
| (2,434 | ) |
Cash, cash equivalents and restricted cash at beginning of period |
|
| 84,254 |
|
|
| 79,441 |
|
|
| 252,340 |
|
|
| 84,254 |
|
Cash, cash equivalents and restricted cash at end of period |
| $ | 82,934 |
|
| $ | 97,970 |
|
| $ | 382,701 |
|
| $ | 81,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt assumed by buyer in sale of facility |
| $ | — |
|
| $ | 29,000 |
| ||||||||
Accrued property, plant and equipment additions |
| $ | 706 |
|
| $ | 244 |
|
| $ | 2,263 |
|
| $ | 1,380 |
|
Accrued timberlands reforestation and roads |
| $ | 462 |
|
| $ | 592 |
|
| $ | 813 |
|
| $ | 260 |
|
|
|
|
|
|
|
|
|
|
5
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 in the Condensed Consolidated Statements of Cash Flows.
(in thousands) |
| June 30, 2020 |
|
| June 30, 2019 |
|
| March 31, 2021 |
|
| March 31, 2020 |
| ||||
Cash and cash equivalents |
| $ | 80,987 |
|
| $ | 97,970 |
|
| $ | 382,032 |
|
| $ | 79,484 |
|
Restricted cash included in other long-term assets1 |
|
| 1,947 |
|
|
| — |
|
|
| 669 |
|
|
| 2,336 |
|
Total cash, cash equivalents, and restricted cash |
| $ | 82,934 |
|
| $ | 97,970 |
|
| $ | 382,701 |
|
| $ | 81,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Amounts included in restricted cash represent proceeds held by a qualified intermediary that are intended to be reinvested in timber and timberlands. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
| ||||||||||||||||||
(in thousands, except per share amounts) |
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2019 |
|
| 67,221 |
|
| $ | 67,221 |
|
| $ | 1,666,299 |
|
| $ | (359,330 | ) |
| $ | (147,359 | ) |
| $ | 1,226,831 |
| ||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,832 | ) |
|
| — |
|
|
| (16,832 | ) | ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 131 |
|
|
| 131 |
|
|
| (131 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,885 |
|
|
| — |
|
|
| — |
|
|
| 1,885 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,578 |
|
|
| 15,578 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (38,525 | ) |
|
| (38,525 | ) | ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,941 | ) |
|
| — |
|
|
| (26,941 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (401 | ) |
|
| (401 | ) |
|
| — |
|
|
| (11,954 | ) |
|
| — |
|
|
| (12,355 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| (96 | ) |
|
| — |
|
|
| (27 | ) | ||||||||||||||||||||||||
Balance, March 31, 2020 |
|
| 66,951 |
|
| $ | 66,951 |
|
| $ | 1,668,122 |
|
| $ | (415,153 | ) |
| $ | (170,306 | ) |
| $ | 1,149,614 |
| ||||||||||||||||||||||||
Balance, December 31, 2020 |
|
| 66,876 |
|
| $ | 66,876 |
|
| $ | 1,674,576 |
|
| $ | (315,510 | ) |
| $ | (120,989 | ) |
| $ | 1,304,953 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,638 |
|
|
| — |
|
|
| 2,638 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 131,106 |
|
|
| — |
|
|
| 131,106 |
|
Shares issued for stock compensation |
|
| 9 |
|
|
| 9 |
|
|
| (9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 166 |
|
|
| 166 |
|
|
| (166 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,980 |
|
|
| — |
|
|
| — |
|
|
| 1,980 |
|
|
| — |
|
|
| — |
|
|
| 1,930 |
|
|
| — |
|
|
| — |
|
|
| 1,930 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,727 |
|
|
| 2,727 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,953 |
|
|
| 2,953 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,847 | ) |
|
| (1,847 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 64,107 |
|
|
| 64,107 |
|
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,744 | ) |
|
| — |
|
|
| (26,744 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (89 | ) |
|
| (89 | ) |
|
| — |
|
|
| (2,920 | ) |
|
| — |
|
|
| (3,009 | ) | ||||||||||||||||||||||||
Dividends on common stock, $0.41 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,484 | ) |
|
| — |
|
|
| (27,484 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 91 |
|
|
| 26 |
|
|
| — |
|
|
| 117 |
|
|
| — |
|
|
| — |
|
|
| 81 |
|
|
| (97 | ) |
|
| — |
|
|
| (16 | ) |
Balance, June 30, 2020 |
|
| 66,871 |
|
| $ | 66,871 |
|
| $ | 1,670,184 |
|
| $ | (442,153 | ) |
| $ | (169,426 | ) |
| $ | 1,125,476 |
| ||||||||||||||||||||||||
Balance, March 31, 2021 |
|
| 67,042 |
|
| $ | 67,042 |
|
| $ | 1,676,421 |
|
| $ | (211,985 | ) |
| $ | (53,929 | ) |
| $ | 1,477,549 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
|
| Common Stock |
|
| Additional Paid- |
|
| Accumulated |
|
| Accumulated Other Comprehensive |
|
| Total Stockholders' |
| ||||||||||||||||||
(in thousands, except per share amounts) |
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
|
| Shares |
|
| Amount |
|
| in Capital |
|
| Deficit |
|
| Loss |
|
| Equity |
| ||||||||||||
Balance, December 31, 2018 |
|
| 67,570 |
|
| $ | 67,570 |
|
| $ | 1,659,031 |
|
| $ | (282,391 | ) |
| $ | (129,431 | ) |
| $ | 1,314,779 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,560 |
|
|
| — |
|
|
| 6,560 |
| ||||||||||||||||||||||||
Balance, December 31, 2019 |
|
| 67,221 |
|
| $ | 67,221 |
|
| $ | 1,666,299 |
|
| $ | (359,330 | ) |
| $ | (147,359 | ) |
| $ | 1,226,831 |
| ||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,832 | ) |
|
| — |
|
|
| (16,832 | ) | ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 297 |
|
|
| 297 |
|
|
| (297 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 131 |
|
|
| 131 |
|
|
| (131 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,617 |
|
|
| — |
|
|
| — |
|
|
| 1,617 |
|
|
| — |
|
|
| — |
|
|
| 1,885 |
|
|
| — |
|
|
| — |
|
|
| 1,885 |
|
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,166 |
|
|
| 1,166 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,578 |
|
|
| 15,578 |
|
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (8,513 | ) |
|
| (8,513 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (38,525 | ) |
|
| (38,525 | ) |
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,065 | ) |
|
| — |
|
|
| (27,065 | ) | ||||||||||||||||||||||||
Dividends on common stock, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,941 | ) |
|
| — |
|
|
| (26,941 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (279 | ) |
|
| (279 | ) |
|
| — |
|
|
| (9,879 | ) |
|
| — |
|
|
| (10,158 | ) |
|
| (401 | ) |
|
| (401 | ) |
|
| — |
|
|
| (11,954 | ) |
|
| — |
|
|
| (12,355 | ) |
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 99 |
|
|
| (99 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
|
| (96 | ) |
|
| — |
|
|
| (27 | ) |
Balance, March 31, 2019 |
|
| 67,588 |
|
| $ | 67,588 |
|
| $ | 1,660,450 |
|
| $ | (312,874 | ) |
| $ | (136,778 | ) |
| $ | 1,278,386 |
| ||||||||||||||||||||||||
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17,137 |
|
|
| — |
|
|
| 17,137 |
| ||||||||||||||||||||||||
Shares issued for stock compensation |
|
| 5 |
|
|
| 5 |
|
|
| (5 | ) |
|
| — |
|
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Equity-based compensation expense |
|
| — |
|
|
| — |
|
|
| 1,832 |
|
|
| — |
|
|
| — |
|
|
| 1,832 |
| ||||||||||||||||||||||||
Pension plans and OPEB obligations |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,008 |
|
|
| 1,008 |
| ||||||||||||||||||||||||
Cash flow hedges |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,417 | ) |
|
| (10,417 | ) | ||||||||||||||||||||||||
Common dividends, $0.40 per share |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,881 | ) |
|
| — |
|
|
| (26,881 | ) | ||||||||||||||||||||||||
Repurchase of common stock |
|
| (407 | ) |
|
| (407 | ) |
|
|
|
|
|
| (14,608 | ) |
|
|
|
|
|
| (15,015 | ) | ||||||||||||||||||||||||
Other transactions, net |
|
| — |
|
|
| — |
|
|
| 104 |
|
|
| (104 | ) |
|
| — |
|
|
| — |
| ||||||||||||||||||||||||
Balance, June 30, 2019 |
|
| 67,186 |
|
| $ | 67,186 |
|
| $ | 1,662,381 |
|
| $ | (337,330 | ) |
| $ | (146,187 | ) |
| $ | 1,246,050 |
| ||||||||||||||||||||||||
Balance, March 31, 2020 |
|
| 66,951 |
|
| $ | 66,951 |
|
| $ | 1,668,122 |
|
| $ | (415,153 | ) |
| $ | (170,306 | ) |
| $ | 1,149,614 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
INDEX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8
Notes to Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
For purposes of this report, any reference to “PotlatchDeltic,” “Potlatch,” “the company,” “we,” “us” and “our” means General
PotlatchDeltic Corporation and allits subsidiaries (collectively referred to in this report as the company, us, we or our) is a leading timberland Real Estate Investment Trust (REIT) with ownership of its wholly owned subsidiaries, except where the context indicates otherwise.
approximatelyWe are primarily engaged in 1.8 million acres of timberlands. Our timberland activities associated with timberland management, includinginclude the sale of timber, the management of approximately 1.8 million acrespurchase of timberlands and the purchase and saleoperation of timberlands. a rural timberland sales program. We are also engaged in the manufacturemanufacturing and sale of wood products and operate a residential and commercial real estate development business. Our timberlands, real estate development projects and all of our wood products facilities are located within the development of real estate.continental United States.
Condensed Consolidated Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements provide an overall view of our results and financial condition and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019,2020, as filed with the Securities and Exchange Commission on February 19, 2020.18, 2021. Results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the full year.
Use of Estimates
In March 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Shortly thereafter the United States declared a national emergency concerning the outbreak, and all states and several municipalities subsequently declared public health emergencies. These declarations resulted in a wide-range of government directives impacting individuals and businesses beginning in late March 2020 to contain and combat the outbreak and spread of COVID-19.
The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, which we refer to in this report as GAAP, requires usmanagement to make estimates and assumptions that affectjudgments affecting the amounts reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date ofin the financial statements and the reported amounts of revenuesaccompanying notes. The inputs into our judgments and expenses. The full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition, will depend on future developments that are highly uncertain, including new information that may emerge concerning COVID-19,estimates reflect the additional actions taken to contain it or treat it, as well as the severity and durationconsideration of the economic impactimplications of COVID-19 on local, regional,our critical and national customers, suppliers and markets.significant accounting estimates. The actual results that we experience may differ materially from our estimates.
Commitments and Contingencies
At any given time, we are subject to claims and actions incidental to the operations of our business. Based on information currently available, we do not expect that any sums we may have to pay in connection with any legal proceeding would have a materially adverse effect on our consolidated financial position or net cash flow.
On June 21, 2020, we announced an agreement to sell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund for approximately $48.0 million in cash, subject to certain closing adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2020.
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
New Accounting Standards Recently Adopted
In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.ASU 2018-15 clarifies that implementation costs incurred by customers in cloud computing arrangements are deferred if they would be capitalized by customers in software licensing arrangements under the internal-use software guidance. Additionally, ASU 2018-15 clarifies that all capitalized costs must be presented in the same financial statement line item as the cloud computing arrangement. The standard was effective, on either a prospective or retrospective basis, for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The prospective adoption of this standard on January 1, 2020 did not have a material impact our Condensed Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Topic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for defined benefit pension plans and other postretirement plans. ASU 2018-14 was effective for fiscal years ending after December 15, 2020, including interim periods within those years and requires retrospective adoption; early adoption is permitted. The adoption of this standard on January 1, 2020 did not have a material impact on our defined benefit pension plan and other postretirement plan disclosures.
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which modifies certain disclosure requirements related to fair value measurements including (i) requiring disclosures on changes in unrealized gains and losses in other comprehensive income for recurring Level 3 fair value measurements; and (ii) a requirement to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. ASU 2018-13 was effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The adoption of this standard on January 1, 2020 did not have a material impact on our fair value measurement disclosures.
New Accounting Standards Being Evaluated
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients and exceptions to USU.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting impacts related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. The guidance in ASU 2020-04, which companies can apply immediately, is optional and may be elected over time as reference rate reform activities occur. Companies can apply the ASU immediately. Unlike other topics, the provisions of this update are only available until December 31, 2022, when the reference rate replacement activity iswas expected to be completed. A number of our debt instruments and associated interest rate derivative agreements have an interest rate tied to LIBOR. We are currently evaluatingmonitoring the developments regarding the alternative rates, will work with our lenders and counter-parties to identify a suitable replacement rate and may amend certain debt and interest rate derivative agreements to accommodate those rates if the contract does not already specify a replacement rate. While the notional value of our agreements indexed to LIBOR is material, we are not yet able to reasonably estimate any expected impact this guidance may have onto our Condensed Consolidated Financial Statements and related disclosures.
NOTE 3. SALE OF DELTIC MDF FACILITY9
On December 20, 2018, we entered into an Asset Purchase and Sale Agreement (the Agreement) with Roseburg Forest Products Co. to sell the Deltic MDF facility for $92.0 million, consistingTable of $63.0 million in cash and assumption of $29.0 million of revenue bonds. The purchase price was subject to post-closing adjustments for certain changes in working capital as defined in the Agreement. The transaction closed on February 12, 2019 resulting in a $9.2 million pre-tax gain on sale. Net proceeds received in February 2019 after closing costs and other expenses were $60.0 million. The net proceeds were reduced by $1.2 million during the second quarter of 2019 following the finalization of the post-closing working capital adjustments. A portion of the purchase price was escrowed pending satisfaction of certain covenants as outlined in the Agreement. These funds were fully released to us during the three months ended March 31, 2020. In addition, we had a carryover tax basis in the facility from the Deltic merger, and as a result, we recorded a reduction to deferred tax liabilities and increase to income taxes payable of $15.8 million at the date of sale. The sale of the MDF facility was not considered a strategic shift that has or will have a major effect on our operations or financial results and therefore did not meet the requirements for presentation as discontinued operations.Contents
NOTE 4. REVENUE RECOGNITION
The following table represents our revenues by major product. For additional information regarding our segments, see Note 5: Segment Information.
| Three Months Ended June 30, |
|
|
|
| Six Months Ended June 30, |
| ||||||||||||
(in thousands) | 2020 |
|
| 2019 |
|
|
|
| 2020 |
|
|
|
| 2019 |
| ||||
Timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs | $ | 30,638 |
|
| $ | 30,467 |
|
|
|
| $ | 72,045 |
|
|
|
| $ | 62,966 |
|
Pulpwood |
| 1,236 |
|
|
| 1,148 |
|
|
|
|
| 2,671 |
|
|
|
|
| 3,209 |
|
Stumpage |
| - |
|
|
| - |
|
|
|
|
| 316 |
|
|
|
|
| 106 |
|
Other |
| 292 |
|
|
| 353 |
|
|
|
|
| 595 |
|
|
|
|
| 564 |
|
Total Northern revenues |
| 32,166 |
|
|
| 31,968 |
|
|
|
|
| 75,627 |
|
|
|
|
| 66,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs |
| 21,205 |
|
|
| 20,979 |
|
|
|
|
| 45,144 |
|
|
|
|
| 39,416 |
|
Pulpwood |
| 10,872 |
|
|
| 11,282 |
|
|
|
|
| 22,073 |
|
|
|
|
| 23,093 |
|
Stumpage |
| 817 |
|
|
| 144 |
|
|
|
|
| 1,646 |
|
|
|
|
| 466 |
|
Other |
| 2,285 |
|
|
| 2,508 |
|
|
|
|
| 5,280 |
|
|
|
|
| 5,219 |
|
Total Southern revenues |
| 35,179 |
|
|
| 34,913 |
|
|
|
|
| 74,143 |
|
|
|
|
| 68,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Timberlands revenues |
| 67,345 |
|
|
| 66,881 |
|
|
|
|
| 149,770 |
|
|
|
|
| 135,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood Products |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lumber |
| 102,793 |
|
|
| 103,054 |
|
|
|
|
| 214,732 |
|
|
|
|
| 193,559 |
|
Residuals and Panels |
| 23,423 |
|
|
| 34,976 |
|
|
|
|
| 56,484 |
|
|
|
|
| 76,777 |
|
Total Wood Products revenues |
| 126,216 |
|
|
| 138,030 |
|
|
|
|
| 271,216 |
|
|
|
|
| 270,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural real estate |
| 9,879 |
|
|
| 30,315 |
|
|
|
|
| 17,171 |
|
|
|
|
| 34,534 |
|
Development real estate |
| 1,672 |
|
|
| 3,755 |
|
|
|
|
| 3,964 |
|
|
|
|
| 4,428 |
|
Other |
| 1,554 |
|
|
| 2,362 |
|
|
|
|
| 2,939 |
|
|
|
|
| 3,634 |
|
Total Real Estate revenues |
| 13,105 |
|
|
| 36,432 |
|
|
|
|
| 24,074 |
|
|
|
|
| 42,596 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenues |
| 206,666 |
|
|
| 241,343 |
|
|
|
|
| 445,060 |
|
|
|
|
| 447,971 |
|
Intersegment Timberlands revenues1 |
| (25,111 | ) |
|
| (25,762 | ) |
|
|
|
| (54,625 | ) |
|
|
|
| (50,674 | ) |
Total consolidated revenues | $ | 181,555 |
|
| $ | 215,581 |
|
|
|
| $ | 390,435 |
|
|
|
| $ | 397,297 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract Balances
In general, a customer receivable is recorded as we deliver wood products, logs and residuals. We generally receive payment shortly after products have been received by our customers. At June 30, 2020 and December 31, 2019, we recorded deferred revenue of $10.4 million and $5.5 million, respectively, for contract liabilities. These contract liabilities predominately relate to hunting and other access rights on our timberlands and member related activities at the Chenal Country Club. These contract liabilities are recognized over the term of the contracts, which is typically twelve months or less, except membership initiation fees at the country club which typically are recognized up to 10 years. Other contract asset and liability balances, such as prepayments, are immaterial. For real estate sales, we typically receive the entire consideration in cash at closing.
NOTE 5.2. SEGMENT INFORMATION
Our businessesoperations are organized into 3 reportable operating segments: Timberlands, Wood Products and Real Estate. TheManagement activities in the Timberlands segment includesinclude planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts, oil and gas royalties and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. TheActivities in the Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives,include our rural timberland-holdings sales program, master planned community development and a country club.
OurOur Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizeable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. These intercompanyintercompany transactions are eliminated in consolidation.
The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories, which are reported using the average cost method for purposes of reporting segment results.
The following table represents our revenues by major product:
|
|
|
| Three Months Ended March 31, |
| |||||||
(in thousands) |
|
|
| 2021 |
|
|
|
| 2020 |
| ||
Timberlands |
|
|
|
|
|
|
|
|
|
|
|
|
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs |
|
|
| $ | 76,181 |
|
|
|
| $ | 41,407 |
|
Pulpwood |
|
|
|
| 499 |
|
|
|
|
| 1,435 |
|
Stumpage |
|
|
|
| — |
|
|
|
|
| 316 |
|
Other |
|
|
|
| 300 |
|
|
|
|
| 303 |
|
Total Northern revenues |
|
|
|
| 76,980 |
|
|
|
|
| 43,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
Sawlogs |
|
|
|
| 22,416 |
|
|
|
|
| 23,939 |
|
Pulpwood |
|
|
|
| 9,161 |
|
|
|
|
| 11,201 |
|
Stumpage |
|
|
|
| 764 |
|
|
|
|
| 829 |
|
Other |
|
|
|
| 2,595 |
|
|
|
|
| 2,995 |
|
Total Southern revenues |
|
|
|
| 34,936 |
|
|
|
|
| 38,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Timberlands revenues |
|
|
|
| 111,916 |
|
|
|
|
| 82,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wood Products |
|
|
|
|
|
|
|
|
|
|
|
|
Lumber |
|
|
|
| 229,682 |
|
|
|
|
| 111,939 |
|
Residuals and Panels |
|
|
|
| 39,614 |
|
|
|
|
| 33,061 |
|
Total Wood Products revenues |
|
|
|
| 269,296 |
|
|
|
|
| 145,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
Rural real estate |
|
|
|
| 10,025 |
|
|
|
|
| 7,292 |
|
Development real estate |
|
|
|
| 8,053 |
|
|
|
|
| 2,292 |
|
Other |
|
|
|
| 2,235 |
|
|
|
|
| 1,385 |
|
Total Real Estate revenues |
|
|
|
| 20,313 |
|
|
|
|
| 10,969 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment revenues |
|
|
|
| 401,525 |
|
|
|
|
| 238,394 |
|
Intersegment Timberlands revenues1 |
|
|
|
| (47,332 | ) |
|
|
|
| (29,514 | ) |
Total consolidated revenues |
|
|
| $ | 354,193 |
|
|
|
| $ | 208,880 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment. |
10
Management primarily evaluates the performance of its segments and allocates resources to them based upon Adjusted EBITDDA. EBITDDA is calculated as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Management uses Adjusted EBITDDA to compare the operating performance of our segments on a consistent basis and to evaluate the performance and effectiveness of each segment’s operational strategies. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.
The following table summarizes information for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income (loss) before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.
|
| Three Months Ended June 30, |
|
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
|
| 2020 |
| ||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Timberlands |
| $ | 67,345 |
|
| $ | 66,881 |
| $ | 149,770 |
| $ | 135,039 |
| ||||||||||||||||||
Wood Products |
|
| 126,216 |
|
|
| 138,030 |
| 271,216 |
| 270,336 |
| ||||||||||||||||||||
Real Estate |
|
| 13,105 |
|
|
| 36,432 |
|
|
| 24,074 |
|
|
| 42,596 |
| ||||||||||||||||
|
|
| 206,666 |
|
|
| 241,343 |
|
|
| 445,060 |
|
|
| 447,971 |
| ||||||||||||||||
Intersegment Timberlands revenues1 |
|
| (25,111 | ) |
|
| (25,762 | ) |
|
| (54,625 | ) |
|
| (50,674 | ) | ||||||||||||||||
Consolidated revenues |
| $ | 181,555 |
|
| $ | 215,581 |
|
| $ | 390,435 |
|
| $ | 397,297 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Adjusted EBITDDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Timberlands |
| $ | 25,659 |
|
| $ | 26,131 |
| $ | 60,641 |
| $ | 52,981 |
|
| $ | 67,858 |
| $ | 34,982 |
| |||||||||||
Wood Products |
|
| 10,907 |
|
|
| (2,071 | ) |
| 24,136 |
| 5,155 |
|
| 125,555 |
| 13,229 |
| ||||||||||||||
Real Estate |
|
| 9,256 |
|
|
| 31,316 |
| 16,596 |
| 34,019 |
|
| 16,593 |
| 7,340 |
| |||||||||||||||
Corporate |
|
| (10,534 | ) |
|
| (9,346 | ) |
| (19,206 | ) |
| (20,000 | ) |
| (10,710 | ) |
| (8,672 | ) | ||||||||||||
Eliminations and adjustments |
|
| 85 |
|
|
| 3,050 |
|
|
| 777 |
|
|
| 5,177 |
|
|
| (4,310 | ) |
|
| 692 |
| ||||||||
Total Adjusted EBITDDA |
|
| 35,373 |
|
|
| 49,080 |
|
|
| 82,944 |
|
|
| 77,332 |
|
|
| 194,986 |
|
|
| 47,571 |
| ||||||||
Interest expense, net2 |
|
| (8,339 | ) |
|
| (7,882 | ) |
| (12,037 | ) |
| (13,346 | ) | ||||||||||||||||||
Interest expense, net1 |
| (3,574 | ) |
| (3,698 | ) | ||||||||||||||||||||||||||
Depreciation, depletion and amortization |
|
| (17,765 | ) |
|
| (16,727 | ) |
| (36,403 | ) |
| (32,524 | ) |
| (17,996 | ) |
| (18,638 | ) | ||||||||||||
Basis of real estate sold |
|
| (2,693 | ) |
|
| (7,427 | ) |
| (9,191 | ) |
| (8,983 | ) |
| (8,823 | ) |
| (6,498 | ) | ||||||||||||
Loss on extinguishment of debt |
|
| — |
|
|
| — |
| — |
| (5,512 | ) | ||||||||||||||||||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| (42,988 | ) |
|
|
| — |
|
|
|
| — |
|
|
| (42,988 | ) | ||||||
Non-operating pension and other postretirement employee benefits |
|
| (3,478 | ) |
|
| (889 | ) |
| (7,113 | ) |
| (1,869 | ) |
| (3,414 | ) |
| (3,635 | ) | ||||||||||||
Gain on sale of facility |
|
| — |
|
|
| — |
| — |
| 9,176 |
| ||||||||||||||||||||
(Loss) gain on disposal of fixed assets |
|
| (7 | ) |
|
| 30 |
|
|
| 185 |
|
|
| 62 |
|
|
| (34 | ) |
|
| 192 |
| ||||||||
Income (loss) before income taxes |
| $ | 3,091 |
|
| $ | 16,185 |
|
|
|
| $ | (24,603 | ) |
|
|
| $ | 24,336 |
|
|
|
| $ | 161,145 |
|
|
|
| $ | (27,694 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Depreciation, depletion and amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Timberlands |
| $ | 11,566 |
|
| $ | 10,469 |
| $ | 24,157 |
| $ | 20,734 |
|
| $ | 11,417 |
| $ | 12,591 |
| |||||||||||
Wood Products |
|
| 5,798 |
|
|
| 5,861 |
| 11,428 |
| 10,903 |
|
| 6,203 |
| 5,630 |
| |||||||||||||||
Real Estate |
|
| 156 |
|
|
| 147 |
|
|
| 316 |
|
|
| 356 |
|
|
|
| 155 |
|
|
| 160 |
| |||||||
Corporate |
|
| 245 |
|
|
| 250 |
|
|
| 502 |
|
|
| 531 |
|
|
| 221 |
|
|
| 257 |
| ||||||||
|
|
| 17,765 |
|
|
| 16,727 |
|
|
| 36,403 |
|
|
| 32,524 |
|
|
| 17,996 |
|
|
| 18,638 |
| ||||||||
Bond discounts and deferred loan fees2 |
|
| 406 |
|
|
| 410 |
|
|
| 812 |
|
|
| 887 |
| ||||||||||||||||
Bond discounts and deferred loan fees1 |
|
| 403 |
|
|
| 406 |
| ||||||||||||||||||||||||
Total depreciation, depletion and amortization |
| $ | 18,171 |
|
| $ | 17,137 |
|
| $ | 37,215 |
|
| $ | 33,411 |
|
| $ | 18,399 |
|
| $ | 19,044 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Basis of real estate sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Real Estate |
| $ | 3,212 |
|
| $ | 7,455 |
| $ | 9,716 |
| $ | 9,043 |
|
| $ | 8,829 |
| $ | 6,504 |
| |||||||||||
Eliminations and adjustments |
|
| (519 | ) |
|
| (28 | ) |
|
| (525 | ) |
|
| (60 | ) |
|
| (6 | ) |
|
| (6 | ) | ||||||||
Total basis of real estate sold |
| $ | 2,693 |
|
| $ | 7,427 |
|
| $ | 9,191 |
|
| $ | 8,983 |
|
| $ | 8,823 |
|
| $ | 6,498 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
| Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations. |
11
NOTE 6.3. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating basic and diluted earnings per share:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands, except per share amounts) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||||||||||
Net income (loss) |
| $ | 2,638 |
|
| $ | 17,137 |
|
| $ | (14,194 | ) |
| $ | 23,697 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
(in thousands) |
| 2021 |
|
| 2020 |
| ||||||||||||||||||
Basic weighted-average shares outstanding |
|
| 67,176 |
|
|
| 67,664 |
|
|
| 67,321 |
|
|
| 67,774 |
|
|
| 67,207 |
|
|
| 67,478 |
|
Incremental shares due to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance shares |
|
| 153 |
|
|
| 26 |
|
|
| — |
|
|
| 21 |
|
|
| 326 |
|
|
| — |
|
Restricted stock units |
|
| 30 |
|
|
| 23 |
|
|
| — |
|
|
| 71 |
|
|
| 74 |
|
|
| — |
|
Diluted weighted-average shares outstanding |
|
| 67,359 |
|
|
| 67,713 |
|
|
| 67,321 |
|
|
| 67,866 |
|
|
| 67,607 |
|
|
| 67,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share |
| $ | 0.04 |
|
| $ | 0.25 |
|
| $ | (0.21 | ) |
| $ | 0.35 |
| ||||||||
Diluted net income (loss) per share |
| $ | 0.04 |
|
| $ | 0.25 |
|
| $ | (0.21 | ) |
| $ | 0.35 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include future compensation cost associated with the stock award.
For the three and six months ended June 30,March 31, 2021 and 2020, there were approximately 39,00063,000 and 490,000317,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive. For the three and six months ended June 30, 2019 there were approximately 95,000 and 71,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Anti-dilutive stock-based awards could be dilutive in future periods.
Share Repurchase Program
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common stock with no time limit set for the repurchase (the 2018 Repurchase Program). Shares under the Repurchase Program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan). The timing, manner, price and amount of repurchases will be determined according to, and subject to, the terms of the Trading Plan, and, subject to the terms of the Trading Plan, the Repurchase Program may be suspended, terminated or modified at any time for any reason.
We did 0t repurchase any shares during the three months ended March 31, 2021. During the three and six months ended June 30,March 31, 2020, we repurchased 88,933 and 489,850400,917 shares of common stock (atat a total consideration of $3.0$12.4 million and $15.4 million), respectively, under the 2018 Repurchase Program. During the three and six months ended June 30, 2019 we repurchased 407,293 and 686,240 shares of common stock (at a total consideration of $15.0 million and $25.2 million), respectively, under the 2018 Repurchase Program. All common stock purchases under the 2018 Repurchase Program, all of which were made in open-market transactions. At June 30, 2020,March 31, 2021, we had remaining authorization of $59.5 million for future stock repurchases under the 2018 Repurchase Program.
We record share repurchases upon trade date as opposed to the settlement date when cash is disbursed. We record a liability to account for repurchases that have not been cash settled. There were 0 unsettled repurchases as of June 30, 2020. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.
12
NOTE 7.4. CERTAIN BALANCE SHEET COMPONENTS
Inventories
(in thousands) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Logs |
| $ | 19,999 |
|
| $ | 33,313 |
|
| $ | 28,396 |
|
| $ | 31,210 |
|
Lumber, panels and veneer |
|
| 30,189 |
|
|
| 31,639 |
|
|
| 36,543 |
|
|
| 34,136 |
|
Materials and supplies |
|
| 14,029 |
|
|
| 12,831 |
|
|
| 15,973 |
|
|
| 14,939 |
|
Total inventories |
|
| 64,217 |
|
|
| 77,783 |
|
|
| 80,912 |
|
|
| 80,285 |
|
Less: LIFO reserve |
|
| (12,002 | ) |
|
| (12,002 | ) |
|
| (18,249 | ) |
|
| (18,249 | ) |
Total inventories, net |
| $ | 52,215 |
|
| $ | 65,781 |
|
| $ | 62,663 |
|
| $ | 62,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
(in thousands) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Property, plant and equipment |
| $ | 508,874 |
|
| $ | 498,113 |
|
| $ | 520,524 |
|
| $ | 517,711 |
|
Less: accumulated depreciation |
|
| (222,705 | ) |
|
| (211,730 | ) |
|
| (229,041 | ) |
|
| (229,167 | ) |
Total property, plant and equipment, net |
| $ | 286,169 |
|
| $ | 286,383 |
|
| $ | 291,483 |
|
| $ | 288,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timber and timberlands
(in thousands) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Timber and timberlands |
| $ | 1,536,576 |
|
| $ | 1,554,882 |
|
| $ | 1,505,150 |
|
| $ | 1,516,788 |
|
Logging roads |
|
| 82,399 |
|
|
| 83,781 |
|
|
| 82,443 |
|
|
| 83,273 |
|
Total timber and timberlands, net |
| $ | 1,618,975 |
|
| $ | 1,638,663 |
|
| $ | 1,587,593 |
|
| $ | 1,600,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
(in thousands) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Accrued payroll and benefits |
| $ | 17,716 |
|
| $ | 12,920 |
|
| $ | 20,972 |
|
| $ | 29,675 |
|
Accounts payable |
|
| 17,106 |
|
|
| 12,734 |
|
|
| 15,495 |
|
|
| 9,724 |
|
Deferred revenue |
|
| 10,395 |
|
|
| 5,514 |
| ||||||||
Accrued taxes |
|
| 9,269 |
|
|
| 6,638 |
| ||||||||
Accrued interest |
|
| 6,829 |
|
|
| 6,946 |
|
|
| 5,024 |
|
|
| 6,485 |
|
Deferred revenue1 |
|
| 7,233 |
|
|
| 8,789 |
| ||||||||
Operating lease liabilities |
|
| 4,783 |
|
|
| 4,998 |
|
|
| 3,848 |
|
|
| 4,304 |
|
Income taxes payable |
|
| 42,286 |
|
|
| 14,755 |
| ||||||||
Other accrued taxes |
|
| 7,522 |
|
|
| 6,025 |
| ||||||||
Other current liabilities |
|
| 9,839 |
|
|
| 10,827 |
|
|
| 12,469 |
|
|
| 13,522 |
|
Total accounts payable and accrued liabilities |
| $ | 75,937 |
|
| $ | 60,577 |
|
| $ | 114,849 |
|
| $ | 93,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for lumber shipments where control of goods have not transferred, member related activities at an owned country club and certain post-close obligations for real estate sales. These contract liabilities are recognized over the term of the contracts, which is typically twelve months or less, except for initiation fees which are recognized over the average life of club membership. |
NOTE 8.5. DEBT
At June 30, 2020,March 31, 2021, our total outstanding long-term debt included $693.5 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender, of which $46.0$40.0 million matures in December 2020.2021. Certain borrowings under the Amended Term Loan Agreement are at variable rates of one or three-month LIBOR plus a spread between 1.85% and 2.15%. We have entered into interest rate swaps for these variable rate term loans to fix the interest rate. See Note: 96 Derivative Instruments for additional information.
At June 30, 2020March 31, 2021, there were no borrowings under our $380.0 million revolving line of credit and approximately $1.0 million of our revolving line of credit was utilized for outstanding letters of credit. As provided in the revolving line of credit agreement, borrowings may be increased by up to an additional $420.0 million. The revolving line of credit agreement also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of $25.0 million for
13
swing line loans. Usage under either or both subfacilities reduces availability under the revolving line of credit. We may utilize borrowings under the credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.
We were in compliance with all debt and credit agreement covenants at June 30, 2020.March 31, 2021.
NOTE 9.6. 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 changes in the fair value of an asset or liability to a particular risk are considered fair value hedges.
Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges.
At As of June 30, 2020,March 31, 2021, we have 6 interest rate swaps associated with $397.5$403.5 million of term loan debt. These swaps are cash flow hedges that convert variable rates ranging from three-month and one-month LIBOR plus 1.85% to 2.15%, to fixed rates ranging from 3.17%3.04% to 4.82%. Our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedges. At March 31, 2021, the amount of net losses expected to be reclassified into earnings in the next 12 months is approximately $8.7 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 at the time of net swap cash payments.
In March 2020, we entered into $653.5We also hold $607.5 million of forward starting interest rate swaps. 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 $607.5 million of future debt refinancing by locking in fixed rates on our anticipated future refinancing of $653.5 million of term loan debt maturing December 2020refinances through January 2029. The2029 by converting the benchmark interest rates to fixed interest rate components for these forward swaps range from 0.85% to 1.17%. The variable rate component on these forward interest rate swaps is one-month LIBOR. Accordingly, the forward rate swaps were designated as cash flow hedges.rates. In addition, these cash flowthe cashflow hedges for future debt refinances require settlement on the stated maturity date for each respective term loan currently outstanding. date. At March 31, 2021, we have recorded derivative assets of $64.6 million associated with these forward starting interest rate swaps.
The following table presents the gross fair values of derivative instruments on our Condensed Consolidated Balance Sheets:
|
|
|
| Asset Derivatives |
|
|
|
| Liability Derivatives |
|
|
|
| Asset Derivatives |
|
|
|
| Liability Derivatives |
| ||||||||||||||||||||
(in thousands) |
| Location |
| June 30, 2020 |
|
| December 31, 2019 |
|
| Location |
| June 30, 2020 |
|
| December 31, 2019 |
|
| Location |
| March 31, 2021 |
|
| December 31, 2020 |
|
| Location |
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||
Derivatives designated in cash flow hedging relationships: | Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
| Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Interest rate contracts |
| Other assets, current1 |
| $ | — |
|
| $ | — |
|
| Accounts payable and accrued liabilities1 |
| $ | 1,768 |
|
| $ | — |
|
| Other assets, current1 |
| $ | 3,227 |
|
| $ | 63 |
|
| Accounts payable and accrued liabilities1 |
| $ | 737 |
|
| $ | 1,010 |
|
Interest rate contracts |
| Other assets, non-current |
|
| — |
|
|
| 1,601 |
|
| Other long-term obligations |
|
| 61,207 |
|
|
| 22,398 |
|
| Other assets, non-current |
|
| 64,543 |
|
|
| 18,466 |
|
| Other long-term obligations |
|
| 26,475 |
|
|
| 45,100 |
|
|
|
|
| $ | — |
|
| $ | 1,601 |
|
|
|
| $ | 62,975 |
|
| $ | 22,398 |
|
|
|
| $ | 67,770 |
|
| $ | 18,529 |
|
|
|
| $ | 27,212 |
|
| $ | 46,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, |
|
|
|
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| Location |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| Location |
| 2021 |
|
| 2020 |
| ||||||
Derivatives designated in cash flow hedging relationships: | Derivatives designated in cash flow hedging relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
| Derivatives designated in cash flow hedging relationships: |
|
|
|
|
| ||||||||
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss recognized in other comprehensive loss, net of tax |
|
|
| $ | (3,669 | ) |
| $ | (10,598 | ) |
| $ | (43,032 | ) |
| $ | (19,192 | ) | ||||||||||
Loss reclassified from accumulated other comprehensive loss1 |
| Interest expense |
| $ | (1,822 | ) |
| $ | (181 | ) |
| $ | (2,660 | ) |
| $ | (262 | ) | ||||||||||
Income (loss) recognized in other comprehensive income (loss), net of tax |
|
|
| $ | 61,875 |
|
| $ | (39,363 | ) | ||||||||||||||||||
Amounts reclassified from accumulated other comprehensive loss, net of tax1 |
| Interest expense |
| $ | (2,232 | ) |
| $ | (838 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
| $ | 8,339 |
|
| $ | 7,882 |
|
| $ | 12,037 |
|
| $ | 13,346 |
|
|
|
| $ | 3,574 |
|
| $ | 3,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Realized losses on interest rate contracts consist of net cash received or paid and interest accruals on the interest rate swaps during the periods. Net cash received or paid is included in the supplemental cash flow information within interest, net of amounts capitalized in the Condensed Consolidated Statements of Cash Flows. |
114
At June 30, 2020, approximately $9.1 million of net losses are expected to be reclassified into earnings over the next 12 months. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate amount recognized in earnings is based on the market LIBOR rate at the time of cash settlement.
NOTE 10.7. FAIR VALUE MEASUREMENTS
The following table presents the estimated fair values of our financial instruments:
|
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||||||||||||||||||
(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) |
| $ | — |
|
| $ | — |
|
| $ | 1,601 |
|
| $ | 1,601 |
|
| $ | 67,770 |
|
| $ | 67,770 |
|
| $ | 18,529 |
|
| $ | 18,529 |
|
Derivative liabilities related to interest rate swaps (Level 2) |
| $ | (62,975 | ) |
| $ | (62,975 | ) |
| $ | (22,398 | ) |
| $ | (22,398 | ) |
| $ | (27,212 | ) |
| $ | (27,212 | ) |
| $ | (46,110 | ) |
| $ | (46,110 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, including current portion (Level 2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans |
| $ | (690,144 | ) |
| $ | (718,225 | ) |
| $ | (689,820 | ) |
| $ | (703,437 | ) |
| $ | (690,632 | ) |
| $ | (712,473 | ) |
| $ | (690,469 | ) |
| $ | (716,631 | ) |
Revenue bonds |
|
| (65,735 | ) |
|
| (65,945 | ) |
|
| (65,735 | ) |
|
| (68,200 | ) |
|
| (65,735 | ) |
|
| (67,957 | ) |
|
| (65,735 | ) |
|
| (67,885 | ) |
Medium-term notes |
|
| (3,000 | ) |
|
| (3,568 | ) |
|
| (3,000 | ) |
|
| (3,480 | ) |
|
| (3,000 | ) |
|
| (3,143 | ) |
|
| (3,000 | ) |
|
| (3,545 | ) |
Total long-term debt1 |
| $ | (758,879 | ) |
| $ | (787,738 | ) |
| $ | (758,555 | ) |
| $ | (775,117 | ) |
| $ | (759,367 | ) |
| $ | (783,573 | ) |
| $ | (759,204 | ) |
| $ | (788,061 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company owned life insurance asset (COLI) (Level 3) |
| $ | 2,967 |
|
| $ | 2,967 |
|
| $ | 4,157 |
|
| $ | 4,157 |
|
| $ | 3,540 |
|
| $ | 3,540 |
|
| $ | 3,328 |
|
| $ | 3,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | The carrying amount of long-term debt includes principal and unamortized discounts. |
The fair value of interest rate swaps are determined using a discounted cash flow analysis on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs, including interest rate forward curves.
The fair value of our long-term debt is estimated based upon quoted market prices for similar debt issues or estimated based on average market prices for comparable debt when there is no quoted market price.
The contract value of our company owned life insurance is based on the amount at which it could be redeemed and, accordingly, approximates fair value.
We believe that our other financial instruments, including cash and cash equivalents, receivables and payables have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments.
NOTE 11.8. EQUITY-BASED COMPENSATION
At June 30, 2020,March 31, 2021, approximately 1.21.0 million shares are available for future use under our long-term incentive plan.plans.
Share-based compensation activity during the sixthree months ended June 30, 2020March 31, 2021 included the following:
(Shares in thousands) |
| Granted |
|
| Vested |
|
| Forfeited |
|
| Granted |
|
| Vested |
|
| Forfeited |
| ||||||
Performance Share Awards (PSAs) |
|
| 125,001 |
|
|
| — |
|
|
| 2,879 |
|
|
| 88,128 |
|
|
| — |
|
|
| 1,450 |
|
Restricted Stock Units (RSUs) |
|
| 68,263 |
|
|
| 27,671 |
|
|
| 959 |
|
|
| 32,870 |
|
|
| — |
|
|
| 1,484 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximately 0.1 million shares of common stock were issued during the sixthree months ended June 30, 2020March 31, 2021 as a result of PSA and RSU vesting during 2019 andin 2020.
15
The following table details equity-based compensation expense and the related income tax benefit:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| 2021 |
|
| 2020 |
| ||||||
Equity-based compensation expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance share awards |
| $ | 1,243 |
|
| $ | 1,187 |
|
| $ | 2,401 |
|
| $ | 2,231 |
| $ | 1,224 |
|
| $ | 1,158 |
|
Restricted stock units |
|
| 718 |
|
|
| 629 |
|
|
| 1,426 |
|
|
| 1,187 |
|
| 665 |
|
|
| 708 |
|
Deferred compensation stock equivalent units expense |
|
| 19 |
|
|
| 15 |
|
|
| 38 |
|
|
| 31 |
|
| 41 |
|
|
| 19 |
|
Total equity-based compensation expense |
| $ | 1,980 |
|
| $ | 1,831 |
|
| $ | 3,865 |
|
| $ | 3,449 |
| $ | 1,930 |
|
| $ | 1,885 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total tax benefit recognized for equity-based expense |
| $ | 93 |
|
| $ | 83 |
|
| $ | 176 |
|
| $ | 155 |
| $ | 89 |
|
| $ | 83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Share Awards
The weighted average grant date fair value of PSAs granted in 2021 was $69.72 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 performance measures are based on the percentile ranking of our total shareholder return relative to the total shareholder return performance of both a selected peer group of companies and a larger group of indexed companies over the three-year performance period. The number of shares actually issued, as a percentage of the amount subject to the PSA, could range from 0% to 200%. PSAs granted under ourthe stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of thethree-year performance measurement period, the recipients will receive dividend equivalents in the form of additional shares at the time of payment equal to the dividends that would have been paid on the shares earned had the recipients owned the shares during the three-year period. Therefore, the shares are not considered participating securities. The fair value of performance shares granted in 2020 was $45.04 per share.
The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards granted in 2020:2021:
Stock price as of valuation date |
| $ | 42.16 |
|
| $ | 53.53 |
|
Risk-free rate |
|
| 1.42 | % |
|
| 0.18 | % |
Expected volatility |
|
| 25.74 | % |
|
| 45.56 | % |
Expected dividend yield (assuming full reinvestment) |
|
| — |
| ||||
Expected dividend yield1 |
|
| — |
| ||||
Expected term (years) |
|
| 3.00 |
|
|
| 3.00 |
|
|
|
|
|
|
|
|
|
|
1Full dividend reinvestment assumed.
Restricted Stock Units
RSU awards accrue dividend equivalents based on dividends paidThe weighted average fair value of all RSUs granted during the RSU vesting period. The dividend equivalents will be converted into additional RSUs that will vest in the same manner as the underlying RSUs to which they relate. Therefore, the shares are not considered participating securities. The terms of the awards state that the RSUs will vest in a given time period of one to three years and the terms of certain awards follow a vesting schedule within the given time period.months ended March 31, 2021 was $53.51 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 weighted average fair valueterms of allthe awards state that the RSUs will vest in a given time period of one to three years. The vesting provisions for RSUs granted during the six months ended June 30, 2020 was $38.77 per share.in 2021 were consistent with prior year grants.
NOTE 12.9. INCOME TAXES
As a real estate investment trust (REIT),REIT, we generally are not subject to federal and state corporate income taxes on income of the REITfrom 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 taxable activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Therefore, income tax expense or benefit is primarily due to income or loss of the TRS, as well as permanent book versus tax differences. During the six months ended June 30, 2020 we recorded an income tax benefit
16
NOTE 13.10. 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, 2020 |
|
| December 31, 2019 |
| Classification |
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease assets | Other long-term assets |
| $ | 13,425 |
|
| $ | 15,772 |
| Other long-term assets |
| $ | 9,922 |
|
| $ | 11,081 |
|
Finance lease assets1 | Property, plant and equipment, net |
|
| 4,448 |
|
|
| 2,360 |
| Property, plant and equipment, net |
|
| 7,419 |
|
|
| 7,206 |
|
Total lease assets |
|
| $ | 17,873 |
|
| $ | 18,132 |
|
|
| $ | 17,341 |
|
| $ | 18,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
|
|
| |||||||||
Current: |
|
|
|
|
|
|
|
|
| |||||||||
Operating lease liabilities | Accounts payable and accrued liabilities |
| $ | 4,783 |
|
| $ | 4,998 |
| Accounts payable and accrued liabilities |
| $ | 3,848 |
|
| $ | 4,304 |
|
Finance lease liabilities | Accounts payable and accrued liabilities |
|
| 1,218 |
|
|
| 644 |
| Accounts payable and accrued liabilities |
|
| 2,363 |
|
|
| 2,202 |
|
Noncurrent |
|
|
|
|
|
|
|
|
| |||||||||
Noncurrent: |
|
|
|
|
|
|
|
|
| |||||||||
Operating lease liabilities | Other long-term obligations |
|
| 8,647 |
|
|
| 10,775 |
| Other long-term obligations |
|
| 6,101 |
|
|
| 6,835 |
|
Finance lease liabilities | Other long-term obligations |
|
| 3,201 |
|
|
| 1,703 |
| Other long-term obligations |
|
| 4,977 |
|
|
| 4,914 |
|
Total lease liabilities |
|
| $ | 17,849 |
|
| $ | 18,120 |
|
|
| $ | 17,289 |
|
| $ | 18,255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Finance lease assets are presented net of accumulated amortization of $2.3 million and $1.7 million as of March 31, 2021 and December 31, 2020, 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) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Operating lease costs1 |
| $ | 1,414 |
|
| $ | 1,511 |
|
| $ | 2,839 |
|
| $ | 2,922 |
|
| $ | 1,328 |
|
| $ | 1,425 |
|
Finance lease costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Finance lease costs: |
|
|
|
|
|
|
|
| ||||||||||||||||
Amortization of leased assets |
| 260 |
|
| 25 |
|
| 473 |
|
| 46 |
|
|
| 589 |
|
| 213 |
| |||||
Interest on lease liabilities |
| 32 |
|
| 5 |
|
| 59 |
|
| 10 |
|
|
| 51 |
|
| 27 |
| |||||
Net lease costs |
| $ | 1,706 |
|
| $ | 1,541 |
|
| $ | 3,371 |
|
| $ | 2,978 |
|
| $ | 1,968 |
|
| $ | 1,665 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Excludes short-term leases and variable lease costs, which are immaterial. |
The following tablestable presents supplemental cash flow information related to leases:
|
|
| Six Months Ended June 30, |
|
|
| Three Months Ended March 31, |
| ||||||||||
(in thousands) |
|
| 2020 |
|
| 2019 |
|
|
| 2021 |
|
| 2020 |
| ||||
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 |
| $ | 2,884 |
|
| $ | 2,960 |
| Operating cash flows for operating leases |
| $ | 1,368 |
|
| $ | 1,506 |
|
Operating cash flows for finance leases | Operating cash flows for finance leases |
| $ | 59 |
|
| $ | 10 |
| Operating cash flows for finance leases |
| $ | 51 |
|
| $ | 27 |
|
Financing cash flows for finance leases | Financing cash flows for finance leases |
| $ | 486 |
|
| $ | 50 |
| Financing cash flows for finance leases |
| $ | 577 |
|
| $ | 215 |
|
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 |
| $ | 248 |
|
| $ | 5,789 |
| Operating leases |
| $ | 124 |
|
| $ | 38 |
|
Finance leases | Finance leases |
| $ | 2,558 |
|
| $ | 675 |
| Finance leases |
| $ | 801 |
|
| $ | 1,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
NOTE 14.11. 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) |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Service cost |
| $ | 2,045 |
|
| $ | 2,290 |
|
| $ | 168 |
|
| $ | 143 |
|
Interest cost |
|
| 2,633 |
|
|
| 3,564 |
|
|
| 317 |
|
|
| 375 |
|
Expected return on plan assets |
|
| (3,525 | ) |
|
| (4,586 | ) |
|
| — |
|
|
| — |
|
Amortization of prior service cost (credit) |
|
| 21 |
|
|
| 28 |
|
|
| (298 | ) |
|
| (319 | ) |
Amortization of actuarial loss |
|
| 3,721 |
|
|
| 4,154 |
|
|
| 545 |
|
|
| 419 |
|
Net periodic cost before pension settlement charge |
|
| 4,895 |
|
|
| 5,450 |
|
|
| 732 |
|
|
| 618 |
|
Pension settlement charge |
|
| — |
|
|
| 42,988 |
|
|
| — |
|
|
| — |
|
Net periodic cost |
| $ | 4,895 |
|
| $ | 48,438 |
|
| $ | 732 |
|
| $ | 618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the three months ended March 31, 2021 and 2020, funding of pension and other postretirement employee benefit plans was $1.4 million and $1.5 million, respectively.
Pension Annuitization
In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of our outstanding pension benefit obligation related to our qualified pension plans to the insurance company. This transaction was funded with plan assets. As a result of the transaction, the insurance company assumed responsibility for annuity administration and benefit payments to select retirees, with 0 change to their monthly retirement benefit payment amounts. The settlement triggered a remeasurement of plan assets and liabilities resulting in a reduction in the funded status of our qualified pension plans of approximately $26.2 million during the first quarter of 2020. In connection with this transaction we recorded a non-cash pretax settlement charge of $43.0 million during the three months ended March 31,first quarter of 2020 in non-operating expense, net, as a result of accelerating the recognition of actuarial losses included in accumulated other comprehensive lossAccumulated Other Comprehensive Loss that would have been recognized in future periods.
The settlement triggered a remeasurement of plan assets and liabilities. We updated the discount rate used to measure our projected benefit obligation for the qualified pension plans as of February 29, 2020 and to calculate the related net periodic benefit cost for the remainder of 2020 to 2.95% from 3.40%. All other pension assumptions remain unchanged. The net effect of the remeasurement was a reduction in the funded status of our qualified pension plans of approximately $26.2 million, primarily driven by the decrease in the discount rate.
The following tables detail the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB):
|
| Three Months Ended June 30, |
| |||||||||||||
|
| Pension |
|
| OPEB |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Service cost |
| $ | 2,176 |
|
| $ | 1,862 |
|
| $ | 112 |
|
| $ | 80 |
|
Interest cost |
|
| 2,568 |
|
|
| 4,692 |
|
|
| 376 |
|
|
| 375 |
|
Expected return on plan assets |
|
| (3,151 | ) |
|
| (5,541 | ) |
|
| — |
|
|
| — |
|
Amortization of prior service cost (credit) |
|
| 28 |
|
|
| 53 |
|
|
| (319 | ) |
|
| (2,211 | ) |
Amortization of actuarial loss |
|
| 3,559 |
|
|
| 3,321 |
|
|
| 417 |
|
|
| 200 |
|
Total net periodic cost (benefit) |
| $ | 5,180 |
|
| $ | 4,387 |
|
| $ | 586 |
|
| $ | (1,556 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, |
| |||||||||||||
|
| Pension |
|
| OPEB |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| ||||
Service cost |
| $ | 4,466 |
|
| $ | 3,883 |
|
| $ | 254 |
|
| $ | 185 |
|
Interest cost |
|
| 6,132 |
|
|
| 9,231 |
|
|
| 751 |
|
|
| 794 |
|
Expected return on plan assets |
|
| (7,737 | ) |
|
| (11,095 | ) |
|
| — |
|
|
| — |
|
Amortization of prior service cost (credit) |
|
| 56 |
|
|
| 106 |
|
|
| (638 | ) |
|
| (4,422 | ) |
Amortization of actuarial loss |
|
| 7,713 |
|
|
| 6,748 |
|
|
| 836 |
|
|
| 507 |
|
Net periodic cost (benefit) before pension settlement charge |
|
| 10,630 |
|
|
| 8,873 |
|
|
| 1,203 |
|
|
| (2,936 | ) |
Pension settlement charge |
|
| 42,988 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Net periodic cost (benefit) |
| $ | 53,618 |
|
| $ | 8,873 |
|
| $ | 1,203 |
|
| $ | (2,936 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2020 and 2019, funding of pension and other postretirement employee benefit plans was $2.8 million and $3.1 million, respectively. Further, as allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) passed in March 2020, we will defer approximately $4.4 million of required 2020 contributions for our qualified pension plans until 2021.
NOTE 15.12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
During 2020,The following table details changes in amounts included in our accumulated other comprehensive loss (AOCL) by component on our Condensed Consolidated Balance Sheets, net of tax, are:tax:
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||
Pension Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 101,524 |
|
| $ | 126,678 |
|
| $ | 117,028 |
|
| $ | 129,253 |
|
| $ | 79,025 |
|
| $ | 117,028 |
|
Net loss arising during the period |
|
| — |
|
|
| — |
|
|
| 19,402 |
|
|
| — |
| ||||||||
Amounts arising during the period |
|
| — |
|
|
| 19,402 |
| ||||||||||||||||
Effect of pension settlement |
|
| — |
|
|
| — |
|
|
| (31,811 | ) |
|
| — |
|
|
| — |
|
|
| (31,811 | ) |
Amounts reclassified from AOCL to earnings |
|
| (2,654 | ) |
|
| (2,497 | ) |
|
| (5,749 | ) |
|
| (5,072 | ) |
|
| (2,770 | ) |
|
| (3,095 | ) |
Balance at end of period |
| $ | 98,870 |
|
| $ | 124,181 |
|
| $ | 98,870 |
|
| $ | 124,181 |
|
| $ | 76,255 |
|
| $ | 101,524 |
|
Other Postretirement Benefit Plans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 10,257 |
|
| $ | 27 |
|
| $ | 10,331 |
|
| $ | (1,382 | ) |
| $ | 14,783 |
|
| $ | 10,331 |
|
Amounts reclassified from AOCL to earnings |
|
| (73 | ) |
|
| 1,489 |
|
|
| (147 | ) |
|
| 2,898 |
|
|
| (183 | ) |
|
| (74 | ) |
Balance at end of period |
| $ | 10,184 |
|
| $ | 1,516 |
|
| $ | 10,184 |
|
| $ | 1,516 |
|
| $ | 14,600 |
|
| $ | 10,257 |
|
Cash Flow Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period |
| $ | 58,525 |
|
| $ | 10,073 |
|
| $ | 20,000 |
|
| $ | 1,560 |
|
| $ | 27,181 |
|
| $ | 20,000 |
|
Net loss arising during the period |
|
| 3,669 |
|
|
| 10,598 |
|
|
| 43,032 |
|
|
| 19,192 |
| ||||||||
Amounts arising during the period |
|
| (61,875 | ) |
|
| 39,363 |
| ||||||||||||||||
Amounts reclassified from AOCL to earnings |
|
| (1,822 | ) |
|
| (181 | ) |
|
| (2,660 | ) |
|
| (262 | ) |
|
| (2,232 | ) |
|
| (838 | ) |
Balance at end of period |
| $ | 60,372 |
|
| $ | 20,490 |
|
| $ | 60,372 |
|
| $ | 20,490 |
|
| $ | (36,926 | ) |
| $ | 58,525 |
|
Accumulated other comprehensive loss, end of period |
| $ | 169,426 |
|
| $ | 146,187 |
|
| $ | 169,426 |
|
| $ | 146,187 |
|
| $ | 53,929 |
|
| $ | 170,306 |
|
See Note 14:11: Pension and Other Postretirement Employee Benefits and Note 9:6: Derivative Instruments for additional information.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, expected impacts of COVID-19 on our business andbusiness; expected effectiveness of our ability to continue operations during the pandemic, fair value of hedging instruments and swaps,swaps; expected return on pension assets,assets; required contributions to pension plans; recognition of compensation costs relating to our performance share awards (PSAs) and RSUs, required contributions to pension plans,restricted stock units (RSUs); expected amortization of unrecognized compensation cost of performance share awardsPSAs and RSUs,RSUs; amount of net losses on cash flow hedges expected to be reclassified into earnings in the next 12 months,months; expected tax payments and deferrals,deferrals; anticipated share repurchases and dividend payments,payments; anticipated cash balances, cash flows from operations and expected liquidity,liquidity; potential uses of and estimated payments under our credit facility,facility; expected debt refinancing; expectations regarding the U.S. housing market, home repair and remodeling activity, the lumber and log markets, expectedlumber shipment volumes, sawlog demand, percent of log sales by log supply agreements; timber harvest volumes, expected lumber shipments, expectedsawlog mix and pricing, rural real estate and residential and commercial real estate development sales, including the closing of the sale of approximately 72,000 rural acres in the fourth quarter of 2020,and the average price per acre and developed lot,lot; sufficiency of cash to meet operating requirements, 2020requirements; expected 2021 capital expendituresexpenditures; and similar matters. WordsForward-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 “anticipate,” “expect,” “will,” “intend,” “plan,” “target,” “project,” “believe,” “seek,” “schedule,” “estimate,” “could,” “can,” “may” andexpects, may, could, should, will, believes, anticipates, estimates, projects, intends, plans, targets or approximately, or similar expressions are intended to identify such forward-looking statements.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. Our actual results of operations could differ materially from our historical results or those expressed or implied by forward-looking statements contained in this report. Important factors that could cause or contribute to such differences include, but are not limited to, the following:
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| 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 |
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| • | changes in the cost or availability of transportation; |
• | changes in principle expenses; |
• | impact of the |
| • | disruptions or inefficiencies in our supply chain and/or operations. |
For a discussion of some of the factors that may affect our business, results and prospects and a nonexclusive listing of forward-looking statements, refer to Cautionary Statement Regarding Forward-Looking Information on page 1 and Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and Risk Factors in Part II, Item 1A in this Form 10-Q.2020.
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.
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Our Company
We are a leading timberland real estate investment trust (REIT)REIT with operations in seven states where we ownownership of approximately 1.8 million acres of timberland,timberland. We also own six sawmills and an industrial grade plywood mill, a residential and commercial real estate development projects.business and a rural timberland sales program.
Our business isoperations are organized into three business segments: Timberlands, Wood Products and Real Estate. The Timberlands segment includes planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts, oil and gas royalties and carbon sequestration. The Wood Products segment manufactures and markets lumber and plywood. The Real Estate segment includes the sale of land holdings deemed non-strategic or identified as having higher and better use alternatives, master planned community development and a country club.
Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a 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 discussions,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 influencedaffected by a variety of factors, including the cyclical nature of the forest products industry,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 spring and summer traditional home building and buying season.
Additionally, 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, asset dispositions or acquisitions, impact of pandemics (such as COVID-19), fires, other natural disasters and other factors.
Non-GAAP Measures
To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), we usepresent 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 Measuressection below. Our definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to and not a substitute for, financial information prepared in accordance with GAAP.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance 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 (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. See Note 5:2: Segment Informationin theNotes to the Condensed Consolidated Financial Statements for information related to the use of segment Adjusted EBITDDA.
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Business and Economic Trends Affecting Our Operations
In March 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Shortly thereafter, the United States declared a national emergency concerning the outbreak, and all states and several municipalities began to declare public health emergencies. These declarations resulted in a wide-range of actions taken to contain and combat the outbreak and spread of COVID-19 including quarantines, “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to reduce or cease normal operations.Although the restrictions began to ease by the end of the second quarter, such directives are subject to change and may, depending on direction from local authorities and the pandemic’s effects on the public, require us, our suppliers or our customers to limit or suspend operations.
The United States Department of Homeland Security has designated the forest and wood products industry as an "essential critical infrastructure workforce," which recognizes the importance of these operations in supporting critical infrastructure and construction projects. The demand for timber is directly affected by the underlying demand for lumber and other wood-products, as well as by the demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by demand for new homes in the United States and by repair and remodeling activity. T
Hhe COVID-19 pandemic has introduced significant economicousing fundamentals remain stronger than at any point since the Great Financial Crisis driven by the demand for new single-family homes, historically low mortgage rates, a shift from urban to suburban living, millennials entering their prime home-buying years, scarce re-sale housing inventory and business uncertainty, along with volatile financial market conditions duringan aging existing housing stock supporting repair and remodel demand. In March 2021, the first halfU.S. Census Bureau reported housing starts of 2020 which is expected to continue into the future.
A housing construction slowdown1.7 million in the spring dueU.S. on a seasonally adjusted annual basis, including single-family new home construction starts of 1.2 million, an increase of over 40% from March of 2020. While the U.S. economy continues to social-distancing rulesnavigate challenges from COVID-19, we believe housing fundamentals, a key factor driving the strong lumber demand and delayed permits and inspections led to a massive destocking of lumber in the supply chain as well as significant curtailment of North American lumber manufacturing capacity. The atypical early spring pullback in lumber production coupled with strong demand led to an acute shortage that underpins a historic run in lumber prices that began in the second quarter and is continuing.pricing, will remain strong.
In our Wood Products segment, lumber shipments of 249we shipped 258 million board feet of lumber during the first quarter of 2021. Lumber production was lower during the quarter stemming from extended planned downtime for maintenance at one of our sawmills, and a severe winter storm that led to week-long shutdowns in our Southern mills. Lumber prices remained elevated throughout the first quarter of 2021 and established new records as we entered the spring building season. With buyers’ lumber inventories estimated to be at the low end of their historic range, combined with strong housing fundamentals, we believe lumber prices will continue to rise in the second quarter compared to first quarter levels. We plan to ship 275 to 285 million board feet of lumber during the second quarter.
In our Timberlands segment, Northern sawlog prices benefitted from Idaho sawlogs prices being indexed to lumber prices, while Southern pine sawlog prices remained stable. Our harvest volume of 1.3 million tons during the first quarter of 2021 was lower than the first quarter of 2020 primarily due to a severe winter storm impacting harvest conditions in the Southern region. Further, several Southern pulpwood mills experienced extended downtime as a result of the winter storm which decreased the demand for pulpwood in the region. We expect to harvest between 1.1 and 1.3 million tons during the second quarter of 2020 were constrained by lower production hours, particularly in April when we lost a week2021, with approximately 70% of production at our Warren, Arkansas sawmill due to a tornado-caused power outage. For the third quarter of 2020, we plan to ship 270 to 280 million board feet of lumber and expect our average lumber price to be significantly highervolume in the third quarter compared to the second quarter.
The demand forSouthern region. Additionally, approximately 75% of our industrial grade plywood product line was adversely affectedIdaho sawlog deliveries in the second quarter, as these products are used in boat, recreational vehicle and furniture industries, many of which were forced to temporarily shut down. As a result, we temporarily suspended operations at our St. Maries, Idaho industrial plywood facility for three weeks and ranwill be at a reduced operating posture for the balance of the second quarter after restarting production in May. seasonally low level, will continue to benefit from being indexed to historically high lumber prices on an approximate four-week lag.
Our plywood mill returned to normal operating posture in July 2020.
In our TimberlandsReal Estate segment the Northern region experienced an increase in sawlog volume inbenefitted from robust rural and development demand during the first halfquarter of 2020 because of favorable harvest conditions compared to the prior year. Southern pine sawlog prices remain stable and our harvest volumes improved in the first half of 2020 as a result of favorable harvest conditions. However, our Southern region harvest volumes were adversely impacted by third-party mill curtailments due to COVID-19 during2021. For the second quarter of 2020. We do not anticipate making up the pulpwood shortfall during the remainder of 2020. We expect total harvest volumes to be between 1.5 and 1.7 million tons in the third quarter of 2020. Because we index approximately 70% of our Idaho sawlogs to the price of lumber under long-term supply agreements, we expect Idaho sawlog prices to increase significantly in the third quarter.
On June 21, 2020, we announced an agreement to sell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund (TCF) for approximately $48.0 million in cash, subject to certain adjustments as defined in the agreement. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2020.For the year,2021, we expect to sell 93,000 to 97,000approximately 2,500 acres of rural land including the 72,000-acre Minnesota transaction. Residential and commercial sales in Chenal Valley mainly follow the national housing market trends but do experience microeconomic factors for the area including economic growth and the availability15 residential development lots.
21
Finally, we anticipate our current cash balances, cash flows from operations and our available sources of liquidity will be more than adequate to meet our cash requirements. At June 30, 2020 we had approximately $81.0 million in cash and cash equivalents and availability of $379.0 million on our revolving line of credit. Additionally, expected net proceeds from the Minnesota timberlands transaction discussed above will further enhance our liquidity position and flexibility. As the impact of COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. See Liquidity and Capital Resources section below for further discussion of our liquidity.
Consolidated Results
The following table sets forth changes in our Condensed Consolidated Statements of Operations. Our Business Segment Resultsprovide a more detailed discussion of our segments:
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| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| Three Months Ended March 31, |
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(in thousands) |
| 2020 |
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| 2019 |
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| 2020 |
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| 2019 |
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| 2021 |
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| 2020 |
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Revenues |
| $ | 181,555 |
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| $ | 215,581 |
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| $ | (34,026 | ) |
| $ | 390,435 |
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| $ | 397,297 |
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| $ | (6,862 | ) |
| $ | 354,193 |
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| $ | 208,880 |
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| $ | 145,313 |
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Costs and expenses: |
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Cost of goods sold |
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| 149,836 |
| 175,673 |
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| (25,837 | ) |
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| 321,882 |
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| 329,888 |
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| (8,006 | ) |
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| 169,302 |
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| 172,046 |
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| (2,744 | ) | ||||
Selling, general and administrative expenses |
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| 16,811 |
| 14,952 |
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| 1,859 |
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| 31,018 |
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| 31,522 |
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| (504 | ) |
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| 16,758 |
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| 14,207 |
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| 2,551 |
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Gain on sale of facility |
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| — |
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| — |
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| — |
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| — |
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| (9,176 | ) |
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| 9,176 |
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| 166,647 |
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| 190,625 |
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| (23,978 | ) |
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| 352,900 |
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| 352,234 |
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| 666 |
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| 186,060 |
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| 186,253 |
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| (193 | ) | ||
Operating income |
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| 14,908 |
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| 24,956 |
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| (10,048 | ) |
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| 37,535 |
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| 45,063 |
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| (7,528 | ) |
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| 168,133 |
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| 22,627 |
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| 145,506 |
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Interest expense, net |
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| (8,339 | ) |
| (7,882 | ) |
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| (457 | ) |
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| (12,037 | ) |
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| (13,346 | ) |
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| 1,309 |
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| (3,574 | ) |
|
| (3,698 | ) |
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| 124 |
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Loss on extinguishment of debt |
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| — |
| — |
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| — |
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| — |
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| (5,512 | ) |
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| 5,512 |
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Pension settlement charge |
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| — |
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| — |
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| — |
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| (42,988 | ) |
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| — |
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| (42,988 | ) |
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| — |
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| (42,988 | ) |
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| 42,988 |
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Non-operating pension and other postretirement benefit costs |
|
| (3,478 | ) |
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| (889 | ) |
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| (2,589 | ) |
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| (7,113 | ) |
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| (1,869 | ) |
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| (5,244 | ) |
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| (3,414 | ) |
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| (3,635 | ) |
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| 221 |
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Income (loss) before income taxes |
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| 3,091 |
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| 16,185 |
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| (13,094 | ) |
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| (24,603 | ) |
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| 24,336 |
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| (48,939 | ) |
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| 161,145 |
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| (27,694 | ) |
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| 188,839 |
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Income taxes |
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| (453 | ) |
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| 952 |
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| (1,405 | ) |
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| 10,409 |
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| (639 | ) |
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| 11,048 |
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| (30,039 | ) |
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| 10,862 |
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| (40,901 | ) | ||
Net income (loss) |
| $ | 2,638 |
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| $ | 17,137 |
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| $ | (14,499 | ) |
| $ | (14,194 | ) |
| $ | 23,697 |
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| $ | (37,891 | ) |
| $ | 131,106 |
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| $ | (16,832 | ) |
| $ | 147,938 |
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Total Adjusted EBITDDA1 |
| $ | 35,373 |
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| $ | 49,080 |
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| $ | (13,707 | ) |
| $ | 82,944 |
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| $ | 77,332 |
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| $ | 5,612 |
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| $ | 194,986 |
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| $ | 47,571 |
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| $ | 147,415 |
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1 | See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income (loss), the closest comparable GAAP measure, for each of the periods presented. |
SecondFirst Quarter 20202021 Compared with SecondFirst Quarter 20192020
Revenues
Revenues were $181.6$354.2 million, a decreasean increase of $34.0$145.3 million compared with the secondfirst quarter of 2019. Declines in2020 primarily due to historically high lumber prices, increased Idaho sawlog prices and plywood shipments,increased rural acres sold, and development real estate lot sales were partiallysales. These increases more than offset by increaseslower harvest volumes and lower lumber shipments in lumber prices, Northern sawlog prices and Southern harvest volumes.the first quarter of 2021.
Cost of goods sold
Cost of goods sold decreased $25.8$2.7 million compared with the secondfirst quarter of 20192020 primarily due primarily to lower harvest volumes and lower lumber shipmentsshipments. These decreases were partially offset by increased repairs and the temporary curtailment and reduced operating posturemaintenance at our plywood facility.Wood Products facilities and increased rural and development real estate sales.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $1.9$2.6 million compared with the secondfirst quarter of 20192020 primarily as a result of mark-to-market adjustments for deferred equityincentive compensation plans and higher estimated performance-based variable compensation.
Non-operating pension and other postretirement benefit costs
Non-operating pension and other postretirement benefit costs increased $2.6 million compared to the second quarter of 2019. This increase was because prior service credits of $1.9 million per quarter were fully amortized at the end of 2019. Non-operating pension and other postretirement benefit costs were also impacted by a decrease in the discount rate used to determine the benefit obligations and a decrease in expected return on plan assets.
Income taxes
Income taxes for the second quarter of 2020 was a $0.5 million income tax expense compared with $1.0 million income tax benefit for the second quarter of 2019. Income taxes are primarily due to income or loss from our taxable REIT subsidiaries (TRS). For the three months ended June 30, 2020, the TRS’s pre-tax income was $1.5 million. For the same period in 2019, the TRS’s loss before income tax was $6.5 million.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the second quarter of 2020 decreased $13.7 million compared to the second quarter of 2019. The decrease in Total Adjusted EBITDDA was driven primarily by decreased operating results in our Real Estate segment as 2019 included a large sale in Arkansas with no similar sales during the second quarter of 2020. Refer to the Business Segment Results below for further discussions on activities for each of our segments.
Year to Date 2020 Compared with Year to Date 2019
Revenues
Revenues were $390.4 million, a decrease of $6.9 million compared with the first half of 2019. Revenues in the first half of 2019 included revenuesincentive compensation related to our Deltic Medium Density Fiberboard (MDF) facility that we sold in the first quarter of 2019 and a 1,787-acre rural real estate sale for $11,000 per acre with no similar transactions in the first half of 2020. In addition, we shipped less plywood in 2020 due to a temporary curtailment and reduced operating posture. These decreases were mostly offset by increased lumber prices, lumber shipments, sawlog prices in the Northern Region and harvest volumes.
Cost of goods sold
Cost of goods sold decreased $8.0 million compared with the same period in 2019 primarily due to the temporary curtailment and reduced operating posture at our plywood facility during the second quarter of 2020 and because 2019 included approximately 1.5 months of activity related to the Deltic MDF Facility. These decreases were partly offset by increased harvest activities and increased lumber shipments.
Gain on sale of facility
In February 2019 we closed on the sale of our Deltic MDF facility to Roseburg Forest Products Co. for $92.0 million, before certain working capital adjustments, resulting in a $9.2 million pre-tax gain on sale.
Interest expense, net
Net interest expense decreased $1.3 million compared with the first half of 2019 primarily due to the refinancing of $150.0 million of 7.5% Senior Notes (Senior Notes) during the first quarter of 2019.
Loss on extinguishment of debt
As part of the $150.0 million Senior Notes redemption during the first quarter of 2019 we incurred a redemption premium of $4.9 million and wrote off certain unamortized debt costs.strong company performance.
Pension settlement charge
In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of our outstanding pension benefit obligation related to our qualified pension plans. This transaction was funded with plan assets. In connection with this transaction, we recorded a non-cash pretax settlement charge of $43.0 million.
Non-operating pension and other postretirement benefit costs
Non-operating pension and other postretirement benefit costs increased $5.2 million compared toin the first halfquarter of 2019. This increase was because prior service credits of $1.9 million per quarter were fully amortized at the end of 2019. Non-operating pension and other postretirement benefit costs were also impacted by a decrease in the discount rate used to determine the benefit obligations and a decrease in expected return on plan assets.2020.
Income taxes
Income taxes for the first half of 2020 was a $10.4 million income tax benefit compared with a $0.6 million income tax expense for the first half of 2019. Income taxes are primarily due to income or loss from our PotlatchDeltic taxable REIT subsidiaries (TRS). For the sixthree months ended June 30,March 31, 2021, we recorded income tax expense of $30.0 million as our TRS’s income before tax was $115.8 million driven primarily by historically high lumber prices. For the three months ended March 31, 2020, we recorded an income tax benefit of approximately $10.9 million primarily as a result of the TRS’s loss before income tax was $41.3of $42.8 million, which includedwas mainly as a result of the $43.0 million pension settlement charge. For the same period in 2019, the TRS’s income before income tax was $0.7 million which included the gain on sale
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Table of the Deltic MDF facility.Contents
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the first halfquarter of 20202021 increased $5.6$147.4 million compared to the first halfquarter of 2019.2020. The increase in Total Adjusted EBITDDA was driven primarily by historically high lumber prices, increased operating results in our TimberlandsIdaho sawlog prices and Wood Products business segments partially offset by a decrease inincreased rural and development real estate acres and development lots sold in our Real Estate segment.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 (loss), the closest comparable GAAP measure, for each of the periods presented.
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Business Segment Results
Timberlands Segment
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| Three Months Ended June 30, |
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| Six Months Ended June 30, |
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| Three Months Ended March 31, |
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(in thousands) |
| 2020 |
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| 2019 |
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| Change |
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| 2020 |
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| 2019 |
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| Change |
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| 2021 |
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| 2020 |
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| Change |
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Revenues1 |
| $ | 67,345 |
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| $ | 66,881 |
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| $ | 464 |
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| $ | 149,770 |
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| $ | 135,039 |
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| $ | 14,731 |
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| $ | 111,916 |
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| $ | 82,425 |
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| $ | 29,491 |
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Costs and expenses: |
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Logging and hauling |
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| 31,655 |
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| 30,536 |
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| 1,119 |
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| 70,259 |
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| 63,452 |
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| 6,807 |
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| 36,468 |
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| 38,604 |
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| (2,136 | ) |
Other |
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| 8,277 |
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| 8,530 |
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| (253 | ) |
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| 15,568 |
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| 15,194 |
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| 374 |
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| 5,888 |
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| 7,291 |
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| (1,403 | ) |
Selling, general and administrative expenses |
|
| 1,754 |
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| 1,684 |
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| 70 |
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| 3,302 |
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| 3,412 |
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| (110 | ) |
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| 1,702 |
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| 1,548 |
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| 154 |
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Timberlands Adjusted EBITDDA2 |
| $ | 25,659 |
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| $ | 26,131 |
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| $ | (472 | ) |
| $ | 60,641 |
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| $ | 52,981 |
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| $ | 7,660 |
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| $ | 67,858 |
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| $ | 34,982 |
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| $ | 32,876 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Prior to elimination of intersegment fiber revenues of |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the |
Timberlands Segment Statistics
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
Harvest Volumes (in tons) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| |||||||||
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
|
| 302,917 |
|
|
| 324,556 |
|
|
| (21,639 | ) |
|
| 736,787 |
|
|
| 698,421 |
|
|
| 38,366 |
|
|
| 427,255 |
|
|
| 433,870 |
|
|
| (6,615 | ) |
Pulpwood |
|
| 31,463 |
|
|
| 30,520 |
|
|
| 943 |
|
|
| 69,264 |
|
|
| 79,163 |
|
|
| (9,899 | ) |
|
| 13,884 |
|
|
| 37,801 |
|
|
| (23,917 | ) |
Stumpage |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 23,178 |
|
|
| 7,376 |
|
|
| 15,802 |
|
|
| — |
|
|
| 23,178 |
|
|
| (23,178 | ) |
Total |
|
| 334,380 |
|
|
| 355,076 |
|
|
| (20,696 | ) |
|
| 829,229 |
|
|
| 784,960 |
|
|
| 44,269 |
|
|
| 441,139 |
|
|
| 494,849 |
|
|
| (53,710 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
|
| 490,754 |
|
|
| 448,918 |
|
|
| 41,836 |
|
|
| 1,039,221 |
|
|
| 861,752 |
|
|
| 177,469 |
|
|
| 508,073 |
|
|
| 548,467 |
|
|
| (40,394 | ) |
Pulpwood |
|
| 372,234 |
|
|
| 341,909 |
|
|
| 30,325 |
|
|
| 739,333 |
|
|
| 715,173 |
|
|
| 24,160 |
|
|
| 326,429 |
|
|
| 367,099 |
|
|
| (40,670 | ) |
Stumpage |
|
| 100,231 |
|
|
| 22,807 |
|
|
| 77,424 |
|
|
| 190,468 |
|
|
| 65,156 |
|
|
| 125,312 |
|
|
| 58,413 |
|
|
| 90,237 |
|
|
| (31,824 | ) |
Total |
|
| 963,219 |
|
|
| 813,634 |
|
|
| 149,585 |
|
|
| 1,969,022 |
|
|
| 1,642,081 |
|
|
| 326,941 |
|
|
| 892,915 |
|
|
| 1,005,803 |
|
|
| (112,888 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total harvest volume |
|
| 1,297,599 |
|
|
| 1,168,710 |
|
|
| 128,889 |
|
|
| 2,798,251 |
|
|
| 2,427,041 |
|
|
| 371,210 |
|
|
| 1,334,054 |
|
|
| 1,500,652 |
|
|
| (166,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Price/Unit ($ per ton)1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Northern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
| $ | 101 |
|
| $ | 94 |
|
| $ | 7 |
|
| $ | 98 |
|
| $ | 90 |
|
| $ | 8 |
|
| $ | 178 |
|
| $ | 95 |
|
| $ | 83 |
|
Pulpwood |
| $ | 39 |
|
| $ | 38 |
|
| $ | 1 |
|
| $ | 39 |
|
| $ | 41 |
|
| $ | (2 | ) |
| $ | 36 |
|
| $ | 38 |
|
| $ | (2 | ) |
Stumpage |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 14 |
|
| $ | 14 |
|
| $ | — |
|
| $ | — |
|
| $ | 14 |
|
| $ | (14 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Southern region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sawlog |
| $ | 43 |
|
| $ | 47 |
|
| $ | (4 | ) |
| $ | 43 |
|
| $ | 46 |
|
| $ | (3 | ) |
| $ | 44 |
|
| $ | 44 |
|
| $ | — |
|
Pulpwood |
| $ | 29 |
|
| $ | 33 |
|
| $ | (4 | ) |
| $ | 30 |
|
| $ | 32 |
|
| $ | (2 | ) |
| $ | 28 |
|
| $ | 31 |
|
| $ | (3 | ) |
Stumpage |
| $ | 8 |
|
| $ | 6 |
|
| $ | 2 |
|
| $ | 9 |
|
| $ | 7 |
|
| $ | 2 |
|
| $ | 13 |
|
| $ | 9 |
|
| $ | 4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Sawlog and pulpwood sales prices are on a delivered basis, which includes |
24
Timberlands Adjusted EBITDDA
The following table summarizes Timberlands Adjusted EBITDDA variances for the three and six months ended June 30, 2020March 31, 2021 compared with the three and six months ended June 30, 2019:March 31, 2020:
(in thousands) |
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months |
| |||
Timberlands Adjusted EBITDDA June 30, 2019 |
| $ | 26,131 |
|
| $ | 52,981 |
| ||||
Timberlands 2020 Adjusted EBITDDA |
| $ | 34,982 |
| ||||||||
Sales price and mix |
|
| (2,561 | ) |
|
| 828 |
|
|
| 36,723 |
|
Harvest volume |
|
| 1,947 |
|
|
| 7,584 |
|
|
| (3,725 | ) |
Other revenue |
|
| (284 | ) |
|
| 92 |
|
|
| (403 | ) |
Logging and hauling costs per unit |
|
| 244 |
|
|
| (580 | ) |
|
| (967 | ) |
Forest management |
|
| 282 |
|
|
| (273 | ) |
|
| 918 |
|
Administrative, indirect and overhead costs |
|
| (100 | ) |
|
| 9 |
|
|
| 330 |
|
Timberlands Adjusted EBITDDA June 30, 2020 |
| $ | 25,659 |
|
| $ | 60,641 |
| ||||
Timberlands 2021 Adjusted EBITDDA |
| $ | 67,858 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
SecondFirst Quarter 2021 Compared with First Quarter 2020 Compared with Second Quarter 2019
Timberlands Adjusted EBITDDA for the secondfirst quarter of 2020 decreased $0.52021 increased $32.9 million compared with the same period in 2019,2020, primarily as a result of the following:
| • | Sales Price and Mix: |
| • | Harvest Volume: We harvested |
Year to Date 2020 Compared with Year to Date 2019
Timberlands Adjusted EBITDDA for the first half of 2020 increased $7.7 million compared with the same period in 2019, primarily as a result of the following:
|
|
|
|
Wood Products Segment
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| |||||||||
Revenues |
| $ | 126,216 |
|
| $ | 138,030 |
|
| $ | (11,814 | ) |
| $ | 271,216 |
|
| $ | 270,336 |
|
| $ | 880 |
|
| $ | 269,296 |
|
| $ | 145,000 |
|
| $ | 124,296 |
|
Costs and expenses1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiber costs |
|
| 58,950 |
|
|
| 68,988 |
|
|
| (10,038 | ) |
|
| 123,962 |
|
|
| 138,015 |
|
|
| (14,053 | ) |
|
| 79,469 |
|
|
| 65,012 |
|
|
| 14,457 |
|
Freight, logging and hauling |
|
| 13,522 |
|
|
| 17,729 |
|
|
| (4,207 | ) |
|
| 30,924 |
|
|
| 33,953 |
|
|
| (3,029 | ) |
|
| 18,197 |
|
|
| 17,402 |
|
|
| 795 |
|
Manufacturing costs |
|
| 41,951 |
|
|
| 45,080 |
|
|
| (3,129 | ) |
|
| 86,955 |
|
|
| 92,521 |
|
|
| (5,566 | ) |
|
| 47,602 |
|
|
| 45,004 |
|
|
| 2,598 |
|
Finished goods inventory change |
|
| (1,898 | ) |
|
| 6,213 |
|
|
| (8,111 | ) |
|
| (7 | ) |
|
| (3,879 | ) |
|
| 3,872 |
|
|
| (4,019 | ) |
|
| 1,891 |
|
|
| (5,910 | ) |
Selling, general and administrative expenses |
|
| 2,779 |
|
|
| 2,093 |
|
|
| 686 |
|
|
| 5,050 |
|
|
| 4,543 |
|
|
| 507 |
|
|
| 2,522 |
|
|
| 2,271 |
|
|
| 251 |
|
Other |
|
| 5 |
|
|
| (2 | ) |
|
| 7 |
|
|
| 196 |
|
|
| 28 |
|
|
| 168 |
|
|
| (30 | ) |
|
| 191 |
|
|
| (221 | ) |
Wood Products Adjusted EBITDDA2 |
| $ | 10,907 |
|
| $ | (2,071 | ) |
| $ | 12,978 |
|
| $ | 24,136 |
|
| $ | 5,155 |
|
| $ | 18,981 |
|
| $ | 125,555 |
|
| $ | 13,229 |
|
| $ | 112,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Prior to elimination of intersegment fiber costs of |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the |
25
Wood Products Segment Statistics
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| |||||||||
Lumber shipments (MBF)1 |
|
| 249,239 |
|
|
| 272,523 |
|
|
| (23,284 | ) |
|
| 532,206 |
|
|
| 510,926 |
|
|
| 21,280 |
|
|
| 258,069 |
|
|
| 282,967 |
|
|
| (24,898 | ) |
Lumber sales prices ($ per MBF) |
| $ | 412 |
|
| $ | 378 |
|
| $ | 34 |
|
| $ | 404 |
|
| $ | 379 |
|
| $ | 25 |
|
| $ | 890 |
|
| $ | 396 |
|
| $ | 494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 2020March 31, 2021 compared with the three and six months ended June 30, 2019:March 31, 2020:
(in thousands) |
| Three Months Ended |
|
| Six Months Ended |
|
| Three Months |
| |||
Wood Products Adjusted EBITDDA June 30, 2019 |
| $ | (2,071 | ) |
| $ | 5,155 |
| ||||
Wood Products 2020 Adjusted EBITDDA |
| $ | 13,229 |
| ||||||||
Lumber: |
|
|
|
|
|
|
|
|
|
|
|
|
Price |
|
| 9,556 |
|
|
| 13,476 |
|
|
| 126,614 |
|
Volume |
|
| (507 | ) | ||||||||
Manufacturing costs per unit |
|
| (952 | ) |
|
| (2,900 | ) |
|
| (3,118 | ) |
Log costs per unit |
|
| 1,244 |
|
|
| 3,150 |
|
|
| (11,494 | ) |
Inventory charge |
|
| 7,396 |
|
|
| 7,396 |
|
|
| 895 |
|
Residuals, panels and other |
|
| (4,266 | ) |
|
| (2,141 | ) |
|
| (64 | ) |
Wood Products Adjusted EBITDDA June 30, 2020 |
| $ | 10,907 |
|
| $ | 24,136 |
| ||||
Wood Products 2021 Adjusted EBITDDA |
| $ | 125,555 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
First Quarter 2021 Compared with First Quarter 2020 Compared with Second Quarter 2019
Wood Products Adjusted EBITDDA for the secondfirst quarter of 20202021 increased $13.0$112.3 million compared with the same period in 20192020, primarily as a result of the following:
| • | Lumber Price: Average lumber sales prices increased to |
|
|
|
|
| • |
|
|
|
|
Year to Date 2020 Compared with Year to Date 2019
Wood Products Adjusted EBITDDA for the first half of 2020 increased $19.0 million compared with the same period in 2019 primarily as a result of the following:
• |
|
|
|
| Log Costs Per Unit: Log costs per unit were |
|
|
|
|
Real Estate Segment
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| |||||||||||||||||||||||||||||
(in thousands) |
| 2020 |
|
|
| 2019 |
|
| Change |
|
| 2020 |
|
| 2019 |
|
| Change |
|
| 2021 |
|
| 2020 |
|
| Change |
| ||||||||||
Revenues |
| $ | 13,105 |
|
| $ | 36,432 |
|
| $ | (23,327 | ) |
| $ | 24,074 |
|
| $ | 42,596 |
|
| $ | (18,522 | ) |
| $ | 20,313 |
|
| $ | 10,969 |
|
| $ | 9,344 |
| ||
Costs and expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Costs of goods sold |
|
| 2,610 |
| 3,787 |
|
|
| (1,177 | ) |
|
| 5,041 |
|
|
| 6,041 |
|
|
| (1,000 | ) |
|
| 2,468 |
|
|
| 2,431 |
|
|
| 37 |
| ||||
Selling, general and administrative expenses |
|
| 1,239 |
|
|
|
|
| 1,329 |
|
|
| (90 | ) |
|
| 2,437 |
|
|
| 2,536 |
|
|
| (99 | ) |
|
| 1,252 |
|
|
| 1,198 |
|
|
| 54 |
|
Real Estate Adjusted EBITDDA1 |
| $ | 9,256 |
|
| $ | 31,316 |
|
| $ | (22,060 | ) |
| $ | 16,596 |
|
| $ | 34,019 |
|
| $ | (17,423 | ) |
| $ | 16,593 |
|
| $ | 7,340 |
|
| $ | 9,253 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Management uses Adjusted EBITDDA to evaluate the performance of the |
26
Real Estate Segment Statistics
Rural Real Estate |
| Three Months Ended June 30, |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
| ||||
Higher and better use (HBU) |
|
| 2,257 |
|
| $ | 2,545 |
|
|
| 2,497 |
|
| $ | 8,551 |
|
Recreation real estate |
|
| 2,216 |
|
| $ | 1,364 |
|
|
| 1,637 |
|
| $ | 1,382 |
|
Non-strategic timberland |
|
| 1,064 |
|
| $ | 1,045 |
|
|
| 8,241 |
|
| $ | 813 |
|
Total |
|
| 5,537 |
|
| $ | 1,784 |
|
|
| 12,375 |
|
| $ | 2,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended June 30, |
| |||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||
|
| Acres Sold |
|
| Average Price/Acre |
|
| Acres Sold |
|
| Average Price/Acre |
| ||||
Higher and better use (HBU) |
|
| 2,887 |
|
| $ | 2,676 |
|
|
| 3,257 |
|
| $ | 7,302 |
|
Recreation real estate |
|
| 3,096 |
|
| $ | 1,404 |
|
|
| 2,779 |
|
| $ | 1,315 |
|
Non-strategic timberland |
|
| 3,993 |
|
| $ | 1,277 |
|
|
| 8,681 |
|
| $ | 818 |
|
Total |
|
| 9,976 |
|
| $ | 1,721 |
|
|
| 14,717 |
|
| $ | 2,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rural Real Estate |
| Three Months Ended March 31, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Acres sold |
|
| 7,083 |
|
|
| 4,439 |
|
Average price per acre |
| $ | 1,415 |
|
| $ | 1,643 |
|
|
|
|
|
|
|
|
|
|
Development Real Estate |
| Three Months Ended June 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||
Residential lots |
|
| 51 |
|
|
| 23 |
| ||||||||||||||||||
Average price per lot |
| $ | 98,629 |
|
| $ | 99,652 |
| ||||||||||||||||||
|
| Lots Sold |
|
|
|
| Average Price/ Lot |
|
| Lots Sold |
|
| Average Price/ Lot |
|
|
|
|
|
|
|
|
| ||||
Residential lots |
|
| 17 |
|
| $ | 97,059 |
|
|
| 44 |
|
| $ | 85,345 |
| ||||||||||
Commercial acres |
|
| 11 |
|
|
| — |
| ||||||||||||||||||
Average price per acre |
| $ | 277,425 |
|
| $ | — |
| ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| Six Months Ended June 30, |
| |||||||||||||||||||||||
|
| 2020 |
|
| 2019 |
| ||||||||||||||||||||
|
| Lots Sold |
|
|
|
| Average Price/ Lot |
|
| Lots Sold |
|
| Average Price/ Lot |
| ||||||||||||
Residential lots |
|
| 40 |
|
|
|
|
| 98,550 |
|
|
| 51 |
|
| $ | 86,825 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate Adjusted EBITDDA
The following table summarizes Real Estate Adjusted EBITDDA variances for the three and six months ended June 30, 2020March 31, 2021 compared with the three and six months ended June 30, 2019:March 31, 2020:
(in thousands) |
| Three Months Ended |
|
| Six Months Ended |
| ||
Real Estate Adjusted EBITDDA June 30, 2019 |
| $ | 31,316 |
|
| $ | 34,019 |
|
Rural real estate sales |
|
| (20,435 | ) |
|
| (17,363 | ) |
Development real estate sales |
|
| (2,892 | ) |
|
| (1,160 | ) |
Selling, general and administrative expenses |
|
| 90 |
|
|
| 100 |
|
Other costs, net |
|
| 1,177 |
|
|
| 1,000 |
|
Real Estate Adjusted EBITDDA June 30, 2020 |
| $ | 9,256 |
|
| $ | 16,596 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
| Three Months |
| |
Real Estate 2020 Adjusted EBITDDA |
| $ | 7,340 |
|
Rural sales |
|
| 2,743 |
|
Development sales |
|
| 6,601 |
|
Other, net |
|
| (91 | ) |
Real Estate 2021 Adjusted EBITDDA |
| $ | 16,593 |
|
|
|
|
|
|
SecondFirst Quarter 20202021 Compared with SecondFirst Quarter 20192020
Real Estate Adjusted EBITDDA for the secondfirst quarter of 2020 decreased $22.12021 was $16.6 million, an increase of $9.3 million compared with the same period in 2019 primarilyfirst quarter of 2020 as a result of the following:
| • | Rural |
| • | Development |
Year to Date 2020 Compared with Year to Date 201927
Real Estate Adjusted EBITDDA for the first half of 2020 decreased $17.4 million compared with the same period in 2019 primarily as a result of the following:
|
|
|
|
|
Liquidity and Capital Resources
Changes in significant sources and uses of cash for the sixthree months ended June 30,March 31, 2021 and 2020 and 2019 are presented by categories as follows:
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| ||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||
Net cash provided by operating activities |
| $ | 87,943 |
|
| $ | 67,521 |
|
| $ | 169,965 |
|
| $ | 48,138 |
|
Net cash (used in) provided by investing activities |
| $ | (19,688 | ) |
| $ | 35,256 |
| ||||||||
Net cash used in investing activities |
| $ | (11,529 | ) |
| $ | (11,034 | ) | ||||||||
Net cash used in financing activities |
| $ | (69,575 | ) |
| $ | (84,248 | ) |
| $ | (28,075 | ) |
| $ | (39,538 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Flows from OperationsOperating Activities
Net cash provided by operating activities increased $20.4$121.8 million compared to the first halfquarter of 2019.2020. Changes in cash provided by operating activities was impacted by the following:
| • | Cash received from customers increased |
|
|
|
• |
|
|
|
Net Cash Flows from Investing Activities
Changes in cash flows from investing activities were primarily a result of the following:
| • | We spent |
|
|
|
• |
|
Net Cash Flows from Financing Activities
Changes in cash flows from financing activities were primarily a result of the following:
| • |
|
| • |
|
Future Sources and Uses of Cash Requirements
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. While weWe currently expect to spend a total of approximately $40$55.0 to $44$60.0 million for capital expenditures during 2020, we are reviewing options to pull some 2021 high return mill projects forward to this year.
We are deferring payments of approximately $8.4 million for our 2020 employer portion of social security payroll tax and contributions to qualified pension plans as allowed under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). These payments will be funded in 2021 and 2022 as required under the CARES Act.2021.
On August 30, 2018, the board of directors authorized the repurchase of up to $100.0 million of common stock with no time limit set for the repurchase.repurchase (the Repurchase Program). At June 30, 2020,March 31, 2021, we had remaining authorization of $59.5 million for future stock repurchase under the 2018 Repurchase Program. StockThe timing, manner, price and amount of repurchases in the future will depend on a variety of factors including our cash position, alternative investment opportunities, our desired level of liquidity, debt covenant restrictionsbe determined according to, and our stock price.
On June 21, 2020, we announced an agreement to sell approximately 72,000 acres of rural timberland in Minnesota to The Conservation Fund (TCF) for approximately $48.0 million in cash, subject to, certain adjustments as defined in the agreement. The transaction isterms of the Trading Plan, and, subject to customary closing conditions and is expected to close in the fourth quarterterms of 2020.the Trading Plan, the Repurchase Program may be suspended, terminated or modified at any time for any reason.
28
Capital Structure
(in thousands) |
| June 30, 2020 |
|
| December 31, 2019 |
|
| March 31, 2021 |
|
| December 31, 2020 |
| ||||
Long-term debt |
| $ | 756,989 |
|
| $ | 756,469 |
| ||||||||
Long-term debt (including current portion) |
| $ | 757,604 |
|
| $ | 757,347 |
| ||||||||
Cash and cash equivalents |
|
| (80,987 | ) |
|
| (83,310 | ) |
|
| (382,032 | ) |
|
| (252,340 | ) |
Net debt |
|
| 676,002 |
|
|
| 673,159 |
|
|
| 375,572 |
|
|
| 505,007 |
|
Market capitalization1 |
|
| 2,543,104 |
|
|
| 2,908,653 |
|
|
| 3,547,863 |
|
|
| 3,345,138 |
|
Enterprise value |
| $ | 3,219,106 |
|
| $ | 3,581,812 |
|
| $ | 3,923,435 |
|
| $ | 3,850,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt to enterprise value |
|
| 21.0 | % |
|
| 18.8 | % |
|
| 9.6 | % |
|
| 13.1 | % |
Dividend yield2 |
|
| 4.2 | % |
|
| 3.7 | % |
|
| 3.1 | % |
|
| 3.3 | % |
Weighted-average cost of debt, after tax3 |
|
| 3.3 | % |
|
| 3.3 | % |
|
| 3.2 | % |
|
| 3.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 | Market capitalization is based on outstanding shares of |
2 | Dividend yield is based on annualized dividends per share of |
3 | Weighted-average cost of debt excludes deferred debt costs and credit facility fees and includes estimated annual patronage credit on term loan debt. |
Liquidity and Performance Measures
The discussion below is presented to enhance the reader’s understanding of our operating performance, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures: Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the discussion of Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures described herein.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance 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 operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.
Our definition of EBITDDA may be different from similarly titled measures reported by other companies. We define EBITDDA as net income (loss) before interest expense, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses.
We reconcile Total Adjusted EBITDDA to net income (loss) for the consolidated company as it is the most comparable GAAP measure.
The following table provides a reconciliation of net income (loss) to Total Adjusted EBITDDA for the respective periods:
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
| ||||||||||||||||||||
(in thousands) |
| 2020 |
|
|
| 2019 |
|
|
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
| ||||||||
Net income (loss) |
| $ | 2,638 |
|
| $ | 17,137 |
|
| $ | (14,194 | ) |
| $ | 23,697 |
|
| $ | 131,106 |
|
| $ | (16,832 | ) | ||||
Interest expense, net |
|
| 8,339 |
| 7,882 |
| 12,037 |
|
|
| 13,346 |
|
|
| 3,574 |
|
|
| 3,698 |
| ||||||||
Income taxes |
|
| 453 |
| (952 | ) |
| (10,409 | ) |
|
| 639 |
|
|
| 30,039 |
|
|
| (10,862 | ) | |||||||
Depreciation, depletion and amortization |
|
| 17,765 |
| 16,727 |
| 36,403 |
|
|
| 32,524 |
|
|
| 17,996 |
|
|
| 18,638 |
| ||||||||
Basis of real estate sold |
|
| 2,693 |
| 7,427 |
| 9,191 |
|
|
| 8,983 |
|
|
| 8,823 |
|
|
| 6,498 |
| ||||||||
Loss on extinguishment of debt |
|
| — |
| — |
| — |
|
|
| 5,512 |
| ||||||||||||||||
Pension settlement charge |
|
| — |
|
|
| — |
|
|
| 42,988 |
|
|
| — |
|
|
| — |
|
|
| 42,988 |
| ||||
Non-operating pension and other postretirement benefit costs |
|
| 3,478 |
| 889 |
| 7,113 |
|
|
| 1,869 |
|
|
| 3,414 |
|
|
| 3,635 |
| ||||||||
Gain on sale of facility |
|
| — |
| — |
| — |
|
|
| (9,176 | ) | ||||||||||||||||
Loss (gain) on disposal of fixed assets |
|
| 7 |
|
|
| (30 | ) |
|
| (185 | ) |
|
| (62 | ) |
|
| 34 |
|
|
| (192 | ) | ||||
Total Adjusted EBITDDA |
| $ | 35,373 |
|
| $ | 49,080 |
|
| $ | 82,944 |
|
| $ | 77,332 |
|
| $ | 194,986 |
|
| $ | 47,571 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
We define CAD as cash provided by operating activities adjusted for capital spending for purchases of property, plant and equipment, timberlands reforestation and roads and timberland acquisitions not classified as strategic. Management believes CAD is a useful indicator of the company’s overall liquidity, as it provides a measure of cash generated that is available for dividends to common stockholders (an important factor in maintaining our REIT status), repurchase of the company’s common shares, debt repayment, acquisitions and other discretionary and nondiscretionary activities. Our definition of CAD is limited in that it does not solely represent residual cash flows available for discretionary expenditures since the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view CAD as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows. Our definition of CAD may be different from similarly titled measures reported by other companies, including those in our industry. CAD is not necessarily indicative of the CAD that may be generated in future periods.
The following table provides a reconciliation of cash provided by operating activities to CAD:
|
| Six Months Ended June 30, |
|
| Three Months Ended March 31, |
|
| Twelve Months Ended March 31, |
| |||||||||||||||
(in thousands) |
| 2020 |
|
| 2019 |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||
Cash provided by operating activities1 |
| $ | 87,943 |
|
| $ | 67,521 |
| ||||||||||||||||
Net cash provided by operating activities1 |
| $ | 169,965 |
|
| $ | 48,138 |
|
| $ | 457,090 |
|
| $ | 168,139 |
| ||||||||
Capital expenditures |
|
| (22,801 | ) |
|
| (23,970 | ) |
|
| (11,718 | ) |
|
| (13,539 | ) |
|
| (43,964 | ) |
|
| (63,011 | ) |
CAD |
| $ | 65,142 |
|
| $ | 43,551 |
|
| $ | 158,247 |
|
| $ | 34,599 |
|
| $ | 413,126 |
|
| $ | 105,128 |
|
Net cash (used in) provided by investing activities2 |
| $ | (19,688 | ) |
| $ | 35,256 |
| ||||||||||||||||
Net cash used in investing activities2 |
| $ | (11,529 | ) |
| $ | (11,034 | ) |
| $ | (42,688 | ) |
| $ | (58,690 | ) | ||||||||
Net cash used in financing activities |
| $ | (69,575 | ) |
| $ | (84,248 | ) |
| $ | (28,075 | ) |
| $ | (39,538 | ) |
| $ | (113,521 | ) |
| $ | (136,009 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
2 | Net cash |
Sources of Financing
CreditLong-Term Debt and Term LoanCredit Agreements
At June 30, 2020,March 31, 2021, our total outstanding net long-term debt was $757.0 million, of which $46.0$40.0 million matures in December 2020. Included in total outstanding long-term debt was $693.52021. We expect to refinance the $40.0 million of term loan principal balances under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. Certain borrowings under the Amended Term Loan Agreement aredebt at variable rates of one or three-month LIBOR plusmaturity which is covered by a spread between 1.85% and 2.15%. We entered into interest rate swaps for these variable rate term loans to fix the interest rates.
At June 30, 2020 there were no borrowings under our $380.0 million revolving line of credit and approximately $1.0 million of the revolving line of credit was utilized for outstanding letters of credit. As provided in the revolving line of credit agreement, borrowings may be increased by up to an additional $420.0 million. We may utilize borrowings under the
credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.
As of June 30, 2020, we were in compliance with all debt and credit agreement covenants. The following table sets forth the financial covenants in the credit and term loan agreements and our status with respect to these covenants as of June 30, 2020:
|
| Covenant Requirement |
|
| Actual at June 30, 2020 |
| ||||
Interest coverage ratio |
| ≥ |
| 3.00 to 1.00 |
|
| 6.28 |
| ||
Leverage ratio |
| ≤ |
| 40% |
|
| 21% |
| ||
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
In March 2020, we entered into $653.5 million of forward starting interest rate swaps. These forward starting interest rate swaps effectively hedgeswap that hedges the variability in future benchmark interest payments attributable to changes in interest rates on future debt refinancing by locking fixedrates. All interest rates on our anticipated future refinancing of $653.5 million of term loanoutstanding long-term debt maturing December 2020 through January 2029. Theare fixed rates under fixed rate loans or variable rate loans with an associated interest rate components for these forward startingswap that fix the variable benchmark interest rate swaps range from 0.85% to 1.17%. The variable rate component on these forward startingcomponent.
A number of our debt instruments and associated interest rate swapsderivative 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 USD LIBOR will no longer be published after June 30, 2023. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a steering committee comprised of large U.S. financial institutions, is 1-month LIBOR. Accordingly,recommending replacing LIBOR with the forward startingSecured Overnight Finance Rate (SOFR). While we expect LIBOR to be available in substantially its current form until at least the end of June 30, 2023, it is possible that LIBOR will become unavailable prior to that point. We are monitoring the developments regarding the alternative rates, will work with our lenders and counter parties to identify a suitable replacement rate swapsand may amend certain debt and interest rate derivative agreements to accommodate those rates if the contract does not already specify a replacement rate. However, at this time, we are not able to predict whether SOFR will become a widely accepted benchmark in place of LIBOR, or what the impact of such possible transition to SOFR may be on our financial condition.
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.
30
At March 31, 2021, we were designated as cash flow hedges. In addition, these cash flow hedges require settlement onin compliance with all covenants under the stated maturity dateAgreements. The following table sets forth the financial covenants for each respective term loan currently outstanding. the Agreements and our status with respect to these covenants at March 31, 2021:
|
| Covenant Requirement |
|
| Actual at March 31, 2021 |
| ||||
Interest coverage ratio |
| ≥ |
| 3.00 to 1.00 |
|
| 17.84 |
| ||
Leverage ratio |
| ≤ |
| 40% |
|
| 20% |
| ||
|
|
|
|
|
|
|
|
|
|
|
See Note 9: Derivatives5: Debt in the Notes to the Condensed Consolidated Financial Statements for additional information.information on our debt and credit agreements.
Other than these new forward starting interest rate swaps thereContractual Obligations
There have been no material changes to our contractual obligations during the sixthree months ended June 30, 2020March 31, 2021 outside the ordinary course of business.
Credit Ratings
Two major debt rating agencies routinely evaluate our debt and our cost of borrowing can increase or decrease depending on our credit rating. Both Moody’s and S&P rate our debt investment grade. There have been no changes in our credit rating during the six months ended June 30, 2020.
Off-Balance Sheet Arrangements
We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.
Critical Accounting Policies and Estimates
There have been no significant changes during 20202021 to our critical accounting policies presented in our 20192020 Annual Report on Form 10-K.
31
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-startingforward 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 interest rate swaps to hedge our exposure to the impact of interest rate changes on existing debt and future debt issuances, respectively. All market risk sensitive instruments were entered into for purposes other than trading purposes.
At June 30, 2020, we have six interest rate swaps associated with $397.5 million of term loan debt. The cash flow hedges convert variable rates ranging from three-month and one-month LIBOR plus 1.85% to 2.15%, to fixed rates ranging from 3.17% to 4.82%. Our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedge.
In March 2020, we entered into $653.5 million of forward starting interest rate swaps. These forward starting interest rate swaps effectively hedge the variability in future benchmark interest payments attributable to changes in interest rates on future debt refinancing by locking fixed interest rates on our anticipated future refinancing of $653.5 million of term loan debt maturing December 2020 through January 2029. The fixed interest rate components for these forward starting interest rate swaps range from 0.85% to 1.17%. The variable rate component on these forward starting interest rate swaps is one-month LIBOR. Accordingly, the forward starting rate swaps were designated as cash flow hedges. In addition, these cash flow hedges require settlement on the stated maturity date for each respective term loan currently outstanding.
At June 30, 2020,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 total outstanding principal balance on our debt agreements was $762.2 million. Interest rates on all outstanding debt is fixed, either through a fixed interest rate or corresponding interest rate swap.year ended December 31, 2020. Our exposures to market risk have not changed materially since December 31, 2020.
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, 2020.March 31, 2021. 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, 2020.March 31, 2021.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Internal Control over Financial Reporting
No changes occurred in our internal control over financial reporting during the three months ended June 30, 2020March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
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
Our business and results of operations are subject to numerous risks and uncertainties, many of which are beyond our control.The following discussion supplements and updatesThere 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, 2019. The impacts of the COVID-19 pandemic on the economy is affecting and is expected to continue to affect our business and financial results andshould be considered carefully, in addition to the information set forth elsewhere in this Form 10-Q and the Annual Report on Form 10-K for the year-ended December 31, 2019, including under Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2020.
Events beyond our control such as pandemics (including the COVID-19 outbreak) could negatively impact our business.
In March 2020 the World Health Organization declared the novel strain of coronavirus (COVID-19) a global pandemic and recommended containment and mitigation measures worldwide. Shortly thereafter, the United States declared a national emergency concerning the outbreak, and all states and several municipalities subsequently declared public health emergencies.These declarations have resulted in a wide-range of actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19.Such actions included quarantines, “stay-at-home” orders and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations. These restrictions have prevented or significantly restricted us, our employees, vendors and customers from conducting some or all business activities for an indefinite period of time. Under the governmental restrictions put in place, our Timberlands and Wood Products segments were designated as an essential business in states that had issued stay-at-home orders and as such, we have continued to operate each of our businesses at full capacity where market conditions allow while maintaining the health and safety of our employees, contractors, suppliers and customers. This outbreak has spread widely throughout the United States and while governmental restrictions began to ease by the end of the second quarter in several states, they are subject to change and may, depending on direction from local authorities and the pandemic’s effects on the public, require us, our suppliers or our customers to limit or suspend operations.
We have introduced measures to protect the health and well-being of our workforce and customers. Such measures include, among other things, encouraging office employees to work remotely where their duties allow, restricting travel and group meetings, increasing the frequency of cleaning and disinfecting, screening visitors and vendors at our locations, implementing mask-wearing protocols, and requiring physical distancing where it is practical. However, such measures will not be sufficient to eliminate all exposure to the COVID-19 virus. We have experienced exposure to the virus at certain of our facilities. We have implemented plans and procedures in the event of a workplace exposure to aid in the protection of our workforce including a temporary shutdown of certain production areas in the facility in order to perform proper cleaning and disinfection procedures. If additional exposures to the virus occur in the future we may be required to temporarily shut down certain operations for additional cleaning and disinfecting.
Pandemics, such as COVID-19, that bring about widespread national or global economic hardship, have had and will have impacts on pricing and demand for our timber, lumber, and real estate businesses. We have experienced and expect to continue to experience unpredictable demand for certain of our products and continue to adjust production as necessary to match demand. There have been adverse effects on the demand for our products and disruptions to our supply chain, the manufacturing and distribution of our timber and wood products and demand for our real estate properties, all of which could worsen in the future. We are actively monitoring the COVID-19 outbreak and its potential impact on our operations, workforce, supply chain and our consolidated results of operations.
Our predictions about the impact that COVID-19 will have on our business, financial condition, or results of operations may not be accurate as they depend on future developments, which are highly uncertain and cannot be predicted with confidence. Such developments include, but are not limited to, the severity of the virus’s impact on the economy, the future geographic spread or mutation of COVID-19 or the outbreak of another virulent disease, continuation of or changes in governmental responses to disease outbreak, the duration of disease outbreak, the timing and effectiveness of treatment and testing options, including availability of a vaccine, and consequential restrictions, business disruptions, the effectiveness of responsive actions taken in the United States and other countries to contain the disease and actions that may be taken by our competitors, suppliers or customers. A recession, further market correction, or depression resulting from the spread of COVID-19 could materially affect our business, financial condition, results of operations, liquidity, our
stock price and access to capital markets. The impact of COVID-19 or other virulent disease may also trigger the occurrence, or exacerbate, other risks discussed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019, any of which could have a material adverse effect on our business, results of operation, cash flows and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common stock with no time limit set for the repurchase (the 2018 Repurchase Program). During the six months ended June 30, 2020, we repurchased 489,850 shares of common stock for $15.4 million (including transaction costs)Shares under the 2018Repurchase Program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan). The timing, manner, price and amount of repurchases will be determined according to, and subject to, the terms of the Trading Plan, and, subject to the terms of the Trading Plan, the Repurchase Program may be suspended, terminated or modified at any time for any reason.
There were no shares repurchased during the first quarter of 2021 under the Repurchase Program. At March 31, 2021, we had remaining authorization of $59.5 million for future stock repurchases under the Repurchase Program. Transaction costs are not counted against authorized funds. All common stock purchases wereare made in open-market transactions. At June 30, 2020, we had remaining authorization of $59.5 million for future stock repurchases under the 2018 Repurchase Program.
The following table provides information with respect to purchases of common stock made by the company during second quarter 2020:
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 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 62,504,102 |
|
May 1 - May 31 |
|
| 88,933 |
|
| $ | 33.81 |
|
|
| 88,933 |
|
| $ | 59,496,899 |
|
June 1 - June 30 |
|
| — |
|
| $ | — |
|
|
| — |
|
| $ | 59,496,899 |
|
Total |
|
| 88,933 |
|
|
|
|
|
|
| 88,933 |
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ITEM 6. EXHIBITS
EXHIBIT NUMBER | DESCRIPTION |
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(4) | See Exhibits (3)(a) and (3)(b). The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt. |
(101) | The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended |
(104) | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
* Incorporated by reference.
33
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| PotlatchDeltic Corporation | |
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| (Registrant) | |
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| By | /s/ WAYNE WASECHEK |
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| Wayne Wasechek |
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| Corporate Controller (Duly Authorized; Principal Accounting Officer) |
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Date: |
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4134