UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
| ☒ | Annual Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the fiscal year ended December 31, 2018
OR
| ☐ | Transition Report Pursuant to Section 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number 1-12147
A. | Full title of the plan and the address of the plan, if different from that of the issuer named below: |
THRIFT PLAN OF DELTIC TIMBER CORPORATION
B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
PotlatchDeltic Corporation
601 West First Avenue, Suite 1600,
Spokane, Washington 99201
Report of Independent Registered Public
Accounting Firms and Financial Statements
with Supplemental Information for
Thrift Plan of Deltic Timber Corporation
December 31, 2018 and 2017
| PAGE |
1 | |
FINANCIAL STATEMENTS |
|
2 | |
3 | |
4 | |
SUPPLEMENTAL INFORMATION REQUIRED BY THE DEPARTMENT OF LABOR |
|
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) | 9 |
10 | |
EXHIBIT 23 |
|
Consent of Independent Registered Public Accounting Firm |
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Plan Administrator and Participants of
Thrift Plan of Deltic Timber Corporation
Opinion on the Financial Statements
We have audited the accompanying statements of net assets available for benefits of Thrift Plan of Deltic Timber Corporation (Plan) as of December 31, 2018 and 2017, the related statement of changes in net assets available for benefits for the year ended December 31, 2018, and the related notes (collectively, financial statements). In our opinion, the financial statements present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2018 and 2017, and the changes in net assets available for benefits for the year ended December 31, 2018 in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on the Plan’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Opinion on the Supplementary Information
The supplementary information included in Schedule H, line 4(i) – schedule of assets (held at end of year) as of December 31, 2018, has been subjected to audit procedures performed in conjunction with the audit of the Plan’s financial statements. The supplementary information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplementary information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplementary information. In forming our opinion on the supplementary information in the accompanying schedules, we evaluated whether the supplementary information, including its form and content, is presented in conformity with DOL’s Rules and Regulations for Reporting and Disclosure under ERISA. In our opinion, the supplementary information in the accompanying schedule is fairly stated in all material respects in relation to the financial statements as a whole.
/s/ Moss Adams LLP
Spokane, Washington
June 20, 2019
We have served as the Plan’s auditor since 2018.
1
Thrift Plan of Deltic Timber Corporation
Statements of Net Assets Available for Benefits
| December 31, |
| ||||||
|
| 2018 |
|
| 2017 |
| ||
Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 21,374,911 |
|
| $ | 3,337,495 |
|
Investments, at fair value |
|
| — |
|
|
| 27,905,267 |
|
Total Assets |
|
| 21,374,911 |
|
|
| 31,242,762 |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
| — |
|
|
| 7,384 |
|
Excess contributions payable to participants |
|
| — |
|
|
| 5,653 |
|
Payable to other plans |
|
| 21,374,911 |
|
|
| — |
|
Total liabilities |
|
| 21,374,911 |
|
|
| 13,037 |
|
|
|
|
|
|
|
|
|
|
Net assets available for benefits |
| $ | — |
|
| $ | 31,229,725 |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
2
Thrift Plan of Deltic Timber Corporation
Statement of Changes in Net Assets Available for Benefits
|
| Year Ended December 31, |
| |
|
| 2018 |
| |
Investment (loss) income: |
|
|
|
|
Interest and dividend income |
| $ | 1,519,801 |
|
Net depreciation of fair value of investments |
|
| (3,363,417 | ) |
Total investment loss |
|
| (1,843,616 | ) |
|
|
|
|
|
Contributions: |
|
|
|
|
Participant |
|
| 1,276,187 |
|
Rollover |
|
| 2,803 |
|
Employer |
|
| 1,133,731 |
|
Total contributions |
|
| 2,412,721 |
|
|
|
|
|
|
Distributions to participants |
|
| (8,990,398 | ) |
Administrative fees |
|
| (33,137 | ) |
|
|
|
|
|
Net decrease in net assets available for benefit before transfers |
|
| (8,454,430 | ) |
Transfer of assets to other plans |
|
| (22,775,295 | ) |
Net decrease in net assets available for benefit |
|
| (31,229,725 | ) |
|
|
|
|
|
Net assets available for benefits: |
|
|
|
|
Beginning of year |
|
| 31,229,725 |
|
End of year |
| $ | — |
|
The accompanying notes are an integral part of these financial statements.
3
Thrift Plan of Deltic Timber Corporation
Note 1: Description of Plan
The following description of the Thrift Plan of Deltic Timber Corporation (“the Plan”) provides only general information. Participants should refer to the Plan Document for a more complete description of the Plan’s provisions.
General
The Plan is a profit sharing, defined contribution plan covering each employee who is scheduled to work, or actually does work, 1,000 or more hours per year, and becomes eligible to participate following the completion of 30 days of service. Employees hired or rehired on or after January 1, 2015 or enter or reenter covered employment on or after January 1, 2015, will be an Automatic Active Participant and will be eligible for Automatic Employer Contributions beginning on the first day of the month following the date of satisfaction of eligibility requirements. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
Change in Plan Sponsor
On February 20, 2018, Deltic Timber Corporation merged with Potlatch Corporation to form PotlatchDeltic Corporation (collectively referred to as the “Company”). Prior to the merger, the Plan was administered by the Company’s Pension, Investment, and Employee Benefits Committee whose members are appointed by the Company’s Board of Directors. Upon merger, administration of the Plan became the responsibility of the PotlatchDeltic Benefits Committee. SunTrust Bank (“SunTrust” or the “Trustee”), Nashville N.A. is the Plan’s trustee, and FASCore, LLC is the record keeper for the Plan. See Note 6: Transfer of Plan Assets.
Contributions
Contributions to the Plan include (a) employee tax-deferred, earnings-reduction contributions, (b) employee after-tax supplemental contributions, (c) Company matching safe harbor contributions, (d) rollovers from other qualified plans, and (e) Automatic Employer Contributions for employees hired or rehired on or after January 1, 2016.
A participant may contribute up to 50 percent of their eligible compensation to a tax-deferred account. Tax- deferred contributions may not exceed the annual Internal Revenue Service limit. The Company will make a safe harbor contribution on behalf of each participant who makes a tax-deferred contribution to the Plan. The safe harbor contribution will equal 100 percent of the first five percent of eligible compensation. In addition, for Automatic Active Participants the Automatic Employer Contribution is equal to four percent of the participants’ compensation for the pay period. Participants who have attained age 50 before the end of the plan year are eligible to make catch-up contributions. The Company may make additional voluntary matching contributions at its discretion. No such additional voluntary contributions were made in 2018. Participants may also contribute to an after-tax supplemental account not to exceed 10 percent of eligible compensation. After-tax supplemental contributions are not matched by the Company. Participants direct the investment of their contributions and Company matching contributions into various investment options offered by the Plan, including stock in the Deltic Timber Corporation prior to the merger with Potlatch Corporation and in PotlatchDeltic stock following the merger.
Participant Accounts
Each participant’s account is credited with their contributions and (a) the Company’s contribution and (b) Plan earnings and charged with an allocation of administrative expenses. Allocations are based on participant’s portion of account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from their vested accounts.
Vesting
For those employed on or after January 1, 2015, the employee will be 100 percent vested in the Automatic Employer Contributions and investment returns of the Automatic Employer Contributions after the employee completes three years of service, or if the employee is employed by the Company on or after the employee’s normal retirement age.
4
Payment of Benefits
Upon attaining normal retirement age, disability or death, the participant (or his/her beneficiary) has the option to receive payment equal to the value of the participant’s account in a lump sum, in installment payments not to exceed 20 years with each annual installment equal to at least 5 percent of the account balance, or in a combination of lump sum and installments (for pre-1987 after-tax contributions). For termination of service for reason other than retirement, disability, or death, a participant may receive the value of the vested account balance as a lump sum distribution.
Although the Plan is designed specifically for retirement, a participant may request an in-service withdrawal from the Plan while actively employed. A participant may withdraw employee after-tax supplemental contributions, Pre-2005 Company matching contributions, Pre-1987 deductible contributions, or Post-1986 matching employee contributions at a minimum of $250. Withdrawals from these accounts are limited to once every 12 months. Pre-1987 matching employee contributions may be withdrawn at any time and at any amount. Participants may be required to bear the cost of any distribution fees associated with an in-service withdrawal.
A participant may withdraw employee tax-deferred contributions or rollovers from other qualified plans under IRS hardship provisions only. If a hardship withdrawal is taken, contributions are suspended for 6 months.
Company contributions, employee tax-deferred or account earnings withdrawn from the Plan may be subject to a 10 percent penalty tax if the participant is not 59 1/2 years old or permanently disabled or has died.
Forfeited Accounts
Forfeitures may arise if separation from service occurs before the three-year vesting period for the Automatic Employer Contributions. During 2018, $47,761 of forfeitures were used to offset Company contributions and $94,725 were transferred to pay plan expenses. Forfeited non-vested accounts were $43,707 and $24,753 at December 31, 2018 and 2017, respectively. Forfeited balances in non-vested accounts at December 31, 2018 were transferred to the Potlatch Salaried 401(k) Plan and are included in the transfer to other plans.
Administrative Expenses
The Company pays most administrative expenses. Participant level fees are paid by the participant from the participant’s account within the Plan. In addition, certain investment related expenses are netted in the investment returns reported to the Plan.
Concentration of Investments
At December 31, 2018, all investments within the Plan were held in the SunTrust Bank FDIC Insured account. At December 31, 2017, three investments within the Plan each individually represented greater than 10% of the net assets available for benefits and together represented 36% of the net assets available for benefits.
Note 2 – Summary of Significant Accounting Policies Basis of Accounting
The accompanying financial statements of the Plan have been prepared on the accrual basis of accounting.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
The Plan’s investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at measurement date.
5
Purchases and sales of securities are recorded on a trade-date basis. Net appreciation includes the Plan’s gains and losses on investments bought and sold as well as held during the year. Dividends are recorded on the ex-dividend date, and interest income is recorded on the accrual basis.
Excess Contributions Payable
Amounts payable to participants for contributions in excess of amounts allowed by the Internal Revenue Service are recorded as a liability with a corresponding reduction to contributions. At December 31, 2018 and 2017, $0 and $5,653, respectively, was accrued on the Statements of Net Assets Available for Benefits for excess contributions payable to participants.
Payment of Benefits
Benefits are recorded when paid.
Subsequent events
The Plan’s management has evaluated subsequent events through the date the financial statements were available for issuance, and there were no new subsequent events requiring adjustment to the financial statements or disclosure, as stated herein.
Note 3 – Investments
U.S. GAAP establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 | Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access. |
Level 2Inputs to the valuation methodology include:
| • | Quoted prices for similar assets or liabilities in active markets; |
| • | Quoted prices for identical or similar assets or liabilities in inactive markets; |
| • | Inputs other than quoted prices that are observable for the asset or liability; |
| • | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. |
Level 3Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2018 and 2017.
| • | Cash equivalents are valued at cost, which approximates fair value. |
| • | Registered investment company funds are valued at the daily closing price as reported by the fund. Registered investment company funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded. |
| • | Common stock is valued at the closing price reported on the active market in which the individual securities are traded. |
6
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following tables set forth by level, within the fair value hierarchy, the Plan's investments at fair value as of December 31, 2018 and 2017. There were no transfers between levels during 2018 or 2017.
| Investments at Fair Value at December 31, 2018 |
| ||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SunTrust Bank FDIC insured account |
| $ | 21,374,911 |
|
| $ | — |
|
| $ | — |
|
| $ | 21,374,911 |
|
Total investments |
| $ | 21,374,911 |
|
| $ | — |
|
| $ | — |
|
| $ | 21,374,911 |
|
| Investments at Fair Value at December 31, 2017 |
| ||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SunTrust Bank FDIC insured account |
| $ | 3,337,495 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,337,495 |
|
Registered investment company funds |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total registered investment company funds |
|
| 25,285,675 |
|
|
| — |
|
|
| — |
|
|
| 25,285,675 |
|
Total common stocks |
|
| 2,619,592 |
|
|
| — |
|
|
| — |
|
|
| 2,619,592 |
|
Total investments |
| $ | 31,242,762 |
|
| $ | — |
|
| $ | — |
|
| $ | 31,242,762 |
|
Note 4 – Income Tax Status
The Internal Revenue Service has determined and informed the Company by a letter dated January 4, 2017, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code of 1986, as amended (the “IRC”).
U.S. GAAP require plan management to evaluate tax positions taken by the Plan and recognize a tax liability if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan Administrator has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2018, there are no uncertain tax positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
Note 5 – Parties-in-Interest
Parties-in-interest are defined under Department of Labor regulations as any fiduciary of the Plan, any party rendering service to the Plan, the Company and certain others. Funds invested in the cash equivalent investment option are considered deposits of SunTrust Bank. SunTrust is the Trustee of the Plan; therefore, these transactions qualify as party-in-interest transactions. Additionally, investments in common stock of the Company, the Plan sponsor, are party-in-interest transactions.
Note 6 – Transfer of Plan Assets
At December 31, 2018, the Plan was terminated, and all asset balances were transferred to the below PotlatchDeltic plans:
| Asset Value Transferred |
|
| Payable at December 31, 20181 |
| |||
PotlatchDeltic Hourly 401(k) Plan |
| $ | 7,899,403 |
|
| $ | 7,497,874 |
|
PotlatchDeltic Salary 401(k) Plan |
|
| 14,875,892 |
|
|
| 13,877,037 |
|
Total Assets Transferred |
| $ | 22,775,295 |
|
| $ | 21,374,911 |
|
7
1 These assets were wired on January 2, 2019.
Note 7 – Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participant’s account balances and the amounts reported in the statements of net assets available for benefits.
Note 8: Reconciliation of Financial Statements to the Form 5500
The following is a reconciliation of participant contribution per the financial statements to Form 5500 for the year ended December 31, 2018:
|
| 2018 |
| |
| $ | 1,276,187 |
| |
Current year excess contribution due to participants |
|
| — |
|
Prior year excess contributions due to participants |
|
| (5,653 | ) |
Participant contributions per Form 5500 |
| $ | 1,270,534 |
|
Participant contributions in the financial statements have been reduced by excess contributions payable as of December 31, 2017. The Form 5500 reports participant contributions of the cash basis.
The following is a reconciliation of administrative expenses per the financial statements to Form 5500 for the year ended December 31, 2018:
| 2018 |
| ||
Administrative expenses per the financial statements |
| $ | 33,137 |
|
Change in administrative expenses payable |
|
| 7,384 |
|
Administrative expenses per Form 5500 |
| $ | 40,521 |
|
8
Thrift Plan of Deltic Timber Corporation
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
Plan Sponsor's EIN: 71-0795870
Plan Number: 280099-01
| (b) |
| (c) |
| December 31, 2018 |
| ||||
(a) |
| Identify of Issue, Borrower, Lessor, or Similar Party |
| Description, Including Maturity Date, Rate of Interest, Collateral, Par, Maturity Value, Number of Shares |
| (d) Cost |
| (e) Current Value |
| |
|
| Cash and cash equivalents |
|
|
|
|
|
| ||
| * | SunTrust Bank (Cash or Cash equivalents) | * | SunTrust Bank FDIC Insured account |
| ** |
| $ | 21,374,911 |
|
|
|
|
|
|
|
|
| $ | 21,374,911 |
|
*Represents a party in interest at December 31, 2018.
**The cost of participant-directed investments is not required to be disclosed.
9
Thrift Plan of Deltic Timber Corporation
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the administrator of the Plan has duly caused this annual report to be signed on its behalf by the undersigned thereunto duly authorized:
| Thrift Plan of Deltic Timber Corporation | |
|
|
|
By | /s/ Wayne Wasechek | |
|
| Wayne Wasechek |
|
| Corporate Controller and Principal Accounting Officer |
|
| On behalf of the administrator |
Date: June 20, 2019
10