FINANCIAL INFORMATION
Dollars in thousands
Revenues
Net income
Total assets
Long-term debt (including current portion)
Total stockholders’ equity
Capital expenditures, excluding timber and timberland acquisitions:
Property, plant and equipment
Timberlands reforestation and roads
Real estate development expenditures
Total capital expenditures
Distributions to common stockholders 1
Common shares outstanding (in thousands)
Adjusted EBITDDA:
Timberlands
Wood Products
Real Estate
Corporate
Eliminations and adjustments
Total Adjusted EBITDDA2
2021
2020
2019
$ 1,337,435
423,860
$
$ 2,535,215
$
758,256
$ 1,526,133
$
$
$
$
$
38,947
16,401
9,229
64,577
388,241
69,064
262,944
393,858
47,457
(47,393)
(3,995)
652,871
$ 1,040,930
166,830
$
$ 2,381,065
$
757,347
$ 1,304,953
22,693
16,234
6,706
45,633
$
$
$
$ 827,098
55,661
$
$ 2,235,059
$ 756,469
$ 1,226,831
$
$
39,153
17,695
7,254
64,102
107,853
$ 107,722
66,876
67,221
$
$
182,802
176,095
86,476
(48,451)
(14,694)
382,228
$ 133,987
12,901
62,650
(36,257)
5,662
$ 178,943
PotlatchDeltic (Nasdaq:PCH) is a leading Real Estate Investment Trust (REIT) that owns approximately 1.8 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 residential and commercial real estate development business and a rural timberland
sales program. PotlatchDeltic, a leader in sustainable forest management, is committed to environmental and social responsibility and
to responsible governance. More information can be found at www.potlatchdeltic.com.
1 2021 includes a $4 per share, or $276.3 million, special dividend.
2 Total Adjusted EBITDDA is a non-GAAP measure. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Form 10-K
enclosed herewith for definition and reconciliation to the nearest GAAP measure.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
☐ 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
(State or other jurisdiction of incorporation or organization)
601 West 1st Ave., Suite 1600
Spokane, Washington
(Address of principal executive offices)
82-0156045
(IRS Employer Identification No.)
99201
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
Registrant’s telephone number, including area code: (509) 835-1500
TITLE OF EACH CLASS
Common Stock ($1 par value)
Trading symbol(s)
PCH
NAME OF EACH EXCHANGE ON WHICH REGISTERED
The Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act ☐ Yes ☒ No
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 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, a 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
Smaller reporting company
☒
☐
Accelerated filer
Emerging growth company
☐
☐
Non-accelerated filer
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No
The aggregate market value of the common stock held by non-affiliates of the registrant at June 30, 2021, was approximately $3,489.1 million, based on
the closing price of $53.15.
As of February 11, 2022, 69,083,913 shares of the registrant's common stock, par value $1 per share, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the 2022 annual meeting of stockholders expected to be filed with the Commission on or about March 29,
2022 are incorporated by reference in Part III hereof.
Auditor Name: KPMG LLP Auditor Location: Seattle, Washington Auditor Firm ID: 185
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Table of Contents
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. RESERVED
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Stockholders' Equity
Index for Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16. FORM 10-K SUMMARY
SIGNATURES
PAGE
NUMBER
3
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89
EXPLANATORY NOTE
For purposes of this report, any references to "the company,” “us,” “we” and “our” include PotlatchDeltic Corporation
and its consolidated subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains, in addition to historical information, certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements often reference or describe our expected future financial and operating performance, including without
limitation, expected effectiveness of our hedging instruments and swaps; expected return on pension assets;
required contributions to pension plans; recognition of compensation costs relating to our performance share
awards (PSAs) and restricted stock units (RSUs); expected amortization of unrecognized compensation cost of
PSAs and RSUs; amount of net losses on cash flow hedges expected to be reclassified into earnings in the next
12 months; expected tax payments and deferrals; anticipated share repurchases and dividend payments;
anticipated cash balances, cash flows from operations and expected liquidity; potential uses of and estimated
payments under our credit facility; the expected impact from the Ola, Arkansas sawmill fire, anticipated insurance
coverage, and expected timing to complete reconstruction and installation activities and return to full operation;
planned carbon and climate report; expectations regarding debt obligations, interest payments and debt refinancing;
expected purchase and other obligations; expectations regarding the U.S. housing market, home repair and
remodeling activity; the lumber and log markets, lumber shipment volumes, sawlog demand, percent of log sales
by log supply agreements; timber harvest volumes, sawlog mix and pricing; rural real estate and residential and
commercial real estate development sales, and the average price per acre and developed lot; sufficiency of cash
to meet operating requirements; expected 2022 capital expenditures; 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 expects, may, could, should, will, believes, anticipates, estimates, projects,
intends, plans, targets or approximately, or similar words or terminology. These forward-looking statements are
based on our current expectations and assumptions and are not guarantees of future events or 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. The factors listed below and those described under Part I – Item 1A. Risk Factors and Part II - Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as other factors
not described herein because they are not currently known to us or we currently judge them to be immaterial, may
cause our actual results to differ significantly from our forward-looking statements. We undertake no obligation to
update our forward-looking statements after the date of this report.
Risks, Uncertainties and Assumptions
Our actual results of operations could differ materially from our historical results or those expressed or implied by
forward-looking statements contained in this report. Important factors that could cause or contribute to such
differences include, but are not limited to, the following:
•
the effect of general economic conditions, including employment rates, interest rate levels, discount rates,
housing starts and the general availability of financing for home mortgages;
• changes in silviculture;
•
timber cruising variables;
• changes in state forest acts or best management practices;
• changes in timber growth rates and harvest levels on our lands;
• changes in timber prices and timberland values;
• changes in policy regarding governmental timber sales;
• changes in requirements for Forest Stewardship Council (FSC®) or Sustainable Forest Initiative (SFI®)
certification;
• changes in the level of residential and commercial construction and remodeling activity;
• changes in tariffs, quotas and trade agreements involving wood products;
1
• changes in demand for our products and real estate;
• availability of labor and developable land;
• changes in production and production capacity in the forest products industry;
• competitive pricing pressures for our products;
• unanticipated manufacturing disruptions, including disruptions or inefficiencies in our supply chain and/or
•
•
•
operations;
the effect of weather on our harvesting and manufacturing activities;
the risk of loss from fires (such as the Ola, Arkansas sawmill fire and fires on our timberlands), floods,
windstorms, hurricanes, pest infestation and other natural disasters;
impact of the coronavirus (COVID-19 and its variants) outbreaks, governmental responses to such
outbreaks including any adverse effects of jurisdictions mandating COVID-19 vaccination and our ability to
retain and recruit key personnel in light of such mandates, the effects of such mandates and the anticipated
recovery from the pandemic on our business, suppliers, consumers, customers and employees;
• changes in the cost or availability of shipping and transportation;
• performance of our manufacturing operations, including maintenance and capital requirements;
•
the level of competition from domestic and foreign producers;
• changes in raw material and other costs;
• changes in principle expenses;
• collectability of amounts owed by customers;
• changes in the United States (U.S.) and international economies;
• changes in exchange rates;
• changes in federal and state tax laws and policies;
• changes in global or regional climate conditions and governmental response to such changes;
• changes in general and industry-specific environmental laws and regulations;
• unforeseen environmental liabilities or expenditures;
• changes in accounting principles;
•
the ability to satisfy complex rules in order to remain qualified as a REIT; and
• changes in tax laws that could reduce the benefits associated with REIT status.
2
PART I
ITEM 1. BUSINESS
General
PotlatchDeltic Corporation, formerly known as Potlatch Corporation and also formerly known as Potlatch Holdings,
Inc., was incorporated in Delaware in September 2005 to facilitate a restructuring to qualify for treatment as a real
estate investment trust (REIT) for federal income tax purposes. It is the successor to the business of the original
Potlatch Corporation, which was incorporated in Maine in 1903. On February 20, 2018, Deltic Timber Corporation
(Deltic) merged into a wholly owned subsidiary of Potlatch. Following the merger Potlatch changed its name to
PotlatchDeltic Corporation.
We are a leading timberland REIT with operations in seven states where we own approximately 1.8 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
The map below shows the locations of our timberlands, manufacturing facilities, real estate development operations,
and our corporate office located in Spokane, Washington.
3
Additional information regarding each of our business segments is included in this section, as well as in Part II –
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 2:
Segment Information in the Notes to Consolidated Financial Statements.
As a REIT, we generally are not subject to federal and state corporate income taxes on our income from investments
in real estate that we distribute to our stockholders, including the income derived from the sale of standing timber.
We are required to pay federal corporate income taxes on income generated from the operations of PotlatchDeltic’s
taxable REIT subsidiaries (PotlatchDeltic TRS or TRS), which principally consists of our Wood Products
manufacturing operations and certain real estate investments. We are, however, subject to corporate taxes on built-
in gains (the excess of fair market value over tax basis on the merger date) on sales of former Deltic real property
held by the REIT during the five years following the Deltic merger (until February 2023). The sale of standing timber
is not subject to built-in gains tax.
Business Strategy
Our business strategy encompasses the following key elements:
• Timberlands provide stability. We own high-quality timberlands under a tax-efficient REIT structure,
representing over 80% of our gross tangible asset value. We manage our timberlands sustainably over the
long-term using best management practices designed to optimize the balance among timber growth, prudent
environmental management and current cash flow, in order to achieve increasing levels of sustainable yield
over the long-term. The stability of our timberlands supports a sustainable and growing dividend.
• Leverage to lumber prices. We have the highest direct leverage to lumber prices of the timber REITs. Our
leverage to lumber is attributable to both our lumber manufacturing business and indexed sawlog prices in
Idaho. We are well positioned to take advantage of positive housing fundamentals. Returns earned by this
component of our strategy provide funding for discretionary capital allocation opportunities.
•
Integrated Timberlands and Wood Products operating model. Internal log sales to our mills comprised
approximately 37% of our Timberlands revenues in 2021 and represented approximately 52% of our Wood
Product's fiber costs. This strategy enables us to maximize the value of our assets, and, because we are a
net log buyer in the South, our integrated model provides a natural hedge against southern sawlog prices
that remain below long-term levels.
• Efficient and productive Wood Products facilities. We rank as a top-10 lumber producer in the U.S. with
approximately 1.1 billion board feet of capacity. We also own an industrial grade plywood mill with
approximately 150 million square feet of capacity. Discretionary capital expenditures in our mills typically
earn returns exceeding 20%.
• Capturing incremental value of our real estate holdings. A portion of our timberland acreage is more valuable
for other purposes, such as recreation, conservation, alternative energy facilities (such as new solar farms),
residential or commercial development or to other timberland or real estate investors. We continually assess
the potential uses of our lands and manage them proactively for the highest value. We have currently
identified approximately 102,000 acres of our rural timberlands that we intend to sell over time at a
meaningful premium to timberland value. Our real estate development activity in the TRS is primarily
focused on a 4,800-acre premier master-planned community in Little Rock, Arkansas that we acquired as
part of the 2018 Deltic merger.
• Pursuing attractive acquisitions. We actively pursue timberland acquisitions that meet our financial and
strategic criteria. The critical elements of our acquisition strategy generally include acquiring properties that
complement our existing land base, are cash flow accretive and have attractive timber or include non-core
timberland uses such as recreational, conservation, commercial or residential purposes, and that we can
sell over time. For example during 2021, one of our acquisitions included just over 51,000 acres of high-
quality, well stocked timberlands in southern Arkansas and northern Louisiana.
• Committed to responsible environmental, social and governance values. Sustainability is a core corporate
value instilled by managing a renewable resource for the long-term. We focus on meeting the needs of our
stakeholders, now and into the future. We are committed to responsible corporate citizenship and
environmental, social and governance (ESG) considerations are integrated in the way we do business every
day. We recognize that our environmental commitment, the well-being of our employees, the independence
and oversight of our Board of Directors, the positive impact we have in our communities, and our public
advocacy can have a profound impact on our success for our stakeholders.
4
Business Segments
Timberlands Segment
We recognize the role forests play in combating climate change, including our timberlands providing a powerful
source for carbon sequestration. In addition, harvested trees made into wood products continue to store carbon
they have sequestered and can substitute for fossil-fuel emissions-intensive building materials. By leveraging
decades of management experience and by working closely with scientific research organizations, we manage our
timberlands on a sustainable basis in compliance with internationally recognized forest management standards
while considering how climate change could create potential risks and opportunities. Our environmental, health,
safety and forest stewardship policies reinforce our timberlands management approach. We are a leader in forest
stewardship and sustainability with rigorous third-party auditing and certification of our forest practices which further
supports clean air and water and protection of wildlife habitats.
Industry Background. The demand for sawlogs is significantly dependent upon price, species, grade, quality,
proximity to wood consuming facilities and the ability to meet customer needs. The demand for pulpwood is
dependent on the paper and pulp-based manufacturing industries. Both pulpwood and sawlogs are affected by
domestic and international economic conditions, global population growth and other demographic factors, industry
capacity and the value of the U.S. dollar in relation to foreign currencies. Locally, timber demand and pricing also
fluctuate due to the expansion or closure of individual wood products and pulp-based manufacturing facilities.
Local log supplies also change in response to prevailing timber prices. Rising timber prices often leads to increased
harvesting on private timberlands, including lands not previously made available for commercial timber operations.
In the U.S. South, an oversupply of ready-to-cut standing timber exists due to years of low and deferred harvesting
following the last housing market crash, which continues to depress sawlog prices. Supplies could tighten in the
event of higher demand due to increased U.S. housing starts, increased wood product mill capacity, increased log
and lumber exports and the impacts from weather-related conditions or a natural disaster. Log availability has
tightened in the Pacific Northwest and Western Canada as a result of several years of devastating forest fires and
continued harvest restrictions on federal lands. Further, in Western Canada, log availability continues to decline as
salvage sawlogs remaining from the damage caused by the mountain pine beetle have mostly been processed, the
British Columbia (B.C.) province continues to lower the Annual Allowable Cut, and the B.C. government recently
announced its intention to defer harvesting of a significant portion of old growth forest in the province. These actions
are contributing to potential B.C. mill closures and a shift of Canadian softwood lumber production to the eastern
provinces of Canada.
Timberlands Operations. We strive to maximize cash flow by selling both delivered logs and entering into
stumpage sales to external customers while managing our timberlands sustainably over the long-term. The
Timberlands segment sells a portion of its logs at market prices to our Wood Products facilities. Intersegment sales
to our Wood Products facilities were 37%, 37% and 36% of our total Timberlands segment revenues for 2021, 2020
and 2019, respectively. The segment also sells sawlogs and pulpwood to a variety of forest products companies
located near our timberlands. The segment’s customers range in size from small operators to multinational
corporations. No third-party customer represented more than 10% of our consolidated revenues in 2021, 2020 or
2019. We compete in the marketplace through our ability to provide our customers with a consistent and reliable
supply of high-quality logs at scale volumes and competitive prices.
In general, our log supply agreements require a specified volume of timber to be delivered to defined customer
facilities at prices that are adjusted periodically to reflect market conditions. Prices in our Northern region contracts
are adjusted periodically by species to prevailing market prices for logs, lumber, wood chips and other residuals.
Additionally, in Idaho for both external and internal customers, we index the price of approximately 75% of our
sawlogs sold to the price of lumber. Prices in our Southern region contracts are adjusted every three months based
on prevailing market prices for logs. Typically, our log supply agreements are in place for one to five years. In 2021,
approximately 34% of our harvest volume was sold under log supply agreements. We expect approximately the
same amount to be sold under log supply agreements in 2022. The segment also generates revenue from non-
timber resources such as hunting leases, recreation permits and leases, mineral rights leases and carbon
sequestration.
5
Timberlands Ownership. The Timberlands segment manages approximately 1.8 million acres of timberlands,
including approximately 16,000 acres under long-term leases. The following provides additional information about
our timberlands at December 31, 2021.
Region
Northern region
State
Idaho
Variety of commercially viable softwood species,
such as Douglas fir, grand fir and inland red cedar
Description
Acres (in thousands)
Minnesota Primarily pine, aspen and hardwoods
Total Northern region
Southern region Arkansas
Primarily southern yellow pine and hardwoods
Mississippi Primarily southern yellow pine and hardwoods
Primarily southern yellow pine and hardwoods
Alabama
Primarily southern yellow pine and hardwoods
Louisiana
Total Southern region
Total
626
11
637
950
98
87
31
1,166
1,803
The aggregate estimated volume of current standing merchantable timber inventory is updated annually to reflect
increases due to reclassification of young growth to merchantable timber, when the young growth meets defined
diameter specifications, the annual growth rates of merchantable timber and the acquisition of additional
merchantable timber and to reflect decreases due to timber harvests and land sales. This estimate is derived using
methods consistent with industry practice and is based on statistical methods and field sampling. The estimated
timberland volume includes timber in environmentally sensitive areas where the timberlands are managed in a
manner consistent with best management practices and state forest practice acts. The following provides additional
information about our estimated standing timber inventory at December 31:
(Tons in millions)
Northern region
Southern region
Total
2021
2020
Change
28.8
59.2
88.0
29.8
53.5
83.3
(1.0 )
5.7
4.7
Timberlands Harvest. Our short-term and long-term harvest plans are critical factors in our timberland
management process. Each year, we prepare a harvest plan designating the timber tracts and volumes to be
harvested during that particular year. Our harvest plans take into account changing market conditions, are designed
to contribute to the growth of the remaining timber and reflect our policy of environmental stewardship. These plans
optimize harvest schedules, incorporating best forest management practices such as streamside management
zones and stand level retention of wildlife habitat features. We conduct all operations in accordance with regulatory
and certification requirements that protect water quality, wildlife habitat, and worker safety. Each harvest plan
reflects our analysis of the age, size and species distribution of our timber, as well as our expectations about harvest
methods, growth rates, the volume of each species to be harvested, anticipated dispositions, thinning operations,
regulatory constraints and other relevant information. Since sustainable harvest plans are based on projections of
weather, timber growth rates, regulatory constraints and other assumptions, many of which are beyond our control,
there can be no assurance that we will be able to harvest the volumes projected or the specific timber stands
designated in our harvest plans. Detailed harvest information for the year ended December 31, 2021 and 2020, by
region and product is presented in Part II – Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations. The following table presents a summary of our total timber harvest by region during
2021.
(Tons in thousands)
Northern region
Southern region
Total
Timber Harvested
Sawlogs
Pulpwood
Stumpage
Total
1,593
1,834
3,427
33
1,578
1,611
—
477
477
1,626
3,889
5,515
6
Our harvest volume in 2021 was lower than planned primarily due to wet weather in the Southern region hampering
harvest activities and the fire at the Ola sawmill leading to harvest deferrals. Our current harvest projection for 2022,
which is based on constant timberland holdings and takes into consideration such factors as market conditions, the
age of our timber stands and recent timberland sales and acquisitions is expected to be approximately 6.1 million
tons.
Sustainable Forestry Practices
Our timberlands are working forests where we ensure appropriate measures are taken to protect biological diversity,
water quality and other ecosystem values. Our timberlands also provide unique environmental, cultural, historical
and recreational value. We recognize that some areas need to be conserved and species at risk need to be
protected on the lands we manage. We work hard to protect these and other qualities, while still managing our
forests to produce financially mature timber. Our timberlands include a wide diversity of softwood and hardwood
species. We have developed an internal best management practice (BMP) to promote sustainable timberland
management through a set of standards. We use these standards to maintain the health of forest soil, protect water
quality and aquatic habitat and promote biodiversity. Our foresters implement BMPs as part of our environmental
management system, and we require that all contractors implement applicable BPMs during forest management
activities on our lands and in our mill supply chain. Our foresters maintain an approved contractor list and monitor
trained contractors who implement environmental protections by following specific prescriptions for the tract being
harvested and planting following final harvests. In 2021, we planted over 21.6 million seedlings – 14.9 million in the
U.S. South on 32,000 acres and 6.7 million in Idaho on 16,300 acres.
Our timberlands are 100% certified to the SFI® Forest Management standards and approximately 70% of our
combined timberlands in Arkansas and Louisiana are certified to the FSC® Forest Management standards. We
generally are able to realize price premiums for pulpwood from our FSC® certified lands. We also take an active
approach to regulatory developments by participating in standard-setting where possible. We work cooperatively
with regulators to create voluntary conservation plans that address environmental concerns while preserving our
ability to operate our timberlands efficiently.
Timberland fires continue to increase, particularly in Western Canada and the Pacific Northwest. As the largest
private landowner in Idaho, we have implemented several practices to help mitigate fire risk on our Idaho
timberlands. Such practices include participating in fire protection districts or cooperative agreements with state,
federal and private timberland owners where participants contribute assets and resources to fight fires regardless
of the location of the fire. During periods of high fire danger, we may prohibit campfires, close access on our
timberlands, adjust harvest schedules to late evening/early mornings and post individuals on site following logging
activities to monitor for potential fire outbreaks. Further, from May to October, our agreements with both logging
and silviculture contractors require them to have on site specific firefighting resources such as water, water pumps
and hand tools. Fire is an important tool in forest management to remove post-logging woody debris known as slash
and to help prepare sites for replanting. Approvals for burning the remaining slash are obtained through the
Montana/Idaho Airshed Group, which evaluates atmospheric conditions and other burning activities underway to
minimize airshed impacts.
Our Southern timberlands are less susceptible to fires as they are located in areas that have relatively high humidity.
Our Southern harvesting operations result in less slash at final harvest due to stand thinning techniques to promote
timber yield. Warm weather and wet conditions in the South allow the slash to be mechanically spread back into
the tract returning nutrients to the soil. These practices not only help ensure our timberlands are available for future
harvest, but also reduces potential environmental impacts that often come from timberland fires.
Wood Products Segment
Operations. We are a top 10 lumber manufacturer in the U.S. with 1.1 billion board feet of capacity. We also own
an industrial grade plywood mill with 150 million square feet of capacity. We believe that competitiveness in the
industry is largely based on individual mill efficiency and on the availability of competitively priced raw materials on
a facility-by-facility basis, rather than on the number of mills operated. This is because it is generally not economical
to transfer logs between or among facilities, which might permit a greater degree of specialization and operating
efficiencies. Instead, each facility must utilize the raw materials that are available to it in a relatively limited
geographic area. For these reasons, we believe we are able to compete effectively with companies that have a
larger number of mills. We compete based on product quality, customer service and price.
7
Our Wood Products segment manufactures and sells lumber, plywood and residual products at seven mills located
in Arkansas, Idaho, Michigan and Minnesota. The segment’s products are largely commodity products, which are
sold through our sales department to end users, retailers or wholesalers for nationwide distribution primarily for use
in home building, repair and remodeling, industrial products and other construction activity. In general, the following
factors influence sales realization and demand for wood products:
• Residential and multi-family construction is influenced by factors such as population growth and other
demographics, availability of labor and developable land, level of employment, consumer confidence,
consumer income, availability of financing, interest rate levels, and the supply and pricing of existing homes
on the market.
• Repair and remodel of existing homes is influenced by the size and age of existing housing stock, which is
now 42 years on average, and access to home equity financing and other credit.
• The supply of commodity building products is influenced by changes in production capacity and utilization
rates, weather, raw material supply and availability of skilled labor and transportation.
We continually invest in maintenance and discretionary capital projects at our Wood Products facilities. We evaluate
discretionary capital improvements primarily based on expected level of return on investment. Our ongoing capital
improvements provide increased productivity, enhanced employee safety, compliance with regulatory standards
and environmental benefits. A description of our Wood Products facilities, all of which are owned by us, together
with their respective 2021 capacities are as follows:
Sawmills:
Warren, Arkansas
Waldo, Arkansas
St. Maries, Idaho
Gwinn, Michigan
Ola, Arkansas3
Bemidji, Minnesota
Plywood Mill:
Annual Capacity1,2
220 MMBF
190 MMBF
185 MMBF
185 MMBF
150 MMBF
140 MMBF
St. Maries, Idaho
150 MMSF
1 Capacity represents the proven annual production capabilities of the facility under normal operating conditions and producing a normal
product mix. Normal operating conditions are based on the configuration, efficiency and the number of shifts worked at each individual facility.
In general, the definition includes two shifts per day for five days per week (two 40-hour shifts) at each facility, which is consistent with
industry-wide recognized measures. Production can exceed capacity due to efficiency gains and overtime. Actual sawmill production for 2021
was 1,024 MMBF.
2 MMBF stands for million board feet; MMSF stands for million square feet, 3/8-inch panel thickness basis.
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In June 2021, a fire occurred in the Ola, Arkansas sawmill’s large-log primary breakdown machine center. The planer mill, kiln, and shipping
department were not affected. We restarted the small-log line at the sawmill in the fourth quarter of 2021, which has an estimated annual
capacity of 30 MMBF. Reconstruction is underway and we expect to restart the large-log line in the third quarter of 2022. The sawmill’s annual
capacity is estimated to be 150 MMBF after the start-up phase is completed in 2023. Actual production was averaging approximately 130
MMBF prior to the fire.
Wood Procurement. Our procurement foresters purchase wood fiber for our facilities from our timberlands or from
private, state and federal sources. We are committed to producing wood products that meet both customer demand
and quality as well as responsibly sourcing the raw materials. No matter where the logs originate, we are committed
to sourcing them in a manner that protects the many values the forest provides. All seven of our Wood Products
facilities are certified to the SFI Fiber Sourcing standard, which provides structure as to how we purchase fiber from
both certified and non-certified forest lands. We generally do not maintain long-term supply contracts for a significant
volume of logs. During 2021, 2020 and 2019, purchases from our Timberlands segment was approximately 52%,
51% and 43% of our Wood Products segment fiber costs, respectively.
Wood products manufacturing uses sophisticated computerization that maximizes log utilization. During the
manufacturing process, wood residuals are generated, including sawdust, shavings, chips and bark which are used
internally in our boilers for steam energy, with the remainder sold for a wide range of uses. As a result, nearly 100%
of our logs are utilized. We source energy for the mills from our internal boilers with any shortfall of needs provided
by purchased electricity, natural gas and propane. We ship the lumber and plywood produced by rail and truck for
end uses that typically have long-life applications prior to recycling or disposal.
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Real Estate Segment
The activities of our Real Estate segment consist primarily of the sale of rural land and real estate development and
subdivision activity.
Rural real estate operations. We sell rural land that is not strategic to our core timberland operations, or that has
higher values for recreational, conservation, commercial or residential purposes over time. Sales of these lands
may occur over a decade or more. We continually assess the highest value and best use of our timberlands through
periodic stratification assessments on our timberlands, and as new timberlands are acquired. From time to time,
we also take advantage of opportunities to sell core timberland where we believe pricing to be particularly attractive,
to match a sale with a purchase of more desirable property while deferring taxes in a like-kind exchange transaction,
or to meet various other financial or strategic objectives. We have currently identified approximately 102,000 acres
of non-core timberland real estate.
As a custodian of our timberlands, we recognize that the best outcome for some of our timberlands could be to
conserve them as forestland in perpetuity. We realize this goal through land partnerships, conservation land sales
and conservation easements. Through our conservation efforts, public agencies have increased forest ownership
and connected parcels previously blocked from public access, while securing working forests for the future, and
most often allowing for access to the public for recreation. Since 2018, approximately 70% of our rural land sales
acreage has been for conservation with the remaining 30% for rural recreational purposes. Rural recreational land
transactions provide an opportunity for neighboring landowners to increase their ownership, and also for both in-
state and out-of-state buyers to find a place where they can get away to a rural home, or hunt, fish, hike and enjoy
the outdoors.
Results for the rural real estate operations depend on the demand for our non-core timberlands, the types of
properties sold, the basis of these properties and the timing of closings of property sales.
Development real estate operations. The Real Estate segment also engages in real estate development and
sales through PotlatchDeltic TRS. Chenal Valley in Little Rock, Arkansas is a premier, upscale master planned
community, with approximately 4,800 acres of residential and commercial properties centered around a country
club with two championship golf courses. In addition, we have 800 acres of land in Hot Springs, Arkansas available
for future development. In Chenal Valley, approximately 20% of each neighborhood is set aside as greenspace. In
addition, about 15% of the total acreage is preserved as greenspace throughout the development and between
neighborhoods. Our Red Oak Ridge development in Hot Springs, Arkansas incorporates many of the same
environmentally conscious practices.
For these properties, we develop and market residential lots and commercial sites, and at times sell undeveloped
acreage. Residential lots are sold to homebuilders and individuals, while commercial sites are sold to developers
and businesses. Infrastructure and other improvements to support the development and sale of residential and
commercial properties are provided for and funded directly by us, or in some circumstances, through real property
improvement districts. We develop such properties when sufficient demand exists and substantially all infrastructure
is completed. Future infrastructure investments are primarily for the development and sale of additional property.
Most of the core infrastructure is already in place for Chenal Valley. We typically develop between 100-150
residential lots in the Chenal Valley each year. In addition, approximately 1,600 potential residential lots are
available for future development and sale. We have approximately 335 additional acres available for commercial
purposes. Our competitors in our real estate markets are other landowners or developers.
Results for the development real estate operations depend on the location within the development, the amount of
new and existing housing inventory levels, and the timing of closing of property sales.
Seasonality
Log and pulpwood sales volumes in our Timberlands segment are typically lower in the first half of each year as
winter rains in the Southern region and spring thaw in the Northern region limit timber harvesting operations due to
softened roadbeds and wet logging conditions that restrict access to logging sites. The third quarter is typically our
Timberlands segment's strongest production quarter. Demand for our manufactured wood products typically
decreases in the winter months when construction activity is slower, while demand typically increases during the
spring, summer and fall when construction activity is generally higher. Rural real estate dispositions and acquisitions
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can 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 at Chenal Valley occur throughout the year, though
historically most sales take place in the second half of the year as builders prepare for the following spring and
summer traditional home building and buying season.
Environmental Compliance and Regulations
Regulations affecting our timberlands. Enactment of new environmental laws or regulations, or changes in
existing laws or regulations, particularly relating to air, wildlife, water quality and climate change, or their
enforcement, may require significant expenditures by us or may adversely affect our timberland management,
harvesting activities and manufacturing operations. Forest practice laws and regulations that affect present or future
harvest and forest management activities in certain states include:
•
•
•
•
limits on the size of clearcuts,
requirements that some timber is left unharvested to protect water quality and fish and wildlife habitat,
regulations regarding construction and maintenance of forest roads,
rules requiring reforestation following timber harvests, and
• various related permit programs.
Each state in which we own timberlands has developed best management practices to reduce the effects of forest
practices on water quality and aquatic habitats. Additional and more stringent regulations may be adopted by
various state and local governments to achieve water-quality standards under the federal Clean Water Act, protect
fish and wildlife habitats and human health, or achieve other public policy objectives. These requirements may alter
or introduce restrictions on some of our silviculture activities, notably the application of pesticides and herbicides to
our timberlands in some areas.
Similarly, a number of species indigenous to our timberlands have been listed as threatened or endangered or have
been proposed for one or the other status under the Endangered Species Act. As a result, our activities in or
adjacent to the habitat of these species may be subject to restrictions on the harvesting of timber, reforestation
activities and the construction and use of roads.
Our operations are regulated under the Clean Water Act, which regulates the discharge of pollutants into the waters
of the U.S. This generally means obtaining permits for certain of our silviculture activities and abiding by applicable
restrictions. Federal agency rulemaking and related litigation under the Clean Water Act has expanded the definition
of waterways subject to the Act’s jurisdiction. This, in turn, has increased the number of required federal and state
permits in some areas of our operations as it relates to the application of pesticides and herbicides on timberlands,
which has increased operating costs. Pending and future federal and state rulemaking, and judicial challenges
thereto, could make compliance with the Clean Water Act, as well as comparable state laws, more or less costly to
us, and we are not able to predict the final resolution of these matters. Although this and related regulations have
not had, and we do not expect in 2022 that they will have a material effect on our operations, they could do so in
the future.
Regulations affecting our manufacturing operations. Our manufacturing operations are subject to federal and
state laws and regulations, including those relating to air emissions, storm water and wastewater discharges, solid
and hazardous waste management, site remediation and endangered species. We are also subject to the
requirements of the federal Occupational Safety and Health Act (OSHA) and comparable state statutes relating to
the health and safety of our employees. We maintain environmental and safety compliance programs and conduct
regular internal and independent third-party audits of our facilities to monitor compliance with these laws and
regulations. Our capital projects typically are designed to enhance safety, extend the life of a facility, lower costs
and improve efficiencies, increase capacity and comply with regulatory standards. Compliance with environmental
regulations is a significant factor in our business and can require significant capital expenditures as well as
additional operating costs.
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Our Wood Products facilities have environmental compliance procedures, which establish best practices, programs
and procedures to drive continual compliance with federal, state and local regulations governing air emissions,
water discharges, and waste disposal. We pursue continual improvement in our compliance programs through
plans, training, monitoring and performance evaluation and through regular internal compliance audits and
corrective action processes. We share key findings and best practices identified through these processes across
facilities to drive proactive improvements elsewhere.
Under the Clean Air Act and our site specific Renewable Operating Permits, our Wood Products facilities closely
monitor operating parameters and air emissions, including hazardous air pollutants to ensure those emissions are
minimized. Efforts that increase the efficiency of our manufacturing process and improve energy efficiency provide
the benefit and opportunity to reduce greenhouse gas emissions. Direct greenhouse gas emissions from our
operations largely consist of carbon dioxide from our Wood Products facilities which use energy sourced from a
combination of purchased electricity and on-site boilers that utilize residual wood or natural gas for fuel.
Compliance. Our manufacturing facilities and timberland operations are currently in substantial compliance with
applicable environmental laws and regulations. We cannot be certain, however, that situations that give rise to
material environmental liabilities will not be discovered.
At this time, we believe that federal and state laws and regulations related to the protection of endangered species
and air and water quality will not have a material adverse effect on our financial position, results of operations or
liquidity. We anticipate, however, the enactment of increasingly strict laws and regulations relating to the
environment, natural resources, climate change and forestry operations, which may result in additional restrictions
on our operations, leading to increased costs, additional capital expenditures and reduced operating flexibility.
ESG and Climate Change. We recognize that ESG factors are the foundation for long-term success and that global
climate change presents opportunities and risks. Our Vice President, Public Affairs and Chief ESG Officer provides
leadership on our ESG reporting and initiatives, working with cross-functional ESG teams. ESG programs are
integrated into existing environmental management and safety systems across divisions, supported by annual
audits, regional and divisional management reviews, safety team processes, and annual training and budgeting
plans. Our board of directors and management team has oversight of our ESG strategies, goals, and progress,
including climate risks and opportunities and are regularly provided with information and engage in discussions.
Environmental management and ESG risks and opportunities, including climate-related issues, are also coordinated
within our annual Enterprise Risk Management framework.
Sustainably managed forests combat climate change through atmospheric carbon removals. Active forest
management can enhance carbon uptake because the rate of carbon uptake slows as forests mature, and natural
tree mortality increases. Wood products manufacturing converts harvested logs into long-lived wood products
storing about 50% of the carbon in the product and acting like a carbon vault. At the end of 2020, our timberlands
were storing an estimated total of 145 million metric tons of CO2e including an estimated 98 million metric tons
CO2e in merchantable above-ground portions. In 2020, our merchantable tree growth sequestered an additional
estimated 5.1 million metric tons of CO2e.
We have committed to completing scenario-analysis for our business under various temperature forecast scenarios,
aligned with the Task Force on Climate-Related Financial Disclosures guidance. We plan to publish our analysis in
our inaugural Carbon and Climate Report in 2022. This report will also detail our 2021 data for atmospheric carbon
removals, carbon storage and our Scope 1, Scope 2, and Scope 3 greenhouse gas emissions.
Our climate-related risks and opportunities can be grouped in two categories: physical and transition. Physical risks
and opportunities include acute impacts that are event driven and chronic impacts resulting from longer-term
changes in climate patterns. Our acute risks could include potential increases in extreme weather events and
heightened wildfire risks. Chronic impacts could include potential long-term opportunities arising from increased
productivity and yield in tree growth. Transition risks and opportunities arise from policy, regulatory, legal,
technological, market and other societal responses to the challenges posed by climate change and the transition to
a low-carbon economy. Potential opportunities could include market opportunities arising from the increased use of
innovative wood products, such as mass timber and policies and incentives that encourage greater use of wood-
based products in buildings. Growth in carbon offset markets as sustainably managed forests are recognized as a
natural climate solution could also provide opportunities. Transition risks could include a carbon tax as well as
operational impacts such as changes in energy costs and regulatory impacts in environmental management.
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Human Capital Resources
At December 31, 2021, our workforce consisted of 1,299 employees of which 26% are salaried and 74% are hourly
employees. Our Wood Products segment employs approximately 84% of our total workforce and is the only
segment that includes an hourly workforce. Certain employees at one of our sawmills, representing 14% of our
total workforce, are covered under a collective bargaining agreement which expires in 2023.
Health and Safety. Our commitment to our employees starts with a strong culture that prioritizes health and safety
as a core value. We are focused on preventing occupational illness and injuries without compromise. Our operations
have comprehensive safety programs that include safety audits, training, contractor safety requirements and annual
health and safety budgets as part of essential capital planning. We regularly review safety incidents, risk-
identification reports and “near-miss” incidents and apply key learnings across our organization. Contractor safety
is a focal point of our timberland safety program. Timber harvesting, road building and trucking contractors must
meet stringent state and federal safety regulations and undergo annual industry specific and PotlatchDeltic safety
training. In addition, we have implemented a training video and a Supplier Code of Conduct with which we expect
our core operational contractors to comply with.
We remain committed to prioritizing the health and well-being of our employees and their families in light of the
COVID-19 pandemic. We continue to follow guidelines issued by the World Health Organization, Centers for
Disease Control and Prevention, and local health providers, adapting our policies and procedures quickly in
response to continually evolving information, statistics, and best practices. For employees at our Wood Products
facilities, we have implemented protocols for health screening, contact tracing, attendance policies, social
distancing, sanitation and mask-wearing and have enhanced our leave benefits to pay employees that are required
to quarantine through COVID-19 contact tracing exposure protocols. We have provided our workforce with locally
relevant information about the pandemic, including how employees can get vaccinated, have strongly encouraged
our employees to get vaccinated, and have offered on-site vaccination clinics at our Wood Product facilities. As the
number of COVID-19 cases declined and vaccination rates increased, we continue to welcome back employees
who transitioned to working from home during the pandemic back to our corporate and field offices, based on an
evaluation of local conditions and regulations. We continue to monitor the recent spread of new COVID-19 variants
and will adjust our onsite work policies and procedures where necessary.
Diversity and Inclusion. Diversity and inclusion are a fundamental part of our values, and we are proud to be an
equal opportunity employer. The principles underlying our commitment to diversity and inclusion are reflected
through our policies, including our Diversity, Equity, and Inclusion Policy, Human Rights Policy, Corporate Conduct
and Ethics Code, Equal Employment Opportunity Policy and Americans with Disability Act Policy. We strive to
employ a workforce that is representative of the communities in which we operate and continue to incorporate
diversity initiatives into our policies and practices including those related to hiring, employee development, and
succession planning.
We review our compensation and benefit plans annually to ensure that we are providing competitive, contemporary,
and inclusive programs so we can attract and retain the best people and support the health and well-being of our
employees and their families. We believe in the importance of pay equity, evaluate gender pay equity on an on-
going basis and adjust salaries as appropriate. The average variance in median pay between men and women by
pay grade is less than 1% across the company. At December 31, 2021, women represent 18% of our total workforce,
30% of our salaried workforce and 14% of our hourly workforce. We continue to explore how we might more
effectively attract and retain women to our industry and to our company in order to build a pipeline of talent from
which to promote for future leadership roles.
Our ability to influence the overall diversity of our workforce is highly dependent on several key factors, the most
important of which is the pool of qualified candidates in the areas in which we operate. Many of our operations are
located in rural communities where the economy is driven by the timber industry and our workforce reflects the
demographics and culture of those localities. We continue to emphasize the importance of sourcing talent from
these local communities and employee retention so that our workplace demographics represent the communities
in which we operate. Overall, 19% of our workforce is comprised of individuals that identify as a member of one or
more racial minority groups.
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People Development. We recognize that employing a highly skilled and diverse workforce is a competitive
advantage and leads to better employee engagement. We are committed to the development of all employees in
support of their career aspirations. We have formal and informal programs to develop our workforce to become
more proficient in their current roles and grow their careers in preparation for larger roles throughout the company.
Succession planning is critical to ensuring that we have the right people in the right position at the right time. We
conduct annual succession planning meetings across the organization starting with our local operations and rolling
up to our division and corporate levels including our executive team. Individuals who have demonstrated a desire
and ability to move to new leadership roles collaborate with their managers to document meaningful development
plans designed to ensure that their development remains on track.
For more detailed information regarding our programs and initiatives, see “Committed to Social Responsibility”
within our Environmental, Social & Governance Report (on our website). This report and other information on our
website are not incorporated by reference into and do not form any part of this annual report on Form 10-K.
Available Information
We make our periodic and current reports that we file with, or furnish to, the Securities and Exchange Commission
(SEC) available on or through our website, www.PotlatchDeltic.com (under “Investors – Financial Information”), at
no charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the
SEC. Information on our website is not incorporated by reference into this Annual Report on Form 10-K and should
not be considered part of this report.
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Information About Our Executive Officers
As of February 11, 2022, information on our executive officers is as follows:
Eric J. Cremers (age 58), has been a director since March 2013 and our President and Chief Executive Officer
since January 2021. Mr. Cremers also served as President and Chief Operating Officer from March 2013 through
December 2020, Chief Financial Officer from March 2013 through August 2013, and Executive Vice President and
Chief Financial Officer from February 2012 to March 2013. Mr. Cremers joined the company in 2007 as Vice
President and Chief Financial Officer.
Jerald W. Richards (age 53), has served as Vice President and Chief Financial Officer since September 2013. He
was employed by Weyerhaeuser Company and served as Chief Accounting Officer from October 2010 to August
2013, and corporate segment controller from 2008 to October 2010.
Ashlee T. Cribb (age 53), has served as Vice President, Wood Products since July 2021. She previously served in
various roles with Roseburg Forest Products, including as Senior Vice President - Chief Commercial Officer from
February 2019 to July 2021, Vice President, Structural Products from February 2018 to February 2019 and Business
Director, Structural Products from January 2017 to February 2018.
Darin R. Ball (age 56), has served as Vice President of Timberlands since December 2017. From 2012 to December
2017, he served as Manager of our Idaho Timberlands business.
William R. DeReu (age 55), has served as Vice President, Real Estate since February 2018 and as Vice President,
Real Estate and Lake States Timberlands from February 2012 to February 2018.
Michele L. Tyler (age 53), has served as Vice President, General Counsel and Corporate Secretary since August
2019. Prior to joining the company, Ms. Tyler served in legal roles with Vectrus, Inc. (NYSE: VEC), from January
2009 to January 2019, including as Senior Vice President, Chief Legal Officer, and Corporate Secretary from
September 2014 to October 2018.
Anna E. Torma (age 60), has served as Vice President, Public Affairs and Chief ESG Officer since February 2022,
Vice President, Public Affairs from March 2019 to February 2022, and Director of Public Affairs from April 2018 to
March 2019. Prior to joining the company, Ms. Torma worked as Principal for Torma Research providing strategic
consulting services, primarily to forest products companies, from January 2017 to April 2018.
Robert L. Schwartz (age 49), has served as Vice President, Human Resources since May 2014 and as Director,
Human Resources from February 2009 to April 2014.
Wayne Wasechek (age 51) has served as Controller and Principal Accounting Officer since November 2018. He
previously served as Vice President and Assistant Controller of Vail Resorts, Inc. (NYSE: MTN) from 2011 to 2018
and as Senior Director of Financial Reporting of Vail Resorts from 2006 to 2011.
The term of office of the officers of the company expires at the annual meeting of our board and each officer holds
office until the officer’s successor is duly elected and qualified or until the earlier of the officer’s death, resignation,
retirement, removal by the board or as otherwise provided in our bylaws.
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ITEM 1A. RISK FACTORS
Investing in our common stock involves a significant degree of risk. Our business, financial condition, results of
operations or liquidity could be materially adversely affected by any of the following risks and, as a result, the trading
price of our common stock could decline. While the risks described below have been identified by management as
the most material to the company, they are not the only ones we face. Additional risks not presently known to us or
that we currently deem immaterial may also impair our business, financial condition, results of operations or liquidity.
The risks described below should carefully be considered together with the other information contained in this report.
Industry and Business Risks
Economic Conditions
The cyclical nature of our business could adversely affect our results of operations.
The financial performance of our operations is affected by the cyclical nature of our business. The markets for
manufactured wood products and real estate are influenced by a variety of factors beyond our control. Our business
is particularly dependent upon the health of the U.S. housing market, and specifically demand for new homes and
home repair and remodeling which are subject to fluctuations due to changes in economic conditions, changes in
employment levels, consumer confidence, financial markets, interest rates, credit availability (including
homebuyers’ ability to qualify for mortgages), supply chain disruptions, availability of labor and developable land,
inflation, population growth, weather conditions and other factors. Historical prices for our manufactured wood
products have been volatile as a result of demand, particularly in recent years, and we have limited direct influence
over the timing and extent of price changes for our manufactured wood products. In our Timberlands business, our
sawlog price realizations in Idaho are subject to fluctuation in lumber prices as we index a significant portion of
these sawlogs under long-term supply agreements on a four-week lag to lumber prices. The demand for real estate
can be affected by changes in factors, such as interest rates, credit availability, economic conditions, changes in
consumer preferences, limited wage growth, any weakening of consumer confidence and the availability of
developable land, as well as by the impact of federal, state and local land use and environmental protection laws.
The potential effect of these factors on our future operational and financial performance is highly uncertain,
unpredictable and outside our control. As a result, our past performance may not be indicative of future results.
COVID-19 Pandemic
Pandemic issues, including the continuing COVID-19 pandemic, could adversely affect our business.
We face risks related to public health epidemics and other outbreaks, including the global outbreak of a novel strain
of coronavirus (“COVID-19”) and its variants. The COVID-19 pandemic and the resulting containment measures
have caused economic and financial disruptions across the United States including in most of the regions in which
we sell our products and conduct our business operations. As a result, the pandemic has caused, and is likely to
continue to cause, significant volatility in capital markets and economic disruption such as periodic adverse
fluctuations on the demand and pricing for our logs, wood products and real estate properties, personnel absences,
disruptions to our supply chain and the manufacturing and distribution of our timber and wood products. Our
suppliers, third-party logging and hauling and shipping contractors and customers have also experienced, and may
continue to experience, disruptions in their operations, which can result in delayed deliveries of raw materials,
products and services, reduced, or canceled orders, rising commodity prices, increased freight, and increased
collection risks.
We are actively monitoring the potential impacts on our operations, workforce, supply chain and our consolidated
results of operations as a result of the continued spread of the COVID-19 variants and continue to adjust production
where possible to match demand. However, our predictions about the impact that COVID-19 or other viral outbreaks
will have on our business, financial condition, or results of operations may not be accurate as they depend on future
developments, which are highly uncertain and cannot be predicted with confidence. Such developments include,
but are not limited to, the severity of the virus’s impact on the economy, recent increases in inflation and the extent
such increases will continue, housing demand, new residential construction and home repair and remodeling
activity, current and future restrictions or disruptions of transportation such as reduced availability of rail and trucking
to transport our products to our customers, the future geographic spread or mutation of COVID-19 or the outbreak
of another virulent disease, continuation of or changes in governmental responses to disease outbreak, the duration
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of disease outbreak, the timing and effectiveness of treatment and testing options, availability and distribution of a
vaccine, consequential restrictions, business disruptions, the effectiveness of responsive actions taken in the United
States and other countries to contain the disease and actions that may be taken by our competitors, suppliers or
customers.
While several COVID-19 vaccines have been approved and are available for use in the United States, we are unable
to predict how widely utilized the vaccines ultimately will be, whether they will be effective in preventing the
symptoms and spread of COVID-19 (including its variant strains), and when or if normal economic activity and
business operations will resume. These effects, alone or taken together, could have a material adverse effect on
our business, results of operations, or financial condition. The continuation of the pandemic or expanded or recurring
outbreaks could exacerbate the adverse impact of such measures. Any requirements to mandate COVID-19
vaccination of our workforce or require our unvaccinated employees to be tested regularly in the jurisdictions in
which we operate could be difficult and costly, and could result in labor disruptions, employee attrition and difficulty
securing future labor needs.
Commodity Products
Our wood products are commodities that are widely available from other producers. Failure to compete
effectively in our markets could adversely affect our financial results.
Because commodity products have few distinguishing properties from producer to producer, competition for these
products is based primarily on price, which is determined by supply relative to demand and competition from
substitute products. Prices for our products are affected by many factors outside of our control, and we have no
influence over the timing and extent of price changes, which often are volatile. Our profitability with respect to these
products depends, in part, on managing our costs, particularly raw material and energy costs, which represent
significant components of our operating costs. These costs can fluctuate based upon factors beyond our control
including, but not limited to, changes in demand, supply chain disruptions and inflation or deflation, all of which
could have a material adverse effect on our results of operations and cash flows.
The markets for our wood products are highly competitive and companies that have substantially greater financial
resources than we do compete with us in each of our lines of business. In addition, our Wood Products facilities are
relatively capital intensive, which leads to high fixed costs and generally results in continued production as long as
prices are sufficient to cover variable costs. These conditions have contributed to substantial price competition,
particularly during periods of reduced demand. Some of our wood products competitors may currently be lower-
cost producers than we are or may benefit from weak currencies relative to the U.S. dollar and, accordingly, these
competitors may be less adversely affected than we are by price decreases. Wood products also are subject to
significant competition from a variety of substitute products, including non-wood and engineered wood products. To
the extent there is a significant increase in competitive pressure from substitute products or other domestic or
foreign suppliers, our business could be adversely affected.
Competition from wood product imports can vary significantly and have a material effect on U.S. wood
product pricing.
The future volume and pricing of lumber imports entering U.S. markets remain uncertain. Historically, Canada has
been the most significant source of lumber imports to the U.S. market. For decades, the U.S. and Canada have
been in a dispute over pricing for softwood lumber entering the U.S., which has resulted in trade cases and
negotiated agreements between the two countries. The U.S. and Canada signed a Softwood Lumber Agreement in
2006, which expired in October 2015. On November 25, 2016, the U.S. lumber industry filed a petition seeking
injury determination with the U.S. International Trade Commission, and a petition seeking countervailing (CVD) and
anti-dumping (AD) duties on Canadian lumber imports with the U.S. Department of Commerce. Final rulings on
injury and CVD and AD duties went into effect on December 28, 2017 resulting in the combined CVD and AD cash
deposit rate to be paid by most Canadian exporters initially established at 20.23%. The most recent annual
administrative review covering 2019 was completed in November 2021 resulting in the CVD and AD combined rate
of 17.90%. The U.S. Department of Commerce has begun preliminary work on its third administrative review, which
will cover 2020. A final decision on that review is not expected until late 2022. The Government of Canada continues
to appeal the determinations by the U.S. Department of Commerce and the U.S. International Trade Commission
supporting the AD/CVD duties as well as to challenge these duties in the World Trade Organization.
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We are not able to predict when, or if, a new softwood lumber agreement will be reached or, if reached, what the
terms of the agreement would be. Similarly, we are not able to predict if the current U.S. policy of imposing import
duties on Canadian softwood lumber will continue. We could, therefore, experience significant downward pressure
on lumber prices caused by Canadian imports.
Third-Party Logging and Hauling Contractors
Our operations are affected by third-party logger availability, transportation availability and changes in
costs from these third parties.
Our Timberlands business depends on the availability of third-party logging and hauling contractors. Our Wood
Products business depends on third-party transportation providers, including railcar and truck transportation. Our
timberlands are located primarily in rural areas where skilled logging and hauling labor availability may be limited.
As a result of weak business conditions in the timber industry that persisted for several years following the Great
Recession, there are fewer logging and hauling contractors in certain markets to harvest and deliver our logs. This
shortage has resulted in an overall increase in logging and hauling costs and, in some cases, compromised the
general availability of these contractors. Any increase in harvest levels due to significant and/or extended increased
demand for logs could further strain the existing supply of third-party logging and hauling contractors. This, in turn,
could increase the cost of log supply and delivery, or prevent us from fully capitalizing on favorable market conditions
by limiting our ability to harvest our timber and deliver our logs to market.
Additionally, our third-party contractors are subject to several events outside of their control, such as disruption of
transportation infrastructure, labor issues, increased competition for loggers, truck drivers and railcar availability.
Logger and truck driver shortages or failures of a third-party transportation provider to timely deliver our products
to our mills and our customers, could harm our supply chain, negatively affect our customer relationships and have
a material adverse effect on our financial condition, results of operations and our reputation. Further, increases in
the cost of labor or fuel could negatively impact our financial results by increasing the cost of these services and
could also result in an overall reduction in the availability of these services.
Timberlands Operations
Our operating results and cash flows are materially affected by the supply and demand for timber.
A variety of factors affect prices and demand for timber including changes in availability at the local, national and
international level, all of which can vary by region, timber type (sawlogs or pulpwood logs) and species. On a local
level, supplies can fluctuate depending upon factors such as changes in weather conditions and harvest strategies
of local timberland owners, as well as occasionally high timber salvage efforts due to events such as unusual pest
infestations or fires. Our timberlands are primarily located in Alabama, Arkansas, Idaho, Louisiana and Mississippi.
As a result, we may be susceptible to adverse economic and other developments in these regions, including industry
slowdowns, mill closures and curtailments, business layoffs or downsizing, relocations of businesses, changes in
demographics, increases in real estate and other taxes and increased regulation, any of which could have a material
adverse effect on us. Further, as the demand for paper nationwide continues to decline, closures and curtailment
of pulp mills have adversely affected the demand and pricing for pulpwood and wood chips in certain regions in
which we operate. Also, demand in other parts of the world may affect timber prices in the markets in which we
compete. For example, although we do not sell into the Asian markets, Asian demand can indirectly impact pricing
and supply in North American timber and lumber markets.
In Alabama, Arkansas, Louisiana and Mississippi, most timberlands are privately owned. Historically, increases in
timber prices have often resulted in substantial increases in harvesting on private timberlands, including lands not
previously made available for commercial logging operations, causing a short-term increase in supply that has
tended to moderate price increases. Decreases in log prices have often resulted in lower harvest levels, causing
short-term decreases in supply that have tended to moderate price decreases. In the South, timber growth rates
have exceeded harvests during the past decade. This condition has led to an oversupply of harvestable timber in
the region, which has kept timber prices at relatively low levels.
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In Idaho, a greater proportion of timberland is government owned as compared to the southern states where we
operate. For more than 20 years environmental concerns and other factors have limited timber sales by federal
agencies, which historically had been major suppliers of timber to the U.S. forest products industry, particularly in
the West. Any reversal of policy that substantially increases timber sales from government owned land, including
opening federal lands to thinning and additional harvesting to reduce fire risks, could have a material adverse effect
on our results of operations and cash flows.
We may be unable to harvest timber or we may elect to reduce harvest levels due to market, weather, climate
change and regulatory conditions, either of which could adversely affect our results of operations and cash
flows.
Our timber harvest levels and sales may be limited due to weather impacting timber growth cycles and restrictions
on access, availability of contract loggers, mill closures and curtailments and regulatory requirements associated
with the protection of wildlife and water resources. Future timber harvest levels may also be affected by our ability
to timely and effectively replant harvested areas as a result of other factors, including availability of labor, insufficient
or excessive precipitation, damage by fire, pest infestation, disease and natural disasters, significant regional or
local weather events such as ice storms, windstorms, tornadoes, hurricanes and floods. Changes in global climate
conditions could intensify one or more of these factors. Although damage from such natural causes usually is
localized, affecting only a limited percentage of our timber, there can be no assurance that any damage affecting
our timberlands will be limited. Severe weather conditions and other natural disasters can also reduce seedling
survival rates, impact the productivity of timberlands and disrupt the harvesting and delivery of logs. Our financial
results and cash flows are dependent to a significant extent on our continued ability to harvest timber at adequate
levels. As is typical in the forest industry, we assume all risk of loss to the standing timber we own from fire and
other hazards because insurance for such losses is either not available or is cost prohibitive to maintain.
Consequently, a reduction in our timber inventory from such events could adversely affect our financial results and
cash flows. In addition, the geographic concentration of our property makes us more susceptible to adverse impacts
from a single natural disaster, temporary or permanent closures of wood product facilities that purchase our logs
and other factors that could negatively impact our timber production.
We typically experience seasonally lower harvest activity during the winter and early spring due to weather
conditions. On a short-term basis, we may adjust our timber harvest levels in response to market conditions. Longer
term, our timber harvest levels will be affected by acquisitions of additional timberlands, sales of existing timberlands
and shifts in harvest from one region to another. In addition, future timber harvest levels may be affected by changes
in estimates of long-term sustainable yield because of silvicultural advances, regulatory constraints and other
factors beyond our control.
Our estimates of timber inventories and growth rates may be inaccurate and include risks inherent in
calculating such estimates, which may impair our ability to realize expected revenues.
Whether in connection with managing our existing timberlands or assessing potential timberland acquisitions, we
make and rely on important estimates of merchantable timber inventories. These include estimates of timber
inventories that may be lawfully and economically harvested, timber growth rates and end-product yields. Timber
growth rates and yield estimates are developed by forest biometricians and other experts using statistical
measurements of tree samples on given property. These estimates are central to forecasting our anticipated timber
harvests, revenues and expected cash flows. However, future growth and yield estimates are inherently inexact
and uncertain and subject to many external variables that could further affect their accuracy including, among other
things, disease, infestation, natural disasters, changes in weather patterns and changes in product merchandizing
specifications. If these estimates are inaccurate, our ability to manage our timberlands in a sustainable or profitable
manner may be adversely affected.
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Wood Products Operations
A material disruption at one of our manufacturing facilities could prevent us from meeting customer
demand, reduce our sales or negatively affect our results of operations and financial condition.
Any of our manufacturing facilities, or any of our machines within an otherwise operational facility, could
unexpectedly cease to operate due to a number of events, including unscheduled maintenance outages, prolonged
power failures, equipment failures, raw material shortages, equipment and maintenance part shortages, cyber-
attacks, labor difficulties or labor availability due to quarantine requirements for those exposed to flu or viruses,
such as COVID-19 and its variants, disruptions in the transportation infrastructure, such as roads, bridges, railroad
tracks and tunnels, fire such as the fire at our Ola, Arkansas sawmill in June 2021, ice storms, floods, windstorms,
tornadoes, hurricanes or other catastrophes, terrorism or threats of terrorism, governmental regulations and other
operational problems.
We cannot predict the duration of any such downtime or extent of facility damage. Downtime and facility damage
have prevented us and could prevent us in the future from meeting customer demand for our products and/or require
us to make unplanned expenditures. If one of our machines or facilities were to incur significant downtime, our
ability to meet our production targets and satisfy customer demand could be impaired, resulting in lower sales and
income. Although some risks are not insurable and some coverage is limited, we purchase insurance on our
manufacturing facilities for damages and business interruption losses resulting from events such as fires, floods,
windstorms, earthquakes and catastrophic equipment failure. For example, our Ola, Arkansas sawmill was
damaged by fire in June 2021 and we have adequate property and business interruption insurance, subject to an
applicable deductible, to cover this event. However, such insurance may not be sufficient or may be cost prohibitive
to cover all our damages and losses in the future.
Real Estate Operations
Changes in demand for our real estate and delays in the timing of real estate transactions may affect our
revenues and operating results.
A number of factors, including availability of credit, a slowing of residential and commercial real estate development,
availability of funding to support conservation land purchases by governmental and other entities, zoning rules,
population shifts, types and location of land available for sale and changes in demographics could reduce the
demand for our real estate and negatively affect our results of operations. Changes in investor interest in purchasing
timberlands could reduce our ability to execute sales of non-core timberlands and could also negatively affect our
results of operations. Changes in the interpretation or enforcement of current laws, or the enactment of new laws,
regarding the use and development of real estate, or changes in the political composition of federal, state and local
governmental bodies could lead to new or greater costs, delays and liabilities that could materially adversely affect
our real estate business, profitability or financial condition.
The majority of our real estate development projects are concentrated in few markets.
We have real estate development projects located in Central Arkansas, specifically, in and west of Little Rock,
Arkansas and in Hot Springs, Arkansas. These real estate operations are particularly vulnerable to economic
downturns, weather or other adverse events that may occur in this specific region and to competition from nearby
commercial and residential housing developments. Our results of operations may be affected by the cyclicality of
the homebuilding and real estate industries. Factors influencing these industries include changes in population
growth, general and local economic conditions, weather, climate impacts, employment levels, consumer confidence
and income, housing demand, new and existing housing inventory levels, the availability of developable land,
availability and cost of financing, mortgage interest rates and foreclosures, and changes in government regulation
regarding the environment, zoning, real estate taxes, and other local government fees. In addition, the tightening of
credit and economic recession could delay or deter commercial and residential real estate activity and may affect
our operating results.
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Legal, Environmental and Regulatory Compliance Risks
Environmental Laws and Regulations
Our businesses are subject to extensive environmental laws and regulations.
We are subject to a wide range of general and industry-specific laws and regulations relating to the protection of
the environment, including those governing:
• air emissions,
• harvesting,
• silvicultural activities, including use of pesticides and herbicides,
• surface water management
•
the cleanup of contaminated sites,
• building codes, and
• health and safety matters.
We have incurred, and we expect to continue to incur, significant capital, operating and other expenditures to comply
with applicable environmental laws and regulations. We also have incurred and could incur in the future substantial
costs, such as civil or criminal fines, sanctions and enforcement actions (including orders limiting our operations or
requiring corrective measures, installation of pollution control equipment or other remedial actions), cleanup and
closure costs, and third-party claims for property damage and personal injury as a result of violations of, or liabilities
under, environmental laws and regulations on properties we currently own or have owned in the past. Because
environmental regulations are constantly evolving, we will continue to incur costs to maintain compliance with those
laws and our compliance costs could increase materially. In addition, surface water management regulations may
present liabilities and are subject to change. Future compliance with existing and new laws and requirements may
disrupt our business operations and require significant expenditures.
As the owner and operator of land, we have been and may be in the future liable under environmental laws for
cleanup, closure and other damages resulting from the presence and release of hazardous substances on or from
our properties or operations we currently own or have owned and operated in the past. In addition, we lease some
of our properties to third-party operators for the purpose of exploring, extracting, developing and producing oil and
gas in exchange for fees and royalty payments. These operations may create risk of environmental liabilities for
any unlawful discharge of oil, gas or other chemicals into the air, soil or water. Generally, these third-party operators
indemnify us against any such liability, and we require that that they maintain liability insurance during the term of
our lease with them. However, if for any reason an unlawful discharge occurs and our third-party operators are not
able to honor their indemnity obligation, or if the required liability insurance was not in effect, then it is possible that
we could be held responsible for costs associated with environmental liability caused by such third-party operators.
The amount and timing of environmental expenditures is difficult to predict, and in some cases, our liability may
exceed forecasted amounts or the value of the property itself. The discovery of additional contamination or the
imposition of additional cleanup obligations at our current or previously owned sites or third-party sites may result
in significant additional costs.
Similarly, threatened and endangered species restrictions apply to activities that would adversely impact a protected
species or significantly degrade its habitat. A number of species on our timberlands have been, and in the future
may be, protected under these laws. If current or future regulations, including increased mandates for biodiversity,
increased wildlife habitats, additional species on our lands classified as endangered, or the enforcement of
endangered species regulations become more restrictive, the amount of our timberlands subject to harvest
restrictions could increase.
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Climate Conditions
Changes in climate conditions and governmental responses to such changes may affect our operations or
planned or future growth activities.
Climate change represents an urgent global challenge that has the potential to cause significant disruptions to our
business and results of operations, cash flows and profitability. We are committed to do our part to mitigate climate
change, and we believe that working forests are part of the solution. Scientific research supports that emissions of
greenhouse gases continue to alter the composition of the global atmosphere in ways that are affecting and are
expected to continue affecting the global climate. Over the past several years, changing weather patterns and
climatic conditions due to natural and man-made causes have added to the unpredictability and frequency of natural
disasters, such as wildfires, hurricanes, tornadoes, earthquakes, hailstorms, snow and ice storms, the spread of
disease, and insect infestations. Global temperature increases can result in significant regional differences in
weather patterns that affect tree growth. Further, changes in precipitation resulting in droughts have made and
could make in the future wildfires more frequent or more severe. Any of these natural disasters could affect our
timberlands, timber growth rates, productivity of our timberlands, our harvest operations or cause variations in the
cost and supply of raw materials.
Increasing governmental and societal attention to ESG matters, including expanding mandatory and voluntary
reporting, diligence, and disclosure on topics such as climate change, waste production, water usage, human
capital, labor, and risk oversight, could expand the nature, scope, and complexity of matters that we are required
to control, assess and report. These and other rapidly changing laws, regulations, policies and related
interpretations, as well as increased enforcement actions by various governmental and regulatory agencies, create
challenges for us, may alter the environment in which we do business, and may increase the ongoing costs of
compliance. Additionally, environmental groups or interested parties may file or threaten to file lawsuits that seek
to prevent us from obtaining permits, harvesting timber under contract with federal or state agencies, implementing
capital improvements or pursuing operating plans. Any lawsuit, or even a threatened lawsuit, could delay harvesting
on our timberlands or impact our ability to operate or invest in our Wood Products facilities.
We anticipate increased future legislative regulations at the state, federal and international level regarding climate
change and energy access, security and competitiveness to address emission of carbon dioxide, renewable energy
and fuel standards, and the monetization of carbon. Executive orders issued by the current U.S. presidential
administration, including an executive order issued on January 27, 2021, focusing on climate change, are evidence
of the current U.S. government's intent to undertake numerous initiatives in an effort to reduce greenhouse gases.
We manage our manufacturing facilities and timberland operations to comply with applicable laws and regulations.
It is possible that legislation or government mandates, standards or regulations intended to mitigate or reduce
carbon compound or greenhouse gas emissions or other climate change effects could affect renewals or
modifications to permits at our facilities, or result in significantly higher energy and compliance costs, and increased
capital expenditures.
Future legislative regulations could also limit harvest levels for commercial timberland operators, which could in turn
adversely affect our timberland operations as well as potentially lead to significant increases in capital investments,
the cost of energy, wood fiber and other raw materials for our Wood Products facilities. Any one or more of these
developments, as well as other unforeseeable governmental responses to climate change, could have a material
adverse effect on our results of operations, cash flows and profitability. While we have been committed to
continuous improvements to our manufacturing facilities to meet and exceed anticipated regulations, there can be
no assurance that our commitments will be successful, that regulation in the future will not have a negative
competitive impact or that economic returns will reflect our capital investments. Failure to successfully manage new
or pending regulatory and legal matters and resolve such matters without significant liability or damage to our
reputation may materially adversely impact our financial condition, results of operations and cash flows.
Legal Matters
Legal matters, disputes and proceedings (collectively “legal matters”), if determined or concluded in a
manner adverse to our interests, could have a material adverse effect on our financial condition.
We are, from time to time, involved in legal matters, disputes and proceedings (legal matters). It is possible that
there could be adverse judgments against us in some legal matters or that we may agree to settle a matter, and
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that we could be required to take a charge and make cash payments for all or a portion of any related awards of
damages that could materially and adversely affect our results of operations or cash flows for the quarter or year in
which we record or pay it. In some cases, all or a portion of any loss we experience in connection with any such
legal matters will be covered by insurance; in other cases, any such losses will not be covered by insurance.
Indebtedness and Capital Structure Risks
Access to Capital
We depend on external sources of capital for future growth.
Our ability to finance growth is dependent to a significant degree on external sources of capital. Our ability to access
such capital on favorable terms could be hampered by a number of factors, many of which are outside of our control,
including a decline in general market conditions, decreased market liquidity, a downgrade to our public debt rating,
increases in interest rates, an unfavorable market perception of our growth potential, a decrease in our current or
estimated future earnings or a decrease in the market price of our common stock. In addition, our ability to access
additional capital may also be limited by the terms of our existing indebtedness, which, among other things, restricts
our incurrence of debt and the payment of dividends. For additional details, see Liquidity and Capital Resources in
Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Any of
these factors, individually or in combination, could prevent us from being able to obtain the capital we require on
terms that are acceptable to us and the failure to obtain necessary capital could materially adversely affect our
future growth.
Indebtedness
Our indebtedness could materially adversely affect our ability to generate sufficient cash to pay dividends
to stockholders and fulfill our debt obligations, our ability to react to changes in our business and our
ability to incur additional indebtedness to fund future needs.
Our debt requires interest and principal payments. At December 31, 2021, we had total outstanding long-term debt
of $762.2 million. Subject to the limits contained in our debt instruments, we may be able to incur additional debt
from time to time to finance working capital, capital expenditures, investments or acquisitions or for other purposes.
If we do so, the risks related to our indebtedness could intensify.
Our indebtedness, combined with our other financial obligations and contractual commitments, could have
important consequences for stockholders. If we are unable to generate sufficient cash flow from operations to
service our debt, we may be required to, among other things: refinance or restructure all or a portion of our debt;
reduce or delay planned capital or operating expenditures; reduce, suspend or eliminate our dividend payments
and/or our stock repurchase program; or sell selected assets. Such measures might not be sufficient to enable us
to service our debt. In addition, any such refinancing, restructuring or sale of assets might not be available on
economically favorable terms or at all, and if prevailing interest rates at the time of any such refinancing or
restructuring are higher than our current rates, interest expense related to such refinancing or restructuring would
increase. Further, if there are adverse changes in the ratings assigned to our debt securities by credit rating
agencies, our borrowing costs, our ability to access debt financing in the future and the terms of such debt could be
adversely affected.
The alteration or discontinuation of LIBOR may adversely affect our business.
A number of our debt instruments and associated interest rate derivative agreements have an interest rate tied to
the London Interbank Offered Rate (LIBOR). On March 5, 2021, the United Kingdom’s Financial Conduct Authority,
which regulates LIBOR, announced that the US Dollar LIBOR will no longer be published after June 30, 2023. The
U.S. Federal Reserve, in conjunction with the Alternative Reference Rate Committee, a steering committee
comprised of large U.S. financial institutions, has recommended replacing LIBOR with the Secured Overnight
Financing Rate (SOFR).
The market transition away from LIBOR to an alternative reference rate is complex. Once LIBOR is no longer
available as a reference rate, we will have to modify our variable debt and interest rate derivative agreements to
adopt an alternative benchmark. Further, if our lenders or interest rate swap counterparties have increased costs
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due to changes in LIBOR, we may experience potential increases in interest rates from our variable debt and interest
rate derivatives, which could adversely impact our interest expense, results of operations and cash flows. While we
expect LIBOR to be available in substantially its current form until at least through June 30, 2023, it is possible that
LIBOR will become unavailable prior to that point. We are monitoring the developments regarding the alternative
rates, will work with our lenders and counterparties to identify a suitable replacement rate and may amend certain
debt and interest rate derivative agreements to accommodate those rates if the contract does not already specify a
replacement rate. At this time, we are not able to predict whether SOFR or another index or indices will become a
market standard that replaces LIBOR, and if so, the effects on our financial condition.
Changes in credit ratings issued by nationally recognized statistical rating organizations could adversely
affect our cost of financing and have an adverse effect on the market price of our securities.
Credit rating agencies rate our debt securities on factors that include our operating results, actions that we take,
their view of the general outlook for our industry and their view of the general outlook for the economy. Actions
taken by the rating agencies can include maintaining, upgrading or downgrading the current rating or placing us on
a watch list for possible future downgrading. Downgrading the credit rating of our debt securities or placing us on a
watch list for possible future downgrading could limit our access to the credit markets, increase our cost of financing
and have an adverse effect on the market price of our securities. For additional detail on our credit ratings, see
Liquidity and Capital Resources in Part II – Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
Ownership of our Common Stock
The price of our common stock may be volatile and influenced by many factors, some of which are beyond
our control.
The market price of our common stock may be influenced by many factors, some of which are beyond our control,
including those described herein under Risk Factors and the following:
• actual or anticipated fluctuations in our operating results or our competitors’ operating results;
• announcements by us or our competitors of capacity change;
• acquisitions or strategic investments;
• our growth rate and our competitors’ growth rates;
•
the financial markets, interest rates and general economic conditions;
• changes in stock market analyst recommendations regarding us or lack of analyst coverage of our common
stock;
• our competitors or the forest products industry generally;
•
failure to pay cash dividends or the amount of cash dividends paid;
• sales of our common stock by our executive officers, directors and significant stockholders or sales of
substantial amounts of common stock; and
• changes in accounting principles and changes in tax laws and regulations.
There has been significant volatility in the market price and trading volume of securities of companies operating in
the forest products industry that often has been unrelated to individual company operating performance. Some
companies that have experienced volatile market prices for their securities have had securities litigation brought
against them. If litigation of this type is brought against us, it could result in substantial costs and divert
management’s attention and resources.
Additionally, shareholder activism regarding our governance, strategic direction and operations could result in
negative impacts to our business by adversely affecting our ability to effectively and timely implement our strategies
and initiatives. Campaigns by shareholders to effect changes at publicly traded companies are sometimes led by
investors through actions such as strategic initiatives, financial restructuring, increased debt, special dividends,
share repurchases, or sales of assets or the entire company. Any perceived uncertainties as to our future direction
resulting from such a situation could result in the loss of potential business opportunities, be exploited by our
competitors, cause concern to our current or potential customers and make it more difficult to attract and retain
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qualified personnel, all of which could negatively impact our business. In addition, actions of activist shareholders
may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other
factors that do not necessarily reflect the underlying fundamentals of our business.
Certain provisions of our certificate of incorporation and bylaws and of Delaware law may make it difficult
for stockholders to change the composition of our board of directors and may discourage hostile takeover
attempts that some of our stockholders may consider to be beneficial.
Certain provisions of our certificate of incorporation and bylaws and of Delaware law may have the effect of delaying
or preventing changes in control if our board of directors determines that such changes in control are not in our best
interest and that of our stockholders. The provisions in our certificate of incorporation and bylaws include, among
other things, the following:
• a classified board of directors with three-year staggered terms;
•
the ability of our board of directors to issue shares of preferred stock and to determine the price and other
terms, including preferences and voting rights, of those shares without stockholder approval;
• stockholder action can only be taken at a special or regular meeting and not by written consent and
stockholders cannot call a special meeting except upon the written request of stockholders entitled to cast
not less than a majority of all of the votes entitled to be cast at the meeting;
• advance notice procedures for nominating candidates to our board of directors or presenting matters at
stockholder meetings;
•
removal of directors only for cause;
• allowing only our board of directors to fill vacancies on our board of directors;
•
in order to facilitate the preservation of our status as a REIT under the Internal Revenue Code, a prohibition
on any single stockholder, or any group of affiliated stockholders, from beneficially owning more than 9.8%
of our outstanding common or preferred stock, unless our board waives or modifies this ownership limitation;
• unless approved by the vote of at least 80% of our outstanding shares, we may not engage in business
combinations, including mergers, dispositions of assets, certain issuances of shares of stock and other
specified transactions, with a person owning or controlling, directly or indirectly, 5% or more of the voting
power of our outstanding common stock; and
• supermajority voting requirements to amend our bylaws and certain provisions of our certificate of
incorporation.
While these provisions have the effect of encouraging persons seeking to acquire control of our company to
negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction
that stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts
to remove and replace incumbent directors. We are also subject to Delaware laws that could have similar effects.
One of these laws prohibits us from engaging in a business combination with a significant stockholder unless
specific conditions are met.
REIT and Tax Risks
If we fail to remain qualified as a REIT, income from our timberlands will be subject to taxation at regular
corporate rates and we will have reduced cash available for dividends to our stockholders.
Qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue
Code to our operations, including satisfaction of certain asset, income, organizational, dividend, stockholder
ownership and other requirements, on an ongoing basis. Given the highly complex nature of the rules governing
REITs, the ongoing importance of factual determinations and the possibility of future changes in our circumstances,
no assurance can be given that we will remain qualified as a REIT.
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If in any taxable year we fail to remain qualified as a REIT, unless we are entitled to relief under the Internal Revenue
Code:
•
•
•
we would not be allowed a deduction for dividends to stockholders in computing our taxable income;
we would be subject to a federal income tax on our REIT taxable income at regular corporate rates;
and
we would also be disqualified from treatment as a REIT for the four taxable years following the year
during which we lost qualification.
Any such corporate tax liability could be substantial and would reduce the amount of cash available for dividends
to our stockholders, which in turn could have an adverse impact on the value of our common stock. As a result,
net income and the cash available for dividends to our stockholders could be reduced for at least five years.
To maintain our REIT qualification, we are generally required to distribute all our REIT taxable income to
our shareholders.
Under the REIT rules, to remain qualified as a REIT, a REIT must distribute, within a certain period after the end
of each year, 90% of its ordinary taxable income for such year. Our REIT income, however, consists primarily of
net capital gains resulting from payments received under timber cutting contracts with our TRS and third parties,
rather than ordinary taxable income. Therefore, unlike most REITs, we are not required to distribute material
amounts of cash to remain qualified as a REIT. If, after giving effect to our dividends, we have not distributed an
amount equal to 100% of our REIT taxable income, then we would be required to pay tax on the undistributed
portion of such taxable income at regular corporate tax rates and our stockholders would be required to include
their proportionate share of any undistributed capital gain in income and would receive a credit or refund for their
share of the tax paid by us.
To our knowledge, no REIT has utilized the capital gains exception and we believe it is impractical to do so due to
tight reporting deadlines, among other challenges. As a result, our ability to retain REIT cash for use in the
business is generally limited by the required distribution rules and our practice of distributing the REIT’s taxable
income to shareholders.
Certain of our business activities are potentially subject to a prohibited transactions tax on 100% of our
net income derived from such activities, which would reduce our cash flow and impair our ability to pay
dividends.
REITs are generally intended to be passive entities and can thus only engage in those activities permitted by the
Internal Revenue Code, which for us generally include owning and managing a timberland portfolio, growing
timber and selling standing timber.
Accordingly, the manufacture and sale of wood products, certain types of timberland sales, sale of developed real
estate and the harvest and sale of logs are conducted through our TRS because such activities generate non-
qualifying REIT income and could constitute “prohibited transactions” if such activities were engaged in directly by
the REIT. In general, prohibited transactions are defined by the Internal Revenue Code to be sales or other
dispositions of property held primarily for sale to customers in the ordinary course of a trade or business.
By conducting our business in this manner, we believe we will satisfy the REIT requirements and thus avoid the
100% tax that could be imposed if a REIT were to conduct a prohibited transaction. We may not always be
successful, however, in limiting such activities to our TRS. Therefore, we could be subject to the 100% prohibited
transactions tax if such instances were to occur, which would adversely affect our cash flow and impair our ability
to pay quarterly dividends.
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Our ability to pay dividends and service our indebtedness using cash generated through our taxable REIT
subsidiary may be limited.
Returning cash to shareholders through a secure, regular dividend and opportunistic share repurchases is an
important and durable part of our capital allocation strategy. Our board of directors, in its sole discretion,
determines the actual amount of dividends to be made to stockholders based on consideration of a number of
factors, including, but not limited to, our results of operations, cash flow and capital requirements, economic
conditions in our industry and in the markets for our products, REIT requirements, borrowing capacity, debt
covenant restrictions, timber prices, harvest levels on our timberlands, market demand for timberlands, including
timberland properties we have identified as potentially having a higher and better use and future acquisitions and
dispositions. For a description of debt covenants that could limit our ability to pay dividends to stockholders in the
future, see Liquidity and Capital Resources in Part II – Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations. Consequently, the level of future dividends to our stockholders
may fluctuate and any reduction in the dividend rate may adversely affect our stock price.
Further, the rules with which we must comply to maintain our status as a REIT limit the amount of dividends our
REIT can receive from our TRS. In particular, at least 75% of our gross income for each taxable year as a REIT
must be derived from sales of our standing timber and other types of real estate income. No more than 25% of
our gross income may consist of dividends from our TRS and other non-qualifying types of income. This
requirement may limit our ability to receive dividends from our TRS and may impact our ability to pay dividends to
stockholders and service the REIT's indebtedness using cash from PotlatchDeltic TRS.
To maintain our REIT qualification, we are required to limit the size of our taxable REIT subsidiary.
Our TRS enables us to engage in non-REIT qualifying business activities, such as our wood products
manufacturing operations and certain real estate investments. However, no more than 20% of the value of our
REIT gross assets may be represented by securities of our TRS under the REIT rules. We must comply with the
20% limit on a quarterly basis. We believe our TRS’s securities comprise a higher percentage of our REIT’s gross
assets than most other REITs which may limit our ability to grow our TRS.
Our high degree of leverage to volatile lumber prices, coupled with limits on the amount of dividends our REIT can
receive from our TRS, also means our TRS can accumulate significant amounts of cash. Cash accumulated and
retained by our TRS increases the value of our TRS’s securities and IRS rules may limit our ability to sufficiently
rebalance the TRS's assets. The limitations on our ability to reduce the value of our TRS means we have a higher
risk than other REITs that we will not comply with the 20% TRS limit and fail to retain our REIT qualification in the
future.
Furthermore, our use of the TRS may cause the market to value our common shares differently than the shares of
other REITs, which may not use taxable REIT subsidiaries at all, or as extensively as we use them.
General Risk Factors
Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential
information, and adversely impact our reputation and results of operations.
We use information systems to carry out our operational activities and maintain our business records. Some
systems are internally managed and some are maintained by third-party service providers. In the ordinary course
of our business, we collect and store small amounts of sensitive data, including personally identifiable information.
We also use information technology for electronic communications between our facilities, personnel, customers
and suppliers, to process financial information and results of operations for internal reporting purposes and to
comply with regulatory, legal and tax requirements.
We devote significant resources to protecting and improving the security of our systems, and have implemented
and continue to evaluate security initiatives and disaster recovery plans. We require all employees with company
email accounts to complete annual cybersecurity training to learn how to spot and report potential threats, and use
26
continuous internal phishing campaigns to test employees’ cyber knowledge and provide supplemental training
when necessary. In addition, we maintain cyber liability insurance. However, this insurance may be subject to
certain exceptions and may not be sufficient to cover the financial, legal, business or reputational losses that may
result from an interruption or breach of our systems.
Attempted cyber-attacks and other cyber incidents are occurring more frequently, are constantly evolving in nature,
are becoming more sophisticated and are being made by groups and individuals with a wide range of motives and
expertise. Our information technology systems and those of our third-party providers are vulnerable to a variety of
disruptions, including but not limited to the process of upgrading or replacing software, databases or components
thereof, user errors, natural disasters, terrorist attacks, telecommunications failures, computer viruses, cyber-
attacks, hackers, unauthorized access attempts and other security issues. Such incidents could result in
unauthorized or accidental disclosure of material confidential information or regulated individual personal data, may
negatively impact our ability to provide services to our customers, operate our business and fulfill our financial
reporting obligations, lead to lost revenues and/or increased costs, and could result in financial, legal, business and
reputational harm to us. Although we have in the past experienced, and may in the future face, cyber-attacks, other
cyber incidents or security breaches, we have not experienced a significant cyber event to date. There can be no
assurance that our efforts, or efforts of our third-party service providers, will prevent or quickly identify service
interruptions or security breaches. Additionally, we may have limited remedies against third-party service providers
in the event of service disruptions.
We may be unsuccessful in carrying out our acquisition strategy.
Our real property holdings are primarily timberlands and we may make additional strategic timberlands and other
forest products asset acquisitions in the future. The markets for timberland and forest products assets are highly
competitive. We intend to finance acquisitions through cash from operations, borrowings under our credit facility,
proceeds from equity or debt offerings, proceeds from asset dispositions or any combination thereof. In addition, it
is uncertain whether any acquisitions we make will perform in accordance with our expectations. The failure to
identify and complete acquisitions of suitable properties could adversely affect our operating results and cash flows.
Our defined benefit pension plans are currently underfunded.
We have a qualified defined benefit pension plan covering certain of our current and former employees which, at
December 31, 2021 was 95.4% funded. Future actions involving our qualified and unqualified defined benefit and
other postretirement plans, such as annuity buyouts and lump-sum payouts could cause us to incur significant
pension and postretirement settlement and curtailment charges and may require cash contributions to maintain a
legally required funded status.
The measurement of the pension benefit obligation, determination of pension plan net periodic costs and the
requirements for funding our pension plans are based on a number of actuarial assumptions. The most critical
assumption is the discount rate applied to pension plan obligation as changes in long-term interest rates may result
in increased pension costs in future periods. Changes in assumptions regarding discount rates could also increase
future pension costs. Changes in any of these factors may significantly impact future contribution requirements. For
additional information regarding this matter, see Note 15: Savings Plans, Pension Plans and Other Postretirement
Employee Benefits in the Notes to Consolidated Financial Statements.
A strike or other work stoppage, or our inability to renew collective bargaining agreements on favorable
terms, could adversely affect our financial results.
Certain employees at one of our sawmills, representing 14% of our total workforce, are covered under a collective
bargaining agreement which expires in 2023. If our unionized workers were to engage in a strike or other work
stoppage, or other non-unionized operations were to become unionized, we could experience a significant
disruption of operations at our facilities or higher ongoing labor costs. A strike or other work stoppage in the facilities
of any of our major customers or suppliers could also have similar effects on us.
27
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Information on our locations and facilities is included above in Part I – Item 1. Business under each of the respective
segment headers.
ITEM 3. LEGAL PROCEEDINGS
We believe there is no pending or threatened litigation that could have a material adverse effect on our financial
position, results of operations or liquidity.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
28
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock trades on The Nasdaq Global Select Market (NASDAQ) with the ticker symbol “PCH”. There
were approximately 1,254 stockholders of record as of February 11, 2022.
RECENT SALE OF UNREGISTERED SECURITIES
Shares Issued in Connection with the Loutre Land and Timber Company (Loutre) Merger
On December 21, 2021, the company issued 1,962,352 shares of its common stock, $1.00 par value, to the
shareholders of Loutre as consideration for their Loutre shares in connection with our merger with Loutre. The
issuance of the shares of our common stock to the Loutre shareholders was deemed to be exempt from registration
under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities
Act and Rule 506(b) of Regulation D as promulgated thereunder. The shares were not sold through any general
solicitation or advertisement. The Loutre shareholders received written disclosure that the securities had not been
registered under the Securities Act.
ISSUER PURCHASES OF EQUITY SECURITIES AND USE OF PROCEEDS
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common
stock with no time limit set for the repurchase (the Repurchase Program). No repurchases were made by the
company during 2021. Total shares repurchased under the Repurchase Program for the year ended December 31,
2020 was 489,850 for total consideration of $15.4 million. All common stock purchases were made in open-market
transactions. At December 31, 2021, we had remaining authorization of $59.5 million for future stock repurchases
under the Repurchase Program.
Shares under the Repurchase Program may be repurchased in open market transactions, including pursuant to a
trading plan adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan), or
through privately negotiated transactions. The timing, manner, price and amount of repurchases will be determined
according to the Trading Plan, and, subject to the terms of the Trading Plan, and the Repurchase Program may be
suspended, terminated or modified at any time for any reason.
We record share purchases upon trade date, as opposed to the settlement date when cash is disbursed. We record
a liability to account for repurchases that have not been settled. There were no unsettled repurchases at December
31, 2021 and 2020.
EQUITY COMPENSATION PLAN INFORMATION
Information required by this item with respect to equity compensation plans is included under the caption “Equity
Compensation Plan Information” in our definitive Proxy Statement to be filed with the SEC on or about March 29,
2022 and is incorporated herein by reference.
29
Company Stock Price Performance
The following graph and table show a five-year comparison of cumulative total stockholder returns for our
company, the NAREIT Equity Index, the Standard & Poor’s 500 Composite Index and a group of four companies
that we refer to as our peer group index for the period ended December 31, 2021. The total stockholder return
assumes $100 invested at December 31, 2016, with quarterly reinvestment of all dividends.
PotlatchDeltic Corporation
NAREIT Equity Index
S&P 500 Composite Index
2021 Peer Group Index
2017
2018
At December 31,
2019
2020
2021
$
$
$
$
124 $
105 $
122 $
120 $
91 $
100 $
116 $
83 $
129 $
126 $
153 $
119 $
154 $
116 $
181 $
136 $
203
167
233
180
Our peer group index for 2021 consists of Rayonier Inc., St. Joe Co., UFP Industries and Weyerhaeuser Co. Returns
are weighted based on market capitalizations as of the beginning of each year. Deltic has been excluded from our
peer group index in the above table and graph for all years presented due to our merger in 2018. Our 2018 return
includes the impact of the Deltic earnings and profits special distribution of approximately $3.54 per share. Our
2021 return includes the impact of our special dividend of $4.00 per share. See Note 3: Earnings Per Share in the
Notes to Consolidated Financial Statements for additional information.
The performance graph above is being furnished solely to accompany this Report pursuant to Item 201(e) of
Regulation S-K and is not being filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as
amended and is not to be incorporated by reference into any of our filings, whether made before or after the date
hereof, regardless of any general incorporation in such filing.
ITEM 6. [Reserved]
30
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (MD&A)
The following discussion is intended to promote understanding of the results of operations and financial condition.
MD&A is provided as a supplement to, and should be read in conjunction with, Part I – Item 1. Business, Item 1.A.
Risk Factors and Part II – Item 8. Financial Statements and Supplementary Data contained in this report. This
section generally discusses the results of operations for 2021 compared to 2020. For a discussion comparing our
results of operations and liquidity and capital resources for the year ended December 31, 2020 to 2019, refer to this
same section (Part II, Item 7) in our 2020 annual report on Form 10-K as filed with the SEC on February 18, 2021.
Our Company
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 represent a significant 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.
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. Rural real estate dispositions and acquisitions can be adversely affected
when access to any properties to be sold or considered for acquisition are limited due to adverse weather conditions.
Development real estate sales at Chenal Valley occur throughout the year and can fluctuate based on lot availability,
builder demand and market conditions. Historically, most sales have taken place in the second half of the year as
builders prepare for the following spring and summer traditional home building and buying season.
Additionally, our business segments have been and will continue to be influenced by a variety of other factors,
including tariffs, quotas and trade agreements, changes in timber prices and in harvest levels from our timberlands,
competition, timberland valuations, demand for our non-strategic timberland for higher and better use purposes,
lumber prices, weather conditions impacting our ability to harvest on our timberlands, disruptions or inefficiencies
in our supply chain including the availability of transportation and loggers, the efficiency and level of capacity
utilization of our Wood Products manufacturing operations, changes in our principal expenses such as log costs,
asset dispositions or acquisitions, impact of pandemics (such as COVID-19 and its variants), fires (such as the Ola,
Arkansas sawmill fire and fires on our timberlands), other natural disasters and other factors.
Non-GAAP Measures
To supplement our financial statements presented in accordance with generally accepted accounting principles in
the United States (GAAP), we use certain non-GAAP measures on a consolidated basis, including Adjusted
EBITDDA and Cash Available for Distribution (CAD), which are defined and further explained and reconciled to the
nearest GAAP measure in the Liquidity and Capital Resources section below. Our definitions of these non-GAAP
measures may differ from similarly titled measures used by others. These non-GAAP measures should be
considered supplemental to and not a substitute for, financial information prepared in accordance with GAAP.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and allocating
resources between segments, and that investors can use to evaluate the operational performance of the assets
under management. It removes the impact of specific items that management believes do not directly reflect the
core business operations on an ongoing basis. This measure should not be considered in isolation from and is not
intended to represent an alternative to, our results reported in accordance with GAAP. Management believes that
this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information
to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability
31
to identify trends in our underlying business and the comparison of our operating results against analyst financial
models and operating results of other public companies that supplement their GAAP results with non-GAAP
financial measures.
Our definition of EBITDDA and Adjusted EBITDDA may be different from similarly titled measures reported by other
companies. We define EBITDDA as net income before interest expense, income taxes, basis of real estate sold,
depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that are
considered to hinder comparison of the performance of our businesses either year-on-year or with other businesses.
See Note 2: Segment Information in the Notes to the Consolidated Financial Statements for information related to
the use of segment Adjusted EBITDDA.
Business and Economic Conditions Affecting Our Operations
The demand for timber is affected by the underlying demand for lumber and other wood products, as well as by the
demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by demand
for new homes in the U.S. and by repair and remodel activity, a large contributor to residential construction spending.
Overall, housing fundamentals remain strong, driven by a shortage of homes, large millennial demographic entering
their prime home-buying years, interest rates remaining below historical averages, the continued remote work
evolution and an aging existing housing stock supporting repair and remodel demand. These fundamentals are key
drivers for our business and we continue to expect that lumber prices will remain structurally higher than long-term
historical averages due to exceptional lumber demand and tight supply. In January 2022, the U.S. Census Bureau
reported housing starts for December 2021 were 1.7 million on a seasonally adjusted annual basis, which was only
the second time since 2006 the figure topped the 1.7 million mark. Homebuilder confidence remains very strong
with the NAHB Homebuilder Index at 83 in January 2022. However, rising construction costs, a persistently tight
labor pool, supply chain challenges and consumer concerns about rising interest rates could impact the pace of
housing starts. The repair and remodel sector is expected to maintain steady growth in 2022, extending the strength
from the pandemic-driven home improvement movement that began in 2020.
During the second quarter of 2021 we experienced a fire at our Ola, Arkansas sawmill, which had an annual capacity
of 150 million board feet prior to the fire. The damage was principally limited to the large log primary breakdown
machine center. The planer mill, kiln, and shipping department were not affected. We have adequate property
damage and business interruption insurance, subject to an applicable deductible, and have begun the
reconstruction process at the sawmill. We expect to install the new large-log line in the third quarter of 2022.
In our Wood Products segment, we shipped approximately 1.0 billion board feet of lumber during 2021. Lumber
shipments during 2021 were impacted by the Ola sawmill fire, along with COVID-19 absenteeism impacting
production. For 2022, we expect to ship approximately 1.0 billion board feet. This estimate reflects continued
uncertainty associated with staffing from COVID-19 related absences and the expected timing of the start-up of the
large-log line at the Ola, Arkansas sawmill.
In our Timberlands segment, Northern sawlog prices benefitted from Idaho sawlogs prices being indexed on a four-
week lag to lumber prices and strong cedar sawlog prices. Southern pine sawlog prices increased as a result of log
supply constraints from persistent wet weather during the year. Our harvest volume of 5.5 million tons in 2021 was
lower than 2020 primarily due to the fire at the Ola sawmill leading to harvest deferrals and the wet weather in the
Southern region hampering harvest activities. In the Northern region, harvest volumes were lower as a result of
lighter sawlogs on a tonnage basis and a planned reduction in low-margin pulpwood volume in 2021. Additionally,
in 2021 we completed a merger with Loutre Land and Timber Company (Loutre) whereby we acquired 51,340 acres
of high-quality, well-stocked timberlands in southern Arkansas and northern Louisiana. For 2022, we expect to
harvest approximately 6.1 million tons, with approximately 70% of the volume in the Southern region.
Our Real Estate segment benefitted from a strong rural and development sales environment, which we expect to
continue into 2022. We expect to sell approximately 13,500 acres of rural land and 165 residential development lots
during 2022.
32
CONSOLIDATED RESULTS
The following table sets forth year-over-year changes in items included in our Consolidated Statements of
Operations. Our Business Segment Results provide a more detailed discussion of our segments.
Years Ended December 31,
2021
2020
$ 1,337,435 $ 1,040,930 $
2021
vs.
2020
296,505
(in thousands)
Revenues
Costs and expenses:
Cost of goods sold
Selling, general and administrative expenses
Net gain on fire damage
715,846
73,432
(3,361 )
785,917
551,518
(29,275 )
—
(13,227 )
509,016
(85,156 )
423,860 $
652,871 $
687,781
72,519
—
760,300
280,630
(29,463 )
(42,988 )
(14,226 )
193,953
(27,123 )
166,830 $
382,228 $
28,065
913
(3,361 )
25,617
270,888
188
42,988
999
315,063
(58,033 )
257,030
270,643
Operating income
Interest expense, net
Pension settlement charge
Non-operating pension and other postretirement benefit costs
Income before income taxes
Income taxes
Net income
Total Adjusted EBITDDA1
1 See Liquidity and Performance Measures for a reconciliation of Total Adjusted EBITDDA to net income, the closest comparable GAAP
$
$
measure, for each of the years presented.
2021 compared with 2020
Revenues
Revenues were approximately $1.3 billion, an increase of $296.5 million compared to 2020, primarily due to
historically high lumber and Idaho sawlog prices in 2021. These increases were partially offset by lower lumber
shipments which were impacted by the loss of production at our Ola, Arkansas sawmill following a fire in June 2021.
Additionally, 2020 includes a 72,440 acre conservation land sale to The Conservation Fund (TCF) for nearly $48
million and the impact of the temporary curtailment and reduced operating posture at our industrial plywood facility.
Cost of goods sold
Cost of goods sold increased $28.1 million compared with 2020, primarily due to higher log, manufacturing and
shipping costs on lower lumber shipments in our Wood Products segment, partially offset by lower harvest volumes.
Additionally, 2020 included the impact of the temporary curtailment and reduced operating posture at our industrial
plywood facility.
Net gain on fire damage
In June 2021, a fire occurred at our Ola, Arkansas sawmill resulting in a $12.1 million charge for the write-off of
damaged and obsolete equipment and disposal costs. During 2021, we recognized insurance recoveries of $15.5
million for Ola and timberlands fire damage.
Pension settlement charge
In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of
our outstanding pension benefit obligation related to our qualified pension plans. This transaction was funded with
plan assets. In connection with this transaction, we recorded a non-cash pretax settlement charge of $43.0 million
in 2020.
33
Income taxes
For 2021 we recorded income tax expense of $85.2 million compared to $27.1 million for 2020. Income taxes are
primarily due to income generated from our TRS. For 2021, our TRS's income before tax was $345.5 million,
primarily due to historically high lumber prices. For 2020, our TRS's income before tax was $113.2 million, which
included the $43.0 million pension settlement charge.
Total Adjusted EBITDDA
Total Adjusted EBITDDA for 2021 increased $270.6 million compared to 2020. The increase in Total Adjusted
EBITDDA was primarily due to historically high lumber and Idaho sawlog prices. This increase was partly offset by
the 72,440 acre conservation sale to TCF in 2020, which was not matched by a similarly-sized sale in 2021. 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, the closest comparable
GAAP measure, for each of the periods presented.
BUSINESS SEGMENT RESULTS
Timberlands Segment
(in thousands)
Revenues1
Costs and expenses
Logging and hauling
Other
Selling, general and administrative expenses
Adjusted EBITDDA2
Years Ended December 31,
2021
449,447 $
2020
376,519 $
$
147,860
31,302
7,341
262,944 $
155,351
31,711
6,655
182,802 $
$
2021
vs.
2020
72,928
(7,491 )
(409 )
686
80,142
1 Prior to elimination of intersegment fiber revenues of $164.7 million and $138.4 million in 2021 and 2020, respectively.
2 Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to
Consolidated Financial Statements.
34
Timberlands Segment Statistics
Harvest Volumes (in tons)
Northern region
Sawlog
Pulpwood
Stumpage
Total
Southern region
Sawlog
Pulpwood
Stumpage
Total
Years Ended December 31,
2021
2020
2021
vs.
2020
1,592,474
33,134
—
1,625,608
1,669,317
113,881
23,178
1,806,376
(76,843 )
(80,747 )
(23,178 )
(180,768 )
1,834,141
1,578,465
476,868
3,889,474
2,137,699
1,682,029
380,935
4,200,663
(303,558 )
(103,564 )
95,933
(311,189 )
Total harvest volume
5,515,082
6,007,039
(491,957 )
Sales Price/Unit ($ per ton)
Northern region1
Sawlog
Pulpwood
Stumpage
Southern region1
Sawlog
Pulpwood
Stumpage
$
$
$
$
$
$
188 $
34 $
— $
46 $
29 $
16 $
128
40
14
$
$
$
44
29
11
$
$
$
60
(6 )
(14 )
2
—
5
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 Adjusted EBITDDA variances for the year ended December 31, 2021, compared
with the year ended December 31, 2020:
(in thousands)
Adjusted EBITDDA - prior year
Sales price and mix
Harvest volume
Logging and hauling cost per unit
Forest management, indirect and other
Adjusted EBITDDA - current year
2021 compared with 2020
$
$
2021 vs 2020
182,802
108,313
(19,702 )
(8,166 )
(303 )
262,944
Timberlands Adjusted EBITDDA for 2021 was $262.9 million, an increase of $80.1 million compared to 2020
primarily due to the following:
• Sales Price and Mix: Sawlog prices in the Northern region increased 46.9%, to $188 per ton primarily from
the effect of higher lumber price realizations on indexed sawlogs and increased cedar log prices in Idaho.
Southern sawlog prices increased 4.5% primarily due to log supply constraints from persistent wet weather
conditions during 2021.
35
• Harvest Volume: We harvested 3.9 million tons in the Southern region during 2021, which was 7.4% lower
compared to 2020, primarily due to adverse weather conditions impacting logging activities and harvest
deferrals as a result of the fire at the Ola, Arkansas sawmill. Harvest volumes in the Northern region
decreased as extreme heat during the summer months led to lighter logs on a tonnage basis along with a
planned reduction in low-margin pulpwood volumes in 2021.
• Logging and Hauling Cost per Unit: Logging and hauling costs were higher on a per unit basis year over
year primarily due to increased diesel costs and a higher mix of more expensive Idaho logging.
Wood Products Segment
(in thousands)
Revenues
Costs and expenses1
Fiber costs
Manufacturing costs
Freight, logging and hauling
Finished goods inventory change
Selling, general and administrative expenses
Other
Years Ended December 31,
2021
988,888 $
2020
698,405 $
$
2021
vs.
2020
290,483
310,842
201,167
72,165
1,243
11,542
(1,929 )
393,858 $
272,652
178,970
66,637
(5,888 )
9,954
(15 )
38,190
22,197
5,528
7,131
1,588
(1,914 )
217,763
Adjusted EBITDDA2
1 Prior to elimination of intersegment fiber costs of $164.7 million and $138.4 million in 2021 and 2020, respectively.
2 Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to
176,095 $
$
Consolidated Financial Statements.
Wood Products Segment Statistics
Lumber shipments (MBF)1
Lumber sales prices ($ per MBF)
1 MBF stands for thousand board feet.
Wood Products Adjusted EBITDDA
Years Ended December 31,
2021
2020
1,026,289
1,098,082
$
795 $
522 $
2021
vs.
2020
(71,793 )
273
The following table summarizes Adjusted EBITDDA variances for the year ended December 31, 2021, compared
with the year ended December 31, 2020:
(in thousands)
Adjusted EBITDDA - prior year
Lumber:
Price
Log costs per unit
Manufacturing costs per unit
Volume
Residuals, panels and other
Adjusted EBITDDA - current year
2021 compared with 2020
$
$
2021 vs 2020
176,095
273,674
(46,695 )
(20,093 )
(8,961 )
19,838
393,858
Wood Products Adjusted EBITDDA for 2021 was $393.9 million, an increase of $217.8 million compared to 2020
primarily due to the following:
• Lumber Price: Average lumber sales prices increased to $795 per MBF as a result of a historic surge in
lumber prices compared with $522 per MBF during 2020.
36
• Log Costs per Unit: Log costs per unit were higher in 2021 primarily because of increased indexed log
costs at our Idaho sawmill.
• Manufacturing Costs Per Unit: Higher manufacturing costs per unit was primarily a result of week-long
shutdowns at our Southern mills from a severe winter storm in the first quarter of 2021, lost production at
our Ola, Arkansas sawmill following the fire in June 2021 and extended planned downtime for maintenance
and capital projects at two of our sawmills.
• Lumber Volume: Lumber shipments decreased 71.8 million board feet during 2021 driven by decreased
shipments at our Ola, Arkansas sawmill following the fire in June 2021.
• Residual Sales, Panels and Other: 2021 benefitted from increased plywood prices and shipments
compared to 2020, which included a temporary production curtailment and reduced operating posture at
our industrial plywood facility, which more than offset lower residual sales.
Real Estate Segment
(in thousands)
Revenues
Costs and expenses
Costs of goods sold
Selling, general and administrative expenses
Other
Adjusted EBITDDA1
Years Ended December 31,
2021
$
63,813 $
2020
104,416 $
11,180
4,964
212
47,457 $
12,502
5,438
—
86,476
$
$
2021
vs.
2020
(40,603 )
(1,322 )
(474 )
212
(39,019 )
1 Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to
Consolidated Financial Statements.
Real Estate Segment Statistics
Rural Real Estate
Acres sold
Average price per acre
Development Real Estate
Residential lots
Average price per lot
Commercial acres
Average price per acre
Year Ended December 31,
2020
2021
$
17,665
2,115 $
94,597
867
Year Ended December 31,
2021
2020
159
85,986 $
138
85,922
11
277,425 $
4
817,629
$
$
37
Real Estate Adjusted EBITDDA
The following table summarizes Adjusted EBITDDA variances for the year ended December 31, 2021, compared
with the year ended December 31, 2020:
(in thousands)
Adjusted EBITDDA - prior year
Rural real estate sales
Real estate development sales
Selling, general and administrative expenses
Other costs, net
Adjusted EBITDDA - current year
2021 compared with 2020
$
$
2021 vs 2020
86,476
(44,612 )
4,009
474
1,110
47,457
Real Estate Adjusted EBITDDA for 2021 was $47.5 million, a decrease of $39.0 million compared with 2020
primarily due to the following:
• Rural Real Estate Sales: During 2020 we sold 72,440 acres to The Conservation Fund for nearly $48
million compared to no similar size land sales during 2021. Rural real estate sales vary period-to-period
with the average price per acre fluctuating based on both the geographic area of the real estate and product
mix.
• Development Real Estate Sales: During 2021 we sold 159 residential lots at an average lot price of
$85,986 compared with 138 lots at an average lot price of $85,922 during 2020. In addition, we sold 11
acres of commercial land in Chenal Valley for $277,425 per acre during 2021 compared to 4 acres of
commercial land in Chenal Valley for $817,629 per acre during 2020. The average price per lot or
commercial acre fluctuates based on a variety of factors including size, location and planned end use within
the developments.
Liquidity and Capital Resources
Overview
An important source of liquidity is cash generated from our operations, which is highly dependent on selling prices
for our products, as described in Part I – Item. Business, and can vary from period to period. Changes in significant
sources of cash for the years ended December 31, 2021 and 2020 are presented by category as follows:
(in thousands)
Net cash from operating activities
Net cash from investing activities
Net cash from financing activities
$
$
$
Net Cash Flows from Operating Activities
2021
Year Ended December 31,
2020
$ 335,263
$
504,886
(59,145 ) $ (42,192 ) $
(401,309 ) $ (124,985 ) $
Change
169,623
(16,953 )
(276,324 )
Net cash from operating activities increased $169.6 million in 2021 compared to 2020 primarily as a result of the
following:
• Cash received from customers increased $304.5 million primarily due to historically high lumber and Idaho
sawlog and cedar prices during 2021. These increases were partially offset by the 72,440 acre rural land
sale to TCF in 2020, which was not matched by a similarly-sized sale in 2021, and reduced shipments at
our Ola, Arkansas sawmill following the fire in June 2021. In addition, 2020 was impacted by the temporary
curtailment of our industrial plywood mill.
38
• Cash payments increased $63.6 million due to vendor payments on higher log, manufacturing and freight
costs in our Wood Products segment and employee incentive compensation payouts related to strong 2020
company performance. Additionally, 2020 experienced reduced vendor payments stemming from the
temporary curtailment of our industrial plywood mill.
•
Income tax payments increased $72.9 million as a result of higher taxable income generated from our TRS
operations.
Net Cash Flows from Investing Activities
Changes in cash flows from investing activities were primarily a result of the following:
• We spent $55.3 million on capital expenditures for property, plant and equipment, timberlands reforestation
and road construction projects during 2021 compared to $38.9 million during 2020.
• Cash expenditures for timberland acquisitions in 2021 was $20.1 million compared to $6.9 million in 2020.
• During 2021 we received initial insurance proceeds of $15.0 million for property losses as a result of the
fire at our Ola, Arkansas sawmill.
Net Cash Flows from Financing Activities
Changes in cash flows from financing activities were primarily a result of the following:
• We paid dividends of $388.2 million in 2021, including a special dividend totaling $276.3 million, compared
to $107.9 million in 2020.
• We did not repurchase any of our common stock during 2021 compared to 489,850 shares repurchased
totaling $15.4 million during 2020.
• We paid off $6.6 million in debt assumed in the merger with Loutre in December 2021.
•
In December 2021, we paid $1.7 million in loan fees for the refinancing of our revolving credit facility.
Future Sources and Uses of Cash
At December 31, 2021, we had cash and cash equivalents of $296.2 million. We expect cash and cash equivalents
and cash generated from operating activities, supplemented by borrowings under our credit agreement, if needed,
to be adequate to meet our future cash requirements.
Our material cash commitments arising in the normal course of business under our known contractual and other
obligations as of December 31, 2021, primarily relate to purchase obligations, repayments of long-term debt and
related interest, payments under operating and financing leases and pension and postretirement benefits. Our
purchase obligations and “take or pay” arrangements were approximately $60.7 million, of which $35.3 million is
expected to be paid in the next twelve months. Purchase obligations primarily include open purchase orders for
goods or services that are legally binding on us and that specify fixed or minimum quantities to be purchased.
Purchase obligations also include future payments due under timber cutting contracts, commitments for
construction contracts, commitments to complete real estate development projects and commitments to acquire
property and equipment in the next twelve months. Additionally, we expect net interest payments on long-term debt,
including the impact of any associated interest rate swaps and patronage credits from lenders to be approximately
$128.3 million over the term of the loans, of which approximately $25.4 million is expected to be paid in 2022.
For further detail on our debt, lease, and pension and other postretirement plans obligations and timing of expected
future payments see Note 9: Debt, Note 13: Leases, and Note 15: Savings Plans, Pension Plans and Other
Postretirement Employee Benefit Plans in the Notes to Consolidated Financial Statements.
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
39
on an expected level of return on investment. We expect to spend a total of approximately $70 to $75 million for
capital expenditures during 2022.
Our 2022 planned capital spend includes approximately $15 million of capital expenditures for the reconstruction of
our fire-damaged Ola sawmill, which is largely covered by insurance. We expect the sawmill reconstruction to be
substantially completed and the large-log line to be operational in the latter half of 2022. A determination regarding
the extent of downtime and costs to repair the Ola sawmill is on-going as the reconstruction progresses. We have
adequate property damage and business interruption insurance, subject to an applicable deductible. The timing of
expenditures incurred for the sawmill rebuild and economic losses is expected to vary from when we receive
proceeds from our insurance carriers.
Share Repurchase Program
On August 30, 2018, the board of directors authorized the repurchase up to $100.0 million of common stock with
no time limit set for the repurchase (the Repurchase Program). At December 31, 2021, we had remaining
authorization of $59.5 million for future stock repurchase under the Repurchase Program. The timing, manner, price
and amount of repurchases will be determined according to the trading plan adopted in accordance with Rule 10b5-
1 of the Securities Exchange Act of 1934 (the Trading Plan), and, subject to the terms of the Trading Plan, the
Repurchase Program may be suspended, terminated or modified at any time for any reason.
Dividends to Shareholders
Returning cash to shareholders through a secure regular dividend and opportunistic share repurchases is an
important and durable part of our disciplined capital allocation strategy. Our board of directors, in its sole discretion,
determines the actual amount of dividends to be made to stockholders based on consideration of a number of
factors, including, but not limited to, our results of operations, cash flow and capital requirements, economic
conditions in our industry and in the markets for our products, borrowing capacity, debt covenant restrictions, future
acquisitions and dispositions, and REIT requirements. Generally, a REIT must distribute its taxable income each
year and there is a 20% limit on the value of our TRS, including cash, that can be retained. Our strong financial
performance, driven by record lumber and indexed sawlog prices during 2021, generated large cash balances in
both our REIT and TRS. As a result, on December 3, 2021, our board of directors approved a special, one-time
cash dividend of $4.00 per share, or $276.3 million in aggregate, that was paid on December 31, 2021.
The following table summarizes the historical tax characteristics of dividends to shareholders for the years ended
December 31:
(Amounts per share)
Capital gain dividends
Qualified dividends
Non-taxable return of capital
Total dividends
2021
2020
$
$
3.87 $
0.18
1.62
5.67 $
1.61
—
—
1.61
On February 11, 2022, the board of directors approved a quarterly cash dividend of $0.44 per share payable on
March 31, 2022, to stockholders of record as of March 4, 2022.
Long-Term Debt and Credit Agreement
At December 31, 2021, our total outstanding net long-term debt was $758.3 million. We expect to refinance a $40.0
million term loan expiring in December 2022 at maturity, which is covered by a forward starting interest rate swap
that hedges the variability in future benchmark interest payments attributable to changes in interest rates. All interest
rates on our outstanding long-term debt are fixed rates under fixed rate loans or variable rate loans with an
associated interest rate swap that fixes the variable benchmark interest rate component.
We have a $300.0 million revolving line of credit with a syndicate of lenders, providing loans for us through February
14, 2027. 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 December 31, 2021, there were no borrowings under
40
the revolving line of credit and approximately $1.0 million of the credit facility was utilized by outstanding letters of
credit.
Our credit agreement, variable rate term loans with $403.5 million in principal and our interest rate derivative
agreements have an interest rate tied to LIBOR. On March 5, 2021, the United Kingdom’s Financial Conduct
Authority, which regulates LIBOR, announced that the US Dollar LIBOR will no longer be published after June 30,
2023. The market transition away from LIBOR to an alternative reference rate is complex. While we expect LIBOR
to be available in substantially its current form until at least through June 30, 2023, it is possible that LIBOR will
become unavailable prior to that point. We continue to evaluate and monitor market developments regarding the
alternative rates, will work with our lenders and counterparties to identify a suitable replacement rate, and may
amend certain debt and interest rate derivative agreements to accommodate those rates.
Financial Covenants
The Amended Credit Agreement and the Amended Term Loan Agreement (collectively referred to as the
Agreements) contain certain covenants that limit our ability and that of our subsidiaries to create liens, merge or
consolidate, dispose of assets, incur indebtedness and guarantees, repurchase or redeem capital stock and
indebtedness, make certain investments or acquisitions, enter into certain transactions with affiliates or change the
nature of our business. The Agreements also contain financial maintenance covenants including the maintenance
of a minimum interest coverage ratio and a maximum leverage ratio. We are permitted to pay dividends to our
stockholders under the terms of the Agreements so long as we expect to remain in compliance with the financial
maintenance covenants.
The Interest Coverage Ratio is EBITDDA, which is defined in the Agreements as net income adjusted for interest
expense, income taxes, depreciation, depletion and amortization, the basis of real estate sold and non-cash equity
compensation expense, divided by interest expense for the same period.
The Leverage Ratio is our Total Funded Indebtedness divided by our Total Asset Value (TAV). Our Total Funded
Indebtedness consists of long-term debt, including any current portion of long-term debt, finance lease liabilities,
revolving line of credit borrowings and the amount outstanding under the letter of credit subfacility.
The following table presents the components and applicable limits of TAV at December 31, 2021.
(in thousands)
Estimated timberland fair value
Wood Products manufacturing facilities book basis (limited to 10% of TAV)
Cash and cash equivalents
Company owned life insurance (COLI) (limited to 5% of TAV)
Total Asset Value1
$
$
3,332,983
277,513
296,151
3,923
3,910,570
1 TAV also includes, as applicable, Construction In Progress (limited to 10% of TAV) and Investments in Affiliates (limited to 15% TAV) as
defined in the Agreements.
At December 31, 2021, we were in compliance with all covenants under the Agreements. The table below sets forth
the financial covenants for the Agreements and our status with respect to these covenants at December 31, 2021:
Interest Coverage Ratio
Leverage Ratio
Credit Ratings
Covenant Requirement
3.00 to 1.00
40%
≥
≤
Actual
22.2
20%
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.
41
Capital Structure
(in thousands)
Long-term debt (including current portion)
Cash and cash equivalents
Net debt
Market capitalization1
Enterprise value
December 31,
2021
December 31,
2020
$
$
758,256
(296,151 )
462,105
4,159,034
4,621,139
$
$
757,347
(252,340 )
505,007
3,345,138
3,850,145
Net debt to enterprise value
Dividend yield2
Weighted-average cost of debt, after tax3
1 Market capitalization is based on outstanding shares of 69.1 million and 66.9 million times closing share prices of $60.22 and $50.02 at
13.1 %
3.3 %
3.2 %
10.0 %
2.9 %
3.1 %
December 31, 2021 and 2020, respectively.
2 Dividend yield is based on annualized dividends per share of $1.76 and $1.64 divided by share prices of $60.22 and $50.02 at December
31, 2021 and 2020, respectively.
3 Weighted-average cost of debt excludes deferred debt costs and credit facility fees and includes estimated annual patronage credits from
lenders on term loan debt.
Liquidity and Performance Measures
The discussion below is presented to enhance the reader’s understanding of our operating performance, ability to
generate cash and satisfy rating agency and creditor requirements. This information includes two measures:
Adjusted EBITDDA and Cash Available for Distribution (CAD). These measures are not defined by GAAP and the
discussion of Adjusted EBITDDA and CAD is not intended to conflict with or change any of the GAAP disclosures
described herein.
Adjusted EBITDDA is a non-GAAP measure that management uses in evaluating performance and to allocate
resources between segments, and that investors can use to evaluate the operational performance of the assets
under management. It removes the impact of specific items that management believes do not directly reflect the
core business operations on an ongoing basis. This measure should not be considered in isolation from and is not
intended to represent an alternative to our results reported in accordance with GAAP. Management believes that
this non-GAAP measure, when read in conjunction with our GAAP financial statements, provides useful information
to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability
to identify trends in our underlying business and the comparison of our operating results against analyst financial
models and operating results of other public companies that supplement their GAAP results with non-GAAP
financial measures.
Our definition of EBITDDA may be different from similarly titled measures reported by other companies. We define
EBITDDA as net income before interest expense, income taxes, basis of real estate sold, depreciation, depletion
and amortization. Adjusted EBITDDA further excludes certain specific items that are considered to hinder
comparison of the performance of our businesses either year-on-year or with other businesses.
We reconcile Total Adjusted EBITDDA to net income for the consolidated company as it is the most comparable
GAAP measure.
42
The following table provides a reconciliation of net income to Total Adjusted EBITDDA for the respective periods:
(in thousands)
Net income
Interest, net
Income taxes
Depreciation, depletion and amortization
Basis of real estate sold
Net gain on fire damage
Pension settlement charge
Non-operating pension and other postretirement benefit costs
Loss (gain) on fixed assets
Total Adjusted EBITDDA
Years Ended December 31,
2020
2021
423,860 $
29,275
85,156
75,633
27,360
(3,361 )
—
13,227
1,721
652,871 $
166,830
29,463
27,123
76,261
25,348
—
42,988
14,226
(11 )
382,228
$
$
We define CAD as cash provided by operating activities adjusted for capital spending for purchases of property,
plant and equipment, timberlands reforestation and roads and timberland acquisitions not classified as strategic.
Management believes CAD is a useful indicator of the company’s overall liquidity, as it provides a measure of cash
generated that is available for dividends to common stockholders (an important factor in maintaining our REIT
status), repurchase of the company’s common shares, debt repayment, acquisitions and other discretionary and
nondiscretionary activities. Our definition of CAD is limited in that it does not solely represent residual cash flows
available for discretionary expenditures since the measure does not deduct the payments required for debt service
and other contractual obligations. Therefore, we believe it is important to view CAD as a measure that provides
supplemental information to our 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 net cash provided by operating activities to CAD:
Years Ended December 31,
2021
2020
504,886 $
(75,414 )
429,472 $
335,263
(45,785 )
289,478
(in thousands)
Net cash from operating activities1
Capital expenditures2
$
CAD
Net cash from investing activities3
Net cash from financing activities
1 Cash from operating activities for the years ended December 31, 2021 and 2020 includes cash paid for real estate development expenditures
(59,145 ) $
(401,309 ) $
(42,192 )
(124,985 )
$
$
$
2
of $9.2 million and $6.7 million, respectively.
Includes capital expenditures for the rebuild of the Ola, Arkansas sawmill of $7.3 million and excludes $15.0 million of insurance proceeds
for the Ola, Arkansas sawmill property losses for the year ended December 31, 2021.
3 Net cash from investing activities includes payments for capital expenditures, which is also included in our reconciliation of CAD.
43
Critical Accounting Policies and Estimates
In preparing our Consolidated Financial Statements in accordance with GAAP and pursuant to the rules and
regulations of the SEC, we make assumptions, judgments and estimates that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our
assumptions, judgments and estimates on current facts, historical experience and various other factors that we
believe to be reasonable under the circumstances, including assumptions as to future events. Actual results could
differ materially from these estimates under different assumptions or conditions. We evaluate our assumptions,
judgments and estimates on a regular basis. We also discuss our critical accounting policies and estimates with the
Audit Committee of the Board of Directors. The following critical accounting policy and estimate requires some of
management’s most difficult, subjective and complex judgment.
Pension benefits. The measurement of the pension benefit obligation, determination of pension plan net periodic
costs, and the requirements for funding our pension plans are based on actuarial assumptions that require
judgment. The most significant assumption is the discount rate used to value the current cost of future pension
obligations as different assumptions would change the net periodic pension costs and funded status of the benefit
plans.
The discount rate is determined at the measurement date by matching current spot rates of high-quality corporate
bonds with maturities similar to the timing of expected cash outflows for benefits. The selection of discount rates
requires judgment as well as the involvement of actuarial specialists. These specialists assist with selecting yield
curves based on published indices for high-quality corporate bonds and projecting the timing and amount of cash
flows associated with our obligations to ultimately support our determination of an appropriate discount rate for our
pension plans. We use these estimates to calculate plan asset and obligation information as of year-end as well as
pension costs for the following year. Actual experience that differs from our estimates, or any changes in our
estimates that support the actuarial methods and assumptions could have a significant effect on our financial
position, results of operations and cash flows.
Pension expense for 2022 will be based on a 3.0% discount rate. Holding all other assumptions constant, a 25-
basis point decrease in the discount rate would increase the total projected benefit obligation at December 31, 2021
by approximately $11.8 million and increase estimated pension expense for 2022 by approximately $0.9 million.
See Note 15: Savings Plans, Pension Plans and Other Postretirement Employee Benefits in the Notes to
Consolidated Financial Statements for additional information.
See Note 1: Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements for
further information on our accounting policies and new accounting pronouncements.
44
ITEM 7A. 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 trading purposes. We
do not attempt to hedge our exposure to interest rate risk for our cash equivalents.
The interest rates applied to borrowings under our credit facility adjust often and therefore react quickly to any
movement in the general trend of market interest rates. We do not attempt to mitigate the effects of short-term
interest rate fluctuations on our credit facility borrowings through the use of derivative financial instruments. There
were no borrowings under our credit facility at December 31, 2021.
At December 31, 2021, we had nine interest rate swaps associated with $403.5 million of term loan debt. We use
forward starting interest rate swap contracts to manage interest rate exposure in periods prior to the anticipated
refinancing of existing term loan debt, and we had forward starting interest rate swap contracts designated as cash
flow hedges with an aggregated notional amount of $567.5 million associated with anticipated future refinancing of
term loan debt maturing through January 2029. In addition, these cash flow hedges for future debt refinance require
settlement on the maturity date. Our cash flow hedges are expected to be highly effective in achieving offsetting
cash flows attributable to the hedged interest rate risk through the term of the hedge. See Note 10: Derivative
Instruments in the Notes to Consolidated Financial Statements for additional information.
Quantitative Information about Market Risks
The table below provides information about our long-term debt, weighted-average interest rates and associated
interest rate swaps. For debt obligations, the table presents principal cash flows and related weighted-average
interest rates by expected maturity dates. For interest rate swaps, the table presents notional amounts and
weighted-average interest rates by expected (contractual) maturity dates. Notional amounts are used to calculate
the contractual payments to be exchanged under the contract and weighted-average variable rates are based on
implied forward rates in the yield curve. The table excludes our forward starting interest rate swaps.
(in thousands,
except interest rates)
Variable rate debt:
Principal due
Average interest
rate
$
2022
2023
2024
2025
2026
Thereafter
Total
Fair Value
—
$
—
$
—
$
—
$ 27,500
$ 376,000
$ 403,500
$
403,500
—
—
—
—
3.64 %
3.51 %
3.52 %
Expected Maturity Date
Fixed rate debt:
Principal due
Average interest
rate
Interest rate
swaps:
$ 43,000
$ 40,000
$ 175,735
$ 100,000
$
—
$
—
$ 358,735
$
373,920
4.60 %
4.49 %
3.93 %
4.05 %
—
—
4.11 %
Variable to fixed $
—
$
—
$
—
$
—
$ 27,500
$ 376,000
$ 403,500
$
(20,720 )
Average pay
rate
Average
receive rate
—
—
—
—
—
—
—
—
1.73 %
2.20 %
2.17 %
1.54 %
1.59 %
1.58 %
45
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
PotlatchDeltic Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of PotlatchDeltic Corporation and subsidiaries
(the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations,
comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended
December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-
year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on
criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated February 17, 2022 expressed an unqualified
opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company 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 consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
46
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our
especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Measurement of the pension benefit obligation
As discussed in Notes 1 and 15 to the consolidated financial statements, the Company’s pension benefit
obligation was $386.2 million as of December 31, 2021. The measurement of the pension benefit obligation
is based on actuarial assumptions that require judgment. The discount rate applied to pension plan obligations
is a critical assumption in the measurement of the pension benefit obligation.
We identified the evaluation of the measurement of the benefit obligation as a critical audit matter. Specialized
skills and knowledge were required to evaluate the discount rate used to determine the pension benefit
obligation. In addition, there was subjective judgment in applying and evaluating results of the procedures due
to the sensitivity of the pension benefit obligation to changes in the discount rate.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the
design and tested the operating effectiveness of certain internal controls over the Company’s pension benefit
process. This included a control related to the determination of the discount rate assumption. We involved an
actuarial professional with specialized skills and knowledge, who assisted in evaluating the discount rate as
determined using the hypothetical bond portfolio model through analyzing the bond selection criteria, the bond
ratings, and the cash flow matching of the model. We considered the change in the discount rate from that
used in prior year, including consideration of the changes in the discount rate in light of published reports of
actuarial experts.
/s/ KPMG LLP
We have served as the Company’s auditor since 1952.
Seattle, Washington
February 17, 2022
47
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share amount)
Revenues
Costs and expenses:
Cost of goods sold
Selling, general and administrative expenses
Net gain on fire damage
Gain on sale of facility
Operating income
Interest expense, net
Pension settlement charge
Loss on the extinguishment of debt
Non-operating pension and other postretirement employee
benefit costs
Income before income taxes
Income taxes
Net income
Net income per share:
Basic
Diluted
Dividends per share
Weighted-average shares outstanding (in thousands)
Basic
Diluted
$
$
$
$
2021
1,337,435 $
Years Ended December 31,
2020
1,040,930 $
$
2019
827,098
715,846
73,432
(3,361 )
—
785,917
551,518
(29,275 )
—
—
687,781
72,519
—
—
760,300
280,630
(29,463 )
(42,988 )
—
(13,227 )
509,016
(85,156 )
423,860 $
(14,226 )
193,953
(27,123 )
166,830 $
682,066
57,925
—
(9,176 )
730,815
96,283
(30,361 )
—
(5,512 )
(3,739 )
56,671
(1,010 )
55,661
6.29 $
6.26 $
5.67 $
2.48 $
2.47 $
1.61 $
0.82
0.82
1.60
67,352
67,719
67,237
67,568
67,608
67,743
The accompanying notes are an integral part of these consolidated financial statements.
48
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income (loss), net of tax:
Years Ended December 31,
2020
166,830 $
2021
423,860 $
$
2019
55,661
Pension and other postretirement employee benefits:
Net gain (loss) arising during the period, net of tax
expense (benefit) of $11,444, $(3,531) and $(1,348)
Effect of pension settlement, net of tax benefit of $0,
$11,177, and $0
Amortization of actuarial loss included in net income,
net of tax expense of $4,901, $4,445 and $3,772
Amortization of prior service credit included in net income,
net of tax benefit of $(288), $(303) and $(2,244)
Cash flow hedges, net of tax expense (benefit) of $1,706, $396
and $(978)
Other comprehensive income (loss), net of tax
Comprehensive income
$
31,525
(10,053 )
(3,836 )
—
31,811
—
11,732
12,653
10,737
(818 )
(860 )
(6,389 )
35,312
77,751
501,611 $
(7,181 )
26,370
193,200 $
(18,440 )
(17,928 )
37,733
The accompanying notes are an integral part of these consolidated financial statements.
49
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents
Customer receivables, net
Inventories, net
Other current assets
Total current assets
Property, plant and equipment, net
Investment in real estate held for development and sale
Timber and timberlands, net
Intangible assets, net
Other long-term assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
Current portion of long-term debt
Current portion of pension and other postretirement employee benefits
Total current liabilities
Long-term debt
Pension and other postretirement employee benefits
Deferred tax liabilities, net
Other long-term obligations
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, authorized 4,000 shares, no shares issued
Common stock, $1 par value, authorized 100,000 shares, issued 69,064 and
66,876 shares
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders' equity
At December 31,
2021
2020
31,028
72,369
21,630
421,178
292,320
65,604
$ 296,151 $ 252,340
26,606
62,036
16,136
357,118
288,544
72,355
1,682,671 1,600,061
16,270
46,717
$ 2,535,215 $ 2,381,065
15,491
57,951
$
78,209 $
42,977
4,993
126,179
715,279
83,674
34,874
49,076
93,279
39,981
6,574
139,834
717,366
128,807
17,740
72,365
1,009,082 1,076,112
—
—
69,064
66,876
1,781,217 1,674,576
(315,510 )
(120,989 )
1,526,133 1,304,953
$ 2,535,215 $ 2,381,065
(280,910 )
(43,238 )
The accompanying notes are an integral part of these consolidated financial statements.
50
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash from operating
activities:
Depreciation, depletion and amortization
Basis of real estate sold
Gain on sale of facility
Loss on extinguishment of debt
Change in deferred taxes
Pension and other postretirement employee benefits
Pension settlement charge
Equity-based compensation expense
Net gain on fire damage
Other, net
Change in working capital and operating-related activities
Receivables, net
Inventories, net
Other assets
Accounts payable and accrued liabilities
Other liabilities
Real estate development expenditures
Funding of pension and other postretirement employee benefits
Net cash from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Property, plant and equipment additions
Timberlands reforestation and roads
Acquisition of timber and timberlands
Proceeds on sale of facility
Proceeds from property insurance
Other, net
Net cash from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to common stockholders
Repurchase of common stock
Proceeds from issuance of long-term debt
Repayment of long-term debt
Premiums and fees on debt retirement
Other, net
2021
Years Ended December 31,
2020
2019
$
423,860 $
166,830 $
55,661
77,425
27,360
—
—
25
22,079
—
8,607
(3,361 )
363
(4,404 )
(10,333 )
7,331
(17,626 )
(8,167 )
(9,229 )
(9,044 )
504,886
(38,947 )
(16,401 )
(20,066 )
—
15,000
1,269
(59,145 )
77,885
25,348
—
—
(14,610 )
23,666
42,988
8,063
—
(1,269 )
(12,439 )
3,745
4,591
25,848
1,327
(6,706 )
(10,004 )
335,263
(22,693 )
(16,234 )
(6,858 )
1,000
—
2,593
(42,192 )
(388,241 )
—
40,000
(46,366 )
—
(6,702 )
(401,309 )
44,432
252,340
296,772 $
(107,853 )
(15,364 )
46,000
(46,000 )
—
(1,768 )
(124,985 )
168,086
84,254
252,340 $
72,105
20,554
(9,176 )
5,512
(11,045 )
11,877
—
7,272
—
(2,324 )
7,238
(3,519 )
5,305
(11,415 )
3,955
(7,254 )
(5,678 )
139,068
(39,153 )
(17,695 )
(626 )
58,793
—
3,198
4,517
(107,722 )
(25,173 )
190,000
(190,000 )
(4,865 )
(1,012 )
(138,772 )
4,813
79,441
84,254
Net cash from financing activities
Change in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
$
The accompanying notes are an integral part of these consolidated financial statements.
51
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(in thousands, except per share amounts)
Balance, December 31, 2018
Shares
Amount
67,570 $ 67,570 $
Common Stock
Additional Paid-
Accumulated
in Capital
Deficit
Net income
Equity-based compensation expense
Shares issued for stock compensation
Repurchase of common stock
Pension plans and OPEB obligations
Cash flow hedges
Common dividends, $1.60 per share
Other transactions, net
Balance, December 31, 2019
Net income
Equity-based compensation expense
Shares issued for stock compensation
Repurchase of common stock
Pension plans and OPEB obligations
Cash flow hedges
Common dividends, $1.61 per share
Other transactions, net
Balance, December 31, 2020
Net income
Equity-based compensation expense
Shares issued for stock compensation
Shares issued for Loutre acquisition
Pension plans and OPEB obligations
Cash flow hedges
Common dividends, $5.67 per share
Other transactions, net
Balance, December 31, 2021
—
—
337
(686 )
—
—
—
—
—
—
337
(686 )
—
—
—
—
1,659,031 $
—
7,272
(337 )
—
—
—
—
333
67,221 $ 67,221 $
1,666,299 $
—
—
144
(489 )
—
—
—
—
—
—
144
(489 )
—
—
—
—
—
8,063
(144 )
—
—
—
—
358
66,876 $ 66,876 $
1,674,576 $
—
—
226
1,962
—
—
—
—
—
—
226
1,962
—
—
—
—
—
8,607
(226 )
98,968
—
—
—
(708 )
69,064 $ 69,064 $
1,781,217 $
Accumulated Other
Comprehensive
Loss
Total Stockholders'
Equity
(282,391 ) $
55,661
—
—
(24,487 )
—
—
(107,722 )
(391 )
(359,330 ) $
166,830
—
—
(14,875 )
—
—
(107,853 )
(282 )
(315,510 ) $
423,860
—
—
—
—
—
(388,241 )
(1,019 )
(280,910 ) $
(129,431 ) $
—
—
—
—
512
(18,440 )
—
—
(147,359 ) $
—
—
—
—
33,551
(7,181 )
—
—
(120,989 ) $
—
—
—
—
42,439
35,312
—
—
(43,238 ) $
1,314,779
55,661
7,272
—
(25,173 )
512
(18,440 )
(107,722 )
(58 )
1,226,831
166,830
8,063
—
(15,364 )
33,551
(7,181 )
(107,853 )
76
1,304,953
423,860
8,607
—
100,930
42,439
35,312
(388,241 )
(1,727 )
1,526,133
The accompanying notes are an integral part of these consolidated financial statements.
52
INDEX FOR NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Summary of Significant Accounting Policies ............................................................................................... 54
Note 2: Segment Information ...................................................................................................................................... 60
Note 3: Earnings Per Share ........................................................................................................................................ 63
Note 4: Inventories ........................................................................................................................................................ 64
Note 5: Property, Plant and Equipment ..................................................................................................................... 64
Note 6: Timber and Timberlands ................................................................................................................................ 65
Note 7: Other Assets .................................................................................................................................................... 66
Note 8: Accounts Payable and Accrued Liabilities .................................................................................................. 66
Note 9: Debt ................................................................................................................................................................... 67
Note 10: Derivative Instruments ................................................................................................................................. 68
Note 11: Fair Value Measurements ........................................................................................................................... 69
Note 12: Equity-Based Compensation Plans............................................................................................................ 70
Note 13: Leases ............................................................................................................................................................ 72
Note 14: Income Taxes ................................................................................................................................................ 73
Note 15: Savings Plans, Pension Plans and Other Postretirement Employee Benefits .................................... 75
Note 16: Components of Accumulated Other Comprehensive Loss..................................................................... 80
53
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 seven states. We are engaged in
activities associated with timberland management, including the sale of timber, the management of approximately
1.8 million acres of timberlands and the purchase and sale of timberlands. We are also engaged in the manufacture
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.
CONSOLIDATION
The Consolidated Financial Statements include the accounts of PotlatchDeltic Corporation and its subsidiaries after
the elimination of intercompany transactions and accounts. There are no unconsolidated subsidiaries.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America, which we refer to in this report as GAAP, requires management to make estimates and
judgments affecting the amounts reported in the financial statements and the accompanying notes. The actual
results that we experience may differ materially from our estimates.
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash equivalents are investments that are highly liquid with original maturities of three months or less when
purchased. The following provides a reconciliation of cash, cash equivalents, and restricted cash at December 31:
(in thousands)
Cash and cash equivalents
Restricted cash included in other long-term assets1
Total cash, cash equivalents, and restricted cash
2021
2020
2019
$
$
296,151
$
252,340 $
621
—
296,772 $
252,340 $
83,310
944
84,254
1 Consists of proceeds held by a qualified intermediary that are intended to be reinvested in timberlands.
The following presents supplemental disclosures to the Consolidated Statements of Cash Flows:
(in thousands)
NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued property, plant and equipment additions
Accrued timberlands reforestation and roads
Equity issued as consideration for our acquisition of Loutre
Long-term debt assumed in our acquisition of Loutre
Long-term debt assumed by buyer in sale of facility
CASH FLOW INFORMATION
Cash paid during the year for:
Interest, net of amounts capitalized
Income taxes, net
2021
Years Ended December 31,
2020
2019
1,521
$
$
1,190
100,930 $
6,366 $
$
—
1,142
697
$
$
— $
— $
$
—
1,396
352
—
—
29,000
27,934
98,670
$
$
28,518
25,790
$
$
32,282
7,148
$
$
$
$
$
$
$
54
BUSINESS COMBINATIONS AND ACQUISITIONS
We apply the principles provided in the Financial Accounting Standards Board (FASB) Accounting Standards
Codification (ASC) 805, Business Combinations, to determine whether an acquisition involves an asset or a
business. If the acquisition is determined to be a business combination, tangible and intangible assets acquired and
liabilities assumed are recorded at their estimated fair value and goodwill, if any, is recognized for any differences
between the fair value of consideration transferred and the estimated fair value of net assets acquired. If an
acquisition is determined to be an asset acquisition, the purchase consideration is allocated to the acquired assets
and liabilities based on their relative estimated fair values. Goodwill is not recognized in an asset acquisition with
any consideration in excess of net assets acquired allocated to acquired assets on a relative estimated fair value
basis. Transaction costs are expensed in a business combination and are considered a component of the cost of
the acquisition in an asset acquisition.
REVENUE RECOGNITION
We recognize revenue in accordance ASC 606, Revenue from Contracts with Customers (ASC 606). For our
Timberlands segment, we generate revenue predominantly in the form of delivered logs, pay-as-cut stumpage
contracts, lump sum stumpage contracts and timber deeds. For our Wood Products segment we generate revenue
from the sale of manufactured wood products and residual by-products. For our Real Estate segment, we generate
revenue from the sale of rural real property deemed non-strategic or identified as having higher and better use
alternatives and real estate development and subdivision activity.
Performance Obligations
A performance obligation, as defined in ASC 606, is a promise in a contract to transfer a distinct good or service to
a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as
revenue at the point in time, or over the period in which the performance obligation is satisfied.
Performance obligations associated with delivered logs sales are typically recognized at the point the logs are
delivered and scaled at our customers’ mills. Revenue is recognized on timber deeds and lump sum stumpage
contracts generally upon closing or when the contracts are effective, which is the point at which the buyer assumes
risk of loss associated with the standing timber. We enter into pay-as-cut contracts with customers that provide the
customer with the right of access to harvest timber on a specified area of our land. At the execution of the
agreement, the customer typically does not take title, control or risk of ownership to the timber. Revenue for pay-
as-cut contracts is recognized once scaling occurs as that is the point when control of the harvested trees has
transferred to the customer and we have a right to payment.
Performance obligations associated with the sale of wood products are typically satisfied when the products are
shipped (FOB shipping point) or upon delivery to our customer (FOB destination) depending on the terms of the
customer contract. Shipping and handling costs for all wood products, log hauling costs and residual sales are
accounted for as cost of goods sold in our Consolidated Statements of Operations. We also enter into vendor
managed inventory (VMI) programs with certain customers whereby inventory is shipped to a VMI warehouse. For
products shipped under VMI arrangements, revenue is recognized and billed when control transfers to the customer
and we have no further obligations, which is generally once the customer pulls the inventory from the VMI
warehouse.
Performance obligations associated with real estate sales are generally satisfied at a point in time when all
conditions of closing have been met and title transfers to the buyer.
ASC 606 requires entities to consider significant financing components of contracts with customers, though allows
for the use of a practical expedient when the period between satisfaction of a performance obligation and payment
receipt is one year or less. Given the nature of our revenue transactions, we have elected to utilize this practical
expedient.
Contract Estimates
There are no significant contract estimates as substantially all of our performance obligations are satisfied as of a
point in time. The transaction price for log sales includes amounts billed for logging and hauling and generally
55
equals the amount billed to our customer for logs delivered during the accounting period. For the limited number of
log sales subject to a long-term supply agreement, the transaction price is variable but is known at the time of billing.
For wood products sales, the transaction price is typically the amount billed to the customer for the products shipped
but may be reduced slightly for estimated cash discounts and rebates. In general, a customer receivable is recorded
as we deliver wood products, logs and residuals. We generally receive payment shortly after products have been
received by our customers. For real estate sales we typically receive the entire consideration in cash at closing. At
December 31, 2021 and 2020, the allowance for credit losses associated with our customer receivables was
insignificant.
See Note 2 Segment Information for information on our revenues by major products.
INVENTORIES
For most of our Wood Products operations, we use the last-in, first-out (LIFO) method to value log, lumber and
plywood inventory as we believe the LIFO method more fairly presents the results of operations by more closely
matching current costs with current revenue. Inventories valued under LIFO are stated at the lower of cost or market.
All segment inventories are reported using the average cost method. The LIFO reserve and intersegment
eliminations are recorded at the corporate level.
Inventories not valued under LIFO are recorded at the lower of average cost or net realizable value. Expenses
associated with idle capacity or abnormally low production are reflected in cost of goods sold in the periods incurred.
See Note 4: Inventories for additional information.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are valued at cost less accumulated depreciation. Depreciation of buildings,
equipment and other depreciable assets is determined using the straight-line method of depreciation.
Major improvements and replacements of property are capitalized. Maintenance, repairs and minor improvements
and replacements are expensed. Upon retirement or other disposition of property, applicable cost and accumulated
depreciation are removed from the accounts. Any gains or losses are included in operating income. See Note 5:
Property, Plant and Equipment for additional information.
RECOVERY OF LONG-LIVED ASSETS
Our long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. We evaluate recoverability of an asset group by comparing
its carrying value to the future net undiscounted cash flows that we expect will be generated by the asset group. If
the comparison indicates that the carrying value of an asset group is not recoverable, we recognize an impairment
loss for the excess of carrying value over the estimated fair value. When we recognize an impairment loss for assets
to be held and used, we depreciate the adjusted carrying amount of those assets over their estimated remaining
useful life. We also perform a test for recoverability when management has committed to a plan to sell or otherwise
dispose of an asset group. Assets to be disposed of are reported at the lower of carrying amount or fair value less
cost to sell.
In June 2021, we experienced a fire at our Ola, Arkansas sawmill and as a result wrote-off $9.5 million of net book
value of property and equipment and recorded $2.6 million in disposal costs for the year ended December 31, 2021.
See Note 5: Property, Plant and Equipment for further discussion on the fire at our Ola, Arkansas sawmill. There
were no other events or changes in circumstances that indicated the carrying amounts of our other long-lived held
and used assets were not recoverable during the years ended December 31, 2021, 2020 or 2019. For the years
ended December 31, 2021, 2020 and 2019 we recorded losses on disposal of property, plant and equipment,
excluding the losses from the Ola, Arkansas sawmill fire, of $1.7 million, $0 and $0.9 million, respectively.
TIMBER AND TIMBERLANDS
Timber and timberlands are valued at cost less accumulated depletion and depreciation. We capitalize costs related
to stand establishment, which include the preparation of the land for planting, seeds or seedlings and tree planting
costs, which include third-party labor costs, materials and other contract services. Upon completion of planting
56
activities and field inspection to confirm the planting operation was successful, a plantation is considered
“established.”
Subsequent expenditures to maintain the integrity or enhance the growth of an established plantation or stand are
expensed. Post-establishment expenses include vegetation control, fertilization, thinning operations and the
replanting of seedlings lost through mortality. Forest management costs are considered current operating expenses
and include property taxes and insurance, silviculture costs incurred subsequent to stand establishment, cruising
of timber volume, property maintenance, salaries, supplies, travel, record-keeping, fire protection and other normal
recurring administrative personnel costs.
The components of timberland acquisitions are capitalized and allocated based on the relative estimated fair values
of timberland, merchantable timber, pre-production timber (young growth that is not yet merchantable timber),
logging roads and other land improvements.
The estimated volume of current standing merchantable timber, which is a component of calculating our depletion
rates, is updated at least annually to reflect increases due to the reclassification of pre-production timber to
merchantable timber when it meets defined diameter specifications, the annual growth of merchantable timber and
the acquisition of additional merchantable timber, decreases due to timber harvests and land sales and changes
resulting from other factors, such as casualty losses. Timber volumes are estimated from cruises of the timber
tracts, which are completed on our timberlands on approximately a five to ten year cycle.
Depletion represents the amount charged to expense as timber is harvested. Rates at which timber is depleted are
calculated annually for each of our depletion pools by dividing the beginning of year balance of the merchantable
timber accounts by the volume of standing merchantable timber, after estimated timber volume updates.
The base cost of logging roads, such as clearing, grading and ditching, is not depreciated and remains a capitalized
item until disposition. Other portions of the initial logging road cost, such as bridges, culverts and gravel surfacing
are depreciated over their useful lives, which range from 5 to 20 years. Costs associated with temporary logging
road spurs, which are typically used for one harvest season, are expensed as incurred. See Note 6: Timber and
Timberlands for additional information.
INTANGIBLE ASSETS
We have both indefinite-lived and long-lived intangible assets. Long-lived intangible assets include customer
relationships and certain trade names we estimate have a finite life and are being amortized over 10 and 20 years,
respectively, and are evaluated for impairment under our Recovery of Long-Lived Assets policy described above.
At December 31, 2021 and 2020, the gross carrying amount of our long-lived intangible assets were $8.4 million
and accumulated amortization was $3.1 million and $2.3 million, respectively. Amortization expense for the
customer relationship and trade name totaled $0.8 million in 2021, 2020 and 2019 and is estimated to be $0.8
million annually for the next five years.
Our indefinite-lived intangible assets consist of trade names and were $10.2 million at December 31, 2021 and
2020 and are not amortized. Rather, they are tested for potential impairments annually as of October 1, or during
the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the
assets.
We did not impair any intangible assets during the years ended December 31, 2021, 2020 or 2019.
COMPANY OWNED LIFE INSURANCE
We are the beneficiary of insurance policies on the lives of certain past officers and employees. We have recognized
the amount that could be realized upon surrender of the insurance policies in other assets in our Consolidated
Balance Sheets. Company owned life insurance expense and interest income are included in selling, general and
administrative expenses and interest expense, net, respectively, in the Consolidated Statements of Operations. The
net effect of these amounts on income was not significant for the years ended December 31, 2021, 2020 and 2019.
Cash receipts and disbursements are recorded as investing activities within Other, net in the Consolidated
Statements of Cash Flows.
57
DERIVATIVE INSTRUMENTS
We use, from time to time, certain derivative instruments to mitigate exposure to volatility in interest rates and
effectively convert a portion of floating rate debt to a fixed rate basis, thus reducing the impact of interest rate
changes on future interest expense and cash flows. All derivatives, whether designated as a hedging relationship
or not, are recorded in the Consolidated Balance Sheets at fair value. The accounting for changes in fair value of a
derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship
and the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging
instruments, we must designate the hedging instrument as a fair value hedge or cash flow hedge based on the
exposure being hedged. At December 31, 2021 and 2020, we did not hold any derivatives designated or qualifying
as fair value hedges.
For a cash flow hedge, the fair value of the effective portion of the derivative is recognized as an asset or liability
with a corresponding amount in Accumulated Other Comprehensive Loss on our Consolidated Balance Sheets.
Amounts recorded in Accumulated Other Comprehensive Loss are recognized in earnings when the underlying
hedged transaction affects earnings. Ineffectiveness is measured by comparing the present value of the cumulative
change in the expected future cash flows of the derivative and the present value of the cumulative change in the
expected future cash flows of the related instrument. Any ineffective portion of a cash flow hedge is recognized in
earnings immediately.
If a hedge ceases to qualify for hedge accounting, the contract would continue to be carried on the balance sheet
at fair value until settled and adjustments to the contract’s fair value would be recognized in earnings. If a forecasted
transaction were no longer probable of occurring, amounts previously deferred in Accumulated Other
Comprehensive Loss would be recognized immediately in earnings. For derivative instruments not designated as
hedges, the change in fair value of the derivative is recognized in earnings each reporting period.
We have International Swap Dealers Association ("ISDA") Master Agreements with each counterparty that permits
the net settlement of amounts owed under the respective contracts. The ISDA Master Agreement is an industry
standardized contract that governs all derivative contracts entered into between the company and the respective
counterparty. Under these master netting agreements, net settlement generally permits the company or the
counterparty to determine the net amount payable or receivable for contracts due on the same date for similar types
of derivative transactions. We have not elected to offset the fair value positions of the derivative contracts recorded
in the Consolidated Balance Sheets. See Note: 10 Derivative Instruments for additional information.
FAIR VALUE MEASUREMENTS
We use a fair value hierarchy in accounting for certain nonfinancial assets and liabilities including long-lived assets
(asset groups) measured at fair value for an impairment assessment and pension plan assets measured at fair
value.
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are
either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing
an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a
reporting entity’s pricing based upon its own market assumptions.
The fair value hierarchy consists of the following three levels:
• Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities
in active markets.
• Level 2: Inputs are quoted prices in non-active markets for which pricing inputs are observable either directly
or indirectly at the reporting date.
• Level 3: Inputs are derived from valuation techniques in which one or more significant inputs or value drivers
are observed.
See Note: 11 Fair Value Measurements for additional information.
58
EQUITY-BASED COMPENSATION
Equity-based awards are measured at estimated fair value on the dates they are granted or modified. These
measurements establish the cost of the equity-based awards for accounting purposes. Equity-based compensation
expense is recognized over the awards’ applicable vesting period using the straight-line method. We account for
forfeitures as they occur. Equity based compensation is classified in the Consolidated Statements of Operations
based on the function to which the related services are provided. See Note 12: Equity-Based Compensation Plans
for additional information.
LEASES
We lease certain equipment, office space and land. Right-of-use (ROU) 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. Operating and finance lease ROU assets and liabilities are recognized at the lease commencement
date based on the present value of lease payments over the lease term. As most of our leases do not provide an
implicit rate, we use our incremental borrowing rate in determining the present value of lease payments.
Most leases include one or more options to renew, with renewal terms that can extend the lease term between one
to five years. The exercise of lease renewal options is at our sole discretion. Under the operating lease model, lease
expense is recognized on a straight-line basis over the lease term. Under the finance lease model, lease expense
consists of the amortization of the ROU asset on a straight-line basis over the asset’s estimated useful life and
interest expense calculated using the effective interest method. Leases with an initial term of 12 months or less are
not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the
lease term.
The depreciable life of assets and leasehold improvements are limited by the expected lease term unless there is
a transfer of title or purchase option reasonably certain of exercise. Certain of our rental payments are adjusted
periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material
restrictive covenants and we do not have any significant sublease income. See Note 13: Leases for additional
information.
INCOME TAXES
We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences between the financial
statement carrying amounts of assets and liabilities and their respective tax bases, operating loss carryforwards
and tax credit carryforwards. Deferred tax assets and liabilities are measured pursuant to tax laws using rates
expected to apply to taxable income in the years in which the temporary differences are expected to be recovered
or settled. We recognize the effect of a change in income tax rates on deferred tax assets and liabilities in the
Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income in the period that
includes the enactment date of the rate change. We record a valuation allowance to reduce the carrying amounts
of deferred tax assets if it is more likely than not that such deferred tax assets will not be realized.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities. The determination is based on the technical merits of the
position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has
full knowledge of all relevant information. See Note 14: Income Taxes for additional information.
PENSION AND OTHER POSTRETIREMENT BENEFITS
We recognize any overfunded or underfunded status of our defined benefit pension and other postretirement plans
on our Consolidated Balance Sheets and recognize changes in the funded status through comprehensive income
(loss) in the year in which the changes occur. The funded status and the requirements for funding our pension plans
are based on a number of actuarial assumptions that require judgment. The determination of net periodic pension
and postretirement benefit costs includes:
•
•
costs of benefits provided in exchange for employees’ services rendered;
interest cost of the obligation;
59
• expected long-term return on plan assets for funded plans;
• amortization of prior service costs and plan amendments over the average remaining service period of the
active employee group covered by the plan; and
• amortization of cumulative unrecognized net actuarial gains and losses – generally in excess of 10 percent
of the greater of the benefit obligation or market-related value of plan assets at the beginning of the year –
over the average remaining service period of the active employee group covered by the plan.
Different assumptions would change the net periodic pension and postretirement benefit costs and the obligation
of the benefit plans. See Note 15: Savings Plans, Pension Plans and Other Postretirement Employee Benefits for
additional information.
COMMITMENTS, CONTINGENCIES AND LEGAL MATTERS
We accrue estimates for resolution of any legal and other contingencies when losses are probable and estimable,
in accordance with ASC 450, Contingencies. Liabilities for loss contingencies arising from claims, assessments,
litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred
and the amount of the assessment can be reasonably estimated.
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 receive or have to pay in connection with
any legal proceeding would have a materially adverse effect on our consolidated financial position, operating results
or net cash flow.
NEW ACCOUNTING PRONOUNCEMENTS
New Accounting Standards Adopted in 2021
There were no new accounting pronouncements adopted during 2021 that had a material impact on our
consolidated financial statements or footnote disclosures.
New Accounting Standards Being Evaluated
In March 2020, the FASB issued Accounting Standards Update (ASU) 2020-04, Reference Rate Reform (Topic
848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical
expedients and exceptions to GAAP guidance on contract modifications and hedge accounting to ease the financial
reporting impacts related to the expected market transition from the London Interbank Offered Rate (LIBOR) and
other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR).
The guidance in ASU 2020-04, which we can apply immediately, is optional and may be elected over time as
reference rate reform activities occur. Unlike other topics, the provisions of this update are only available until
December 31, 2022, when the reference rate replacement activity was expected to be completed. Our credit
agreement, variable rate term loans with $403.5 million in principal, and interest rate derivative agreements have
an interest rate tied to LIBOR. We continue to evaluate the impact of the guidance, are monitoring the developments
regarding the alternative rates, will work with our lenders and counterparties to identify a suitable replacement rate,
may amend certain debt and interest rate derivative agreements to accommodate those rates, and may apply
elections allowed under the standard as applicable as additional changes in the market occur.
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, oil and gas royalties and carbon sequestration. The
Wood Products segment manufactures and markets lumber and plywood. The Real Estate segment includes the
sale of land holdings deemed non-strategic or identified as having higher and better use alternatives, master
planned community development and a country club. Sales outside of the United States are inconsequential and
no single customer represented more than 10% of our consolidated revenues during 2021, 2020 or 2019.
60
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 represent a significant 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 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. For additional information regarding valuation of inventories and our revenue recognition
policy see Note 1: Summary of Significant Accounting Policies.
The following table represents our revenues by major product:
(in thousands)
Timberlands
Northern region
Sawlogs
Pulpwood
Stumpage
Other
Total Northern revenues
Southern region
Sawlogs
Pulpwood
Stumpage
Other
Total Southern revenues
Year Ended December 31,
2020
2021
2019
$
299,330 $
1,134
—
993
301,457
213,030 $
4,502
316
1,581
219,429
161,570
5,767
109
1,970
169,416
83,836
45,957
7,533
10,664
147,990
93,828
49,084
4,077
10,101
157,090
88,048
53,315
1,666
10,248
153,277
Total Timberlands revenues
449,447
376,519
322,693
Wood Products
Lumber
Residuals and Panels
Total Wood Products revenues
Real Estate
Rural real estate
Development real estate
Other
Total Real Estate revenues
Total segment revenues
Intersegment Timberlands revenues1
Total consolidated revenues
1
816,149
172,739
988,888
573,069
125,336
698,405
396,648
143,760
540,408
37,622
16,751
9,440
63,813
81,979
14,979
7,458
104,416
49,675
22,363
6,834
78,872
1,502,148 1,179,340
(138,410 )
(164,713 )
$ 1,337,435 $ 1,040,930 $
941,973
(114,875 )
827,098
Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment.
Management primarily evaluates the performance of its segments and allocates resources to them based upon
Adjusted EBITDDA. EBITDDA is calculated as net income before interest expense, income taxes, basis of real
estate sold, depreciation, depletion and amortization. Adjusted EBITDDA further excludes certain specific items that
are considered to hinder comparison of the performance of our businesses either year-on-year or with other
businesses. Management uses Adjusted EBITDDA to compare the operating performance of our segments on a
consistent basis and to evaluate the performance and effectiveness of each segment’s operating strategies. Our
calculation of Adjusted EBITDDA may not be comparable to that reported by other companies.
61
The following table summarizes information for each of the company’s reportable segments and includes a
reconciliation of Total Adjusted EBITDDA to income before income taxes. Corporate information is included to
reconcile segment data to the Consolidated Financial Statements.
(in thousands)
Adjusted EBITDDA:
Timberlands
Wood Products
Real Estate
Corporate
Eliminations and adjustments
Total Adjusted EBITDDA
Interest expense, net1
Depreciation, depletion and amortization
Basis of real estate sold
Net gain on fire damage
Loss on extinguishment of debt
Pension settlement charge
Non-operating pension and other postretirement employee
benefits
(Loss) gain on fixed assets
Gain on sale of facility
Income before income taxes
1
Includes amortization of bond discounts and deferred loan fees.
2021
Year Ended December 31,
2020
2019
$
262,944 $
393,858
47,457
(47,393 )
(3,995 )
652,871
(29,275 )
(75,633 )
(27,360 )
3,361
—
—
182,802 $
176,095
86,476
(48,451 )
(14,694 )
382,228
(29,463 )
(76,261 )
(25,348 )
—
—
(42,988 )
(13,227 )
(1,721 )
—
(14,226 )
11
—
$
509,016 $
193,953 $
133,987
12,901
62,650
(36,257 )
5,662
178,943
(30,361 )
(70,417 )
(20,554 )
—
(5,512 )
—
(3,739 )
(865 )
9,176
56,671
62
The following table summarizes additional reportable segment financial information:
(in thousands)
Depreciation, depletion and amortization:
Timberlands
Wood Products
Real Estate
Corporate
Bond discount and deferred loan fees1
Total depreciation, depletion and amortization
Basis of real estate sold:
Real Estate
Elimination and adjustments
Total basis of real estate sold
Assets:
Timberlands2
Wood Products
Real Estate3
Corporate
Total consolidated assets
Capital Expenditures:4
Timberlands
Wood Products
Real Estate5
Corporate
Total capital expenditures
1
2021
Year Ended December 31,
2020
2019
$
$
$
$
45,403 $
28,802
640
788
75,633
1,792
77,425 $
27,381 $
(21 )
27,360 $
51,047 $
23,611
620
983
76,261
1,624
77,885 $
25,990 $
(642 )
25,348 $
46,601
22,059
678
1,079
70,417
1,688
72,105
20,749
(195 )
20,554
1,713,582
435,300
81,561
2,230,443
304,772
1,655,407
398,465
87,421
2,141,293
93,766
$ 2,535,215 $ 2,381,065 $ 2,235,059
1,617,809
421,066
89,509
2,128,384
252,681
$
$
16,163 $
38,360
9,798
64,321
256
64,577 $
16,252 $
21,565
7,088
44,905
728
45,633 $
17,500
37,232
8,053
62,785
1,317
64,102
Included within interest expense in the Consolidated Statements of Operations.
2 We do not report rural real estate separate from Timberlands as we do not report these assets separately to management.
3 Real Estate assets primarily consist of the master planned community development and a country club, both located in Arkansas.
4 Does not include the acquisition of timber and timberlands, all of which were acquired by our Timberlands segment.
5 Real Estate capital expenditures include development expenditures of $9.2 million, $6.7 million and $7.3 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
NOTE 3. EARNINGS PER SHARE
The following table reconciles the number of shares used in calculating basic and diluted earnings per share for the
years ended December 31:
(in thousands)
Basic weighted-average shares outstanding
Incremental shares due to:
Performance shares
Restricted stock units
Diluted weighted-average shares outstanding
2021
2020
2019
67,352
67,237
67,608
307
60
67,719
289
42
67,568
109
26
67,743
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.
At December 31, 2021, 2020 and 2019, there were approximately 48,600, 1,100 and 49,500 stock-based awards,
respectively, which were excluded from the calculation of earnings per share because they were anti-dilutive. Anti-
dilutive stock-based awards could be dilutive in future periods.
63
Share Repurchase Program
On August 30, 2018, our board of directors authorized management to repurchase up to $100.0 million of common
stock with no time limit set for the repurchase (the Repurchase Program). Shares under the Repurchase Program
may be repurchased in open market transactions, including pursuant to a trading plan adopted in accordance with
Rule 10b5-1 of the Securities Exchange Act of 1934 (the Trading Plan). The timing, manner, price and amount of
repurchases will be determined according to the Trading Plan, and, subject to the terms of the Trading Plan and
the Repurchase Program may be suspended, terminated or modified at any time for any reason.
We did not repurchase any shares under the Repurchase Program during the year ended December 31, 2021.
Total shares repurchased under the Repurchase Program for the years ended December 31, 2020 and 2019 were
489,850 and 686,240, respectively, for total consideration of $15.4 million and $25.2 million, respectively. All
common stock purchases were made in open-market transactions. At December 31, 2021, we had remaining
authorization of $59.5 million for future stock repurchases under the Repurchase Program.
We record share purchases upon trade date, as opposed to the settlement date. We retire shares upon repurchase.
Any excess repurchase price over par is recorded in accumulated deficit. There were no unsettled repurchases at
December 31, 2021 and 2020.
Dividends
Generally, a REIT must distribute its taxable income each year and there is a 20% limit on the value of our
PotlatchDeltic TRS, including cash, that can be retained. Our strong financial performance, driven by record lumber
and indexed sawlog prices, generated large cash balances in both our REIT and PotlatchDeltic TRS during 2021.
As a result, on December 3, 2021, our board of directors approved a special cash dividend of $4.00 per share, or
$276.3 million in aggregate, that was paid on December 31, 2021.
On February 11, 2022, the board of directors approved a quarterly cash dividend of $0.44 per share payable on
March 31, 2022 to stockholders of record as of March 4, 2022.
NOTE 4. INVENTORIES
Inventories consist of the following at December 31:
(in thousands)
Logs
Lumber, plywood and veneer
Materials and supplies
Less: LIFO reserve
Total inventories
$
$
2021
2020
41,199 $
34,528
17,780
93,507
(21,138 )
72,369 $
31,210
34,136
14,939
80,285
(18,249 )
62,036
If the last-in, first-out inventory had been carried at average cost, the values would have been higher by $21.1
million and $18.2 million at December 31, 2021 and 2020, respectively.
NOTE 5. PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consist of the following at December 31:
(in thousands)
Land
Buildings and improvements
Machinery and equipment
Construction in progress
Less: accumulated depreciation
Total property, plant and equipment,
net
Range of useful lives
2021
2020
$
10-40 years
2-25 years
$
7,171
128,387
375,860
20,906
532,324
(240,004 )
7,333
126,576
377,782
6,020
517,711
(229,167 )
$
292,320
$
288,544
64
Depreciation expense for property and equipment, including assets under finance leases, was $30.6 million, $25.2
million and $23.9 million in 2021, 2020 and 2019, respectively.
Ola, Arkansas Sawmill Fire
On June 13, 2021, a fire occurred at our Ola, Arkansas sawmill. There were no injuries or environmental issues
from the fire. The damage was principally limited to the large log primary breakdown area of the mill. The planer
mill, kiln, and shipping department were not affected. We have adequate property damage and business interruption
insurance, subject to an applicable deductible, under which we filed a claim with the insurance carriers.
Damaged and obsolete fixed asset write-offs, disposal costs, insurance recoveries for the Ola, Arkansas sawmill
fire and net gain on fire damage consist of the following for the year-ended December 31, 2021:
(in thousands)
Fixed asset write-offs
Disposal costs
Total fixed asset loss on disposal
Insurance recoveries
Net gain on fire damage at Ola
Net gain on timberlands fire damage
Net gain on fire damage
$
$
(9,544 )
(2,595 )
(12,139 )
15,000
2,861
500
3,361
No business interruption recoveries were recorded during the year as discussions with the insurance carriers are
ongoing. Business interruption recoveries will be recorded when deemed probable and reasonably estimable.
Sale of Deltic MDF Facility
In February 2019 we sold our Deltic Medium Density Fiberboard (MDF) facility to Roseburg Forest Products Co. for
$92.0 million, consisting of $63.0 million in cash and assumption of $29.0 million of revenue bonds. The price was
subject to post-closing adjustments for certain changes in working capital as defined in the purchase and sale
agreement. The transaction resulted in a $9.2 million pre-tax gain on sale. Total cash proceeds received after
working capital adjustments, closing costs and other expenses were approximately $59.8 million, of which $1.0
million was received in 2020 after satisfaction of certain covenants as outlined in the purchase and sale agreement.
The sale of the MDF facility was not considered a strategic shift that had or will have a major effect on our operations
or financial results and therefore did not meet the requirements for presentation as discontinued operations.
NOTE 6. TIMBER AND TIMBERLANDS
Timber and Timberlands consist of the following at December 31:
(in thousands)
Timber and timberlands
Logging roads
Total timber and timberlands, net
$
$
2021
1,597,011 $
85,660
1,682,671 $
2020
1,516,788
83,273
1,600,061
Depletion from company-owned lands totaled $40.4 million, $46.3 million and $41.7 million in 2021, 2020 and 2019,
respectively. Amortization of road costs, such as bridges, culverts and gravel surfacing, totaled $3.5 million, $3.6
million and $3.6 million in 2021, 2020 and 2019, respectively.
Future payments due under timber cutting contracts at December 31, 2021 were $13.8 million.
Loutre Land and Timber Company (Loutre) Merger
On December 21, 2021, we merged with Loutre which owned and managed 51,340 acres of high-quality, well
stocked timberlands in southern Arkansas and northern Louisiana. The acquisition cost of $107.7 million was
satisfied through the issuance of 1.96 million shares of our common stock to the former Loutre shareholders valued
at $100.9 million and the assumption of $6.8 million of liabilities, including $6.3 million of long-term debt which we
65
paid off after the transaction closed. For accounting purposes, the fair value of the shares issued includes a discount
for a required minimum holding period by the former Loutre shareholders.
We accounted for the transaction as an asset acquisition as substantially all the value of the acquisition was
concentrated in the acquired timber and timberlands. We allocated the cost of the acquisition to the net assets
acquired based on their estimated fair values on the acquisition date. This resulted in an allocation of $105.2 million
to timber and timberlands, $2.0 million to mineral rights and $0.5 million to other assets. Additionally, $0.6 million
of transaction costs were capitalized.
NOTE 7. OTHER ASSETS
Other Current Assets consist of the following at December 31:
(in thousands)
Real estate held for sale
Prepaid expenses
Other
Total other current assets
Other Long-Term Assets consist of the following at December 31:
(in thousands)
Interest rate swaps
Operating leases
Mineral rights
Investment in company owned life insurance (COLI), net
Real estate development costs
Debt issuance costs
Other
Total other long-term assets
$
$
$
$
2021
2020
12,013 $
4,134
5,483
21,630 $
8,818
4,032
3,286
16,136
2021
2020
31,306 $
8,514
6,436
3,923
3,408
2,260
2,104
57,951 $
18,466
11,081
4,825
3,328
3,748
1,288
3,981
46,717
NOTE 8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts Payable and Accrued Liabilities consist of the following at December 31:
(in thousands)
Accrued payroll and benefits
Accounts payable
Deferred revenue1
Accrued taxes
Accrued interest
Other current liabilities
Total accounts payable and accrued liabilities
1 Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for shipments where
control of goods have not transferred, member related activities at an owned country club and certain post-close obligations for real estate
sales. These contract liabilities are recognized over the term of the contracts, which is typically twelve months or less, except for initiation
fees which are recognized over the average life of club membership.
28,944 $
12,749
8,392
6,848
6,046
15,230
78,209 $
29,675
9,724
8,789
20,780
6,485
17,826
93,279
2020
2021
$
$
66
NOTE 9. DEBT
Long-term Debt consists of the following at December 31:
(in thousands)
2021
2020
$
Long-term principal
Debt issuance costs
Unamortized discounts
Variable rate term loans1
Fixed rate term loans2
Revenue bonds3
Medium-term notes4
403,500
290,000
65,735
3,000
762,235
(1,857 )
(3,031 )
757,347
(39,981 )
717,366
1 Variable rate term loans are at rates of one or three-month LIBOR plus a spread between 1.85% and 2.10% and mature between 2026 and
2031. At December 31, 2021, the one and three-month LIBOR rates were 0.10% and 0.13%, respectively. We have entered into interest
rate swaps for these variable rate term loans to fix the interest rate. See Note 10: Derivative Instruments for additional information.
403,500 $
290,000
65,735
3,000
762,235
(1,598 )
(2,381 )
758,256
(42,977 )
715,279 $
Less: current portion of long-term debt
Long-term debt
Total long-term debt
$
2 Fixed rate term loans are at rates between 4.05% and 4.64% and mature between 2022 and 2025.
3 Revenue bonds have a fixed rate of 2.75% and mature in 2024.
4 Medium-term notes have a fixed rate of 8.75% and were paid off upon maturity in January 2022.
TERM LOANS
In December 2020, through a fourth amendment to the Second Amended and Restated Term Loan Agreement
(Amended Term Loan Agreement) with our primary lender, we refinanced existing term loans of $46.0 million that
matured with a new term loan that matures in 2030. The new term loan carries a variable interest rate of one-month
LIBOR plus 2.10%. In conjunction with the new term loan we entered into $46.0 million of interest rate swaps to fix
the rate at 3.04% before patronage credits from lenders.
In December 2021, through a fifth amendment to the Amended Term Loan Agreement, we refinanced an existing
term loan of $40.0 million that matured with a new term loan that matures in November 2031. The new term loan
carries a variable interest rate of one-month LIBOR plus 2.10%. In conjunction with the new term loan we entered
into $40.0 million of interest rate swaps to fix the rate at 3.10% before patronage credits from lenders. See Note 10:
Derivative Instruments for additional information on our derivative instruments.
At December 31, 2021, $693.5 million was outstanding under our Amended Term Loan Agreement.
DEBT ISSUANCE COSTS AND UNAMORTIZED DISCOUNTS
Debt issuance costs represent the capitalized direct costs incurred related to the issuance of debt. These costs are
amortized to interest expense over the terms of the respective borrowings.
Unamortized discounts include a $4.9 million fair value adjustment to the $100.0 million term loan assumed in the
Deltic merger. The unamortized balance of the fair value adjustment at December 31, 2021, was $2.4 million and
will be amortized through the term loan’s maturity in 2025.
DEBT MATURITIES
Scheduled principal payments due on long-term debt at December 31, 2021 are as follows:
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Total
$
$
43,000
40,000
175,735
100,000
27,500
376,000
762,235
67
CREDIT AGREEMENT
On December 14, 2021, we entered into the Third Amended and Restated Credit Agreement (Amended Credit
Agreement). The Amended Credit Agreement extended the expiration date to February 14, 2027 and reduced our
revolving line of credit from $380.0 million to $300.0 million. Under the terms of the Amended Credit Agreement,
the amount of available principal may be increased up to an additional $500.0 million. The Amended Credit
Agreement also includes a sublimit of $75.0 million for the issuance of standby letters of credit and a sublimit of
$25.0 million for swing line loans. Usage under either or both subfacilities reduces availability under the revolving
line of credit.
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.
Pricing on the Amended Credit Agreement is set according to the type of borrowing. LIBOR Loans are issued at a
rate equal to the LIBOR Rate plus an applicable rate, while Base Rate Loans are issued at a rate equal to a Base
Rate, which is a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus one half of one
percent, (b) LIBOR that would then be applicable to a new LIBOR loan with a one month interest period plus 1%,
and (c) the rate of interest in effect for such day as publicly announced from time to time by KeyBank as its "prime
rate." The interest rates we pay for borrowings under either type of loan include an additional Applicable Rate,
which can range from 0.85% to 1.10% for LIBOR loans and actual rate for Base Rate loans can range from 0% to
0.10% depending on our credit rating. Additionally, the Amended Credit Agreement provides mechanics relating to
the transition from the use of LIBOR to a replacement benchmark rate upon the occurrence of certain transition
events or elections made by the parties. As of December 31, 2021, we were able to borrow under the bank credit
facility with an additional Applicable Rate of 1.025% for LIBOR Loans and 0.025% for Base Rate Loans. We also
pay an annual fee of 0.175% on the $300.0 million revolving line of credit. At December 31, 2021, there were no
borrowings under the revolving line of credit and approximately $1.0 million of the credit facility was utilized by
outstanding letters of credit.
FINANCIAL COVENANTS
The Amended Term Loan Agreement and the Amended Credit Agreement (collectively referred to as the
Agreements) contain certain covenants that limit our ability and that of our subsidiaries to create liens, merge or
consolidate, dispose of assets, incur indebtedness and guarantees, repurchase or redeem capital stock and
indebtedness, make certain investments or acquisitions, enter into certain transactions with affiliates or change the
nature of our business. The Agreements also contain financial maintenance covenants including the maintenance
of a minimum interest coverage ratio and a maximum leverage ratio. We are permitted to pay dividends to our
stockholders under the terms of the Agreements so long as we expect to remain in compliance with the financial
maintenance covenants. We were in compliance with all debt and credit agreement covenants at December 31,
2021.
NOTE 10. 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. As of
December 31, 2021, we have nine interest rate swaps associated with $403.5 million of term loan debt. These cash
flow hedges convert variable rates ranging from one-month and three-month LIBOR plus 1.85% to 2.10%, to fixed
rates ranging from 3.04% to 4.75%. Our cash flow hedges are expected to be highly effective in achieving the
offsetting of cash flows attributable to the hedged interest rate risk through the term of the hedge. At December 31,
2021, the amount of net losses expected to be reclassified into earnings in the next 12 months is approximately
$6.9 million. However, this expected amount to be reclassified into earnings is subject to volatility as the ultimate
amount recognized in earnings is based on the LIBOR rate at the time of net swap cash payments.
68
In December 2021, we refinanced $40.0 million of existing term loans that matured with a new term loan maturing
November 2031. Upon completing the refinance of the term loans, we redesignated $40.0 million of forward starting
interest rate swaps with terms consistent with the new term loan, which fixed the rate on the borrowing at 3.10%
before patronage credits from lenders.
At December 31, 2021, we hold $567.5 million of forward starting interest rate swaps designated as cash flow
hedges. These forward starting interest rate swaps effectively hedge the variability in future benchmark interest
payments attributable to changes in interest rates on $567.5 million of future debt refinances through January 2029
by converting the benchmark interest rates to fixed interest rates. In addition, these cash flow hedges for future debt
refinances require settlement on the stated maturity date.
The gross fair values of our cash flow derivative instruments on our Consolidated Balance Sheets as of December
31 are as follows:
(in thousands)
Derivatives designated in cash flow hedging relationships:
Location
2021
2020
Location
Asset Derivatives
Liability Derivatives
2020
2021
Interest rate contracts
Interest rate contracts
Other assets,
current1
Other assets,
non-current
$
2,191 $
63
$
31,306
33,497 $
18,466
18,529
Accounts
payable and
accrued
liabilities1
Other long-
term
obligations
$
— $
1,010
$
24,060
24,060 $
45,100
46,110
1 Derivative instruments that mature within one year, as a whole, are classified as current.
The following table details the effect of derivatives on our Consolidated Statements of Operations:
(in thousands)
Derivatives designated in cash flow hedging relationships:
Interest rate contracts
Location
Year Ended December 31,
2020
2021
2019
Income (loss) recognized in other comprehensive income
(loss), net of tax
Amounts reclassified from accumulated other comprehensive
loss, net of tax1
Interest expense
Interest expense, net
$
$
$
26,206 $
(14,632 ) $
(19,824 )
(9,106 ) $
(7,451 ) $
(1,384 )
29,275 $
29,463 $
30,361
1 Realized gains and losses on interest rate contracts consist of net cash received or paid and interest accruals on the interest rate swaps
during the periods. Net cash received or paid is included in the supplemental cash flow information within interest, net of amounts
capitalized in the Consolidated Statements of Cash Flows.
NOTE 11. FAIR VALUE MEASUREMENTS
Carrying amounts and estimated fair values of our financial instruments as of December 31 are as follows:
(in thousands)
Derivative assets related to interest rate swaps (Level 2) $
Derivative liabilities related to interest rate swaps (Level
2)
$
Long-term debt, including current portion (Level 2):
2021
2020
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
33,497 $
33,497
$ 18,529 $ 18,529
(24,060 ) $
(24,060 ) $ (46,110 ) $ (46,110 )
Term loans
Revenue bonds
Medium-term notes
Total long-term debt1
$ (691,119 ) $ (705,135 )
(69,278 )
(3,007 )
$ (690,469 ) $ (716,631 )
(67,885 )
(3,545 )
$ (759,854 ) $ (777,420 ) $ (759,204 ) $ (788,061 )
(65,735 )
(3,000 )
(65,735 )
(3,000 )
Company owned life insurance (Level 3)
1 The carrying amount of long-term debt includes principal and unamortized discounts.
$
3,923 $
3,923
$
3,328 $
3,328
69
The fair value of interest rate swaps are 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, receivables and payables
have net carrying value that approximates their fair value with only insignificant differences. This is primarily due to
the short-term nature of these instruments.
NOTE 12. EQUITY-BASED COMPENSATION PLANS
We issue new shares of common stock to settle performance stock awards (PSAs), restricted stock units (RSUs)
and deferred compensation stock equivalent units. At December 31, 2021, approximately 0.9 million shares were
available for future use under our long-term incentive plans.
The following table details our compensation expense and the related income tax benefit for the years ended
December 31:
(in thousands)
Employee equity-based compensation expense:
2021
2020
2019
Performance stock awards
Restricted stock units
Deferred compensation stock equivalent units expense
Total equity-based compensation expense
$
$
5,381
3,041
185
8,607
$
$
5,083
2,904
76
8,063
$
$
4,605
2,595
72
7,272
Total tax benefit recognized for shared-based payment awards
$
428
$
357
$
314
PERFORMANCE STOCK AWARDS
During 2021, 2020 and 2019, officers and certain other employees of the company were granted PSA awards.
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. Performance shares are earned based on the company's
total shareholder return (TSR) over a three-year performance period relative to the median TSR of performance
peer group (weighted 50%) and the company's TSR percentile ranking relative to all companies within the NAREIT
All Equity REITs Index (of which we are a member) (weighted 50%) over such performance period. TSR is
calculated based on stock price appreciation plus cash and share distributions. 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 our
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 three-year performance measurement period, the recipients will receive dividend
equivalents in the form of additional shares at the time of payment equal to the dividends that would have been paid
on the shares earned had the recipients owned the shares during the three-year period. Therefore, the shares are
not considered participating securities.
Since the awards contain a market condition, the effect of the market condition is reflected in the grant-date fair
value, which is estimated using a Monte Carlo simulation. This method is used to estimate the stock prices of
PotlatchDeltic and the selected peer companies at the end of the three-year performance period. The Monte Carlo
simulation uses inputs such as stock prices and expected volatility of PotlatchDeltic and the peer group of
companies as of the award date. Multiple simulations are generated, resulting in share prices and total shareholder
return values for PotlatchDeltic and the peer group of companies. For each simulation, the total shareholder return
of PotlatchDeltic is ranked against that of the peer group of companies. The future value of the performance share
unit is calculated based on a multiplier for the median outperformance and percentile ranking and then discounted
to present value. The discount rate is the risk-free rate as of the award date for a term consistent with the
70
performance period. Awards are also credited with dividend equivalents at the end of the performance period, and
as a result, award values are not adjusted for dividends.
The following table presents the key inputs used in calculating the fair value of the PSAs and the resulting fair
values:
Stock price as of valuation date
Risk-free rate
Expected volatility
Expected dividend yield1
Expected term (years)
Fair value of a performance share
1 Full dividend reinvestment assumed.
2021
Year Ended December 31,
2020
2019
$
$
53.53
$
0.18 %
45.56 %
—
3.00
69.72
$
42.16
$
1.42 %
25.74 %
—
3.00
45.04
$
35.01
2.47 %
25.15 %
—
3.00
37.87
The following table summarizes outstanding PSAs as of December 31 and the changes during each year:
2021
2020
2019
(in thousands, except per share amounts)
Nonvested shares outstanding at January 1
Granted
Vested
Forfeited
Nonvested shares outstanding at December 31
Total grant date fair value of PSA awards
vested during the year
Total fair value of PSA awards
vested during the year
$
$
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Grant Date
Fair Value
Shares
Shares
41.36 196,007 $
69.72 125,001 $
37.87
(63,456 ) $
(4,286 ) $
58.32
55.16 253,266 $
50.15 142,238 $
45.04 142,066 $
75.37
(75,048 ) $
(13,249 ) $
47.07
41.36 196,007 $
Weighted
Average
Grant Date
Fair Value
63.91
37.87
53.85
45.35
50.15
Shares
253,266 $
88,128 $
(129,666 ) $
(9,281 ) $
202,447 $
4,910
$ 4,783
$ 4,041
12,015
$ 3,968
$ 3,561
As of December 31, 2021, there was $5.8 million of unrecognized compensation cost related to nonvested PSAs,
which is expected to be recognized over a weighted average period of 1.4 years.
RESTRICTED STOCK UNITS
During 2021, 2020 and 2019, directors, officers, and certain other employees of the company were granted RSU
awards that will vest from one to three years. RSU awards are credited with dividend equivalents for any dividends
paid on the company's common stock during the 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. Therefore, the shares are not considered participating securities.
The following table summarizes outstanding RSU awards as of December 31 and the changes during each year:
2021
2020
2019
Shares
(in thousands, except per share amounts)
Nonvested shares outstanding at January 1
139,492 $ 37.54
Granted
66,107 $ 54.52
Vested
(68,606 ) $ 34.50
(4,094 ) $ 49.35
Forfeited
Nonvested shares outstanding at December 31 132,899 $ 47.19
Total grant date fair value of RSU awards
vested during the year
Total fair value of RSU awards
vested during the year
2,367
4,130
$
$
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Grant Date
Fair Value
39.83
38.77
44.48
40.20
37.54
Shares
127,471 $
68,263 $
(52,908 ) $
(3,334 ) $
139,492 $
Shares
Weighted
Average
Grant Date
Fair Value
72,020 $ 47.66
104,488 $ 36.80
(43,102 ) $ 45.51
(5,935 ) $ 40.26
127,471 $ 39.83
$
2,354
$
1,961
$
2,196
$
1,771
As of December 31, 2021, there was $2.9 million of total unrecognized compensation cost related to nonvested
RSU awards, which is expected to be recognized over a weighted average period of 1.3 years.
71
DEFERRED COMPENSATION STOCK EQUIVALENT UNITS
A long-term incentive award was granted annually to our directors through December 2017. The awards are payable
upon a director's separation from service. Directors may also elect to defer their annual retainers, payable in the
form of stock. Additionally, issuance of restricted stock units awarded to certain officers and employees may also
be deferred. All stock unit equivalent accounts are credited with dividend equivalents. At December 31, 2021, shares
outstanding that will be distributed in the future to directors or officers and employees as common stock were
174,559 and 7,247, respectively.
NOTE 13. LEASES
See Note 1: Summary of Significant Accounting Policies for details on our lease accounting policies.
Balance Sheet Classification
The following tables provide supplemental balance sheet information related to our leases as of December 31:
Classification
2021
2020
(in thousands)
Assets
Operating lease assets
Finance lease assets1
Total lease assets
Liabilities
Current
Other long-term assets
Property, plant and equipment, net
$
$
$
8,514
10,663
19,177
$
$
11,081
7,206
18,287
3,021
3,577
$
4,304
2,202
5,598
6,972
19,168
6,835
4,914
18,255
Operating lease liabilities
Finance lease liabilities
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
Noncurrent
Operating lease liabilities
Finance lease liabilities
Other long-term obligations
Other long-term obligations
Total lease liabilities
1 Finance lease assets are presented net of accumulated amortization of $4.5 million and $1.7 million as of December 31, 2021 and 2020,
$
$
respectively.
Weighted-average remaining terms (years)
Operating leases
Finance leases
Weighted-average discount rate
Operating leases
Finance leases
Lease Costs
2021
2020
3.88
3.66
3.84 %
2.54 %
3.80
3.59
4.13 %
2.76 %
The following table summarizes the components of our lease expense for the years ended December 31:
(in thousands)
Operating lease costs1
Finance lease costs:
Amortization of leased assets
Interest on lease assets
2021
2020
2019
$
4,798 $
5,640
$
2,825
227
7,850 $
1,451
153
7,244
$
5,938
269
40
6,247
Net lease costs
1 Excludes short-term leases and variable lease costs, which are immaterial.
$
Operating lease costs and amortization of finance lease assets are included within costs of goods sold and selling,
general and administrative expenses and interest on leased assets is included in interest expense, net on our
Consolidated Statements of Operations.
72
Other Lease Information
The following table presents supplemental cash flow information related to leases for the years ended December
31:
(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
2021
2020
Operating cash flows for operating leases
Operating cash flows for finance leases
Financing cash flows for finance leases
Leased assets exchanged for new lease liabilities:
Operating leases
Finance leases
Maturity of Lease Liabilities
$
$
$
$
$
4,745
227
2,846
$
$
$
1,907
6,279
$
$
5,627
153
1,526
447
6,295
At December 31, 2021, the future minimum lease payment obligations under noncancelable leases were as follows:
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: interest
Present value of lease liabilities
NOTE 14. INCOME TAXES
$
$
Operating Leases
Finance Leases
$
3,289
2,289
1,349
1,052
1,008
292
9,279
660
8,619 $
3,800
3,076
2,213
1,156
554
240
11,039
490
10,549
As a REIT, we generally are not subject to federal and state corporate income taxes on income from investments
in real estate that we distribute to our shareholders. We conduct certain activities through our PotlatchDeltic 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 income or loss of the PotlatchDeltic TRS, as well as permanent book versus tax
differences.
We are also subject to corporate taxes on built-in gains (the excess of fair market value over tax basis on the merger
date) on sales of former Deltic real property held by the REIT during the five years following the Deltic merger (until
February 2023). The sale of standing timber is not subject to built-in gains tax.
Income tax expense consists of the following for the years ended December 31:
(in thousands)
Current
Deferred
Net operating loss carryforwards
Income taxes
2021
2020
$
$
85,131
25
—
85,156
$
$
41,733
(14,610 )
—
27,123
$
$
2019
12,055
(11,082 )
37
1,010
73
Income tax expense differs from the amount computed by applying the statutory federal income tax rate of 21% to
income before income taxes due to the following for the years ended December 31:
(in thousands, except effective tax rate)
U.S. federal statutory income tax
REIT income not subject to federal income tax
Change in valuation allowance
State income taxes, net of federal tax benefit
Other items, net
Income taxes
Effective tax rate
2021
$ 106,893
(34,332 )
—
13,314
(719 )
85,156
$
2020
40,730
(16,949 )
(395 )
3,099
638
27,123
$
$
2019
11,901
(11,285 )
(395 )
334
455
1,010
$
$
16.7 %
14.0 %
1.8 %
The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:
(in thousands)
Deferred tax assets:
Pension and other postretirement employee benefits
Inventories
Tax credits
Nondeductible accruals
Incentive compensation
Employee benefits
Other
Total deferred tax assets
Deferred tax liabilities:
Timber and timberlands, net
Property, plant and equipment, net
Intangible assets, net
Real estate development
Other
Total deferred tax liabilities
Deferred tax liabilities, net
2021
2020
22,610 $
387
—
1,634
1,437
1,444
598
28,110
(226 )
(53,800 )
(3,466 )
(2,476 )
(3,016 )
(62,984 )
(34,874 ) $
34,703
552
1,519
2,005
971
1,323
1,110
42,183
(354 )
(52,698 )
(3,656 )
(1,236 )
(1,979 )
(59,923 )
(17,740 )
$
$
We believe it is more likely than not that we will have sufficient future taxable income to realize our deferred tax
assets. At December 31, 2021, we had no state or federal net operating loss carryforwards and at December 31,
2021 and 2020, we had no material unrecognized tax benefits.
We reflect accrued interest related to tax obligations, as well as penalties, in our provision for income taxes. For the
years ended December 31, 2021, 2020 and 2019, we recognized insignificant amounts related to interest and
penalties in our tax provision. At December 31, 2021, 2020 and 2019, we had insignificant amounts of accrued
interest related to tax obligations and no accrued interest receivable with respect to open tax refunds.
The following table summarizes the tax years subject to examination by major taxing jurisdictions:
Jurisdiction
Federal
Arkansas
Idaho
Michigan
Minnesota
Years
2018 - 2021
2018 - 2021
2018 - 2021
2017 - 2021
2017 - 2021
74
NOTE 15. SAVINGS PLANS, PENSION PLANS AND OTHER POSTRETIREMENT
EMPLOYEE BENEFITS
SAVINGS PLANS
Substantially all of our employees are eligible to participate in 401(k) savings plans. In 2021, 2020 and 2019, we
made matching 401(k) contributions on behalf of our employees of $4.0 million, $3.6 million and $3.9 million,
respectively.
Certain eligible employees who earn awards under our annual incentive plan are permitted to defer receipt of those
awards. These employees may defer receipt of a minimum of 50% and a maximum of 100% of the award pursuant
to rules established under our Management Deferred Compensation Plan. Eligible employees may also defer up to
50% of their base salary under the Management Deferred Compensation Plan. At the employee's election, deferrals
may be deemed invested in a company stock unit account, a directed investment account with certain deemed
investments available under the 401(k) Plan or a combination of these investment vehicles. If company stock units
are elected, dividend equivalents are credited to the units.
PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
On January 1, 2011, we closed the legacy Potlatch pension plans to any new salaried and hourly non-represented
employees hired after that date. Upon merger with Deltic in 2018, we assumed one qualified pension plan, one
nonqualified pension plan and one other postretirement benefit (OPEB) plan. The acquired plans have been frozen
to new participants since 2014. Effective December 31, 2021, the Potlatch Salaried Retirement Plan (Salaried Plan)
was amended and the three other qualified pension plans merged into the Salaried Plan creating one qualified
pension plan renamed the PotlatchDeltic Retirement Plan. There were no impacts to vesting provisions or benefits
to the participants of the former qualified defined benefit pension plans as a result of the merger into the Salaried
Plan.
Effective January 1, 2010, we restructured our OPEB plans. The level of health care subsidy was frozen for retirees
so that all future increments in health care costs will be borne by the retirees. In addition, for retirees under age 65,
a high deductible medical plan was created and all other existing health care plans were terminated. For retirees
age 65 or over, the medical plan is divided into two components, with the company continuing to self-insure
prescription drugs and providing a fully-insured medical supplemental plan through AARP/United Healthcare. Both
health care plans require the retiree to contribute amounts in excess of the company subsidy in order to continue
coverage. The Plan does not pay for vision, dental and life insurance for the retirees. The effect of these retiree
plan changes was a reduction in the accumulated postretirement benefit obligation of $76.7 million, which was
recognized in Accumulated Other Comprehensive Loss as of December 31, 2009 and was fully amortized as of
December 31, 2019.
In February 2020, we purchased a group annuity contract from an insurance company to transfer $101.1 million of
our outstanding pension benefit obligation related to our qualified pension plans to the insurance company. This
transaction was funded with plan assets. As a result of the transaction, the insurance company assumed
responsibility for annuity administration and benefit payments to select retirees, with no change to their monthly
retirement benefit payment amounts. In connection with this transaction, we recorded a non-cash pretax settlement
charge of $43.0 million as a result of accelerating the recognition of actuarial losses included in accumulated other
comprehensive loss that would have been recognized in future periods. The settlement also triggered a
remeasurement of plan assets and liabilities. We updated the discount rate used to measure our projected benefit
obligation for the qualified pension plans as of February 29, 2020 and to calculate the related net periodic benefit
cost for the remainder of 2020 to 2.95% from 3.40%. All other pension assumptions were unchanged.
We use a December 31 measurement date for our benefit plans and obligations. We recognize the underfunded
status of our defined benefit pension plans and OPEB plan obligations on our Consolidated Balance Sheets. We
recognize changes in the funded status in the year in which changes occur in Accumulated Other Comprehensive
Loss and amortize actuarial gains and losses in the Consolidated Statements of Operations as net periodic cost
(benefit).
75
Changes in benefit obligation, plan assets and funded status for our pension and OPEB plans are as follows:
(in thousands)
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial gain (loss)
Benefits paid
Plan settlements
Pension Plans
2021
2020
$ (408,429 ) $ (474,237 ) $
(8,182 )
(10,533 )
17,204
23,735
—
(8,932 )
(12,263 )
(38,366 )
23,614
101,755
OPEB
2021
(50,835 ) $
(670 )
(1,267 )
16,614
3,900
—
Benefit obligation at end of year
$ (386,205 ) $ (408,429 ) $
(32,258 ) $
2020
(46,395 )
(508 )
(1,502 )
(6,415 )
3,985
—
(50,835 )
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions and benefit payments
Benefits paid
Plan settlements
Fair value of plan assets at end of year
$
$ 325,790 $ 398,468
46,672
6,019
(23,614 )
(101,755 )
22,597
5,144
(23,735 )
—
$ 329,796 $ 325,790
$
— $
—
3,900
(3,900 )
—
— $
—
—
3,985
(3,985 )
—
—
Amounts recognized in the consolidated balance sheets:
Current liabilities
Noncurrent assets
Noncurrent liabilities
Funded status
$
$
(2,462 ) $
—
(53,947 )
(56,409 ) $
(2,363 ) $
1,907
(82,183 )
(82,639 ) $
(2,531 ) $
—
(29,727 )
(32,258 ) $
(4,211 )
—
(46,624 )
(50,835 )
The accumulated benefit obligation for all defined benefit pension plans is determined using the actuarial present
value of the vested benefits to which the employee is currently entitled and the employee’s expected date of
separation for retirement. At December 31, 2021 and 2020, the accumulated benefit obligation for all defined benefit
pension plans was $374.7 million and $390.3 million, respectively. Actuarial gain (loss) in our pension plans is
primarily due to year over year changes in the discount rate. Actuarial gain (loss) for our OPEB plans is primarily
due to year over year changes in the discount rate and assumptions associated with medical trends, claims and
participant contributions. During 2021 and 2020, funding of pension and other postretirement employee benefit
plans was $9.0 million and $10.0 million, respectively.
Pension plans with projected benefit obligations greater than plan assets at December 31 are as follows:
Projected benefit obligations
Fair value of plan assets
$
$
2021
386,205 $
329,796 $
2020
350,091
265,546
Pension plans with accumulated benefit obligations greater than plan assets at December 31 are as follows:
Accumulated benefit obligations
Fair value of plan assets
PENSION ASSETS
$
$
2021
374,719 $
329,796 $
2020
332,012
265,546
We utilize formal investment policy guidelines for our company-sponsored pension plan assets. Management is
responsible for ensuring the investment policy and guidelines are adhered to and the investment objectives are
met.
The general policy states that plan assets will be invested to seek the greatest return consistent with the fiduciary
character of the pension funds and to allow the plans to meet the need for timely pension benefit payments. The
specific investment guidelines stipulate that management will maintain adequate liquidity for meeting expected
benefit payments by reviewing, on a timely basis, contribution and benefit payment levels and appropriately revise
long-term and short-term asset allocations. Management takes reasonable and prudent steps to preserve the value
76
of pension fund assets and to avoid the risk of large losses. Major steps taken to provide this protection include the
following:
• Assets are diversified among various asset classes, such as global equities, fixed income, alternatives and
liquid reserves.
• Periodic reviews of allocations within these ranges are made to determine what adjustments should be
made based on changing economic and market conditions and specific liquidity requirements.
• Assets are managed by professional investment managers and may be invested in separately managed
accounts or commingled funds.
• Assets are not invested in PotlatchDeltic stock.
The investment guidelines also provide that the individual investment managers are expected to achieve a
reasonable rate of return over a market cycle. Emphasis will be placed on long-term performance versus short-term
market aberrations. Factors to be considered in determining reasonable rates of return include performance
achieved by a diverse cross section of other investment managers, performance of commonly used benchmarks
(e.g., MSCI All-Country World Index, Barclays Long Credit Index), actuarial assumptions for return on plan
investments and specific performance guidelines given to individual investment managers.
The long-term targeted asset allocation ranges for the pension benefit plans’ asset categories are as follows:
Asset Category
Global equities
Fixed income securities
Alternatives, which may include equities and fixed income securities
Cash and cash equivalents
Allocation Range
5% - 35%
50% - 100%
0% - 15%
0% - 5%
The asset allocations of the pension benefit plans’ assets at December 31 by asset category are as follows:
Asset Category
Global equities
Fixed income securities
Other (includes cash and cash equivalents and alternatives)
Total
Pension Plans
2021
20 %
73
7
100 %
2020
32 %
53
15
100 %
The pension assets are stated at fair value. Refer to Note 1: Summary of Significant Accounting Policies for a
discussion of the framework used to measure fair value.
77
Assets within our defined benefit pension plans were invested as follows:
(in thousands)
Asset Category
Cash and cash equivalents
Global equity securities1
Fixed income securities2
Alternatives3
Total
(in thousands)
Asset Category
Cash and cash equivalents
Global equity securities1
Fixed income securities2
Alternatives3
Total
Level 1
December 31, 2021
Level 2
4,269 $
66,517
182,506
17,099
270,391 $
— $
—
59,405
—
59,405 $
Total
4,269
66,517
241,911
17,099
329,796
Level 1
December 31, 2020
Level 2
5,571 $
104,775
143,415
42,535
296,296 $
— $
—
29,494
—
29,494 $
Total
5,571
104,775
172,909
42,535
325,790
$
$
$
$
1 Level 1 assets are international and domestic managed investments with quoted prices on major security markets and also include
investments in registered investment company funds for which market quotations are generally readily available on the primary market or
exchange on which they are traded. The global equity securities track the MSCI All-Country World Index.
2 Level 1 assets are investments in a diversified portfolio of fixed income instruments of varying maturities representing corporates, U.S.
treasuries, municipals and futures. Level 2 assets are thinly traded investments in a diversified portfolio of fixed income instruments of varying
maturities representing mostly corporates securities. Both Level 1 & Level 2 investments track the Bloomberg Barclay’s Long-term Credit
Index.
3 Level 1 assets are long-term investment funds which are invested in tangible assets and real asset companies such as, infrastructure, natural
resources and timber.
There were no Level 3 investments held by the defined benefit pension plans at December 31, 2021 or 2020.
PLAN ACTIVITY
Pre-tax components of net periodic cost (benefit) recognized in our Consolidated Statements of Operations were
as follows for the years ended December 31:
Pension Plans
OPEB
(in thousands)
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (credit)
Amortization of actuarial loss
$
2021
$
8,182
10,533
(14,100 )
86
14,455
2020
8,932 $
12,263
(15,474 )
111
15,426
2019
7,767 $
2020
508 $
2021
670
18,465 1,267
(22,190 )
211
2019
$
371
1,502 1,588
—
—
(8,844 )
(1,274 )
13,497 2,178 1,672 1,012
—
(1,192 )
Net periodic cost (benefit) before
pension settlement charge
Pension settlement charge
Net periodic cost (benefit)
19,156
—
(5,873 )
—
$ 19,156 $ 64,246 $ 17,750 $ 2,923 $ 2,408 $ (5,873 )
17,750 2,923 2,408
—
21,258
42,988
—
—
The amounts recorded in Accumulated Other Comprehensive Loss on our Consolidated Balance Sheets, that have
not yet been recognized as components of net periodic benefit costs at December 31, net of tax, consist of:
(in thousands)
Net loss
Prior service cost (credit)
Total amount unrecognized
Pension Plans
2021
49,476 $
103
49,579 $
2020
78,859
166
79,025
$
$
$
$
OPEB
2021
2,075 $
(285 )
1,790 $
2020
15,947
(1,164 )
14,783
EXPECTED FUNDING AND BENEFIT PAYMENTS
We are not required to contribute to our qualified pension plans in 2022. Our non-qualified pension plan and other
postretirement employee benefit plans are unfunded and benefit payments are paid from our general assets. We
estimate that we will make non-qualified pension plan payments of $2.5 million and other postretirement employee
benefit payments of $2.5 million in 2022, which are included below.
78
Estimated future benefit payments, which reflect expected future service are as follows for the years indicated:
(in thousands)
2022
2023
2024
2025
2026
2027–2031
ACTUARIAL ASSUMPTIONS
Pension Plans
$
$
$
$
$
$
22,574 $
22,944 $
22,945 $
22,730 $
22,554 $
109,673 $
OPEB
2,532
2,414
2,192
2,017
1,926
8,447
The weighted average assumptions used to determine the benefit obligation for our pension and OPEB plans as of
December 31 were:
Discount rate
Rate of compensation increase
Pension Plans
2021
3.00%
3.00 - 4.00%
2020
2.65%
3.00 - 4.00%
OPEB
2021
2.95 %
—
2020
2.60 %
—
The weighted average assumptions used for all pension and OPEB plans to determine the net periodic benefit cost
for the years ended December 31 were:
Discount rate
Expected return on plan assets
Rate of compensation increase
2021
2.65%
5.25%
3.00 -
4.00%
Pension Plans
2020
3.40%
5.75%
3.00 - 4.00%
2019 2021
4.40% 2.60 %
6.25% —
3.00 -
4.00% —
OPEB
2020
3.40 %
—
2019
4.40 %
—
—
—
The discount rate used in the determination of pension and other postretirement employee benefit obligations was
calculated using hypothetical bond portfolios to match the expected benefit payments under each of our pension
plans and other postretirement employee benefit obligations based on bonds available at each year end with a
rating of "AA" or better. The portfolios were well-diversified over corporate industrial, corporate financial, municipal,
federal and foreign government issuers.
Determining our expected return on plan assets requires a high degree of judgment. The expected return on plan
assets assumption is based upon an analysis of historical long-term returns for various investment categories, as
measured by appropriate indices. These indices are weighted based upon the extent to which plan assets are
invested in the particular categories in arriving at our determination of a composite expected return.
At December 31, 2021, the assumed health care cost trend rate used to calculate other postretirement employee
benefit obligations was between 6.06% and 6.58% depending on the individual plan participant makeup and graded
ratably to an assumption of 4.00% in 2046. The actual rates of health care cost increases may vary significantly
from the assumption used because of unanticipated changes in health care costs.
79
NOTE 16. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS
The following tables detail the changes in our Accumulated Other Comprehensive Loss (AOCL) on our Consolidated
Balance Sheets for the years ended December 31, 2021 and 2020, net of tax.
$
(in thousands)
Pension Plans
Balance at beginning of period
Net (gain) loss arising during the period
Effect of pension settlement
Amounts reclassified from AOCL to earnings
Balance at end of period
Other Postretirement Benefit Plans
Balance at beginning of period
Net (gain) loss arising during the period
Amounts reclassified from AOCL to earnings
Balance at end of period
Cash Flow Hedges
Balance at beginning of period
Net (gain) loss arising during the period
Amounts reclassified from AOCL to earnings
Balance at end of period
Accumulated other comprehensive loss, end of period
$
2021
2020
79,025
(19,147 )
$
-
(10,299 )
49,579
14,783
(12,378 )
(615 )
1,790
27,181
(26,206 )
(9,106 )
(8,131 )
43,238
$
117,028
5,306
(31,811 )
(11,498 )
79,025
10,331
4,747
(295 )
14,783
20,000
14,632
(7,451 )
27,181
120,989
See Note 10: Derivative Instruments and Note 15: Savings Plans, Pension and Other Postretirement Employee
Benefits for additional information.
80
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange
Act)), under the supervision and with the participation of management, including the Chief Executive Officer (CEO)
and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Exchange Act) as of December 31, 2021. These disclosure controls and procedures are
designed to ensure that information required to be disclosed in our reports that are filed or submitted under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'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 December 31, 2021.
Management's Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined in Rule 13a-15(f) under the Exchange Act of 1934.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Our management, with the participation of our CEO and CFO, assessed the effectiveness of our internal control
over financial reporting as of December 31, 2021. In making this assessment, our management used the criteria
set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated
Framework (2013).
Based on our assessment, management believes that, as of December 31, 2021, our internal control over financial
reporting is effective based on those criteria.
Our independent registered public accounting firm has audited the effectiveness of our internal controls over
financial reporting as of December 31, 2021, as stated in their report which appears on the next page.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the latest fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
81
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
PotlatchDeltic Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited PotlatchDeltic Corporation and subsidiaries' (the Company) internal control over financial reporting
as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued
by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related
consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the
years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated
financial statements), and our report dated February 17, 2022 expressed an unqualified opinion on those
consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audit also included performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Seattle, Washington
February 17, 2022
82
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Certain of the information required by this item is incorporated by reference to the information appearing under the
headings "Board of Directors," "Corporate Governance," and "Delinquent Section 16(a) Reports" from our definitive
Proxy Statement to be filed with the SEC on or about March 29, 2022.
Our Corporate Conduct and Ethics Code, which is applicable to all directors, officers and employees, can be found
on our website at www.PotlatchDeltic.com. We post any amendments to or waivers from our Corporate Conduct
and Ethics Code on our website.
ITEM 11. EXECUTIVE COMPENSATION
Information set forth under the headings "Report of the Executive Compensation and Personnel Policies
Committee," "Compensation Discussion and Analysis," "Executive Compensation Tables," “CEO Pay Ratio,”
"Compensation of Directors" and "Corporate Governance - Compensation Committee Interlocks and Insider
Participation" in our definitive Proxy Statement to be filed with the SEC on or about March 29, 2022, is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information regarding any person or group known by us to be the beneficial owner of more than five percent of our
common stock as well as the security ownership of management set forth under the heading "Security Ownership"
in our definitive Proxy Statement to be filed with the SEC on or about March 29, 2022, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by this item regarding certain relationships and related transactions is to be included under
the heading "Corporate Governance - Transactions with Related Persons" in our definitive Proxy Statement to be
filed with the SEC on or about March 29, 2022, and is incorporated herein by reference.
The information required by this item regarding director independence is to be included under the headings "Board
of Directors" and "Corporate Governance - Director Independence" in our definitive Proxy Statement to be filed with
the SEC on or about March 29, 2022, and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item regarding principal accounting fees and services is to be included under the
heading "Audit Committee Report - Fees Paid to Independent Registered Public Accounting Firm in 2021 and 2020"
in our definitive Proxy Statement to be filed with the SEC on or about March 29, 2022, and is incorporated herein
by reference.
83
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because of the absence of conditions under which they are
required or because the required information is included in the consolidated financial statements or the notes
thereto, included in Part II – Item 8. Financial Statements and Supplementary Data above.
Exhibits:
POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES
EXHIBIT
NUMBER
2.1*
2.2*
3.1*
3.2*
4.1
4.2*
4.3*
4.4*
4.5*
10.11*
10.21*
DESCRIPTION
Agreement and Plan of Merger dated October 22, 2017 between PotlatchDeltic Corporation,
Portland Merger LLC and Deltic Timber Corporation, filed as Exhibit 2.1 to the Current Report on
Form 8-K filed by the Registrant on October 23, 2017.
Agreement and Plan of Merger dated as of December 6, 2021 among Loutre Land and Lumber
Company, PotlatchDeltic Corporation, PCH Merger LLC and the Shareholder Representatives party
thereto, filed as Exhibit 2.1 to the Current Report on Form 8-K filed by the Registrant on December
22, 2021.
Third Restated Certificate of Incorporation of the Registrant, effective February 20, 2018, filed as
Exhibit 3.1 to the Current Report on Form 8-K filed by the Registrant on February 21, 2018.
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.
See Exhibits 3.1 and 3.2. The Registrant also undertakes to furnish to the SEC, upon request, any
instrument defining the rights of holders of long-term debt.
Description of Registrant’s Securities, filed as Exhibit 4(a) to the Annual Report on Form 10-K for the
fiscal year ended December 31, 2019.
Indenture, dated as of November 27, 1990, between Original PotlatchDeltic and Deutsche Bank
National Trust Company (successor in interest to Bankers Trust Company of California, National
Association), as trustee, filed as Exhibit (4)(a) to the Original PotlatchDeltic Annual Report on Form
10-K for the fiscal year ended December 31, 2000. (SEC File No. 001-05313)
Officer’s Certificate, dated January 24, 1991, filed as Exhibit (4)(a)(i) to the Original PotlatchDeltic
Annual Report on Form 10-K for the fiscal year ended December 31, 2000. (SEC File No. 001-
05313)
Officer’s Certificate, dated December 12, 1991, filed as Exhibit (4)(a)(i) to the Original PotlatchDeltic
Annual Report on Form 10-K for the fiscal year ended December 31, 1996. (SEC File No. 001-
05313)
PotlatchDeltic Corporation Management Performance Award Plan, as amended effective December
2, 2004, filed as Exhibit (10)(a) to the Annual Report on Form 10-K filed by Original PotlatchDeltic
for the fiscal year ended December 31, 2004. (SEC File No. 001-05313)
Amendment to PotlatchDeltic Corporation Management Performance Award Plan, filed as Exhibit
10.6 to the Current Report on Form 8-K filed by the Registrant on December 11, 2008.
84
10.31*
10.41*
10.51*
10.61*
10.71*
10.81*
10.91*
10.101*
10.111*
10.121*
10.131*
10.141*
10.151*
10.161*
10.171*
10.181*
Summary of PotlatchDeltic Corporation Non-Employee Director Compensation, effective May 6,
2021, filed as Exhibit 10(a) to the Quarterly Report on Form 10-Q by the Registrant on July 30, 2021.
PotlatchDeltic Corporation Severance Program for Executive Employees, amended and restated
effective January 1, 2019, filed as Exhibit 10.5 to the Current Report on Form 8-K filed by the
Registrant on February 21, 2019.
PotlatchDeltic Corporation Salaried Employees’ Supplemental Benefit Plan, as amended and
restated effective January 1, 1989, and as amended through May 24, 2005, filed as Exhibit (10)(d)
to the Quarterly Report on Form 10-Q filed by Original PotlatchDeltic for the quarter ended June 30,
2005.
Amendment, effective as of January 1, 1998, to Plan described in Exhibit (10)(c), filed as Exhibit
(10)(d)(i) to the Annual Report on Form 10-K filed by Original PotlatchDeltic for the fiscal year ended
December 31, 2003. (SEC File No. 001-5313)
Amendment, effective as of January 1, 2009, to Plan described in Exhibit (10)(c), filed as Exhibit
10.5 to the Current Report on Form 8-K filed by the Registrant on December 11, 2008.
PotlatchDeltic Corporation Deferred Compensation Plan for Directors, as amended through May 24,
2005, filed as Exhibit (10)(g) to the Quarterly Report on Form 10-Q filed by Original PotlatchDeltic
for the quarter ended June 30, 2005.
PotlatchDeltic Corporation Deferred Compensation Plan for Directors II, as amended and restated
effective May 8, 2014 and further amended and restated effective September 8, 2016, filed as Exhibit
10(e) to the Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
First Amendment to the PotlatchDeltic Corporation Deferred Compensation Plan for Directors II, filed
as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on December 7, 2017.
PotlatchDeltic Corporation Benefits Protection Trust Agreement, amended and restated effective
September 1, 2018, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant
on February 21, 2019.
Form of Indemnification Agreement with each director of the Registrant and with each executive
officer of the Registrant, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant
on September 23, 2009.
PotlatchDeltic Corporation 2005 Stock Incentive Plan, as amended and restated May 19, 2006, filed
as Exhibit (10)(r) to the Quarterly Report on Form 10-Q filed by the Registrant for the quarter ended
June 30, 2006, and as further amended and restated effective September 16, 2006, filed as Exhibit
(10)(e) to the Current Report on Form 8-K filed by the Registrant on September 21, 2006.
PotlatchDeltic Corporation 2014 Stock Incentive Plan, filed as Exhibit 10.C to the Quarterly Report
on Form 10-Q filed by the Registrant for the quarter ended June 30, 2014.
PotlatchDeltic Corporation Restricted Stock Unit Award Notice and Agreement (Directors) 2014
Long-Term Incentive Plan, filed as Exhibit 10.2 to the Current Report on Form 8-K filed by the
Registrant on December 7, 2017.
Form of 2014 RSU Award Notice and Award Agreement (2014 Long-Term Incentive Plan) filed as
Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on May 9, 2014.
Form of 2015 RSU Award Notice and Agreement (2014 Long-Term Incentive Plan) filed as Exhibit
10.1 to the Current Report on Form 8-K filed by the Registrant on February 18, 2015.
Form of 2019 Performance Share Award Notice and Agreement (2014 Long-Term Incentive Plan),
filed as Exhibit 10.6 to the Current Report on Form 8-K filed by the Registrant on February 21, 2019.
85
10.191*
10.201*
10.211*
10.221*
10.231,2
10.241*
10.251*
10.261,2
10.271*
10.281*
10.291*
10.301*
10.311*
10.321*
Form of 2019 RSU Award Notice and Agreement (2014 Long-term Incentive Plan) filed as Exhibit
10.7 to the Current Report on Form 8-K filed by the Registrant on February 21, 2019.
PotlatchDeltic Corporation 2019 Long-Term Incentive Plan filed as Exhibit 10.1 to the Current Report
on Form 8-K filed by the Registrant on May 10, 2019.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan RSU Award Notice (Employee) filed as
Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on May 10, 2019.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan RSU Award Agreement for restricted stock
unit awards granted prior to December 2, 2021, filed as Exhibit 10.3 to the Current Report on Form
8-K filed by the Registrant on May 10, 2019.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan RSU Award Agreement (Employee) for
restricted stock unit awards granted on or after December 2, 2021.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan Performance Share Award Notice filed as
Exhibit 10.5 to the Current Report on Form 8-K filed by the Registrant on May 10, 2019.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan Performance Share Agreement for
performance share awards granted prior to December 2, 2021, filed as Exhibit 10.6 to the Current
Report on Form 8-K filed by the Registrant on May 10, 2019.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan Performance Share Agreement for
performance share awards granted on or after December 2, 2021.
Form of PotlatchDeltic 2019 Long-Term Incentive Plan Award Director RSU Notice and Agreement
filed as Exhibit 10.7 to the Current Report on Form 8-K filed by the Registrant on May 10, 2019.
PotlatchDeltic Corporation Management Performance Award Plan II, as amended through February
20, 2008, filed as Exhibit (10)(r)(iv) to the Current Report on Form 8-K filed by the Registrant on
February 26, 2008.
Amendment to PotlatchDeltic Corporation Management Performance Award Plan II, effective June
1, 2008, filed as Exhibit (10)(r)(v) to the Current Report on Form 8-K filed by the Registrant on May
21, 2008.
PotlatchDeltic Corporation Salaried Supplemental Benefit Plan II, effective December 5, 2008, and
amended and restated as of January 1, 2019, filed as Exhibit 10.4 to the Current Report on Form 8-
K filed by the Registrant on February 21, 2019.
PotlatchDeltic Corporation Annual Incentive Plan, amended and restated effective January 1, 2019,
filed as Exhibit 10.2 to the Current Report on Form 8-K filed by the Registrant on February 21, 2019.
PotlatchDeltic Corporation Management Deferred Compensation Plan, effective June 1, 2008,
amended and restated on February 14, 2014, filed as Exhibit (10)(x) to the Annual Report on Form
10-K for the fiscal year ended December 31, 2013.
86
10.33*
10.34*
10.35*
10.36*
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
Second Amended and Restated Term Loan Agreement, dated as of March 22, 2018, by and among
the Registrant and its wholly-owned subsidiaries, as borrowers, Northwest Farm Credit Services,
PCA as administrative agent, the Guarantors from time to time party thereto and the Lenders from
time to time party thereto, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the
Registrant on March 28, 2018.
First amendment to Second Amended and Restated Term Loan Agreement and Incremental Term
Loan Agreement dated January 30, 2019, by and among the Registrant and its wholly-owned
subsidiaries as borrowers and Northwest Farm Credit Services, PCA, as Administrative Agent, the
Guarantors party thereto, and the Lenders party thereto, filed as Exhibit 10.1 to the Current Report
on Form 8-K filed by the Registrant on February 5, 2019.
Second amendment to Second Amended and Restated Term Loan Agreement dated December 2,
2019, by and among the Registrant and its wholly-owned subsidiaries as borrowers and Northwest
Farm Credit Services, PCA, as Administrative Agent, the Guarantors party thereto, and the Lenders
party thereto, filed as Exhibit 10.1 to the Current Report on Form 8-K/A filed by the Registrant on
December 10, 2019.
Third Amendment to Second Amended and Restated Term Loan Agreement dated April 14, 2020,
by and among the Registrant and its wholly-owned subsidiaries as borrowers and Northwest Farm
Credit Services, PCA, as Administrative Agent, the Guarantors party thereto, and the Lenders party
thereto, filed as Exhibit 10(a) to the Quarterly Report on Form 10-Q filed by the Registrant for the
quarter ended March 30, 2020.
Fourth amendment to Second Amended and Restated Term Loan Agreement dated December 1,
2020, by and among the Registrant and its wholly-owned subsidiaries as borrowers and Northwest
Farm Credit Services, PCA, as Administrative Agent, the Guarantors party thereto, the Lenders party
thereto, and the Voting Participants party thereto, filed as Exhibit 10.1 to the Current Report on Form
8-K filed by the Registrant on December 1, 2020.
Fifth amendment to Second Amended and Restated Term Loan Agreement dated December 1,
2021, by and among the Registrant and its wholly-owned subsidiaries as borrowers and Northwest
Farm Credit Services, PCA, as Administrative Agent, the Guarantors party thereto, the Lenders party
thereto, and the Voting Participants party thereto, filed as Exhibit 10.1 to the Current Report on Form
8-K filed by the Registrant on December 1, 2021.
Sixth amendment to Second Amended and Restated Term Loan Agreement dated February 14,
2022, by and among the Registrant and its wholly-owned subsidiaries as borrowers and Northwest
Farm Credit Services, PCA, as Administrative Agent, the Guarantors party thereto, the Lenders party
thereto, and the Voting Participants party thereto, filed as Exhibit 10.1 to the Current Report on Form
8-K filed by the Registrant on February 14, 2022.
Loan Agreement dated August 1, 2016 by and among Nez Perce County, Idaho, PotlatchDeltic
Corporation, PotlatchDeltic Forest Holdings, Inc., PotlatchDeltic Lake States Timberlands, LLC,
PotlatchDeltic Land and Lumber, LLC, Minnesota Timberlands, LLC and PotlatchDeltic Timberlands,
LLC, filed as Exhibit 1.1 to the Current Report on Form 8-K filed by the Registrant on August 19,
2016.
Second Amended and Restated Credit Agreement dated as of February 14, 2018, by and among
the Registrant and its wholly-owned subsidiaries as borrowers, Key Bank National Association as
Administrative Agent, swing line lender and L/C issuer, the Guarantors from time to time party thereto
and the Lenders from time to time party thereto, filed as Exhibit 10.1 to the Current Report on Form
8-K filed by the Registrant on February 15, 2018.
Third Amended and Restated Credit Agreement dated as of December 14, 2021, by and among the
Registrant and its wholly-owned subsidiaries as borrowers, KeyBank National Association as
Administrative Agent, swing line lender and L/C Issuer, the Guarantors from time to time party thereto
and the Lenders from time to time party thereto, filed as Exhibit 10.1 to the Current Report on Form
8-K filed by the Registrant on December 14, 2021.
87
10.43*
10.44*
10.451*
212
232
242
312
322
101
Asset Purchase and sales agreement between the Registrant’s wholly-owned subsidiary, Del-Tin
Fiber, LLC (Del-Tin) and Roseburg Forest Products Co. for the sale of Del-Tin’s El Dorado MDF
Business filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on December
21,2018.
Group annuity contract, effective March 6, 2020, between NY Life Insurance Company and the
Registrant, filed as Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on October
16, 2020.
Letter Agreement, dated November 6, 2020, between Michael J. Covey and the Registrant, filed as
Exhibit 10.1 to the Current Report on Form 8-K filed by the Registrant on November 9, 2020.
PotlatchDeltic Corporation Subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney.
Rule 13a-14(a)/15d-14(a) Certifications.
Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C.
Section 1350.
The following financial information from PotlatchDeltic Corporation’s Annual Report on Form 10-K
for the year ended December 31, 2021, filed on February 17, 2022, formatted in iXBRL (Inline
Extensible Business Reporting Language): (i) the Consolidated Statements of Operations for the
years ended December 31, 2021, 2020 and 2019, (ii) the Consolidated Statements of
Comprehensive Income for the years ended December 31, 2021, 2020 and 2019, (iii) the
Consolidated Balance Sheets at December 31, 2021 and 2020, (iv) the Consolidated Statements of
Cash Flows for the years ended December 31, 2021, 2020 and 2019, (v) the Consolidated
Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019 and (vi)
the Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in
Exhibit 101).
Incorporated by reference (SEC File No. 001-32729, unless otherwise indicated).
*
1 Management contract or compensatory plan, contract or arrangement.
2 Document filed with this Form 10-K.
ITEM 16. FORM 10-K SUMMARY
None.
88
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
POTLATCHDELTIC CORPORATION
(Registrant)
By
/s/ ERIC J. CREMERS
Eric J. Cremers
President and
Chief Executive Officer
Date: February 17, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on
February 17, 2022, by the following persons on behalf of the registrant in the capacities indicated.
/s/ ERIC J. CREMERS
Director, President and Chief Executive Officer
Eric J. Cremers
(Principal Executive Officer)
/s/ JERALD W. RICHARDS
Vice President and Chief Financial Officer
Jerald W. Richards
/s/ WAYNE WASECHEK
Controller (Principal Accounting Officer)
Wayne Wasechek
*
Michael J. Covey
*
Anne L. Alonzo
*
Linda M. Breard
*
William L. Driscoll
*
D. Mark Leland
*
Lawrence S. Peiros
*
R. Hunter Pierson Jr.
Director, Executive Chairperson of the Board
Director
Director
Director
Director
Director
Director
*
Director
Lenore M. Sullivan
*By
/s/ MICHELE L. TYLER
Michele L. Tyler
(Attorney-in-fact)
89
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BOARD OF DIRECTORS
Anne L. Alonzo
Former Senior Vice President, External Affairs
and Chief Sustainability Officer
Corteva AgriScience
Wilmington, Delaware
Director since 2021
Linda M. Breard
Former Strategic Consultant to the CEO
Impinj, Inc.
Seattle, Washington
Director since 2015
Michael J. Covey
Executive Chairperson
Former Chief Executive Officer
PotlatchDeltic Corporation
Spokane, Washington
Director since 2006
Eric J. Cremers
President and Chief Executive Officer
Director since 2013
William L. Driscoll
Partner
Lincoln Park Partners
Real Estate Management
Tacoma, Washington
Director since 2004
OFFICERS
Darin R. Ball
Vice President, Timberlands
D. Mark Leland
Retired President
Midstream Division of El Paso Corporation
Houston, Texas
Director since 2018
Lawrence S. Peiros*
Retired Executive Vice President
and Chief Operating Officer
The Clorox Company
Oakland, California
Director since 2003
*Independent Lead Director
R. Hunter Pierson, Jr.
Private Investor
Timberland, Commercial Real Estate
and Securities
New Orleans, Louisiana
Director since 2018
Lenore M. Sullivan
Retired Partner
Perella Weinberg Partners
Dallas, Texas
Director since 2018
Robert L. Schwartz
Vice President, Human Resources
Eric J. Cremers
President and Chief Executive Officer
Anna E. Torma
Vice President, Public Affairs and Chief ESG Officer
Ashlee Townsend Cribb
Vice President, Wood Products
William R. DeReu
Vice President, Real Estate
Jerald W. Richards
Vice President and Chief Financial Officer
Michele L. Tyler
Vice President, General Counsel and Corporate Secretary
Wayne Wasechek
Controller and Principal Accounting Officer
Executive Offices601 West First Avenue, Suite 1600 Spokane, Washington 99201-3807 509-835-1500 www.potlatchdeltic.comTransfer Agent and RegistrarComputershare P.O. Box 505000 Louisville, KY 40253 866-593-2351 www.computershare.com/investorStock ListingPotlatchDeltic common stock is traded under the symbol PCH on Nasdaq.Distribution ReinvestmentFor the convenience of our registered stockholders, dividend distributions may be reinvested in PotlatchDeltic common stock. For information, contact Computershare at 866-593-2351.Annual MeetingThe annual meeting of stockholders will be held online: May 2, 2022, at 9 a.m. Pacific Daylight Time www.virtualshareholdermeeting.com/PCH2022CORPORATE INFORMATIONFSC®-Certified PaperPotlatchDeltic Corporation’s 2021 Annual Report is printed entirely on FSC-Mix paper manufactured using fiber from responsible and legal sources.Additional InformationCopies of our filings with the U.S. Securities andExchange Commission, our Corporate GovernanceGuidelines, Corporate Conduct and Ethics Code, and Charters of the Committees of the Board of Directorsare available, free of charge, at our Web address,www.potlatchdeltic.com, or upon written request to the Corporate Secretary at our executive offices.Forward-Looking StatementsThis report contains forward-looking statements that reflect management’s current views regarding future events based on estimates and assumptions, and are therefore subject to known and unknown risks and uncertainties. For a nonexclusive listing of forward-looking statements and potential factors affecting our business, please refer to “Cautionary Statement Regarding Forward-Looking Information” on Page 1 and “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021, which is included as part of this report. These forward-looking statements are made as of the date of this report and, except as required under applicable law, we do not intend to issue updates concerning any future revisions of management’s views to reflect events or circumstances occurring after the date of this report.BUREAU VERITASCertification