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PRESS RELEASE from provider: Globe Newswire
This content is a press release from our partner Globe Newswire. The AP newsroom and editorial departments were not involved in its creation.

PotlatchDeltic Corporation Reports First Quarter 2018 Results

May 3, 2018

SPOKANE, Wash., May 03, 2018 (GLOBE NEWSWIRE) -- PotlatchDeltic Corporation (Nasdaq:PCH) today reported net income of $14.6 million, or $0.29 per diluted share, on revenues of $199.9 million for the quarter ended March 31, 2018.

First Quarter 2018 Highlights

-- Merged with Deltic Timber on February 20, 2018 to form PotlatchDeltic -- On track with $50 million in after-tax annual cash synergy run rate in year two; achieved $30 million run rate as of March 31, 2018 -- Adjusted EBITDDA of $64.7 million and Adjusted EBITDDA margin of 32.4% -- Closed new $380 million revolver with $420 million accordion -- Moody’s upgraded PotlatchDeltic to Baa3 (investment grade)

“First quarter 2018 marked a key milestone in our company history as we successfully closed our merger and began a new chapter as PotlatchDeltic,” said Mike Covey, chairman and chief executive officer. “Significant work has been accomplished toward integrating the two companies and we have made meaningful progress capturing $30 million of our $50 million annual synergy target on a run-rate basis. Our employees have also done a tremendous job this quarter achieving excellent operating results, taking advantage of strong market conditions in lumber and favorable sawlog demand,” stated Mr. Covey.

Financial Highlights ($ in millions, except per share data) Q1 2018 Q4 2017 Q1 2017 ----------------------------------------------------------- --------- --------- --------- Revenues $ 199.9 $ 175.2 $ 149.7 Net income $ 14.6 $ 11.6 $ 16.9 Weighted average shares outstanding, diluted (in thousands) 50,786 41,301 41,071 Net income per diluted share $ 0.29 $ 0.28 $ 0.41 Adjusted net income $ 35.2 $ 25.7 $ 16.9 Adjusted net income per diluted share $ 0.69 $ 0.62 $ 0.41 Adjusted EBITDDA $ 64.7 $ 50.5 $ 36.9 Distribution per share $ 0.40 $ 0.40 $ 0.375 Net cash from operations $ 34.9 $ 33.3 $ 41.9 Cash and cash equivalents $ 102.3 $ 120.5 $ 101.7

Consolidated results for first quarter of 2018 as presented include the results of Deltic Timber for the period February 21, 2018 through March 31, 2018. The financial statements included within this release do not include Deltic Timber’s financial results for any period prior to the merger date.

Excluding $8.8 million attributable to Deltic Timber, first quarter 2018 Adjusted EBITDDA was $55.9 million, a $5.4 million increase from fourth quarter 2017.

Business Performance: Q1 2018 vs. Q4 2017

Resource

First Quarter 2018 Highlights

-- Harvest volumes increased 9%; southern sawlog volumes up nearly 45% due to the addition of Deltic operations -- Forestry costs declined due to accelerated southern fertilization in Q4 2017 and seasonally lower activity in Idaho -- Partially offset by lower southern sawlog pricing due to mix and seasonally lower northern sawlog volumes -- Northern sawlog pricing remained relatively flat

($ in millions) Q1 2018 Q4 2017 $ Change ---------------- ------- ------- -------- Segment Revenues $ 76.5 $ 75.8 $ 0.7 Adjusted EBITDDA $ 37.7 $ 35.5 $ 2.2

Excluding $4.7 million attributable to Deltic Timber operations, first quarter 2018 Resource segment Adjusted EBITDDA was $33.0 million, a $2.5 million decrease from fourth quarter 2017.

Wood Products

First Quarter 2018 Highlights

-- Lumber shipments increased nearly 11% due to solid demand and the addition of Deltic operations -- Lumber pricing increased 4% with strong markets supported by improving housing demand and transportation disruptions -- Adjusted EBITDDA benefitted from the addition of El Dorado MDF and higher industrial plywood shipments and realizations

($ in millions) Q1 2018 Q4 2017 $ Change ---------------- -------- -------- -------- Segment Revenues $ 139.8 $ 114.6 $ 25.2 Adjusted EBITDDA $ 29.0 $ 21.8 $ 7.2

Excluding $5.7 million attributable to Deltic Timber operations, first quarter 2018 Wood Products segment Adjusted EBITDDA was $23.3 million, a $1.5 million increase from fourth quarter 2017.

Real Estate

First Quarter 2018 Highlights

-- Sold 6,144 acres of rural real estate; average pricing of $1,438 per acre -- Sold 12 residential lots in Chenal with average pricing of $99,000 per lot -- No commercial acreage sales in Chenal; several indications of interest

($ in millions) Q1 2018 Q4 2017 $ Change ---------------- ------- ------- -------- Segment Revenues $ 10.6 $ 4.8 $ 5.8 Adjusted EBITDDA $ 8.0 $ 3.4 $ 4.6

Excluding $0.5 million attributable to acquired Deltic Timber operations, first quarter 2018 Real Estate segment Adjusted EBITDDA was $7.5 million, a $4.1 million increase from fourth quarter 2017.

Outlook

“We remain optimistic that improving U.S. housing starts and strong repair and remodel activity will continue to support favorable fundamentals for our resource and wood products businesses. The merger with Deltic is off to a very successful start, we are confident that our synergies and operational efficiencies are attainable, and we continue to identify additional opportunities. We are well positioned with a strong balance sheet, significant financial flexibility and a conservative dividend payout ratio,” concluded Mr. Covey.

Non-GAAP Measures

This press release includes certain non-GAAP financial measures, which management believes are useful to investors, securities analysts and other interested parties. These non-GAAP financial measures should be considered only as supplemental to, and not as superior to, financial measures prepared in accordance with GAAP.

Management uses Adjusted EBITDDA to evaluate the performance of the company. This is a non-GAAP measure that represents EBITDDA before certain items that impact comparison of the performance of our business either period-over-period or with other businesses.

Adjusted Net Income and Adjusted Net Income Per Diluted Share are non-GAAP measures that represent GAAP net income and GAAP net earnings per diluted share before certain items that impact the ability of investors, securities analysts and other interested parties to compare the performance of our business, either period-over-period or with other businesses.

Reconciliations to GAAP are set forth in the accompanying schedules.

Conference Call Information

A live conference call and webcast will be held Friday, May 4, 2018, at 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time). Investors may access the webcast at www.potlatchdeltic.com by clicking on the Investor Resources link or by conference call at 1-866-393-8403 for U.S./Canada and 1-706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 5047548. Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available two hours following the call until May 11, 2018 by calling 1-800-585-8367 for U.S./Canada or 1-404-537-3406 for international callers. Callers must enter conference I.D. number 5047548 to access the replay.

About PotlatchDeltic

PotlatchDeltic (NASDAQ:PCH) is a leading Real Estate Investment Trust (REIT) that owns nearly 2 million acres of timberlands in Alabama, Arkansas, Idaho, Louisiana, Minnesota and Mississippi. Through its taxable REIT subsidiary, the company also operates six sawmills, an industrial-grade plywood mill, a medium density fiberboard plant, a residential and commercial real estate development business and a rural timberland sales program. PotlatchDeltic, a leader in sustainable forest practices, is dedicated to long-term stewardship and sustainable management of its timber resources. More information can be found at www.potlatchdeltic.com.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, our expectations regarding the U.S. housing market; strong repair and remodel market; lumber demand and pricing; increased capital investment in manufacturing in the U.S. South; the expected synergies and operational efficiencies from the Deltic merger; the estimated distribution of Deltic’s accumulated earnings and profits; and the integration of Deltic’s operations. You should carefully read forward-looking statements, including statements that contain these words, because they discuss the future expectations or state other “forward-looking” information about Potlatch. A number of important factors could cause actual results or events to differ materially from those indicated by such forward-looking statements, many of which are beyond PotlatchDeltic’s control, including the U.S. housing market; changes in timberland values; changes in timber harvest levels on the company’s lands; changes in timber prices; changes in policy regarding governmental timber sales; availability of logging contractors and shipping capacity; changes in the United States and international economies; changes in interest rates; changes in the level of construction activity; changes in Asia demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; changes in demand for our products; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; changes in share price; the successful execution of the company’s strategic plans; the company’s ability to meet expectations regarding the accounting and tax treatments of the merger transaction; the possibility that any of the anticipated benefits of the merger will not be realized or will not be realized within the expected time period; the risk that integration of Deltic’s operations with those of Potlatch will be materially delayed or will be more costly or difficult than expected; the effect of the merger on customer relationships and operating results (including, without limitation, difficulties in maintaining relationships with employees or customers); the estimation of Deltic’s accumulated earnings and profits is preliminary and may change with further due diligence; and the other factors described in Potlatch’s Annual Report on Form 10-K and in the company’s other filings with the SEC. Potlatch assumes no obligation to update the information in this communication, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements, all of which speak only as of the date hereof.

-------------------------------------------------------------------------------------------- PotlatchDeltic Corporation Consolidated Statements of Income Unaudited -------------------------------------------------------------------------------------------- Three Months Ended ------------------------------------- March 31, December March 31, 31, (Dollars in thousands, except per share amounts) 2018 2017 2017 ----------- ----------- ----------- Revenues $ 199,897 $ 175,244 $ 149,681 - ------- - - ------- - - ------- - Costs and expenses: Cost of goods sold1 139,155 120,817 112,498 Selling, general and administrative expenses1 13,656 12,304 11,368 Deltic merger-related costs 19,255 3,382 — Loss on lumber price swap — 97 — - ------- - - ------- - - ------- - 172,066 136,600 123,866 - ------- - - ------- - - ------- - Operating income 27,831 38,644 25,815 Interest expense, net (5,660 ) (7,395 ) (4,970 ) Non-operating pension and other postretirement costs1 (1,857 ) (1,596 ) (1,906 ) - ------- - - ------- - - ------- - Income before income taxes 20,314 29,653 18,939 Income tax (5,717 ) (18,065 ) (2,018 ) - ------- - - ------- - - ------- - Net income $ 14,597 $ 11,588 $ 16,921 - ------- - - ------- - - ------- - Net income per share: Basic $ 0.29 $ 0.28 $ 0.41 Diluted $ 0.29 $ 0.28 $ 0.41 Dividends per share $ 0.40 $ 0.40 $ 0.375 Weighted-average shares outstanding (in thousands): Basic 50,425 40,839 40,778 Diluted 50,786 41,301 41,071

1. We adopted ASU No. 2017-07, Compensation – Retirement Benefits (Topic 715), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, retrospectively on January 1, 2018 and have reclassified non-service costs from operating expenses to non-operating costs. There was no change to income before income taxes.

-------------------------------------------------------------------------------------------------- PotlatchDeltic Corporation Condensed Consolidated Balance Sheets Unaudited -------------------------------------------------------------------------------------------------- (Dollars in thousands) March31, 2018 December31, 2017 ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 102,340 $ 120,457 Customer receivables, net 28,212 11,240 Inventories 62,153 50,132 Other current assets 21,824 11,478 - --------- - - -------- - Total current assets 214,529 193,307 Property, plant and equipment, net 343,176 77,229 Investment in real estate held for development and sale 78,454 — Timber and timberlands, net 1,704,341 654,476 Deferred tax assets, net — 19,796 Trade name and customer relationships intangibles 19,000 — Other long-term assets 12,853 8,271 - --------- - - -------- - Total assets $ 2,372,353 $ 953,079 - --------- - - -------- - LIABILITIES AND STOCKHOLDERS’EQUITY Current liabilities: Accounts payable and accrued liabilities $ 75,241 $ 55,201 Current portion of long-term debt — 14,263 Current portion of pension and other postretirement employee benefits 6,057 5,334 - --------- - - -------- - Total current liabilities 81,298 74,798 Long-term debt 782,974 559,056 Pension and other postretirement employee benefits 131,959 103,524 Deferred tax liabilities, net 22,927 — Other long-term obligations 17,753 15,159 - --------- - - -------- - Total liabilities 1,036,911 752,537 - --------- - - -------- - Commitments and contingencies Stockholders’ equity: Common stock, $1 par value 62,755 40,612 Additional paid-in capital 1,480,402 359,144 Accumulated deficit (90,334 ) (104,363 ) Accumulated other comprehensive loss (117,381 ) (94,851 ) - --------- - - -------- - Total stockholders’ equity 1,335,442 200,542 - --------- - - -------- - Total liabilities and stockholders’ equity $ 2,372,353 $ 953,079 - --------- - - -------- -

------------------------------------------------------------------------------------------------------- PotlatchDeltic Corporation Condensed Consolidated Statements of Cash Flows Unaudited ------------------------------------------------------------------------------------------------------- For the three months ended -------------------------------------- (Dollars in thousands) March31, December31, March31, 2018 2017 2017 ------------ ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 14,597 $ 11,588 $ 16,921 Adjustments to reconcile net income to net cash from operating activities: Depreciation, depletion and amortization 12,635 8,004 6,702 Basis of real estate sold 3,605 476 4,790 Real estate development expenditures (608 ) — — Change in deferred taxes (1,058 ) 16,289 (351 ) Pension and other postretirement employee benefits 3,814 3,288 3,771 Equity-based compensation expense 3,094 1,186 1,157 Other, net (542 ) (405 ) (1,007 ) Funding of qualified pension plans (8,098 ) — — Change in working capital and operating-related activities, net 7,475 (7,112 ) 9,966 - -------- - - ------- - - ------- - Net cash from operating activities 34,914 33,314 41,949 - -------- - - ------- - - ------- - CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (3,632 ) (3,410 ) (3,636 ) Timberlands reforestation and roads (2,860 ) (3,630 ) (2,645 ) Acquisition of timber and timberlands — (10 ) — Other, net 232 191 (102 ) Cash and cash equivalents acquired in Deltic merger 3,419 — — - -------- - - ------- - - ------- - Net cash from investing activities (2,841 ) (6,859 ) (6,383 ) - -------- - - ------- - - ------- - CASH FLOWS FROM FINANCING ACTIVITIES Dividends to common stockholders (25,102 ) (16,245 ) (15,228 ) Revolving line of credit repayment (106,000 ) — — Proceeds from issue of long-term debt 100,000 — — Repayment of long-term debt (14,250 ) (6,000 ) — Debt issuance costs (2,409 ) — — Other, net (2,429 ) (556 ) (1,258 ) - -------- - - ------- - - ------- - Net cash from financing activities (50,190 ) (22,801 ) (16,486 ) - -------- - - ------- - - ------- - Change in cash and cash equivalents (18,117 ) 3,654 19,080 Cash and cash equivalents at beginning of period 120,457 116,803 82,584 - -------- - - ------- - - ------- - Cash and cash equivalents at end of period $ 102,340 $ 120,457 $ 101,664 - -------- - - ------- - - ------- -

------------------------------------------------------------------------------------------------------- PotlatchDeltic Corporation Segment Information Unaudited ------------------------------------------------------------------------------------------------------- For the three months ended ------------------------------------- March 31, December March 31, 31, (Dollars in thousands) 2018 2017 2017 ----------- ----------- ----------- Revenues Resource $ 76,506 $ 75,802 $ 51,768 Wood Products 139,815 114,549 95,592 Real Estate 10,555 4,733 14,504 - ------- - - ------- - - ------- - 226,876 195,084 161,864 Intersegment Resource revenues (26,979 ) (19,840 ) (12,183 ) - ------- - - ------- - - ------- - Consolidated revenues $ 199,897 $ 175,244 $ 149,681 - ------- - - ------- - - ------- - Adjusted EBITDDA1 Resource $ 37,697 $ 35,507 $ 19,343 Wood Products 28,950 21,862 10,769 Real Estate 8,002 3,387 13,460 Corporate (8,716 ) (8,493 ) (7,692 ) Eliminations and adjustments (1,201 ) (1,840 ) 1,040 - ------- - - ------- - - ------- - Total Adjusted EBITDDA 64,732 50,423 36,920 Basis of real estate sold (3,605 ) (476 ) (4,790 ) Depreciation, depletion and amortization (12,196 ) (7,636 ) (6,329 ) Interest expense, net (5,660 ) (7,395 ) (4,970 ) Non-operating pension and other postretirement employee benefits (1,857 ) (1,596 ) (1,906 ) Gain (loss) on fixed assets 4 (188 ) 14 Loss on lumber price swap — (97 ) — Inventory purchase price adjustment in cost of goods sold (1,849 ) — — Deltic merger-related costs (19,255 ) (3,382 ) — - ------- - - ------- - - ------- - Income before income taxes $ 20,314 $ 29,653 $ 18,939 - ------- - - ------- - - ------- - Depreciation, depletion and amortization Resource $ 8,646 $ 5,611 $ 4,384 Wood Products 3,354 1,860 1,827 Real Estate 40 1 1 Corporate 156 164 117 - ------- - - ------- - - ------- - 12,196 7,636 6,329 Bond discounts and deferred loan fees2 439 368 373 - ------- - - ------- - - ------- - Total depreciation, depletion and amortization $ 12,635 $ 8,004 $ 6,702 - ------- - - ------- - - ------- - Basis of real estate sold Real Estate $ 3,723 $ 640 $ 4,809 Eliminations and adjustments (118 ) (164 ) (19 ) - ------- - - ------- - - ------- - Total basis of real estate sold $ 3,605 $ 476 $ 4,790 - ------- - - ------- - - ------- -

1. Management uses adjusted EBITDDA to evaluate company and segment performance. See the reconciliation of consolidated Adjusted EBITDDA on page 9, Reconciliations. 2. Bond discounts and deferred loan fees are included in the computation of interest expense, net in the Consolidated Statements of Income.

--------------------------------------------------------------------------------------------------------- PotlatchDeltic Corporation Reconciliations --------------------------------------------------------------------------------------------------------- For the three months ended ----------------------------------- (Dollars in thousands) March31, December31, March31, 2018 2017 2017 ---------- ----------- ---------- Adjusted EBITDDA Net income (GAAP) $ 14,597 $ 11,588 $ 16,921 Interest, net 5,660 7,395 4,970 Income tax provision 5,717 18,065 2,018 Depreciation, depletion and amortization 12,196 7,636 6,329 Basis of real estate sold 3,605 476 4,790 Non-operating pension and other postretirement benefit costs 1,857 1,596 1,906 Deltic merger-related costs 19,255 3,382 — Inventory purchase price adjustment in cost of goods sold 1,849 — — Loss on lumber hedge — 97 — (Gain) loss on fixed assets (4 ) 188 (14 ) - ------ - - ------ -- - ------ - Adjusted EBITDDA $ 64,732 $ 50,423 $ 36,920 - ------ - - ------ -- - ------ - Adjusted net income Net income (GAAP) $ 14,597 $ 11,588 $ 16,921 Special items: Impact of tax legislation — 10,668 — Deltic merger-related costs 19,255 3,382 — Inventory purchase price adjustment in cost of goods sold, after tax 1,368 — — - ------ - - ------ -- - ------ - Adjusted net income $ 35,220 $ 25,638 $ 16,921 - ------ - - ------ -- - ------ - Adjusted net income per share Net income per diluted share (GAAP) $ 0.29 $ 0.28 $ 0.41 Special items: Impact of tax legislation — 0.26 — Deltic merger-related costs 0.38 0.08 — Inventory purchase price adjustment in cost of goods sold, after tax 0.02 — — - ------ - - ------ -- - ------ - Adjusted net income per diluted share $ 0.69 $ 0.62 $ 0.41 - ------ - - ------ -- - ------ -

Contact: (Investors) (Media) Jerry Richards Mark Benson 509.835.1521 509.835.1513