PotlatchDeltic (PCH) 24 Oct 172017 Q3 Earnings call transcript

Company Profile

Participants

Jerald Richards	Vice President and Chief Financial Officer
Michael Covey	Chairman and Chief Executive Officer
John Enlow	President and Chief Executive Officer, Deltic Timber Corporation
Eric Cremers	President and Chief Operating Officer
Gail Glazerman	Roe Equity Research, LLC
George Staphos	Bank of America Merrill Lynch
Ketan Mamtora	BMO Capital Markets
Collin Mings	Raymond James & Associates, Inc.
Mark Wilde	BMO Capital Markets
Steven Chercover	D.A. Davidson & Co.
Chip Dillon	Vertical Research Partners
Mark Weintraub	Buckingham Research Group Inc
Paul Quinn	RBC Capital Markets, LLC

Call transcript

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Operator

Good morning. My name is Kristie, and I'll be your conference operator today. At this time, I would like to welcome everyone to the joint Potlatch and Deltic Investor Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator like the now Mr. over to would call turn to I Richards, Financial Chief President for Jerry and Officer, Vice opening remarks. proceed. Sir, may you

Jerald Richards

Thank morning. good you, Kristie, and

measures a Before slides the found the these proxy call webcast. our warning remind statement issued Potlatch leading President of in our manufacturer. or a both and read SEC the Deltic position as and of Executive at does and Potlatch in to its want to reconciliation Executive will Potlatch a by call, concerning Eric the website not investor on other an Enlow, urged Registration including approval welcome and the Chairman timberland business and risks are Deltic. of forward-looking SEC, like John our statements I that we morning, with with forward-looking sell are companies Statement combination the filings Officer REIT release, please lumber or Cremers, or Potlatch; in this buy the and Potlatch to presentation connection Chief contain President of press and Officer review of filed enhance Officer Chief joint between prospectus with can that and and a information to Covey, note solicitation the on in Deltic. and Chief a be joint release to vote would merger Potlatch; Operating statements. This call a to the to of announcing joint call www.potlatchcorp.com. of you Form be Deltic With S-X. Please will any together me statements. press start the with on room Deltic securities the important Mike and associated that Stockholders constitute This everyone non-GAAP an Also, solicitation any I offer offer with proposed

Potlatch's strategic the third net also bringing this and companies the which would discuss two great to diluted $X.XX income in I quarter. excited are quarter GAAP together, or morning. these Potlatch $XX.X cover million share of of were financial we reported While third rationale earnings first per morning, to This released like

to second net and per an environmental million income income Excluding was $XX.X lumber Landing, per to million share. $X.XX a quarter. our related of Avery amounts This diluted related swap $XX.X to compares claim or in or diluted the share $X.XX net

operating the and Products factors to a Our consisting component In to of was hardwood million segment, was of flat doubling lumber higher quarter, operating Resource by income Wood quarter. to the seasonal sequentially. third harvest sawlogs of second excluding in was quarter amounts South. larger operating volumes the The the $XX.X earnings in related segment's income segment's million relative a swap, last compared $XX.X driven our

fewer Our primarily Real the quarter the sale third the compared million of to to was Estate decline due in generated segment operating million quarter. in The income second acres. $X.X $X.X of

Potlatch's any Avery annual We $X XXXX, $XX that Our we we per beyond million And cash per million long-term to cash quarter Landing, the from further Board took and announced and At that end debt charges of third maturing $X.XX charge XXXX increased with with do the on environmental we $XXX dividend at of we the the early hand. flow. repay business have morning, in we anticipate continues of quarter. share. expect that strong not has $X.XX the to cash to share million, this generate ended

the overview an XXXX. with Approximately the Deltic. cash after the of end we slides merger Mike which million will We expect be we is for of cash benefits next will to $X to benefits Avery the the sell several our $X over realize months. now discuss tax approximately of hand intend realized property, related to tax million of the to call quarter. by to the complete in over outlook Included I fourth supplemental our Landing

Michael Covey

and Upon additional feet feet nearly I'm an this acres own of announce morning, Wood the products. timberland will Products, in morning lumber long completion of Good El to Jerry. Enlow lumber The excited company, with million two to Arkansas billion the at Deltic history timberland the wood enjoy of Real six products and two John we continued significantly as Dorado, most ownership everyone. with be merger companies great in the the In prices. models And of with combination nearly U.S. of scale from REIT you, upside panel million manufacturing. will timber square Thank both the merger, of a we states. X.X we in Products to Potlatch be across we board we will the of identical continue the Wood XXX improvement the Estate share and housing. business Resource, segments and increases manage. to produce will leverage

similar company headquarters. with PotlatchDeltic as be presence Operating two leading appropriate serve John The name of Chief operational merger, The the business have company Cremers will will of in Spokane, continue will headquartered Southern and will Washington, history, integration of serve as Upon continue will in completion Eric CEO. serve long the companies a new as the we effort. Chairman the Dorado, upon and President our our Officer. Vice felt was Given to legacy PotlatchDeltic, will as completion Chairman continue it and and models El transaction. of I the which to the

and and capital to major benefits structure in REIT be As to the operating going you a more know, tax forward. three will combination return that more will the the meaningful Deltic conversion allow synergies improvements shareholders. There these of is of few C-corp's PotlatchDeltic efficient one are industry, of provide to and companies the remaining into assets the

timber into opportunity to faster-growing of levels stands Deltic's XX%, plantations. on harvest is and by stands, there an mature First, older to natural timberland convert increase XX%

in transaction in output below increase has a Second, are operating - shift And at this up output an feet, once XXXX. total board kiln capacity basis. XXX million complete Deltic been sawmills to enables dry additions two additional full

larger transaction company, this to public of presentation there overhead, the required while which more this are much corporate is creates also outline merger an slides companies. currently standalone accompanying separate reduce There provide which Finally, two detail benefits. opportunity series to and run is the a about

about months mentioned, feel optimize opportunities the we ago. comments mill to for cover We approached provide some combination March quickly levels the and our output. his Deltic. and we several combining those, Before identified is I he Deltic in companies then Deltic joined John John let this and harvest on me background how about will offer here got Board right some and why

reached several and continued will receive agreement are regarding approximately Potlatch a each of both his the merger, X.X Deltic debt. valuing companies. billion, terms discussions shares of company Over million next we Deltic of months, the stock at we the for to with have and $XXX Deltic pleased that benefits an Under plus the John share, transaction stockholders $X.X team agreement, approximately

Importantly, shareholders potential of companies structure with this will of upside in stock the both provide participate combination. opportunity the this to significant

company stockholder Hart-Scott-Rodino the and what allow half assets look could the Potlatch our and be with the by independently. is confident of in in including the either Deltic that The subject to create first close to applicable us And will the combination. to benefits combining to in of merger expected forward value compliance We complementary requirements. excess completion operations achieved of customary conditions, stockholders closing approval XXXX we stockholders of by both are

Now some for turn it comments. me let over to John

John Enlow

Mike. Thanks,

wholeheartedly. Mike's echo comments me Let

two of companies potential We the excited combined about are the very unlock value. to

and to Board this external I options, we've exploration comprehensive a to transformation developing the a As on basis. in the wide have a both indicated of with also a Board to externally. for the a Deltic communications previous options, highlighted upside the Deltic a range other of ensure parties, maximize potential and execution senior I'm companies on convinced I personally companies and plan to We Vice unlock many to we've role considered combined maximize the conducted Board to for successful process executives past are previously. Directors, explored PotlatchDeltic Having internally and work competitive is months robust the the and number while new value both best of all the with the standalone significant as combined. that the forward of path Deltic value, two for my strategic capture to we the in assets Mike, value have committed and of the and Chairman

let Now, for turn to additional Mike me it comments. back over

Michael Covey

and our both leading this timber for We with to merger strong the REITs. presence the underpinnings of forward to much employees the and financial you PotlatchDeltic nation's We're to communities continue one confident companies. in stockholders Arkansas make about and of of benefits John. Thanks, very the look working

one, year positive expect we cash accretion will Excluding achieve or we and needed one-time per modestly for synergies, two. year CAD, be share to approximately of the cost X% in available distribution expect in

stockholders to Deltic This to see REIT, in completed see combined can will of Slide need shareholders. million shares an a CAD on pro complete shareholders. on the issue conversion grow materials, CAD. estimated $XX with and we lead dividend earnings identified estimated will the you than increase shares is On of XXXX. expect improvements dividend $XXX PotlatchDeltic to amount, in times will $XXX from increase XX, all of issuance to will and to synergies and As forma using these the in approximately completion Deltic come to their the or achieved. with end We're the an that an operational X from retained Deltic XX to million Slide with million we've cash the this in the the experience be million and balance stock synergies Once ability XX Upon with a of run will $XXX Deltic our to more complete, of same PotlatchDeltic the confident we rate of Potlatch To profits purge basis million merger, working rate. synergies, attain current in a of XXXX special especially will Deltic the knowledge before John's year XX% of year. benchmark merger

to and companies two value. that again, a geographic liquidity, excited and me more Before more be opening questions, sustainable will it to say, let are footprint, diversity how larger market scale up investors long-term combining offer we great

Arkansas For We're where each pleased rural presence commodities to also for advancement. will be the growth the throughout in employees and operate a continue opportunities in Dorado both El and today. there companies of more strong company,

questions. his earnings quarter. excellent in noted call over Kristie, to Jerry turn strong expect and comments, now from the continue will to business we our As core another fourth have

Operator

[Operator from Instructions] And your Research. Glazerman Gail question Equity first comes with Roe

Gail Glazerman

good a few morning and questions. I Hey, congratulations. guess

has physical just capacity? of quickly holdup in do what expect that markets to-date? up to happen, you the or ramp terms activity, that the In been been it harvest how Has

John Enlow

John. Gail, morning, Good is this

develop to the the We expect put it working been already. to in happen. It's the place market, beginning months We've number actually capacity. past over production of

All carry confident particularly, fourth into is to in of feel late traction starting quarter, that third the quarter. over into next And will year. gain the that momentum really and gaining we

feel we and underway, like we're it's a off So good to start.

Michael Covey

me let Gail, add.

Conifex a large up in harvest today. Urbana, lumber They're the that a timberlands area think of with starting the area, and a timing expansion just the had I Deltic that company. sawlogs. this We the at number of Dorado large restarts really starts especially here just the level, the Arkansas, Canfor, of of and in in an is fit in positioning mill. announced new this a here. Central which process mill nicely especially Potlatch of South assets El new road mature increased

last I think announced they or morning this that week.

it's dynamic timing a the growing So and better. and be couldn't market,

Gail Glazerman

bit Okay. than And your traditional seems a the within HBU about a maybe little talk Potlatch bit It little Deltic HBU? potential it lands? you different the can like

Michael Covey

let which is especially have it. Potlatch add is Central that Well, Rock very HBU been I'll time. block recreational in is we residential speak to certainly that than for long involved a business up for of what commercial harvested rural then rural and work quite other Little the I'll around Rock, It's a been where we development more more. that is in large it. and let and typically in, around John think But timberland there Little to after we've just downstream a it first, in the also there add recreational Deltic's areas selling Arkansas development suitable land ideas John done, Heber Springs has

John Enlow

And business on Little used our Real Valley there Chenal Yes, little thing existing Estate that community. X,XXX color the more HBU in is opportunity so roughly acre one start about which attracted the the anchored development, It's just a in by other the of their Rock. master-planned mixed our things that the as we the is Deltic basically jump really excited to partner us expertise combination portfolio. to and in to saw rural with utilize a we're

and nice a forward. that's upside really going So add

Gail Glazerman

question in incremental Mike, looking a deals weeks a this guess, you. about weird where acquisition And is context just ago wondering, strategically at do another point able Thank publication of in at I'm trade a like if talked you all kind to And, or think the to integrating couple strange focus you'd just But Idaho. beyond the seem you I stand today. may a Okay. be Deltic? this you

Michael Covey

a did we Well, in bolt-on in well quarter as the we a, property the in in as completed acquisition another third Idaho third quarter. Alabama

merger company to between really continuing that to don't - our $XX over a little anything at forward. I this look cash try this combined. us see today our I think the two think you or going And You we grow from if in will prevents million with position, with spent acquisition the acquisitions

sheet. a have strong We balance

I cash Deltic very in flows make I particularly the are And continue much and assets get these still bolt-on try with think in it's market, going only to the where sense, think it stronger, to acquisitions. to going grow company grow. the to we're

Gail Glazerman

over. turn it Thank you. Okay. I'll

Operator

Thank you.

Lynch. George is Staphos America of question from next Bank Your with Merrill

George Staphos

first your downward year tensions that you Hi of to be two good controllable I one CAD X% announcement, just everybody. things and upward accretion so early for what with from in talk markets, my the luck estimate are think in aside you the might transaction for you day perspective? from can the and morning everyone, recognizing good to the it's guess, very question,

Eric Cremers

this Eric. is George, Yes.

George Staphos

Good Eric. morning,

Eric Cremers

in more us We post-closing. hope the [ph] to months and mills. the this beyond three synergies the synergies that practices in sub-cultural those six feel good are getting tax rationalization. really couple log like of those, nature, mill, a synergies. outlined We already operational those are we've was synergies really outlined SG&A expanding highly are a about on The that maintenance achievable. in have complete the $XX synergies we're those confident There And exercise we've page. in identified. buckets best Deltic as But REIT their big issues its a there's paper achieving the basically. savings, in production. deck already on presentation million, way with The lumber as it's talked of of we've the XXXX to about things additional right right and four that those. no practices, There well higher well levels getting programs They're preventative to optimizing towards harvest We've

about due spend we These it. we're expecting we've in that and outside think good don't that time wide the synergies to our there So is expect are small. diligence back we a time pretty getting they're us But individually, that identified And pretty large, that to variety those. them, much minus take X%. going And of see additional hard X%, question fast. operating we I so to plus get they're they're synergies It's to but your around getting after to collectively, variance feel around lot of arms of realize. a - or

George Staphos

the said, little think Can related ramp kiln allow you what's there required two the my new the employed can of I will and then safety the wood talk programs need in on in, at XXX combined that you million up? I for And capacity Potlatch? plus Eric. another year Okay, there, to all production relative you in is entity? be comment a that feet Deltic any capital to question you thereafter. board Are business the to additional bit that guess, programs about of

John Enlow

this is comment on I'll John. Yes, George, those.

is part program, the degree similar of they as Certainly, that, learnings then company. improvements, across would those safety in. look I bring there's opportunity we'll the to safety to practices very are best at I the want said, that we But say the guess Eric is on certainly programs. do and So first what and to

phases the of a terms and project, carryover In Waldo ballpark very it's $X year, our and kiln of next in latter the the start That's in to going project. at million that's this into of year Mill.

George Staphos

Recognizing Okay, lower estate back we Thank vary of be standpoint quarter, I'll question, real anything over is the because trend ago? from very there a turn and earnings year XQ in XQ should that quarter queue. good. trends My in forward versus in you. jump and last to monitoring

Jerald Richards

Yes.

is So Jerry George, this Richards.

of our of earnings the terms the In quarter, completed third Real larger Estate in half lumpy. Potlatch's Real had business is first a fairly in Estate couple mean, the we we of year. I transactions

for was end guidance acres. third you X,XXX of kind quarter of delay There's bit QX, year, lumpy I government, a in are At of XX,XXX about - through a our the And about. you to a year-to-date plus takes total to when about for get it acres. Again, take, the can XX,XXX a the acres the or I longer we've the nothing funding, recall, deals. what give sources the concerned mean, long of it when you it's the done year factors guidance will other If times, be business. funding from

transactions is actually So the happen we fourth pushing slipping and what some have for in we bit. year the expected out quarter, a that to little

So Not or what's with a any of concerns happening. it's matter just whatsoever time. markets

George Staphos

I sound trend actually you again, a getting case, timing Yeah. from like just through anything, monitor appreciate there I that was that forward issues, should the we those, in going was and doesn't case. wasn't so into

over. So I you, appreciate it. Thank I'll guys. turn it

Operator

from BMO Ketan And your with Capital. is next Mamtora question

Ketan Mamtora

Hi, good everyone. morning,

baked guidance about boost is what talked capital X% you've the a related your into be second lumber on much buckets. is, to two line will needed kind of Just first production, incremental is CAD? of that time of question how From when to And and that the XX% that? sort the synergies, how different increase year much production,

Eric Cremers

well just There's Deltic for But get will their production. to mills. towards to needs at capital that on talked to need kilns. it the we expanding way add year. lumber next They Ketan, operating more what that a expansion spent that is we've about part underway, was its So little and bit is expect well on be the hours to most

capital little of will amounts bit a in we slip very us benefit of to into incremental Some XXXX, the XXXX. it that for kiln of year amount full of the But nominal full production. because get get won't required

John Enlow

invested Waldo the And And little we capital. at heavily in of of full Eric's part last about that, bucking the year. really on the is color reinforces into kind log latter and amount point, very small remainder mean, a system for carried at then a processing to line. and a just it's to the Ola for of to potential we line it add year, basically achieving existing year optimized small project of the just I kiln this And of talked those next that then the facility,

Ketan Mamtora

how All of this right. us again once then, of Mike, $XXX this? That's helpful. you kind walk on work, million can just the mechanics earnings just will And through of distribution

Michael Covey

Yeah, the - Jerry can go through that.

Jerald Richards

Yes.

of terms XX% converting C-corp, to within Deltic And be distributed that to part as up and is in $XXX all XXXX. has has built the of in come as stockholders, represents and and not XX% to REIT stock end of a combined million, that Potlatch to that cash. of Ketan, Deltic's that go form a earnings stockholders, the I what by So will mean, to history

Ketan Mamtora

the once on is then done? sale the of any it. of there helpful. be any merger Got assets restrictions And would that's And

Michael Covey

said? restrictions Any you

Ketan Mamtora

Yeah. Yeah.

Michael Covey

today, in a This fit. No. or and think sold. it needs be great think portfolio that We be the don't sold we all at to anything business they're look should - will

and any on improve, the anything portfolio. businesses In revaluating most grow but of the - the fact, restrictions of no in there's can

John Enlow

there kind would we we to point, be thing convert a would that to one REIT, would that restrict timberland built-in consider. us have from that, it Ketan but factor I consider. a five add is to year when would to of window a that doesn't certainly thing, we But So doing operations gain Deltic's Mike's is,

Ketan Mamtora

Got it.

business, Little just then question as That's about how right, important just what you in the the of the especially you that's there? all how of valuing us one just from on helpful. valuation Rock, And thinking element. different another kind one give you it's And Real Estate of Real also slightly to component, the this some coming So you issue because about are Okay. said, doing? back thoughts absorption, think about are help us guys guys thought Estate, because

Eric Cremers

model is Yes, Estate different Ketan, the today. Potlatch it one slightly Real a operates than

multiples from it's generally earlier. raw Chenal worth downstream, As real land that talked just sell we timber of estate to at Valley, business be land raw you standpoint. around land. that that know, sell be Whereas tends development values We estate tend more real Deltic's about a John what to as is

momentum continue developing Deltic West the is is Valley acre and lot great well lots in property. way through a the and a selling over Little that think commercial news half building of I that have They lot is Chenal out property. lots acres. momentum that There Rock of to commercial both residential -

So way that. with they're well their on

the that Deltic is one can add I doing Potlatch about, to as land estate is program. real think can to expand sales rural value further their on we spoke the HBU thing Mike do perhaps front what

call of XX with know land think, I there's over our XX,XXX for at holdings of to acres land. us bring the tracts opportunities we've that and year-in, a sell opportunity. small we you acres past But similar generally - to XX,XXX about it are land. track we we'll year, to business we their there's same-store years, sell can year-out, stratification five realize sales Deltic's if that demonstrated And record look

Michael Covey

to you want do John, speak absorption? to

John Enlow

to just potential color Ketan, add little more forward. Chenal going on a the Yes, Valley

our the what things. products of kind estate all really the to the Part past business and full performance. different of that of position we was over deep in what offer, market there those in Little the our best-in-class a of of done businesses, kind put months at strategies, the we've of the of all the of that is seven level kind Rock, part terms looked together in of for potential terms plan a on of understand of potential was competitive that market absorption understood go-to-market the So captures drivers go-forward real

activity, outgrowth of work with the years. the over we that forward what we've to combined the going commercial see absorption of So last strengthening being couple is, upside with that seen

Ketan Mamtora

helpful. last That's one And just Okay. question.

just became can anything kind player a now You've converters your of do very obviously draw you Arkansas, to more curious, I'm in large timberland. fiber in basket? into

Michael Covey

it Arkansas, Well, of the small. timberland sounds fairly big, in in but we're still scheme

I million think there's acres another around in public. private million timberland is in XX Arkansas, X

fairly a if grand is small have of look Interfor, in we in you are scheme Fraser footprint multiple the place here, So Georgia-Pacific things. Canfor, at a West But think, has I also places. that converters lot facilities; in of the

as of as manufacturers. mills the there's Not be to facilities, will PotlatchDeltic world-class mention when MDF plant we three now All these an close. are well

drive companies additions do expansions plus closer positioned I business. hour to don't The a think a in market proximity South it's Timberland announced and of Arkansas. So Central anybody to a place all to mills four there's Dallas. real capital We're And these have is Texas that these plentiful. here. in market Arkansas, great really the is than

do and going better. it's get an to place to it's exciting So business,

Ketan Mamtora

Good Got turn over. it. the integration. luck That's with it I'll very helpful.

Operator

from your next question Mings with Collin Raymond And is James.

Collin Mings

the on Congrats guys. transaction. morning, good Hey,

Michael Covey

Hey, Collin.

John Enlow

Collin. Thanks,

Collin Mings

areas combined moving of First, of you in just on Arkansas. and that have, given operating expanding expanded how more other will just then, just bit maybe just in other combined the entity forward the in talk concentration the the Mike, questions, platform a about strategically, U.S. entity about think expanding little some And the just this

diversifying platform South bolt-on at South? about, you've region of just the Maybe further Gulf outside in talked particular? again, that in given maybe acquisitions, but that looking the expanded South

Michael Covey

a was know, much value. when concentration customers. think not the the more But mention mill to behind to just got have us. not we you us the that caused harvest Deltic lose Arkansas, period with now, reduce for during a as work certainly, combined to lot external closures a the in was Well, in but recession geographic And Potlatch time us, the options smaller, and facilities financial to Potlatch facilities, only is with I with risk

a concentration So the to concern I in the have timberland with customers. number think a wider in don't all Arkansas is we geographic footprint me of at

company Alabama good grow remains Mississippi, And Very and think states. I Alabama, in in states. South, strategy our acquisition small Mississippi growth acquisition and in where those Deltic touching think platform Louisiana, that in that's to the Arkansas, we here, efforts. has, focused footprint have we'll Our but U.S. a I the Louisiana focus all three certainly, and Central

We will not venture Central seaboard. Southeastern the too outside there. competition into just the Gulf There's - much South too many of

Collin Mings

Okay. then harder taken it year. dividend seems later increase, on pending deal moving the Can board, decision? is the just normally touch again, And dividend the And at That's you helpful has in color. to the a that how historically a look factored this little bit maybe into the bump?

Michael Covey

after in dollars' the completing cash timber at the of was million some dividend. worth quarter. a acquisitions Well, quarter and paying as our million third twenty the we mentioned, we quarter That in end $XXX have third of

rather these and increase a the about together. really position in cash two think So December in board And signal The combined confident our the continues the the cash business they than now just the increase. is I time the feels of about businesses. confidence of ability to company dividend companies to combination generate going in have the

So some the in bigger to to form shareholders it's return dividend. of of that time

Collin Mings

the for growth. as extends Is opposed of that which would runway dividend understood. future current accretion, - like was sounds a kind fair? incremental again I operating any sort like of decision seem of based the fundamentals to just lot it But on

Michael Covey

I business are businesses to confident certainly, these think it's think, I very going do Yeah, combined we're was better. existing our both. doing and very well,

increases dividend longer And of a beginning this so hopefully, stream is of the forward. going

Collin Mings

John, had flow cash was guys Okay. you given going how optimize particularly talk And bit exchange can forward? you just the to opportunity ratio outlined position, clear better a that established, then maybe from the switching especially little to about your

John Enlow

Yeah.

flow So we their triangulated kind relative of going cash in it we the forward. the it, looked That different of at companies of contribution three perspective. was contribution looking two terms at one from perspectives, principally

competitive a in process. were we that mentioned I was, other The

table. of our So relative value other obviously, with asset squared the and the then, we we asset. the opportunities of the of about it thought net on back also to underlying value view value the company And - the

triangulated for we when there in it good great direction, that we was So a we in going the companies that forward. a felt really spot like value combined landed

Collin Mings

put about And Again, just, forward? a the last already far that you just this of we're platform, more helpful. from potential Mike, in of than thinking of Real kind Would maybe over couple just more have. how as put Or But at you'd questions maybe going to commitment lands? then opportunities the That's combined to some some housekeeping, on just ratcheting historically, as getting you Estate legacy front. Okay. me something in to up? there profile? capital one reduce Are risk time look capital one just that the that think Deltic the about capital wind that is down more had guys you Potlatch

Michael Covey

the the to assets the of We're Well, for the we'll invest estate and certainly at merger downstream how take continuing I maximize terms returns. makes way closes, certainly to to dive cash sense what once best real to those deeper not shareholders. for in look to that's business, convert in if think averse a business with John capital

any legacy outside So owns. it's Chenal on than going character Valley of not view Rock that's our and of the Potlatch change land. It's I different Little a property do anything to think the totally Potlatch

few rural exceptions base recreation is land. with So strictly our very land

that understands closed. over is and I John scrub on I the we it here last work months we'll his think get several course think and a good - well. So once it But

John Enlow

capital color real business. little on just our existing Collin, a to to for the add requirements estate that

development ongoing for number real and well that, the behind to lift important heavy thing capital that is been of understand years, us. The has is a

the really street just open. it's forward, the for neighborhoods Going the kind that of infrastructure we

talking of in you're the per so capital to And low-single-digits in terms relative return. flow fairly cash so modest millions requirements, year

Collin Mings

guys. Okay. Really appreciate congratulations. the color, Again,

Michael Covey

you. Thank

Operator

from Wilde BMO And your Markets. Mark next with comes Capital question

Mark Wilde

morning, John. Good Good morning, Mike. Congratulations.

Michael Covey

Mark. Thanks,

John Enlow

morning. Good Mark. Thanks,

Mark Wilde

kind to to land. want Just the of come off harvest I back of Deltic issue volumes of the

of just I'm sense tons ramp less where is the of a X.X some last clear-off rate, You bring which should five talked harvest XX like Or a more and pulling going acre. was a from of in a inventory? curious, the up time? to of up them or about year I really a little kind cumulated like year bubble current age be there to than this think we over catch-up steady of about and you think that kind sustained are kind playing down just per

Eric Cremers

take Yes, the that get term. Deltic that amount we ground There is one. its significant in I'll of mature has will after near Mark, that is this timber on here Eric, a

swings then where You suppose, XX after, years, will these not But we're up are I moderate. been they see And will that a operating. ramp that have huge from about. talking

will you increase, decline an So see not huge a after that. but

Mark Wilde

a sense did think normal your a State Washington level. deal when more accelerate years was years and trying now of had you Okay. harvest, to in a coming of, out competitors to I a could few back really about get just they several of one big the where it's ago, they

Eric Cremers

significant I'd a a X.X now to range, go X.X it's have drop-off. say for I million year million a couple tons I - you won't gave know, don't down tons No, XXX,XXX mean, it Yeah. basically perpetuity. this I if of from to may a

Mark Wilde

Okay.

Michael Covey

the that is practices change real sustainable Mark, makes the forward. in time that forest driver going And the management over there

ownership quality about, natural our roughly slower talk we've us stands. heard XX% got growing, You've of current that's higher

that's intensively up manage then can base, our more and our brought there's growing the market into volume to - rest land the in faster the mature to be rate across And of those significant then to plantation put plantations. that growth So estate. opportunity

the makes time. that of initial and sustainable behind So of that over mature volume fills surge kind in

Mark Wilde

sort Estate on went then Real And slide we coming I business deck, any curious you broke on there - out? component? in numbers the your on guys Real out went historical on on John, numbers see you with Real I think, there where May in I really back some through the out the of Seattle, Estate financials Estate I'm just a Okay. details will be just to didn't back

John Enlow

Yeah, have. to way the that we happy And talk That's questions Mark, we're you you give - field field you most to can it. appropriate with any probably offline.

Mark Wilde

And Okay. get for for synergies the costs be? is kind That's control to would any the in what it I of had. then question an last fine. Mike, cash payments? change And possible estimate then

Jerald Richards

Yes.

achieve all-in, mean, you the as I Jerry And costs were at as cost break control as Richards. i.e., of fees to to synergies. if those costs the synergies. we adviser roughly costs. million. well transaction half somewhere in achieve that's is buckets, to in the that terms as probably it's down, Mark, $XX including each So two specific overall, And of cash around this look probably transaction, of They're change well

Mark Wilde

luck, All Okay. Good Super. guys. right.

Michael Covey

you. Thank

Jerald Richards

Thanks, Mark.

Operator

Chercover comes question next Davidson. with your And Steve from

Steven Chercover

Good morning. Congratulations.

Michael Covey

Thanks.

Steven Chercover

and a quick way. doesn't the plant. that MDF the sound all on question it And this JV? deal still of So part control? trigger change of Is It of does XX-XX Deltic the first

John Enlow

bought I'll Good We out morning, years few partnership field that. ago. a that Steve, is John, this

So and there's implications forward. no by terms deal it's of wholly Deltic, in owned restrictions going

Steven Chercover

[John, actually, looks plant [ph]. rated operating the their it the on And that] sawmills, Thank been MDF have Okay. then, like well capacity. two you, Deltic below

the rated and finished be up capacity? kilns you've to once that will So debottlenecking, whatever they other

John Enlow

to me that we're Yes, first Del-Tin so speak since let on subject.

for probably we that in rate six us August forma uptime. of run a exceeded address week issues actually run ahead from pleased rebuild cases, in And approaching. extremely We're place far that pro for that had we And We're year, weekly how third The that our or forma We're the the we complete basis gone. in year. the pro startup. away average in That with about weeks so. - talked last of in have the August. was You're third the year press hobbled in operating really to a some took that that so some over has had high and substantial the or XX% what great. the went next on or the had are balance the we rates of startup had aware

quality been that's success. great a is high. Product So

product percentage board That's target. for right really on thin high-margin a us. Our is

has talked that to we've Ola. back It the your what sawmills. question to really goes gone realizing two the on part at full already talked it's So will investment project that potential been on investments It's of the the additional kiln potential sawmill rate in then the run made for even the the around call. the at have the talked awesome. There's we the your Ola. that to - Back later about pace about thus we in that put achieve of that to numbers Waldo, further latter And for those year. And us kiln about. far

Steven Chercover

the Asset have idea whether shareholders any the company? they you merged Thank lost has other remain Evidently, in Do Southeastern quickly. you. A few deal. will Management

John Enlow

and shareholders Steve, individual do. really this on we absolute forward, I embrace enthusiastically can I say speculate will what can't I right confidence, think what that. shareholders path will we believe guess, with the is

Steven Chercover

gas mention Last There's little and revenues. Deltic's been Great. of very one. oil

material with $XX? just So it is at not oil

John Enlow

a meaningful it see us. And for recover, substantial. as cash you at that we that out flow oil It's prices is like potential our can feel stream And can be point. there in historicals some really

Steven Chercover

Okay. for wishes Thanks. Best the merger.

Michael Covey

Thank you.

John Enlow

Thanks.

Operator

next with question from Vertical And comes your Chip Research. Dillon

Chip Dillon

Hi, I quick question. a had good morning.

around fair sense mean, is that historically, I it the to the Deltic in all, - first value we that, say look is of million. when see very - division rough the Estate, Real $XX that I Just a book at

has you ready lot You of of is that in terms behind - sale. getting mentioned investment for the a

a together at that Potlatch of be number valuation in how mean, your I ballpark looked least valuation of as at the the of you you And would double rough maybe like put so, value at bid? present guys

Jerald Richards

Jerry to may, mature So of jump components. just going talking individual it's in this to say Chip, if start I'm pretty is valuation Richards. I and

We financial in we next will statements. days. provide we XX an mentioned as S-X the comments, pro XX, filing, here there, And will forma in be in

to and will have be we information that of bit a that, So fair work on left do coming.

Chip Dillon

to term this inside conversion. was objectively, is it the since seen dividend. say has of taxation that's And tax. X.X% I would is XX% first the some avoid Understood. new to noticed with that that Medicare tax special on you And the tax. know least imposed Potlatch I at I'll This happening that Medicare dividends. mentioned on anybody do you up And X.X% sheet pay pay going on don't additional one-pager, the we've a that people the would the put federal know in then That second tax, on question I very that folks. the maybe XX%

let If do how you know that, me know. to

up So it's could have - California, of then, if XX%. to get then XX.X%. close really you course, that folks number in And

you your were pay of at if trust to et because XX all, because want be to actually Act open to we an that entities going conversion pockets you things that and of thought auto different when going tax. maybe issue. know, be did might just and you shareholders And Potlatch, have And reflected so on you're Affordable people's change have I didn't thought that like individual from tax is even this Medicare cetera obviously, X.X%, like since to Care if the XX, XXXXs, full might now you that that maybe to to in $XXX it's to dig number million a if to for to require their other

Michael Covey

in intent slides to our Chip, high was level. the mean, cetera, in all in So stay terms et of Medicare the of those just I factors, tax,

would you're considerations shareholders consider. that So right. all are have Those to

that not jumping it's - pretty in about that didn't the we pretty cash safe XX/XX we're think, I necessarily up. confident to split thinking that say component

Chip Dillon

years. was then why five to mentioned the that for XX somehow? Okay. I Eric, built-in that on it years. know, think once is used And thought you, profits they Or I built-in convert? the it be tax period that the change the I on Deltic five years, you gains side was Did

Eric Cremers

that did Yeah, fairly actually recently. Chip, change here

that before them of that built-in five years, was XXXX. for converted applied made recall you lapse. gain change in And one because that large a window to competitors REIT our period to only If

for timberlands related five is operations. going it years forward Deltic So the

Chip Dillon

is mentioned savings. Okay. you tax CAD And presentation, Slide one shows the which then XX% the bridge, last one. million of On the XX $XX of

to last I of because, XX%. XX% there Now know the one year But it I example, a that sales. was for million. I were know there guess, tax Potlatch's - couple is all was a higher years a I year, expense Deltic's ago noticed, rate with lot non-reactivities there tax was lot - effective of was I $X mean,

within So not And that the you - that within the Deltic? - fact rate my question also now these on is would Is happen is at include pay guess, for Deltic sort that as credit XX% not of I is a does synergies this will Does partly that now them fair have pay. are same make that's included? having to giving that sense? to they tax had C-corp,

Eric Cremers

business. Resource. simplest timber We'll at as C-corp call REIT, a be to through will C-corp, At We higher harvest think be generating in significantly shareholders. is of the about, as The And levels, higher they're the that, earnings taxed is they it they're the rates. Deltic are today, Whereas woodlands and not those near earnings passed way flow. rate future. to Chip, cash harvesting those course,

from So harvest higher that shortly. $XX million is we that the volumes getting anticipate here

Chip Dillon

helpful. I see. Very

John Enlow

Chip, this John. is

XX%. reduced of that would there's benefit effective in I XXXX thing a bit our of historical particularly, little which add tax the had other to one-year rate in just that TREE tax, Act, to where noise a The our the as reminder we

Chip Dillon

assume call you Okay. since And just - we there's call a can have we not all a tomorrow Should housekeeping today? note. since you and reported we

Michael Covey

this as merger the as releases well that call had canceled. Chip. the announcement correct, earnings We, two actually, been morning is in indicated release That press

Chip Dillon

you. Thank great. Okay,

Operator

And Buckingham question next Weintraub with from is Research. your Mark

Mark Weintraub

Thank you.

just sure to just First, I on wanted lumber the side, to make understand.

projects this lumber expecting than there that production So some finalized, go as of to up? higher you're are the the XXX? is end - where these Or XXX, is does

Eric Cremers

Yeah.

this is Eric. So Mark,

the current mills. path are up along Deltic continue their plans ramping of Our that to production outlined, has the

Our I find for got X% feet. a demonstrated ways our the XXX them Mike in think to to the But board production plan in has of the it expect year, combined last the think mills a mills around hope their I Certainly, Each up to increase million two view XXX up get Every with that the is increase. We Potlatch levels. we've XX% and get to going is and been shipment forward. now, that track year to to do record. to up we million to we years, feet. Deltic spoke notes

Mark Weintraub

Okay.

from so where production. expanded and million, efficiencies talk synergy where? to million where about the you $XX lumber in That from operational table, - And $XX going includes

Eric Cremers

million that would to up million include feet Well, volumes about. taking we around just of that XXX feet their from the spoke XXX them historic

Mark Weintraub

Okay.

feet $XX So $XX for a million, million million. board incremental an XXX

of current rates input profitability, costs. you're presumably, using using that of you're - and pricing or in run So kind analysis

Eric Cremers

Correct.

Mark Weintraub

that then so a saw levels harvest an of in million And likely the bake profitability $XX incremental in where increase, talk that or improvement about on does CAD, is also you using pricing? current timber Southern

Eric Cremers

in Well, modest the improvements South. pricing in do we anticipate

CAD from the However, the Resource uplift volumes. the majority higher in is that from of business to harvest going come

John Enlow

anticipate to a and to And this up of of volumes land for in report year of businesses. the we'll earnings on So me November. add kind that terms release With our really both we're deal, all where of just hard pull earnings to earnings tonight. little provide We in expect early those color for guidance let in questions. normally we that we'll release, would try to working

there point you'll in what is productivity, harvest things. this able be kind of to of the year volume, terms of in So, kind of all mill for see those

Mark Weintraub

Okay.

Deltic basis the on and timber you where business, kind rates a would saw just so, your realized? being of operating also built hit is efficiencies for the consumption this be to consumption, timber for when of into harvest run And post-synergies the relative your net the saw

John Enlow

Yes.

optimization that significant up say with generally exceed XX%, to in internal certainly, by where our range don't rationalize marketing So I talk margin I But will to our - in usage. markets ramp about that for it's sense. think utilizing further of And have external you. a we our real makes pretty as the precise number opportunity the fair harvest for is the XX%,

Mark Weintraub

could that last on point. meant one? last you fully understand build so just you didn't I Great, on what the

John Enlow

of Deltic, the its opportunity its Well, to also a in And was the margin of and Potlatch further with of own to real internal it's opportunity into freight expand its back its will of combination little not, of optimization bit starting logs, kind execute and lands the on, optimization, even already we certainly, mills. see going we're that marketing a if historical logs, all team. approach majority bringing more

Mark Weintraub

Okay.

million changes to a - Is as function So $XX is that of opposed part how improvement profitability million, the understand production. just - incremental XX% that $XX marketing that? of to is of

Eric Cremers

you Mark? that, When what marketing say you do by mean changes,

Mark Weintraub

be was other timber. heard the going Well, may heard, to used I buyers had been I than thought just effectively been more I had to I using - they pay some thought previously internally? repeating they what of And But go of who if I going to now, it's are internally wrong. just maybe all saw

John Enlow

Yes.

the So But there's increase. additional issue driver margin and is don't be want there. the added hitter benefit the confuse is think principal volume volume The the rationalization. to some I going certainly, heavy And primary from increase. we to

Mark Weintraub

Okay, great. much. you very Thank

Operator

with Glazerman Roe You Equity have from Research. a follow-up question Gail

Gail Glazerman

so ask of talk questions in couple quick dispute? XXXX just swap? to what you trade the Southern could and also Hi, Products from That housekeeping. guidance anything Wood the you for and maybe out a about fourth include market in seeing you're generally, gave that some And quarter, I does thoughts pricing if can just the looking then on

Eric Cremers

Southern the swap particular so took you we quarter the to Yellow Pine, swap, Gail, product, in a not currently X, is fourth the anything of close swap write-down in by know, so, That the for price. trading as we X Yeah, QX. included have very

lumber RISI, But next start year I cetera, much It's most XXXX. a over lot about here. modestly year, FEA, year. et change too anticipate lumber a So prices think we of to from early next don't expect this prognosticators talking higher higher prices

So into business. will Resource will flow benefit our Wood also and that Products business, our that certainly,

indexed of XX% know, in sawlogs our you prices. lumber to As are Idaho

benefit our expect Resource business we So to as well.

Gail Glazerman

about Okay. I of sign or just for year, of next prices any more movement asking specifically kind was momentum? log Southern

Eric Cremers

Yes.

Southern So found the I seemed bottom. log think have to prices, it

do number across And the ton our see I in up think the look are announcements way pre-recession. consumption a these go up course, the And were to from there GP mean, going new a year I U.S. we South. year. start not a mill. to And a due But levels south. in XX seeing modest at we're might next ton I I improvements. we announced little in working you yet towards tons will And of Canfor U.S. here million that think of steel at mean, just where you steel You're see south. exploring recently. just are bit of

Gail Glazerman

just dispute, negotiations? that and might trade the play or on the any out duties Okay, in thoughts final how with continuing place developments just coming

Michael Covey

to I negotiations I cracks discussions government regular either AD think something side. big in basis. continue continue a best of see any is to we Gail, Yes, the continue on like XX fairly softwood long-term in government that. as or But to a United interest quota the States for I U.S. XX, The believe, of we and CBD But November on of think push determination don't final and think is I the coalition, industry best members system the lumber it the and that. serves that

Gail Glazerman

Okay, thank you.

Michael Covey

for we have runs say, before one Kristie, our Okay, time question here. I think out more time

Operator

Capital RBC with Paul Sure. And Quinn Markets. your next from question is

Paul Quinn

Good morning exciting news. much. congratulations, Yeah, very thanks and

Michael Covey

Thank you.

Eric Cremers

Paul. Thanks,

Paul Quinn

QX well. Solid results as

Just I Maybe think dates I time the what read and half XXXX. something, required? expected of is on transaction talk other voting could first expected of through you approvals are close the regulatory shareholder about

Michael Covey

first votes day the in in shareholder XX yet. and Hopefully, minimum has it we'll second. here. year. half picture have We to company Neither the waiting file S-X - And scheduled big about before a they just - shareholder to first those I So towards in We closing hope the early the talked it's the of votes. days. think the proxy late take in about is XX XX the quarter, period

the to So is the go approval period getting the early I'd the in through a there's concerned Hart-Scott-Rodino to about have through not sometime get We're government we expect U.S. that that. are those approval, quarter. regulatory pacing item. but probably first

towards those all time the half the first first point quarter. things of end so, of and the us And still some for year the on hopefully track in

Paul Quinn

right, best Thanks. of All luck.

Michael Covey

you. Thank

Eric Cremers

Thank you.

Operator

you. for back for to call will Thank any remarks. Covey reached our We've questions. closing now over the I time Mike allotted turn

Michael Covey

your for our Thank Jerry And day questions. look all your speaking will you. we Thank Thank answer forward questions. available to to for be with you, you. Kristie. all investors you

Operator

does Thank conclude call. today's you. conference This

You now disconnect. may

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