UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2024
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 ($1 par value) | PCH | Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| | | | | |
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐ |
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares of common stock of the registrant outstanding (in thousands) at October 31, 2024, was 78,763.
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
Part I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands, except per share amounts) | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Revenues | $ | 255,131 | | | $ | 265,509 | | | $ | 803,929 | | | $ | 769,572 | |
Costs and expenses: |
| | |
| | |
| | |
| |
Cost of goods sold | | 227,556 | | | | 226,303 | | | | 722,189 | | | | 665,716 | |
Selling, general and administrative expenses | | 20,403 | | | | 19,303 | | | | 61,882 | | | | 55,118 | |
CatchMark merger-related expenses | | — | |
| | — | | | | — | | | | 2,453 | |
Gain on fire damage | | — | | | | (16,326 | ) | | | — | | | | (39,436 | ) |
| | 247,959 | | | | 229,280 | | | | 784,071 | | | | 683,851 | |
Operating income | | 7,172 | | | | 36,229 | | | | 19,858 | | | | 85,721 | |
Interest expense, net | | (9,635 | ) | | | (7,971 | ) | | | (18,049 | ) | | | (15,783 | ) |
Non-operating pension and other postretirement employee benefits | | 200 | | | | (228 | ) | | | 602 | | | | (685 | ) |
Other | | 1,516 | | | | 370 | | | | 1,348 | | | | 638 | |
Income (loss) before income taxes | | (747 | ) | | | 28,400 | | | | 3,759 | | | | 69,891 | |
Income taxes | | 4,056 | | | | (4,725 | ) | | | 12,923 | | | | (7,650 | ) |
Net income | $ | 3,309 | | | $ | 23,675 | | | $ | 16,682 | | | $ | 62,241 | |
| | | | | | | | | | | |
Net income per share: | | | | | | | | | | | |
Basic | $ | 0.04 | | | $ | 0.30 | | | $ | 0.21 | | | $ | 0.78 | |
Diluted | $ | 0.04 | | | $ | 0.29 | | | $ | 0.21 | | | $ | 0.78 | |
Dividends per share | $ | 0.45 | | | $ | 0.45 | | | $ | 1.35 | | | $ | 1.35 | |
Weighted-average shares outstanding | | | | | | | | | | | |
Basic | | 79,173 | | | | 80,132 | | | | 79,494 | | | | 80,102 | |
Diluted | | 79,277 | | | | 80,379 | | | | 79,563 | | | | 80,279 | |
| | | | | | | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Net income | | $ | 3,309 | | | $ | 23,675 | | | $ | 16,682 | | | $ | 62,241 | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | | | |
Pension and other postretirement employee benefits | | | (230 | ) | | | (132 | ) | | | (689 | ) | | | (607 | ) |
Cash flow hedges | | | (28,713 | ) | | | 28,464 | | | | (9,177 | ) | | | 28,848 | |
Other comprehensive income (loss), net of tax | | | (28,943 | ) | | | 28,332 | | | | (9,866 | ) | | | 28,241 | |
Comprehensive income (loss) | | $ | (25,634 | ) | | $ | 52,007 | | | $ | 6,816 | | | $ | 90,482 | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
| | | | | | | | |
(in thousands, except per share amounts) | | September 30, 2024 | | | December 31, 2023 | |
ASSETS | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 161,131 | | | $ | 230,118 | |
Customer receivables, net | | | 29,550 | | | | 21,892 | |
Inventories, net | | | 79,894 | | | | 78,665 | |
Other current assets | | | 50,623 | | | | 46,258 | |
Total current assets | | | 321,198 | | | | 376,933 | |
Property, plant and equipment, net | | | 395,908 | | | | 372,832 | |
Investment in real estate held for development and sale | | | 51,769 | | | | 56,321 | |
Timber and timberlands, net | | | 2,375,157 | | | | 2,440,398 | |
Intangible assets, net | | | 14,306 | | | | 15,640 | |
Other long-term assets | | | 148,766 | | | | 169,132 | |
Total assets | | $ | 3,307,104 | | | $ | 3,431,256 | |
| | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | |
Current liabilities: | | | | | | |
Accounts payable and accrued liabilities | | $ | 90,290 | | | $ | 82,383 | |
Current portion of long-term debt | | | 165,113 | | | | 175,615 | |
Current portion of pension and other postretirement employee benefits | | | 4,535 | | | | 4,535 | |
Total current liabilities | | | 259,938 | | | | 262,533 | |
Long-term debt | | | 869,486 | | | | 858,113 | |
Pension and other postretirement employee benefits | | | 64,902 | | | | 67,856 | |
Deferred tax liabilities, net | | | 23,936 | | | | 36,641 | |
Other long-term obligations | | | 36,817 | | | | 35,015 | |
Total liabilities | | | 1,255,079 | | | | 1,260,158 | |
Commitments and contingencies | | | | | | |
Stockholders' equity: | | | | | | |
Preferred stock, authorized 4,000 shares, no shares issued | | | — | | | | — | |
Common stock, $1 par value, 200,000 shares authorized, 78,862 and 79,365 shares issued and outstanding | | | 78,862 | | | | 79,365 | |
Additional paid-in capital | | | 2,312,586 | | | | 2,303,992 | |
Accumulated deficit | | | (432,589 | ) | | | (315,291 | ) |
Accumulated other comprehensive income | | | 93,166 | | | | 103,032 | |
Total stockholders’ equity | | | 2,052,025 | | | | 2,171,098 | |
Total liabilities and stockholders' equity | | $ | 3,307,104 | | | $ | 3,431,256 | |
| | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | | |
| | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
Net income | | $ | 16,682 | | | $ | 62,241 | |
Adjustments to reconcile net income to net cash from operating activities: | | | | | | |
Depreciation, depletion and amortization | | | 86,369 | | | | 90,327 | |
Basis of real estate sold | | | 73,522 | | | | 21,624 | |
Change in deferred taxes | | | (11,896 | ) | | | (3,979 | ) |
Pension and other postretirement employee benefits | | | 3,431 | | | | 4,833 | |
Equity-based compensation expense | | | 8,468 | | | | 6,472 | |
Gain on fire damage | | | — | | | | (39,436 | ) |
Interest received under swaps with other-than-insignificant financing element | | | (22,503 | ) | | | (18,651 | ) |
Other, net | | | 6,953 | | | | 5,648 | |
Change in working capital and operating-related activities, net | | | (7,036 | ) | | | (24,107 | ) |
Real estate development expenditures | | | (5,305 | ) | | | (7,243 | ) |
Funding of pension and other postretirement employee benefits | | | (7,303 | ) | | | (2,176 | ) |
Proceeds from insurance recoveries | | | 1,680 | | | | 21,755 | |
Net cash from operating activities | | | 143,062 | | | | 117,308 | |
| | | | | | |
CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | |
Property, plant and equipment additions | | | (52,178 | ) | | | (28,068 | ) |
Timberlands reforestation and roads | | | (19,290 | ) | | | (17,013 | ) |
Acquisition of timber and timberlands | | | (32,303 | ) | | | (1,676 | ) |
Proceeds from property insurance | | | — | | | | 1,356 | |
Interest received under swaps with other-than-insignificant financing element | | | 20,934 | | | | 17,279 | |
Other, net | | | 752 | | | | 700 | |
Net cash from investing activities | | | (82,085 | ) | | | (27,422 | ) |
| | | | | | |
CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | |
Distributions to common stockholders | | | (106,942 | ) | | | (107,880 | ) |
Repurchase of common stock | | | (27,413 | ) | | | (11,406 | ) |
Other, net | | | (3,179 | ) | | | (2,315 | ) |
Net cash from financing activities | | | (137,534 | ) | | | (121,601 | ) |
Change in cash, cash equivalents and restricted cash | | | (76,557 | ) | | | (31,715 | ) |
Cash, cash equivalents and restricted cash at beginning of period | | | 237,688 | | | | 345,591 | |
Cash, cash equivalents and restricted cash at end of period | | $ | 161,131 | | | $ | 313,876 | |
| | | | | | |
NONCASH INVESTING AND FINANCING ACTIVITIES | | | | | | |
Accrued property, plant and equipment additions | | $ | 985 | | | $ | 20,141 | |
Accrued timberlands reforestation and roads | | $ | 2,365 | | | $ | 2,834 | |
Repurchase of common stock pending settlement | | $ | — | | | $ | 1,723 | |
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the amounts shown above in the Condensed Consolidated Statements of Cash Flows.
| | | | | | | | |
(in thousands) | | September 30, 2024 | | | September 30, 2023 | |
Cash and cash equivalents | | $ | 161,131 | | | $ | 302,799 | |
Restricted cash included in other current and long-term assets1 | | | — | | | | 11,077 | |
Total cash, cash equivalents, and restricted cash | | $ | 161,131 | | | $ | 313,876 | |
| |
1 | Amounts included in restricted cash represent proceeds held by a qualified intermediary that were or are intended to be reinvested in timber and timberlands. At September 30, 2024 and 2023, $0 and $1.8 million, respectively, was classified as Other current assets. |
The accompanying notes are an integral part of these condensed consolidated financial statements.
PotlatchDeltic Corporation and Consolidated Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Additional Paid- | | | Accumulated | | | Accumulated Other
Comprehensive | | | Total Stockholders' | |
(in thousands, except per share amounts) | | Shares | | | Amount | | | in Capital | | | Deficit | | | Income | | | Equity | |
Balance, December 31, 2023 | | | 79,365 | | | $ | 79,365 | | | $ | 2,303,992 | | | $ | (315,291 | ) | | $ | 103,032 | | | $ | 2,171,098 | |
Net loss | | | — | | | | — | | | | — | | | | (305 | ) | | | — | | | | (305 | ) |
Shares issued for stock compensation | | | 143 | | | | 143 | | | | (143 | ) | | | — | | | | — | | | | — | |
Equity-based compensation expense | | | — | | | | — | | | | 2,560 | | | | — | | | | — | | | | 2,560 | |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (229 | ) | | | (229 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | 15,925 | | | | 15,925 | |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,779 | ) | | | — | | | | (35,779 | ) |
Other transactions, net | | | — | | | | — | | | | 90 | | | | (88 | ) | | | — | | | | 2 | |
Balance, March 31, 2024 | | | 79,508 | | | | 79,508 | | | | 2,306,499 | | | | (351,463 | ) | | | 118,728 | | | | 2,153,272 | |
Net income | | | — | | | | — | | | | — | | | | 13,678 | | | | — | | | | 13,678 | |
Shares issued for stock compensation | | | 4 | | | | 4 | | | | (4 | ) | | | — | | | | — | | | | — | |
Equity-based compensation expense | | | — | | | | — | | | | 2,962 | | | | — | | | | — | | | | 2,962 | |
Repurchase of common stock | | | (610 | ) | | | (610 | ) | | | — | | | | (24,402 | ) | | | — | | | | (25,012 | ) |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (230 | ) | | | (230 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | 3,611 | | | | 3,611 | |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,677 | ) | | | — | | | | (35,677 | ) |
Other transactions, net | | | — | | | | — | | | | 98 | | | | (103 | ) | | | — | | | | (5 | ) |
Balance, June 30, 2024 | | | 78,902 | | | | 78,902 | | | | 2,309,555 | | | | (397,967 | ) | | | 122,109 | | | | 2,112,599 | |
Net income | | | — | | | | — | | | | — | | | | 3,309 | | | | — | | | | 3,309 | |
Shares issued for stock compensation | | | 16 | | | | 16 | | | | (16 | ) | | | — | | | | — | | | | — | |
Equity-based compensation expense | | | — | | | | — | | | | 2,946 | | | | — | | | | — | | | | 2,946 | |
Repurchase of common stock | | | (56 | ) | | | (56 | ) | | | — | | | | (2,344 | ) | | | — | | | | (2,400 | ) |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (230 | ) | | | (230 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | (28,713 | ) | | | (28,713 | ) |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,486 | ) | | | — | | | | (35,486 | ) |
Other transactions, net | | | — | | | | — | | | | 101 | | | | (101 | ) | | | — | | | | — | |
Balance, September 30, 2024 | | | 78,862 | | | $ | 78,862 | | | $ | 2,312,586 | | | $ | (432,589 | ) | | $ | 93,166 | | | $ | 2,052,025 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | | Additional Paid- | | | Accumulated | | | Accumulated Other
Comprehensive | | | Total Stockholders' | |
(in thousands, except per share amounts) | | Shares | | | Amount | | | in Capital | | | Deficit | | | Income | | | Equity | |
Balance, December 31, 2022 | | | 79,683 | | | $ | 79,683 | | | $ | 2,294,797 | | | $ | (208,979 | ) | | $ | 97,652 | | | $ | 2,263,153 | |
Net income | | | — | | | | — | | | | — | | | | 16,260 | | | | — | | | | 16,260 | |
Shares issued for stock compensation | | | 233 | | | | 233 | | | | (233 | ) | | | — | | | | — | | | | — | |
Equity-based compensation expense | | | — | | | | — | | | | 2,279 | | | | — | | | | — | | | | 2,279 | |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (131 | ) | | | (131 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | (17,335 | ) | | | (17,335 | ) |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,962 | ) | | | — | | | | (35,962 | ) |
Other transactions, net | | | — | | | | — | | | | 84 | | | | (85 | ) | | | — | | | | (1 | ) |
Balance, March 31, 2023 | | | 79,916 | | | | 79,916 | | | | 2,296,927 | | | | (228,766 | ) | | | 80,186 | | | | 2,228,263 | |
Net income | | | — | | | | — | | | | — | | | | 22,306 | | | | — | | | | 22,306 | |
Shares issued for stock compensation | | | 4 | | | | 4 | | | | (4 | ) | | | — | | | | — | | | | — | |
Equity-based compensation expense | | | — | | | | — | | | | 1,577 | | | | — | | | | — | | | | 1,577 | |
Repurchase of common stock | | | (9 | ) | | | (9 | ) | | | — | | | | (385 | ) | | | — | | | | (394 | ) |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (344 | ) | | | (344 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | 17,719 | | | | 17,719 | |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,958 | ) | | | — | | | | (35,958 | ) |
Other transactions, net | | | — | | | | — | | | | 93 | | | | (93 | ) | | | — | | | | — | |
Balance, June 30, 2023 | | | 79,911 | | | | 79,911 | | | | 2,298,593 | | | | (242,896 | ) | | | 97,561 | | | | 2,233,169 | |
Net income | | | — | | | | — | | | | — | | | | 23,675 | | | | — | | | | 23,675 | |
Equity-based compensation expense | | | — | | | | — | | | | 2,616 | | | | — | | | | — | | | | 2,616 | |
Repurchase of common stock | | | (283 | ) | | | (283 | ) | | | — | | | | (12,452 | ) | | | — | | | | (12,735 | ) |
Pension plans and OPEB obligations, net of tax | | | — | | | | — | | | | — | | | | — | | | | (132 | ) | | | (132 | ) |
Cash flow hedges, net of tax | | | — | | | | — | | | | — | | | | — | | | | 28,464 | | | | 28,464 | |
Dividends on common stock, $0.45 per share | | | — | | | | — | | | | — | | | | (35,960 | ) | | | — | | | | (35,960 | ) |
Other transactions, net | | | — | | | | — | | | | 92 | | | | (92 | ) | | | — | | | | — | |
Balance, September 30, 2023 | | | 79,628 | | | $ | 79,628 | | | $ | 2,301,301 | | | $ | (267,725 | ) | | $ | 125,893 | | | $ | 2,239,097 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
INDEX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notes to Condensed Consolidated Financial Statements
NOTE 1. BASIS OF PRESENTATION
General
PotlatchDeltic Corporation and its subsidiaries (collectively referred to in this report as the company, us, we or our) is a leading timberland Real Estate Investment Trust (REIT) with operations in nine states. We are engaged in activities associated with timberland management, including the sale of timber, the ownership and management of over 2.1 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacturing and sale of wood products and the development of real estate. Our timberlands, real estate development projects and all of our wood products facilities are located within the continental United States. The primary market for our products is the United States. We converted to a REIT effective January 1, 2006.
Condensed Consolidated Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements provide an overall view of our results and financial condition and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission on February 15, 2024. Results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the full year.
Use of Estimates
The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and requires judgments affecting the amounts reported in the financial statements and the accompanying notes. Actual results may differ materially from our estimates.
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 material adverse effect on our consolidated financial position or net cash flow. Additionally, during the three and nine months ended September 30, 2024, there were no significant changes to our obligation under the Thomson Reservoir Project. At September 30, 2024, we have $2.2 million accrued for our estimated remaining contribution to the project, all of which is included in Accounts payable and accrued liabilities in our Condensed Consolidated Balance Sheets. For further information on the project, refer to Note 18: Commitments and Contingencies in the Notes to Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023.
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expense categories that are regularly reported to the chief operating decision maker and included in each reported measure of a segment’s profit or loss and increased interim disclosure requirements, among others. The adoption of this ASU on January 1, 2024, including the required retrospective application for all periods presented in the financial statements, will be reflected in our annual financial statements for the year ended December 31, 2024, and interim financial statements beginning in 2025. The application of this new guidance is not expected to have an impact on the company’s consolidated financial condition, results of operations, or cash flows, as the guidance pertains to disclosure only.
Recent Accounting Standards Not Yet Adopted
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09 provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregated information in the rate reconciliation and disaggregated by jurisdiction of income taxes paid. The ASU is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and early adoption is permitted. Management is evaluating this ASU and currently does not expect it will have an impact on the company’s consolidated financial condition, results of operations, or cash flows, as the guidance pertains to disclosure only.
NOTE 2. SEGMENT INFORMATION
Our operations are organized into three reportable segments: Timberlands, Wood Products and Real Estate. Management activities in the Timberlands segment include planting and harvesting trees and building and maintaining roads. The Timberlands segment also generates revenues from non-timber resources such as hunting leases, recreation permits and leases, mineral rights contracts and carbon sequestration. The Wood Products segment manufactures and sells 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, a master planned community development and a country club.
Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. These intercompany transactions are eliminated in consolidation.
The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories, which are reported using the average cost method for purposes of reporting segment results.
The following table presents our revenues by major product:
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Timberlands | | | | | | | | | | | |
Northern region | | | | | | | | | | | |
Sawlogs | $ | 46,236 | | | $ | 48,538 | | | $ | 120,606 | | | $ | 138,685 | |
Pulpwood | | 232 | | | | 330 | | | | 512 | | | | 1,102 | |
Other | | 365 | | | | 362 | | | | 1,051 | | | | 995 | |
Total Northern revenues | | 46,833 | | | | 49,230 | | | | 122,169 | | | | 140,782 | |
| | | | | | | | | | | |
Southern region | | | | | | | | | | | |
Sawlogs | | 31,711 | | | | 31,863 | | | | 97,236 | | | | 91,419 | |
Pulpwood | | 18,383 | | | | 17,503 | | | | 49,346 | | | | 48,641 | |
Stumpage | | 3,899 | | | | 7,057 | | | | 15,619 | | | | 20,438 | |
Other | | 4,306 | | | | 4,155 | | | | 12,514 | | | | 12,383 | |
Total Southern revenues | | 58,299 | | | | 60,578 | | | | 174,715 | | | | 172,881 | |
| | | | | | | | | | | |
Total Timberlands revenues | | 105,132 | | | | 109,808 | | | | 296,884 | | | | 313,663 | |
| | | | | | | | | | | |
Wood Products | | | | | | | | | | | |
Lumber | | 107,473 | | | | 132,852 | | | | 345,084 | | | | 379,939 | |
Residuals and Panels | | 31,939 | | | | 32,256 | | | | 96,505 | | | | 105,633 | |
Total Wood Products revenues | | 139,412 | | | | 165,108 | | | | 441,589 | | | | 485,572 | |
| | | | | | | | | | | |
Real Estate | | | | | | | | | | | |
Rural real estate | | 24,409 | | | | 11,616 | | | | 114,788 | | | | 34,005 | |
Development real estate | | 10,912 | | | | 4,289 | | | | 21,274 | | | | 16,498 | |
Other | | 3,380 | | | | 3,247 | | | | 9,478 | | | | 9,576 | |
Total Real Estate revenues | | 38,701 | | | | 19,152 | | | | 145,540 | | | | 60,079 | |
| | | | | | | | | | | |
Total segment revenues | | 283,245 | | | | 294,068 | | | | 884,013 | | | | 859,314 | |
Intersegment Timberlands revenues1 | | (28,114 | ) | | | (28,559 | ) | | | (80,084 | ) | | | (89,736 | ) |
Other intersegment revenues | | — | | | | — | | | | — | | | | (6 | ) |
Total consolidated revenues | $ | 255,131 | | | $ | 265,509 | | | $ | 803,929 | | | $ | 769,572 | |
| |
1 | Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment. |
Management uses Adjusted EBITDDA to evaluate the operating performance and effectiveness of operating strategies of our segments and allocation of resources to them. EBITDDA is calculated as net income (loss) before interest expense, net, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses. Our calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.
The following table summarizes information for each of the company’s reportable segments and includes a reconciliation of Total Adjusted EBITDDA to income (loss) before income taxes. Corporate information is included to reconcile segment data to the Condensed Consolidated Financial Statements.
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Adjusted EBITDDA: | |
| | | | | |
| | |
| |
Timberlands | | $ | 35,824 | | | $ | 42,062 | | | $ | 104,696 | | | $ | 118,017 | |
Wood Products | | | (9,581 | ) | | | 15,039 | | | | (16,525 | ) | | | 26,975 | |
Real Estate | | | 31,861 | | | | 14,165 | | | | 127,657 | | | | 45,867 | |
Corporate | | | (12,203 | ) | | | (11,696 | ) | | | (36,624 | ) | | | (32,958 | ) |
Eliminations and adjustments | | | 1 | | | | (3,292 | ) | | | (407 | ) | | | 1,599 | |
Total Adjusted EBITDDA | | | 45,902 | | | | 56,278 | | | | 178,797 | | | | 159,500 | |
Interest expense, net1 | | | (9,635 | ) | | | (7,971 | ) | | | (18,049 | ) | | | (15,783 | ) |
Depreciation, depletion and amortization | | | (25,487 | ) | | | (30,248 | ) | | | (85,150 | ) | | | (89,099 | ) |
Basis of real estate sold | | | (12,905 | ) | | | (6,109 | ) | | | (73,522 | ) | | | (21,624 | ) |
CatchMark merger-related expenses | | | — | | | | — | | | | — | | | | (2,453 | ) |
Gain on fire damage | | | — | | | | 16,326 | | | | — | | | | 39,436 | |
Non-operating pension and other postretirement employee benefits | | | 200 | | | | (228 | ) | | | 602 | | | | (685 | ) |
Loss on disposal of assets | | | (338 | ) | | | (18 | ) | | | (267 | ) | | | (39 | ) |
Other | | | 1,516 | | | | 370 | | | | 1,348 | | | | 638 | |
Income (loss) before income taxes | | $ | (747 | ) | | $ | 28,400 | | | $ | 3,759 | | | $ | 69,891 | |
| | | | | | | | | | | | |
Depreciation, depletion and amortization: | | | | | | | | | | | | |
Timberlands | | $ | 16,778 | | | $ | 19,267 | | | $ | 51,193 | | | $ | 55,623 | |
Wood Products | | | 8,395 | | | | 10,740 | | | | 33,138 | | | | 32,723 | |
Real Estate | | | 138 | | | | 120 | | | | 412 | | | | 397 | |
Corporate | | | 176 | | | | 121 | | | | 407 | | | | 356 | |
| | | 25,487 | | | | 30,248 | | | | 85,150 | | | | 89,099 | |
Bond discounts and deferred loan fees1 | | | 406 | | | | 410 | | | | 1,219 | | | | 1,228 | |
Total depreciation, depletion and amortization | | $ | 25,893 | | | $ | 30,658 | | | $ | 86,369 | | | $ | 90,327 | |
| |
| | | | | |
| | |
| |
Basis of real estate sold: | |
| | | | | |
| | |
| |
Real Estate | | $ | 12,908 | | | $ | 6,111 | | | $ | 73,530 | | | $ | 21,629 | |
Eliminations and adjustments | | | (3 | ) | | | (2 | ) | | | (8 | ) | | | (5 | ) |
Total basis of real estate sold | | $ | 12,905 | | | $ | 6,109 | | | $ | 73,522 | | | $ | 21,624 | |
| |
1 | Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations. |
NOTE 3. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating basic and diluted earnings per share:
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Basic weighted-average shares outstanding | | | 79,173 | | | | 80,132 | | | | 79,494 | | | | 80,102 | |
Incremental shares due to: | | | | | | | | | | | | |
Performance shares | | | 30 | | | | 182 | | | | 19 | | | | 137 | |
Restricted stock units | | | 74 | | | | 65 | | | | 50 | | | | 40 | |
Diluted weighted-average shares outstanding | | | 79,277 | | | | 80,379 | | | | 79,563 | | | | 80,279 | |
For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include future compensation cost associated with the stock award.
For the three and nine months ended September 30, 2024, there were approximately 50,000 and 138,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share as they were anti-dilutive. For the three and nine months ended September 30, 2023, there were approximately 2,000 and 28,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share as they were anti-dilutive. Anti-dilutive stock-based awards could be dilutive in future periods.
Share Repurchase Program
On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). Shares under the 2022 Repurchase Program may be repurchased in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (a Trading Plan), or through privately negotiated transactions. The timing, manner, price and amount of repurchases will be determined according to, and subject to, the terms of a Trading Plan, and, subject to the terms of a Trading Plan, the 2022 Repurchase Program may be suspended, terminated or modified at any time for any reason.
During the three and nine months ended September 30, 2024, we repurchased 56,851 and 666,475 shares of our common stock, respectively, for total consideration of $2.4 million and $27.4 million, respectively, under the 2022 Repurchase Plan. During the three and nine months ended September 30, 2023, we repurchased 282,988 and 291,749 shares of our common stock, respectively, for total consideration of $12.7 million and $13.1 million, respectively, under the 2022 Repurchase Plan. At September 30, 2024, we had remaining authorization of $97.6 million for future stock repurchases under the 2022 Repurchase Program. Transaction costs are not counted against authorized funds.
We record share repurchases upon trade date as opposed to the settlement date. We record a liability to account for repurchases that have not been cash settled. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.
NOTE 4. CERTAIN BALANCE SHEET COMPONENTS
Inventories
| | | | | | | | |
(in thousands) | | September 30, 2024 | | | December 31, 2023 | |
Logs | | $ | 34,745 | | | $ | 39,011 | |
Lumber, panels and veneer | | | 35,547 | | | | 34,621 | |
Materials and supplies | | | 28,282 | | | | 23,713 | |
Total inventories | | | 98,574 | | | | 97,345 | |
Less: LIFO reserve | | | (18,680 | ) | | | (18,680 | ) |
Total inventories, net | | $ | 79,894 | | | $ | 78,665 | |
Property, plant and equipment
| | | | | | | | |
(in thousands) | | September 30, 2024 | | | December 31, 2023 | |
Property, plant and equipment | | $ | 692,163 | | | $ | 681,914 | |
Less: accumulated depreciation | | | (296,255 | ) | | | (309,082 | ) |
Total property, plant and equipment, net | | $ | 395,908 | | | $ | 372,832 | |
Timber and timberlands
| | | | | | | | |
(in thousands) | | September 30, 2024 | | | December 31, 2023 | |
Timber and timberlands | | $ | 2,281,659 | | | $ | 2,347,300 | |
Logging roads | | | 93,498 | | | | 93,098 | |
Total timber and timberlands, net | | $ | 2,375,157 | | | $ | 2,440,398 | |
On June 17, 2024, we completed the sale of 34,100 acres of four-year average age Southern timberlands to Forest Investment Associates (FIA) for $56.7 million. Additionally, in January 2024, we acquired 16,000 acres of mature timberlands in Arkansas for $31.4 million, including transaction costs. We funded the acquisition with cash on hand.
Accounts payable and accrued liabilities
| | | | | | | | |
(in thousands) | | September 30, 2024 | | | December 31, 2023 | |
Accrued payroll and benefits | | $ | 20,770 | | | $ | 24,473 | |
Accounts payable | | | 18,527 | | | | 12,521 | |
Deferred revenue1 | | | 14,084 | | | | 10,455 | |
Accrued interest | | | 6,625 | | | | 8,344 | |
Accrued taxes | | | 6,375 | | | | 5,712 | |
Other current liabilities | | | 23,909 | | | | 20,878 | |
Total accounts payable and accrued liabilities | | $ | 90,290 | | | $ | 82,383 | |
| |
1 | Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for lumber shipments where control of goods has not transferred, member-related activities at an owned country club and any post-close obligations for real estate sales. These deferred revenues are recognized over the term of the respective contract, which is typically twelve months or less, except for country club initiation fees which are recognized over the average life of club membership. |
NOTE 5. DEBT
TERM LOANS
At September 30, 2024, our total outstanding principal on our long-term debt of $1.0 billion included $971.0 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. Approximately $165.7 million of our outstanding long-term debt was classified as current at September 30, 2024 on our accompanying Condensed Consolidated Balance Sheets, including a $65.7 million revenue bond that matured in October 2024 and a $100.0 million term loan that matures in August 2025. Certain borrowings under the Amended Term Loan Agreement are at the one-month Secured Overnight Financing Rate (SOFR)-indexed variable rates, plus an applicable margin between 1.61% and 2.30%. We have entered into SOFR-indexed interest rate swaps to fix the interest rate on these variable rate term loans. See Note: 6 Derivative Instruments for additional information.
On November 1, 2024, we entered into a tenth amendment to the Amended Term Loan Agreement, which provided for a new 8-year term loan of $38.0 million maturing on November 1, 2032, a new 9-year term loan of $38.0 million maturing on November 1, 2033, and a new 10-year term loan of $100.0 million maturing on November 1, 2034 (collectively, the New Term Loans). The proceeds of the New Term Loans were used to refinance a $110.0 million term loan under the Amended Term Loan agreement that matured on November 1, 2024, and to replenish cash used to repay the $65.7 million revenue bond that matured in October 2024.
The New Term Loans bear interest at a rate equal to daily simple SOFR plus an applicable margin ranging between 2.20% and 2.30% per annum depending on their respective maturity date. The New Term Loans provide for a cost-of-capital reset at year five whereby the applicable margin may be reset at the sole discretion of the lender. In connection with the New Term Loans, we terminated $125.0 million of our forward-starting interest rate swaps and transferred the value realized from their termination into three new daily simple SOFR-indexed interest rate swaps to fix the interest rates associated with the New Term Loans. See Note 6: Derivative Instruments for additional information.
CREDIT AGREEMENT
On May 18, 2023, we entered into a First Amendment to the Third Amended and Restated Credit Agreement (Amended Credit Agreement). The Amended Credit Agreement provides for loans based on SOFR instead of the London Inter-Bank Offered Rate, or LIBOR, provides us the option to borrow based on a daily SOFR or term SOFR basis, and provides mechanics relating to the transition from the use of SOFR to a replacement benchmark rate upon the occurrence of certain transition events.
The Amended Credit Agreement provides for a $300.0 million revolving line of credit that matures February 14, 2027. As provided in the Amended Credit Agreement, borrowing capacity may be increased by up to an additional $500.0 million. The revolving line of credit also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of $25.0 million for swing line loans. Usage under either or both sub facilities reduces availability under the revolving line of credit. We may utilize borrowings under the Amended Credit Agreement to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures. At September 30, 2024, there were no borrowings under the revolving line of credit and approximately $0.6 million of our revolving line of credit was utilized for outstanding letters of credit.
We were in compliance with all debt and credit agreement covenants at September 30, 2024.
NOTE 6. DERIVATIVE INSTRUMENTS
From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks. Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. All our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedges.
At September 30, 2024, we had interest rate swaps associated with $761.0 million of SOFR-indexed term loan debt. These cash flow hedges convert variable rates ranging from one-month SOFR plus 1.61% to 2.30%, to fixed rates ranging from 2.14% to 4.83% before patronage credits from lenders. Additionally, at September 30, 2024, we had $200.0 million of forward-starting interest rate swaps designated as cash flow hedges for expected future debt refinancings that require settlement on the stated maturity date.
On October 22, 2024, we terminated $125.0 million of the forward-starting interest rate swaps and transferred the value realized from their termination into three new interest rate swaps to hedge the variability in future cash flows on the New Term Loans. These new daily simple SOFR-indexed interest rate swaps effectively fixed the interest rates associated with the New Term Loans between 4.02% and 4.28%, before patronage credits from lenders, depending on the maturity date of the associated term loan. Following these transactions, we had one remaining forward-starting interest rate swap of $75.0 million available to fix the interest rate on future debt refinancings. See Note 5: Debt for additional information.
The gross fair values of derivative instruments at September 30, 2024 and December 31, 2023 were $111.7 million and $129.1 million, respectively, all of which were classified in Other assets, non-current on our Condensed Consolidated Balance Sheets. Derivative instruments that mature within one year, as a whole, are classified as current.
The following table details the effect of derivatives on the Condensed Consolidated Statements of Operations and the Condensed Consolidated Statements of Comprehensive Income (Loss):
| | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | Location | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Derivatives designated in cash flow hedging relationships: | | | | | | | | | | |
Interest rate contracts | | | | | | | | | | | | | | |
Income (loss) recognized in other comprehensive income (loss), net of tax | | | | $ | (23,130 | ) | | $ | 33,607 | | | $ | 7,574 | | | $ | 42,353 | |
Amounts reclassified from accumulated other comprehensive income to income, net of tax1 | | Interest expense, net | | $ | 5,583 | | | $ | 5,143 | | | $ | 16,751 | | | $ | 13,505 | |
| | | | | | | | | | | | | | |
Interest expense, net | | | | $ | 9,635 | | | $ | 7,971 | | | $ | 18,049 | | | $ | 15,783 | |
| |
1 | Realized gains and losses on interest rate contracts consist of realized net cash received or paid and interest accruals on the interest rate swaps during the periods in addition to amortization of amounts out of other comprehensive income related to certain terminated hedges and adjustments to interest expense resulting from amortization of inception value of certain off-market designated hedges. For the nine months ended September 30, 2024 and 2023, we amortized approximately $8.0 million and $7.7 million, respectively, of the off-market designated hedges which is included in Other, net within operating activities in the Condensed Consolidated Statements of Cash Flows. Net cash received or paid is included within Interest expense, net in the Condensed Consolidated Statements of Operations. |
At September 30, 2024, the amount of net gains expected to be reclassified into earnings in the next 12 months is approximately $12.3 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 SOFR rates at the time of net swap cash payments.
NOTE 7. FAIR VALUE MEASUREMENTS
The following table presents the estimated fair values of our financial instruments:
| | | | | | | | | | | | | | | | |
| | September 30, 2024 | | | December 31, 2023 | |
(in thousands) | | Carrying
Amount | | | Fair
Value | | | Carrying
Amount | | | Fair
Value | |
Derivative assets related to interest rate swaps (Level 2) | | $ | 111,735 | | | $ | 111,735 | | | $ | 129,125 | | | $ | 129,125 | |
| | | | | | | | | | | | |
Long-term debt, including current portion (Level 2): | | | | | | | | | | | | |
Term loans | | $ | (970,407 | ) | | $ | (969,050 | ) | | $ | (969,919 | ) | | $ | (965,718 | ) |
Revenue bonds | | | (65,735 | ) | | | (65,735 | ) | | | (65,735 | ) | | | (64,786 | ) |
Total long-term debt1 | | $ | (1,036,142 | ) | | $ | (1,034,785 | ) | | $ | (1,035,654 | ) | | $ | (1,030,504 | ) |
| | | | | | | | | | | | |
Company owned life insurance asset (COLI) (Level 3) | | $ | 6,046 | | | $ | 6,046 | | | $ | 5,220 | | | $ | 5,220 | |
| |
1 | The carrying amount of long-term debt includes principal and unamortized discounts. |
The fair value of interest rate swaps is determined using a discounted cash flow analysis, based on third-party sources, on the expected cash flows of each derivative. The analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs, including interest rate forward curves.
The fair value of our long-term debt is estimated based upon quoted market prices for similar debt issues or estimated based on average market prices for comparable debt when there is no quoted market price.
The contract value of our company owned life insurance is based on the amount at which it could be redeemed and, accordingly, approximates fair value.
We believe that our other financial instruments, including cash and cash equivalents, restricted cash, receivables and payables have net carrying values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments.
NOTE 8. EQUITY-BASED COMPENSATION
We issue new shares of common stock to settle performance share awards (PSAs), restricted stock units (RSUs) and deferred compensation stock equivalent units. At September 30, 2024 approximately 1.5 million shares were available for future use under our long-term incentive plans.
Share-based compensation activity during the nine months ended September 30, 2024 included the following:
| | | | | | | | | | | | |
| | Granted | | | Vested | | | Forfeited | |
Performance Share Awards (PSAs) | | | 130,536 | | | | — | | | | 2,767 | |
Restricted Stock Units (RSUs) | | | 121,726 | | | | 45,014 | | | | 1,657 | |
Approximately 0.1 million shares of common stock were issued to employees during the nine months ended September 30, 2024, as a result of PSA and RSU vesting during 2023 and 2024.
The following table details compensation expense and the related income tax benefit for company specific equity-based awards:
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Equity-based compensation expense: | | | | | | | | | | | | |
Performance share awards | | $ | 1,635 | | | $ | 1,483 | | | $ | 4,628 | | | $ | 3,623 | |
Restricted stock units | | | 1,260 | | | | 1,084 | | | | 3,691 | | | | 2,702 | |
Deferred compensation stock equivalent units expense | | | 51 | | | | 49 | | | | 149 | | | | 147 | |
Total equity-based compensation expense | | $ | 2,946 | | | $ | 2,616 | | | $ | 8,468 | | | $ | 6,472 | |
| | | | | | | | | | | | |
Total tax benefit recognized for equity-based expense | | $ | 197 | | | $ | 135 | | | $ | 554 | | | $ | 394 | |
Performance Share Awards
The weighted-average grant date fair value of PSAs granted during the nine months ended September 30, 2024, was $52.92 per share. PSAs granted under the stock incentive plans have a three-year performance period and shares are issued at the end of the period if the performance measures are met. The number of shares actually issued, as a percentage of the amount subject to the PSA, could range from 0% to 200%. PSAs granted under the stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of the performance measurement period, the recipients will receive dividend equivalents in the form of additional shares of common stock at the date of settlement equal to the dividends that would have been paid on the shares earned had the recipients owned the shares during the three-year period. The share awards are not considered participating securities.
The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards granted in 2024:
| | | |
Stock price as of valuation date | $ | 44.67 | |
Risk-free rate | | 4.20 | % |
Expected volatility | | 27.71 | % |
Expected dividend yield1 | | — | |
Expected term (years) | | 3.00 | |
| |
1 | Full dividend reinvestment assumed. |
Restricted Stock Units
The weighted-average fair value of all RSUs granted during the nine months ended September 30, 2024, was $44.31 per share. The fair value of RSUs granted equaled our common share price on the date of grant factoring in any required post-vesting holding periods. The RSU awards granted accrue dividend equivalents based on dividends paid during the RSU vesting period. Recipients will receive dividend equivalents in the form of additional shares of common stock at the date the vested RSUs are settled. Any forfeited RSUs will not receive dividends. The share awards are not considered participating securities.
NOTE 9. INCOME TAXES
As a REIT, we generally are not subject to federal and state corporate income taxes on income from investments in real estate, including our timberlands, that we distribute to our stockholders. We conduct certain activities through our PotlatchDeltic taxable REIT subsidiaries (each, a TRS) which are subject to corporate level federal and state income taxes. These activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Therefore, income tax expense or benefit is primarily due to pre-tax book income or loss of the TRS, as well as permanent book versus tax differences and discrete items.
During the second quarter of 2023, we reduced our federal effected deferred blended state tax rate. This reduction was a result of changes in tax laws enacted in the second quarter of 2023 in certain states in which our TRSs operate. The change resulted in a $1.0 million reduction to our net deferred tax liability and an offsetting reduction to tax expense, all of which was recorded as a discrete item in the second quarter of 2023.
NOTE 10. LEASES
We lease certain equipment, office space and land. Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.
The following table presents supplemental balance sheet information related to lease assets and liabilities:
| | | | | | | | | |
(in thousands) | Classification | | September 30, 2024 | | | December 31, 2023 | |
Assets | | | | | | | |
Operating lease assets | Other long-term assets | | $ | 10,927 | | | $ | 10,169 | |
Finance lease assets1 | Property, plant and equipment, net | | | 12,436 | | | | 11,281 | |
Total lease assets | | | $ | 23,363 | | | $ | 21,450 | |
| | | | | | | |
Liabilities | | | | | | | |
Current: | | | | | | | |
Operating lease liabilities | Accounts payable and accrued liabilities | | $ | 3,032 | | | $ | 2,575 | |
Finance lease liabilities | Accounts payable and accrued liabilities | | | 5,285 | | | | 4,525 | |
Noncurrent: | | | | | | | |
Operating lease liabilities | Other long-term obligations | | | 7,727 | | | | 7,590 | |
Finance lease liabilities | Other long-term obligations | | | 7,069 | | | | 6,699 | |
Total lease liabilities | | | $ | 23,113 | | | $ | 21,389 | |
| |
1 | Finance lease assets are presented net of accumulated amortization of $13.6 million and $9.6 million at September 30, 2024 and December 31, 2023, respectively. |
The following table presents the components of lease expense:
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Operating lease costs1 | | $ | 893 | | | $ | 772 | | | $ | 2,593 | | | $ | 2,454 | |
Finance lease costs: | | | | | | | | | | | | |
Amortization of leased assets | | | 1,441 | | | | 1,206 | | | | 4,061 | | | | 3,768 | |
Interest expense | | | 152 | | | | 115 | | | | 431 | | | | 339 | |
Net lease costs | | $ | 2,486 | | | $ | 2,093 | | | $ | 7,085 | | | $ | 6,561 | |
| |
1 | Excludes short-term leases and variable lease costs, which are immaterial. |
The following table presents supplemental cash flow information related to leases:
| | | | | | | | | |
| | | Nine Months Ended September 30, | |
(in thousands) | | | 2024 | | | 2023 | |
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | |
Operating cash flows for operating leases | | $ | 2,757 | | | $ | 2,498 | |
Operating cash flows for finance leases | | $ | 431 | | | $ | 339 | |
Financing cash flows for finance leases | | $ | 4,142 | | | $ | 3,662 | |
Leased assets exchanged for new lease liabilities: | | | | | | |
Operating leases | | $ | 2,989 | | | $ | 2,407 | |
Finance leases | | $ | 5,215 | | | $ | 2,604 | |
NOTE 11. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS
The following table details the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefit plans (OPEB):
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | |
| | Pension | | | OPEB | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Service cost | | $ | 1,321 | | | $ | 1,355 | | | $ | 22 | | | $ | 27 | |
Interest cost | | | 3,124 | | | | 3,139 | | | | 220 | | | | 294 | |
Expected return on plan assets | | | (3,237 | ) | | | (3,028 | ) | | | — | | | | — | |
Amortization of prior service cost | | | 5 | | | | 10 | | | | — | | | | — | |
Amortization of actuarial (gain) loss | | | 19 | | | | (21 | ) | | | (331 | ) | | | (166 | ) |
Total net periodic cost | | $ | 1,232 | | | $ | 1,455 | | | $ | (89 | ) | | $ | 155 | |
| | | | | | | | | | | | | | | | |
| | Nine Months Ended September 30, | |
| | Pension | | | OPEB | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Service cost | | $ | 3,964 | | | $ | 4,066 | | | $ | 69 | | | $ | 82 | |
Interest cost | | | 9,369 | | | | 9,414 | | | | 658 | | | | 881 | |
Expected return on plan assets | | | (9,711 | ) | | | (9,081 | ) | | | — | | | | — | |
Amortization of prior service cost | | | 15 | | | | 32 | | | | — | | | | — | |
Amortization of actuarial (gain) loss | | | 59 | | | | (63 | ) | | | (992 | ) | | | (498 | ) |
Net periodic cost | | $ | 3,696 | | | $ | 4,368 | | | $ | (265 | ) | | $ | 465 | |
During the nine months ended September 30, 2024 and 2023, funding of non-qualified pension and other postretirement employee benefit plans was $3.3 million and $2.2 million, respectively. During the nine months ended September 30, 2024 and 2023, we made contributions to our qualified pension benefit plan of $4.0 million and $0, respectively.
NOTE 12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE INCOME
The following table details changes in amounts included in our Accumulated Other Comprehensive Income (AOCI) by component on our Condensed Consolidated Balance Sheets, net of tax:
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Pension and Other Postretirement Employee Benefits | | | | | | | | | | | | |
Balance at beginning of period | | $ | (19,384 | ) | | $ | (28,969 | ) | | $ | (18,925 | ) | | $ | (28,494 | ) |
Reclassifications from AOCI to earnings: | | | | | | | | | | | | |
Other1 | | | (307 | ) | | | (177 | ) | | | (918 | ) | | | (529 | ) |
Tax effect | | | 77 | | | | 45 | | | | 229 | | | | 133 | |
Net of tax amount | | | (230 | ) | | | (132 | ) | | | (689 | ) | | | (396 | ) |
Other reclassifications | | | — | | | | — | | | | — | | | | (211 | ) |
Balance at end of period | | | (19,614 | ) | | | (29,101 | ) | | | (19,614 | ) | | | (29,101 | ) |
Cash Flow Hedges | | | | | | | | | | | | |
Balance at beginning of period | | | 141,493 | | | | 126,530 | | | | 121,957 | | | | 126,146 | |
Unrecognized gains (losses) arising in AOCI during the period: | | | | | | | | | | | | |
Gross | | | (23,502 | ) | | | 34,334 | | | | 7,695 | | | | 43,207 | |
Tax effect | | | 372 | | | | (727 | ) | | | (121 | ) | | | (899 | ) |
Reclassifications from AOCI to earnings: | | | | | | | | | | | | |
Gross2 | | | (5,708 | ) | | | (5,266 | ) | | | (17,124 | ) | | | (13,829 | ) |
Tax effect | | | 125 | | | | 123 | | | | 373 | | | | 324 | |
Net of tax amount | | | (28,713 | ) | | | 28,464 | | | | (9,177 | ) | | | 28,803 | |
Other reclassifications | | | — | | | | — | | | | — | | | | 45 | |
Balance at end of period | | | 112,780 | | | | 154,994 | | | | 112,780 | | | | 154,994 | |
Accumulated other comprehensive income, end of period | | $ | 93,166 | | | $ | 125,893 | | | $ | 93,166 | | | $ | 125,893 | |
1 Included in the computation of net periodic pension costs.
2 Included in Interest expense, net on the Condensed Consolidated Statement of Operations.
See Note 11: Pension and Other Postretirement Employee Benefits and Note 6: Derivative Instruments for additional information.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Information
This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, expectations regarding economic conditions, including interest rates and the effect of changes in the federal funds rate on mortgage interest rates; expected seasonal fluctuations in our business segments; expected effectiveness of our hedging instruments and swaps; amount of net earnings on cash flow hedges expected to be reclassified into earnings in the next 12 months; expected return on pension assets; future share repurchases and dividend payments; anticipated cash balances, cash flows from operations and expected liquidity; potential uses of our credit facility; expectations regarding debt obligations, interest payments and debt refinancing; maintenance of our investment grade credit rating; expectations regarding the United States (U.S.) housing market and home repair and remodeling activity; the lumber and log markets and pricing; lumber shipment volumes; timber harvest volumes; rural real estate and real estate development sales; sufficiency of cash and any necessary borrowings to meet operating requirements; expected 2024 and future capital expenditures; expected duration of the ramp-up phase of the expansion and modernization project at our Waldo, Arkansas sawmill and resulting increases in production capacity and reduction in operating costs; expectations regarding our ability to capitalize on actions that governments and businesses are taking on climate change and their commitments towards reducing greenhouse gas emissions; and similar matters.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often involve use of words such as anticipates, approximately, believe, can, continue, could, estimates, expects, future, intends, long-term, may, near-term will, or similar words or terminology. These forward-looking statements reflect our current views regarding future events based on estimates and assumptions and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. The realization of our expectations and the accuracy of our assumptions are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to:
•the effect of general economic conditions in the U.S. and international economies, including employment rates, interest rate levels, discount rates, housing starts, and the general availability of financing for home mortgages;
•availability of labor and developable land;
•changes in the level of residential and commercial construction and remodeling activity;
•changes in tariffs, quotas and trade agreements involving wood products;
•changes in demand for our products and real estate;
•changes in timber prices, harvest levels, and timberland values;
•changes in silviculture, production and production capacity in the forest products industry;
•competitive pricing pressures for our products;
•disruptions or inefficiencies in our supply chain and/or operations and unanticipated manufacturing disruptions;
•the effect of weather on our harvesting and manufacturing activities;
•the risk of loss from fire at our facilities and on our timberland;
•the impact of pandemic disease or other human health threats, floods, windstorms, hurricanes, pest infestation, fungal disease, or other natural disasters;
•changes in the cost or availability of shipping and transportation;
•changes in principal expenses, continued elevated inflation and the extent to which such elevated inflation will continue and impact our principal expenses;
•unforeseen environmental liabilities or expenditures;
•changes in general and industry-specific environmental laws and regulations, and interpretations thereof by regulatory agencies;
•our ability to obtain certification for our carbon credit project and to sell carbon credits;
•changes in standards and requirements governing carbon credit certification;
•our ability to achieve the increased capacity and reduced operating costs expected from the modernization of the Waldo, Arkansas sawmill; and
•the failure of announced real estate transactions to close on time, at the price and on the terms discussed, or at all.
For a discussion of some of the factors that may affect our business, results and prospects and a nonexclusive listing of forward-looking statements, refer to Cautionary Statement Regarding Forward-Looking Information on page 1 and Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. Investors should not interpret the disclosure of a risk to imply that the risk has not already materialized. Forward-looking statements contained in this report present our views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of our views to reflect events or circumstances occurring after the date of this report.
Our Company
We are a leading timberland REIT with ownership and management of over 2.1 million acres of timberland. We also own six sawmills and an industrial grade plywood mill, a residential and commercial real estate development business and a rural timberland sales program. Our operations are organized into three business segments: Timberlands, Wood Products and Real Estate. Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. In the discussion of our consolidated results of operations, our revenues and expenses are reported after elimination of intersegment revenues and expenses. In the Business Segment Results discussion below, each segment’s revenues and expenses, as applicable, are presented before elimination of intersegment revenues and expenses.
Our business segments have been and will continue to be influenced by a variety of factors, including tariffs, quotas and trade agreements, changes in timber prices and in harvest levels from our timberlands, competition, timberland valuations, demand for our non-strategic timberland for higher and better use purposes, lumber and plywood prices, weather conditions, disruptions or inefficiencies in our supply chain including the availability of transportation, the efficiency and level of capacity utilization of our Wood Products manufacturing operations, changes in our principal expenses such as log costs, inflation, asset dispositions or acquisitions, impact of pandemics (such as COVID-19 and its variants), fires at our Wood Products facilities or on our timberlands, other natural disasters, government regulation and enforcement actions, and other factors.
Additionally, governments and businesses across the globe are taking action on climate change and are making significant commitments towards reducing greenhouse gas emissions to net zero. Achieving these commitments will require governments and companies to take major steps to modify operations, invest in low-carbon activities and purchase offsets to reduce environmental impacts. We believe we are well positioned to provide products and services that entities may utilize to achieve these commitments through natural climate solutions, including forest carbon offsets, carbon capture and storage projects, selling or leasing timberlands to third parties for renewable energy projects such as for solar power generation facilities, selling pulpwood and sawmill residuals for green energy production, and other emerging technologies that allows wood fiber to be used in applications ranging from biofuels to bioplastics.
Non-GAAP Measures
To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), we present certain non-GAAP measures on a consolidated basis, including Total Adjusted EBITDDA and Cash Available for Distribution (CAD), which are defined and further explained and reconciled to the nearest GAAP measure in the Liquidity and Performance Measures section below. The presentation of these non-GAAP financial measures should be considered only as supplemental to, and are not intended to be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Our definitions of these non-GAAP measures may differ from similarly titled measures and may not be comparable to other similarly titled non-GAAP measures presented by other companies due to potential inconsistencies in methods of calculation.
See Note 2: Segment Information in the Notes to the Condensed Consolidated Financial Statements for information related to the use of Adjusted EBITDDA for our segments.
Business and Economic Trends Affecting Our Operations
The operating results of our Timberlands, Wood Products and Real Estate business segments have been and will continue to be affected by the cyclical nature of the forest products industry. Log and pulpwood sales volumes in our Timberlands segment are typically lower in the first half of each year as winter rains in the Southern region and spring thaw in the Northern region limit timber harvesting operations due to softened roadbeds and wet logging conditions that restrict access to logging sites. The third quarter is typically our 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.
The demand for timber is directly affected by the underlying demand for lumber and other wood products, as well as by the demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by both demand for new homes and home improvement and repair of existing homes in the United States. Our Timberlands segment is also influenced by the availability of harvestable timber. In general, our Idaho log market is typically in balance but can be tensioned from time to time, while Southern log markets generally have more available supply.
Rural real estate dispositions and acquisitions can also be adversely affected when access to any properties to be sold or considered for acquisition is limited due to adverse weather conditions. Development real estate sales occur throughout the year and depend on when our development of residential neighborhoods and commercial lots are substantially completed. The timing of these sales can also be impacted by contractor availability to complete the necessary infrastructure and other improvements.
Interest rates impact our business primarily through their effect on mortgage rates and the broader U.S. economy, and their influence on our capital allocation activities. According to economic data from Freddie Mac, between the end of 2011 and the end of 2021, the average 30-year fixed mortgage rate, which is correlated with long-term interest rates, was below 4.0% before beginning to rise late in the first quarter of 2022, peaking at approximately 7.8% in October 2023, and ending 2023 at approximately 6.6%. The first half of 2024 continued to experience stubbornly high mortgage rates before easing modestly late in the third quarter of 2024 following the U.S. Federal Reserve's reduction of key benchmark interest rates by 50 basis points in September 2024. Inflation, which continues to slow, unemployment rates and the overall condition of the economy are factors that can influence the U.S. Federal Reserve’s decision to adjust interest rates.
Single-family housing supply continues to remain well below the historical average as housing affordability remains a barrier to home ownership. In October 2024, the U.S. Census Bureau reported total housing starts during the third quarter of 2024 averaged over 1.3 million on a seasonally-adjusted annual basis, which was slightly lower than the second quarter of 2024. While single-family housing starts averaged approximately 963,000 units on a seasonally-adjusted annual basis during the third quarter of 2024, which was 4.1% lower than the second quarter of 2024, single-family housing starts on a seasonally-adjusted annual basis averaged just over 1.0 million units for August and September of 2024. Additionally, authorized building permits for single-family housing averaged nearly 960,000 units on a seasonally-adjusted annual basis during the third quarter of 2024, which was on par with the second quarter of 2024.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) published in September 2024 reported that builders' confidence for newly built single-family homes was 41 that month, up from 37 in December 2023. This broke a string of four consecutive monthly declines. Even though there is increased builder confidence for new construction, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, along with higher material costs that continue to increase the cost of building homes. Overall, we continue to believe long-term underlying housing fundamentals remain favorable due to an undersupply of homes, lower than historical-average existing inventory for sale, and a large millennial demographic in their prime home-buying years. We believe these fundamentals will become more favorable if the Federal Reserve reduces its key benchmark interest rates, and those rate reductions have the effect of reducing mortgage rates.
The repair and remodel sector is the largest market segment for lumber demand. Near term headwinds on the repair and remodel market appear to have been driven by elevated interest rates, which raise the cost of discretionary projects, coupled with the low turnover of existing homes, which typically spurs repair and remodel activity. While spending in the sector for residential home remodeling has moderated, we believe future interest rate reductions along with long-term favorable underlying fundamentals, including solid household balance sheets, strong levels of home equity, an aging existing housing stock, and expected increases in sales of existing homes will stimulate repair and remodel demand for our products.
In our Timberlands segment, a significant portion of our Idaho sawlog prices are indexed on a one-month lag to lumber prices. The Northern region experienced a decline in sawlog prices during the third quarter of 2024 compared to the third quarter of 2023, primarily because of lower indexed lumber prices. In the Southern region, sawlog and pulpwood prices remained relatively stable. Our total harvest volume of over 1.9 million tons in the third quarter of 2024 was slightly lower than the third quarter of 2023, primarily due to decreased stumpage sales in the South. We expect to harvest between 1.8 and 1.9 million tons during the fourth quarter of 2024, with approximately 81% of the volume in the Southern region.
During the third quarter of 2024, we completed the construction phase of the expansion and modernization of our Waldo, Arkansas sawmill (the Waldo Modernization Project). The Waldo Modernization Project included upgrades to the log yard and planer, a new saw line, and a new continuous dry kiln and is expected to increase the sawmill’s annual capacity and reduce its operating costs significantly. The sawmill, which continued to operate during the construction, took limited downtime early in the third quarter to tie in the new equipment and restarted in mid-August 2024. We anticipate it will take between 6 and 12 months to reach the sawmill's expected new capacity of 275 million board feet per year.
In our Wood Products segment, lumber markets remained tepid during the third quarter of 2024, leading to continued pricing pressure. We shipped 267 million board feet of lumber during the third quarter of 2024 which was lower than the third quarter of 2023 primarily as a result of the planned downtime and restart at our Waldo, Arkansas sawmill during the third quarter of
2024. We expect to ship between 275 and 285 million board feet of lumber during the fourth quarter of 2024, which takes into account the expected production ramp-up at the Waldo sawmill.
Our Real Estate segment benefited from increased rural real estate acres sold and increased residential lot sales in Chenal Valley during the third quarter of 2024. We expect to sell approximately 5,500 rural acres and 40 residential lots in Chenal Valley during the fourth quarter of 2024.
Consolidated Results
The following table sets forth changes in our Condensed Consolidated Statements of Operations. Our Business Segment Results provide a more detailed discussion of our segments:
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Revenues | | $ | 255,131 | | | $ | 265,509 | | | $ | (10,378 | ) | | $ | 803,929 | | | $ | 769,572 | | | $ | 34,357 | |
Costs and expenses: | | | | | | | | | | |
| | | | | | | |
Cost of goods sold | | | 227,556 | | | | 226,303 | | | | 1,253 | | | | 722,189 | | | | 665,716 | | | | 56,473 | |
Selling, general and administrative expenses | | | 20,403 | | | | 19,303 | | | | 1,100 | | | | 61,882 | | | | 55,118 | | | | 6,764 | |
CatchMark merger-related expenses | | | — | | | | — | | | | — | | | | — | | | | 2,453 | | | | (2,453 | ) |
Gain on fire damage | | | — | | | | (16,326 | ) | | | 16,326 | | | | — | | | | (39,436 | ) | | | 39,436 | |
| | | 247,959 | | | | 229,280 | | | | 18,679 | | | | 784,071 | | | | 683,851 | | | | 100,220 | |
Operating income | | | 7,172 | | | | 36,229 | | | | (29,057 | ) | | | 19,858 | | | | 85,721 | | | | (65,863 | ) |
Interest expense, net | | | (9,635 | ) | | | (7,971 | ) | | | (1,664 | ) | | | (18,049 | ) | | | (15,783 | ) | | | (2,266 | ) |
Non-operating pension and other postretirement employee benefits | | | 200 | | | | (228 | ) | | | 428 | | | | 602 | | | | (685 | ) | | | 1,287 | |
Other | | | 1,516 | | | | 370 | | | | 1,146 | | | | 1,348 | | | | 638 | | | | 710 | |
Income (loss) before income taxes | | | (747 | ) | | | 28,400 | | | | (29,147 | ) | | | 3,759 | | | | 69,891 | | | | (66,132 | ) |
Income taxes | | | 4,056 | | | | (4,725 | ) | | | 8,781 | | | | 12,923 | | | | (7,650 | ) | | | 20,573 | |
Net income | | $ | 3,309 | | | $ | 23,675 | | | $ | (20,366 | ) | | $ | 16,682 | | | $ | 62,241 | | | $ | (45,559 | ) |
Total Adjusted EBITDDA1 | | $ | 45,902 | | | $ | 56,278 | | | $ | (10,376 | ) | | $ | 178,797 | | | $ | 159,500 | | | $ | 19,297 | |
| |
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. |
Third Quarter 2024 Compared with Third Quarter 2023
Revenues
Revenues were $255.1 million, a $10.4 million decrease compared with the third quarter of 2023 primarily due to lower lumber prices, lower lumber shipments as a result of the planned downtime and restart at our Waldo, Arkansas sawmill, and lower Northern sawlog prices. These decreases were partially offset by increased rural acres and residential lots sold, and a higher average price per residential lot in Chenal Valley due to a greater mix of premium lots sold during the third quarter of 2024.
Cost of goods sold
Cost of goods sold increased $1.3 million compared with the third quarter of 2023 mainly due to increased rural real estate acres and residential lots sold, and increased log and haul costs associated with higher harvest activity. These increases were partially offset by lower raw material, production, and shipping costs primarily at our Waldo, Arkansas sawmill due to its planned downtime early in the third quarter of 2024 and restart in mid-August following the completion of the construction phase of the expansion and modernization project.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $1.1 million compared to the third quarter of 2023 primarily due to professional service fees, including costs for implementation of new systems, and employee-related costs.
Gain on fire damage
During the third quarter of 2023, we recognized insurance recoveries of $16.3 million for fire damage at our Ola, Arkansas sawmill. The claim with insurance carriers was finalized by the end of 2023.
Interest expense, net
Interest expense, net increased $1.7 million compared to the third quarter of 2023 primarily due to less interest income earned on lower average cash and cash equivalents held in interest bearing accounts.
Income taxes
Income taxes are primarily due to income or loss from our PotlatchDeltic taxable REIT subsidiaries (TRS). For the three months ended September 30, 2024, we recorded an income tax benefit of $4.1 million on TRS loss before tax of $15.6 million. For the three months ended September 30, 2023, we recorded income tax expense of $4.7 million on TRS income before tax of $18.4 million, which included the $16.3 million gain on fire damage.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the third quarter of 2024 decreased $10.4 million compared to the third quarter of 2023 primarily due to lower lumber prices, lower lumber shipments, lower Northern sawlog prices and increased logging and hauling costs driven by increased harvest activity. The decrease in Total Adjusted EBITDDA was partially offset by increased rural acres and residential lots sold at a higher average price per residential lot in Chenal Valley. Refer to the Business Segment Results below for further discussions on activities for each of our segments. See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income (loss), the closest comparable GAAP measure, for each of the periods presented.
Year to Date 2024 Compared with Year to Date 2023
Revenues
Revenues were $803.9 million, an increase of $34.4 million compared with the first nine months of 2023 primarily due to increased rural real estate acres sold, including the 34,100-acre rural timberland sale for $56.7 million in the second quarter of 2024, increased lumber shipments, increased Southern harvest volumes, and higher residential price per lot in Chenal Valley. These increases were partially offset by lower lumber prices and a decrease in Northern harvest volumes and sawlog prices.
Cost of goods sold
Cost of goods sold increased $56.5 million compared with the first nine months of 2023 primarily due to increased rural real estate acres sold. These increases were partially offset by lower logging and hauling costs primarily due to lower Northern harvest volume, which more than offset an increase in the South due to higher harvest volumes.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $6.8 million compared to the first nine months of 2023 primarily due to employee-related costs and professional service fees, including costs for implementation of new systems. Additionally, the prior year included a $1.0 million reduction in stock compensation expense due to forfeiture of a former employee’s stock awards.
Gain on fire damage
During the first nine months of 2023, we recognized insurance recoveries of $39.4 million for fire damage at our Ola, Arkansas sawmill. The claim with insurance carriers was finalized by the end of 2023.
Interest expense, net
Interest expense, net increased $2.3 million compared to the first nine months of 2023 primarily due to less interest income earned on lower average cash and cash equivalents held in interest bearing accounts.
Income taxes
Income taxes are primarily due to income or loss from our PotlatchDeltic TRS. For the nine months ended September 30, 2024, we recorded an income tax benefit of $12.9 million on TRS loss before tax of $51.1 million. For the nine months ended September 30, 2023, we recorded income tax expense of $7.7 million on TRS income before tax of $33.8 million, which included the $39.4 million gain on fire damage. Income taxes for the nine months ended September 30, 2023 also included an approximate $1.0 million tax benefit from the reduction of our blended deferred tax rate during the second quarter of 2023.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for the first nine months of 2024 increased $19.3 million compared to the first nine months of 2023 primarily due to increased rural real estate acres sold and increased average price per residential lot in Chenal Valley. The increase in Total Adjusted EBITDDA was partially offset by lower lumber prices, lower Northern sawlog harvest volumes and prices, and higher selling, general and administrative expenses. Refer to the Business Segment Results below for further discussions on activities for each of our segments. See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income (loss), the closest comparable GAAP measure, for each of the periods presented.
Business Segment Results
Timberlands Segment
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Revenues1 | | $ | 105,132 | | | $ | 109,808 | | | $ | (4,676 | ) | | $ | 296,884 | | | $ | 313,663 | | | $ | (16,779 | ) |
Costs and expenses: | | | | | | | | | | |
| | |
| | | | |
Logging and hauling | | | 56,829 | | | | 54,918 | | | | 1,911 | | | | 157,158 | | | | 161,287 | | | | (4,129 | ) |
Other | | | 10,294 | | | | 10,843 | | | | (549 | ) | | | 28,057 | | | | 28,354 | | | | (297 | ) |
Selling, general and administrative expenses | | | 2,185 | | | | 1,985 | | | | 200 | | | | 6,973 | | | | 6,005 | | | | 968 | |
Timberlands Adjusted EBITDDA2 | | $ | 35,824 | | | $ | 42,062 | | | $ | (6,238 | ) | | $ | 104,696 | | | $ | 118,017 | | | $ | (13,321 | ) |
| |
1 | Prior to elimination of intersegment fiber revenues of $28.1 million and $28.6 million for the three months ended September 30, 2024 and 2023, and $80.1 million and $89.7 million for the nine months ended September 30, 2024 and 2023, respectively. |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Timberlands Segment Statistics
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
Harvest Volumes (in tons) | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Northern region | | | | | | | |
| | | | | | | | |
| |
Sawlog | | | 420,896 | | | | 376,607 | | | | 44,289 | | | | 1,107,630 | | | | 1,166,570 | | | | (58,940 | ) |
Pulpwood | | | 5,964 | | | | 7,081 | | | | (1,117 | ) | | | 13,716 | | | | 23,099 | | | | (9,383 | ) |
Total | | | 426,860 | | | | 383,688 | | | | 43,172 | | | | 1,121,346 | | | | 1,189,669 | | | | (68,323 | ) |
| | | | | | | | | | |
| | |
| | | | |
Southern region | | | | | | | | | | |
| | |
| | | | |
Sawlog | | | 668,557 | | | | 661,225 | | | | 7,332 | | | | 2,052,287 | | | | 1,906,805 | | | | 145,482 | |
Pulpwood | | | 591,527 | | | | 558,905 | | | | 32,622 | | | | 1,592,771 | | | | 1,531,620 | | | | 61,151 | |
Stumpage | | | 266,516 | | | | 400,426 | | | | (133,910 | ) | | | 984,120 | | | | 1,074,380 | | | | (90,260 | ) |
Total | | | 1,526,600 | | | | 1,620,556 | | | | (93,956 | ) | | | 4,629,178 | | | | 4,512,805 | | | | 116,373 | |
| |
| | |
| | | | | |
| | |
| | | | |
Total harvest volume | | | 1,953,460 | | | | 2,004,244 | | | | (50,784 | ) | | | 5,750,524 | | | | 5,702,474 | | | | 48,050 | |
| | | | | | | | | | | | | | | | | | |
Sales Price/Unit ($ per ton)1 | | | | | | | | | | | | | | | | | | |
Northern region | | | | | | | | | | | | | | | | | | |
Sawlog | | $ | 110 | | | $ | 129 | | | $ | (19 | ) | | $ | 109 | | | $ | 119 | | | $ | (10 | ) |
Pulpwood | | $ | 39 | | | $ | 47 | | | $ | (8 | ) | | $ | 37 | | | $ | 48 | | | $ | (11 | ) |
| |
| | |
| | | | | | | | | | | | | |
Southern region | |
| | |
| | | | | | | | |
| | | | |
Sawlog | | $ | 47 | | | $ | 48 | | | $ | (1 | ) | | $ | 47 | | | $ | 48 | | | $ | (1 | ) |
Pulpwood | | $ | 31 | | | $ | 31 | | | $ | — | | | $ | 31 | | | $ | 32 | | | $ | (1 | ) |
Stumpage | | $ | 15 | | | $ | 18 | | | $ | (3 | ) | | $ | 16 | | | $ | 19 | | | $ | (3 | ) |
| |
1 | Sawlog and pulpwood sales prices are on a delivered basis, which includes logging and hauling costs. Stumpage sales provide our customers the right to harvest standing timber. As such, the customer contracts the logging and hauling and bears such costs. |
Timberlands Adjusted EBITDDA
The following table summarizes Timberlands Adjusted EBITDDA variances for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023:
| | | | | | | | |
(in thousands) | | Three Months | | | Nine Months | |
Timberlands Adjusted EBITDDA - prior year | | $ | 42,062 | | | $ | 118,017 | |
Sales price and mix | | | (8,959 | ) | | | (15,996 | ) |
Harvest volume | | | 557 | | | | (1,809 | ) |
Logging and hauling costs per unit | | | 1,660 | | | | 4,976 | |
Forest management, indirect and other | | | 504 | | | | (492 | ) |
Timberlands Adjusted EBITDDA - current year | | $ | 35,824 | | | $ | 104,696 | |
Third Quarter 2024 Compared with Third Quarter 2023
Timberlands Adjusted EBITDDA for the third quarter of 2024 decreased $6.2 million compared with the third quarter of 2023 primarily as a result of the following:
•Sales Price and Mix: Sawlog prices in the Northern region declined 14.7% to $110 per ton primarily due to the effect of lower indexed sawlog prices in Idaho. Southern sawlog prices remained relatively stable.
•Harvest Volume: Total Northern harvest volume increased 11.3% primarily due to more favorable operating conditions in the first quarter of 2023 allowing us to accelerate harvesting earlier in 2023 than in 2024. Total Southern harvest volume decreased approximately 5.8% in the third quarter of 2024 compared to the third quarter of 2023, primarily due to fewer stumpage sales.
•Logging and Hauling Cost per Unit: Logging and hauling costs per delivered unit were lower primarily due to decreased fuel costs.
Year to Date 2024 Compared with Year to Date 2023
Timberlands Adjusted EBITDDA for the first nine months of 2024 decreased $13.3 million compared with the first nine months of 2023 primarily as a result of the following:
•Sales Price and Mix: Sawlog prices in the Northern region decreased 8.4% to $109 per ton primarily due to the effect of lower indexed sawlog prices in Idaho. Southern sawlog prices remained relatively stable.
•Harvest Volume: We harvested 4.6 million tons in the Southern region during the first nine months of 2024, which was 2.6% higher than the first nine months of 2023 primarily due to more favorable operating conditions during 2024 partially offset by fewer stumpage sales. In the Northern region, operating conditions were less favorable in the first nine months of 2024 as compared to the first nine months of 2023, resulting in a 5.7% decrease in harvest volume.
•Logging and Hauling Cost per Unit: Logging and hauling costs per delivered unit were lower due to a lower mix of Northern harvest volume and decreased fuel costs.
Wood Products Segment
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Revenues | | $ | 139,412 | | | $ | 165,108 | | | $ | (25,696 | ) | | $ | 441,589 | | | $ | 485,572 | | | $ | (43,983 | ) |
Costs and expenses1 | | | | | | | | | | | | | | | | | | |
Fiber costs | | | 67,552 | | | | 72,273 | | | | (4,721 | ) | | | 216,595 | | | | 225,393 | | | | (8,798 | ) |
Freight, logging and hauling | | | 17,314 | | | | 20,199 | | | | (2,885 | ) | | | 55,805 | | | | 59,843 | | | | (4,038 | ) |
Manufacturing costs | | | 58,025 | | | | 54,537 | | | | 3,488 | | | | 175,845 | | | | 163,787 | | | | 12,058 | |
Finished goods inventory change | | | 2,883 | | | | (690 | ) | | | 3,573 | | | | (1,061 | ) | | | (633 | ) | | | (428 | ) |
Selling, general and administrative expenses | | | 3,127 | | | | 3,674 | | | | (547 | ) | | | 10,656 | | | | 9,954 | | | | 702 | |
Other | | | 92 | | | | 76 | | | | 16 | | | | 274 | | | | 253 | | | | 21 | |
Wood Products Adjusted EBITDDA2 | | $ | (9,581 | ) | | $ | 15,039 | | | $ | (24,620 | ) | | $ | (16,525 | ) | | $ | 26,975 | | | $ | (43,500 | ) |
| |
1 | Prior to elimination of intersegment fiber costs of $28.1 million and $28.6 million for the three months ended September 30, 2024 and 2023, and $80.1 million and $89.7 million for the nine months ended September 30, 2024 and 2023, respectively. |
2 | Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Wood Products Segment Statistics
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Lumber shipments (MBF)1 | | | 267,263 | | | | 276,071 | | | | (8,808 | ) | | | 824,061 | | | | 817,955 | | | | 6,106 | |
Lumber sales prices ($ per MBF) | | $ | 402 | | | $ | 481 | | | $ | (79 | ) | | $ | 419 | | | $ | 465 | | | $ | (46 | ) |
| |
1 | MBF stands for thousand board feet. |
Wood Products Adjusted EBITDDA
The following table summarizes Wood Products Adjusted EBITDDA variances for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023:
| | | | | | | | |
(in thousands) | | Three Months | | | Nine Months | |
Wood Products Adjusted EBITDDA - prior year | | $ | 15,039 | | | $ | 26,975 | |
Lumber: | | | | | | |
Price | | | (21,584 | ) | | | (39,297 | ) |
Manufacturing costs per unit | | | (5,735 | ) | | | (9,329 | ) |
Log costs per unit | | | 1,623 | | | | 7,769 | |
Volume | | | 13 | | | | (187 | ) |
Residuals, panels and other | | | 1,063 | | | | (2,456 | ) |
Wood Products Adjusted EBITDDA - current year | | $ | (9,581 | ) | | $ | (16,525 | ) |
Third Quarter 2024 Compared with Third Quarter 2023
Wood Products Adjusted EBITDDA for the third quarter of 2024 decreased $24.6 million compared to the third quarter of 2023 primarily as a result of the following:
•Lumber Price: Average lumber sales price decreased to $402 per MBF during the third quarter of 2024 from $481 per MBF during the third quarter of 2023.
•Manufacturing Costs Per Unit: Higher manufacturing costs per unit were primarily due an increase in labor costs from normal wage adjustments, and the impact from downtime and the restart of our Waldo, Arkansas sawmill for the expansion and modernization project.
•Log Costs Per Unit: Log costs per unit were lower primarily as a result of lower log costs at our Idaho sawmill due to lower sawlog prices which are largely indexed to the price of lumber.
•Residual Sales, Panels and Other: A decrease in selling, general and administrative expense primarily due to lower variable employee-related costs more than offset lower residual sales compared to the third quarter of 2023.
Year to Date 2024 Compared with Year to Date 2023
Wood Products Adjusted EBITDDA for the first nine months of 2024 decreased $43.5 million compared to the first nine months of 2023 primarily as a result of the following:
•Lumber Price: Average lumber sales price decreased to $419 per MBF during the first nine months of 2024 from $465 per MBF during the first nine months of 2023.
•Manufacturing Costs Per Unit: Higher manufacturing costs per unit were primarily due to an increase in labor costs from normal wage adjustments, and the expansion and modernization project at our Waldo, Arkansas sawmill.
•Log Costs Per Unit: Log costs per unit were lower primarily as a result of lower log costs at our Idaho sawmill due to lower sawlog prices, which are largely indexed to the price of lumber.
•Residual Sales, Panels and Other: Lower demand from industrial customers resulted in lower plywood price realization during the first nine months of 2024 compared to the first nine months of 2023.
Real Estate Segment
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | Change | | | 2024 | | | 2023 | | | Change | |
Revenues | | $ | 38,701 | | | $ | 19,152 | | | $ | 19,549 | | | $ | 145,540 | | | $ | 60,079 | | | $ | 85,461 | |
Costs and expenses | | | | | | | | | | | | | | | | | | |
Cost of goods sold | | | 4,584 | | | | 3,709 | | | | 875 | | | | 12,031 | | | | 10,012 | | | | 2,019 | |
Selling, general and administrative expenses | | | 2,256 | | | | 1,278 | | | | 978 | | | | 5,852 | | | | 4,200 | | | | 1,652 | |
Real Estate Adjusted EBITDDA1 | | $ | 31,861 | | | $ | 14,165 | | | $ | 17,696 | | | $ | 127,657 | | | $ | 45,867 | | | $ | 81,790 | |
| |
1 | Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements. |
Real Estate Segment Statistics
| | | | | | | | | | | | | | | | |
Rural Real Estate | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Acres sold | | | 6,548 | | | | 3,275 | | | | 51,470 | | | | 11,155 | |
Average price per acre | | | 3,727 | | | | 3,546 | | | | 2,230 | | | | 3,048 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Development Real Estate | | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
| | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Residential lots | | | 53 | | | | 32 | | | | 90 | | | | 98 | |
Average price per lot | | $ | 204,851 | | | $ | 89,122 | | | $ | 168,850 | | | $ | 103,526 | |
| | | | | | | | | | | | |
Commercial acres | | | — | | | | 1 | | | | 12 | | | | 7 | |
Average price per acre | | $ | — | | | $ | 972,222 | | | $ | 492,746 | | | $ | 848,828 | |
| | | | | | | | | | | | |
Real Estate Adjusted EBITDDA
The following table summarizes Real Estate Adjusted EBITDDA variances for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023:
| | | | | | | | |
(in thousands) | | Three Months | | | Nine Months | |
Real Estate Adjusted EBITDDA - prior year | | $ | 14,165 | | | $ | 45,867 | |
Rural real estate sales | | | 12,890 | | | | 80,638 | |
Real estate development sales | | | 6,437 | | | | 4,077 | |
Selling, general and administrative expenses | | | (978 | ) | | | (1,661 | ) |
Other costs, net | | | (653 | ) | | | (1,264 | ) |
Real Estate Adjusted EBITDDA - current year | | $ | 31,861 | | | $ | 127,657 | |
Third Quarter 2024 Compared with Third Quarter 2023
Real Estate Adjusted EBITDDA for the third quarter of 2024 was $31.9 million, an increase of $17.7 million compared to the third quarter of 2023 primarily as a result of the following:
•Rural Sales: There were more rural real estate acres sold in the third quarter of 2024 compared to the third quarter of 2023. Rural real estate sales in the third quarter of 2024 included a 1,200-acre sale in Idaho for approximately $3,400 per acre. Rural real estate sales can vary quarter-to-quarter with the average price per acre fluctuating based on both the geographic area of the real estate and product mix.
•Development Sales: During the third quarter of 2024, we sold 53 residential lots at an average lot price of $204,851 compared to 32 lots at an average lot price of $89,122 during the third quarter of 2023. The increase in average lot price was primarily due to a higher mix of premium residential lot closings in the third quarter of 2024. The average price per residential lot fluctuates based on a variety of factors including size, location, and planned end use within the developments. We had no commercial lot sales in Chenal Valley during the third quarter of 2024 compared to one sale for $1.4 million, or $972,222 per acre, during the third quarter of 2023.
Year to Date 2024 Compared with Year to Date 2023
Real Estate Adjusted EBITDDA for the first nine months of 2024 increased $81.8 million compared to the first nine months of 2023 primarily as a result of the following:
•Rural Sales: Rural real estate sales in the first nine months of 2024 included a 34,100-acre sale of four-year average age Southern timberlands to FIA for $56.7 million, a 2,000-acre conservation sale in Arkansas, and a 1,200-acre sale in Idaho. The first nine months of 2023 included a 2,240-acre conservation sale in Alabama and a 2,700-acre sale in Georgia.
•Development Sales: During the first nine months of 2024, we sold 90 residential lots at an average lot price of $168,850 compared to 98 lots at an average lot price of $103,526 during the first nine months of 2023. In addition, we sold 12 acres of commercial land in Chenal Valley for an average price of $492,746 per acre during the first nine months of 2024 compared to 7 acres of commercial land for an average price of $848,828 per acre during the first nine months of 2023.
Liquidity and Capital Resources
Cash generated by our operations is highly dependent on the selling prices and volumes of our products and can vary from period to period. Changes in significant sources and uses of cash for the nine months ended September 30, 2024 and 2023 are presented by category as follows:
| | | | | | | | | | | | |
| | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | Change | |
Net cash from operating activities | | $ | 143,062 | | | $ | 117,308 | | | $ | 25,754 | |
Net cash from investing activities | | $ | (82,085 | ) | | $ | (27,422 | ) | | $ | (54,663 | ) |
Net cash from financing activities | | $ | (137,534 | ) | | $ | (121,601 | ) | | $ | (15,933 | ) |
Net Cash Flows from Operating Activities
Net cash from operating activities increased $25.8 million in the first nine months of 2024 compared to the first nine months of 2023 primarily as a result of the following:
•Cash received from customers increased $34.6 million primarily due to increased rural real estate acres sold, including the 34,100-acre sale to FIA, higher average lot prices in Chenal Valley, and higher Southern harvest volumes. These increases were partially offset by lower lumber and Northern sawlog prices, and lower Northern harvest volumes.
•Cash payments decreased $13.5 million primarily due to lower Northern logging and hauling costs, and lower employee incentive compensation payouts. These declines were partially offset by costs associated with higher Southern harvest volumes.
•During the first nine months of 2024, we received the final $1.7 million of insurance proceeds related to business interruption insurance following the fire at our Ola, Arkansas sawmill in June 2021 compared to $21.8 million received during the first nine months of 2023.
•Cash paid for interest, net increased by approximately $6.9 million primarily due to lower interest income earned as a result of lower average cash balances in interest bearing accounts partially offset by increased patronage dividends from our lenders. Additionally, cash from operating activities for first nine months of 2024 includes reclassification of $22.5 million received from interest rate swaps that contain an other-than-insignificant financing element at inception as investing ($20.9 million) and financing ($1.6 million) activities. Cash from operating activities for first nine months of 2023 includes reclassification of $18.7 million received from interest rate swaps that contain an other-than-insignificant financing element at inception as investing ($17.3 million) and financing ($1.4 million) activities.
•Cash contributions to our pension and other postretirement employee benefit plans increased $5.1 million, primarily due to a $4.0 million contribution to our qualified pension plan.
•Net tax payments decreased $13.0 million due to lower taxable income generated from our TRS operations in 2024.
Net Cash Flows from Investing Activities
Changes in cash flows from investing activities were primarily a result of the following:
•Cash expenditures for property, plant and equipment, timberlands reforestation and road construction projects during the first nine months of 2024 and 2023 were $71.5 million and $45.1 million, respectively, which includes capital expenditures for the Waldo, Arkansas sawmill expansion and modernization project of $38.0 million and $14.8 million, respectively.
•Cash expenditures for timberland acquisitions during the first nine months of 2024 was approximately $32.3 million which included the acquisition of 16,000 acres of mature timberlands in Arkansas. Cash expenditures for timberland acquisitions during the first nine months of 2023 was $1.7 million.
•We received $20.9 million during the first nine months of 2024 compared to $17.3 million during the first nine months of 2023 from certain interest rate swaps that contained an other-than-insignificant financing element at inception, which are required to be classified in investing activities. Cash flows from these above-market interest rate swaps reduce our interest costs on the corresponding variable rate debt.
Net Cash Flows from Financing Activities
Changes in cash flows from financing activities were primarily a result of the following:
•During the first nine months of 2024, we repurchased 666,472 shares of our common stock totaling $27.4 million, compared to the first nine months of 2023 where we repurchased 291,749 shares of our common stock totaling $13.1 million, including $1.7 million of repurchases that were not settled in cash until the fourth quarter of 2023.
•Dividend payments of $106.9 million during the first nine months of 2024 compared to $107.9 million during the first nine months of 2023 due to fewer shares outstanding following share repurchases.
Future Sources and Uses of Cash
At September 30, 2024, we had cash and cash equivalents of $161.1 million. We expect cash and cash equivalents on hand, cash generated from our operating activities, and available borrowing capacity under our Credit Agreement, if needed, to be adequate to meet our future cash requirements. At September 30, 2024, there were no significant changes in our cash commitments arising in the normal course of business under our known contractual and other obligations as described in our Annual Report on Form 10-K for the year ended December 31, 2023. See Term Loans, Credit Agreement and Interest Rate Swap Agreements below for more information on significant sources and uses of cash subsequent to September 30, 2024.
Capital Expenditures
We invest cash in maintenance and discretionary capital expenditures at our Wood Products facilities. We also invest cash in the reforestation of timberlands and construction of roads in our Timberlands operations and to develop land in our Real Estate development operations. We evaluate discretionary capital improvements based on an expected level of return on investment. We expect to spend a total of approximately $100 million to $110 million for capital expenditures during 2024, including capital expenditures for the Waldo Modernization Project.
The Waldo Modernization Project includes upgrades to the log yard and planer, a new saw line, a new continuous dry kiln and other improvements which are expected to increase the sawmill’s annual capacity from 190 million board feet of dimensional lumber to approximately 275 million board feet. The existing sawmill continued to operate before taking limited downtime to tie in the new equipment in July 2024. Following the restart of the sawmill in mid-August 2024, we anticipate it will take between 6 and 12 months to reach the sawmill's expected new capacity of 275 million board feet per year. We expect to spend approximately $131.0 million on the modernization project, of which a total of $124.4 million has been spent through September 30, 2024, and the remaining $6.6 million is expected to be spent during the fourth quarter of 2024.
Share Repurchase Program
On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). Shares under the 2022 Repurchase Program may be repurchased in open market transactions, including pursuant to trading plans adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (a Trading Plan), or through privately negotiated transactions. At September 30, 2024, we had remaining authorization of $97.6 million for future stock repurchases under the 2022 Repurchase Program. The timing, manner, price and amount of repurchases will be determined according to a Trading Plan, and, subject to the terms of a Trading Plan, the Repurchase Program may be suspended, terminated or modified at any time for any reason.
Term Loans, Credit Agreement, and Interest Rate Swap Agreements
At September 30, 2024, our total outstanding principal on our long-term debt of $1.0 billion included $971.0 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. Approximately $165.7 million of our outstanding long-term debt was classified as current at September 30, 2024 on our accompanying Condensed Consolidated Balance Sheets, including a $65.7 million revenue bond that matured in October 2024 and a $100.0 million term loan that matures in August 2025. Certain borrowings under the Amended Term Loan Agreement are at the one-month Secured Overnight Financing Rate (SOFR)-indexed variable rates, plus a spread between 1.61% and 2.30%. We have entered into SOFR-indexed interest rate swaps to fix the interest rate on these variable rate term loans.
On November 1, 2024, we entered into a tenth amendment to the Amended Term Loan Agreement, which provided for three new term loans totaling $176.0 million that mature on November 1, 2032, 2033, and 2034, respectively (collectively referred to as the New Term Loans). The proceeds of the New Term Loans were used to refinance a $110.0 million term loan that matured on November 1, 2024 and to replenish cash used to repay the $65.7 million revenue bond that matured in October 2024. The New Term Loans bear interest at a rate equal to daily simple SOFR plus an applicable margin ranging between 2.20% and 2.30% per annum depending on the term loan's maturity date. The New Term Loans provide for a cost-of-capital reset at year five whereby the applicable margin may be reset at the sole discretion of the lender. As a result of the tenth amendment to the Amended Term Loan Agreement, at November 1, 2024, we had approximately $1.0 billion drawn under the agreement with our primary lender.
In connection with the refinancing, we terminated $125.0 million of our $200.0 million forward-starting interest rate swaps and transferred the value realized from their termination into three new interest rate swaps to hedge the variability in future cash flows on the New Term Loans. These three new daily simple SOFR-indexed interest rate swaps effectively fix the interest rates on the New Term Loans between 4.02% and 4.28%, before patronage credits from lenders, depending on the maturity date of the associated term loan. Following these transactions, we had one remaining forward-starting interest rate swap of $75.0 million available to fix the interest rate on future debt refinancings.
We have a $300.0 million revolving line of credit with a syndicate of lenders, that matures February 14, 2027 (Amended Credit Agreement). Under the terms of the Amended Credit Agreement, the amount of available principal may be increased up to an additional $500.0 million. We may also utilize borrowings under the Amended Credit Agreement to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions, and other general corporate expenditures. At September 30, 2024, there were no borrowings under the revolving line of credit and approximately $0.6 million of the credit facility was utilized by outstanding letters of credit.
See Note 5: Debt and Note 6: Derivative Instruments in the Notes to the Condensed Consolidated Financial Statements for additional information on our debt, credit, and interest rate swap agreements.
Financial Covenants
The Amended Term Loan Agreement and Amended Credit Agreement (collectively referred to as the Financing 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 Financing Agreements also contain financial maintenance covenants including the maintenance of a minimum interest coverage ratio and a maximum leverage ratio as defined in the Financing Agreements. We are permitted to pay dividends to our stockholders under the terms of the Financing Agreements so long as we expect to remain in compliance with the financial maintenance covenants.
The following table presents the components and applicable limits of Total Asset Value (TAV), a component of the Leverage Ratio, at September 30, 2024:
| | | | |
(in thousands) | | | |
Estimated timberland fair value | | $ | 5,220,752 | |
Wood Products manufacturing facilities book basis (limited to 10% of TAV) | | | 381,358 | |
Cash and cash equivalents | | | 161,131 | |
Other1 | | | 10,424 | |
Total Asset Value | | $ | 5,773,665 | |
| |
1 | Includes, as applicable, Company Owned Life Insurance (limited to 5% of TAV), Construction in Progress (limited to 10% of TAV) and Investments in Affiliates (limited to 15% of TAV) as defined in the Financing Agreements. |
At September 30, 2024, we were in compliance with all covenants under the Financing Agreements. The following table sets forth the financial covenants for the Financing Agreements and our status with respect to these covenants at September 30, 2024:
| | | | | | |
| | Covenant Requirement | | Actual |
Interest Coverage Ratio | | ≥ | | 3.00 to 1.00 | | 8.8 |
Leverage Ratio | | ≤ | | 40% | | 18% |
There were no changes to our financial covenants as a result of the tenth amendment to the Amended Term Loan agreement dated November 1, 2024 discussed above.
Credit Ratings
Two major debt rating agencies routinely evaluate our debt, and our cost of borrowing can increase or decrease depending on our credit rating. Both Moody’s and S&P rate our debt as investment grade. There have been no changes in our credit rating during the nine months ended September 30, 2024. In May 2024, Moody's revised their outlook on the company to negative from stable.
Capital Structure
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(in thousands) | | September 30, 2024 | | | December 31, 2023 | |
Long-term debt (including current portion) | | $ | 1,034,599 | | | $ | 1,033,728 | |
Cash and cash equivalents | | | (161,131 | ) | | | (230,118 | ) |
Net debt | | | 873,468 | | | | 803,610 | |
Market capitalization1 | | | 3,552,733 | | | | 3,896,822 | |
Enterprise value | | $ | 4,426,201 | | | $ | 4,700,432 | |
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Net debt to enterprise value | | | 19.7 | % | | | 17.1 | % |
Dividend yield2 | | | 4.0 | % | | | 3.7 | % |
Weighted-average cost of debt, after tax3 | | | 2.3 | % | | | 2.3 | % |
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1 | Market capitalization is based on outstanding shares of 78.9 million and 79.4 million times closing share prices of $45.05 and $49.10 at September 30, 2024 and December 29, 2023, respectively. |
2 | Dividend yield is based on annualized dividends per share of $1.80 and share prices of $45.05 and $49.10 at September 30, 2024 and December 29, 2023, respectively. |
3 | Weighted-average cost of debt excludes deferred debt costs and credit facility fees and includes estimated annual patronage credit on term loan debt. |
Liquidity and Performance Measures
The discussion below is presented to enhance the reader’s understanding of our operating performance, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures: Total Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the discussion of Total Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures described herein. These non-GAAP financial measures should be considered only as supplemental to, and are not intended to be considered in isolation or as a substitute for, or superior to, financial measures prepared in accordance with GAAP. Additionally, these non-GAAP financial measures may not be the same as or comparable to other similarly titled non-GAAP financial measures presented by other companies due to potential inconsistencies in methods of calculation.
Total Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and to allocate resources between segments. Total Adjusted EBITDDA removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. Management believes that this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information to investors and other interested parties by facilitating the comparability of our ongoing operating results over the periods presented and the identification of trends in our underlying business. It also can be used to evaluate the operational performance of the assets under management and to compare our operating results against analyst financial models and against the operating results of other public companies that supplement their GAAP results with non-GAAP financial measures.
We define EBITDDA as net income (loss) before interest expense, net, income taxes, basis of real estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses.
We reconcile Total Adjusted EBITDDA to net income (loss) for the consolidated company as it is the most comparable GAAP measure.
The following table provides a reconciliation of net income (loss) to Total Adjusted EBITDDA for the respective periods:
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| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Net income | | $ | 3,309 | | | $ | 23,675 | | | $ | 16,682 | | | $ | 62,241 | |
Interest expense, net | | | 9,635 | | | | 7,971 | | | | 18,049 | | | | 15,783 | |
Income taxes | | | (4,056 | ) | | | 4,725 | | | | (12,923 | ) | | | 7,650 | |
Depreciation, depletion and amortization | | | 25,487 | | | | 30,248 | | | | 85,150 | | | | 89,099 | |
Basis of real estate sold | | | 12,905 | | | | 6,109 | | | | 73,522 | | | | 21,624 | |
CatchMark merger-related expenses | | | — | | | | — | | | | — | | | | 2,453 | |
Gain on fire damage | | | — | | | | (16,326 | ) | | | — | | | | (39,436 | ) |
Non-operating pension and other postretirement employee benefits | | | (200 | ) | | | 228 | | | | (602 | ) | | | 685 | |
Loss on disposal of assets | | | 338 | | | | 18 | | | | 267 | | | | 39 | |
Other | | | (1,516 | ) | | | (370 | ) | | | (1,348 | ) | | | (638 | ) |
Total Adjusted EBITDDA | | $ | 45,902 | | | $ | 56,278 | | | $ | 178,797 | | | $ | 159,500 | |
We define CAD as cash from operating activities adjusted for capital spending for purchases of property, plant and equipment, timberlands reforestation and roads and timberland acquisitions not classified as strategic. Management believes CAD is a useful indicator of the company’s overall liquidity, as it provides a measure of cash generated that is available for dividends to common stockholders (an important factor in maintaining our REIT status), repurchase of the company’s common shares, debt repayment, acquisitions and other discretionary and nondiscretionary activities. Our definition of CAD is limited in that it does not solely represent residual cash flows available for discretionary expenditures since the measure does not deduct the payments required for debt service and other contractual obligations. Therefore, we believe it is important to view CAD as a measure that provides supplemental information to our Condensed Consolidated Statements of Cash Flows. Our definition of CAD may be different from similarly titled measures reported by other companies, including those in our industry. CAD is not necessarily indicative of the CAD that may be generated in future periods.
The following table provides a reconciliation of cash from operating activities to CAD:
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| | Nine Months Ended September 30, | | | Twelve Months Ended September 30, | |
(in thousands) | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
Net cash from operating activities1, 2 | | $ | 143,062 | | | $ | 117,308 | | | $ | 184,865 | | | $ | 150,772 | |
Capital expenditures3 | | | (103,771 | ) | | | (46,757 | ) | | | (178,627 | ) | | | (79,260 | ) |
CAD | | $ | 39,291 | | | $ | 70,551 | | | $ | 6,238 | | | $ | 71,512 | |
Net cash from investing activities4 | | $ | (82,085 | ) | | $ | (27,422 | ) | | $ | (149,967 | ) | | $ | (47,147 | ) |
Net cash from financing activities | | $ | (137,534 | ) | | $ | (121,601 | ) | | $ | (187,643 | ) | | $ | (284,438 | ) |
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1 | Net cash from operating activities for the nine and twelve months ended September 30, 2024, includes cash paid for real estate development expenditures of $5.3 million and $7.0 million, respectively. Net cash from operating activities for the nine and twelve months ended September 30, 2023, includes cash paid for real estate development expenditures of $7.2 million and $8.4 million, respectively, and CatchMark merger-related expenses of $0.9 million and $6.6 million, respectively. |
2 | Net cash from operating activities for the nine and twelve months ended September 30, 2024, excludes $22.5 million and $29.5 million, respectively, of interest rate swap proceeds classified as investing and financing activities. Net cash from operating activities for the nine and twelve months ended September 30, 2023, excludes $18.7 million and $22.0 million, respectively, of interest rate swap proceeds classified as investing and financing activities. |
3 | The nine and twelve months ended September 30, 2024, includes capital expenditures of $38.0 million and $97.4 million, respectively, related to the Waldo Modernization Project. The nine and twelve months ended September 30, 2023, includes capital expenditures of $14.8 million related to the Waldo Modernization Project. Additionally, the nine and twelve months ended September 30, 2023 include fire-related capital expenditures for the Ola, Arkansas sawmill of $0.6 and $6.4 million, respectively, and excludes $1.4 million and $10.1 million, respectively, of insurance proceeds for the Ola, Arkansas sawmill property losses. The claim with insurance carriers was finalized by the end of 2023. |
4 | Net cash from investing activities includes payment for capital expenditures and acquisition of non-strategic timber and timberlands, which is also included in our reconciliation of CAD. |
Critical Accounting Policies and Estimates
There have been no significant changes during 2024 to our critical accounting policies or estimates as presented in our 2023 Annual Report on Form 10-K.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk exposure on financial instruments includes interest rate risk on our bank credit facility, term loans and interest rate swap agreements and forward starting interest rate swap agreements. We are exposed to interest rate volatility on existing variable rate debt instruments and future incurrences of fixed or variable rate debt, which exposure primarily relates to movements in various interest rates. We use interest rate swaps and forward starting swaps to hedge our exposure to the impact of interest rate changes on existing debt and future debt issuances, respectively. All market risk sensitive instruments were entered into for purposes other than for trading purposes.
For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2023. Our exposures to market risk have not changed materially since December 31, 2023.
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) under the Exchange Act) as of September 30, 2024. These disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO and CFO have concluded that these disclosure controls and procedures were effective as of September 30, 2024.
There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2024, we implemented new enterprise resource planning (ERP) systems which replaced certain legacy systems in which a significant portion of our business transactions originated, were processed, or were recorded. As a result, we have made corresponding changes to our business processes and information systems, updating applicable internal controls over financial reporting where necessary. Our new ERP systems are intended to provide us with enhanced transactional processing, security and management tools and are intended to enhance internal controls over financial reporting.
There have been no other changes that occurred in our internal control over financial reporting during the three months ended September 30, 2024, as defined in the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We believe there is no pending or threatened litigation that could have a material adverse effect on our financial position, operations or liquidity.
ITEM 1A. RISK FACTORS
We do not believe there have been any material changes in the risk factors previously disclosed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
On August 31, 2022, our board of directors authorized management to repurchase up to $200.0 million of our common stock with no set time limit for the repurchase (the 2022 Repurchase Program). Shares under the 2022 Repurchase Program may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 (the Exchange Act), or through privately negotiated transactions. During the three months ended September 30, 2024, we repurchased shares through a trading plan adopted in accordance with Rule 10b5-1 under the Exchange Act.
The following table provides information with respect to purchases of common stock made by the company during the three months ended September 30, 2024:
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Common Share Purchases | | Total Number of Shares Purchased | | | Average Price Paid Per Share | | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | |
July 1 - July 31 | | | — | | | $ | — | | | | — | | | $ | 100,000,080 | |
August 1 - August 31 | | | — | | | $ | — | | | | — | | | $ | 100,000,080 | |
September 1 - September 30 | | | 56,851 | | | $ | 42.20 | | | | 56,851 | | | $ | 97,600,781 | |
Total | | | 56,851 | | | $ | 42.20 | | | | 56,851 | | | $ | 97,600,781 | |
At September 30, 2024, we had remaining authorization of $97.6 million for future stock repurchases under the 2022 Repurchase Program. We record share repurchases upon trade date as opposed to settlement date when cash is disbursed.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the three months ended September 30, 2024, the following company officers adopted Rule 10b5-1 trading arrangements (as defined in Item 408(a) of Regulation S-K under the Exchange Act), each on the dates specified below. Each trading arrangement authorizes the automatic sale of the number of shares required to generate sufficient proceeds to cover the tax withholding obligation (calculated at the officer’s minimum or maximum withholding rate, as determined by the terms of the respective officer's trading arrangement) in connection with the settlement of performance shares or restricted stock units granted to the respective officer under the company’s equity incentive plans. The proceeds of the sales will be delivered to the company in satisfaction of the applicable tax withholding obligation and used to pay any fees, commissions and costs of sale. The number of shares that will be sold to cover the applicable tax withholding obligation is indeterminable and the duration of each arrangement is perpetual until terminated by the applicable company officer.
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Name & Title | | Date of Adoption |
Eric J. Cremers
President and Chief Executive Officer | | August 12, 2024 |
Wayne Wasechek
Vice President and Chief Financial Officer | | August 1, 2024 |
Ashlee Townsend Cribb
Vice President, Wood Products | | August 1, 2024 |
Darin R. Ball
Vice President, Timberlands | | August 5, 2024 |
William R. DeReu
Vice President, Real Estate | | August 12, 2024 |
Michele L. Tyler
Vice President, General Counsel and Corporate Secretary | | August 1, 2024 |
Anna E. Torma
Vice President, Public Affairs and Chief Sustainability Officer | | August 15, 2024 |
Robert L. Schwartz
Vice President, Human Resources | | August 5, 2024 |
Glen F. Smith
Chief Accounting Officer | | August 14, 2024 |
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No other officers or directors adopted, modified, or terminated any "Rule 10b5-1 trading arrangements" or "non-Rule 10b5-1 trading arrangements," as each term is defined in Item 408(a) of Regulation S-K under the Exchange Act.
ITEM 6. EXHIBITS
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EXHIBIT NUMBER | DESCRIPTION |
3.1*
| Fourth Restated Certificate of Incorporation of the Registrant, effective May 1, 2023, filed as Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on May 4, 2023. |
3.2* | Bylaws of the Registrant, as amended through February 18, 2009, filed as Exhibit (3)(b) to the Current Report on Form 8-K filed by the Registrant on February 20, 2009. |
4 | See Exhibits 3.1 and 3.2. The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt. |
10.11, 2 | Form of PotlatchDeltic 2019 Long-Term Incentive Plan RSU Award Agreement (Employee) for restricted stock unit awards granted on or after August 27, 2024. |
10.21, 2 | Form of PotlatchDeltic 2019 Long-Term Incentive Plan Performance Share Award Agreement (Employee) for performance share awards granted on or after August 27, 2024. |
31 | Rule 13a-14(a)/15d-14(a) Certifications. |
32 | Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350. |
101 | The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024, filed on November 4, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Balance Sheets at September 30, 2024 and December 31, 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2024 and 2023, and (vi) the Notes to Condensed Consolidated Financial Statements. |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |
* Incorporated by reference.
1 Management contract or compensatory plan, contract, or arrangement.
2 Document filed with this Form 10-Q
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/ GLEN F. SMITH |
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| Glen F. Smith |
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| Chief Accounting Officer (Duly Authorized; Principal Accounting Officer) |
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Date: | November 4, 2024 |
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