PCH - Earnings call transcript Q4 2017 | PotlatchDeltic Corporation

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Operator

Good morning. My name is Jenney, and I will be your conference operator today. At this time, I would like to welcome everyone to the Potlatch Fourth Quarter 2017 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 [Operator Instructions] .Thank you. to call like to now would turn over the Mr. I Financial Vice opening President Richards, Officer and Jerry Chief for remarks. Sir, you may proceed.

Jerry Richards

Thank Statement over and to to Operating statement call in review Form statements. now the call Officer comments prospectus important merger information and Registration the covering and Deltic of good outlook. Officer. solicitation or or Mike these Covey, on are read morning. sell will joint quarter I This a www.potlatchcorp.com. does slides solicitation any that found Please at note securities This S-X. urged both call site other and connection to call cover with Mike the warning room Cremers, the I concerning proxy of of together for turn Chief in and the including then a filed the SEC an and be vote our statements XXXX in webcast forward-looking reconciliation constitute Executive by an will any Deltic. a our measures to non-GAAP and SEC, me please with fourth Stockholders to Potlatch approval results filings quarter and our was with not buy release, offer you, companies with Potlatch on and some press our the offer Potlatch’s of the between or forward-looking proposed in fourth Also, President that are associated the will With the a Eric contain Chairman Web on can Potlatch’s Jenney, with investor presentation earnings. Welcome risks and Chief statements.

Mike Covey

XXXX, of execution We three year prices from businesses. XXXX solid was sawlog and resulting million EBITDA, to strong by Jerry. compared $XXX million our each you, banner for prices, lumber Idaho increase of $XX record an Thank Potlatch. a generated of

resulted prices sawlog our record our effect in $XXX and tons, Northern EBITDA earlier harvested prices over the proactively X sales cedar Resource locking of million segment of strong log in million Our on in business. lumber XXXX Resource index in

Pine being our Although, levels encouraged capital manufacturing trend prices this operations invested of by remained year, wood are in increased the below baskets. pace in Southern we southern sawlog well

time is capacity sawlog to of improving While it'll take wood additions for our the sawlogs, baskets long oversupply the these improvement for absorb over outlook in price the term.

because from the reminder, from sawmill a That's volume model provides natural south, the in As prices. consumes the a of integrated our Warren's our timberlands hedge and margins Arkansas sell we our as in approximately sawlog same benefit Warren, south. sawlogs low

this very wood Our generated year. of products are mills $XX EBITDA million last and operating well

the Our sawmills ever and set safety production performance some we've with best XXXX did so records in of recorded. that

our as capital We outstanding Also the years, mills few as of at the initiatives returns. past our seeing productivity benefits plywood each well grade made are good continues by to and an workforce. mill generate industrial cost investments of over driven

Our recurring real opportunities value of segment sales to real to shareholder continues rural recreational drive regular beyond estate estate. pursue our

HBU large strong market, recurring conservation in core the is first $X,XXX XXXX. which acre rural the example per sale our in Minnesota an remained a estate of XXXX. real -- for an The was sales, recreational of Alabama very As example almost quarter in

Turning to sheet. the balance

of $XX closed closed largely increased this debt. million prices to cash. balance successfully We repaid and million strong acquisitions due year of we $XX $XXX the year $XX million million bolt-on timberland of with cash Our lumber almost and

XXXX to the in million shareholders quarter. of and increased in $XX also the we form dividends fourth in the dividend We returned X%

expect million repair and strong. markets starts housing we be Looking units X.X to ahead to to XXXX, we remodel anticipate and U.S. approximately remain

XXXX. of expect and start the in delays, outlook to Low lumber duties the favorable challenges led year. we faced south strong in weather to the and strong improved have backdrop to U.S., lumber on lumber to the prices by due higher With customers lumber the a inventories in demand transportation imports demand Canadian field, remain the prices to

We antitrust clearance received the scheduled quarter are the Deltic forward to and merger closing Timber. February votes looking XXth. with also on fourth in We the shareholder are

We within expect to transaction vote. day close the of a the

we've the significantly increase previously, discussed of As the scale combination the will company.

be and Yellow benefit market. leverage nearly lumber REIT have approximately business we'll estate timber U.S. in from own the will our development board issue lumber capacity, we will XX% million. paid real still this additional timberland of We $XXX the be dividend including and two will in is of to million of amount, shares the merger and also shares. We'll and in XX To feet of to MDF will form housing of we a common in also be Arkansas. the to X.X to Potlatch estimated be add the X cash facility well Southern quarter complete conversion Deltic REIT, billion pay Of will prices a the a positioned improving most will to with special million complete the Pine fourth the common completed, about the sawmills to addition of portfolio. an merger. balance will we acres be When XXXX,

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

about now sawmills, in Deltic’s These discuss our timberland these another then increase the prospects improvements questions. be million. operational in to the to result utilization of REIT harvest SG&A. Potlatch Deltic’s will XXXX tax remained expect I’ll converting timberlands, into CAD that we’ll efficient structure Jerry identified and on back ability in to $XX synergies Deltic increasing increasing achieve in and synergies. confident an take to quarter good reducing the it I’m very year. and We excited pass Deltic significantly a include of have two We capacity

Jerry Richards

call, or $X.XX in the million $XX.X share income Beginning diluted fourth page GAAP quarter. four per Mike. this this net with we the Thanks of slides reported accompanying of morning

amounts in results per in fourth compares and diluted third $XX.X $X.XX items income eight. harvest for our $XX.X Information the costs, before in decline million Excluding share earnings The displayed normal operating quarter. This million compared to lower diluted to EBITDA $X.XX Deltic $XX.X is legislation in of the for $XX or our tax was to in the review to is to segments. our million million net merger Adjusted fourth of million segment compared million the quarter income the share. was special and third seasonally Resource or is net related in primarily was related quarter I’ll and quarter. Operating six EBITDA per fourth income in due $XX.X the quarter. the through volumes. now segment slide on the third quarter sequential $XX.X

Resource’s for down fourth put context, While due sequentially XXXX. normal operating segment. XX% as that will color quarter region. cover very provide a quarter income to into each I more quarter I the factors, fourth higher was strong To XXXX seasonal this fourth was than

dimensional price a prices logs in the flat were slide proportion to Product prices in turn south tons of due mix lower on the Southern harvested X% to slide in harvested We sawlogs Pine was will and a of the basis in cedar’s of quarter moisture Turning sequentially Sawlog heavier logs I sales quarter. ton on record in increased We relative result per and This seven. a declined The prices on in XXX,XXX fourth seasonally slides the the third to higher fourth quarter. content to on segment the basis a hardwood XX. of eight. logs. south Wood mix. the quarter-over-quarter. Sawlog sawlog now Northern tons North primarily Results of favorable the nine due displayed prices. remained flat to quarter. XXX,XXX for sawlogs are X% more

mark-to-market million the the The operating now lumber related in received settlements a Excluding price of in second XXXX. $X.X swap and in quarter. is third million half to $XX.X of price quarter lumber million was amounts the $XX.X complete we cash compared to income swap,

effect in lower Our partially quarter, prices X% the average fourth lumber offset X% increased lumber of the shipments. which

to million to quarter, segment’s $X.X compared recurring to than was heavily million compared set The which mix in production shift segment shipped of real in Rural new acres sales slides on operating in the real Real XX $XX segment our mills Total XX. the million and XX year in lumber increase in lumber The third now generated of the Recreational XXX more records quarter third the sales to more I the and segment increased estate’s sold our Minnesota mentioned, margin weighted quarter to fourth percentage. XXXX. million estate board-feet, EBITDA. Mike almost million in quarter. will current quarter fourth the board-feet income estate As reflected $X.X for the was is quarter. the as the third

with We cash financial ended slide highlights on to of million. quarter $XXX Turning XX. the

available have $XXX We on million existing our revolver.

on million quarter. capital $XXX year. We revolving the a a facility $X expect expenditures, new fourth close credit expenditures of acquisitions, for Capital the in excluding couple $XX.X weeks. Total million were million were to in

be than We little of on XX. the price in be full to slightly not Note logs. percentage the plan will related percentage first a and fourth baskets. in the comments of sawlogs more XX% effect Higher stumpage, sawlogs, would think South. North lower quarter will the our merger. hem-fir in first the higher prices a the prices volume year harvest over is slide cedar comment total quarter decline of expected do Deltic sawlogs quarter. harvest I remained proportion that to the the of higher more harvesting flat in tons wood to half in to in expected pine for coupled including in Approximately seasonally slightly than prices the markets. Note are tons Now, mix of a on sawlogs the XXX,XXX the the the sawlogs. a Southern that like We We and which heavier South, southern flat for between and million to sawlog hardwood outlook, compared our these sawlogs, anticipate in of and is the in sawlog tons XX% X harvest northern believe weaker We of or include summarized Douglas-fir amounts to the harvest first significantly with Pine quarter. due offset any of with XX% Yellow the XXX,XXX

to be to and anticipated million relative are the $XX volumes first was $XX prices expect resource in than when segment’s fourth the quarter. the operating income meaningfully quarter million pulpwood quarter million. be first prices, the $XX these we flat be in XXXX quarter. income will first the and operating At to higher This Southern to

be lumber wood $XXX just quarter. first We the under to in believe Turning shipments board-feet products. will million

Lumber XXXX. we four X% in about anticipated to for lumber year, than prices the from year. gotten increase expect off shipments have the stronger this to the start For level record a sawmills Potlatch achieved

Our up that forecast lumber to average the modestly assumes compared in the the quarter. quarter realized be will price fourth first

more reminder, this a occurred over be would and first about board XX,XXX in highest quarterly in $XX million, $XXX in feet. acres the realized XXXX the We prices, operating thousand XXXX. wood which in real our is to fourth of quarter sell products’ per price Shifting lumber estate. income than double segment quarter and earned bit these volumes that As At plan the to XXXX. the amount a was

that Corporate sell quarter, to We basis $X will XX% an the related about quarter. estimate be revenue first revenue. we XX% land year. expenses between We quarter We first and X,XXX in will estate's $X,XXX million that XX% be quarter, the expect of to HBU. real In will merger income the excluding in anticipated of costs. land be XX% operating that believe recreation the of price We first estate million be real basis just average $X expect acre. under for in rural approximately acres are will XX% at that per and estimate the be approximately be will

earnings income corporate off our XXXX. of quarter. for includes on XX% credit REIT have in tax is federal is full of XXXX this We Had estimate debt quarter, $X quarters to for the as and prices be expense to in the Potlatch our tax Potlatch higher as rate than they because XX% tax taxable a consolidated XXXX, quarter quarter than $X expense second of expect the the receipt distribution farm current fourth first expect higher debt. the This lower XXXX. million million per well first to lower earnings related been are year time strong reflects about to our rate in were first be This operations, wood from first our interest We expected year million year. expenditures start is the be in a annual of to products’ rate, patronage primarily and subsidiary. for both excluding the Capital we quarter new new are been the to $X through Interest would to which expense year. planned great XX% million lumber quarter items, meaningfully This first place special last XXXX. $X.X in be at annual

to We like call day which Deltic, merger I'd are shareholders up concludes a our the we prepared open to our occurring Q&A. close February to Jamie, our with That excited XXth remarks. anticipate votes. now within

Operator

[Operator you Instructions]. Thank

Our Merrill first America question George Staphos from Lynch. with comes Bank of

George Staphos

recognizing you comment Where have And of is visibility to staying in log trend. of now. logs stand in do guess questions the markets what more chain that And normal quarter, as they in markets, Jerry, the pine were pricing I upcoming higher about of like-for-like What percentage you decks southern couple seeing the right you'd level? except a can weaker actual terms first, see flat? a Just on relative supply you're on western that the is driving you in in that. talking what

Eric Cremers

to So about couple different think that. ways of

decks let question in take me first, west. log your So last is which the

As log and a it relatively season the tough supply have DC. even U.S. know, in of low to crimp and the decks in really Western you fire half mills. up log at Those the was low are have fires mills log regions in log most are some inventories. west decks log are decks log all got mills northern U.S. that with But running the But not of in the acceptable. with are running mills, low decks,

George Staphos

specifically, decks any normal, from on there it a than that I'd lower size your anyway. I a way answer was is you point? X% but going question, log to are can't that or ask shot give you say probably Would quantify vantage XX% average to Eric

Eric Cremers

some mean, mill our it's is survive the all fully I mills lumber over -- and should I Maries wooded map, mean, St. fine. just own George. breakup in

log not our Southern through with low of likely decks Some and Idaho breakup. it running are to make are

the a So range It's region. hard really it it's depends characterize. just the mill particular and particular in wide to on

George Staphos

well in region, and weight maybe I'll issue are on answer that I well. win guess southern as then the on how mix lumber inventories as your Thanks.

Eric Cremers

in in firm to a run commentary, the field here heading as are up And reason response. across meet were Jerry caught had seen QX. in prices mentioned demand takeaway Dealers sharp So good inventories to the low an the you've relatively provide lumber firm demand, into year, chain, Western in inventories mills and low. supply inability why inventories seen his lumber product that's and part of a particular that we’ve

And so consequently you seen up. prices run

just you in to there that’s lot because of regarding mix on due question when sands I’d the your sands water And is just the seasonality. get into normal ground. to a those really in it’s on South, that to the Hardwood tend be So harder what access the months, elevation say wetter areas. lower is

hardwood seasonality and warms and to will maybe as as mix it the XX% XX% X% turn it and is will you dries it QX X% a percent into of QX. outside, a range So up be up the to and QX, normal to in QX as get then

normal really So the than seasonality. nothing other

Operator

Roe the line Our is from of Gail Markets. with Equity next Glazerman question

Gail Glazerman

and they about off the bit well patterns you the summer potentially back on? then volume talk the just seen and market, current the softwood I how a as little since guess, litigations out agreement, you come duties see Canada maybe can since fell as of negotiations when you’ve any lumber impacting

Mike Covey

chapter I been process tariffs is process appeal NAFTA. in to negotiations lumber U.S. through the are take a deal, I bigger large As on an not resolution have pursuing NAFTA Canada of work part two in NAFTA. while really under to place. the all degree, Mexico, dispute between think you try the countries is XX which Canada know, and a sidelined

negotiated based foreseeable the share we the see that’s and for stay long-term bulk duties to So we we of best future year. market I it, the support outcome. this on that, think the Having a each think place country, as settlement in for still in we said tariffs expect

of There gets lands that’s from pretty been response so trade down, more seen on not from In not it’s has an little as Northwest expected typically flows, been stronger And stable. alarming the U.S. been or Eastern amount, big market lumber that a pretty I so result Inland, steady. up spikes supplier the much of Coast, Europe, much lumber not think. the to any be the hasn’t terms Canada or We bit maybe on pricing tariffs a and that’s when

Gail Glazerman

you on versus lumber weather relevant those extreme year much of had in strength would the How log this weather of logs a lumber not reflective normal can you supply-demand underlying decks we of than was pricing? your some just of Western that And if more and that XXXX in think pattern do any do give as get think perspective impact How plays stocked. you logs. out

Eric Cremers

been prices I’ve that is into about the impact an it, something I lots lumber is What been is have in we to thinking of you how this I can on of And think demand. head strength certainly move pricing tell there higher. fires that’s XXXX about of firm as prices. XXXX. we’ve reasons did There thinking question for big lumber about all

billion recently and that is resolved low; Chinese pine strong; to in been east, looks increasingly model with ERA demand a New housing its Canadian issues mix is a X takeaway. report installs demand a the towards peaked the are out are feet billion commercial west cut now continues production, have allowable peaked. and inventories the Canadian issue starts appears in beetle showed year. and issues XX%, field firm year strong; like is versus industrial repair board so in production family is feet roughly X.X residual the whereas is single board and higher growing put capacity be the moving to to issues multi-family; new duty frankly the

frankly higher. So capacity inching it’s utilization is, in industry the

we Europe, those billion mentioned to see factors feet are Mike so starting year, small, a So that is higher get prices. it’s half move that the all imports fire negative are negative lumber a driving we’re still factors show in prices positive of And then issues look support I from compare and board up the far to increase factors. positive a at markets could normal a starting cause the these prices. higher back outweigh to maybe season. positives at the And frankly, The lower. it I but to it’s factors

think in modestly well XXXX. XXXX I prices for are prices here lumber our So higher and supported is outlook versus

Gail Glazerman

this just any year? specific any you we news or that major give on basket new And update be can your the following in should projects wood on projects

Mike Covey

are number is now are list. in are it’s fairly also that’s some that Alabama for Eric those that these, it ups ones coming list. on mill, That’s there the Newton, mill can new but top facility heart benefit one in those and a couple going We’ve a been Arkansas of well facilities. to going important the and a Potlatch several the the company new to start that’s to delivering in underway Well, months old looking there’s we’re probably certainly Mississippi of add behind the of the us, Conifex saw a in logs forward, got But El legacy one other and on more in an ownership. Dorado, is GP Arkansas are restart months. he’s And at mind clearly to of

to locations. Eric if is know So any. of you there And want I add don’t a key number

Eric Cremers

XX to a And GP, baskets like that every Lumber total Alabama the Arkansas, next of capacity. new mill Interfor demand year of Gail, I primary Southeast. there exploring a somewhere day a they’re million projects is three announcement that South Rex XX it’s the thing just over XX wood to are projects then new few years. add the and mean, going somewhere same Mississippi, in the increase I would there tons is our in announced other a new almost

very of a So -- very and underway. meaningful large, just there's they’re just host projects

excited we’re and we’re So bullish.

Gail Glazerman

And include specifically and does [Sun] that project? XX pulpwood the million tons

Mike Covey

of It does. those. it includes both Yes,

Gail Glazerman

how have on sense into do that of And any come you in years? [Sun] of visibility the will probability few next as

Mike Covey

-- pulp, pushing pushing they And still definitely everybody we else. don’t is permits. what that’s forward is we decided fluff anecdotal and They’re but we of that that Well, kind we’re hearing. fine. like all they’re word the moving the hear not to forward get They’ve forward are with reports their pursue

Eric Cremers

that million X million reiterate just demand. threw million out, pulpwood sawlog tons to I that’s of And XX and that X roughly of

Operator

Mamtora with next question Capital BMO is Our Markets. Ketan from

Ketan Mamtora

forecast sense big sense up Can any is they for on color were to been XX% you in that or reduction drove your provide to versus a on Just at about There because ramp of or drop Deltic earlier. us color we’ve you for harvest two can provide years? pretty expecting pointing what what three next that. some the

Mike Covey

the Deltic you impact of say, the will harvest to Did Potlatch?

Ketan Mamtora

that their but provided forecast forecast, they are 'XX, XX% 'XX. harvest, in the of both was have your and in lower Yes, 'XX their internal prospectus

am So just that? what I curious drove

Mike Covey

get production optimistic top and low outlook sales, head, product know. back numbers had more to we margin a think a for to as I off very have the Deltic pulpwood and of and compare offline, my you the it's We'll

not optimistic as as they in. about We were are that

key formas. I probably you're to the that's that difference So think going the pro see in

Ketan Mamtora

mean And turning financial interest seeing you where are and creating if the is strongest? economy in the to for And just are recreational I land. the increase estate. rural stronger case, any stronger real that's interest then markets

Eric Cremers

strongest Minnesota. the part question Well, The interest the in I to your Ketan would say address second first. of is

got inaccess the cities inability the lands relative or and levels household high on compared west. to access relatively with income to recreate You've twin the to

many that’s land example a to recreate lot For thing. doesn't here land owned was cost open too on, people there of out for government that

XXX(k) very I with first to confidence flood sharply out Minnesota. don't higher and is That consumer We higher, question, the yes at is demand the for So estate ourselves. demand property the your it running think think to real rural people's with time. said, And we're going to levels answer market against meet of in over I the strong. these continue compete part want to strongest

about So that's how it. we think

Ketan Mamtora

you're And there prices? on then what thoughts market. thoughts turning and on seeing XXXX cedar to Any or color

Eric Cremers

Yes, softened so to year, prices the X%. bit saw have little QX last that down a little have run a cedar from up they sharp rolled QX were over prices we bit,

further that additional We and enjoying, stimulating speak, into are material, some supply that are expect they putting little a say bit on its And out as because prices incredibly prices 'XX. wouldn’t it we softness higher move us a have higher of over little I rolled but these the bit. is to these still it's high woods, pretty is pressure prices. clear cedar coming we're at these to prices, so

Ketan Mamtora

But And from been just I production got question sawmills and target numbers feet. have on one over the increase XXX last that then is me lumber wrong. if to my board XXX thinking I’ve at correct production million to million the Deltic

And so reports of skilled is labor, And availability kind that mind because in on preferences we've and how have in it be difficult that? view, prove on been the regional things. hearing your you timeline what of to that those will

color So just around any that.

Eric Cremers

So you're correct.

feet up get we XXX XXXX, any and that. to get their to million we by them issues goal to there mills is don't with expect Our see

installation hours in production man for we'll XXXX. goal simply feet levels, increased new we of at sawmill. bit be it is of that our mills. equipment labor, so is more where running a in kiln XXXX hours of and Part expect to little And just to their range, be of the going under new the probably certainly more million get Waldo the we'll part it in XXX As relates

XXXX far on themselves. feet in at production from frankly so path historical XXXX. to XXX And their were they And if to roughly increase a about in Deltic’s million million went you XXX look they results, feet

well. the labor, So find we it they as that labor way, expect are to finding the and put

Mike Covey

force. that touched of reports Ketan we One other thing on certainly our was through And seeing have substitution you and CCs. sales anecdotally are read

In Southern within that from LA. I fact, sales shipping a our VP we’re Pine story of week last into heard Yellow

shipped what more traditionally. been seeing being than certainly we’re broadly So would it have

Operator

question the Chip next Vertical of Dillon from Our comes with Research. line

Chip Dillon

sustainable? what especially effect. continue, variety is from When some but I And helped Far fact for just a peaked a it on time. that could probably prices. ’XX last ripple would like of very to I you think a perhaps long with reasons. some is are out look mean, Canada on some year I had in at that slides, even of good going log having Coast, some ’XX, know First influence as look you a suppose do the was Northern the Could ’XX us that. saw bit Asia and give you is you you I are have question impacting the help it But Notwithstanding really we the year talk the it and West little to about seem what for forces

Eric Cremers

XXXX, long ago, mills bullish have that’s you’re we’re about still curtail due on As volumes in minute spoke the seeing where production to decks. low particularly in true modestly I a higher prices especially prices, west to lumber

think well do we So supported western are prices here.

sawlogs Northern are by enlarged to our know, indexed you lumber As prices.

higher lumber should So prices to those translate prices. sawlogs higher

mix We other, hem-fir two Those cedar little more do XXXX, factors offset will will doug-fir prices. slightly see little bit production. and a a less little we effect of but expect in higher bit production each

Chip Dillon

very where not get should any them you when very, as how long point an contracts indexing, of time us getting is renegotiated might on date And preponderance should they to the renegotiated tell that get renegotiated, they of there are be aware we open those that on or term? any line. But

Mike Covey

the an and allow it’s discuss we’ve other renewing the believe and contract, the But two it I every and if had of and an two one parties it. Well, evergreen is in after the no goes three approach contract, then both by summer years renewal. on up evergreen issues term remaining terms disagreed to of Each There the comes there parties clause contract years the year. year expires generally is that is when agreement. the

Chip Dillon

And million the gave you the I around volatility a then is corporate of from expense, an for the but where bit up comp. incentive beginning know us year. compensation, some goes And stock X for stock executive there the number I believe is

yesterday? if And is regime compensation think say in just the And you with to incorporated so the with we what run where front? maybe new I along know rate if remind once that to And X million not, it on what through on that moved sensitivity a us don’t Deltic? should stock good price close sustainable use about you the

Jerry Richards

In terms in has in recent effect it million, be was more move dollar stock that factored X the before a have of we to that price more significant significant. move

given the million expenses we target we the later on performance. our until large of our the potentially versus and corporate our I why we the guide enough at QX, down -- if $XX were reason bonus is that we belt very under we you adjust in year. that’s X XXXX, in then think year reasons strong ’XX accrue QX adjust maximum for had of at don’t of so that, in we And will the get

delta. biggest the probably that’s So

merger, reasonable back Potlatch comment this come guidance and our We’ll is do on combined once quarter I’ll provide company thing that on other probably probably close earnings. $X standalone The million we a run-rate. is and that first

Chip Dillon

of seen private -- I in I treasury at off in XX influence, any in days, you we of very year long-term points least question, had the look for are transactions having a going is in don’t the XX guess all I it any isn’t mean meaningful we’ve last then three terms terms but rate. rates it’s at see what pretty know move terms influence guys. the for I what discount And early But huge. basis if base When know you timberland of used? that’s lease

Mike Covey

There have pressure small. have mismatch long-term some This a few the -- XX there your answer of discounted class suppose it’s think could I there I got very be bit. and you’ve little pretty is maybe on rates. But I been a question asset we’ve we the seen market so in certainly that a year any in way. to either increase evidence wouldn’t transactions since don’t

Chip Dillon

you of it up Mike? you for And the just there be or more point, is find be for more do increasing it years, the normally tend Do back dried Is sale. on that is it last how tell or terms sale lands about out the to look what in supply is? over amount you as could to XX situation

Mike Covey

it agreement characterize good and as attractive. XX,XXX in think terms would well, transactions has as just geographies have deals I been complex I supply largely acre transactions transactions -- here. as The or that surrounding of been south the been been think in there aren’t the to the quality larger are have lower XX,XXX range, the price very that smaller of speaking I have that happening,

there the as So sale as quiet. think -- think so recently maybe I fairly been it’s expected I there much been hasn’t for market originally,

Operator

question of next Buckingham from Mark Our line is the Weintraub Research. with

Mark Weintraub

some to there’d modes or markets funds really Do of least why at terms be have of been you number any Just seem larger been were you. the following on was that have on the going seems there up in the through parcel coming parcels first question key to asking, what color that XX last relative the of activity that where fewer lives end to year their of as Chip it or and have on? doesn’t what all have a talks coming there their maybe much

Mike Covey

a Mark, are matured, have funds that is there number maturing. or Well,

seems have the XX,XXX acres team That that, a But them trend and that was think than don’t occurred. I time. typically to selling really offer. carving beyond at off insight I acre selling pieces XX,XXX to XXX,XXX rather be and I a has

Mark Weintraub

you growth than mean of much in to your part exposure no earnings small your I REIT And peers, of stronger lumber. timber experienced because any then have second,

tails the dividend certainly earnings your which is has in but X%, consequential comparison it did You raise been. to what growth

You getting very for aggressive certain talked At on remain more more justify dynamics the a manufacturing do the the how about about at you perhaps time, how dividend? the point you in favorable. think year ahead when profitability least lumber using comfortable to get in

Mike Covey

year. Before that I There's answer capital steps going Jerry just this let step important allocation outflows of briefly a number through maybe are to that, the happen.

Jerry Richards

pick these terms Mike with of that And of you sheet. on So closed cash year Mark, the that to $XXX is that we merger half is we're the then first, in outflows as balance on touching costs know, the specific we million and is million that and achieve cost going about pay other of $XX transaction half have of synergies. to to about up,

that will cash pay week or have that’s of then send million which we'll we go maturing is a have million, expect that we to so quarter of distribution actually XXXX. And are cash, $XX the that also XX% we that's out. We special off. fourth planning be paid debt of million in also amount $XX $XXX Total this is

dividend add that's purposes. platform for turn existing our close and Mike probably that's it that strong remains that about a up, lumber we point, the but I'll merger, on when cash generation him And robust and you how this given think comment of to we cash And chunk when So increases prices. certainly that. to let back earmarked well. your specific

Mike Covey

Deltic's Mark in summary The and get I’d offer some belt. of year takeaway under, we'll after the behind you the the later or merger revisit our issues we this

fair I it's log be say to for going prices lower longer. think southern the to are

think plethora a and supports that. data I there's that information of

the think the with natural the of got I a was we we've two between sawmills the issues hedge Deltic we Manufacturing open only the Warren additional the the The just a in sawmill leakage Yellow with really return, from the is that not are And Deltic sawmill merger tax but can trees strategic have in the go one Ola market. in TRS. Pine leakage did and capture Waldo. Southern and at only whether we or trees to that Fortunately, sold

the the it also very is confidence get than think we will can to to the more supported board western comfortable more different we're prices, timber dividend by manufacturing think by south, gain capacity manufacturing where I manufacturing the in because south. have that that, hedged as leg a southern be in be supported more the doesn't with that I have just have the

Mark Weintraub

should meaningfully you you change lumber your south through this, possibly when know in of level fairly that Deltic? or still integration but integrated I saw the from then are And do the Deltic timber transaction, does

Eric Cremers

No.

Eric. is this Mark, So

natural tons year we'll across Deltic, our tons more have closing sawlogs So we'll million a -- with X.X three producing across we'll Post still consume that hedge. our still ground. or be combined southern sawmills we'll be about million and X.X less about

hedged, we'll going So pretty be forward. naturally

Mark Weintraub

And actually a so correctly? I modest net buyer if of sawlogs, understood

Eric Cremers

correct. That's

Mark Weintraub

just And follow-up. -- just one

I at -- produced about this that think were expecting mentioned point sawmills XXXX. about XXXX? you’d XXX million board in you're XXX feet say also I you in did guess they that And expecting Deltic

Eric Cremers

plan feet to up year. our to million the get That’s is them XXX roughly for

Mark Weintraub

And as of sawmill lastly, optimization in of million improvements cetera, then that. just et on the part a synergies, highlighted $XX had you the

meaningful So the that get can And from Is related to clearly, cost production. some so, if how to putting benefit you’re cost you is that also million you there optimization? equipment side sawmill related $XX in. much quantify increased of the reduction of the

Eric Cremers

projects, be implementing that, leverage for would I greater whether tell to of or certainly opportunities going there going areas, implementing variety safety a supplies What Mark programs capital cost us while size. or save us to you it’s across our there is is be opportunities to purchasing for to is

into those million have to number. $XX the We benefits capture not tried

Operator

of line DA comes question next Davidson. from Our Steve Chercover with the

Steve Chercover

huge from question abatement give some I it, us of is recognize the South in whether on you’ve My I perhaps plywood. volume strength perspective amount And coming hoping the could but in and not that you’re in on you first was America? an seen

Eric Cremers

Steve, this is Eric.

of showing is business plywood industrial signs strength. Our

further our the firm you The the of of some from is issues enhancing One good. in furniture, whether is RVs are competitors demand its both, fire our name have is is doing opportunity. so the They and it. west, demand good very curtailed across pricing all of markets, business, is and firm having production Western mills

from heard I notable given an surprised are about not markets higher I’ve it these if of imports But higher. wouldn’t that South been increase we’re has be And creeping good. America. prices So seeing, anything

Steve Chercover

And down want Deltic to Deltic. But talk that was the not as anything then to the best Arkansas view should there component of about estate might up. I know? in recognize is purposes, we for Or you to don’t be real way flat aware really of local modeling

Eric Cremers

that with job Deltic hiding historically over play. have stratified a development. only acreage been doing REITs was saw timber of a Valley due The one off been us limber real I in say, all Deltic other stratifying is out has work solid Chenal thing our that a its that opportunity not like to and state of the and acres would The estate its diligence we

program be Deltic that across the implementing will We acreage.

been estate expect we real rural doing do that amount some that we as they or not of So have HBU sales historically. to see classify

Steve Chercover

of or through lower just off equation as no at part holding is guess REIT. new into corporate period it’s comes the the TRS There is rate? that sold it anything tax I the

Mike Covey

they’ll correct, normal you be in Yes, be are TRS that it Steve stratify the and will that, we in when TRS acres, business. just

in requirements. constraint So or built period gains there is no or holding other

Steve Chercover

in two that are similar you’ve margins final at me. what it and to Arkansas assume And product? Warren question got safe of to terms from saw Deltic’s in Is mills

Eric Cremers

bit more we same, else little Their is not different. produce mill. Their it’s a Warren to Ola they’re similar Well, and quite timbers our mill timbers Waldo don’t than the all anything mill is probably most really today.

producing little bit margins. So and different baskets they’re healthy wood but good a all they’re in

Mike Covey

one product Steve, And to our the it it out as add really well. line thing to one thing rounds that does

Eric timbers about So talked MSR. also but

think And be so we I attractive market. to go will very think that’s as I something that

Eric Cremers

Yes, we today, customer offering, Waldo good MSR, they But base. does MSR well -- we which product should be for will don’t higher produce a MSR run struck. it our produce produce comfortable called our select have but product

Operator

line Quinn Capital Our next the Paul RBC with from comes Markets. of question

Paul Quinn

it higher to increase you’re effect couple the timber the a Trying and like of price weights, questions, understand the of had seeing starting quarter-over-quarter. on Just offsetting sounds that it’s the log side.

So how much of to in QX? an your that logs effect is have

Eric Cremers

are most are Paul, the X%, the QX to dense. where heaviest X% QX and roughly logs it’s Yes, the months

equal, So X% impact QX. in has another it things X% all and a on QX

as reversal code. QX that zip as So into you and into then you’re get in a see you of you get And month. QX the dryer that

the should X%, X% So be in range. swing the X%,

Paul Quinn

XX in you X on over in that’s when for but I timber million then tons XX did much XXXX pretty the ’XX and flat ’XX. And look in at guidance ’XX, harvest

wondering is for or side, be see and coming in harvest some I the I’m is to trees? that And little maybe the a to more So why aggressive Deltic you’re not you management do that trying just because the just going you’re guess down? have

Eric Cremers

Paul, the trees. tons, at Central in having the of Idaho X.X we we recall so were When an it’s not issue had not million mix.

chip a the harvesting late, So we year we and to little we And ton today haul in in margin and margin gotten low is take And sold virtually about X.XX we’re about margin. a did us Idaho on million from come a that. hauling margin in them and at what’s logs. $XX X no happened pulpwood chip that pretty we’re Central particular hauling tons at north XXX,XXX tons. those in plan high lost million tons tight. hallowing no did pulpwood saw We’ve have and We maybe in has saw value saw, so and to trucking over XXXX decided little trucks we’re

less production. that in decision or to do wise I agree more tons XXX,XXX at business that a you’d these us cost was think And has effectively margins northern that we’re seeing our sawlog So strong that. from

with towards being may full the there end as cost and in we’re wet weather mills relatively the QX, got of is as And in QX south, recall. we’ve year. south the pretty the in Now you

logs and with we as full going market. logging. So then that got mills not make volume we QX, decided being got we and got do show we were And to behind up, we into oversupplied into on caught an

kept But we year the timberland. X.X little has it, you So Central think our tons back always per a been volumes Idaho we million bit. to million X.X divested range since if about held guidance

of million tons be. to X where we're million, at we in zip So code the X.X want or

Paul Quinn

that but definitely described sounds like you it you're way code, the in sounds in zip you're the upside. constrained It the like

the I a describing down to was of XX%. and conference sitting owners week just potential rates Northwest of the we’re harvest, X% at Pacific in think the most the in I last timber the

that still constrained manpower is got right just -- You now? it ability, right, it's that's

Eric Cremers

when don't we around, I to it's to sustainably, you're manage minus steady volumes that's year-to-year. a XX% have business, plan, and year-over-year. haulers term mean we just hard long to We plus the And the I our want like our think we it's the volumes jerk want to run operate loggers XX% manage and tough business. we relatively be No, to how harvest

Paul Quinn

were I current million question forecast And I think QX -- or just that would at pricing? a you at stayed lumber the if Jerry, XX you prices in lumber income think saying be on then what

Jerry Richards

Paul So at be the forecast. QX clarification would

Paul Quinn

higher how QX And high prices -- how in much forecast? are current

Jerry Richards

quarter-over-quarter, improvement of you sense Well, had in modest single-digit it, percent Paul, a to give low a the -- range. we single-digit very

saw lengths and it's QX was QX random print I at last $XXX the $XXX, So X% finished so average. higher than

right, you know. in lot, mean I that's one time, incredibly point just it's around random volatile lengths Now as bounces a

X%. more So for for our relative own today or increase, random forecast X% is to not QX, an but lengths like where is X% something is which

Paul Quinn

prices random benchmark benchmark So of it if a we one in that -- guys? the fit profile overall? benchmark the what – does fits composite, comp lumber your or length, actually well for Does look you with at

Eric Cremers

have lengths you really and that won't component probably to mean, index. any we deposit it one I have random broad lengths And can we the you a there's good but lengths heavy I an the arms mix maybe at, by studs then economy, that benchmark. that's look be at studs, western. as captures have on your get don't isn't which get Yellow if can and I -- know that just because Pine as is SPF random any, I one have. western, and There random at. you won’t suppose western to And six look for suppose, the could that look want you index two might Southern could look your at, has around hands you hem-fir Great but to Lakes WWPA

Paul Quinn

higher, that the do that mills that looking think I and of two addition that Deltic, you’re like with that about you that the all it the question. at I a up is Maybe be seems am to to I’ve to all the you something stuff closer seems given random in move be question other got acquire south? lot composite would link do more ask

Mike Covey

be the could case. That

on compared us One you of a it's real that benchmarks the these referenced. drag things, to

economy a lot Our moved lumber produce the has and months. price up it over grade several stud last in mills of not

drag results And so compared a on that's our broader the to market.

little So south from effect it will Yellow mute a Pine bit. adding the the into Southern that mix

closer. we approach So the to benchmarks a ought little

Operator

There are Gentlemen, time. there at remarks? no any further closing questions, are this

Mike Covey

Well, and I we merger. move your this as just forward time forward catching want close to to thank look for up and today everybody

So that is it Jenney

Operator

teleconference. this today's gentleman, concludes Ladies and

disconnect. now may You

PotlatchDeltic (PCH) 30 Jan 182017 Q4 Earnings call transcript