CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2019
(unaudited)
CatchMark Timber Trust
Inc. ("CatchMark Timber Trust") (
NYSE
: CTT) owns and operates timberlands located in the United States and has elected to be taxed as a
REIT
for federal income tax purposes. CatchMark Timber Trust acquires, owns, operates, manages, and disposes of timberland directly, through wholly-owned subsidiaries, or through joint ventures.
CatchMark Timber Trust
was incorporated in Maryland in 2005 and commenced operations in 2007.
CatchMark Timber Trust
conducts substantially all of its business through CatchMark Timber Operating Partnership, L.P. (“
CatchMark Timber OP
”), a Delaware limited partnership.
CatchMark Timber Trust
is the general partner of
CatchMark Timber OP
, possesses full legal control and authority over its operations, and owns
99.99%
of its common partnership units. CatchMark LP Holder, LLC (“
CatchMark LP Holder
”), a Delaware limited liability company and wholly-owned subsidiary of
CatchMark Timber Trust
, is the sole limited partner of
CatchMark Timber OP
and owns the remaining
0.01%
of its common partnership units. In addition, CatchMark Timber TRS, Inc. (“CatchMark TRS”), a Delaware corporation formed as a wholly-owned subsidiary of
CatchMark Timber OP
in 2006, is our taxable REIT subsidiary. Unless otherwise noted, references herein to CatchMark shall include
CatchMark Timber Trust
and all of its subsidiaries, including
CatchMark Timber OP
, and the subsidiaries of
CatchMark Timber OP
, including CatchMark TRS.
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of CatchMark have been prepared in accordance with the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X and do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments, which are of a normal and recurring nature, necessary for a fair and consistent presentation of the results for such periods. Results for these interim periods are not necessarily indicative of results for a full year.
CatchMark’s consolidated financial statements include the accounts of CatchMark and any VIE in which CatchMark is deemed the primary beneficiary. With respect to entities that are not VIEs, CatchMark's consolidated financial statements also include the accounts of any entity in which CatchMark owns a controlling financial interest and any limited partnership in which CatchMark owns a controlling general partnership interest. In determining whether a controlling interest exists, CatchMark considers, among other factors, the ownership of voting interests, protective rights, and participatory rights of the investors. All intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the audited financial statements and footnotes included in CatchMark’s Annual Report on Form 10-K for the year ended December 31, 2018.
Investments in Joint Ventures
For joint ventures that it does not control but exercises significant influence, CatchMark uses the equity method of accounting. CatchMark's judgment about its level of influence or control of an entity involves consideration of various factors including the form of its ownership interest; its representation in the entity's governance; its ability to participate in policy-making decisions; and the rights of other investors to participate in the decision-making process, to replace CatchMark as manager, and/or to liquidate the venture. Under the equity method, the investment in a joint venture is recorded at cost and adjusted for equity in earnings and cash contributions and distributions. Income or loss and cash distributions from an unconsolidated joint venture are allocated according to the provisions of the respective joint venture agreement, which may be different from its stated ownership percentages. Any difference between the carrying amount of these investments on CatchMark’s balance sheets and the underlying equity in net assets on the joint venture’s balance sheets is adjusted as the related underlying assets are depreciated, amortized, or sold. Distributions received from unconsolidated joint ventures are classified in the accompanying consolidated statements of cash flows using the
cumulative earnings approach under which distributions received in an amount equal to cumulative equity in earnings are classified as cash inflows from operating activities and distributions received in excess of cumulative equity in earnings represent returns of investment and therefore are classified as cash inflows from investing activities.
CatchMark evaluates the recoverability of its investments in unconsolidated joint ventures in accordance with accounting standards for equity investments by first reviewing each investment for any indicators of impairment. If indicators are present, CatchMark estimates the fair value of the investment. If the carrying value of the investment is greater than the estimated fair value, management assesses whether the impairment is “temporary” or “other-than-temporary.” In making this assessment, management considers the following: (1) the length of time and the extent to which fair value has been less than cost, (2) the financial condition and near-term prospects of the entity, and (3) CatchMark’s intent and ability to retain its interest long enough for a recovery in market value. If management concludes that the impairment is "other than temporary," CatchMark reduces the investment to its estimated fair value.
For information on CatchMark’s unconsolidated joint ventures, which are accounted for using the equity method of accounting, see
Note 4
,
Unconsolidated Joint Ventures
.
Segment Information
CatchMark primarily engages in the acquisition, ownership, operation, management, and disposition of timberland properties located in the United States, either directly through wholly-owned subsidiaries or through equity method investments in affiliated joint ventures. CatchMark defines operating segments in accordance with ASC Topic 280,
Segment Reporting,
to reflect the manner in which its chief operating decision maker, the Chief Executive Officer, evaluates performance and allocates resources in managing the business. CatchMark has aggregated its operating segments into
three
reportable segments: Harvest, Real Estate and Investment Management. See
Note 9 — Segment Information
for additional information.
New Lease Accounting Standard
In February 2016, the FASB issued ASU 2016-02,
Leases
("ASC 842"). ASC 842 establishes a right-of-use ("ROU") model that requires a lessee to record a ROU asset and a lease liability on its balance sheet for all leases, subject to certain scope exceptions. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
CatchMark adopted ASC 842 effective January 1, 2019 using the modified retrospective approach with the cumulative effect of the application recognized at the effective date. CatchMark elected the package of practical expedients, including the option to account for each separate lease component of a contract and its associated non-lease component as a single lease component, thus causing all fixed payments to be capitalized; and the practical expedient, which among other things, allows CatchMark to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the operating lease ROU asset or liability. These are expensed as incurred and recorded as variable lease expense. Management identified and evaluated all of its in-place leases, subleases, and contracts with a lease component, and determined that its office lease is the only lease within the scope of ASC 842. CatchMark elected the practical expedient to not apply the recognition requirements of ASC 842 to its short-term leases. CatchMark determined its long-term timber lease to be a lease of biological assets, a scope exception to ASC 842. Long-term timber lease expense is reported as land rent expense on CatchMark's consolidated statements of operations. See
Note 7 - Commitments and Contingencies, Obligations under Operating Leases
for additional information on the long-term timber lease. Additionally, CatchMark determined that its hunting and recreational leases do not qualify as leases under ASC 842. See
Note 2 - Summary of Significant Accounting Policies
and
Note 11 - Recreational Leases
to CatchMark’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2018 for additional information on its hunting and recreational leases.
CatchMark's office lease commenced in January 2019 and expires in November 2028 and qualifies as an operating lease under ASC 842. As of January 1, 2019, CatchMark recorded an operating lease ROU asset and an operating lease
liability of approximately
$3.4 million
on its balance sheet, which represents the net present value of lease payments over the lease term discounted using CatchMark's incremental borrowing rate at commencement date. CatchMark’s office lease contains renewal options; however, the options were not included in the calculation of the operating lease ROU and operating lease liability as it is not reasonably certain that CatchMark will exercise the renewal options. CatchMark recorded
$87,000
of amortization expense related to the operating lease ROU asset and the operating lease liability for the three months ended March 31, 2019, which was included in general and administrative expenses on its consolidated statement of operations and in other amortization on its consolidated statement of cash flows. The adoption of ASC 842 did not result in a cumulative-effect adjustment to CatchMark's retained earnings, as its office lease commenced in January 2019.
The following amounts related to the office lease were reflected in CatchMark's consolidated financial statements:
|
|
|
|
|
(in thousands)
|
Three Months Ended March 31, 2019
|
Cash paid for office lease
|
$
|
21
|
|
ROU asset obtained in exchange for new operating lease liability
|
$
|
3,418
|
|
Lease term
|
9.9 years
|
|
Discount rate
|
4.58
|
%
|
CatchMark had the following future annual payments for its operating lease as of March 31, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
As of
|
(
in thousands
)
|
March 31, 2019
|
|
December 31, 2018
|
Required Payments as of March 31,
|
|
|
|
2019
|
$
|
290
|
|
|
$
|
312
|
|
2020
|
397
|
|
|
397
|
|
2021
|
412
|
|
|
412
|
|
2022
|
424
|
|
|
424
|
|
2023
|
435
|
|
|
435
|
|
2024
|
447
|
|
|
447
|
|
Thereafter
|
1,873
|
|
|
1,873
|
|
|
$
|
4,278
|
|
|
$
|
4,300
|
|
Less: imputed interest
|
(860
|
)
|
|
|
Operating lease liability
|
$
|
3,418
|
|
|
|
|
Reclassification
Certain prior period amounts have been reclassified to conform with the current period's financial statement presentation. Within revenues on the accompanying statements of operations, asset management fees in the amount of
$36,000
for the three months ended March 31, 2018 have been reclassified out of other revenues.
Recent Accounting Pronouncements
In August 2017, the FASB issued ASU 2017-12,
Targeted Improvements to Accounting for Hedging Activities (Topic 815),
which amends the hedge accounting recognition and presentation requirements in ASC 815, "
Derivatives and Hedging
." In October 2018, the FASB issued ASU 2018-16,
Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes
. ASU 2017-12 expands an entity's ability to hedge nonfinancial and financial risk components and reduces the complexity in fair value hedges of interest rate risk. It eliminates the requirement to separately measure and report hedge ineffectiveness and requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item when the hedged item affects earnings. The amendments in ASU 2018-16 permit use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes
under Topic 815. CatchMark adopted ASU 2017-12 on January 1, 2018 and ASU 2018-16 on January 1, 2019. These adoptions did not have a material effect on CatchMark's consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07,
Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,
which expands the scope of ASC 718 to include share-based payments granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations. This guidance aligns the measurement and classification for share-based payments to non-employees with the guidance for share-based payments to employees, with certain exceptions. ASU 2018-07 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods therein. CatchMark adopted ASU 2018-07 on January 1, 2019 and the adoption did not have a material effect on its consolidated financial statements.
On July 16, 2018, the FASB issued ASU 2018-09,
Codification Improvements.
The amendments in this update represent changes to clarify the ASC, correct unintended application of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. Some of the amendments make the ASC easier to understand and easier to apply by eliminating inconsistencies, providing needed clarifications, and improving the presentation of guidance in the ASC. ASU 2018-09 is effective for public entities for fiscal years beginning after December 15, 2018, and interim periods therein. CatchMark adopted ASU 2018-09 on January 1, 2019 and the adoption did not have a material effect on its consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (Topic 820)
:
Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement,
which added new disclosure requirements, eliminated and modified existing disclosure requirements on fair value measurement to improve the effectiveness of ASC 820. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. CatchMark is currently assessing the impact ASU 2018-13 will have on its consolidated financial statements.
In October 2018, the FASB issued ASU 2018-17,
Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities,
which
reduces the cost and complexity of financial reporting associated with consolidation of VIEs. This guidance supersedes the private company alternative for common control leasing arrangements issued in 2014 and expands it to all qualifying common control arrangements. ASU 2018-17 is effective for public entities for fiscal years beginning after December 15, 2019, and interim periods therein. CatchMark is currently assessing the impact ASU 2018-17 will have on its consolidated financial statements.
3. Timber Assets
As of
March 31, 2019
and
December 31, 2018
, timber and timberlands consisted of the following, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
(in thousands)
|
Gross
|
|
Accumulated
Depletion or
Amortization
|
|
Net
|
Timber
|
$
|
320,356
|
|
|
$
|
5,268
|
|
|
$
|
315,088
|
|
Timberlands
|
366,356
|
|
|
—
|
|
|
366,356
|
|
Mainline roads
|
972
|
|
|
672
|
|
|
300
|
|
Timber and timberlands
|
$
|
687,684
|
|
|
$
|
5,940
|
|
|
$
|
681,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
(in thousands)
|
Gross
|
|
Accumulated
Depletion or
Amortization
|
|
Net
|
Timber
|
$
|
345,972
|
|
|
$
|
25,912
|
|
|
$
|
320,060
|
|
Timberlands
|
367,488
|
|
|
—
|
|
|
367,488
|
|
Mainline roads
|
954
|
|
|
651
|
|
|
303
|
|
Timber and timberlands
|
$
|
714,414
|
|
|
$
|
26,563
|
|
|
$
|
687,851
|
|
Timberland Sales
During the
three months ended
March 31, 2019
and
2018
, CatchMark sold approximately
900
and
2,200
acres of timberland for
$2.1 million
and
$4.3 million
, respectively. CatchMark's cost basis in the timberland sold was
$1.4 million
and
$2.9 million
, respectively.
Timberland sales acreage by state is listed below:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
Acres Sold In:
|
|
2019
|
|
2018
|
Alabama
|
|
500
|
|
|
—
|
|
Georgia
|
|
—
|
|
|
1,400
|
|
Louisiana
|
|
—
|
|
|
100
|
|
North Carolina
|
|
400
|
|
|
—
|
|
South Carolina
|
|
—
|
|
|
600
|
|
Texas
|
|
—
|
|
|
100
|
|
Total
|
|
900
|
|
|
2,200
|
|
Current Timberland Portfolio
As of
March 31, 2019
, CatchMark directly owned interests in approximately
458,700
acres of timberlands in the U.S. South and Pacific Northwest, approximately
432,000
acres of which were fee-simple interests and approximately
26,700
acres were leasehold interests. Land acreage by state is listed below:
|
|
|
|
|
|
|
|
|
|
|
Acres by state as of March 31, 2019
(1)
|
|
Fee
|
|
Lease
|
|
Total
|
South
|
|
|
|
|
|
|
Alabama
|
|
72,400
|
|
|
1,800
|
|
|
74,200
|
|
Florida
|
|
2,000
|
|
|
—
|
|
|
2,000
|
|
Georgia
|
|
261,300
|
|
|
24,900
|
|
|
286,200
|
|
North Carolina
|
|
200
|
|
|
—
|
|
|
200
|
|
South Carolina
|
|
77,700
|
|
|
—
|
|
|
77,700
|
|
Tennessee
|
|
300
|
|
|
—
|
|
|
300
|
|
|
|
413,900
|
|
|
26,700
|
|
|
440,600
|
|
Pacific Northwest
|
|
|
|
|
|
|
Oregon
|
|
18,100
|
|
|
—
|
|
|
18,100
|
|
Total
|
|
432,000
|
|
|
26,700
|
|
|
458,700
|
|
|
|
(1)
|
Represents CatchMark wholly-owned acreage only; excludes ownership interest in acreage held by joint ventures.
|
4. Unconsolidated Joint Ventures
As of
March 31, 2019
, CatchMark owned interests in
two
joint ventures with unrelated parties: the Triple T Joint Venture and the Dawsonville Bluffs Joint Venture (each as defined and described below).
|
|
|
|
|
|
|
|
|
As of March 31, 2019
|
|
Dawsonville Bluffs Joint Venture
|
|
Triple T Joint Venture
|
Ownership percentage
|
50.0%
|
|
|
21.6
|
%
|
(1)
|
Acreage owned by the joint venture
|
4,400
|
|
|
1,099,500
|
|
|
Merchantable timber inventory (million tons)
|
0.3
|
(3)
|
|
42.1
|
|
(2)
|
Location
|
Georgia
|
|
|
Texas
|
|
|
|
|
(1)
|
Represents our share of total partner capital contributions.
|
|
|
(2)
|
The Triple T Joint Venture considers inventory to be merchantable at age 12. Merchantable timber inventory does not include current year growth.
|
|
|
(3)
|
Merchantable timber inventory does not include current year growth.
|
CatchMark accounts for these investments using the equity method of accounting.
Triple T Joint Venture
During 2018, CatchMark formed a joint venture, TexMark Timber Treasury, LP, a Delaware limited partnership (the "Triple T Joint Venture"), with a consortium of institutional investors (the "Preferred Investors") to acquire
1.1 million
acres of high-quality East Texas industrial timberlands (the “Triple T Timberlands”), for approximately
$1.39 billion
(the “Acquisition Price”), exclusive of transaction costs. The Triple T Joint Venture completed the acquisition of the Triple T Timberlands in July 2018. CatchMark invested
$200.0 million
in the Triple T Joint Venture, equal to
21.6%
of the total equity contributions, in exchange for a common limited partnership interest. CatchMark, through a separate wholly-owned and consolidated subsidiary, is the sole general partner of the Triple T Joint Venture.
CatchMark uses the equity method to account for its investment in the Triple T Joint Venture since it does not possess the power to direct the activities that most significantly impact the economic performance of the Triple T Joint Venture, and accordingly, CatchMark does not possess the first characteristic of a primary beneficiary described in GAAP. CatchMark appointed three common board members of the Triple T Joint Venture, including its Chief Executive Officer,
Chief Financial Officer, and Senior Vice President of Forest Resources, which provides CatchMark with significant influence over the Triple T Joint Venture. Accordingly, pursuant to the applicable accounting literature, it is appropriate for CatchMark to apply the equity method of accounting to its investment in the Triple T Joint Venture.
The Triple T Joint Venture agreement provides for liquidation rights and distribution priorities that are significantly different from CatchMark's stated ownership percentage based on total equity contributions. The Preferred Investors are entitled to a minimum
10.25%
cumulative return on their equity contributions, plus a complete return of their equity contributions before any distributions may be made on CatchMark’s common limited partnership interest. As such, CatchMark uses the hypothetical-liquidation-at-book-value method (“HLBV”) to determine its equity in the earnings of the Triple T Joint Venture. The HLBV method is commonly applied to equity investments in real estate, where cash distribution percentages vary at different points in time and are not directly linked to an investor's ownership percentage. For investments accounted for under the HLBV method, applying the percentage ownership interest to GAAP net income in order to determine earnings or losses would not accurately represent the income allocation and cash flow distributions that will ultimately be received by the investors.
CatchMark applies HLBV using a balance sheet approach. A calculation is prepared at each balance sheet date to determine the amount that CatchMark would receive if the Triple T Joint Venture were to liquidate all of its assets (at book value in accordance with GAAP) on that date and distribute the proceeds to the partners based on the contractually-defined liquidation priorities. The difference between the calculated liquidation distribution amounts at the beginning
and the end of the reporting period, after adjusting for capital contributions and distributions, is CatchMark's income or loss from the Triple T Joint Venture for the period.
Condensed balance sheet information for the Triple T Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
As of
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
Triple T Joint Venture:
|
|
|
|
Total assets
|
$
|
1,594,454
|
|
|
$
|
1,607,413
|
|
Total liabilities
|
$
|
749,742
|
|
|
$
|
754,610
|
|
Total equity
|
$
|
844,712
|
|
|
$
|
852,803
|
|
CatchMark:
|
|
|
|
Carrying value of investment
|
$
|
62,962
|
|
|
$
|
90,450
|
|
Condensed income statement information for the Triple T Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Triple T Joint Venture:
|
|
|
|
Total revenues
|
$
|
35,964
|
|
|
$
|
—
|
|
Operating income
|
$
|
2,522
|
|
|
$
|
—
|
|
Net loss
|
$
|
(4,281
|
)
|
|
$
|
—
|
|
CatchMark:
|
|
|
|
Equity share of net loss
|
$
|
(27,488
|
)
|
|
$
|
—
|
|
Condensed statement of cash flow information for the Triple T Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Triple T Joint Venture:
|
|
|
|
Net cash used in operating activities
|
$
|
(5,575
|
)
|
|
$
|
—
|
|
Net cash used in investing activities
|
$
|
(1,503
|
)
|
|
$
|
—
|
|
Net cash provided by financing activities
|
$
|
100
|
|
|
$
|
—
|
|
Net change in cash and cash equivalents
|
$
|
(6,978
|
)
|
|
$
|
—
|
|
Cash and cash equivalents, beginning of period
|
$
|
39,300
|
|
|
$
|
—
|
|
Cash and cash equivalents, end of period
|
$
|
32,322
|
|
|
$
|
—
|
|
CatchMark's equity share of the Triple T Joint Venture's net loss determined using the HLBV method as of March 31, 2019 is calculated as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
Triple T Joint Venture:
|
|
|
Total equity as of March 31, 2019
|
|
$
|
844,712
|
|
Preferred Investors:
|
|
|
Equity in Triple T Joint Venture, beginning balance
|
$
|
762,353
|
|
|
Minimum preferred return as of March 31, 2019
|
$
|
19,268
|
|
|
|
|
|
Class A preferred equity as of March 31, 2019
|
$
|
129
|
|
|
HLBV distribution as of March 31, 2019
|
|
$
|
781,750
|
|
CatchMark:
|
|
|
Equity in Triple T Joint Venture as of March 31, 2019
|
|
$
|
62,962
|
|
Equity in Triple T Joint Venture, as of January 1, 2019
|
|
$
|
90,450
|
|
Equity share of Triple T Joint Venture's net loss
|
|
$
|
(27,488
|
)
|
Dawsonville Bluffs Joint Venture
During 2017, CatchMark formed the Dawsonville Bluffs Joint Venture with MPERS, each owns a
50%
membership interest. CatchMark shares substantive participation rights with MPERS, including management selection and termination, and the approval of material operating and capital decisions and, as such, uses the equity method of accounting to record its investment. Income or loss and cash distributions are allocated according to the provisions of the joint venture agreement, which are consistent with the ownership percentages for the Dawsonville Bluffs Joint Venture.
Condensed balance sheet information for the Dawsonville Bluffs Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
As of
|
(in thousands)
|
March 31, 2019
|
|
December 31, 2018
|
Dawsonville Bluffs Joint Venture:
|
|
|
|
Total assets
|
$
|
10,603
|
|
|
$
|
12,164
|
|
Total liabilities
|
$
|
605
|
|
|
$
|
575
|
|
Total equity
|
$
|
9,998
|
|
|
$
|
11,589
|
|
CatchMark:
|
|
|
|
Carrying value of investment
|
$
|
4,999
|
|
|
$
|
5,795
|
|
Condensed income statement information for the Dawsonville Bluffs Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Dawsonville Bluffs Joint Venture:
|
|
|
|
Total revenues
|
$
|
1,413
|
|
|
$
|
10,793
|
|
Net income
|
$
|
357
|
|
|
$
|
3,642
|
|
CatchMark:
|
|
|
|
Equity share of net income
|
$
|
179
|
|
|
$
|
1,821
|
|
Condensed statement of cash flow information for the Dawsonville Joint Venture is as follows:
|
|
|
|
|
|
|
|
|
|
As of
|
(in thousands)
|
March 31, 2019
|
|
March 31, 2018
|
Dawsonville Joint Venture:
|
|
|
|
Net cash provided by operating activities
|
$
|
1,185
|
|
|
$
|
10,084
|
|
Net cash provided by investing activities
|
$
|
—
|
|
|
$
|
—
|
|
Net cash used in financing activities
|
$
|
(1,949
|
)
|
|
$
|
(4,375
|
)
|
Net change in cash and cash equivalents
|
$
|
(764
|
)
|
|
$
|
5,709
|
|
Cash and cash equivalents, beginning of period
|
$
|
1,731
|
|
|
$
|
5,375
|
|
Cash and cash equivalents, end of period
|
$
|
967
|
|
|
$
|
11,084
|
|
During the three months ended
March 31, 2019
and 2018, CatchMark received cash distributions of
$1.0 million
and
$2.2 million
, respectively, from the Dawsonville Bluffs Joint Venture.
Asset Management Fees
CatchMark provides asset management services to the Triple T Joint Venture and the Dawsonville Bluffs Joint Venture. Under these arrangements, CatchMark oversees the day-to-day operations of these joint ventures and their properties, including accounting, reporting and other administrative services, subject to certain major decisions that require partner approval. For management of the Triple T Joint Venture, CatchMark receives a fee equal to
1%
per annum, subject to reduction and deferment in certain circumstances, of the Acquisition Price multiplied by
78.4
%, which represents the percentage of the total equity contributions made to the Triple T Joint Venture by the Preferred Investors. For management of the Dawsonville Bluffs Joint Venture, CatchMark receives a percentage fee based on invested capital, as defined by the joint venture agreement.
During the three months ended
March 31, 2019
and 2018, CatchMark earned the following fees from these unconsolidated joint ventures:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Triple T Joint Venture
(1)
|
$
|
2,821
|
|
|
$
|
—
|
|
Dawsonville Bluffs Joint Venture
|
21
|
|
|
36
|
|
|
$
|
2,842
|
|
|
$
|
36
|
|
|
|
(1)
|
Includes approximately
$0.1 million
of reimbursements of compensation costs for the three months ended March 31, 2019.
|
5. Notes Payable and Lines of Credit
As of
March 31, 2019
and
December 31, 2018
, CatchMark had the following debt balances outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Outstanding Balance as of
|
Credit Facility
|
|
Maturity Date
|
|
Interest Rate
|
|
Current Interest Rate
(1)
|
|
March 31, 2019
|
|
December 31, 2018
|
Term Loan A-1
|
|
12/23/2024
|
|
LIBOR + 1.75%
|
|
4.24
|
%
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
Term Loan A-2
|
|
12/1/2026
|
|
LIBOR + 1.90%
|
|
4.40
|
%
|
|
100,000
|
|
|
100,000
|
|
Term Loan A-3
|
|
12/1/2027
|
|
LIBOR + 2.00%
|
|
4.50
|
%
|
|
68,619
|
|
|
68,619
|
|
Term Loan A-4
|
|
8/22/2025
|
|
LIBOR + 1.70%
|
|
4.18
|
%
|
|
140,000
|
|
|
140,000
|
|
Multi-Draw Term Facility
|
|
12/1/2024
|
|
LIBOR + 2.20%
|
|
4.69
|
%
|
|
70,000
|
|
|
70,000
|
|
Total principal balance
|
|
|
|
|
|
|
|
$
|
478,619
|
|
|
$
|
478,619
|
|
Less: net unamortized deferred financing costs
|
|
(6,176
|
)
|
|
$
|
(6,379
|
)
|
Total
|
|
|
|
|
|
|
|
$
|
472,443
|
|
|
$
|
472,240
|
|
|
|
(1)
|
For the Multi-Draw Term Facility, the interest rate represents weighted-average interest rate as of
March 31, 2019
. The weighted-average interest rate excludes the impact of the interest rate swaps (see
Note 6 - Interest Rate Swaps
), amortization of deferred financing costs, unused commitment fees, and estimated patronage refunds.
|
2018 Amended Credit Agreement
CatchMark is party to a credit agreement
dated as of December 1, 2017, as amended on August 22, 2018 (the “2018 Amended Credit Agreement”), with a syndicate of lenders, including CoBank. The 2018 Amended Credit Agreement provides for borrowing under credit facilities consisting of the following:
|
|
•
|
a
$35.0 million
five
-year revolving credit facility (the “Revolving Credit Facility”);
|
|
|
•
|
a
$200.0 million
seven
-year multi-draw term credit facility (the “Multi-Draw Term Facility”);
|
|
|
•
|
a
$100.0 million
ten
-year term loan (the “Term Loan A-1”);
|
|
|
•
|
a
$100.0 million
nine
-year term loan (the “Term Loan A-2”);
|
|
|
•
|
a
$68.6 million
ten
-year term loan (the “Term Loan A-3”); and
|
|
|
•
|
a
$140.0 million
seven
-year term loan (the "Term Loan A-4").
|
As of
March 31, 2019
,
$165.0 million
remained available under CatchMark's credit facilities, consisting of
$130.0 million
under
the Multi-Draw Term Facility and
$35.0 million
under
the Revolving Credit Facility.
Borrowings under the Revolving Credit Facility may be used for general working capital, to support letters of credit, to fund cash earnest money deposits, to fund acquisitions in an amount not to exceed
$5.0 million
, and for other general corporate purposes. The Revolving Credit Facility bears interest at an adjustable rate equal to a
base rate
plus between
0.50%
and
1.20%
or a
LIBOR
rate plus between
1.50%
and
2.20%
, in each case depending on CatchMark's LTV Ratio, and will terminate and all amounts outstanding under the facility will be due and payable on December 1, 2022.
The Multi-Draw Term Facility may be used to finance timberland acquisitions and associated expenses, to fund investment in joint ventures, and to reimburse payments of drafts under letters of credit. The Multi-Draw Term Facility, which is interest only until its maturity date, bears interest at an adjustable rate equal to a
base rate
plus between
0.50%
and
1.20%
or a
LIBOR
rate plus between
1.50%
and
2.20%
, in each case depending on CatchMark's LTV Ratio, and will terminate and all amounts outstanding under the facility will be due and payable on December 1, 2024.
CatchMark pays the lenders an unused commitment fee on the unused portions of the Revolving Credit Facility and the Multi-Draw Term Facility at an adjustable rate ranging from
0.15%
to
0.35%
, depending on the LTV Ratio.
CatchMark’s obligations under the credit agreement are collateralized by a first priority lien on the timberlands owned by CatchMark’s subsidiaries and substantially all of CatchMark’s subsidiaries’ other assets in which a security interest may lawfully be granted, including, without limitation, accounts, equipment, inventory, intellectual property, bank accounts and investment property. In addition, the obligations under the credit agreement are jointly and severally guaranteed by CatchMark and all of its subsidiaries pursuant to the terms of the credit agreement. CatchMark has also agreed to guarantee certain losses caused by certain willful acts of CatchMark or its subsidiaries.
Patronage Refunds
CatchMark is eligible to receive annual patronage refunds from its lenders (the "Patronage Banks") under a profit-sharing program made available to borrowers of the Farm Credit System. CatchMark has received a patronage refund on its eligible patronage loans annually since 2015. The eligibility remains the same under the 2018 Amended Credit Agreement. Therefore, CatchMark accrues patronage refunds it expects to receive based on actual patronage refunds received as a percentage of its weighted-average eligible debt balance. For the
three months ended
March 31, 2019
and 2018, CatchMark accrued approximately
$1.0 million
and
$0.7 million
, respectively, as patronage refunds receivable on its consolidated balance sheets and as an offset against interest expense on the consolidated statements of operations.
In March 2019 and 2018, CatchMark received patronage refunds of
$3.3 million
and
$2.7 million
, respectively, on its patronage eligible borrowings. Of the total patronage refunds received in both years,
75%
was received in cash and
25%
was received in equity of the Patronage Banks.
As of
March 31, 2019
and
December 31, 2018
, the following balances related to the patronage refunds program were included on CatchMark's consolidated balance sheets:
|
|
|
|
|
|
|
|
|
(in thousands)
|
As of
|
Patronage refunds classified as:
|
March 31, 2019
|
|
December 31, 2018
|
Accounts receivable
|
$
|
957
|
|
|
$
|
3,323
|
|
Prepaid expenses and other assets
(1)
|
2,329
|
|
|
1,499
|
|
Total
|
$
|
3,286
|
|
|
$
|
4,822
|
|
|
|
(1)
|
Represents cumulative patronage refunds received as equity of the Patronage Banks.
|
Debt Covenants
The 2018 Amended Credit Agreement contains, among others, the following financial covenants:
|
|
•
|
limit the LTV ratio to (i)
50%
at any time prior to the last day of fiscal quarter corresponding to December 1, 2021, and (ii)
45%
at any time thereafter;
|
|
|
•
|
require maintenance of a FCCR of not less than 1.05:1.00;
|
|
|
•
|
require maintenance of a minimum liquidity balance of no less than
$25.0 million
at any time; and
|
|
|
•
|
limit the aggregated capital expenditures to
1%
of the value of the timberlands during any fiscal year.
|
The 2018 Amended Credit Agreement permits CatchMark to declare, set aside funds for, or pay dividends, distributions, or other payments to stockholders so long as it is not in default under the credit agreement and its minimum liquidity balance, after giving effect to the payment, is at least
$25 million
. However, if CatchMark has suffered a bankruptcy event or a change of control, the credit agreement prohibits CatchMark from declaring, setting aside, or paying any dividend, distribution, or other payment other than as required to maintain its REIT qualification. Restrictions in CatchMark’s credit agreements in the past have restricted CatchMark's ability to pay cash distributions to its stockholders. The 2018 Amended Credit Agreement also subjects CatchMark to mandatory prepayment from proceeds generated from dispositions of timberlands or lease terminations, which may have the effect of limiting its ability to make distributions to stockholders under certain circumstances.
CatchMark was in compliance with the financial covenants of its credit agreement as of
March 31, 2019
.
Interest Paid and Fair Value of Outstanding Debt
During the
three months ended
March 31, 2019
and
2018
, CatchMark made interest payments of
$5.2 million
and
$2.9 million
, respectively, on its borrowings.
No
unused commitment fees were paid for the
three months ended
March 31, 2019
and
$0.1 million
of fees were paid for the same period in 2018.
As of
March 31, 2019
and
December 31, 2018
, the weighted-average interest rate on CatchMark's borrowings, after consideration of its interest rate swaps (see
Note 6 — Interest Rate Swaps
), was
4.32%
and
4.31%
, respectively. After further consideration of expected patronage refunds, CatchMark's weighted-average interest rate as of
March 31, 2019
and
December 31, 2018
was
3.52%
and
3.51%
, respectively.
6. Interest Rate Swaps
CatchMark uses interest rate swaps to mitigate its exposure to changing interest rates on its variable rate debt instruments. As of
March 31, 2019
, CatchMark had
ten
outstanding interest rate swaps with terms below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap
|
|
Effective Date
|
|
Maturity Date
|
|
Pay Rate
|
|
Receive Rate
|
|
Notional Amount
|
2017 Swap - 3YR
|
|
3/28/2017
|
|
3/28/2020
|
|
1.800%
|
|
one-month LIBOR
|
|
$
|
30,000
|
|
2018 Swap - 2YR
|
|
9/6/2018
|
|
9/6/2020
|
|
2.796%
|
|
one-month LIBOR
|
|
$
|
50,000
|
|
2018 Swap - 3YR
|
|
9/6/2018
|
|
9/6/2021
|
|
2.869%
|
|
one-month LIBOR
|
|
$
|
50,000
|
|
2017 Swap - 4YR
|
|
3/28/2017
|
|
11/28/2021
|
|
2.045%
|
|
one-month LIBOR
|
|
$
|
20,000
|
|
2018 Swap - 4YR
|
|
2/28/2018
|
|
11/28/2022
|
|
2.703%
|
|
one-month LIBOR
|
|
$
|
30,000
|
|
2017 Swap - 7YR
|
|
3/23/2017
|
|
3/23/2024
|
|
2.330%
|
|
one-month LIBOR
|
|
$
|
20,000
|
|
2014 Swap - 10YR
|
|
12/23/2014
|
|
12/23/2024
|
|
2.395%
|
|
one-month LIBOR
|
|
$
|
35,000
|
|
2016 Swap - 8YR
|
|
8/23/2016
|
|
12/23/2024
|
|
1.280%
|
|
one-month LIBOR
|
|
$
|
45,000
|
|
2018 Swap - 8YR
|
|
2/28/2018
|
|
11/28/2026
|
|
2.884%
|
|
one-month LIBOR
|
|
$
|
20,000
|
|
2018 Swap - 9YR
|
|
8/28/2018
|
|
8/28/2027
|
|
3.014%
|
|
one-month LIBOR
|
|
$
|
50,000
|
|
|
|
|
|
|
|
|
|
|
|
$
|
350,000
|
|
As of
March 31, 2019
, CatchMark’s interest rate swaps effectively fixed the interest rate on
$350.0 million
of its
$478.6 million
variable rate debt at
4.26%
, inclusive of the applicable spread. All
ten
interest rate swaps qualify for hedge accounting treatment.
Fair Value and Cash Paid for Interest Under Interest Rate Swaps
The following table presents information about CatchMark's interest rate swaps measured at fair value as of
March 31, 2019
and
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Estimated Fair Value as of
|
Instrument Type
|
|
Balance Sheet Classification
|
|
March 31, 2019
|
|
December 31, 2018
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
Interest rate swaps
|
|
Prepaid expenses and other assets
|
|
$
|
2,425
|
|
|
$
|
3,643
|
|
Interest rate swaps
|
|
Other liabilities
|
|
$
|
(6,358
|
)
|
|
$
|
(3,635
|
)
|
As of
March 31, 2019
, CatchMark estimated that approximately
$0.2 million
will be reclassified from accumulated other comprehensive loss to interest expense over the next 12 months.
Pursuant to the terms of its interest rate swaps, CatchMark received
$42,000
during the three months ended March 31, 2019 and paid
$188,000
during the three months ended March 31, 2018, each of which was included in interest expense in its consolidated statements of operations.
7. Commitments and Contingencies
Mahrt Timber Agreements
In connection with its acquisition of timberlands from WestRock, CatchMark entered into a master stumpage agreement and a fiber supply agreement (collectively, the “Mahrt Timber Agreements”) with a wholly-owned subsidiary of WestRock. The master stumpage agreement provides that CatchMark will sell specified amounts of timber and make available certain portions of our timberlands to CatchMark TRS for harvesting. The fiber supply agreement provides that WestRock will purchase a specified tonnage of timber from CatchMark TRS at specified prices per ton, depending upon the type of timber product. The prices for the timber purchased pursuant to the fiber supply agreement are negotiated every
two years
but are subject to quarterly market pricing adjustments based on an index published by TimberMart-South, a quarterly trade publication that reports raw forest product prices in
11
southern states. The initial term of the Mahrt Timber Agreements is
October 9, 2007
through
December 31, 2032
, subject to extension and early termination provisions. The Mahrt Timber Agreements ensure a long-term source of supply of wood fiber products for WestRock in order to meet its paperboard and lumber production requirements at specified mills and provide CatchMark with a reliable customer for the wood products from its timberlands.
WestRock can terminate the Mahrt Timber Agreements prior to the expiration of the initial term if CatchMark replaces FRC as the forest manager without the prior written consent of WestRock, except pursuant to an internalization of the company's forestry management functions. CatchMark can terminate the Mahrt Timber Agreements if WestRock (i) ceases to operate the Mahrt mill for a period that exceeds
12
consecutive months, (ii) fails to purchase a specified tonnage of timber for
two
consecutive years, subject to certain limited exceptions or (iii) fails to make payments when due (and fails to cure within
30 days
). In addition, either party can terminate the Mahrt Timber Agreements if the other party commits a material breach (and fails to cure within
60 days
) or becomes insolvent. Further, the Mahrt Timber Agreements provide for adjustments to both parties' obligations in the event of a force majeure, which is defined to include, among other things, lightning, fires, storms, floods, infestation and other acts of God or nature.
Timberland Operating Agreements
Pursuant to the terms of the timberland operating agreement between CatchMark and
FRC
(the "FRC Timberland Operating Agreement"), FRC manages and operates certain of
CatchMark
's timberlands and related timber operations, including ensuring delivery of timber to WestRock in compliance with the Mahrt Timber Agreements. In consideration for rendering the services described in the timberland operating agreement, CatchMark pays FRC (i) a monthly management fee based on the actual acreage that FRC manages, which is payable monthly in advance, and (ii) an incentive fee based on timber harvest revenues generated by the timberlands, which is payable quarterly in arrears. The FRC Timberland Operating Agreement, as amended, is effective through March 31, 2020, and is automatically extended for
one
-year periods unless written notice is provided by CatchMark or FRC to the other party at least
120
days prior to the current expiration. The FRC Timberland Operating Agreement may be terminated by either party with mutual consent or by CatchMark with or without cause upon providing
120
days’ prior written notice.
Pursuant to the terms of the timberland operating agreement between CatchMark and AFM (the "AFM Timberland Operating Agreement"), AFM manages and operates certain of CatchMark's timberlands and related timber operations, including ensuring delivery of timber to customers. In consideration for rendering the services described in the AFM Timberland Operating Agreement, CatchMark pays AFM (i) a monthly management fee based on the actual acreage AFM manages, which is payable monthly in advance, and (ii) an incentive fee based on revenues generated by the timber operations. The incentive fee is payable quarterly in arrears. The AFM Timberland Operating Agreement is effective through November 30, 2019 for the U.S. South region and December 31, 2019 for the Pacific Northwest region, and is automatically extended for
one
-year periods unless written notice is provided by CatchMark or AFM to the other party at least
120
days prior to the current expiration. The AFM Timberland Operating Agreement may be terminated by either party with mutual consent or by CatchMark with or without cause upon providing
120
days’ prior written notice.
Obligations under Operating Leases
CatchMark held leasehold interest in approximately
26,700
acres of timberlands under a long-term lease that expires in May 2022 (the “LTC Lease”). The LTC Lease provides CatchMark access rights to harvest timber as specified in the lease agreement, therefore, a lease of biological assets, which is excluded from the scope of ASC 842.
As of March 31, 2019, CatchMark had the following future lease payments under its LTC Lease:
|
|
|
|
|
(in thousands)
|
Required Payments
|
2019
|
$
|
510
|
|
2020
|
510
|
|
2021
|
510
|
|
2022
|
452
|
|
|
$
|
1,982
|
|
See
Note 2 - Summary of Significant Accounting Policies
for information on CatchMark's office lease, which is within the scope of ASC 842.
Litigation
From time to time, CatchMark may be a party to legal proceedings, claims, and administrative proceedings that arise in the ordinary course of its business. Management makes assumptions and estimates concerning the likelihood and amount of any reasonably possible loss relating to these matters using the latest information available. CatchMark records a liability for litigation if an unfavorable outcome is probable and the amount of loss or range of loss can be reasonably estimated. If an unfavorable outcome is probable and a reasonable estimate of the loss is a range, CatchMark accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, CatchMark accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, CatchMark discloses the nature of the litigation and indicates that an estimate of the loss or range of loss cannot be made. If an unfavorable outcome is reasonably possible and the estimated loss is material, CatchMark discloses the nature and estimate of the possible loss of the litigation. CatchMark does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote.
CatchMark is
no
t currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the results of operations or financial condition of CatchMark. CatchMark is not aware of any legal proceedings contemplated by governmental authorities.
8. Stock-based Compensation
Stock-based Compensation - Employees
During the three months ended
March 31, 2019
, CatchMark issued
131,500
shares of service-based restricted stock grants to certain non-executive employees, vesting over a four-year period. The fair value of serviced-based restricted stock grants was determined by the closing price of CatchMark's common stock on the grant date.
A rollforward of CatchMark's unvested, service-based restricted stock awards to employees for the three months ended
March 31, 2019
is as follows:
|
|
|
|
|
|
|
|
|
Number of
Underlying Shares
|
|
Weighted-Average
Grant Date
Fair Value
|
Unvested at December 31, 2018
|
300,395
|
|
|
$
|
10.60
|
|
Granted
|
131,500
|
|
|
$
|
9.34
|
|
Vested
|
(83,817
|
)
|
|
$
|
11.37
|
|
Forfeited
|
(1,312
|
)
|
|
$
|
9.53
|
|
Unvested at March 31, 2019
|
346,766
|
|
|
$
|
9.94
|
|
On January 22, 2019, the compensation committee of the board of directors determined that, based on a set of pre-determined performance metrics between January 1, 2016 and December 31, 2018,
80,366
RSUs issued to CatchMark's executive officers in May 2016 were forfeited.
No
RSUs remained outstanding as of March 31, 2019.
Stock-based Compensation Expense
A summary of CatchMark's stock-based compensation expense for the three months ended
March 31, 2019
and
2018
is presented below:
|
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended March 31,
|
Stock-based Compensation Expense classified as:
|
2019
|
|
2018
|
General and administrative expenses
|
$
|
571
|
|
|
$
|
516
|
|
Forestry management expenses
|
88
|
|
|
249
|
|
Total
|
$
|
659
|
|
|
$
|
765
|
|
As of
March 31, 2019
, approximately
$3.9 million
of unrecognized compensation expense related to unvested restricted stock and LTIP units remained and will be recognized over a weighted-average period of
2.7
years.
9. Segment Information
As of March 31, 2019, CatchMark had the following reportable segments: Harvest, Real Estate and Investment Management. Harvest includes wholly-owned timber assets and associated timber sales, other revenues and related expenses. Real Estate includes timberland sales, cost of timberland sales and large dispositions. Investment Management includes investment in and income (loss) from unconsolidated joint ventures and asset management fee revenues earned for the management of these joint ventures. General and administrative expenses, along with other expense and income items, are not allocated among segments. Asset information and capital expenditures by segment are not reported because CatchMark does not use these measures to assess performance. CatchMark’s investments in unconsolidated joint ventures is reported separately on the accompanying consolidated balance sheets. During the periods presented, there have been no material intersegment transactions.
Adjusted EBITDA is the primary performance measure reviewed by management to assess operating performance. EBITDA is a non-GAAP financial measure of operating performance. EBITDA is defined by the SEC as earnings before interest, taxes, depreciation and amortization; however, CatchMark has excluded certain other expenses that CatchMark believes are not indicative of the ongoing operating results of its timberland portfolio and investment management business, and CatchMark refers to this measure as Adjusted EBITDA. As such, CatchMark's Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies.
The following table presents operating revenues by reportable segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Harvest
|
$
|
17,641
|
|
|
$
|
19,816
|
|
Real Estate
|
2,090
|
|
|
4,252
|
|
Investment Management
|
2,842
|
|
|
36
|
|
Total
|
$
|
22,573
|
|
|
$
|
24,104
|
|
The following table presents Adjusted EBITDA by reportable segment:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Harvest
|
$
|
7,260
|
|
|
$
|
8,140
|
|
Real Estate
|
1,957
|
|
|
3,961
|
|
Investment Management
|
3,415
|
|
|
5,113
|
|
Non-allocated / Corporate EBITDA
|
(2,470
|
)
|
|
$
|
(2,319
|
)
|
Total
|
$
|
10,162
|
|
|
$
|
14,895
|
|
A reconciliation of Adjusted EBITDA to GAAP net loss is presented below:
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
(in thousands)
|
2019
|
|
2018
|
Adjusted EBITDA
|
$
|
10,162
|
|
|
$
|
14,895
|
|
Subtract:
|
|
|
|
Depletion
|
5,268
|
|
|
7,062
|
|
Basis of timberland sold, lease terminations and other
(1)
|
1,807
|
|
|
2,856
|
|
Amortization
(2)
|
458
|
|
|
1,725
|
|
Depletion, amortization, and basis of timberland and mitigation credits sold included in loss from unconsolidated joint venture
(3)
|
395
|
|
|
3,256
|
|
HLBV loss from unconsolidated joint venture
(4)
|
27,488
|
|
|
—
|
|
Stock-based compensation expense
|
659
|
|
|
765
|
|
Interest expense
(2)
|
4,372
|
|
|
2,581
|
|
Other
(5)
|
110
|
|
|
35
|
|
Net loss
|
$
|
(30,395
|
)
|
|
$
|
(3,385
|
)
|
|
|
(1)
|
Includes non-cash basis of timber and timberland assets written-off related to timberland sold, terminations of timberland leases and casualty losses.
|
|
|
(2)
|
For the purpose of the above reconciliation, amortization includes amortization of deferred financing costs, amortization of intangible lease assets, and amortization of mainline road costs, which are included in either interest expense, land rent expense, or other operating expenses in the consolidated statements of operations.
|
|
|
(3)
|
Reflects our share of depletion, amortization, and basis of timberland and mitigation credits sold of the unconsolidated Dawsonville Bluffs Joint Venture.
|
|
|
(4)
|
Reflects HLBV (income) losses from the Triple T Joint Venture, which is determined based on a hypothetical liquidation of the underlying joint venture at book value as of the reporting date.
|
|
|
(5)
|
Includes certain cash expenses paid, or reimbursement received, that management believes do not directly reflect the core business operations of our timberland portfolio on an on-going basis, including costs required to be expensed by GAAP related to acquisitions, transactions, joint ventures or new business initiatives.
|
10. Subsequent Event
Dividend Declaration
On May 2, 2019, CatchMark declared a cash dividend of
$0.135
per share for its common stockholders of record on May 31, 2019, payable on June 14, 2019.