0001341141-17-000034.txt : 20170504 0001341141-17-000034.hdr.sgml : 20170504 20170504160326 ACCESSION NUMBER: 0001341141-17-000034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 51 CONFORMED PERIOD OF REPORT: 20170331 FILED AS OF DATE: 20170504 DATE AS OF CHANGE: 20170504 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CatchMark Timber Trust, Inc. CENTRAL INDEX KEY: 0001341141 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 203536671 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36239 FILM NUMBER: 17813847 BUSINESS ADDRESS: STREET 1: 5 CONCOURSE PARKWAY STREET 2: SUITE 2325 CITY: ATLANTA STATE: GA ZIP: 30328 BUSINESS PHONE: 855-858-9794 MAIL ADDRESS: STREET 1: 5 CONCOURSE PARKWAY STREET 2: SUITE 2325 CITY: ATLANTA STATE: GA ZIP: 30328 FORMER COMPANY: FORMER CONFORMED NAME: Wells Timberland REIT, Inc. DATE OF NAME CHANGE: 20061120 FORMER COMPANY: FORMER CONFORMED NAME: Wells Timber Real Estate Investment Trust, Inc. DATE OF NAME CHANGE: 20051011 10-Q 1 cttq1201710-q.htm CATCHMARK Q1 2017 QUARTERLY REPORT Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
___________________________________________________
FORM 10-Q
___________________________________________________ 
(Mark One)
 
x
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2017
OR
o
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 001-36239
CATCHMARK TIMBER TRUST, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
20-3536671
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
5 Concourse Parkway, Suite 2325
Atlanta, GA 30328
(Address of principal executive offices)
(Zip Code)

(855) 858-9794
(Registrant’s telephone number, including area code)
N/A 
___________________________________________________ 
(Former name, former address, and former fiscal year, if changed since last report)
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  x    No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files)
Yes  x    No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer," “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act (check one).
Large accelerated filer
o
 
Accelerated filer 
x
 
 
 
 
 
Non-accelerated filer
o
(Do not check if a smaller reporting company)
Smaller reporting company
o
 
 
 
Emerging growth company
o

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 o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  o    No  x
Number of shares outstanding of the registrant’s common stock, as of April 28, 2017: 38,810,513 shares





FORM 10-Q

CATCHMARK TIMBER TRUST, INC.

TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
Page No.
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016
 
 
 
 
 
 
 
 
Consolidated Statements of Operations for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)
 
 
 
 
 
 
 
 
Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)
 
 
 
 
 
 
 
 
Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)
 
 
 
 
 
 
 
 
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
PART II. OTHER INFORMATION
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
Item 1A.
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
 
 
Item 3.
 
 
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
Item 5.
 
 
 
 
 
 
 
Item 6.
 


1


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q of CatchMark Timber Trust, Inc. and subsidiaries (“CatchMark Timber Trust,” “we,” “our,” or “us”) may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, CatchMark Timber Trust, or the executive officers on CatchMark Timber Trust’s behalf, may from time to time make forward-looking statements in reports and other documents CatchMark Timber Trust files with the Securities and Exchange Commission (the "SEC") or in connection with oral statements made to the press, potential investors, or others. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Securities Act and the Exchange Act. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of our performance in future periods.
 
Forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is filed with the SEC. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
 
Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our timberland properties, may be significantly hindered. See Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2016 for a discussion of some, although not all, of the risks and uncertainties that could cause actual results to differ materially from those presented in our forward-looking statements.




2


GLOSSARY

The following abbreviations or acronyms may be used in this document and shall have the adjacent meanings set forth below:


AgFirst
 
Agfirst Farm Credit Bank
ASU
 
Accounting Standards Update
CoBank
 
CoBank, ACB
Code
 
Internal Revenue Code of 1986, as amended
EBITDA
 
Earnings from Continuing Operations before Interest, Taxes, Depletion, and Amortization
FASB
 
Financial Accounting Standards Board
FCCR
 
Fixed Charge Coverage Ratio
FRC
 
Forest Resource Consultants, Inc.
GAAP
 
Generally Accepted Accounting Principles
HBU
 
Higher and Better Use
LIBOR
 
London Interbank Offered Rate
LTIP
 
Long-Term Incentive Plan
LTV
 
Loan-to-Value
NYSE
 
New York Stock Exchange
Rabobank
 
Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A.
REIT
 
Real Estate Investment Trust
RSU
 
Restricted Stock Unit
TRS
 
Taxable REIT Subsidiary
TSR
 
Total Shareholder Return
U.S.
 
United States
VIE
 
Variable Interest Entity
WestRock
 
WestRock Company (formerly known as MeadWestvaco Corporation)



3


PART I.
FINANCIAL INFORMATION

ITEM 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The information furnished in the accompanying consolidated balance sheets and related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows reflects all normal and recurring adjustments that are, in management’s opinion, necessary for a fair and consistent presentation of the aforementioned financial statements.

The accompanying consolidated financial statements should be read in conjunction with the condensed notes to CatchMark Timber Trust’s consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Quarterly Report on Form 10-Q and with CatchMark Timber Trust’s Annual Report on Form 10-K for the year ended December 31, 2016. CatchMark Timber Trust’s results of operations for the three months ended March 31, 2017 are not necessarily indicative of the operating results expected for the full year.


4


CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for per-share amounts)
 
 
 
 
 
(Unaudited)
March 31, 2017
 
December 31, 2016
Assets:
 
 
 
Cash and cash equivalents
$
7,739

 
$
9,108

Accounts receivable
2,399

 
3,882

Prepaid expenses and other assets
6,403

 
4,815

Deferred financing costs, net
285

 
313

Timber assets (Note 3):
 
 
 
Timber and timberlands, net
684,272

 
691,687

Intangible lease assets, less accumulated amortization of $939 and $938 as of March 31, 2017 and December 31, 2016, respectively
18

 
19

Total assets
$
701,116

 
$
709,824

 
 
 
 
Liabilities:
 
 
 
Accounts payable and accrued expenses
$
4,250

 
$
4,393

Other liabilities
3,121

 
3,610

Note payable and line of credit, less net deferred financing costs (Note 4)
320,983

 
320,751

Total liabilities
328,354

 
328,754

 
 
 
 
Commitments and Contingencies (Note 6)

 

 
 
 
 
Stockholders’ Equity:
 
 
 
Common stock, $0.01 par value; 900,000 shares authorized; 38,753 and 38,797 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
388

 
388

Additional paid-in capital
604,860

 
605,728

Accumulated deficit and distributions
(233,954
)
 
(226,793
)
Accumulated other comprehensive income
1,468

 
1,747

Total stockholders’ equity
372,762

 
381,070

Total liabilities and stockholders’ equity
$
701,116

 
$
709,824

See accompanying notes.

5


CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per-share amounts)
 
(Unaudited)
Three Months Ended,
March 31,
 
2017
 
2016
Revenues:
 
 
 
Timber sales
$
16,492

 
$
17,501

Timberland sales
5,450

 
8,666

Other revenues
1,183

 
1,014

 
23,125

 
27,181

Expenses:
 
 
 
Contract logging and hauling costs
7,421

 
6,423

Depletion
6,057

 
7,784

Cost of timberland sales
3,872

 
7,699

Forestry management expenses
1,413

 
1,352

General and administrative expenses
2,478

 
2,047

Land rent expense
150

 
171

Other operating expenses
1,167

 
1,035

 
22,558

 
26,511

Operating income
567

 
670

 
 
 
 
Other income (expense):
 
 
 
Interest income
11

 
11

Interest expense
(2,556
)
 
(1,268
)
 
(2,545
)
 
(1,257
)
Net loss
$
(1,978
)
 
$
(587
)
 
 
 
 
Weighted-average common shares outstanding - basic and diluted
38,769

 
38,878

 
 
 
 
Net loss per share - basic and diluted
$
(0.05
)
 
$
(0.02
)

See accompanying notes.

6



CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
 
(Unaudited)
Three Months Ended,
March 31,
 
2017
 
2016
Net loss
$
(1,978
)
 
$
(587
)
Other comprehensive loss:
 
 
 
     Market value adjustment to interest rate swaps
(279
)
 
(1,321
)
Comprehensive loss
$
(2,257
)
 
$
(1,908
)


See accompanying notes.


7


CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands, except for per-share amounts)


 

Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit and Distributions
 
Accumulated Other Comprehensive Income (Loss)
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
 
Balance, December 31, 2016
38,797

 
$
388

 
$
605,728

 
$
(226,793
)
 
$
1,747

 
$
381,070

Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Long-term incentive plan, net of forfeitures and amounts withheld for income taxes
53

 
1

 
167

 
 
 
 
 
168

Dividends to common stockholders ($0.135 per share)
 
 
 
 
 
 
(5,183
)
 
 
 
(5,183
)
Repurchases of common shares
(97
)
 
(1
)
 
(1,035
)
 
 
 
 
 
(1,036
)
Net loss
 
 
 
 
 
 
(1,978
)
 


 
(1,978
)
Other comprehensive loss
 
 
 
 
 
 
 
 
(279
)
 
(279
)
Balance, March 31, 2017
38,753

 
$
388

 
$
604,860

 
$
(233,954
)
 
$
1,468

 
$
372,762

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Common Stock
 
Additional
Paid-In
Capital
 
Accumulated
Deficit and Distributions
 
Accumulated Other Comprehensive Loss
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
 
Balance, December 31, 2015
38,975

 
$
390

 
$
607,409

 
$
(195,341
)
 
$
(1,420
)
 
$
411,038

Common stock issued pursuant to:
 
 
 
 
 
 
 
 
 
 
 
Long-term incentive plan, net of amounts withheld for income taxes
39

 

 
136

 
 
 
 
 
136

Dividends to common stockholders ($0.125 per share)
 
 
 
 
 
 
(4,811
)
 
 
 
(4,811
)
Repurchases of common shares
(242
)
 
(2
)
 
(2,505
)
 
 
 
 
 
(2,507
)
Net loss
 
 
 
 
 
 
(587
)
 
 
 
(587
)
Other comprehensive loss
 
 
 
 
 
 
 
 
(1,321
)
 
(1,321
)
Balance, March 31, 2016
38,772

 
$
388

 
$
605,040

 
$
(200,739
)
 
$
(2,741
)
 
$
401,948



See accompanying notes.

8


CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
(Unaudited)
Three Months Ended,
March 31,
 
2017
 
2016
Cash Flows from Operating Activities:
 
 
 
Net loss
$
(1,978
)
 
$
(587
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
Depletion
6,057

 
7,784

Basis of timberland sold
3,517

 
7,327

Stock-based compensation expense
420

 
276

Noncash interest expense
262

 
189

Other amortization
42

 
28

Changes in assets and liabilities:
 
 
 
Accounts receivable
1,483

 
396

Prepaid expenses and other assets
(398
)
 
(187
)
Accounts payable and accrued expenses
(193
)
 
157

Other liabilities
(906
)
 
(613
)
Net cash provided by operating activities
8,306

 
14,770

 
 
 
 
Cash Flows from Investing Activities:
 
 
 
Timberland acquisitions
(979
)
 
(12,504
)
Capital expenditures (excluding timberland acquisitions)
(2,195
)
 
(737
)
Net cash used in investing activities
(3,174
)
 
(13,241
)
 
 
 
 
Cash Flows from Financing Activities:
 
 
 
Proceeds from note payable

 
13,000

Financing costs paid
(30
)
 
(787
)
Dividends paid to common stockholders
(5,183
)
 
(4,811
)
Repurchase of common shares under the share repurchase program
(1,036
)
 
(2,507
)
Repurchase of common shares for minimum tax withholdings
(252
)
 
(140
)
Net cash (used in) provided by financing activities
(6,501
)
 
4,755

Net (decrease) increase in cash and cash equivalents
(1,369
)
 
6,284

Cash and cash equivalents, beginning of period
9,108

 
8,025

Cash and cash equivalents, end of period
$
7,739

 
$
14,309


See accompanying notes.

9


CATCHMARK TIMBER TRUST, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2017 (unaudited)

1.
Organization

CatchMark Timber Trust Inc. ("CatchMark Timber Trust") (NYSE: CTT) primarily engages in the ownership, management, acquisition, and disposition of timberlands located in the United States and has elected to be taxed as a REIT for federal income tax purposes. 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 wholly owned subsidiary of CatchMark Timber Trust, is the sole limited partner of CatchMark Timber OP. In addition, CatchMark Timber TRS, Inc. (“CatchMark TRS”), a Delaware corporation, was formed as a wholly owned subsidiary of CatchMark Timber OP in 2006. Unless otherwise noted, references herein to CatchMark Timber Trust 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 Timber Trust 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 statements for these 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 Timber Trust’s consolidated financial statements include the accounts of any entity in which CatchMark Timber Trust or its subsidiaries owns a controlling financial interest and any limited partnership in which CatchMark Timber Trust or its subsidiaries owns a controlling general partnership interest. All intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the audited financial statements and footnotes included in CatchMark Timber Trust’s Annual Report on Form 10-K for the year ended December 31, 2016.

Reclassification

Certain prior period amounts have been reclassified to conform with the current period's financial statement presentation. Share repurchases of common stock under the share repurchase program and share repurchases of common stock for minimum tax withholdings were presented together as repurchases of common shares in the consolidated statement of cash flows included in CatchMark Timber Trust's quarterly report on Form 10-Q for the quarter ended March 31, 2016.

Recent Accounting Pronouncements

In August 2016, the FASB issued ASU 2016-15, Classification of Cash Receipts and Payments ("ASU 2016-15"), which addresses the statement of cash flow classification requirements for several types of receipts and payments. ASU 2016-15 provides that, among other things, (i) debt prepayments and extinguishment costs should be classified as financing activities, (ii) insurance proceeds should be classified in accordance with the nature of the respective claims, and (iii) distributions from equity method investees should be classified based on the underlying nature of the investee activity according to specific guidelines. ASU 2016-15 is effective for CatchMark Timber Trust on January 1, 2018, with early adoption permitted. CatchMark Timber Trust has early adopted ASU No. 2016-15 as of January 1, 2017 and the adoption will not have a material impact on its consolidated financial statements.

10


In January 2017, the FASB issued Accounting Standards Update 2017-01, Clarifying the Definition of a Business, ("ASU 2017-01"), which provides a more narrow definition of a business to be used in determining the accounting treatment of an acquisition, and, as a result, certain acquisitions that previously may have qualified as business combinations will be treated as asset acquisitions. For asset acquisitions, acquisition costs may be capitalized and purchase price may be allocated on a relative fair value basis. ASU 2017-01 is effective prospectively for CatchMark Timber Trust on January 1, 2018, with early adoption permitted. CatchMark Timber Trust does not expect it to have a material impact on its consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (ASU “2017-05”). It defines an in-substance nonfinancial asset, unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing the sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. ASU 2017-05 is effective for fiscal years beginning after December 15, 2017 and will be applied under either a full retrospective approach or a modified retrospective approach. CatchMark Timber Trust is evaluating the impact that ASU 2017-05 will have on its consolidated financial statements and related disclosures.

3.
Timber Assets

As of March 31, 2017 and December 31, 2016, timber and timberlands consisted of the following, respectively:
 
As of March 31, 2017
(in thousands)
Gross
 
Accumulated
Depletion or
Amortization
 
Net
Timber
$
296,795

 
$
6,057

 
$
290,738

Timberlands
393,064

 

 
393,064

Mainline roads
990

 
520

 
470

Timber and timberlands
$
690,849

 
$
6,577

 
$
684,272


 
As of December 31, 2016
(in thousands)
Gross
 
Accumulated
Depletion or
Amortization
 
Net
Timber
$
324,796

 
$
28,897

 
$
295,899

Timberlands
395,348

 

 
395,348

Mainline roads
935

 
495

 
440

Timber and timberlands
$
721,079

 
$
29,392

 
$
691,687


Timberland Acquisitions

During the three months ended March 31, 2017, CatchMark Timber Trust did not complete any timberland acquisitions, but paid $0.9 million in earnest money related to the acquisition made by a joint venture that closed on April 25, 2017 (see Note 8 – Subsequent Events for information regarding the joint venture). During the three months ended March 31, 2016, CatchMark Timber Trust acquired fee-simple interests in approximately 8,700 acres of timberland for $12.2 million, exclusive of closing costs.


11


Timberland Sales

During the three months ended March 31, 2017 and 2016, CatchMark Timber Trust sold approximately 2,800 and 5,000 acres of timberland for $5.4 million and $8.7 million, respectively. CatchMark Timber Trust's cost basis in the timberland sold was $3.5 million and $7.3 million, respectively. Land sale acreage by state is listed below:

 
 
Three Months Ended
March 31,
Acres Sold In:
 
2017
 
2016
Alabama
 
1,700

 
300

Georgia
 
700

 
4,100

Florida
 

 
600

Louisiana
 
400

 

Total
 
2,800

 
5,000


Timberland Portfolio

As of March 31, 2017, CatchMark Timber Trust owned interests in approximately 496,800 acres of timberlands in the U.S. South, of which 464,700 acres were held in fee-simple interests and 32,100 acres were held in leasehold interests. Land acreage by state is listed below:
 
 
As of March 31, 2017
Acres Located In:
 
Fee
 
Lease
 
Total
Alabama
 
75,000

 
5,600

 
80,600

Florida
 
2,000

 

 
2,000

Georgia
 
252,900

 
26,500

 
279,400

Louisiana
 
20,900

 

 
20,900

North Carolina
 
1,600

 

 
1,600

South Carolina
 
76,400

 

 
76,400

Tennessee
 
300

 

 
300

Texas
 
35,600

 

 
35,600

Total:
 
464,700

 
32,100

 
496,800


4.
Note Payable and Line of Credit

2014 Amended Credit Agreement

CatchMark Timber Trust is party to a credit agreement, which was amended and restated as of May 13, 2016 ( the “2014 Amended Credit Agreement”) with CoBank, AgFirst, Rabobank, and certain other financial institutions, which provides for borrowings consisting of:

a $35.0 million revolving credit facility (the “2014 Revolving Credit Facility”);
a $365.0 million multi-draw term credit facility (the “2014 Multi-Draw Term Facility”); and
a $100.0 million term loan (the “2014 Term Loan Facility”, and together with the 2014 Revolving Credit Facility and the 2014 Multi-Draw Term Facility, the “2014 Amended Credit Facilities”).

The 2014 Amended Credit Facilities may be increased, upon the agreement of lenders willing to increase their loans, by an additional $110.0 million.


12


As of March 31, 2017 and December 31, 2016, CatchMark Timber Trust's amounts outstanding under the 2014 Amended Credit Facilities consisted of the following:
 
 
 
 
 
 
 
Outstanding Balance as of
(dollars in thousands)
Maturity Date
 
Interest Rate (2)
 
Current Interest Rate (3)
 
March 31, 2017
 
December 31, 2016
2014 Term Loan Facility
12/23/2024
 
LIBOR + 1.75%
 
2.73%
 
$
100,000

 
$
100,000

2014 Multi-Draw Term Facility
12/23/2021
 
LIBOR + 2.25%
 
3.22%
 
225,656

 
225,656

Total Principal Balance
 
 
 
 
 
 
$
325,656

 
$
325,656

Less: Net Unamortized Deferred Financing Costs (1)
 
 
 
 
 
 
(4,673
)
 
(4,905
)
      Total
 
 
 
 
 
 
$
320,983

 
$
320,751

(1) 
Represents costs incurred for borrowings under the 2014 Term Loan Facility and the 2014 Multi-Draw Term Facility only.
(2) 
The applicable LIBOR margin on the 2014 Multi-Draw Term Facility ranges between 1.75% and 2.75%, depending on the LTV ratio.
(3) 
Represents the weighted-average interest rate as of March 31, 2017. The weighted-average interest rate excludes the impact of interest rate swaps (see Note 5 – Interest Rate Swaps), amortization of deferred financing costs, unused commitment fees, and estimated patronage refunds.

As of March 31, 2017, $174.3 million remained available under the 2014 Amended Credit Facilities, $139.3 million from the 2014 Multi-Draw Term Facility and $35.0 million from the 2014 Revolving Credit Facility.

Patronage

CatchMark Timber Trust 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. In March 2017 and 2016, CatchMark Timber Trust received patronage refunds of $2.1 million and $1.2 million, respectively, on its eligible borrowings under the 2014 Amended Credit Agreement. Of the total amount received, 75% was received in cash and 25% was received in equity in Patronage Banks. As of March 31, 2017 and December 31, 2016, CatchMark Timber Trust had approximately $0.8 million and $0.3 million, respectively, of equity in Patronage Banks included in prepaid expenses and other assets on the accompanying consolidated balance sheets.

CatchMark Timber Trust has received a patronage refund on its eligible patronage loans for each year it has been party to the 2014 Amended Credit Agreement. Therefore, CatchMark Timber Trust accrues patronage refunds expected to be received in 2018 based on actual patronage refunds received as a percentage of its weighted-average debt balance. For the three months ended March 31, 2017 and 2016, CatchMark Timber Trust recorded $0.7 million and $0.4 million, respectively, in expected patronage refunds against interest expense on the consolidated statements of operations. As of March 31, 2017 and December 31, 2016, approximately $0.7 million and $2.3 million of patronage refunds were included in accounts receivable on the consolidated balance sheets.

Debt Covenants

The 2014 Amended Credit Agreement contains, among others, the following financial covenants:
limits the LTV Ratio to 45% at the end of each fiscal quarter and upon the sale or acquisition of any property;
requires a FCCR of not less than 1.05:1.00; and
requires maintenance of a minimum liquidity balance of no less than $20.0 million at any time.

CatchMark Timber Trust was in compliance with the financial covenants of the 2014 Amended Credit Agreement as of March 31, 2017.

CatchMark Timber Trust’s obligations under the 2014 Amended Credit Agreement are collateralized by a first priority lien on the timberlands owned by CatchMark Timber Trust’s subsidiaries and substantially all of CatchMark Timber Trust’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, CatchMark

13


Timber Trust's obligations under the 2014 Amended Credit Agreement are jointly and severally guaranteed by CatchMark Timber Trust and all of its subsidiaries pursuant to the terms of the 2014 Amended Credit Agreement. CatchMark Timber Trust has also agreed to guarantee certain losses caused by certain willful acts of CatchMark Timber Trust or its subsidiaries.

Interest Paid and Fair Value of Outstanding Debt

CatchMark Timber Trust pays its lenders a commitment fee on the unused portion of the 2014 Multi-Draw Term Facility and 2014 Revolving Credit Facility, at an adjustable rate ranging from 0.20% to 0.35%, depending on the LTV ratio.

During the three months ended March 31, 2017 and 2016, CatchMark Timber Trust made interest payments of $2.5 million and $1.2 million, respectively, on its borrowings. Included in the interest payments for the three months ended March 31, 2017 and 2016 were unused commitment fees of $0.2 million and $0.2 million, respectively.

As of March 31, 2017 and December 31, 2016, the weighted-average interest rate on these borrowings, after consideration of interest rate swaps, was 3.48% and 3.09%, respectively. After further consideration of estimated patronage refunds, CatchMark Timber Trust's weighted average interest rate as of March 31, 2017 and December 31, 2016 was 2.68% and 2.19%, respectively.

As of March 31, 2017, the fair value of CatchMark Timber Trust's outstanding debt approximated its book value. The fair value was estimated based on discounted cash flow analysis using the current market borrowing rates for similar types of borrowing arrangements as of the measurement dates.

5.     Interest Rate Swaps
CatchMark Timber Trust uses interest rate swaps to mitigate its exposure to changing interest rates on its variable rate debt instruments. During the first quarter of 2017, CatchMark Timber Trust entered into three separate interest rate swaps with Rabobank on $20.0 million of the 2014 Term Loan Facility and a total of $50.0 million of the 2014 Multi-Draw Term Facility (collectively, the "2017 Rabobank Swaps"). CatchMark Timber Trust had five interest rate swaps outstanding as of March 31, 2017, with terms below:

 
 
 
 
 
 
 
 
 
 
(in thousands)
Hedged Debt
 
Effective Date
 
Maturity Date
 
Pay Rate
 
Receive Rate
 
Notional Amount
2014 Term Loan Facility
 
12/23/2014
 
12/23/2024
 
2.395%
 
one-month LIBOR
 
$
35,000

2014 Term Loan Facility
 
8/23/2016
 
12/23/2024
 
1.280%
 
one-month LIBOR
 
$
45,000

2014 Term Loan Facility
 
3/23/2017
 
3/23/2024
 
2.330%
 
one-month LIBOR
 
$
20,000

2014 Multi-Draw Term Facility
 
3/28/2017
 
3/28/2020
 
1.800%
 
one-month LIBOR
 
$
30,000

2014 Multi-Draw Term Facility
 
3/28/2017
 
11/28/2021
 
2.045%
 
one-month LIBOR
 
$
20,000

 
 
 
 
 
 
 
 
 
 
$
150,000


As of March 31, 2017, CatchMark Timber Trust’s interest rate swaps effectively fixed the interest rate on $150.0 million of its $325.7 million variable rate debt at 3.80%. All five interest rate swaps qualify for hedge accounting treatment.


14


Fair Value and Cash Paid for Interest Under Interest Rate Swaps

The following table presents information about CatchMark Timber Trust's interest rate swaps measured at fair value as of March 31, 2017 and December 31, 2016:
(in thousands)
 
 
Estimated Fair Value as of
Instrument Type
Balance Sheet Classification
 
March 31, 2017
 
December 31, 2016
Derivatives designated as hedging instruments:
 
 
 
 
 
Interest rate swaps
Prepaid and other assets
 
$
2,768

 
$
2,632

Interest rate swaps
Other liabilities
 
$
(1,300
)
 
$
(885
)

During the three months ended March 31, 2017, CatchMark Timber Trust recognized a change in fair value of the interest rate swaps of approximately $0.3 million as other comprehensive loss. There was no hedge ineffectiveness on the interest rate swaps required to be recognized in current earnings. During the three months ended March 31, 2017 and 2016, net payments of approximately $0.2 million and $0.2 million were made under the interest rate swaps and recorded as interest expense, respectively.

6.    Commitments and Contingencies

Mahrt Timber Agreements

CatchMark Timber Trust is party to a fiber supply agreement and a master stumpage agreement (collectively, the “Mahrt Timber Agreements”) with a wholly owned subsidiary of WestRock. The fiber supply agreement provides that WestRock will purchase specified tonnage of timber from CatchMark TRS at specified prices per ton, depending upon the type of timber. The fiber supply agreement is subject to quarterly market pricing adjustments based on an index published by Timber Mart-South, a quarterly trade publication that reports raw forest product prices in 11 southern states. The master stumpage agreement provides that CatchMark Timber Trust will sell specified amounts of timber and make available certain portions of its timberlands to CatchMark TRS for harvesting. 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 Timber Trust with a reliable customer for the wood products from its timberlands.

Timberland Operating Agreements

Pursuant to the terms of the timberland operating agreement between CatchMark Timber Trust and FRC (the "FRC Timberland Operating Agreement"), FRC manages and operates approximately 418,300 acres of CatchMark Timber Trust'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 Timber Trust pays FRC (i) a monthly management fee based on the actual acreage 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, 2018, and is automatically extended for one-year periods unless written notice is provided by CatchMark Timber Trust 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 Timber Trust with or without cause upon providing 120 days’ prior written notice.

Pursuant to the terms of the timberland operating agreement between CatchMark Timber Trust and AFM (the "AFM Timberland Operating Agreement"), AFM manages and operates approximately 78,500 acres of CatchMark Timber Trust'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 Timber Trust pays AFM (i) a monthly management fee based on the actual acreage AFM manages, which is payable monthly in advance,

15


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, 2017, and is automatically extended for one-year periods unless written notice is provided by CatchMark Timber Trust 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 Timber Trust with or without cause upon providing 120 days’ prior written notice.

Litigation

From time to time, CatchMark Timber Trust 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 Timber Trust 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 Timber Trust accrues the best estimate within the range. If no amount within the range is a better estimate than any other amount, CatchMark Timber Trust accrues the minimum amount within the range. If an unfavorable outcome is probable but the amount of the loss cannot be reasonably estimated, CatchMark Timber Trust 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 Timber Trust discloses the nature and estimate of the possible loss of the litigation. CatchMark Timber Trust does not disclose information with respect to litigation where an unfavorable outcome is considered to be remote.

CatchMark Timber Trust is not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the results of operations, financial condition, or cash flows of CatchMark Timber Trust. CatchMark Timber Trust is not aware of any such legal proceedings contemplated by governmental authorities.

7.    Stockholders' Equity

Share Repurchase Program

On August 7, 2015, the board of directors authorized a stock repurchase program under which CatchMark Timber Trust may repurchase up to $30.0 million of its outstanding common shares. The program has no set duration and the board may discontinue or suspend it at any time. During the three months ended March 31, 2017, CatchMark Timber Trust repurchased 97,469 shares of common stock for approximately $1.0 million. All common stock repurchases through the quarter ended March 31, 2017 under the stock repurchase program were made in open-market transactions. As of March 31, 2017, CatchMark Timber Trust had 38.8 million shares of common stock outstanding and may purchase up to an additional $19.8 million under the program.

Stock-based Compensation

During the three months ended March 31, 2017, CatchMark Timber Trust issued 75,651 shares of service-based restricted stock grants to its non-executive employees, vesting over a four-year period. The fair value of service-based restricted stock grants is determined by the closing price of CatchMark Timber Trust's common stock on the grant date.


16


A rollforward of CatchMark Timber Trust's unvested, service-based restricted stock awards to employees for the three months ended March 31, 2017 is as follows:
 
Number of 
Underlying Shares
 
Weighted- Average
Grant Date
Fair Value
Unvested at December 31, 2016
255,098

 
$
11.56

Granted
75,651

 
$
10.81

Vested
(65,506
)
 
$
11.47

Forfeited

 
$

Unvested at March 31, 2017
265,243

 
$
11.38



CatchMark Timber Trust did not issue stock grants to its executive officers during the first quarter of 2017.

A summary of CatchMark Timber Trust's stock-based compensation expense for the three months ended March 31, 2017 and 2016 is presented below:

 
Three Months Ended
March 31,
(in thousands)
2017
 
2016
General and administrative expenses
$
326

 
$
231

Forestry management expenses
94

 
45

Total
$
420

 
$
276


As of March 31, 2017, approximately $3.6 million of unrecognized compensation expenses related to non-vested restricted stock and RSU's remained and will be recognized over a weighted-average period of 2.6 years.

8.    Subsequent Events

Joint Venture and Dawsonville Acquisition

On April 20, 2017, CatchMark Timber Trust formed a joint venture (“Dawsonville Bluffs”) with the Missouri Department of Transportation & Patrol Retirement System (“MPERS”). On April 25, 2017, Dawsonville Bluffs acquired 11,031 acres of timberlands in North Georgia for $20.0 million, exclusive of transaction costs (the “Dawsonville Timberlands”). The Dawsonville Timberlands contain an average of 51 tons of merchantable timber per acre with 75% pine and 41% sawtimber. CatchMark will manage the Dawsonville Timberlands on behalf of Dawsonville Bluffs. CatchMark Timber Trust funded its 50% ownership interest in Dawsonville Bluffs from the 2014 Multi-Draw Term Facility.

Dividend Declaration

On May 3, 2017, CatchMark Timber Trust declared a cash dividend of $0.135 per share for its common stockholders of record on May 31, 2017, payable on June 16, 2017.


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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto. See also “Cautionary Note Regarding Forward-Looking Statements” preceding Part I, as well as our consolidated financial statements and the notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2016.
Overview

We primarily engage in the ownership, management, acquisition, and disposition of timberland properties located in the United States. We generate recurring income and cash flow from the harvest and sale of timber, as well as from non-timber related revenue sources, such as rent from hunting and recreational leases. When and where we believe appropriate, we also generate income and cash flow from timberland sales.

We strive to deliver superior long-term returns for our stockholders through disciplined acquisitions, sustainable harvest, and well-timed sales. Our immediate emphasis is to grow through selective acquisitions in high demand fiber basket markets and to efficiently integrate the new acquisitions. Operationally, we focus on generating cash flows from sustainable harvests and improved harvest mix on prime timberlands as well as opportunistic land sales to provide recurring dividends to our stockholders. We continue to practice intensive forest management and silvicultural techniques that increase the biological growth of the forest.

We also seek to create additional value by joint venturing with long-term, institutional equity partners to opportunistically acquire, own and manage timberland properties that fit our core investment strategy. In addition, we expect that our joint venture activities will create a platform for future growth by establishing a new fee-based business that leverages our scale and timberland management efficiencies. We entered into our first joint venture on April 25, 2017. See Subsequent Events below for more information.

Timberland Portfolio

As of March 31, 2017, we owned interests in approximately 496,800 acres of high quality industrial timberlands that have been intensively managed for sustainable commercial timber production, consisting of 74% pine stands and 26% hardwood stands. Our timberlands are within an attractive and competitive fiber basket encompassing a diverse group of pulp, paper and wood products manufacturing facilities. Land acreage by state is listed below:
 
 
As of March 31, 2017
Acres Located In:
 
Fee
 
Lease
 
Total
Alabama
 
75,000

 
5,600

 
80,600

Florida
 
2,000

 

 
2,000

Georgia
 
252,900

 
26,500

 
279,400

Louisiana
 
20,900

 

 
20,900

North Carolina
 
1,600

 

 
1,600

South Carolina
 
76,400

 

 
76,400

Tennessee
 
300

 

 
300

Texas
 
35,600

 

 
35,600

Total:
 
464,700

 
32,100

 
496,800



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As of March 31, 2017, our timber inventory consisted of an estimated 19.7 million tons of merchantable inventory with the following components:
 
Tons (in millions)
Merchantable timber inventory(1):
Fee
Lease
Total
Pulpwood
9.4
0.6
10.0
Sawtimber (2)
9.2
0.5
9.7
Total
18.6
1.1
19.7
(1) 
Merchantable timber inventory does not include current year growth, which we expect to approximate current year harvest volumes (see Results of Operations below for information on current year harvest volume).
(2) 
Includes chip-n-saw and sawtimber.

Timber Agreements

A substantial portion of our timber sales is derived from the Mahrt Timber Agreements under which we sell specified amounts of timber to WestRock subject to market pricing adjustments. For the year ended December 31, 2017, WestRock is required to purchase approximately 485,000 tons of timber under the Mahrt Timber Agreements. For the three months ended March 31, 2017, WestRock purchased approximately 116,000 tons under the Mahrt Timber Agreements, which represented approximately 17% of our net timber sales revenue. WestRock has historically purchased tonnage that exceeded the minimum requirement under the Mahrt Timber Agreements. See Note 6 – Commitments and Contingencies to our accompanying consolidated financial statements for additional information regarding the material terms of the Mahrt Timber Agreements.

During the year ended December 31, 2017, we are required to sell approximately 150,000 tons of pulpwood under the
a pulpwood supply agreement (the "Carolinas Supply Agreement") we assumed in connection a timberland acquisition that closed on June 15, 2016. During the three months ended March 31, 2017, we have sold approximately 39,000 under the Carolinas Supply Agreement, which represented 7% of our net timber revenue.

Liquidity and Capital Resources

Overview

Cash flows generated from our operations are primarily used to fund recurring expenditures and distributions to our stockholders. The amount of distributions to common stockholders is determined by our board of directors and is dependent upon a number of factors, including funds deemed available for distribution, which is based principally on our current and future projected operating cash flows, less capital requirements necessary to maintain and grow our existing timberland portfolio. In determining the amount of distributions to common stockholders, we also consider our financial condition, our expectations of future sources of liquidity, current and future economic conditions, market demand for timber and timberlands, and tax conditions, including the annual distribution requirements necessary to maintain our status as a REIT under the Code.
In determining how to allocate cash resources in the future, we will initially consider the source of the cash. We anticipate using a portion of cash generated from operations, after payments of periodic operating expenses and interest expense, to fund certain capital expenditures required for our timberlands. Any remaining cash generated from operations may be used to partially fund timberland acquisitions and pay distributions to stockholders. Therefore, to the extent that cash flows from operations are lower, timberland acquisitions and stockholder distributions are anticipated to be lower as well. Capital expenditures, including new timberland acquisitions, are generally funded with cash from operations or existing debt availability; however, proceeds from future debt financings and equity offerings may be used to fund capital expenditures, acquire new timberland properties and pay down existing and future borrowings.


19


Short-Term Liquidity and Capital Resources

Net cash provided by operating activities for the three months ended March 31, 2017 was $8.3 million, a $6.5 million decrease from the three months ended March 31, 2016, primarily due to a decrease of $2.0 million in net timber sales, a $3.2 million decrease in net cash received from timberland sales and higher interest expense.

Net cash used in investing activities for the three months ended March 31, 2017 was $3.2 million, a $10.1 million decrease from the three months ended March 31, 2016. Cash paid for timberland acquisitions decreased by $11.5 million as we did not complete any timberland acquisitions during the first quarter of 2017. During the three months ended March 31, 2017, we funded approximately $0.9 million of earnest money related to the assets acquired by a new joint venture on April 25, 2017 (see Subsequent Events below). Capital expenditures increased according to plan by $1.5 million due to the continued growth of the company.

Net cash used in financing activities for the three months ended March 31, 2017 was $6.5 million. During the three months ended March 31, 2017, we paid total distributions to stockholders of $5.2 million, which were funded by net cash provided by operating activities. During the three months ended March 31, 2017, we repurchased $1.0 million of common shares under our share repurchase program (see Share Repurchase Program below) and $0.3 million of common shares to satisfy minimum tax withholding requirements on granted and vested shares to employees and directors.

We believe that we have access to adequate liquidity and capital resources, including cash flow generated from operations, cash on-hand, and borrowing capacity, necessary to meet our current and future obligations that become due over the next 12 months. As of March 31, 2017, we had a cash balance of $7.7 million and had access to $174.3 million of additional borrowing availability under the 2014 Amended Credit Facilities (see 2014 Amended Credit Agreement below).

Long-Term Liquidity and Capital Resources

Over the long-term, we expect our primary sources of capital to include net cash flows from operations, including proceeds from timberland sales, proceeds from secured or unsecured financings from banks and other lenders, and public offerings of equity or debt securities. Our principal demands for capital include operating expenses, interest expense on any outstanding indebtedness, certain capital expenditures (other than timberland acquisitions), repayment of debt, timberland acquisitions, and stockholder distributions.

Share Repurchase Program

On August 7, 2015, our board of directors approved a stock repurchase program for up to $30.0 million of our common stock at management's discretion. The program has no set duration and the board may discontinue or suspend the program at any time. During the quarter ended March 31, 2017, we repurchased 97,469 shares of our common stock at an average price of $10.60 per share for a total of approximately $1.0 million. All common stock purchases under the stock repurchase program were made in open-market transactions and were funded with cash on-hand. As of March 31, 2017, we had 38.8 million shares of common stock outstanding and may repurchase up to an additional $19.8 million under the program. The 2014 Amended Credit Facilities allows us to borrow up to $25.0 million under the 2014 Multi-Draw Term Facility to repurchase our common stock. Management believes that opportunistic repurchases of our common stock is a prudent use of capital resources.


20


Contractual Obligations and Commitments

As of March 31, 2017, our contractual obligations are as follows:

Contractual Obligations
 
Payments Due by Period
(in thousands)
 
Total
 
2017
 
2018-2019
 
2020-2021
 
Thereafter
Debt obligations (1)
 
$
325,656

 
$

 
$

 
$
225,656

 
$
100,000

Estimated interest on debt obligations (1) (2)
 
63,929

 
8,511

 
22,695

 
22,103

 
10,620

Operating lease obligations
 
3,175

 
505

 
1,156

 
1,051

 
463

Other liabilities (3)
 
504

 
100

 
184

 
156

 
64

Total
 
$
393,264

 
$
9,116

 
$
24,035

 
$
248,966

 
$
111,147

(1) 
Represents respective obligations under the 2014 Amended Credit Facilities as of March 31, 2017, $100.0 million of which was outstanding under the 2014 Term Loan Facility and $225.7 million of which was outstanding under the 2014 Multi-Draw Term Facility (see 2014 Amended Credit Agreement below).
(2) 
Amounts include the impact of interest rate swaps. See Note 5 Interest Rate Swaps of our accompanying consolidated financial statements for additional information.
(3) 
Represents net present value of future payments to satisfy a liability assumed upon a timberland acquisition.

2014 Amended Credit Agreement

The 2014 Amended Credit Agreement provides for borrowing under credit facilities consisting of:
a $35.0 million revolving credit facility (the “2014 Revolving Credit Facility”);
a $365.0 million multi-draw term credit facility (the “2014 Multi-Draw Term Facility”); and
a $100.0 million term loan (the “2014 Term Loan Facility”, and together with the 2014 Revolving Credit Facility and the 2014 Multi-Draw Term Facility, the “2014 Amended Credit Facilities”).

The 2014 Amended Credit Facilities may be increased, upon the agreement of lenders willing to increase their loans, by an additional $110.0 million. The table below presents the details of our 2014 Amended Credit Facilities as of March 31, 2017:

(dollars in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Facility Name
 
Maturity Date
 
Interest Rate(1)
 
Unused Commitment Fee
 
Outstanding Balance
 
Total Availability
 
Remaining Availability
2014 Revolving Credit Facility
 
12/23/2019
 
LIBOR + 2.25%
 
0.30
%
 
$

 
$
35,000

 
$
35,000

2014 Multi-Draw Term Facility
 
12/23/2021
 
LIBOR + 2.25%
 
0.30
%
 
225,656

 
365,000

 
139,344

2014 Term Loan Facility
 
12/23/2024
 
LIBOR + 1.75%
 
N/A

 
100,000

 
100,000

 

Total
 
 
 
 
 
 
 
$
325,656

 
$
500,000

 
$
174,344

(1) 
The applicable LIBOR margin on the 2014 Revolving Credit Facility and the 2014 Multi-Draw Term Facility ranges from 1.75% to 2.75%, depending on the LTV ratio.

Patronage

We are eligible to receive annual patronage refunds from our lenders under the 2014 Amended Credit Agreement. The annual patronage refund is dependent on the weighted-average debt balance with each participating lender, as calculated by CoBank, for the respective fiscal year under the eligible patronage loans, as well as the financial performance of the Patronage Banks. In March 2017, we received a patronage refund of $2.1 million on our borrowings under the eligible patronage loans that were outstanding during 2016. Of the total amount received, 75% was received in cash and 25% was received in equity in Patronage Banks. The equity component of the patronage refund is redeemable for cash only at the discretion of the Patronage Banks' board of directors.

21


Debt Covenants

The 2014 Amended Credit Agreement contains, among others, the following financial covenants:
limits the LTV ratio to 45% at the end of each fiscal quarter and upon the sale or acquisition of any property;
requires us to maintain a FCCR of not less than 1.05:1.00; and
requires maintenance of a minimum liquidity balance of no less than $20.0 million at any time.

We were in compliance with the financial covenants of the 2014 Amended Credit Agreement as of March 31, 2017.

The terms of our credit agreement prohibit us from declaring, setting aside funds for, or paying any dividend, distribution, or other payment to our stockholders other than as required to maintain our REIT qualification if our LTV ratio is greater than or equal to 45% or we are otherwise in default as defined in the credit agreement. See Note 4 – Note Payable and Line of Credit of our accompanying consolidated financial statements for more information about our credit agreement.

Distributions

Our board of directors declares quarterly distributions based on a single record date. In determining the rate of stockholder distributions, our board considers a number of factors, including current and future levels of cash available to fund stockholder distributions, which is dependent upon the operations of our timberland properties, our current and future projected financial condition, our capital expenditure requirements, our expectations of future sources of liquidity, and the annual distribution requirements necessary to maintain our status as a REIT under the Code.

Our board of directors declared a quarterly distribution for stockholders of record as of February 28, 2017 in the amount of $0.135 per share. This distribution was paid in March 2017. For the three months ended March 31, 2017, we paid total distributions to stockholders of $5.2 million, which was funded from net cash provided by operating activities of $8.3 million.

On May 3, 2017, we declared a cash dividend of $0.135 per share for our common stockholders of record on May 31, 2017, payable on June 16, 2017.

Results of Operations

Overview

Our results of operations are materially impacted by the fluctuating nature of timber prices, changes in the levels and composition of our harvest volumes, the level of timberland acquisitions and sales, changes to associated depletion rates, and varying interest expense based on the amount and cost of outstanding borrowings. Timber prices, harvest volumes, and changes in the levels and composition of each for our timberlands for the three months ended March 31, 2017 and 2016 are shown in the following tables:

22


 
Three Months Ended
March 31,
 
Change
 
2017
 
2016
 
%
Timber sales volume (tons)
 
 
Pulpwood
290,945

 
336,246

 
(13
)%
Sawtimber (1)
220,387

 
260,605

 
(15
)%
 
511,332

 
596,851

 
(14
)%
 
 
 
 
 
 
Harvest mix
 
 
 
 
 
Pulpwood
57
%
 
56
%
 
 
Sawtimber (1)
43
%
 
44
%
 
 
 
 
 
 
 
 
Net timber sales price (per ton)(2)
 
 
Pulpwood
$
13

 
$
14

 
(9
)%
Sawtimber (1)
$
24

 
$
24

 
(1
)%
 
 
 
 
 
 
Timberland sales
 
 
 
 
 
Gross sales (000's)
$
5,450

 
$
8,666

 
 
Sales volumes (acres)
2,824

 
4,982

 
 
Sales price (per acre)
$
1,930

 
$
1,739

 
 
(1)    Includes chip-n-saw and sawtimber.
(2)  
Prices per ton are rounded to the nearest dollar and shown on a stumpage basis (i.e., net of contract logging and hauling costs) and, as such, the sum of these prices multiplied by the tons sold does not equal timber sales in the accompanying consolidated statements of operations for the three months ended March 31, 2017 and 2016.

Harvest volumes decreased 14% to 511,300 tons from 596,900 tons in the prior year period. Our harvest volume in the first quarter of 2016 surged 17% from the fourth quarter of 2015 driven by stumpage sales increases as we opportunistically took advantage of increased demand due to persistent wet weather. Dry weather conditions through much of the first quarter of 2017 provided ample supply in the market, which led to decreased stumpage sales volume compared to same quarter last year, consistent with our expectations. Accordingly, we increased our delivered sales volume by 16% during the first quarter of 2017 to compensate for lower stumpage volume.

Our first quarter net stumpage pricing for both pulpwood and sawtimber slightly improved from the fourth quarter of 2016 but was down slightly year over year, consistent with our expectation and the overall market price. We realized above-average pulpwood stumpage pricing in the first quarter of 2016 as a result of entering into favorable stumpage contracts due to wet weather. Pulpwood prices in 2017 have returned to the trendline levels and are expected to remain stable. Our sawtimber net stumpage pricing was slightly lower due to higher mix of chip-n-saw in our harvest volume for the three months ended March 31, 2017 as compared to the same period in 2016.

Our realized stumpage prices, while trending with the overall South-wide timber market as tracked by TimberMart-South, are generally higher than the South-wide average (weighted by our mix) due to the premiums offered by the micro-markets in which we operate. We expect that our sawtimber and pulpwood pricing will remain steady during the remainder of 2017.


23


Comparison of the three months ended March 31, 2017 versus the three months ended March 31, 2016

Revenues. Revenues decreased to $23.1 million for the three months ended March 31, 2017 from $27.2 million for the three months ended March 31, 2016 due to a decrease in timber sales revenue of $1.0 million and a decrease in timberland sales revenue of $3.2 million, offset by an increase in other revenue of $0.2 million. Gross timber sales revenue decreased 6% as a result of a 14% decrease in harvest volume offset by increases in gross pricing. Harvest volumes were lower in 2017 as we entered into several opportunistic stumpage sales contracts in 2016 to take advantage of demand increases attributable to wet weather, as noted above. Gross pricing was up during the three months ended March 31, 2017 as compared to three months ended March 31, 2016 because delivered sales as a percentage of our mix increased from 60% in the first quarter of 2016 to 81% in the current quarter. Gross pricing on delivered sales includes a premium for logging and hauling costs.

Timber sales by product for the three months ended March 31, 2016 and 2017 are shown in the following table:
 
Three Months Ended
March 31, 2016
 
Changes attributable to:
 
Three Months Ended
March 31, 2017
(in thousands)
 
Price/Mix
 
Volume
 
Timber sales (1)
 
 
 
 
 
 
 
Pulpwood
$
8,532

 
$
401

 
$
(660
)
 
$
8,273

Sawtimber (2)
8,969

 
542

 
(1,292
)
 
8,219

 
$
17,501

 
$
943

 
$
(1,952
)
 
$
16,492

(1) 
Timber sales are presented on a gross basis.
(2) 
Includes chip-n-saw and sawtimber.

Timberland sales revenue decreased to $5.5 million for the three months ended March 31, 2017 from $8.7 million for the three months ended March 31, 2016 as we sold fewer acres in 2017. Other revenues increased to $1.2 million for the three months ended March 31, 2017 from $1.0 million for the three months ended March 31, 2016 due to higher hunting lease income as result of prior year acquisitions.

Operating expenses. Contract logging and hauling costs increased to $7.4 million for the three months ended March 31, 2017 from $6.4 million for the three months ended March 31, 2016 as a result of a 16% increase in delivered sales volume. Delivered sales increased as we continued to implement delivered wood sales on properties acquired since our listing in 2013 and as a result of weak stumpage markets in the first quarter of 2017.

Depletion expense decreased to $6.1 million for the three months ended March 31, 2017 from $7.8 million for the three months ended March 31, 2016 due to a 14% decrease in harvest volume and lower blended depletion rates. We calculate depletion rates annually by dividing the beginning merchantable inventory book value, after the write-off of accumulated depletion, by current standing timber inventory volume. Before the impact of any future acquisitions or significant land sales, the merchantable book value is expected to decrease over time due to depletion, while the standing timber inventory volume is expected to stay relatively stable due to our sustainable harvest management practice. Therefore, we generally expect our depletion rates of our current portfolio to decrease over time.

Costs of timberland sales decreased to $3.9 million for the three months ended March 31, 2017 from $7.7 million for the three months ended March 31, 2016 due to selling fewer acres. Other operating expenses increased to $1.2 million for the three months ended March 31, 2017 from $1.0 million for the three months ended March 31, 2016, primarily as a result of higher property taxes and other costs associated with having more acres under management.

General and administrative expenses increased to $2.5 million for the three months ended March 31, 2017 from $2.0 million for the three months ended March 31, 2016, primarily due to a $0.5 million increase in employee compensation expense. Employee compensation increased due to increased staffing and incremental stock-based compensation costs from new restricted stock issuances in 2017 (see Note 7 – Stock-based Compensation to the accompanying consolidated financial statements).


24


Interest expense. Interest expense increased to $2.6 million for the three months ended March 31, 2017 from $1.3 million for the three months ended March 31, 2016 as a result of a higher average debt balance during the period and higher interest rates incurred on our effectively variable-rate debt.

Net loss. Our net loss increased to $2.0 million for the three months ended March 31, 2017 from $0.6 million for the three months ended March 31, 2016 because of a $1.3 million increase in our interest expense and a $0.1 million decrease in operating income. Our net loss per share for the three months ended March 31, 2017 and 2016 was $0.05 and $0.02, respectively. We anticipate future net losses to fluctuate with timber prices, harvest volumes and mix, depletion rates, timberland sales, and interest expense based on our level of current and future borrowings.

Adjusted EBITDA

The discussion below is intended to enhance the reader’s understanding of our operating performance and ability to satisfy lender requirements. EBITDA is a non-GAAP measure of operating performance. EBITDA is defined by the SEC; however, we have excluded certain other expenses due to their non-cash nature, and we refer to this measure as Adjusted EBITDA. As such, our Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies and should not be viewed as an alternative to net income or cash from operations as measurements of our operating performance. Due to the significant amount of timber assets subject to depletion and the significant amount of financing subject to interest and amortization expense, management considers Adjusted EBITDA to be an important measure of our financial condition. Our credit agreement contains a minimum debt service coverage ratio based, in part, on Adjusted EBITDA since this measure is representative of adjusted income available for interest payments.

For the three months ended March 31, 2017, Adjusted EBITDA was $10.6 million, a $5.5 million decrease from the three months ended March 31, 2016, primarily due to a $2.0 million decrease in net timber sales, a $3.2 million decrease in net timberland sales, a $0.4 million increase in general and administrative expenses and a $0.1 million increase in forestry management expenses, offset by a $0.2 million increase in other revenues.

Our reconciliation of net loss to Adjusted EBITDA for the three months ended March 31, 2017 and 2016 follows:
 
Three Months Ended
March 31,
(in thousands)
2017
 
2016
Net loss
$
(1,978
)
 
$
(587
)
Add:
 
 
 
Depletion
6,057

 
7,784

Basis of timberland sold
3,517

 
7,327

Amortization (1)
304

 
217

Stock-based compensation expense
420

 
276

Interest expense (1)
2,294

 
1,079

Adjusted EBITDA
$
10,614

 
$
16,096

(1)
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 accompanying consolidated statements of operations.

Election as a REIT

We have elected to be taxed as a REIT under the Code, and have operated as such beginning with our taxable year ended December 31, 2009. To qualify to be taxed as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our adjusted taxable income, as defined in the Code, to our stockholders, computed without regard to the dividends-paid deduction and by excluding our net capital gain. As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders.

25


If we fail to qualify to be taxed as a REIT in any taxable year, we will then be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for that year and for the four years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we believe that we are organized and operate in such a manner as to qualify for treatment as a REIT for federal income tax purposes.

Inflation

Our timber agreements provide that we will sell specified amounts of timber subject to quarterly market pricing adjustments and monthly fuel pricing adjustments, which are intended to protect us from, and mitigate the risk of, the impact of inflation. The price of timber has generally increased with increases in inflation; however, we have not noticed a significant impact from inflation on our revenues, net sales, or income from continuing operations.

Application of Critical Accounting Policies
Our accounting policies have been established to conform to GAAP. The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If management’s judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied or different amounts of assets, liabilities, revenues, and expenses would have been recorded, thus resulting in a different presentation of the financial statements or different amounts reported in the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of our results of operations to those of companies in similar businesses.
A discussion of the accounting policies that management deems critical because they may require complex judgment in their application or otherwise require estimates about matters that are inherently uncertain, is provided below.
Timber Assets
Timber and timberlands, including logging roads, are stated at cost less accumulated depletion for timber harvested and accumulated amortization. We capitalize timber and timberland purchases. Reforestation costs, including all costs associated with stand establishment, such as site preparation, cost of seedlings, fertilization, and herbicide application, are capitalized and tracked as premerchantable timber assets by vintage year. Annually, capitalized reforestation costs for timber that has reached a merchantable age is reclassified into merchantable timber inventory and are depleted as harvested. Timber carrying costs, such as real estate taxes, insect control, wildlife control, leases of timberlands and forestry management personnel salaries and fringe benefits, are expensed as incurred. Costs of major roads are capitalized and amortized over their estimated useful lives. Costs of roads built to access multiple logging sites over numerous years are capitalized and amortized over seven years. Costs of roads built to access a single logging site are expensed as incurred.

Depletion
We recognize depletion expense as timber is harvested. Depletion rates are calculated at least annually using the straight-line method by dividing the remaining merchantable inventory book value by the current standing timber inventory volume.

Evaluating the Recoverability of Timber Assets
We continually monitor events and changes in circumstances that could indicate that the carrying amounts of our timber assets may not be recoverable. When indicators of potential impairment are present that suggest that the carrying amounts of timber assets may not be recoverable, we assess the recoverability of these assets by determining whether

26


the carrying value will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. Impairment losses would be recognized for (i) long-lived assets used in our operations when the carrying value of such assets exceeds the undiscounted cash flows estimated to be generated from the future operations of those assets, and (ii) long-lived assets held for sale when the carrying value of such assets exceeds an amount equal to their fair value less selling costs. Estimated fair values are calculated based on the following information in order of preference, dependent upon availability: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. We intend to use one harvest cycle for the purpose of evaluating the recoverability of timber and timberlands used in our operations. Future cash flow estimates are based on probability-weighted projections for a range of possible outcomes and are discounted at risk-free rates of interest. We consider assets to be held for sale at the point at which a sale contract is executed and the buyer has made a nonrefundable earnest money deposit against the contracted purchase price. We have determined that there has been no impairment of our long-lived assets to date.
Allocation of Purchase Price of Acquired Assets
Upon the acquisition of timberland properties, we allocate the purchase price to tangible assets, consisting of timberland and timber, and identified intangible assets and liabilities, which may include values associated with in-place leases or supply agreements, based in each case on our estimate of their fair values. The values of tangible assets are then allocated to timberland and timber based on our determination of the relative fair value of these assets.

Revenue Recognition
Revenue from the sale of timber is recognized when the following criteria are met: (i) persuasive evidence of an agreement exists, (ii) legal ownership and the risk of loss are transferred to the purchaser, (iii) price and quantity are determinable, and (iv) collectability is reasonably assured. Our primary sources of revenue are recognized as follows:
(1)
For delivered sales contracts, which include amounts sufficient to cover costs of logging and hauling of timber, revenues are recognized upon delivery to the customer.
(2)
For pay-as-cut contracts, the purchaser acquires the right to harvest specified timber on a tract, at an agreed-upon price per unit. Payments and contract advances are recognized as revenue as the timber is harvested based on the contracted sale rate per unit.
(3)
Revenues from the sale of HBU timberland and nonstrategic timberlands are recognized when title passes and full payment or a minimum down payment is received and full collectability is assured. If a down payment of less than the minimum down payment is received at closing, we will record revenue based on the installment method.
(4)
For recreational leases, rental income collected in advance is recorded as other liabilities in the accompanying consolidated balance sheets until earned over the term of the respective recreational lease and recognized as other revenue.

In addition to the sources of revenue noted above, we also may enter into lump-sum sale contracts, whereby the purchaser generally pays the purchase price upon execution of the contract. Title to the timber and risk of loss transfers to the buyer at the time the contract is consummated. Revenues are recognized upon receipt of the purchase price. When the contract expires, ownership of the remaining standing timber reverts to us; however, adjustments are not made to the revenues previously recognized.

Commitments and Contingencies

We are subject to certain commitments and contingencies with regard to certain transactions. Refer to Note 6 –Commitments and Contingencies to our accompanying consolidated financial statements for further explanation. Examples of such commitments and contingencies include Mahrt Timber Agreements and Timberland Operating Agreements.


27


Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that are reasonably likely to have a current or future material effect on our financial condition or changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Subsequent Events

Joint Venture and Dawsonville Acquisition

On April 20, 2017, we formed a joint venture (“Dawsonville Bluffs”) with the Missouri Department of Transportation & Patrol Retirement System (“MPERS”). On April 25, 2017, Dawsonville Bluffs acquired 11,031 acres of timberlands in North Georgia for $20.0 million, exclusive of transaction costs (the “Dawsonville Timberlands”). The Dawsonville Timberlands contain an average of 51 tons of merchantable timber per acre with 75% pine and 41% sawtimber. We will manage the Dawsonville Timberlands on behalf of Dawsonville Bluffs. We funded our 50% ownership interest in Dawsonville Bluffs from the 2014 Multi-Draw Term Facility.

Dividend Declaration

On May 3, 2017, we declared a cash dividend of $0.135 per share for our common stockholders of record on May 31, 2017, payable on June 16, 2017.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

As a result of our debt facilities, we are exposed to interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. To achieve these objectives, we have entered into five interest rate swaps, and may enter into other interest rate swaps, caps, or other arrangements in order to mitigate our interest rate risk on a related financial instrument. We do not enter into derivative or interest rate transactions for speculative purposes; however, certain of our derivatives may not qualify for hedge accounting treatment. All of our debt was entered into for other than trading purposes. We manage our ratio of fixed-to-floating-rate debt with the objective of achieving a mix that we believe is appropriate in light of anticipated changes in interest rates. We closely monitor interest rates and will continue to consider the sources and terms of our borrowing facilities to determine whether we have appropriately guarded ourselves against the risk of increasing interest rates in future periods.

As of March 31, 2017, we had $325.7 million outstanding under the 2014 Amended Credit Facilities, of which $100.0 million matures on December 23, 2024 and $225.7 million matures on December 23, 2021. The 2014 Term Loan Facility bears interest at an adjustable rate based on one-month LIBOR Rate plus a margin of 1.75% and the 2014 Multi-Draw Term Facility bears interest at an adjustable rate based on one-month LIBOR Rate plus a margin ranging from 1.75% to 2.75%, depending on the LTV Ratio (see Note 4 – Note Payable and Line of Credit to the accompanying consolidated financial statements for the applicable margin and current interest rates as of March 31, 2017).

During the first quarter of 2017, we entered three separate interest rate swaps with Rabobank on $20.0 million of the 2014 Term Loan Facility and $50.0 million of the 2014 Multi-Draw Term Facility that effectively fixes the interest rates on debt that is subject to variable interest rates. As of March 31, 2017, we are party to five interest rate swaps, with notional values totaling $100.0 million of the 2014 Term Loan Facility and $50.0 million of the 2014 Multi-Draw Term Facility (see Note 5 – Interest Rate Swaps to the accompanying consolidated financial statements for more information on our interest rate swaps).

As of March 31, 2017, after consideration of the interest rate swaps, $175.7 million of our total debt outstanding is subject to an effectively variable interest rate while the remaining $150.0 million is subject to an effectively fixed-interest rate. A change in the market interest rate impacts the net financial instrument position of our effectively fixed-rate debt portfolio; however, it has no impact on interest incurred or cash flows.

28


Details of our effectively variable-rate and effectively fixed-rate debt outstanding as of March 31, 2017, along with the corresponding average interest rates, are listed below:
 
 
Expected Maturity Date
 
 
(dollars in thousands)
 
2017
 
2018
 
2019
 
2020
 
2021
 
Thereafter
 
Total
Maturing debt:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable-rate debt
 
$

 
$

 
$

 
$

 
$
175,656

 
$

 
$
175,656

Effectively fixed-rate debt
 
$

 
$

 
$

 
$

 
$
50,000

 
$
100,000

 
$
150,000

Average interest rate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Variable-rate debt
 
%
 
%
 
%
 
%
 
3.21
%
 
%
 
3.21
%
Effectively fixed-rate debt
 
%
 
%
 
%
 
%
 
4.15
%
 
3.63
%
 
3.80
%

As of March 31, 2017, the weighted-average interest rate of our outstanding debt, after consideration of the interest rate swaps, was 3.48%. A 1.0% change in interest rates would result in a change in interest expense of approximately $1.8 million per year. The amount of effectively variable-rate debt outstanding in the future will be largely dependent upon the level of cash from operations and the rate at which we are able to employ such proceeds toward repayment of the 2014 Amended Credit Facilities and acquisition of timberland properties.

ITEM 4.    CONTROLS AND PROCEDURES
Management’s Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
Management, with the participation of the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods in SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


29


PART II.
OTHER INFORMATION

ITEM 1.
LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition. Nor are we aware of any such legal proceedings contemplated by governmental authorities.

ITEM 1A.     RISK FACTORS

There have been no material changes from the risk factors disclosed in the "Risk Factors" section of our Annual Report on Form 10-K for the year ended December 31, 2016.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 

Issuer Purchases of Equity Securities

The following table provides information regarding our purchases of CatchMark Timber Trust's common stock during the quarter ended March 31, 2017:
Period
 
Total Number of Shares Purchased (1) (2)
 
Average Price Paid per Share (1) (2)
 
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) 
 
Maximum Number (Or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs (1)
January 1 - January 31
 
36,711

 
$
10.62

 
31,944

 
$
20.5

million
February 1 - February 28
 
52,169

 
$
10.63

 
33,617

 
$
20.1

million
March 1 - March 31
 
31,908

 
$
10.66

 
31,908

 
$
19.8

million
Total
 
120,788

 
 
 
97,469

 
 
 
(1) 
On August 7, 2015, our Board of Directors authorized a share repurchase program under which we may repurchase up to $30 million of our outstanding common shares. All repurchases of outstanding common shares to date have been made in open-market transactions.
(2) 
Includes shares withheld for tax withholding purposes.

ITEM 3.
DEFAULTS UPON SENIOR SECURITIES

(a)
There have been no defaults with respect to any of our indebtedness.
(b)
Not applicable.


ITEM 4.
MINE SAFETY DISCLOSURES

Not applicable.


ITEM 5.
OTHER INFORMATION

(a)
During the first quarter of 2017, there was no information that was required to be disclosed in a report on Form 8-K that was not disclosed in a report on Form 8-K.


30


(b)
There are no material changes to the procedures by which stockholders may recommend nominees to our board of directors since the filing of our Schedule 14A.

ITEM 6.    EXHIBITS
The exhibits required to be filed with this report are set forth on the Exhibit Index hereto and incorporated by reference herein.

31


SIGNATURES
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.

 
 
CATCHMARK TIMBER TRUST, INC.
(Registrant)
 
 
 
 
Date:
May 4, 2017
By:
 
/s/ Brian M. Davis
 
 
 
 
Brian M. Davis
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
 

32


EXHIBIT INDEX TO FIRST QUARTER 2017 FORM 10-Q
CATCHMARK TIMBER TRUST, INC.
Exhibit
Number
 
Description
 
 
 
3.1
 
Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 filed on August 9, 2013)
 
 
 
3.2
 
First Articles of Amendment to the Sixth Articles of Amendment and Restatement (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-11 (File No. 333-191322) filed on September 23, 2013)
 
 
 
3.3
 
Articles of Amendment (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on October 25, 2013 (the “October 25 Form 8-K”))
 
 
 
3.4
 
Articles of Amendment (incorporated by reference to Exhibit 3.2 to the October 25 Form 8-K)
 
 
 
3.5
 
Articles Supplementary (incorporated by reference to Exhibit 3.3 to the October 25 Form 8-K)
 
 
 
3.6
 
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.6 to Registration Statement on Form S-8 (File No. 333-191916) filed on October 25, 2013)
 
 
 
31.1*
 
Certification of the Principal Executive Officer of the Company, pursuant to Securities Exchange Act Rule 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
31.2*
 
Certification of the Principal Financial Officer of the Company, pursuant to Securities Exchange Act Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
 
 
32.1*
 
Statement of the Principal Executive Officer and Principal Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
 
101.INS*
 
XBRL Instance Document
 
 
 
101.SCH*
 
XBRL Taxonomy Extension Schema Document
 
 
 
101.CAL*
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
101.DEF*
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
101.LAB*
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
101.PRE*
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
*
 
Filed herewith.

EX-31.1 2 exhibit311section302certpe.htm SECTION 302 CERTIFICATION - PEO Exhibit


EXHIBIT 31.1
 
PRINCIPAL EXECUTIVE OFFICER CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
  I, Jerry Barag, certify that:
 
1.
I have reviewed this quarterly report on Form 10-Q of CatchMark Timber Trust, Inc. for the quarter ended March 31, 2017:

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated: May 4, 2017
By: 
/s/ Jerry Barag
 
 
Jerry Barag
 
 
Principal Executive Officer



EX-31.2 3 exhibit312section302pfocer.htm SECTION 302 CERTIFICATION - PFO Exhibit


EXHIBIT 31.2
 
PRINCIPAL FINANCIAL OFFICER CERTIFICATION
PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Brian M. Davis, certify that:  
1.
I have reviewed this quarterly report on Form 10-Q of CatchMark Timber Trust, Inc. for the quarter ended March 31, 2017;

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
 
Dated: May 4, 2017
By: 
/s/ Brian M. Davis
 
 
Brian M. Davis
 
 
Principal Financial Officer



EX-32.1 4 exhibit321section906cert_2.htm SECTION 906 CERTIFICATION Exhibit


EXHIBIT 32.1
 
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. 1350)
 
In connection with the Quarterly Report on Form 10-Q of CatchMark Timber Trust, Inc. (the “Registrant”) for the quarter ended March 31, 2017, as filed with the Securities and Exchange Commission (the “Report”), the undersigned, Jerry Barag, Principal Executive Officer of the Registrant, and Brian M. Davis, Principal Financial Officer of the Registrant, hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350) that, to the best of our knowledge and belief:
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

/s/ Jerry Barag
 
Jerry Barag
 
Principal Executive Officer
 
May 4, 2017
 
 
 
/s/ Brian M. Davis
 
Brian M. Davis
 
Principal Financial Officer
 
May 4, 2017
 



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