PotlatchDeltic(PCH) - 2023 Q1 - Quarterly Report

Financial Performance - Revenues for Q1 2023 were $258.0 million, a decrease of $153.4 million compared to Q1 2022, primarily due to lower lumber prices and fewer sales in Chenal Valley [101]. - Adjusted EBITDDA for Q1 2023 was $57.8 million, down from $245.6 million in Q1 2022, reflecting a decrease of $187.8 million [100]. - Total Adjusted EBITDDA for Q1 2023 decreased by $187.8 million compared to Q1 2022, primarily due to lower lumber prices and higher manufacturing costs [108]. - Cash Available for Distribution (CAD) for the first quarter of 2023 was $28.8 million, compared to $213.1 million in the same period of 2022 [146]. - Net cash from operating activities decreased by $191.2 million in Q1 2023, totaling $39.1 million compared to $230.3 million in Q1 2022 [123]. Cost and Expenses - Cost of goods sold increased by $44.5 million compared to Q1 2022, mainly due to inflationary price increases in diesel fuel, energy, and repair and maintenance [102]. - Selling, general and administrative expenses rose by $1.9 million compared to Q1 2022, driven by inflation and activities related to the CatchMark merger [103]. - Average lumber sales prices fell to $435 per MBF in Q1 2023, a decrease of $640 from $1,075 per MBF in Q1 2022 [118]. - Wood Products Adjusted EBITDDA for Q1 2023 was $(31,000), a decline of $149.98 million from $149.95 million in Q1 2022 [115]. - Real Estate Adjusted EBITDDA for Q1 2023 was $19.5 million, down $10.7 million from $30.1 million in Q1 2022, influenced by lower rural and development real estate sales [122]. Timber and Production - The company harvested 2.1 million tons of timber in Q1 2023, significantly higher than Q1 2022, due to the addition of CatchMark timberlands and favorable conditions [96]. - Total harvest volume increased by 617,285 tons to 2,077,091 tons in Q1 2023 compared to 1,459,806 tons in Q1 2022 [112]. - Lumber shipments in Q1 2023 totaled 262 million board feet, with expectations to ship between 270 and 280 million board feet in Q2 2023 [98]. - Timberlands Adjusted EBITDDA for Q1 2023 was $46.6 million, down $29.8 million from $76.4 million in Q1 2022, driven by a 49.9% increase in Southern region harvest volumes [114]. Debt and Financing - The company assumed and refinanced $277.5 million in long-term debt at attractive interest rates in connection with the CatchMark merger [105]. - Total outstanding net long-term debt was $1.0 billion as of March 31, 2023, with a fixed interest rate structure [131]. - The company has a $300 million revolving line of credit, with no borrowings under this facility as of March 31, 2023 [132]. - The interest coverage ratio was 16.1, significantly above the required minimum of 3.00, and the leverage ratio was 19%, below the maximum limit of 40% [136]. Market Conditions - The average 30-year fixed mortgage rate increased from approximately 4.7% in March 2022 to approximately 6.3% in March 2023, impacting housing starts [93]. - The annual inflation rate in the U.S. slowed to 5.0% in March 2023, while the Producer Price Index decreased to 2.7% [95]. - Market capitalization increased to $3.96 billion as of March 31, 2023, compared to $3.51 billion at the end of 2022 [138]. Cash Flow and Investments - Cash received from customers decreased by $151.1 million due to lower lumber prices and fewer land sales, partially offset by increased shipments from the Ola sawmill and higher harvest activity [126]. - Capital expenditures for the first quarter of 2023 were $10.4 million, down from $17.2 million in the same period of 2022, with a total expected capital expenditure of approximately $135 million to $145 million for the year [126][127]. - The company plans to invest approximately $131 million in the expansion and modernization of the Waldo sawmill, increasing its capacity from 190 million to 275 million board feet, with completion expected by the end of 2024 [128]. Risk Management - The company is exposed to interest rate risk on its bank credit facility, term loans, and interest rate swap agreements [150]. - Interest rate volatility affects existing variable rate debt instruments and future fixed or variable rate debt [150]. - The company utilizes interest rate swaps and forward starting swaps to hedge against interest rate changes on existing and future debt issuances [150]. - All market risk sensitive instruments are used for purposes other than trading [150]. - There has been no material change in market risk exposure since December 31, 2022 [151].