Potlatchdeltic Corp (PCH) 2004 Q3 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Q3 2004 Potlatch Earnings Conference Call. (CALLER INSTRUCTIONS)

Your speakers for today are Mr. Penn Siegel, CEO, and Gerald Zuehlke, CFO.

I would now like to turn the presentation over to your host for today’s call, Mr. Gerald Zuehlke, CFO. Please proceed, sir.

Before we begin, I remind you this call may contain forward-looking statements within the meaning of the U.S. securities laws. These statements include statements about the Company’s future business prospects and anticipated performance in upcoming quarters. These statements are not guarantees of future performance and the Company undertakes no duty to update them. Although these statements reflect management’s expectations today, they are subject to a number of business risks and uncertainties. Actual results may differ materially from those expressed or implied in this call. For a discussion of certain factors that may cause actual results to differ from the results anticipated, please refer to Potlatch’s recent filings with the SEC.

I would now like to turn the time over to Penn Siegel, who will discuss third quarter results and provide an overview of our operations and markets.

Penn?

Thanks, Jerry, and my apologies to the group. I’ve got an interesting cold, so my voice may be shaky today. I’ll start off, as I usually do, just by going through business segments.

Resource segment had a strong third quarter, which was aided by $12 million in the land sale category versus it was only $3 million a year ago. Hence, even without that, the quarter was quite strong. As we told you in both the first and second quarters, the Resource business is quite seasonal, based on when we can physically deliver logs and move them over roads. So it is always back-end-weighted to the second half of the year - both third and fourth quarters - and this year is no exception.

Because weather is uncertain, the amount of back half waiting varies from one year to the next and we don’t really know, going into a year, exactly what that’ll be. Although by the end of the year weather is not a factor in the annual income.

Resource did quite well. Included in the land sale was $4.1 million in the third quarter from the continuing sale of some conservation easements on some of our timberland in Northern Idaho.

Last year we had a sale of only $0.5 million in the third quarter and we anticipate additional conservation easement sales, at points in time in the future, when we are able to put them together. The business has remained strong. Pricing for logs has been good, basically, especially in Idaho, but also has been good in Arkansas and we anticipate that to continue.

Moving to Wood Products, I will not comment on the OSB business, which as you all know was sold to Ainsworth Lumber Company and that transaction did close in last September, I think the 21st of September. And so, while there were earnings from OSB, they are not included in the business segments as broken out in your release, which we issued yesterday and which you should have a copy of. And last year’s results were also restated to take out OSB as a discontinued operation.

In the remaining businesses - Lumber, Plywood, and Particleboard - the market was quite strong in the third quarter. Demand was good. Our costs are quite good, from a manufacturing and productivity standpoint.

However, as is normal, if there is such a thing, such a word to apply to the wood business, we did begin a seasonal decline in pricing in September. That is more or less normal each year, as many of you know. And we anticipate that seasonal decline will carry through, throughout the fourth quarter into some part of the first quarter before it once again builds up, since it is tied to the seasonality of housing construction.

The market, though, remains quite good. Product moving to job sites remains quite active, from the information we have across the U.S. and so that market continues to look pretty good and it looks pretty good for next year as well.

The Pulp and Paperboard segment, we began seeing some price increases earlier this year and those increases were, at first, fairly difficult to put through, since the industry -- we would announce an increase and others would announce increases. And then a fair amount of those increases were given back in negotiations with customers, as various companies attempted to upgrade their product mix by gaining customers from other producers. That’s a normal process.

The increases, enfolding Cartons, which is our biggest revenue segment, there was a $50 increase, which went in late in the second quarter. Only about something less than 50 percent of that increase actually got into the market and stuck and the rest was basically given away in negotiations, I believe, for the whole industry and certainly for us.

There was another increase in Folding Cartons in mid-September of $40. That increase appears to be sticking, and as of this point, we have not seen fit to negotiate or change that price downward for any customers and don’t anticipate doing so.

Paperboard prices were falling during much of last year and as they began to firm up earlier this year they hit bottom. And they have, by the third quarter of this year, prior to this latest increase, they had reached a level, which is slightly ahead of third quarter of last year and we would anticipate that trend to continue into the fourth quarter.

From a productivity standpoint, both mills ran quite well in terms of production and that, as you know, causes lower unit costs. So that business is doing quite well.

There was, in addition, an unusual item, which we’ve highlighted in the release. A number of years ago we bought some defective equipment from Beloit Corporation, sued them, won a suit, had it sent back by the Idaho Supreme Court for retrial, at which point in time Beloit entered bankruptcy.

And so the $3.0 million, which is part of the income that was reported in the third quarter of $12.2 million, in this year’s third quarter for Pulp and Paperboard, is a onetime event. And there may be something else that’ll come along from Beloit, but very little of the money, which we believe we were owed, we were ultimately recapture. This is probably the largest amount that we will recapture.

The markets remain quite good. Our backlogs are extended. We have not, as of the end of the third quarter, begun to see what we might call a normal seasonal decline in order backlogs in Bleached Paperboard, although I still anticipate seeing one in the fourth quarter. It would be highly unusual not to. But that market remains good and looks to be quite good going into next year.

The Consumer Products segment, we incurred an operating loss of $5.0 million versus basically break-even in the third quarter a year ago. The markets for Consumer Tissue products are quite competitive. We are seeing improved pricing but that, to date, through the third quarter, is almost entirely a result of the introduction of our TAD Towel product, which is a much higher-priced product. So the average realizations in the segment are going up, although if you take that out, the realizations have not been increasing.

Starting in the fourth quarter, we will begin to see price increases, partly through higher prices and partly through our following a number of sheet-count reductions in the Tissue business, which have already been announced and implemented by the brands. As a private label producer we are a follower in something like sheet-count reductions and so ours will phase in over the next 4 to 6 months, fully. But that is quite a significant factor in terms of raising the average realization per ton of paper sold, which looks to be improving also.

Let’s see. Jerry has a comment in here on the OSB. I see no reason to cover it again. It was in the release. In terms of in addition to the gain on sale of the OSB business, the OSB business made $37.3 million during the third quarter, which included it up until September 21st at the time it closed.

Jerry, back to you.

Thanks, Penn. What I’d like to do is, as I typically do, go through some shipment and realization numbers and I, like Penn, will not do any of that for OSB, inasmuch as we did not have a full quarter and we won’t have those statistics going forward.

So I will start with shipments and these will be percentage changes from the second quarter of ’04, sequentially. Lumber shipments were up 1.8 percent; Plywood shipments down 4.5 percent; Particleboard down 9.7 percent; Paperboard shipments up 1.2 percent; Pulp down 15.4 percent and Tissue down 4.2 percent.

In realizations for the quarter, Lumber realizations up 1.5 percent; Plywood up two-tenths of a percent; Particleboard up 9.8 percent; Paperboard up 3.3 percent; Pulp down 2.8 percent; and Tissue up 3.4 percent.

I will also give you the trend in pricing, the month of September versus the quarter average. Lumber was down; Plywood was down; Particleboard down; Paperboard up; Pulp down and Tissue up.

In addition, I normally give a few other statistics. As you noticed, interest expense was $12.5 million in the quarter. Capital expenditures were $16.7 million during the quarter and YTD are $42.2 million. Looking at those statistics without OSB, in the quarter we spent $13.1 million on CapEx and YTD has been $36.1 million.

Depreciation, depletion and amortization (DD&A) during the quarter was $25 million, as it was last quarter. A run rate without OSB would be about $3.0 million lower per quarter and you probably noticed on our balance sheet that we have cash, in excess of debt, of about $131 million. That due, in great part, due to the sale of OSB, but also due to quite good cash flow due to earnings over the last quarter.

So, with that, we’d like to turn it over for questions, Michelle.

(CALLER INSTRUCTIONS) Rich Schneider, UBS.

Penn, you had a big buildup in cash, obviously, in the quarter, a lot of it coming from the sale of the OSB operations. But cash rose by something like $545 million and the sale was $455 million. Could you go through the components of that? Also, on the other hand, accounts payable is up, so am I supposed to assume there’s a tax bill that needs to be coming out of the balance sheet?

Well, I’ll take a top line shot at that and let Jerry cover details - Jerry or Doug. Rich, good morning. You were correct. In the accounts payable, because we entered the year with fairly substantial tax loss carry-forwards, both for regular taxes and for -- I’ve forgotten the term, Jerry.

Well, we had net operating loss carry-forwards, as well as -- I’ve forgotten the term, too.

Well, in any event, we had tax loss carry-forwards, Rich, which were fairly substantial. We had used all of those up by the time of the sale, just from strong operating income and so the sale is a taxable event.

And in the accounts payable and accrued liabilities, the biggest item in the buildup there is roughly $100 million of tax payable and I say roughly because, as we get to December 15th, the gentleman who runs our taxes will go through all the calculations.

But that’s a rough proxy and there are some other items in there too. Operations were pretty strong during the quarter, not just from the non-OSB operations but OSB as well, so most of the remainder of the cash buildup is normal. We did have -- I did not have, when I left the office yesterday, still a detailed breakdown of all of our financial statements by plant and by business.

But we did have as normal, from the end of June to the end of August and I’m sure through September, a buildup in log inventories or wood inventories, as we do each year in the second half of the year. So that has eaten up some cash that otherwise would have gone elsewhere.

Jerry, I don’t know whether you have any other details.

No. That’s accurate. We obviously will have a detailed cash flow statement in our Q. It is hard to reconcile it totally, because working capital changes are disguised a little bit by the working capital change as part of the sale of the OSB assets. So you can’t totally reconcile it with the numbers you have at hand.

But essentially it’s been good operations, good income, a slight decrease in receivables, and inventory through September in spite of the log buildup that we’ll start seeing. And then, as you noted, Rich, the tax payable due, which we’ll make a payment in December.

The other thing, Rich, which is a factor but again, I didn’t have the detail when I left the office - and Jerry and I are in different places today on this call - there has been a heavier exercise of stock options over the last 6 to 9 months in relation to the prior 3 or 4 years, when many of those options were underwater. So some of that increase in cash is a buildup in capital-type equity.

And Jerry, you said OSB contributed about $37 million or so in the quarter?

That’s correct.

In looking at the Tissue business that you talked about, issues with increased production costs. Can you go through that? I know you’re producing the TAD Tissue or Towel, but is that what you’re referring to in terms of increased production costs?

In part, Rich. The other part would be the Towel business has been very strong and has somewhat surprised us. We had anticipated, when we introduced the TAD Towel, that a fair amount of the volume in that product - which is doing quite well - would come by cannibalizing our own premium conventional two-ply towel and that is not the case.

There is some cannibalization of it, but very little. So that product remains strong and part of our cost issue is an insufficient converting capacity to really meet the orders, which we have from all of our customers. And that has added to some shorter runs on the converting lines and therefore as we shift from customer to customer and therefore higher costs.

We’re working our way through that with the ramp up of the Towel line. We moved to Chicago for some major price savings, as well as increased productivity on the new Towel line in Las Vegas and we’ll be starting up a new Towel line also around the turn of the year in Chicago. So we’ll work our way through that, but that’s been a fair addition to costs.

In addition to the fact that the TAD Towel is a quite profitable product, it’s a higher-cost product than anything else we make, but it’s also a higher-priced product.

So the converting problem, was that the primary reason why the losses expanded in the third quarter?

I’d say yes and it really -- we had never introduced a product like this to take -- when we had previously upgraded products. We were merely upgrading a product.

This is a brand new product and we thought most of our premium Towel sales would go away and first our customers decided they wanted to continue to sell it. Which surprised us in a number of accounts, but what surprised us even more is that it continues to sell very well on the shelf. So the market share we’re gaining is coming not from our own product, but from elsewhere.

Just a couple of last questions. You talked about depreciation in CapEx. Could you give us what you expect your numbers for next year to be, as the Company is currently configured, in terms of depreciation and CapEx?

I’ll take a shot at CapEx. We have been very tight on CapEx for the last 3 or 4 years because of balance sheet considerations, and as a result, we spend money on environmental safety health-type issues, fire protection. We spend money on things, which clearly have to be replaced because they’re broken down.

But when it’s gotten to the discretionary items, Rich, we have funded virtually nothing with an internal rate of return of lower than 80 percent. And so I would anticipate there is clearly a backlog of projects, which are good projects, in the 40 to 80 percent range and so I would anticipate next year our Cap spending will be fairly close to DD&A. Which is probably -- DD&A is probably in the $90 to $95 million range.

And Jerry, any correction of that?

No. That’s correct. It should be in the $90 millions and varying in there, depending on depletion, for the rate of cut.

Which we do not go to our Board for a capital budget, an operating budget, until the first of December. So that’s my guess right now, but it is subject to Board action.

Lastly, I know you’ve given us restated numbers for taking out the discontinued operations for the third quarter a year-ago. Are you going to be able to provide us with those numbers for the quarters for all of last year and the first half of this year, Jerry?

We have not gone through all of the quarters yet. Had enough to do just getting this one done for this quarter, but we will be doing those, obviously, and we’ll have them available.

So it’ll be a while, I guess?

It’ll be a little while. Yes.

Okay. Thanks a lot.

Thank you, Rich.

Steve Sharecover (ph), D.A. Davidson.

First of all, first question. Can you tell us how many acres you actually sold as part of your $12 million line item in Timber or was it all just easements?

Well, of the $12 million, included in that $12 million is, as I referenced, $4.1 million of sale of conservation easements, which basically is the sale of development rights, although we sell on all the acres and all the timber on them.

So, if you back that out, you’ve got about $8.0 million of land sales. There were a lot of transactions. I don’t have the number, but I think the transaction number is probably 50 or 55 separate small parcels. There’s nothing large in there at all.

So you think it might represent a couple thousand acres in total or--?

It’s probably more than that. I would guess 5,000 or 6,000 acres, with almost all of it being in Northern Minnesota, but in 30-acre pieces and 20’s and 80’s. There are no large transactions in the third quarter.

That’s helpful, nonetheless. And I also want to discuss, on the Tissue side, I mean, obviously I heard that the converting capacity constraint hit you. Do you believe that -- will you have to spend any more money to buy new converting equipment or were you just hoping to get it installed and running smoothly?

We actually have bought another line, which had been made for someone else and who then backed out of it - I believe a European player in the tissue business - but it was virtually complete. So it will be up and running during the first quarter, as opposed to the normal lead times.

We also have gone out, Steve, to virtually everybody in the business to see who has excess converting capacity to do some off-site converting, which is expensive but is a way to help solve customer issues and production cost issues. And the towel-converting business is extremely tight.

So we are doing some off-site converting in the fourth quarter with 3 or 4 players, but they’re very small amounts. We’ll be out of this issue by second quarter, in my opinion, if not the beginning of the second quarter certainly during the second quarter.

Do you have to buy any parent roles in the marketplace or are you self-sufficient there?

We have a fairly substantial buildup of parent roles, so no. The machines are running extremely well, so we do not have to buy any parent roles going forward here over the next 18 months or so.

So more outsourcing in Q4 on the tissue side, but (multiple speakers) --

Not much. Not much, only because we can’t find the capacity. There’ll be more production internally as that line in Chicago ramps up and it’s making good progress and as our line in Las Vegas ramps up and it’s making progress.

But we clearly mis-estimated the overall towel demand, because we thought on the order of 65 or 70 percent of our premium towel would go away and we would replace that on the existing lines by making the TAD Towel. It didn’t go away.

Well, that’s good and --

That’s a good problem, but right now it is creating some cost issues for us.

Any thoughts on whose market share you might be stealing?

Well, I’d just as soon not go into that, but it’s not thoughts. I mean, we know customer-by-customer whose market share we’re stealing, but its not ours.

That’s good. And finally, it really does seem like quite a nice swing in the profits of the Bleached Board business, without an awful lot of pricing, if you compare them year-over-year. So is that sustainable, you think? I mean, obviously we’re still dealing with really high energy prices, but--?

Energy has not been -- energy affects us in Arkansas where we do not have a waste-wood boiler, just because of the makeup of that mill and where we get our wood and energy affects us some in Idaho.

Having said that, our energy consumption, in units of say of natural gas, because that’s the energy we would buy, is way down per unit of paperboard produced and our cost is down fairly substantially, even at current prices. So that is not much of an issue and yes, I think it’s sustainable.

Much of what we have seen in our realizations, where realizations in the third quarter are higher than they were a year-ago, that’s really a product mix and we have a lot of mix left. We have fixed our Lewiston operation and its making extremely good quality on a consistent basis.

And we’re in the same process we were in, Steve, in Arkansas starting in 2000, upgrading its mix into products which we were not capable of making, say in 1999. And right now about 40 percent of the Arkansas mills’ output is going into higher-priced customers, with much higher printing demands. In other words, a higher-quality product, that none of which existed in 2000.

We are just starting that process in Lewiston, but having some pretty good success and so I think it is more than sustainable.

Great. Final question, I guess is a two-parter. Can you give us any indication of how your tender is coming along? Do you expect it to be successful and assuming it is do you personally have any preferences in how you return excess capital to shareholders? I mean, do you have a preference for share repurchase or special dividends or are you just indifferent?

Let me take the first part. The tender was announced. It’s kind of a two-part tender with a higher price if the bonds are tendered by close of business tomorrow and then the tender ends, I believe, November 4th. We’re highly confident that the tender will be successful and that’s about all I’ll say at this point in time.

With regard to a return of capital to shareholders, in terms of the combination of either stock purchase and retirement, or being held in treasury and a special cash dividend, both have some appeal. Frankly, to our shareholder [indecipherable] I believe and it would not surprise me if when our Board discusses it we end up with something of a mix between those two items.

Okay, great, thanks very much.

You’re welcome.

Peter Ruschmeier, Lehman Brothers.

Good morning, Peter.

Thanks, good morning. Just two quick questions. I was curious on the Particleboard market. You mentioned the prices are down at the end of the quarter. Just curious if you could flesh that out a little bit. You’ve had a heck of a run in Particleboard demand in prices. What do you see behind the recent move down?

I think, actually, let me go back. Jerry, I believe prices were up in the quarter.

And they were up in the quarter --

But trending down.

-- trending down in September, but it’s such a marginal difference. I don’t know that you could really call it a trend.

No. It’s a different market from other wood markets. It doesn’t seem to follow the exact same pattern. I anticipate, though, Peter, that that market will be quite a bit weaker this winter and then will probably pick up again next spring.

And the market remains -- it is weaker, but the market remains awfully good in relation to where it’s been for the last 3 or 4 years. It’s a small product line for us. It is a product line that we believe we can do some things to over the next couple of years and increase our productivity and therefore lower our unit costs fairly substantially.

Perhaps a bigger question, strategically, is there seems to be just a tremendous appetite from REIT investors for yield and certainly if you’ve considered this in the past or you’ve looked at it in the past. Can you maybe help us to understand how you think about the pros and cons of considering a potential strategic change in your corporate structure? There seem to be some compelling reasons to consider it. Maybe, to narrow down the question, maybe you could help us understand, from your perspective, the arguments against considering reshaping your corporate structure?

Let me take a -- I mean, it’s a question I can talk on for 2 or 3 hours and won’t, mercifully for the rest of you. I think the key thing in terms of a downside -- the key thing for upside, Peter, is obviously to the extent it makes sense in a corporate structure, you avoid C-Corp tax and cash is therefore passed back in a much more efficient way to shareholders.

The downside of a REIT, I think, from a Potlatch standpoint, is that to the extent that we keep our structure as it is today, with the operating entities, you must put those operating entities in a taxable subsidiary of an REIT. And it is possible to downstream cash to them from the parent REIT, but that is a market disaster, I think, in my opinion, just looking at REITs in general, that you never want to be in a position where you must downstream cash.

As a result, anything, which goes into a taxable sub or some combination of taxable subs, must be self-supporting from a cash flow standpoint, at all points in the business cycle. And that is, I think, it also probably true that to the extent that you are in a REIT, the more non-REIT-able assets you have, perhaps the less interested the market is.

So those would be the two larger potential downsides. Jerry, do you have anything that you’d add to that?

Those are the salient points.

Very good. Fair enough. Thanks very much, guys.

Thanks, Peter.

(CALLER INSTRUCTIONS) Joe Sylvatke (ph), Goldman Sachs.

I just wanted to maybe get your perspective a little bit in the context of these decisions on how to deploy your huge cash buildup. I’m trying to understand or get your perception of Moody’s and their decision to downgrade you, despite, I guess, what most of us thought were some fairly positive developments here.

And I guess the point is not only to understand what your thoughts are there, but to understand what your -- how this factors into your decision-making in terms of how important are these bond ratings to you, looking forward, as you decide how to deploy that cash. I mean, obviously the gist of what they’re saying is that you’re going to put a decent amount of that cash to work toward the equity holders and therefore that’s going to be a negative for the bonds.

I guess I’ll take a shot of that, Jerry, and you can. I mean, clearly a Moody’s and an S&P and a Fitch all go through their own processes and make their own decisions and whether we agree with them or not. In this case we clearly wouldn’t, but that’s not -- I think you would get that as a universal answer from any management whose debt has been downgraded -- is interesting but kind of relevant. Because it is their decision and in order to understand it, you’d probably need to talk to them.

From our standpoint going forward, we believe our tender for the sub debt will be quite successful. We believe going forward, as we look at interest coverage going into looking into next year, for example, our interest coverage will be far above what the norm is for investment-grade companies. And so that would be primarily why we would not agree with Moody’s decision, but it is their decision.

In terms of what affect it has on us, we’re running a Company for the benefit of basically everybody, bondholders and shareholders. And as we look at this going forward, the affect of having both Moody’s or either Moody’s and S&P at a below investment-grade rating means that we pay some $3.0 million more on the $100 million credit-sensitive debentures we have outstanding. Which are non-callable and cannot be paid off till ’09.

Other than that, we plan to run the Company with a very conservative balance sheet. We didn’t have one there for a while and none of us liked it. We’ve gotten one back and we’re going to keep it, going forward and so I don’t think it has much affect, frankly, on our decision-making, Joe.

So are you considering additional tender offers for other parts of your debt structure?

We had looked earlier at potentially tendering for medium-term notes and we, through an agent, actually talked to the note-holders and none were interested in parting with the notes, because they liked the credit. Even at a price, which we and our consultants thought ought to free up those bonds, so we did not tender. So, I think the reason is many of those -- there are lots of those different issues and they go all the way out to 2022, I think, is the last maturity. So people liked the credit, liked the coupon, and wanted to hold it. T

The sub debt is different, because in July 15th of ’06 we can call it at 105 (ph) and so the sub debt owners know that we’re going to call it, in the event they don’t tender. And as we look at the rest of the debt, I would rule out tendering for something else, but nothing else to date has looked like it could be bought very economically. It’s clearly something we look at on a frequent basis, though, Joe.

And we would continue to watch that as the interest rate cycle changes. Things may become more attractive than they’ve been to date.

Right, right. Okay, great, well, good luck with it.

Thanks.

Rich Schneider, UBS.

Since we had time, I thought I’d ask a follow-up here.

Sure.

In following up on what Joe asked, if you look at the couple of uses that you have that’ll take up close to $450 million of cash between the distribution and the calling in or the tender. But that leaves you with approximately $200 million of cash on your books. What is your view on that cash that remains on your books?

On the $200 million, I assume you’ve already subtracted the roughly $100 million of taxes?

Exactly.

Okay. We also announced, Rich, that we intended to make a $58 million contribution to the pension plans.

Oh. That’s right.

That only costs us $35 million, because it is fully tax deductible, so $22 million is paid for by Uncle Sam. But so you can really think of that as a $35 million, I think, deduction from that cash amount and beyond that, we plan to keep a pretty healthy cash balance, going forward, for some period of time, until we find a better use for it.

Some of that could be used to pay down debt over time when you have an opportunity?

It sure could, as well as, we anticipate, continuing to be cash flow positive going forward.

Well, you could look at potentially also giving it back to shareholders in some form, at some point in time?

That’s another alternative the Board will clearly look at.

Okay and just on log prices, could you give us an idea how much they were up year-over-year in Arkansas and Idaho?

Let’s see.

Let’s see. I didn’t really run the percentages, but in Idaho, which is the biggest difference, its about a little over 20 percent. The other ones are in the 5 to 10 percent range.

Yeah, the other ones are smaller.

And then that was, on average, in the quarter versus a year-ago?

Correct, quarter to quarter.

And your view on pricing going forward sounded positive. Are you looking for further improvement in pricing or being able to keep what you have?

I anticipate pricing probably to be fairly close to where it is now, maybe a slight upward bias, but I’m not looking for additional increases like we saw in the last 12 months, Rich.

So what we’ve gotten already has reflected the movement in the converted price?

To some degree. Log prices tend to be fairly sticky. They move with a fairly long lag to end product prices and depending on the region of the country, they tend to move up with a ratchet, especially in the South.

The reason we haven’t seen the same increase in the South, I think, is that prices never went down, reflecting lower end product prices. As end product prices drop in the South, because so much of the timber is owned by non-industrial private owners, the supply tends to dry up.

Thanks a lot.

Thank you, Rich.

And sirs, you have no further questions at this time.

All right. Well, we’d like to thank everybody for joining us and we’ll look forward to talking to you again next quarter. Thank you.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.

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