CTT - Earnings call transcript Q1 2018 | CatchMark Timber Trust Inc

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Operator

Hello, and welcome to the CatchMark Timber Trust First Quarter 2018 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I’d now like to turn the conference over to Brian Davis, Chief Financial Officer. Please go ahead, sir.

Brian Davis

Keith. you, Thank thank of and XXXX, joining for us three-month Good Timber you Trust review XX. CatchMark ended quarter results a period morning, March for for the first Officer am of I the Davis, Chief CatchMark. Brian Financial

Joining me President Jerry Forest Senior Chief Barag; Resource, and call Todd Officer, Rasor; President and John CEO, Operating Vice on today the are of Reitz.

available. will current make results expectations. statements from are During affected forward-looking beliefs the risks this that These and call, and results to our materially forward-looking are control CatchMark statements. and CatchMark’s information by certain beyond actual currently management could cause differ be or on management’s actual predict will uncertainties to based ability its

included website, to answer our annual John, is I XX-K in your about that filed X, which Reconciliations XXXX. join other certain our Todd Form release, Form information we these his after questions SEC XXXX reports factors and of May with measures. to financial more Jerry include our the measurements of may cause filed will and are yesterday, earnings also the presentation our any you SEC. such and non-GAAP Today’s on with could report, presentation. posted XX-Q For refer that differences, we

call Jerry I turn Now over the to Barag.

Jerry Barag

for Good another very morning, three-month CatchMark us. March you and XX. solid period thank delivered joining quarter ending for the

very a to share to tracking business the quarterly our perform per of continue well, healthy yesterday, dividend $X.XXX June a payable maintain us Our dividend. XX. CatchMark and cash operations enabling plan for on And year declared

joint and a harvest in year-over-year the pricing were strong Dawsonville pulpwood results of quarter First by higher increase driven financial venture. performance Bluffs volume,

drive and our capitalize cylinders volumes. October, on were market all into dynamics. higher favorable timberlands markets, able on located log quickly pulpwood and harvest completed was acquisition, are integrate we operations last efficiently them the and Georgia strong local Coastal in harvest to and Our export These operating help to

timberlands nonrecurring, expense. venture. result a first We completed We of of capture sales of debt. per also million XX% to the and help haul for harvest EBITDA Bluffs loss the lower the of approximately from Highlights overall of included quarter That timberlands year-over-year, revenues $X.X $X.X paydown in timber offset acres our the interest X% from we by marginally saw incurred recognized adjusted increased those favorable share higher during a increase $XX.X mix generated of of net increase harvest $X.X cost weather-related to financing in adjusted result sales realized and due which noncash joint related chip-n-saw pulpwood of a million unconsolidated stockholders our $X.X of also We for on XX% events primarily volumes primarily as deferred outstanding a XXXX. Dawsonville increased depletion harvest by quarter. that We March a of million, a a mix pricing, recently proceeds, to cost as million XX%. $X.XXX dividend timber We record noncash to XX, to to higher year-over-year. due million, and million, of X,XXX included and income increased write-off paid of XXXX we acquired pricing year-over-year. a net volumes $XX.X We

expect pricing. some we when harvest we also to to While better were capture harvest future year-over-year periods able strategically the we our to quarter, increased during volumes defer

encouraged U.S. be investments by to across continue We manufacturing the the

and ultimately impact housing is The enough demand the which near pricing U.S. recently activity high. surge home in demand which timber the South sustained has lead to future. sawlog driver continues either turnaround from build should activity well new measurably period is improved for announced, the and demand recent underway underway of or homebuilding to for and pricing. at housing encouraged construction, completed, capacity XX-year Pent-up building a starts with suggest an to below-average consumption increases, lumber

are current they take materialize. we positive economic Given of positive markets, trends and future are advantage we further optimistic drivers, these about prospects as our positioned to in

and capitalize We quotas to high also offset on continued adjusted strong log harvest pulpwood our to market pricing higher inventories. demand from resulting help sawmill

timber Our year-over-year, sales XX% a $X.X increase. million rose

discussed, above-plan As pulpwood the We of a harvest Georgia pricing. local Coastal was and generate advantage strong pine the above-plan major overall helping contributor acquisition. recent market, took pulpwood its

sawlogs. favorable very for We also export local sold into that region’s markets

sawtimber of cost. As haul higher down result mix was slightly of noted, year-over-year as and to pricing higher our chip-n-saw modestly a sawtimber

executed big was contributor institutional a we an cash operating deferral joint joint in $X.X investment and from million providing and recognized flexibility us timing of overall Dawsonville returns first to strategy, plan both received We harvesting as this our in income our quarter venture, on venture, $X.X Our Bluffs, date. the original operations harvest determining decisions. million distribution and in enabling exceeding greater

contract plan on year. to were the For meet sales timberland under and the target for quarter, our completed

and huge standpoint, operations quarter was success. an from tactical a So the

to We of deliver continue adjusting demand strong and meeting future plan, our to nimbly market and advantage wood meet harvest sales maximize taking performance, delivered revenues.

rising capital and execute mitigated our We rate strategy rate also of of a swap interest we March, available to execution future capital ventures. strengthened completed rates In million. joint growth outstanding exposure successful converting through $XX.X we through our million potential fixed interest two institutional by to maximized raise of Early balance acquisitions public sheet floating debt February, transactions. from and in $XX to

working $XXX term XX, we direct joint capital multi-draw under facilities credit had available As for acquisitions of March needs. investments properties, our revolving of timberlands and million venture and

growth an sources from promotes. Bluffs with in the provide ongoing augment our new the active capital secure and part initiative ventures investors. and any new accelerate wake strategy of complete CatchMark’s income extremely joint long-term highly business, footprint, growth from not stockholders joint streams venture, first essential our investment our quarter, This a looking dividend. did can of provide for Dawsonville we’re to we maintain successful institutional durable the timberland leading additional to to In and seeking we expand were during and management fees acquisition Although strong

term. results We’re efforts the that in optimistic these will near deliver

and excellent throughout from opportunities return in U.S. a pipeline. pricing very robust acquisition seeing opportunities our the also We’re extend These perspective

South favorable the an balance Northwest. in as well to position solid compete for objectives. capital position extremely By design, put that CatchMark’s our us and sheet Pacific as in growth strong deals meet

demand producing the And will And quarter basis, on Happy and call Dawsonville Bluffs, an So to increasing today. to some the being some recent anticipation future plan on particular, coverage now up At expand we’re for and volumes focused We assemble the produced strong prime have new sales. our our strategically, recently. our our and and performance, you executing harvest on and and CatchMark and meeting of acquisitions. analysts both want highest your and in summary, plan of and operationally of able I from annual in time, and been our have our the in support on to another growth has remain operationally harvest for year. we on portfolio continuing Overall, and Todd shareholders. I timber on committed have timberlands long-term environment John to Thank look This timberland that for stockholder operations durable of same call we the CatchMark industry. for growth join the defer months in take objectives questions. the forward very price quality welcome the target well in existing much meeting remain ahead an dividend, performed ahead. of improving expectations. value enable returns picked will Brian, today. you to promised

Operator

you. Thank

first morning’s We the And comes Mings will Collin Raymond question-and-answer now be [Operator this with in question Instructions] from session. James.

Collin Mings

guys. morning, Good

weren’t I of wanted just in sort maybe of not Can there recognized you XQ similar initiative decision talk Looking you the expenses what charges the kind results, any quarter? quarter specifically, have discuss did kind expense expenses fourth initiative here but over First, costs, million the what I really you back incremental about but drove of and you any guys discuss deal the to just the of corporate to to decision? in guess, corporate or $X first pipeline. in can recognized here expense there just XQ.

Brian Davis

is This Brian. Collin. Sure,

treatment we to opportunities uncertainty. but and some costs, a our of As degrees we pursuit are in call, conservative close there noted costs related fourth are have may that these quarter of

it’s judgment really call. a so And

So uncertainty for time. appropriate at of in degree and quarter the with fourth associated a capitalize was was quarter, the transactions. those point judgment this we that there those in this judgment, it In made us our expenses to

Collin Mings

cost. spend the you any at at can kind you deposit guys discuss through anything the going cash like It $X.X of of – Okay. of like timberland was doesn’t least that but on pursuit placed did was formally formal look Q? million Maybe end, sort quarter note, on

million-plus to what of $X none been talk spent you just recognizing again, So deposit, that was appears a have on? about can that

Jerry Barag

translate proposed of continue transaction is our that – company to will I we’re Collin, into any I on that you in what hasn’t taking a there any review transaction specifics And we or we slower pursue. some discuss policy pipeline transactions if any I are have of firm. optimism disappointment, things have If outlook get a high ability of degree it’s I little it capital into these that changed we they but have than expected, purchases, would will to invested the the that’s in specific can’t mean, basis. a for tell our under closed. multiple the

Collin Mings

At able clarify. point, if maybe the as is being Okay. sit what’s contract Then, If something? there of maybe timing kind I thinking to in not, we May, this under early LOI? or as just far guess, announce here of to anything latest

Jerry Barag

yes, and plural tell premature But you under Again, LOI. we it’d properties, to be do timing. have that’s

Collin Mings

sounds JV based well could Jerry, combination stuff. as property it wholly when stuff it a on of prepared owned through some say the you And a that remarks, Okay. as be partner like

Jerry Barag

above. All of the

be We’re How’s will options, Goldilocks, Bears. we that? you three the going let the to you all bring and

Collin Mings

operationally more enough. me, just over. All of and it I’ll Fair fair then enough, turn kind right. more question One for

was Just million your $X guidance Dawsonville for to as adjusted as $X far Initial EBITDA. million

you’re we there the this to Here at remainder of million as just first over basically Or kind $X should million as that consider stale $X should that initial interpret point? year? of we to and something Dawsonville that of in now falling over off relates Is there. quarter specifically the the it rolling guidance

Brian Davis

I $X of $X not we’re $X changing would What of first it’s guidance. this million year. to $X tell guidance is the to million. million, you million $X in We that that So million gave quarter

likely operate range. occur expect would So third, I it in late to more relates we’re still activity to going that fourth Dawsonville. quarter as in to

Collin Mings

Okay.

maybe is like back acceleration some does contribution as about it’s off we that, for going how sounds in back at you modeling thinking might out think then that of maybe pretty about It to maybe fair? as And we’ll strong. the kind annual taper half for Is a obviously, actually and So XQ about feel shake then it means year. it think guidance. the of better what point, have for that XQ the

Brian Davis

Exactly.

Collin Mings

it guys. All over back turn and right. get queue. the Thanks, in I’ll

Operator

Thank the question And Kucera from you. B. next Riley FBR. comes with Craig

Craig Kucera

guys. Are perhaps better you Hey, that Or you. pricing seeing pricing sawtimber Thank environment in tightening the on seeing morning, you interest future? to any curious you’re there. maybe good on are higher the about rates? acquisitions out some the related I’m for seeing inverse, the softness expectation

Jerry Barag

Pricing has any U.S. there doesn’t propel been in although be both to flat. fundamental seem just pretty timberlands for the There are prices specifically expectations to higher, darn pressure

for Northwest growth South into prices. higher expectations and and built Pacific were really prior expectations robust But in those prior quarter, and prices. the year of

into developed impact have cap prices. had overall well. on prices in any So hasn’t Interest or as it negative perceptible product fashion rates a higher not rates

timberland it’s timber. So just for prices higher for flat expectation the with been prices of

Craig Kucera

guys any a that one us larger of update have in on of Got can sort for to is seeing what those of timberland here. large it. just know portfolios there? likely you’re lot identified give And And where you you seeing retrade portfolios? the out marketplaces you me. more some Are of lies kind an I

Jerry Barag

to the there and are are we between the end stages the the that of and they’re in Yes, There’s I others. think of tell them them But as coming, market, many are deals. market. market, hit final you’ll being And year. actually and some of so robust of see yet many can to offer fairly and on now private many brought there’s deals off that a things pipeline we’re then of there’s working

of I to So as very robust, pipeline as high-quality and continue is pipeline it’s said I’ve It’s say, full. before and products. our a high-quality

Craig Kucera

Okay, thanks.

Operator

And Dave question you. with the Rodgers Thank Baird. next comes from

Dave Rodgers

mix. pricing in Hi, good the Jerry, about wanted to guys. notwithstanding about and chip-n-saw morning, your guess I haul talk costs and sawtimber comments I

overall wouldn’t mills higher are wanted to to the in mill versus of not a new of putting to is pricing year also mills that think just comments about and inventory to see talking I bit regard seeing there? I today new prepared wanted are new year’s out the next logs as of the If we coming I the ask into next in delivered. firm see you little you with dovetail guys just are in your expectation mentioned over sitting to market, holdback a market evolving just saw your much you seeing that kind as a the you’re guess for logs out kind broadly, of how what like – everybody as deliveries? So market,

Todd Reitz

that are lot optimism all is Good of of the obviously announcements around there morning, this Todd. seeing the coming. out been we’ve Yes, a

the completed or the mid-Atlantic down area, cusp on the about you coastal either over so on And where of range. been have coast projects think

like You’re a portfolio, Anticipation we as feel areas. projects, of take improvement these into anything is force beginning the of that little market forward, we improvement optimistic improvements, our for days moves that that see we have which road bit across that and to similar see There’s not now. moving very those in so down better there capital to ahead advantage the right us these to it will are. would

Jerry Barag

pretty to evidence Coastal in your mean are scale any it’s of some seen in Yes. harvest. the answer deferring I haven’t mean other prices we large question, especially of mean parts people I general, I in side said any the to pretty tend we’re be south of of deferring around harvest. But are think I back Georgia or Georgia people and advantage good through good. the as taking some coming I margin,

the under mean first a have to up buy and Dave, capital of Just ramping from mean sector construction lumber to most popular of that delivered now I been ways backlog have it Most equipment And to made either has still especially just into operations. the at lot investments dryers, construction. standpoint, has that scale big just background and the is I very are mills. big a are be kiln capital a still starting which just of manufacturing been to reach hard very equipment. program seem yet today or there is the manufacturing it it’s today, go.

system this for a timber down percolate is to And going the so be to way procurement. But the implementation there, to and capacity this when through take going have of look you measured on and some it’s time – some at increase of really the it XXXX to impact through point all at the it’s keep going announcements.

Dave Rodgers

That’s then always guys margin, know at a if practices. the deferring there’s measure follow I you And that. talk kind good to way don’t when harvesting of about kind you helpful. that of I

And period? you it hold margin that about is back think right kind on you So X% that? a the can XX-month over of what’s do How amount? the

Jerry Barag

to we needed up basis, product harvest markets our seeing move market with can as about think around seeing. there. it, – the On can our an and annual on move flex what look XX%, at basis, fit call out down, we’re it we’ll We annual around and or we’re dynamics demand

Dave Rodgers

that And you where that you now think? be would range within – XX% do in

Jerry Barag

When that doing look what we out backed year-over-year, of we XXXX at to about amount. were off coming XXXX, we

sales, that well back can our while with quicker, in with can turn that that, we’re should an in. we of be though have the bring that be do we some the we flexibility understanding can should operationally So and wheelhouse and as volume there opportunity, in that something expectation right we opportunistic programs

Dave Rodgers

maybe the of perhaps is Dawsonville election kind your EBITDA the just That’s harvest? helpful. some that guidance And not to again Is for the reason of offsetting increases? seeing Brian, defer that maybe,

Brian Davis

million first than That’s upon right. performance The when with looking We what really gave $XX talked that is associated February say really the and Dawsonville at about a actually we’re a is $XX period. Dawsonville based really defer a Dawsonville business $X to we guidance million $X.X in million. for – The strong of in – in range performance quarter I’d of into establishing you for $X our when the like opportunity opportunity, more you quarter still revenues million deferring became harvest, for with it’s in another risk-off guidance. million to

heard feel regarding so delivered Todd’s you’ve and from really XXXX, CapEx take standpoint, marketplace. that late opportunity in our comment those Jerry us being And early some We in is of advantage the the for opportunities. of XXXX,

Dave Rodgers

Thank you.

Operator

Markets. Paul Capital the question you. Thank Quinn from And comes next RBC with

Paul Quinn

guys. much. Hi, Good morning, thanks very

question. a about to around call. a you of people turn you guys, on talked is deals M&A out there, Everybody deals, number the Just don’t in quality of I especially and dirt your timberland. talking

about opportunities the two? What’s pipeline. robust a the disconnect talking between and You’re major excellent the M&A

Jerry Barag

say. We’re have everybody. better than I been mean It’s opportunities hard out there to there.

on able And we’ve at reason, are off-market and working differently have I’ve that whatever several private look probably to converting ability for to it’s of. of As gotten transactions and opportunities those. then things worked some on and said, the that been front our in are we’ve source

Paul Quinn

to surprised the be seem locate mills underlying like look the to mean going Okay. actually are cost I these And guys if on cautious but low to Mississippi, in conversion simply of these the would a that communities of I cost What they are timberland being the locate residual sawmill then you from located ads hearing it be be upper mills? that to see seems in they’re it where critical takeaways, in. these seems you from Because that people areas factor. mean, just very by sawlog of some adds. would jurisdictions I such I a wondering lumber, guess, you’re high think, of capacity with location you component

Jerry Barag

Yes.

places, employment essentially has away, XX from timber that the sense in cheap harvest in the it the those So the fact possibility skilled more is of away base has been timber employment some timber has of gone in – through spite mill knowledge industry areas the what of products because down that. those timber goes of has result industry makes shut those years we a area and base since hear kind it gone places And and forest they from of front to everybody operations. in kind as than mills it’s of dissipated base to think the into any the and risk manufacturing of as activity. all and people a go way And that challenge of restart the and to I manufacturing that lack the the manufacturing big from logging an back around daunting most trucking industry a end about lost view the

so lumber it’s into big really labor, – labor And issue a a manufacturing. is input labor and input cost also

Paul Quinn

And do on about up point. being experiencing your the that’s the flexibility down mean to got lastly, to then more able you’re area talking is any geographic I that harvest there and that? others? – labor labor you Are And guys difficult move you XX%. – than just just Are any flexibility have you

Todd Reitz

delivery Paul, there relationships we’ve this these is grow, some stable Todd. and to developed Through working got that model we’ve continued producers. with the

not independent with also buyers and in that out tracks. as work come can – they’re able We’re to we’re buying needed as

we’ve So there, that our with. contracting are stabilized with the and secured also had we’ve but harvest producers flows flexibility we overall

the partners agreement that, there. to In supply customers you fiber solid with addition class top have some of

very doing that in going regard, So to adds that stable stability forward. what some and we’re

Jerry Barag

them, contractor got where works places base Paul, essentially, a for that works we’ve we time. and keep doing the full we’re business, mean, it us. for in And employed that I

Paul Quinn

right. all That’s guys. Best I All luck had.

Operator

you. Raymond we James. follow-up have [Operator with Mings Collin a Thank And question from Instructions]

Collin Mings

on of right pricing, ago? registering Is question. But actively anything than operations where basis sawlog the a up this some me, point pricing down seeing that now to them. to baskets or year kind gains being point? actually a months more for off highlighted reported ago of Dave’s dragging first one guess, of mix you you of following year-over-year some now there you’re actually Again, you able issues were can per-ton in are at you’re six where I you your wood one on of just the charge

Todd Reitz

Todd. it’s Colin,

really coast, I think If little strong about touched a overall the that markets. bit. in Those on are you

You’re seeing increases. some modest

We’ve across down strength anything there. here footprint, been you’re entire If key and But the you coastline seeing there right now it’s the with more we’re there’s region, It’s if not up South and the the down any results activity. local pleased seeing little Georgia look we’re market the really been in the real on that Carolina takeaways, per area seeing, ticks Coastal se. to pretty going area. stable the

Collin Mings

And to I seeing? way, far guess there that improvements helpful. as baskets, as quantify those maybe And all in the a at wood you’re is that’s maybe, Todd,

Todd Reitz

Sure.

think about TimberMart-South-type and really sawlog, it as pricing, in markets that compare well side and we’re of You markets. chip-n-saw as pulpwood both outpacing on those

In if cases, much TimberMart-South seeing range some of variance, $X. as say, a say, can products, be specialized You’re over to as, some you $X that will, with $X regards. in

Jerry Barag

try into We’re it’s you making effort base, it a conservative a to digestible current. when a across format because and highlight large land that harder here average to and the out it see put it’s –

and figure give isolate to it We’re going out more to visibility it. into you how

John Rasor

It’s John. firmness has would quarter, just is of that’s about. going that and potential a comment everybody price better, the the into environment I talking recovery think translate to felt that pricing this add I

Collin Mings

that over you’re has last from guess, GAAP, that the that So GAAP takeaway? that TimberMart-South the that benchmark, relative one widened Okay, that’s maybe is getting I maybe maybe helpful. year? takeaway those a fair pricing markets, using And in

Todd Reitz

for that of because coastal and key the I that impact. of was strength seeing point, would acquisition the is, that markets the really sits. we’re say the where Jerry’s To

able as So it utilizing to sawlog your well. we’ve markets that, traditional be been export capitalize the markets or on

Collin Mings

year. pricing, reported just of remainder on expectations update this then the little on of through just And Okay. kind quarter on the you Again, but obviously the pulpwood us touched of stronger a side bit pulpwood expectation maybe the pricing. the

Todd Reitz

a the now. of Sure. in right you’re obviously, outage kind first nice season and of We had quarter midst

flat probably So averages year I would anticipate the it see we’ll year-over-year all and when out. throughout some seasonality

Jerry Barag

to places in terms a that been places, lumber doing adding There’s a beneficiary pulpwood OSB been as about well, fair where talked prices I push we’re different amount we’ve that a is which as manufacturing people net and have in well, mean, there’s helping business. been capacity capacity. of Collin, lot of

Collin Mings

Okay, And about think maybe couple follow-ups, growth just all as a the we external fire more just right. then rapid initiatives.

thinking following the the Brian, facility. us, growth in external quarter, full to recognizing equity, credit remind capacity not equity about you’re additional just without the how million for the offering Just you just on $XXX use may again want the

Brian Davis

Yes. And about we markets think the this philosophically, Collin, operate just about in. and past, Jerry, strong how Todd we’ve that. we about in which talked talking John have really been in

model, the those seems feel debt cost range. $XXX Our more we that low past, deliver wood factors us those supply leverage little to our up that lot $XXX marketplace marketplace of special business, into bit regarding CapEx capital in transactions, agreements a said, as based delivering With be comfort that support debt. into upon that talked sale million low and push And being of to types good of we’d gives order and but we’ve deploying of a for pretty for range comfortable to million deals. the in the a the that

Collin Mings

the you a going under owned properties then just is Pacific in Can some further that Northwest contract, And actively as back JV Okay. that’s well? of front. both you kind if wholly and under on Jerry, contract of any to clarification, a that maybe have

Jerry Barag

I Again, on They’re of U.S. we been under working in If both LOI. contract. the actively anything, they were you. under can’t I specifics under to comment it have not would but They’re contract, announce

Northwest. Pacific the and South

Collin Mings

you about think Fair deals, any the additional been Okay, need overall And partners of executing complexity of the then one, more and as to as or enough. leverage kind occur think of ability on take partners and or the G&A? think bringing thoughts team all on you this footprint? pipeline last about the we again growth you how there grow might more just some about should maybe incremental growing Has just on just maybe about right. team that to as

Jerry Barag

that level, tired big grow the us, some we I we certainly isn’t of no, personnel G&A. new at indication have faces. an expand There enough significantly. G&A to enough mean Hopefully, aren’t platform believe really more the to we getting But the have or that you’re senior – plans

Collin Mings

appreciate all morning. guys I of right. the All talk I’ll question soon. patience my you this

Operator

And I the that you. return was for closing any would comments. to as the Barag last over like question, conference to Thank Jerry

Jerry Barag

again to from new on the Like forward you Thank we’re seeing said, to participants I in joining we now. call, you quarter look again us. pleased everybody and a for have

Operator

Thank you. today’s Thank conference has The now presentation. concluded. attending you for

You may lines. now your disconnect

CatchMark Timber Trust (CTT) 5 May 182018 Q1 Earnings call transcript