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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2021

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-32729

PotlatchDeltic Corporation

(Exact name of registrant as specified in its charter)

Delaware | 82-0156045
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.)

601 West First Avenue, Suite 1600 |
Spokane, Washington | 99201
(Address of principal executive offices) | (Zip Code)

(509) 835-1500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading symbol(s) | Name of each exchange on which registered
Common Stock ($1 par value) | PCH | Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Non-accelerated Filer | ☐
Smaller Reporting Company | ☐ | Emerging Growth Company | ☐ |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange act).

Yes ☐ No ☒

The number of shares of common stock of the registrant outstanding as of October 27, 2021 was 67,100,706.

POTLATCHDELTIC CORPORATION AND CONSOLIDATED SUBSIDIARIES

T able of Contents

|  |  | Page Number
PART I. - FINANCIAL INFORMATION |
ITEM 1. | Financial Statements (unaudited) |
| Condensed Consolidated Statements of Operations | 3
| Condensed Consolidated Statements of Comprehensive Income | 4
| Condensed Consolidated Balance Sheets | 5
| Condensed Consolidated Statements of Cash Flows | 6
| Condensed Consolidated Statements of Stockholders’ Equity | 8
| Index for the Notes to Condensed Consolidated Financial Statements | 9
| Notes to Condensed Consolidated Financial Statements | 10
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 21
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 36
ITEM 4. | Controls and Procedures | 36
PART II. - OTHER INFORMATION |
ITEM 1. | Legal Proceedings | 37
ITEM 1A. | Risk Factors | 37
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 37
ITEM 6. | Exhibits | 37
SIGNATURE | 38

Table of Contents

Part I – FINANCIAL INFORMATION

ITEM 1. FINANC IAL STATEMENTS

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Stat ements of Operations

(Unaudited)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands, except per share amounts) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenues |  | $ | 287,330 |  |  | $ | 313,046 |  |  | $ | 1,089,029 |  |  | $ | 703,481 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  |  | 190,602 |  |  |  | 182,039 |  |  |  | 537,683 |  |  |  | 503,921 |
Selling, general and administrative expenses |  |  | 18,512 |  |  |  | 21,046 |  |  |  | 54,782 |  |  |  | 52,064 |
Net gain on insurance recoveries |  |  | (4,394 | ) |  |  | — |  |  |  | (4,394 | ) |  |  | — |
|  |  | 204,720 |  |  |  | 203,085 |  |  |  | 588,071 |  |  |  | 555,985 |
Operating income |  |  | 82,610 |  |  |  | 109,961 |  |  |  | 500,958 |  |  |  | 147,496 |
Interest expense, net |  |  | (8,641 | ) |  |  | (8,557 | ) |  |  | (20,414 | ) |  |  | (20,594 | )
Pension settlement charge |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (42,988 | )
Non-operating pension and other postretirement employee benefit costs |  |  | (3,271 | ) |  |  | (3,557 | ) |  |  | (9,956 | ) |  |  | (10,670 | )
Income before income taxes |  |  | 70,698 |  |  |  | 97,847 |  |  |  | 470,588 |  |  |  | 73,244 |
Income taxes |  |  | (5,031 | ) |  |  | (16,840 | ) |  |  | (85,910 | ) |  |  | (6,431 | )
Net income |  | $ | 65,667 |  |  | $ | 81,007 |  |  | $ | 384,678 |  |  | $ | 66,813 |
Net income per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.98 |  |  | $ | 1.21 |  |  | $ | 5.72 |  |  | $ | 0.99 |
Diluted |  | $ | 0.97 |  |  | $ | 1.20 |  |  | $ | 5.69 |  |  | $ | 0.99 |
Dividends per share |  | $ | 0.41 |  |  | $ | 0.40 |  |  | $ | 1.23 |  |  | $ | 1.20 |
Weighted-average shares outstanding: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 67,315 |  |  |  | 67,149 |  |  |  | 67,275 |  |  |  | 67,263 |
Diluted |  |  | 67,648 |  |  |  | 67,528 |  |  |  | 67,588 |  |  |  | 67,535 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Table of Contents

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net income |  | $ | 65,667 |  |  | $ | 81,007 |  |  | $ | 384,678 |  |  | $ | 66,813 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |  |  |  |  |
Pension and other postretirement employee benefits: |  |  |  |  |  |  |  |  |  |  |  |
Net loss arising during the period, net of tax benefit of $0, $0, $0 and $6,817 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (19,402 | )
Effect of pension settlement, net of tax benefit of $0, $0, $0 and $11,177 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 31,811 |
Amortization of prior service credit included in net income, net of tax benefit of $73, $75, $217 and $227 |  |  | (204 | ) |  |  | (215 | ) |  |  | (614 | ) |  |  | (645 | )
Amortization of actuarial loss included in net income, net of tax expense of $1,073, $1,111, $3,254, and $3,334 |  |  | 3,050 |  |  |  | 3,163 |  |  |  | 9,258 |  |  |  | 9,489 |
Cash flow hedges, net of tax expense (benefit) of $397, $763, $2,249 and $(1,043) |  |  | 6,636 |  |  |  | 11,332 |  |  |  | 39,580 |  |  |  | (29,040 | )
Other comprehensive income (loss), net of tax |  |  | 9,482 |  |  |  | 14,280 |  |  |  | 48,224 |  |  |  | (7,787 | )
Comprehensive income |  | $ | 75,149 |  |  | $ | 95,287 |  |  | $ | 432,902 |  |  | $ | 59,026 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Table of Contents

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolida ted Balance Sheets

(Unaudited)

(in thousands, except per share amounts) |  | September 30, 2021 |  |  | December 31, 2020 |
ASSETS |  |  |  |  |  |
Current assets: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 592,767 |  |  | $ | 252,340 |
Customer receivables, net |  |  | 27,789 |  |  |  | 26,606 |
Inventories, net |  |  | 69,862 |  |  |  | 62,036 |
Other current assets |  |  | 24,460 |  |  |  | 16,136 |
Total current assets |  |  | 714,878 |  |  |  | 357,118 |
Property, plant and equipment, net |  |  | 286,034 |  |  |  | 288,544 |
Investment in real estate held for development and sale |  |  | 65,048 |  |  |  | 72,355 |
Timber and timberlands, net |  |  | 1,572,475 |  |  |  | 1,600,061 |
Intangible assets, net |  |  | 15,685 |  |  |  | 16,270 |
Other long-term assets |  |  | 63,747 |  |  |  | 46,717 |
Total assets |  | $ | 2,717,867 |  |  | $ | 2,381,065 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |
Accounts payable and accrued liabilities |  | $ | 87,819 |  |  | $ | 93,279 |
Current portion of long-term debt |  |  | 42,996 |  |  |  | 39,981 |
Current portion of pension and other postretirement employee benefits |  |  | 6,574 |  |  |  | 6,574 |
Total current liabilities |  |  | 137,389 |  |  |  | 139,834 |
Long-term debt |  |  | 715,122 |  |  |  | 717,366 |
Pension and other postretirement employee benefits |  |  | 126,154 |  |  |  | 128,807 |
Deferred tax liabilities, net |  |  | 26,247 |  |  |  | 17,740 |
Other long-term obligations |  |  | 52,849 |  |  |  | 72,365 |
Total liabilities |  |  | 1,057,761 |  |  |  | 1,076,112 |
Commitments and contingencies |  |  |  |  |  |
Stockholders' equity: |  |  |  |  |  |
Preferred stock, authorized 4,000 shares, no shares issued |  |  | — |  |  |  | — |
Common stock, $1 par value, authorized 100,000 shares, issued and outstanding 67,100 and 66,876 shares |  |  | 67,100 |  |  |  | 66,876 |
Additional paid-in capital |  |  | 1,679,332 |  |  |  | 1,674,576 |
Accumulated deficit |  |  | (13,561 | ) |  |  | (315,510 | )
Accumulated other comprehensive loss |  |  | (72,765 | ) |  |  | (120,989 | )
Total stockholders’ equity |  |  | 1,660,106 |  |  |  | 1,304,953 |
Total liabilities and stockholders' equity |  | $ | 2,717,867 |  |  | $ | 2,381,065 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

PotlatchDeltic Corporation and Consolidated Subsidiaries

Condensed Consolidated S tatements of Cash Flows

(Unaudited)

|  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |
Net income |  | $ | 384,678 |  |  | $ | 66,813 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation, depletion and amortization |  |  | 57,365 |  |  |  | 57,809 |
Basis of real estate sold |  |  | 22,733 |  |  |  | 14,440 |
Change in deferred taxes |  |  | 3,221 |  |  |  | (14,387 | )
Pension and other postretirement employee benefits |  |  | 16,595 |  |  |  | 17,750 |
Pension settlement charge |  |  | — |  |  |  | 42,988 |
Equity-based compensation expense |  |  | 6,345 |  |  |  | 5,928 |
Net gain on insurance recoveries |  |  | (4,394 | ) |  |  | — |
Other, net |  |  | 633 |  |  |  | (544 | )
Change in working capital and operating-related activities, net |  |  | (20,082 | ) |  |  | 12,706 |
Real estate development expenditures |  |  | (6,434 | ) |  |  | (4,200 | )
Funding of pension and other postretirement employee benefits |  |  | (7,418 | ) |  |  | (8,458 | )
Net cash provided by operating activities |  |  | 453,242 |  |  |  | 190,845 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |
Property, plant and equipment additions |  |  | (26,291 | ) |  |  | (14,666 | )
Timberlands reforestation and roads |  |  | (12,236 | ) |  |  | (12,345 | )
Acquisition of timber and timberlands |  |  | (2,450 | ) |  |  | (4,738 | )
Proceeds from insurance recoveries - property, plant & equipment |  |  | 13,250 |  |  |  | — |
Other, net |  |  | 993 |  |  |  | 3,484 |
Net cash used in investing activities |  |  | (26,734 | ) |  |  | (28,265 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |
Distributions to common stockholders |  |  | (82,462 | ) |  |  | (80,434 | )
Repurchase of common stock |  |  | — |  |  |  | (15,364 | )
Other, net |  |  | (3,619 | ) |  |  | (1,032 | )
Net cash used in financing activities |  |  | (86,081 | ) |  |  | (96,830 | )
Change in cash, cash equivalents and restricted cash |  |  | 340,427 |  |  |  | 65,750 |
Cash, cash equivalents and restricted cash at beginning of period |  |  | 252,340 |  |  |  | 84,254 |
Cash, cash equivalents and restricted cash at end of period |  | $ | 592,767 |  |  | $ | 150,004 |
NONCASH INVESTING AND FINANCING ACTIVITIES |  |  |  |  |  |
Accrued property, plant and equipment additions |  | $ | 2,695 |  |  | $ | 3,785 |
Accrued timberlands reforestation and roads |  | $ | 1,590 |  |  | $ | 1,536 |

6

Table of Contents

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the amounts shown in the Condensed Consolidated Statements of Cash Flows.

(in thousands) |  | September 30, 2021 |  |  | September 30, 2020 |
Cash and cash equivalents |  | $ | 592,767 |  |  | $ | 148,919 |
Restricted cash included in other long-term assets 1 |  |  | — |  |  |  | 1,085 |
Total cash, cash equivalents, and restricted cash |  | $ | 592,767 |  |  | $ | 150,004 |

1 | Amounts included in restricted cash represent proceeds held by a qualified intermediary that are intended to be reinvested in timber and timberlands.

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Table of Contents

PotlatchDeltic Corp oration and Consolidated Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

|  | Common Stock |  |  | Additional Paid- |  |  | Accumulated |  |  | Accumulated Other Comprehensive |  |  | Total Stockholders' |
(in thousands, except per share amounts) |  | Shares |  |  | Amount |  |  | in Capital |  |  | Deficit |  |  | Loss |  |  | Equity |
Balance, December 31, 2020 |  |  | 66,876 |  |  | $ | 66,876 |  |  | $ | 1,674,576 |  |  | $ | (315,510 | ) |  | $ | (120,989 | ) |  | $ | 1,304,953 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 131,106 |  |  |  | — |  |  |  | 131,106 |
Shares issued for stock compensation |  |  | 166 |  |  |  | 166 |  |  |  | (166 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,930 |  |  |  | — |  |  |  | — |  |  |  | 1,930 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,953 |  |  |  | 2,953 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 64,107 |  |  |  | 64,107 |
Dividends on common stock, $0.41 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (27,484 | ) |  |  | — |  |  |  | (27,484 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | 81 |  |  |  | (97 | ) |  |  | — |  |  |  | (16 | )
Balance, March 31, 2021 |  |  | 67,042 |  |  | $ | 67,042 |  |  | $ | 1,676,421 |  |  | $ | (211,985 | ) |  | $ | (53,929 | ) |  | $ | 1,477,549 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 187,905 |  |  |  | — |  |  |  | 187,905 |
Shares issued for stock compensation |  |  | 3 |  |  |  | 3 |  |  |  | (3 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 2,140 |  |  |  | — |  |  |  | — |  |  |  | 2,140 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,845 |  |  |  | 2,845 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (31,163 | ) |  |  | (31,163 | )
Dividends on common stock, $0.41 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (27,489 | ) |  |  | — |  |  |  | (27,489 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | 103 |  |  |  | (101 | ) |  |  | — |  |  |  | 2 |
Balance, June 30, 2021 |  |  | 67,045 |  |  | $ | 67,045 |  |  | $ | 1,678,661 |  |  | $ | (51,670 | ) |  | $ | (82,247 | ) |  | $ | 1,611,789 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 65,667 |  |  |  | — |  |  |  | 65,667 |
Shares issued for stock compensation |  |  | 55 |  |  |  | 55 |  |  |  | (55 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 2,275 |  |  |  | — |  |  |  | — |  |  |  | 2,275 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,846 |  |  |  | 2,846 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,636 |  |  |  | 6,636 |
Dividends on common stock, $0.41 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (27,489 | ) |  |  | — |  |  |  | (27,489 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | (1,549 | ) |  |  | (69 | ) |  |  | — |  |  |  | (1,618 | )
Balance, September 30, 2021 |  |  | 67,100 |  |  | $ | 67,100 |  |  | $ | 1,679,332 |  |  | $ | (13,561 | ) |  | $ | (72,765 | ) |  | $ | 1,660,106 |

|  | Common Stock |  |  | Additional Paid- |  |  | Accumulated |  |  | Accumulated Other Comprehensive |  |  | Total Stockholders' |
(in thousands, except per share amounts) |  | Shares |  |  | Amount |  |  | in Capital |  |  | Deficit |  |  | Loss |  |  | Equity |
Balance, December 31, 2019 |  |  | 67,221 |  |  | $ | 67,221 |  |  | $ | 1,666,299 |  |  | $ | (359,330 | ) |  | $ | (147,359 | ) |  | $ | 1,226,831 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (16,832 | ) |  |  | — |  |  |  | (16,832 | )
Shares issued for stock compensation |  |  | 131 |  |  |  | 131 |  |  |  | (131 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,885 |  |  |  | — |  |  |  | — |  |  |  | 1,885 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,578 |  |  |  | 15,578 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (38,525 | ) |  |  | (38,525 | )
Dividends on common stock, $0.40 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (26,941 | ) |  |  | — |  |  |  | (26,941 | )
Repurchase of common stock |  |  | (401 | ) |  |  | (401 | ) |  |  | — |  |  |  | (11,954 | ) |  |  | — |  |  |  | (12,355 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | 69 |  |  |  | (96 | ) |  |  | — |  |  |  | (27 | )
Balance, March 31, 2020 |  |  | 66,951 |  |  | $ | 66,951 |  |  | $ | 1,668,122 |  |  | $ | (415,153 | ) |  | $ | (170,306 | ) |  | $ | 1,149,614 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,638 |  |  |  | — |  |  |  | 2,638 |
Shares issued for stock compensation |  |  | 9 |  |  |  | 9 |  |  |  | (9 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 1,980 |  |  |  | — |  |  |  | — |  |  |  | 1,980 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,727 |  |  |  | 2,727 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,847 | ) |  |  | (1,847 | )
Dividends on common stock, $0.40 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (26,744 | ) |  |  | — |  |  |  | (26,744 | )
Repurchase of common stock |  |  | (89 | ) |  |  | (89 | ) |  |  | — |  |  |  | (2,920 | ) |  |  | — |  |  |  | (3,009 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | 91 |  |  |  | 26 |  |  |  | — |  |  |  | 117 |
Balance, June 30, 2020 |  |  | 66,871 |  |  | $ | 66,871 |  |  | $ | 1,670,184 |  |  | $ | (442,153 | ) |  | $ | (169,426 | ) |  | $ | 1,125,476 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 81,007 |  |  |  | — |  |  |  | 81,007 |
Shares issued for stock compensation |  |  | 1 |  |  |  | 1 |  |  |  | (1 | ) |  |  | — |  |  |  | — |  |  |  | — |
Equity-based compensation expense |  |  | — |  |  |  | — |  |  |  | 2,063 |  |  |  | — |  |  |  | — |  |  |  | 2,063 |
Pension plans and OPEB obligations, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,948 |  |  |  | 2,948 |
Cash flow hedges, net of tax |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11,332 |  |  |  | 11,332 |
Dividends on common stock, $0.40 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (26,749 | ) |  |  | — |  |  |  | (26,749 | )
Other transactions, net |  |  | — |  |  |  | — |  |  |  | 105 |  |  |  | (105 | ) |  |  | — |  |  |  | — |
Balance, September 30, 2020 |  |  | 66,872 |  |  | $ | 66,872 |  |  | $ | 1,672,351 |  |  | $ | (388,000 | ) |  | $ | (155,146 | ) |  | $ | 1,196,077 |

The accompanying notes are an integral part of these condensed consolidated financial statements.

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IND EX FOR THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Basis of Presentation | 10
Note 2: Segment Information | 11
Note 3: Earnings Per Share | 13
Note 4: Certain Balance Sheet Components | 13
Note 5: Debt | 15
Note 6: Derivative Instruments | 15
Note 7: Fair Value Measurements | 16
Note 8: Equity-Based Compensation | 17
Note 9: Income Taxes | 18
Note 10: Leases | 18
Note 11: Pension and Other Postretirement Employee Benefits | 19
Note 12: Components of Accumulated Other Comprehensive Loss | 20

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N otes to Condensed Consolidated Financial Statements

NO TE 1. BASIS OF PRESENTATION

General

PotlatchDeltic Corporation and its subsidiaries (collectively referred to in this report as the company, us, we or our) is a leading timberland Real Estate Investment Trust (REIT) with ownership of approximately 1.8 million acres of timberlands. Our timberland activities include the sale of timber, the purchase of timberlands and the operation of a rural timberland sales program. We are also engaged in the manufacturing and sale of wood products and operate a residential and commercial real estate development business. Our timberlands, real estate development projects and all of our wood products facilities are located within the continental United States.

Condensed Consolidated Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements provide an overall view of our results and financial condition and reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. Except as otherwise disclosed in these Notes to Condensed Consolidated Financial Statements, such adjustments are of a normal, recurring nature. Intercompany transactions and accounts have been eliminated in consolidation. The Condensed Consolidated Financial Statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission pertaining to interim financial statements. Certain disclosures normally provided in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted. This Quarterly Report on Form 10-Q should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the Securities and Exchange Commission on February 18, 2021. Results of operations for interim periods should not be regarded as necessarily indicative of the results that may be expected for the full year.

Use of Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and requires judgments affecting the amounts reported in the financial statements and the accompanying notes. Actual results may differ materially from our estimates.

Commitments and Contingencies

At any given time, we are subject to claims and actions incidental to the operations of our business. Based on information currently available, we do not expect that any sums we may have to pay in connection with any legal proceeding would have a material adverse effect on our consolidated financial position or net cash flow.

New Accounting Standards Being Evaluated

In March 2020, the FASB issued 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 U.S. 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. The guidance in ASU 2020-04, which companies 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. A number of our debt instruments and associated interest rate derivative agreements have an interest rate tied to LIBOR. 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. While the notional value of our agreements indexed to LIBOR is material, we are not yet able to reasonably estimate any expected impact to our Condensed Consolidated Financial Statements and related disclosures.

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NO TE 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. Activities in the Real Estate segment include our rural timberland-holdings sales program, master planned community development and a country club.

Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizeable portion of the Timberlands segment’s total revenues. Our other segments generally do not generate intersegment revenues. These intercompany transactions are eliminated in consolidation.

The reportable segments follow the same accounting policies used for our Condensed Consolidated Financial Statements, with the exception of the valuation of inventories, which are reported using the average cost method for purposes of reporting segment results.

The following table presents our revenues by major product:

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Timberlands |  |  |  |  |  |  |  |  |  |  |
Northern region |  |  |  |  |  |  |  |  |  |  |
Sawlogs | $ | 88,244 |  |  | $ | 72,815 |  |  | $ | 251,198 |  |  | $ | 144,860 |
Pulpwood |  | 119 |  |  |  | 1,243 |  |  |  | 815 |  |  |  | 3,914 |
Stumpage |  | — |  |  |  | — |  |  |  | — |  |  |  | 316 |
Other |  | 205 |  |  |  | 855 |  |  |  | 740 |  |  |  | 1,450 |
Total Northern revenues |  | 88,568 |  |  |  | 74,913 |  |  |  | 252,753 |  |  |  | 150,540 |
Southern region |  |  |  |  |  |  |  |  |  |  |
Sawlogs |  | 22,191 |  |  |  | 25,462 |  |  |  | 65,620 |  |  |  | 70,606 |
Pulpwood |  | 13,843 |  |  |  | 13,413 |  |  |  | 33,167 |  |  |  | 35,486 |
Stumpage |  | 2,275 |  |  |  | 770 |  |  |  | 3,310 |  |  |  | 2,416 |
Other |  | 2,666 |  |  |  | 2,427 |  |  |  | 7,825 |  |  |  | 7,707 |
Total Southern revenues |  | 40,975 |  |  |  | 42,072 |  |  |  | 109,922 |  |  |  | 116,215 |
Total Timberlands revenues |  | 129,543 |  |  |  | 116,985 |  |  |  | 362,675 |  |  |  | 266,755 |
Wood Products |  |  |  |  |  |  |  |  |  |  |
Lumber |  | 141,255 |  |  |  | 185,558 |  |  |  | 679,417 |  |  |  | 400,290 |
Residuals and Panels |  | 46,505 |  |  |  | 32,733 |  |  |  | 135,312 |  |  |  | 89,217 |
Total Wood Products revenues |  | 187,760 |  |  |  | 218,291 |  |  |  | 814,729 |  |  |  | 489,507 |
Real Estate |  |  |  |  |  |  |  |  |  |  |
Rural real estate |  | 6,939 |  |  |  | 13,284 |  |  |  | 28,469 |  |  |  | 30,455 |
Development real estate |  | 4,260 |  |  |  | 2,157 |  |  |  | 14,087 |  |  |  | 6,121 |
Other |  | 2,298 |  |  |  | 2,710 |  |  |  | 7,252 |  |  |  | 5,649 |
Total Real Estate revenues |  | 13,497 |  |  |  | 18,151 |  |  |  | 49,808 |  |  |  | 42,225 |
Total segment revenues |  | 330,800 |  |  |  | 353,427 |  |  |  | 1,227,212 |  |  |  | 798,487 |
Intersegment Timberlands revenues 1 |  | (43,470 | ) |  |  | (40,381 | ) |  |  | (138,183 | ) |  |  | (95,006 | )
Total consolidated revenues | $ | 287,330 |  |  | $ | 313,046 |  |  | $ | 1,089,029 |  |  | $ | 703,481 |

1 | Intersegment revenues represent logs sold by our Timberlands segment to our Wood Products segment.

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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.

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 Condensed Consolidated Financial Statements.

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Adjusted EBITDDA: |  |  |  |  |  |  |  |  |  |  |  |
Timberlands |  | $ | 76,023 |  |  | $ | 59,649 |  |  | $ | 221,140 |  |  | $ | 120,290 |
Wood Products |  |  | 26,566 |  |  |  | 81,644 |  |  |  | 356,654 |  |  |  | 105,780 |
Real Estate |  |  | 9,069 |  |  |  | 13,466 |  |  |  | 37,450 |  |  |  | 30,062 |
Corporate |  |  | (11,496 | ) |  |  | (15,361 | ) |  |  | (35,028 | ) |  |  | (34,567 | )
Eliminations and adjustments |  |  | 7,021 |  |  |  | (4,012 | ) |  |  | (3,063 | ) |  |  | (3,235 | )
Total Adjusted EBITDDA |  |  | 107,183 |  |  |  | 135,386 |  |  |  | 577,153 |  |  |  | 218,330 |
Interest expense, net 1 |  |  | (8,641 | ) |  |  | (8,557 | ) |  |  | (20,414 | ) |  |  | (20,594 | )
Depreciation, depletion and amortization |  |  | (21,131 | ) |  |  | (20,187 | ) |  |  | (56,156 | ) |  |  | (56,590 | )
Basis of real estate sold |  |  | (6,697 | ) |  |  | (5,249 | ) |  |  | (22,733 | ) |  |  | (14,440 | )
Net gain on insurance recoveries |  |  | 4,394 |  |  |  | — |  |  |  | 4,394 |  |  |  | — |
Pension settlement charge |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (42,988 | )
Non-operating pension and other postretirement employee benefits |  |  | (3,271 | ) |  |  | (3,557 | ) |  |  | (9,956 | ) |  |  | (10,670 | )
(Loss) gain on disposal of fixed assets |  |  | (1,139 | ) |  |  | 11 |  |  |  | (1,700 | ) |  |  | 196 |
Income before income taxes |  | $ | 70,698 |  |  | $ | 97,847 |  |  | $ | 470,588 |  |  | $ | 73,244 |
Depreciation, depletion and amortization: |  |  |  |  |  |  |  |  |  |  |  |
Timberlands |  | $ | 11,893 |  |  | $ | 13,821 |  |  | $ | 33,792 |  |  | $ | 37,978 |
Wood Products |  |  | 8,879 |  |  |  | 5,983 |  |  |  | 21,261 |  |  |  | 17,411 |
Real Estate |  |  | 162 |  |  |  | 149 |  |  |  | 477 |  |  |  | 465 |
Corporate |  |  | 197 |  |  |  | 234 |  |  |  | 626 |  |  |  | 736 |
|  |  | 21,131 |  |  |  | 20,187 |  |  |  | 56,156 |  |  |  | 56,590 |
Bond discounts and deferred loan fees 1 |  |  | 403 |  |  |  | 407 |  |  |  | 1,209 |  |  |  | 1,219 |
Total depreciation, depletion and amortization |  | $ | 21,534 |  |  | $ | 20,594 |  |  | $ | 57,365 |  |  | $ | 57,809 |
Basis of real estate sold: |  |  |  |  |  |  |  |  |  |  |  |
Real Estate |  | $ | 6,703 |  |  | $ | 5,257 |  |  | $ | 22,751 |  |  | $ | 14,973 |
Eliminations and adjustments |  |  | (6 | ) |  |  | (8 | ) |  |  | (18 | ) |  |  | (533 | )
Total basis of real estate sold |  | $ | 6,697 |  |  | $ | 5,249 |  |  | $ | 22,733 |  |  | $ | 14,440 |

1 | Bond discounts and deferred loan fees are reported within interest expense, net on the Condensed Consolidated Statements of Operations.

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NO TE 3. EARNINGS PER SHARE

The following table reconciles the number of shares used in calculating basic and diluted earnings per share:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Basic weighted-average shares outstanding |  |  | 67,315 |  |  |  | 67,149 |  |  |  | 67,275 |  |  |  | 67,263 |
Incremental shares due to: |  |  |  |  |  |  |  |  |  |  |  |
Performance shares |  |  | 272 |  |  |  | 320 |  |  |  | 257 |  |  |  | 238 |
Restricted stock units |  |  | 61 |  |  |  | 59 |  |  |  | 56 |  |  |  | 34 |
Diluted weighted-average shares outstanding |  |  | 67,648 |  |  |  | 67,528 |  |  |  | 67,588 |  |  |  | 67,535 |

For stock-based awards, the dilutive effect is calculated using the treasury stock method. Under this method, the dilutive effect is computed as if the awards were exercised at the beginning of the period (or at time of issuance, if later) and assumes the related proceeds were used to repurchase common stock at the average market price during the period. Related proceeds include future compensation cost associated with the stock award.

For the three and nine months ended September 30, 2021, there were approximately 101,000 and 88,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share as they were anti-dilutive. For the three and nine months ended September 30, 2020, there were approximately 0 and 47,000 stock-based awards, respectively, that were excluded from the calculation of diluted earnings per share because they were anti-dilutive. Anti-dilutive stock-based awards could be dilutive in future periods.

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, and subject to, the terms of 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.

We did no t repurchase any shares during the nine months ended September 30, 2021. No shares were repurchased during the three months ended September 30, 2020. During the nine months ended September 30, 2020, we repurchased 489,850 shares of common stock at a total consideration of $15.4 million under the Repurchase Program, all of which were made in open-market transactions. At September 30, 2021, we had remaining authorization of $59.5 million for future stock repurchases under the Repurchase Program.

We record share repurchases 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 cash settled. We retire shares upon repurchase. Any excess repurchase price over par is recorded in accumulated deficit.

NO TE 4. CERTAIN BALANCE SHEET COMPONENTS

Inventories

(in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Logs |  | $ | 34,980 |  |  | $ | 31,210 |
Lumber, panels and veneer |  |  | 35,716 |  |  |  | 34,136 |
Materials and supplies |  |  | 17,415 |  |  |  | 14,939 |
Total inventories |  |  | 88,111 |  |  |  | 80,285 |
Less: LIFO reserve |  |  | (18,249 | ) |  |  | (18,249 | )
Total inventories, net |  | $ | 69,862 |  |  | $ | 62,036 |

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Property, plant and equipment

(in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Property, plant and equipment |  | $ | 521,271 |  |  | $ | 517,711 |
Less: accumulated depreciation |  |  | (235,237 | ) |  |  | (229,167 | )
Total property, plant and equipment, net |  | $ | 286,034 |  |  | $ | 288,544 |

Ola Arkansas sawmill fire

(in thousands) |  | Three Months Ended September 30, 2021 |  |  | Nine Months Ended September 30, 2021 |
Fixed asset write-offs |  | $ | (7,436 | ) |  | $ | (9,544 | )
Disposal costs |  |  | (1,061 | ) |  |  | (1,061 | )
Total fixed asset loss on disposal |  |  | (8,498 | ) |  |  | (10,606 | )
Insurance recoveries |  |  | 12,892 |  |  |  | 15,000 |
Net gain on insurance recoveries |  | $ | 4,394 |  |  | $ | 4,394 |

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. Based on our initial damage assessment, we wrote-off $2.1 million of net book value for property initially identified as destroyed and recognized a corresponding $2.1 million of insurance recoveries at June 30, 2021.

During the quarter ended September 30, 2021, we were able to fully access the sawmill, further assess the damage and solidify a reconstruction plan for the sawmill. As a result, during the three months ended September 30, 2021, we wrote-off an additional $1.1 million of damaged equipment and $6.3 million of obsolete equipment due to the reconstruction plan and incurred approximately $1.1 million of disposal costs. Additionally, we recorded $12.9 million of insurance recoveries during the quarter ended September 30, 2021, resulting in the recognition of a $4.4 million net gain on insurance recoveries for the three and nine months ended September 30, 2021. No business interruption recoveries were recorded during the three or nine months ended September 30, 2021 as discussions with the insurance carriers are ongoing. Business interruption recoveries will be recorded when deemed probable and reasonably estimable.

Timber and timberlands

(in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Timber and timberlands |  | $ | 1,488,727 |  |  | $ | 1,516,788 |
Logging roads |  |  | 83,748 |  |  |  | 83,273 |
Total timber and timberlands, net |  | $ | 1,572,475 |  |  | $ | 1,600,061 |

Accounts payable and accrued liabilities

(in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Accrued payroll and benefits |  | $ | 26,266 |  |  | $ | 29,675 |
Accounts payable |  |  | 15,795 |  |  |  | 9,724 |
Deferred revenue 1 |  |  | 9,806 |  |  |  | 8,789 |
Other accrued taxes |  |  | 8,957 |  |  |  | 6,025 |
Income taxes payable |  |  | 6,778 |  |  |  | 14,755 |
Accrued interest |  |  | 5,040 |  |  |  | 6,485 |
Other current liabilities |  |  | 15,177 |  |  |  | 17,826 |
Total accounts payable and accrued liabilities |  | $ | 87,819 |  |  | $ | 93,279 |

1 | Deferred revenue predominately relates to hunting and other access rights on our timberlands, payments received for lumber 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 country club initiation fees which are recognized over the average life of club membership.

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NO TE 5. DEBT

At September 30, 2021, our total outstanding long-term debt included $693.5 million of term loans under our Second Amended and Restated Term Loan Agreement (Amended Term Loan Agreement) with our primary lender. Included in the Amended Term Loan Agreement is a $40.0 million term loan maturing in December 2021. Certain borrowings under the Amended Term Loan Agreement are at variable rates of one or three-month LIBOR plus a spread between 1.85% and 2.10%. We have entered into interest rate swaps for these variable rate term loans to fix the interest rate. See Note: 6 Derivative Instruments for additional information.

At September 30, 2021, there were no borrowings under our $380.0 million revolving line of credit and approximately $1.0 million of our revolving line of credit was utilized for outstanding letters of credit. As provided in the revolving line of credit agreement, borrowings may be increased by up to an additional $420.0 million. The revolving line of 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 utilize borrowings under the credit facility to, among other things, refinance existing indebtedness and provide funding for working capital requirements, capital projects, acquisitions and other general corporate expenditures.

We were in compliance with all debt and credit agreement covenants at September 30, 2021.

NO TE 6. DERIVATIVE INSTRUMENTS

From time to time, we enter into derivative financial instruments to manage certain cash flow and fair value risks.

Derivatives designated and qualifying as a hedge of the exposure to variability in the cash flows of a specific asset or liability that is attributable to a particular risk, such as interest rate risk, are considered cash flow hedges. As of September 30, 2021, we have interest rate swaps associated with $403.5 million of term loan debt. These swaps are cash flow hedges that convert variable rates ranging from three-month and one-month LIBOR plus 1.85% to 2.10%, to fixed rates ranging from 3.04% to 4.77%. Our cash flow hedges are expected to be highly effective in achieving offsetting cash flows attributable to the hedged interest rate risk through the term of the hedges. At September 30, 2021, the amount of net losses expected to be reclassified into earnings in the next 12 months is approximately $8.0 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.

We also hold $607.5 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 $607.5 million of future debt refinances through January 2029 by converting the benchmark interest rates to fixed interest rates. In addition, the cash flow hedges for future debt refinances require settlement on the stated maturity date. At September 30, 2021, we have recorded derivative assets of $40.8 million associated with these forward starting interest rate swaps.

The following table presents the gross fair values of derivative instruments on our Condensed Consolidated Balance Sheets:

|  |  |  | Asset Derivatives |  |  |  |  | Liability Derivatives |
(in thousands) |  | Location |  | September 30, 2021 |  |  | December 31, 2020 |  |  | Location |  | September 30, 2021 |  |  | December 31, 2020 |
Derivatives designated in cash flow hedging relationships: |  |  |  |  |  |  |  |  |
Interest rate contracts |  | Other assets, current 1 |  | $ | 1,890 |  |  | $ | 63 |  |  | Accounts payable and accrued liabilities 1 |  | $ | 189 |  |  | $ | 1,010 |
Interest rate contracts |  | Other assets, non-current |  |  | 40,480 |  |  |  | 18,466 |  |  | Other long-term obligations |  |  | 27,933 |  |  |  | 45,100 |
|  |  |  | $ | 42,370 |  |  | $ | 18,529 |  |  |  |  | $ | 28,122 |  |  | $ | 46,110 |

1 | Derivative instruments that mature within one year, as a whole, are classified as current.

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The following table details the effect of derivatives on our Condensed Consolidated Statements of Operations:

|  |  |  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | Location |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Derivatives designated in cash flow hedging relationships: |  |  |  |  |  |  |  |  |  |
Interest rate contracts |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) recognized in other comprehensive income, net of tax |  |  |  | $ | 4,310 |  |  | $ | 8,920 |  |  | $ | 32,741 |  |  | $ | (34,112 | )
Amounts reclassified from accumulated other comprehensive loss, net of tax 1 |  | Interest expense |  | $ | (2,326 | ) |  | $ | (2,412 | ) |  | $ | (6,839 | ) |  | $ | (5,072 | )
Interest expense, net |  |  |  | $ | 8,641 |  |  | $ | 8,557 |  |  | $ | 20,414 |  |  | $ | 20,594 |

1 | Realized 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 Condensed Consolidated Statements of Cash Flows.

NO TE 7. FAIR VALUE MEASUREMENTS

The following table presents the estimated fair values of our financial instruments:

|  | September 30, 2021 |  |  | December 31, 2020 |
(in thousands) |  | Carrying Amount |  |  | Fair Value |  |  | Carrying Amount |  |  | Fair Value |
Derivative assets related to interest rate swaps (Level 2) |  | $ | 42,370 |  |  | $ | 42,370 |  |  | $ | 18,529 |  |  | $ | 18,529 |
Derivative liabilities related to interest rate swaps (Level 2) |  | $ | (28,122 | ) |  | $ | (28,122 | ) |  | $ | (46,110 | ) |  | $ | (46,110 | )
Long-term debt, including current portion (Level 2): |  |  |  |  |  |  |  |  |  |  |  |
Term loans |  | $ | (690,957 | ) |  | $ | (709,351 | ) |  | $ | (690,469 | ) |  | $ | (716,631 | )
Revenue bonds |  |  | (65,735 | ) |  |  | (69,508 | ) |  |  | (65,735 | ) |  |  | (67,885 | )
Medium-term notes |  |  | (3,000 | ) |  |  | (3,050 | ) |  |  | (3,000 | ) |  |  | (3,545 | )
Total long-term debt 1 |  | $ | (759,692 | ) |  | $ | (781,909 | ) |  | $ | (759,204 | ) |  | $ | (788,061 | )
Company owned life insurance asset (COLI) (Level 3) |  | $ | 3,857 |  |  | $ | 3,857 |  |  | $ | 3,328 |  |  | $ | 3,328 |

1 | The carrying amount of long-term debt includes principal and unamortized discounts.

The fair value of interest rate swaps are determined using a discounted cash flow analysis 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 values that approximate their fair values with only insignificant differences. This is primarily due to the short-term nature of these instruments.

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NO TE 8. EQUITY-BASED COMPENSATION

At September 30, 2021, approximately 1.0 million shares are available for future use under our long-term incentive plans.

Share-based compensation activity during the nine months ended September 30, 2021 included the following:

(Shares in thousands) |  | Granted |  |  | Vested |  |  | Forfeited |
Performance Share Awards (PSAs) |  |  | 88,128 |  |  |  | — |  |  |  | 1,450 |
Restricted Stock Units (RSUs) |  |  | 65,607 |  |  |  | 24,599 |  |  |  | 1,484 |

Approximately 0.1 million shares of common stock were issued to employees during the nine months ended September 30, 2021 as a result of PSA and RSU vesting during 2020 and 2021.

Issuance of RSUs awarded to certain directors, officers and employees may be deferred at the individual's election. All deferred RSUs are credited with dividend equivalents. During the nine months ended September 30, 2021, approximately 0.1 million shares of common stock were issued for employees and directors where issuance had been deferred.

The following table details equity-based compensation expense and the related income tax benefit:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Equity-based compensation expense: |  |  |  |  |  |  |  |  |  |  |  |
Performance share awards |  | $ | 1,416 |  |  | $ | 1,315 |  |  | $ | 4,012 |  |  | $ | 3,716 |
Restricted stock units |  |  | 805 |  |  |  | 729 |  |  |  | 2,197 |  |  |  | 2,155 |
Deferred compensation stock equivalent units expense |  |  | 54 |  |  |  | 19 |  |  |  | 136 |  |  |  | 57 |
Total equity-based compensation expense |  | $ | 2,275 |  |  | $ | 2,063 |  |  | $ | 6,345 |  |  | $ | 5,928 |
Total tax benefit recognized for equity-based expense |  | $ | 125 |  |  | $ | 97 |  |  | $ | 321 |  |  | $ | 273 |

Performance Share Awards

The weighted average grant date fair value of PSAs granted in 2021 was $69.72 per share. PSAs granted under the stock incentive plans have a three-year performance period and shares are issued at the end of the period if the performance measures are met. The number of shares actually issued, as a percentage of the amount subject to the PSA, could range from 0% to 200%. PSAs granted under the stock incentive plans do not have voting rights unless and until shares are issued upon settlement. If shares are issued at the end of the performance measurement period, the recipients will receive dividend equivalents in the form of additional shares 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.

The following table presents the key inputs used in the Monte Carlo simulation to calculate the fair value of the performance share awards granted in 2021:

Stock price as of valuation date |  | $ | 53.53 |
Risk-free rate |  |  | 0.18 | %
Expected volatility |  |  | 45.56 | %
Expected dividend yield 1 |  |  | — |
Expected term (years) |  |  | 3.00 |

1 | Full dividend reinvestment assumed.

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Restricted Stock Units

The weighted average fair value of all RSUs granted during the nine months ended September 30, 2021 was $54.53 per share. The fair value of RSUs granted equaled our common share price on the date of grant factoring in any required post-vesting holding periods. The RSU awards granted accrue dividend equivalents based on dividends paid during the RSU vesting period. The dividend equivalents will be converted into additional RSUs that vest in the same manner as the underlying RSU to which they relate. The terms of the awards state that the RSUs will vest in a given time period of one to four years. The vesting provisions for RSUs granted in 2021 were consistent with prior year grants.

NO TE 9. INCOME TAXES

As a REIT, we generally are not subject to federal and state corporate income taxes on income from investments in real estate, including our timberlands, that we distribute to our shareholders. We conduct certain activities through our PotlatchDeltic taxable REIT subsidiaries (TRS) which are subject to corporate level federal and state income taxes. These activities are principally comprised of our wood products manufacturing operations and certain real estate investments. Therefore, income tax expense or benefit is primarily due to pre-tax book income or loss of the TRS, as well as permanent book versus tax differences.

NO TE 10. LEASES

We lease certain equipment, office space and land. Lease assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

The following table presents supplemental balance sheet information related to lease assets and liabilities:

(in thousands) | Classification |  | September 30, 2021 |  |  | December 31, 2020 |
Assets |  |  |  |  |  |  |
Operating lease assets | Other long-term assets |  | $ | 7,790 |  |  | $ | 11,081 |
Finance lease assets 1 | Property, plant and equipment, net |  |  | 9,166 |  |  |  | 7,206 |
Total lease assets |  |  | $ | 16,956 |  |  | $ | 18,287 |
Liabilities |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |
Operating lease liabilities | Accounts payable and accrued liabilities |  | $ | 2,988 |  |  | $ | 4,304 |
Finance lease liabilities | Accounts payable and accrued liabilitie s |  |  | 3,004 |  |  |  | 2,202 |
Noncurrent: |  |  |  |  |  |  |
Operating lease liabilities | Other long-term obligations |  |  | 4,873 |  |  |  | 6,835 |
Finance lease liabilities | Other long-term obligations |  |  | 6,066 |  |  |  | 4,914 |
Total lease liabilities |  |  | $ | 16,931 |  |  | $ | 18,255 |

1 | Finance lease assets are presented net of accumulated amortization of $3.7 million and $1.7 million as of September 30, 2021 and December 31, 2020, respectively.

The following table presents the components of lease expense:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Operating lease costs 1 |  | $ | 1,156 |  |  | $ | 1,413 |  |  | $ | 3,769 |  |  | $ | 4,252 |
Finance lease costs: |  |  |  |  |  |  |  |  |  |  |  |
Amortization of leased assets |  |  | 741 |  |  |  | 432 |  |  |  | 1,963 |  |  |  | 905 |
Interest on lease liabilities |  |  | 60 |  |  |  | 44 |  |  |  | 162 |  |  |  | 103 |
Net lease costs |  | $ | 1,957 |  |  | $ | 1,889 |  |  | $ | 5,894 |  |  | $ | 5,260 |

1 | Excludes short-term leases and variable lease costs, which are immaterial.

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The following table presents supplemental cash flow information related to leases:

|  |  | Nine Months Ended September 30, |
(in thousands) |  |  | 2021 |  |  | 2020 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash flows for operating leases |  | $ | 3,723 |  |  | $ | 4,244 |
Operating cash flows for finance leases |  | $ | 162 |  |  | $ | 103 |
Financing cash flows for finance leases |  | $ | 1,963 |  |  | $ | 968 |
Leased assets exchanged for new lease liabilities: |  |  |  |  |  |
Operating leases |  | $ | 213 |  |  | $ | 255 |
Finance leases |  | $ | 3,916 |  |  | $ | 5,630 |

NO TE 11. PENSION AND OTHER POSTRETIREMENT EMPLOYEE BENEFITS

The following table details the components of net periodic cost (benefit) of our pension plans and other postretirement employee benefits (OPEB):

|  | Three Months Ended September 30, |
|  | Pension |  |  | OPEB |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Service cost |  | $ | 2,045 |  |  | $ | 2,233 |  |  | $ | 168 |  |  | $ | 127 |
Interest cost |  |  | 2,633 |  |  |  | 3,066 |  |  |  | 317 |  |  |  | 376 |
Expected return on plan assets |  |  | (3,525 | ) |  |  | (3,869 | ) |  |  | — |  |  |  | — |
Amortization of prior service cost (credit) |  |  | 21 |  |  |  | 29 |  |  |  | (298 | ) |  |  | (319 | )
Amortization of actuarial loss |  |  | 3,578 |  |  |  | 3,856 |  |  |  | 545 |  |  |  | 418 |
Total net periodic cost |  | $ | 4,752 |  |  | $ | 5,315 |  |  | $ | 732 |  |  | $ | 602 |
|  | Nine Months Ended September 30, |
|  | Pension |  |  | OPEB |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Service cost |  | $ | 6,135 |  |  | $ | 6,699 |  |  | $ | 504 |  |  | $ | 381 |
Interest cost |  |  | 7,899 |  |  |  | 9,198 |  |  |  | 951 |  |  |  | 1,127 |
Expected return on plan assets |  |  | (10,575 | ) |  |  | (11,606 | ) |  |  | — |  |  |  | — |
Amortization of prior service cost (credit) |  |  | 63 |  |  |  | 85 |  |  |  | (894 | ) |  |  | (957 | )
Amortization of actuarial loss |  |  | 10,877 |  |  |  | 11,569 |  |  |  | 1,635 |  |  |  | 1,254 |
Net periodic cost before pension settlement charge |  |  | 14,399 |  |  |  | 15,945 |  |  |  | 2,196 |  |  |  | 1,805 |
Pension settlement charge |  |  | — |  |  |  | 42,988 |  |  |  | — |  |  |  | — |
Net periodic cost |  | $ | 14,399 |  |  | $ | 58,933 |  |  | $ | 2,196 |  |  | $ | 1,805 |

During the nine months ended September 30, 2021 and 2020, funding of pension and other postretirement employee benefit plans was $7.4 million and $8.5 million, respectively.

Pension Annuitization

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. The settlement triggered a remeasurement of plan assets and liabilities resulting in a reduction in the funded status of our qualified pension plans of approximately $26.2 million during the first quarter of 2020. In connection with this transaction, we recorded a non-cash pretax settlement charge of $43.0 million during the first quarter of 2020 in non-operating expense, net, as a result of accelerating the recognition of actuarial losses included in accumulated other comprehensive loss that would have been recognized in future periods.

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NO TE 12. COMPONENTS OF ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table details changes in amounts included in our accumulated other comprehensive loss (AOCL) by component on our Condensed Consolidated Balance Sheets, net of tax:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Pension Plans |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 73,592 |  |  | $ | 98,870 |  |  | $ | 79,025 |  |  | $ | 117,028 |
Amounts arising during the period |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 19,402 |
Effect of pension settlement |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (31,811 | )
Amounts reclassified from AOCL to earnings |  |  | (2,664 | ) |  |  | (2,874 | ) |  |  | (8,097 | ) |  |  | (8,623 | )
Balance at end of period |  | $ | 70,928 |  |  | $ | 95,996 |  |  | $ | 70,928 |  |  | $ | 95,996 |
Other Postretirement Benefit Plans |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | 14,418 |  |  | $ | 10,184 |  |  | $ | 14,783 |  |  | $ | 10,331 |
Amounts reclassified from AOCL to earnings |  |  | (182 | ) |  |  | (74 | ) |  |  | (547 | ) |  |  | (221 | )
Balance at end of period |  | $ | 14,236 |  |  | $ | 10,110 |  |  | $ | 14,236 |  |  | $ | 10,110 |
Cash Flow Hedges |  |  |  |  |  |  |  |  |  |  |  |
Balance at beginning of period |  | $ | (5,763 | ) |  | $ | 60,372 |  |  | $ | 27,181 |  |  | $ | 20,000 |
Amounts arising during the period |  |  | (4,310 | ) |  |  | (8,920 | ) |  |  | (32,741 | ) |  |  | 34,112 |
Amounts reclassified from AOCL to earnings |  |  | (2,326 | ) |  |  | (2,412 | ) |  |  | (6,839 | ) |  |  | (5,072 | )
Balance at end of period |  | $ | (12,399 | ) |  | $ | 49,040 |  |  | $ | (12,399 | ) |  | $ | 49,040 |
Accumulated other comprehensive loss, end of period |  | $ | 72,765 |  |  | $ | 155,146 |  |  | $ | 72,765 |  |  | $ | 155,146 |

See Note 11: Pension and Other Postretirement Employee Benefits and Note 6: Derivative Instruments for additional information.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information

This report contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including without limitation, expected effectiveness of our hedging instruments and swaps; amount of net losses on cash flow hedges expected to be reclassified into earnings in the next 12 months; expected tax payments; anticipated share repurchases and dividend payments; expected interest rates; potential uses of our credit facility; expected debt refinancing; expectations regarding the U.S. housing market, the lumber and log markets, lumber shipment volumes and pricing; impact from the Ola, Arkansas sawmill fire and anticipated insurance coverage; timber harvest volumes and pricing; rural real estate and residential and commercial real estate development sales; expected 2021 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 reflect our current views regarding future events based on estimates and assumptions and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. 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;
•
availability of labor and developable land;
•
changes in the level of residential and commercial construction and remodeling activity;
•
changes in tariffs, quotas and trade agreements involving wood products;
•
changes in demand for our products and real estate;
•
changes in timber prices and timberland values;
•
changes in silviculture, production and production capacity in the forest products industry;
•
competitive pricing pressures for our products;
•
unanticipated manufacturing disruptions;
•
the effect of weather on our harvesting and manufacturing activities;
•
the risk of loss from fire (such as the Ola, Arkansas sawmill fire and fires on our timberland), floods, windstorms, hurricanes, pest infestation or other natural disasters;
•
changes in the cost or availability of transportation;
•
changes in principle expenses;
•
unforeseen environmental liabilities or expenditures;
•
changes in general and industry-specific environmental laws and regulations, and interpretations thereof by regulatory agencies;
•
impact of the coronavirus (COVID-19 and its variants) outbreaks, governmental responses to such outbreaks, and anticipated recovery from the pandemic on our business, suppliers, consumers, customers and employees; and
•
disruptions or inefficiencies in our supply chain and/or operations.

For a discussion of some of the factors that may affect our business, results and prospects and a nonexclusive listing of forward-looking statements, refer to Cautionary Statement Regarding Forward-Looking Information on page 1 and Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020. Investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.

Forward-looking statements contained in this report present our views only as of the date of this report. Except as required under applicable law, we do not intend to issue updates concerning any future revisions of our views to reflect events or circumstances occurring after the date of this report.

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Our Company

We are a leading timberland REIT with ownership of 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. Our Timberlands segment supplies our Wood Products segment with a portion of its wood fiber needs. These intersegment revenues are based on prevailing market prices and typically represent a sizeable 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, 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.

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, disruptions or inefficiencies in our supply chain including the availability of transportation, the efficiency and level of capacity utilization of our Wood Products manufacturing operations, changes in our principal expenses such as log costs, 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 present 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 Performance Measures 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 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 Condensed Consolidated Financial Statements for information related to the use of segment Adjusted EBITDDA.

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Business and Economic Trends Affecting Our Operations

The demand for timber is directly affected by the underlying demand for lumber and other wood-products, as well as by the demand for pulp, paper and packaging. Our Timberlands and Wood Products segments are impacted by demand for new homes in the United States and by repair and remodeling activity.

In October 2021, the U.S. Census Bureau reported U.S. housing starts for September 2021 were 1.56 million units on a seasonally adjusted basis, an increase of 7.4% from September of 2020 and near the 2021 average. We believe supply chain challenges continue to moderate the pace of starts and have resulted in variable month-to-month housing start statistics. Homebuilder confidence remains very strong with the NAHB Homebuilder Index at 80 in October 2021. Housing fundamentals remain strong driven by low interest rates, a shortage of homes, large millennial demographic entering their prime home-buying years, remote work evolution and an aging existing housing stock supporting repair and remodel demand. Overall, the fundamentals that drive our business remain favorable and we continue to expect that lumber prices will remain structurally higher than long-term historical averages.

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 265 million board feet of lumber during the third quarter of 2021. Lumber shipments in the third quarter were impacted by lower home center takeaway, the Ola sawmill fire, and COVID-19 related absences hampering startup at one of our sawmills following a capital project installation. We expect to ship approximately 240 to 250 million board feet of lumber during the fourth quarter of 2021.

In our Timberlands segment, Northern sawlog prices benefitted from Idaho sawlogs being indexed to lumber prices and continued strong cedar sawlog prices. Southern sawlog prices increased as wet weather led to log supply constraints. Our harvest volume of 1.5 million tons during the third quarter of 2021 was lower than the third quarter of 2020 primarily due to the closure of the Ola sawmill along with wet weather in the Southern region. In the Northern region we shifted harvest activity to the first half of 2021 due to market demand and favorable conditions. We expect total harvest volumes to be between 1.3 to 1.5 million tons during the fourth quarter of 2021.

Our Real Estate segment results for the first nine months of 2021 were driven by strong development sales demand and an increased per acre price realization from rural land sales. We expect to sell approximately 4,500 acres of rural land and approximately 35 residential development lots during the fourth quarter of 2021.

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Consolidated Results

The following table sets forth changes in our Condensed Consolidated Statements of Operations. Our Business Segment Results provide a more detailed discussion of our segments:

| Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Revenues | $ | 287,330 |  |  | $ | 313,046 |  |  | $ | (25,716 | ) |  | $ | 1,089,029 |  |  | $ | 703,481 |  |  | $ | 385,548 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold |  | 190,602 |  |  |  | 182,039 |  |  |  | 8,563 |  |  |  | 537,683 |  |  |  | 503,921 |  |  |  | 33,762 |
Selling, general and administrative expenses |  | 18,512 |  |  |  | 21,046 |  |  |  | (2,534 | ) |  |  | 54,782 |  |  |  | 52,064 |  |  |  | 2,718 |
Net gain on insurance recoveries |  | (4,394 | ) |  |  | — |  |  |  | (4,394 | ) |  |  | (4,394 | ) |  |  | — |  |  |  | (4,394 | )
|  | 204,720 |  |  |  | 203,085 |  |  |  | 1,635 |  |  |  | 588,071 |  |  |  | 555,985 |  |  |  | 32,086 |
Operating income |  | 82,610 |  |  |  | 109,961 |  |  |  | (27,351 | ) |  |  | 500,958 |  |  |  | 147,496 |  |  |  | 353,462 |
Interest expense, net |  | (8,641 | ) |  |  | (8,557 | ) |  |  | (84 | ) |  |  | (20,414 | ) |  |  | (20,594 | ) |  |  | 180 |
Pension settlement charge |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (42,988 | ) |  |  | 42,988 |
Non-operating pension and other postretirement benefit costs |  | (3,271 | ) |  |  | (3,557 | ) |  |  | 286 |  |  |  | (9,956 | ) |  |  | (10,670 | ) |  |  | 714 |
Income before income taxes |  | 70,698 |  |  |  | 97,847 |  |  |  | (27,149 | ) |  |  | 470,588 |  |  |  | 73,244 |  |  |  | 397,344 |
Income taxes |  | (5,031 | ) |  |  | (16,840 | ) |  |  | 11,809 |  |  |  | (85,910 | ) |  |  | (6,431 | ) |  |  | (79,479 | )
Net income | $ | 65,667 |  |  | $ | 81,007 |  |  | $ | (15,340 | ) |  | $ | 384,678 |  |  | $ | 66,813 |  |  | $ | 317,865 |
Total Adjusted EBITDDA 1 | $ | 107,183 |  |  | $ | 135,386 |  |  | $ | (28,203 | ) |  | $ | 577,153 |  |  | $ | 218,330 |  |  | $ | 358,823 |

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 periods presented.

Third Quarter 2021 Compared with Third Quarter 2020

Revenues

Revenues were $287.3 million, a decrease of $25.7 million compared with the third quarter of 2020 primarily due to lower harvest volumes and lower lumber shipments and prices. Lumber shipments were impacted primarily as a result of lower home center takeaway in the third quarter of 2021 and the loss of production at our Ola, Arkansas sawmill following a fire in June 2021. These decreases were partially offset by higher sawlog prices.

Cost of goods sold

Cost of goods sold increased $8.6 million compared with the third quarter of 2020 primarily due to higher log and manufacturing costs on lower lumber shipments in our Wood Products segment, partially offset by lower harvest volumes.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $2.5 million compared with the third quarter of 2020 primarily as a result of a year-to-date adjustment to incentive compensation in the third quarter of 2020 to reflect strong 2020 company performance.

Net gain on insurance recoveries

In June 2021, a fire occurred at our Ola, Arkansas sawmill. During the third quarter of 2021, we recorded an $8.5 million charge for the write-off of damaged and obsolete equipment and disposal costs. Additionally, we recognized insurance recoveries of $12.9 million for these property losses and costs, resulting in a $4.4 million net gain on insurance recoveries.

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Income taxes

Income taxes are primarily due to income from our PotlatchDeltic taxable REIT subsidiaries (TRS). For the third quarter of 2021, we recorded income tax expense of $5.0 million on TRS income before tax of $18.2 million. For the third quarter of 2020, we recorded an income tax expense of approximately $16.8 million on TRS income before tax of $65.2 million.

Total Adjusted EBITDDA

Total Adjusted EBITDDA for the third quarter of 2021 decreased $28.2 million compared to the third quarter of 2020. The decrease in Total Adjusted EBITDDA was primarily driven by lower harvest volumes and lumber shipments and prices, partially offset by higher sawlog prices. 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.

Year to Date 2021 Compared with Year to Date 2020

Revenues

Revenues were $1.1 billion, an increase of $385.5 million compared with the first nine months of 2020, primarily due to historically high lumber and Idaho sawlog prices in 2021. These increases were partially offset by lower lumber shipments as a result of lower home center takeaway in the third quarter of 2021 and the loss of production at our Ola, Arkansas sawmill following a fire in June 2021. Additionally, the first nine months of 2020 includes the impact of the temporary curtailment and reduced operating posture at our industrial plywood facility.

Cost of goods sold

Cost of goods sold increased $33.8 million compared with the first nine months of 2020, primarily due to higher log and manufacturing costs on lower lumber shipments in our Wood Products segment. Additionally, the first nine months of 2020 includes the impact of the temporary curtailment and reduced operating posture at our industrial plywood facility.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $2.7 million compared with the first nine months of 2020, primarily as a result of increased employee related costs, including travel and information technology services.

Net gain on insurance recoveries

In June 2021, a fire occurred at our Ola, Arkansas sawmill. For the first nine months of 2021, we recorded a $10.6 million charge for the write-off of damaged and obsolete equipment and disposal costs. Additionally, we recognized insurance recoveries of $15.0 million for these property losses and costs, resulting in a $4.4 million net gain on insurance recoveries.

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.

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Income taxes

Income taxes are primarily due to income from our TRS. For the nine months ended September 30, 2021, we recorded income tax expense of $85.9 million on TRS income before tax of $329.4 million primarily due to historically high lumber prices. For the nine months ended September 30, 2020, we recorded income tax expense of $6.4 million on TRS income before tax of $23.9 million, which included the $43.0 million pension settlement charge.

Total Adjusted EBITDDA

Total Adjusted EBITDDA for the first nine months of 2021 increased $358.8 million compared to the first nine months of 2020. The increase in Total Adjusted EBITDDA was primarily due to historically high lumber and Idaho sawlog prices. 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

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Revenues 1 |  | $ | 129,543 |  |  | $ | 116,985 |  |  | $ | 12,558 |  |  | $ | 362,675 |  |  | $ | 266,755 |  |  | $ | 95,920 |
Costs and expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Logging and hauling |  |  | 42,397 |  |  |  | 47,158 |  |  |  | (4,761 | ) |  |  | 112,168 |  |  |  | 117,417 |  |  |  | (5,249 | )
Other |  |  | 9,108 |  |  |  | 8,539 |  |  |  | 569 |  |  |  | 23,792 |  |  |  | 24,107 |  |  |  | (315 | )
Selling, general and administrative expenses |  |  | 2,015 |  |  |  | 1,639 |  |  |  | 376 |  |  |  | 5,575 |  |  |  | 4,941 |  |  |  | 634 |
Timberlands Adjusted EBITDDA 2 |  | $ | 76,023 |  |  | $ | 59,649 |  |  | $ | 16,374 |  |  | $ | 221,140 |  |  | $ | 120,290 |  |  | $ | 100,850 |

1 | Prior to elimination of intersegment fiber revenues of $43.5 million and $40.4 million for the three months ended September 30, 2021 and 2020, and $138.2 million and $95.0 million for the nine months ended September 30, 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 Condensed Consolidated Financial Statements.

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Timberlands Segment Statistics

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
Harvest Volumes (in tons) |  | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Northern region |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sawlog |  |  | 462,492 |  |  |  | 554,845 |  |  |  | (92,353 | ) |  |  | 1,243,539 |  |  |  | 1,291,632 |  |  |  | (48,093 | )
Pulpwood |  |  | 4,039 |  |  |  | 29,910 |  |  |  | (25,871 | ) |  |  | 24,736 |  |  |  | 99,174 |  |  |  | (74,438 | )
Stumpage |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 23,178 |  |  |  | (23,178 | )
Total |  |  | 466,531 |  |  |  | 584,755 |  |  |  | (118,224 | ) |  |  | 1,268,275 |  |  |  | 1,413,984 |  |  |  | (145,709 | )
Southern region |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sawlog |  |  | 460,840 |  |  |  | 577,975 |  |  |  | (117,135 | ) |  |  | 1,449,106 |  |  |  | 1,617,196 |  |  |  | (168,090 | )
Pulpwood |  |  | 467,138 |  |  |  | 462,571 |  |  |  | 4,567 |  |  |  | 1,145,572 |  |  |  | 1,201,904 |  |  |  | (56,332 | )
Stumpage |  |  | 109,469 |  |  |  | 65,085 |  |  |  | 44,384 |  |  |  | 211,234 |  |  |  | 255,553 |  |  |  | (44,319 | )
Total |  |  | 1,037,447 |  |  |  | 1,105,631 |  |  |  | (68,184 | ) |  |  | 2,805,912 |  |  |  | 3,074,653 |  |  |  | (268,741 | )
Total harvest volume |  |  | 1,503,978 |  |  |  | 1,690,386 |  |  |  | (186,408 | ) |  |  | 4,074,187 |  |  |  | 4,488,637 |  |  |  | (414,450 | )
Sales Price/Unit ($ per ton)1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Northern region |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sawlog |  | $ | 191 |  |  | $ | 131 |  |  | $ | 60 |  |  | $ | 202 |  |  | $ | 112 |  |  | $ | 90 |
Pulpwood |  | $ | 30 |  |  | $ | 42 |  |  | $ | (12 | ) |  | $ | 33 |  |  | $ | 39 |  |  | $ | (6 | )
Stumpage |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 14 |  |  | $ | (14 | )
Southern region |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Sawlog |  | $ | 48 |  |  | $ | 44 |  |  | $ | 4 |  |  | $ | 45 |  |  | $ | 44 |  |  | $ | 1 |
Pulpwood |  | $ | 30 |  |  | $ | 29 |  |  | $ | 1 |  |  | $ | 29 |  |  | $ | 30 |  |  | $ | (1 | )
Stumpage |  | $ | 21 |  |  | $ | 12 |  |  | $ | 9 |  |  | $ | 16 |  |  | $ | 9 |  |  | $ | 7 |

1 | Sawlog and pulpwood sales prices are on a delivered basis, which includes logging and hauling costs. Stumpage sales provide our customers the right to harvest standing timber. As such, the customer contracts the logging and hauling and bears such costs.

Timberlands Adjusted EBITDDA

The following table summarizes Timberlands Adjusted EBITDDA variances for the three and nine months ended September 30, 2021, compared with the three and nine months ended September 30, 2020:

(in thousands) |  | Three Months |  |  | Nine Months |
Timberlands 2020 Adjusted EBITDDA |  | $ | 59,649 |  |  | $ | 120,290 |
Sales price and mix |  |  | 28,281 |  |  |  | 118,178 |
Harvest volume |  |  | (8,615 | ) |  |  | (11,990 | )
Other revenue |  |  | (411 | ) |  |  | (592 | )
Logging and hauling costs per unit |  |  | (1,936 | ) |  |  | (4,427 | )
Forest management |  |  | (644 | ) |  |  | (580 | )
Administrative, indirect and overhead costs |  |  | (301 | ) |  |  | 261 |
Timberlands 2021 Adjusted EBITDDA |  | $ | 76,023 |  |  | $ | 221,140 |

Third Quarter 2021 Compared with Third Quarter 2020

Timberlands Adjusted EBITDDA for the third quarter of 2021 increased $16.4 million compared with the same period in 2020, primarily as a result of the following:


Sales Price and Mix: Sawlog prices in the Northern region increased 45.8%, to $191 per ton, primarily from the effect of higher realizations on indexed sawlogs and an increase in cedar log prices. Southern sawlog prices increased 9.1% to $48 per ton, compared to the third quarter of 2020, as wet weather led to log supply constraints.

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
Harvest Volume: We harvested 1.0 million tons in the Southern region during the third quarter of 2021, which was 6.2% lower than the third quarter of 2020, primarily due to wet weather impacting harvest conditions and harvest deferrals as a result of the fire at the Ola, Arkansas sawmill. Harvest volumes in the Northern region decreased 20.2% compared to the third quarter of 2020 primarily as favorable harvest conditions and strong sawlog demand in Idaho accelerated harvest activities to the first half of 2021. Additionally, extreme heat led to lighter logs in Idaho on a tonnage basis and pulpwood volumes were reduced in 2021.

Logging and Hauling Cost per Unit: Log and hauling costs per unit were higher primarily due to increased diesel costs and longer haul distances.

Year to Date 2021 Compared with Year to Date 2020

Timberlands Adjusted EBITDDA for the first nine months of 2021 increased $100.9 million compared with the same period in 2020, primarily as a result of the following:


Sales Price and Mix: Sawlog prices in the Northern region increased 80.4%, to $202 per ton primarily from the effect of higher price realizations on indexed sawlogs and an increase in cedar log prices. Southern sawlog prices remained consistent with the first nine months of 2020.

Harvest Volume: We harvested 2.8 million tons in the Southern region during the first nine months of 2021, which was 8.7% lower than the first nine months of 2020, primarily due to adverse weather conditions impacting logging activities and harvest deferrals as a result of the fire at the Ola, Arkansas sawmill. Sawlog harvest volumes in the Northern region decreased as extreme heat led to lighter logs on a tonnage basis along with a planned reduction in pulpwood volumes in 2021.

Logging and Hauling Cost per Unit: Log and hauling costs were higher primarily due to increased diesel costs and a higher mix of more expensive Idaho logging.

Wood Products Segment

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Revenues |  | $ | 187,760 |  |  | $ | 218,291 |  |  | $ | (30,531 | ) |  | $ | 814,729 |  |  | $ | 489,507 |  |  | $ | 325,222 |
Costs and expenses 1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Fiber costs |  |  | 75,629 |  |  |  | 72,239 |  |  |  | 3,390 |  |  |  | 242,719 |  |  |  | 196,201 |  |  |  | 46,518 |
Freight, logging and hauling |  |  | 17,760 |  |  |  | 17,677 |  |  |  | 83 |  |  |  | 56,223 |  |  |  | 48,601 |  |  |  | 7,622 |
Manufacturing costs |  |  | 52,976 |  |  |  | 45,893 |  |  |  | 7,083 |  |  |  | 152,195 |  |  |  | 132,848 |  |  |  | 19,347 |
Finished goods inventory change |  |  | 12,681 |  |  |  | (1,595 | ) |  |  | 14,276 |  |  |  | 90 |  |  |  | (1,602 | ) |  |  | 1,692 |
Selling, general and administrative expenses |  |  | 3,288 |  |  |  | 2,433 |  |  |  | 855 |  |  |  | 8,758 |  |  |  | 7,483 |  |  |  | 1,275 |
Other |  |  | (1,140 | ) |  |  | — |  |  |  | (1,140 | ) |  |  | (1,910 | ) |  |  | 196 |  |  |  | (2,106 | )
Wood Products Adjusted EBITDDA 2 |  | $ | 26,566 |  |  | $ | 81,644 |  |  | $ | (55,078 | ) |  | $ | 356,654 |  |  | $ | 105,780 |  |  | $ | 250,874 |

1 | Prior to elimination of intersegment fiber costs of $43.5 million and $40.4 million for the three months ended September 30, 2021 and 2020, and $138.2 million and $95.0 million for the nine months ended September 30, 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 Condensed Consolidated Financial Statements.

Wood Products Segment Statistics

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Lumber shipments (MBF)1 |  |  | 264,855 |  |  |  | 291,391 |  |  |  | (26,536 | ) |  |  | 783,235 |  |  |  | 823,597 |  |  |  | (40,362 | )
Lumber sales prices ($ per MBF) |  | $ | 533 |  |  | $ | 637 |  |  | $ | (104 | ) |  | $ | 867 |  |  | $ | 486 |  |  | $ | 381 |

1 | MBF stands for thousand board feet.

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Wood Products Adjusted EBITDDA

The following table summarizes Wood Products Adjusted EBITDDA variances for the three and nine months ended September 30, 2021, compared with the three and nine months ended September 30, 2020:

(in thousands) |  | Three Months |  |  | Nine Months |
Wood Products 2020 Adjusted EBITDDA |  | $ | 81,644 |  |  | $ | 105,780 |
Lumber: |  |  |  |  |  |
Price |  |  | (30,697 | ) |  |  | 292,697 |
Volume |  |  | (5,259 | ) |  |  | (3,818 | )
Manufacturing costs per unit |  |  | (6,522 | ) |  |  | (13,743 | )
Log costs per unit |  |  | (16,378 | ) |  |  | (39,856 | )
Inventory charge |  |  | (6,437 | ) |  |  | (6,437 | )
Residuals, panels and other |  |  | 10,215 |  |  |  | 22,031 |
Wood Products 2021 Adjusted EBITDDA |  | $ | 26,566 |  |  | $ | 356,654 |

Third Quarter 2021 Compared with Third Quarter 2020

Wood Products Adjusted EBITDDA for the third quarter of 2021 decreased $55.1 million compared with the same period in 2020, primarily as a result of the following:


Lumber Price: Average lumber sales prices decreased to $533 per MBF during the third quarter of 2021 compared to $637 during the third quarter of 2020. The third quarter of 2020 was early in the lumber price run that ultimately peaked in May 2021, and lumber prices declined significantly beginning in the second quarter of 2021.

Lumber Volume: Lumber shipments decreased 26.5 million board feet during the third quarter of 2021 compared to the third quarter of 2020 as a result of lower home center takeaway and lost production and shipments at our Ola, Arkansas sawmill following the fire in June 2021.

Manufacturing Cost Per Unit: Higher manufacturing costs per unit quarter over quarter was primarily a result of lost production at our Ola, Arkansas sawmill and COVID-19 related absences hampering startup at one of our sawmills following a capital project installation.

Log Costs Per Unit: Log costs per unit were higher primarily as a result of increased indexed log costs at our Idaho sawmill.

Inventory Charge: Inventory at the end of the third quarter of 2021 was written down $6.4 million due to high indexed Idaho log costs.

Residual Sales, Panels and Other: T he third quarter of 2021 benefitted from increased plywood price realization due to strong demand from industrial manufacturers, which more than offset lower residual sales.

Year to Date 2021 Compared with Year to Date 2020

Wood Products Adjusted EBITDDA for the first nine months of 2021 increased $250.9 million compared with the same period in 2020, primarily as a result of the following:


Lumber Price: Average lumber sales prices increased during the first nine months of 2021 to $867 per MBF compared with $486 per MBF during the first nine months of 2020.

Manufacturing Cost 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.

Log Costs Per Unit: Log costs per unit were higher primarily as a result of increased indexed log costs at our Idaho sawmill.

Inventory Charge: Inventory at the end of the third quarter of 2021 was written down $6.4 million due to high indexed Idaho log costs.

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
Residual Sales, Panels and Other: T he first nine months of 2021 benefitted from increased plywood prices and shipments compared to the first nine months of 2020, which included a temporary production curtailment and reduced operating posture at our industrial plywood facility.

Real Estate Segment

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | Change |  |  | 2021 |  |  | 2020 |  |  | Change |
Revenues |  | $ | 13,497 |  |  | $ | 18,151 |  |  | $ | (4,654 | ) |  | $ | 49,808 |  |  | $ | 42,225 |  |  | $ | 7,583 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Costs of goods sold |  |  | 3,263 |  |  |  | 3,554 |  |  |  | (291 | ) |  |  | 8,612 |  |  |  | 8,595 |  |  |  | 17 |
Selling, general and administrative expenses |  |  | 1,165 |  |  |  | 1,131 |  |  |  | 34 |  |  |  | 3,746 |  |  |  | 3,568 |  |  |  | 178 |
Real Estate Adjusted EBITDDA 1 |  | $ | 9,069 |  |  | $ | 13,466 |  |  | $ | (4,397 | ) |  | $ | 37,450 |  |  | $ | 30,062 |  |  | $ | 7,388 |

1 | Management uses Adjusted EBITDDA to evaluate the performance of the segment. See Note 2: Segment Information in the Notes to Condensed Consolidated Financial Statements.

Real Estate Segment Statistics

Rural Real Estate |  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Acres sold |  |  | 2,303 |  |  |  | 11,048 |  |  |  | 11,991 |  |  |  | 21,024 |
Average price per acre |  | $ | 3,013 |  |  | $ | 1,202 |  |  | $ | 2,374 |  |  | $ | 1,449 |

Development Real Estate |  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Residential lots |  |  | 52 |  |  |  | 26 |  |  |  | 122 |  |  |  | 66 |
Average price per lot |  | $ | 81,923 |  |  | $ | 82,573 |  |  | $ | 90,301 |  |  | $ | 92,256 |
Commercial acres |  |  | — |  |  |  | — |  |  |  | 11 |  |  |  | — |
Average price per acre |  | $ | — |  |  | $ | — |  |  | $ | 277,425 |  |  | $ | — |

Real Estate Adjusted EBITDDA

The following table summarizes Real Estate Adjusted EBITDDA variances for the three and nine months ended September 30, 2021 compared with the three and nine months ended September 30, 2020:

(in thousands) |  | Three Months |  |  | Nine Months |
Real Estate 2020 Adjusted EBITDDA |  | $ | 13,466 |  |  | $ | 30,062 |
Rural sales |  |  | (6,345 | ) |  |  | (1,975 | )
Development sales |  |  | 1,691 |  |  |  | 9,557 |
Other, net |  |  | 257 |  |  |  | (194 | )
Real Estate 2021 Adjusted EBITDDA |  | $ | 9,069 |  |  | $ | 37,450 |

Third Quarter 2021 Compared with Third Quarter 2020

Real Estate Adjusted EBITDDA for the third quarter of 2021 was $9.1 million, a decrease of $4.4 million compared with the third quarter of 2020 as a result of the following:


Rural Sales: The decrease in rural real estate sales is primarily a result of fewer acres sold as compared to the third quarter of 2020, which included the sale of approximately 8,100 acres of non-strategic timberlands in Minnesota to a conservation entity. Rural real estate sales can vary quarter-to-quarter with the average price per acre fluctuating based on both the geographic area of the real estate and product mix.

Development Sales: During the third quarter of 2021, we sold 52 residential lots at an average lot price of $81,923 compared to 26 lots at an average lot price of $82,573 during the third quarter of 2020. The average price per lot or acre fluctuates based on a variety of factors including size and location of lots within the developments.

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Year to Date 2021 Compared with Year to Date 2020

Real Estate Adjusted EBITDDA for the first nine months of 2021 was $37.5 million, an increase of $7.4 million compared with the first nine months of 2020 as a result of the following:


Rural Sales: The decrease in rural real estate sales was because the first nine months of 2020 included an 8,100 acre conservation land sale in Minnesota and there were no similar size land sales during the first nine months of 2021.

Development Sales: During the first nine months of 2021, we sold 122 residential lots at an average lot price of $90,301 compared to 66 lots at an average lot price of $92,256 in the first nine months of 2020. In addition, we sold 11 acres of commercial land in Chenal Valley for $277,425 per acre in the first nine months of 2021 compared to no commercial acres sold in the first nine months of 2020.

Liquidity and Capital Resources

Changes in significant sources and uses of cash for the nine months ended September 30, 2021 and 2020 are presented by categories as follows:

|  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | Change |
Net cash provided by operating activities |  | $ | 453,242 |  |  | $ | 190,845 |  |  | $ | 262,397 |
Net cash used in investing activities |  | $ | (26,734 | ) |  | $ | (28,265 | ) |  | $ | 1,531 |
Net cash used in financing activities |  | $ | (86,081 | ) |  | $ | (96,830 | ) |  | $ | 10,749 |

Net Cash Flows from Operating Activities

Net cash provided by operating activities increased $262.4 million compared to the first nine months of 2020. Changes in cash provided by operating activities was impacted by the following:


Cash received from customers increased $420.3 million primarily due to historically high average lumber and Idaho sawlog prices during the first nine months of 2021. These increases were partially offset by the reduced shipments at our Ola, Arkansas sawmill following the fire in June 2021. In addition, the first nine months of 2020 was impacted by the temporary curtailment of our industrial plywood mill during the second quarter of 2020.

Cash payments increased $72.3 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, the first nine months of 2020 experienced reduced vendor payments stemming from the curtailment of our industrial plywood mill during the second quarter of 2020.

Net tax payments increased $87.0 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 $38.5 million on capital expenditures for property, plant and equipment, timberlands reforestation and road construction projects during the first nine months of 2021 compared to $27.0 million during the first nine of 2020.

During the first nine months of 2021 we spent $2.5 million on timberland acquisitions compared to $4.7 million during the first nine months of 2020.

During the third quarter of 2021, we received initial insurance proceeds of $13.3 million for property losses as a result of the fire at our Ola, Arkansas sawmill.

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Net Cash Flows from Financing Activities

Changes in cash flows from financing activities were primarily a result of the following:


We paid dividends of $82.5 million in the first nine months of 2021 compared to $80.4 million in the first nine months of 2020.

We did not repurchase any of our common stock during the first nine months of 2021 compared to 489,850 shares repurchased totaling $15.4 million during the first nine months of 2020.

Future Sources and Uses of Cash

We invest cash in maintenance and discretionary capital expenditures at our Wood Products facilities. We also invest cash in the reforestation of timberlands and construction of roads in our Timberlands operations and to develop land in our Real Estate development operations. We evaluate discretionary capital improvements based on an expected level of return on investment. We currently expect to spend a total of approximately $70.0 million for capital projects during 2021.

Our 2021 planned capital spend includes approximately $7.0 million of capital expenditures for the reconstruction of our fire damaged Ola sawmill, which is largely covered by insurance. A determination regarding downtime and costs to repair the Ola sawmill will be made 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.

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, has generated large cash balances in both our REIT and TRS. As a result, we expect to pay a special dividend of $3 to $5 per share, or approximately $200.0 million to $335.0 million in aggregate, to stockholders in December 2021. In addition, our board will evaluate our regular annual dividend, which is currently $1.64 per share, in the fourth quarter of 2021.

On August 30, 2018, the board of directors authorized the repurchase of up to $100.0 million of common stock with no time limit set for the repurchase (the Repurchase Program). At September 30, 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, and subject to, the terms of 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.

Capital Structure

(in thousands) |  | September 30, 2021 |  |  | December 31, 2020 |
Long-term debt (including current portion) |  | $ | 758,118 |  |  | $ | 757,347 |
Cash and cash equivalents |  |  | (592,767 | ) |  |  | (252,340 | )
Net debt |  |  | 165,351 |  |  |  | 505,007 |
Market capitalization 1 |  |  | 3,461,018 |  |  |  | 3,345,138 |
Enterprise value |  | $ | 3,626,369 |  |  | $ | 3,850,145 |
Net debt to enterprise value |  |  | 4.6 | % |  |  | 13.1 | %
Dividend yield 2 |  |  | 3.2 | % |  |  | 3.3 | %
Weighted-average cost of debt, after tax 3 |  |  | 3.2 | % |  |  | 3.2 | %

1 | Market capitalization is based on outstanding shares of 67.1 million and 66.9 million times closing share prices of $51.58 and $50.02 as of September 30, 2021, and December 31, 2020, respectively.
2 | Dividend yield is based on annualized dividends per share of $1.64 and share prices of $51.58 and $50.02 as of September 30, 2021, and December 31, 2020, respectively.
3 | Weighted-average cost of debt excludes deferred debt costs and credit facility fees and includes estimated annual patronage credit on term loan debt.

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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.

The following table provides a reconciliation of net income to Total Adjusted EBITDDA for the respective periods:

|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net income |  | $ | 65,667 |  |  | $ | 81,007 |  |  | $ | 384,678 |  |  | $ | 66,813 |
Interest expense, net |  |  | 8,641 |  |  |  | 8,557 |  |  |  | 20,414 |  |  |  | 20,594 |
Income taxes |  |  | 5,031 |  |  |  | 16,840 |  |  |  | 85,910 |  |  |  | 6,431 |
Depreciation, depletion and amortization |  |  | 21,131 |  |  |  | 20,187 |  |  |  | 56,156 |  |  |  | 56,590 |
Basis of real estate sold |  |  | 6,697 |  |  |  | 5,249 |  |  |  | 22,733 |  |  |  | 14,440 |
Net gain on insurance recoveries |  |  | (4,394 | ) |  |  | — |  |  |  | (4,394 | ) |  |  | — |
Pension settlement charge |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 42,988 |
Non-operating pension and other postretirement benefit costs |  |  | 3,271 |  |  |  | 3,557 |  |  |  | 9,956 |  |  |  | 10,670 |
Loss (gain) on disposal of fixed assets |  |  | 1,139 |  |  |  | (11 | ) |  |  | 1,700 |  |  |  | (196 | )
Total Adjusted EBITDDA |  | $ | 107,183 |  |  | $ | 135,386 |  |  | $ | 577,153 |  |  | $ | 218,330 |

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 Condensed Consolidated Statements of Cash Flows. Our definition of CAD may be different from similarly titled measures reported by other companies, including those in our industry. CAD is not necessarily indicative of the CAD that may be generated in future periods.

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The following table provides a reconciliation of cash provided by operating activities to CAD:

|  | Nine Months Ended September 30, |  |  | Twelve Months Ended September 30, |
(in thousands) |  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Net cash provided by operating activities 1 |  | $ | 453,242 |  |  | $ | 190,845 |  |  | $ | 597,660 |  |  | $ | 224,486 |
Capital expenditures 2 |  |  | (40,977 | ) |  |  | (31,749 | ) |  |  | (55,013 | ) |  |  | (50,080 | )
CAD |  | $ | 412,265 |  |  | $ | 159,096 |  |  | $ | 542,647 |  |  | $ | 174,406 |
Net cash used in investing activities 3 |  | $ | (26,734 | ) |  | $ | (28,265 | ) |  | $ | (41,026 | ) |  | $ | (45,935 | )
Net cash used in financing activities |  | $ | (86,081 | ) |  | $ | (96,830 | ) |  | $ | (114,205 | ) |  | $ | (124,337 | )

1 | Net cash provided by operating activities for the nine months ended September 30, 2021 and 2020 includes cash paid for real estate development expenditures of $6.4 million and $4.2 million, respectively. Net cash provided by operating activities for the twelve months ended September 30, 2021 and 2020 includes cash paid for real estate development expenditures of $8.9 million and $5.7 million, respectively.
2 | Includes capital expenditures for the rebuild of the Ola, Arkansas sawmill of $5.0 million and excludes $13.3 million of insurance proceeds for the Ola, Arkansas sawmill property losses for the nine and twelve months ended September 30, 2021.
3 | Net cash used in investing activities includes payment for capital expenditures and acquisition of non-strategic timber and timberlands, which is also included in our reconciliation of CAD.

Sources of Financing

Long-Term Debt and Credit Agreements

At September 30, 2021, our total outstanding net long-term debt was $758.1 million. We expect to refinance a $40.0 million term loan expiring in December 2021 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.

A number of our debt instruments and associated 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 USD 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). While we expect LIBOR to be available in substantially its current form until at least the end of 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. However, at this time, we are not able to predict whether SOFR will become a widely accepted benchmark in place of LIBOR, or what the impact of such possible transition to alternative rates may be on our financial condition.

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Financial Covenants

The Amended Term Loan Agreement and 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. At September 30, 2021, we were in compliance with all covenants under the Agreements. The following table sets forth the financial covenants for the Agreements and our status with respect to these covenants at September 30, 2021:

|  | Covenant Requirement |  | Actual at September 30, 2021
Interest coverage ratio |  | ≥ |  | 3.00 to 1.00 |  | 25.22
Leverage ratio |  | ≤ |  | 40% |  | 19%

See Note 5: Debt in the Notes to the Condensed Consolidated Financial Statements for additional information on our debt and credit agreements.

Contractual Obligations

There have been no material changes to our contractual obligations during the nine months ended September 30, 2021 outside the ordinary course of business.

Credit Ratings

Two major debt rating agencies routinely evaluate our debt and our cost of borrowing can increase or decrease depending on our credit rating. Both Moody’s and S&P rate our debt investment grade.

Off-Balance Sheet Arrangements

We currently are not a party to off-balance sheet arrangements that would require disclosure under this section.

Critical Accounting Policies and Estimates

There have been no significant changes during 2021 to our critical accounting policies presented in our 2020 Annual Report on Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITAT IVE 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.

For quantitative and qualitative disclosures about market risk, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of our annual report on Form 10-K for the year ended December 31, 2020. Our exposures to market risk have not changed materially since December 31, 2020.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We conducted an evaluation (pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the Exchange Act)), under the supervision and with the participation of management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of September 30, 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 Securities and Exchange Commission's rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on the evaluation, the CEO and CFO have concluded that these disclosure controls and procedures were effective as of September 30, 2021.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Internal Control over Financial Reporting

No changes occurred in our internal control over financial reporting during the three months ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We believe there is no pending or threatened litigation that could have a material adverse effect on our financial position, operations or liquidity.

ITEM 1A. RI SK FACTORS

There have been no material changes in the risk factors previously disclosed in Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

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, and subject to, the terms of 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.

There were no shares repurchased during the third quarter of 2021 under the Repurchase Program. At September 30, 2021, we had remaining authorization of $59.5 million for future stock repurchases under the Repurchase Program. Transaction costs are not counted against authorized funds. All common stock purchases are made in open-market transactions.

ITEM 6. E XHIBITS

EXHIBIT NUMBER | DESCRIPTION
(3)(a)* | 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.
(3)(b)* | Bylaws of the Registrant, as amended through February 18, 2009, filed as Exhibit (3)(b) to the Current Report on Form 8-K filed by the Registrant on February 20, 2009.
(4) | See Exhibits (3)(a) and (3)(b). The registrant undertakes to furnish to the Commission, upon request, any instrument defining the rights of holders of long-term debt.
(31) | Rule 13a-14(a)/15d-14(a) Certifications.
(32) | Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350.
(101) | The following financial information from PotlatchDeltic Corporation’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed on October 29, 2021 formatted in iXBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020, (ii) the Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2021 and 2020, (iii) the Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020, (v) the Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 and (vi) the Notes to Condensed Consolidated Financial Statements.
(104) | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).

* Incorporated by reference.

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SIGNAT URE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|  | PotlatchDeltic Corporation
|  | (Registrant)
|  | By | /s/ WAYNE WASECHEK
|  |  | Wayne Wasechek
|  |  | Corporate Controller (Duly Authorized; Principal Accounting Officer)
Date: | October 29, 2021 |  |

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