Potlatchdeltic Corp (PCH) 2006 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the fourth quarter 2006 Potlatch earnings conference call. My name is Fab and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question and answer session towards the end of this conference. [OPERATOR INSTRUCTIONS] As a reminder, this conference is being recorded for replay purposes.

For those who are listening using a telephone and not a computer, be aware that Potlatch will be conducting a virtual live webcast using slides. All slides will be made available for downloading after the webcast.

And now I would like to turn the presentation over to your host for today's call, Mr. Gerry Zuehlke, Chief Financial Officer. Please proceed, sir.

Thank you, Fab. Good morning. Joining me on the call today is Mike Covey, our President and CEO. And just a note, I think those slides should be up and available now.

Before we begin, let me remind you that 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 results to differ from the results anticipated, please refer to Potlatch's recent filings with the SEC.

Also before we begin, please note that segment information for volumes and prices per unit as well as reconciliation of non-GAAP measures can be found on our website as part of the webcast for this call.

I would now like to discuss our fourth quarter results after which Mike Covey will provide some additional comments, including an overview of our markets. Our fourth quarter net income totaled $44.1 million or $1.13 per diluted common share as can be seen on page three of the slides accompanying this presentation. Included in this number is $39.3 million pre-tax, $24.0 million after-tax, from the settlement of the softwood lumber trade dispute which represents our entire share of the settlement and is non-recurring, as well as a $3.9 million addition to our tax provision for the quarter resulting from a transfer of assets from the REIT to the TRS. Therefore, recurring fourth quarter net income for comparison purposes would have been $24.0 million or $0.62 per share.

In the third quarter, we had a $9.2 million non-recurring adjustment to earnings from an agreement with the IRS on closing open tax years resulting in net income on a recurring basis for the quarter of $15 million or $0.39 per share. The results for the fourth quarter of 2005 include a non- recurring REIT conversion cost of $4.2 million before tax resulting in net income on a recurring basis of $12.5 million.

Our effective tax rate for the year, net of the deferred tax adjustment related to the REIT, was approximately 8.3%. Going forward now that most one-time tax events are behind us, we would anticipate a similar effective tax rate. This assumes effective use of like-kind exchanges and similar TRS performance. The reconcilement of our 2006 tax provision by quarter can be found on page eight of this presentation.

If you'll now turn with me to page four, I would like to discuss fourth quarter results from our operation. Our Resource segment results were slightly stronger in the fourth quarter with income of $19.6 million versus the third quarter income of $19.3 million, and significantly above the $13.4 million earned in last year's fourth quarter. Harvest levels in Idaho were a significant contributor to the year-over-year variance, increasing by approximately 20%, partly due to favorable operating conditions and our planned increase in harvest levels. Harvest levels in the south were much improved over the third quarter but were still lower than the fourth quarter last year. For the full year, we had consciously held back on harvesting in the south due to high log inventory levels at mills in our operating region. Pricing in the north was lower both comparable quarters, while there was little difference in the south.

Land Sales and Development operating income in the fourth quarter was $9.1 million compared to 8-tenths of a million in the third quarter and $14.9 million in the fourth quarter of 2005. We announced during the quarter that we closed the sale of a conservation easement for $6.7 million in Arkansas as well as a couple of small land sale transactions. However, the bulk of our Land Sales efforts were on hold during the fourth quarter while we completed our Companywide land stratification process. The $14.9 million in the fourth quarter of 2005 represented Land Sales income of $9.3 million, conservation easement income of $6.1 million, less administrative costs of a $0.5 million. Looking forward, as we discussed during the fourth quarter investor presentation, we anticipate selling 15,000 to 20,000 acres of land in 2007. We estimate at this time that about 30% to 40% of those sales should occur in the first half of the year with the balance occurring in the second half.

Wood Products operating income of $33.9 million during the quarter included the $39.3 million Canadian settlement discussed earlier. Without the settlement, the segment lost $5.4 million in the fourth quarter versus $5.2 million loss in the third quarter and positive earnings of $400,000 a year ago. The drivers behind fourth quarter results were lower prices in all product lines except particleboard versus both periods and lower lumber shipments versus both periods. During the quarter, we curtailed lumber production through down time and shift reductions. Lumber prices were down approximately $37 per thousand board feet in the fourth quarter compared to the same period one year ago. Log prices for our lumber mills only dropped $8 per thousand board foot on a lumber scale basis during the same period resulting in the margin squeeze that has eroded profitability. Higher plywood shipments together with lower production costs partially offset the negative variance.

Pulp and Paperboard segment earnings of $7 million during the quarter were significantly below the $14.3 million in earnings during the third quarter and much improved over the loss of $4.3 million in the fourth quarter of 2005. While market trends in the segment continue to be positive, the high cost of wood chips in the Idaho operating region had a significant negative effect in the quarter compared to the third quarter. Fiber costs increased by approximately $6 million during the quarter and our energy costs increased due to seasonal usage of natural gas.

Consumer Products had a $7.2 million in earnings for the fourth quarter versus $6.2 million sequentially and $7.4 million in last year's fourth quarter. Shipments and pricing were both slightly lower than the third quarter. Lower production costs, with the exception of high pulp costs, offset the negative variances. Energy costs declined during the quarter due to seasonally lower electricity rates in the Las Vegas Basin and we're seeing the benefit of reducing our inventory by over $25 million which is reflected in lower warehousing costs.

Pulp costs rose by approximately $7 million in the fouth quarter compared to the same period one year ago. Eliminations have positive effect on fourth quarter versus the third quarter of this year and the fourth quarter of 2005. Normally the building of log inventory during the second half of the year leads to a negative elimination but we converted a large volume of cedar logs in the fourth quarter resulting in a positive LIFO adjustment which more than offset the effect of building inventory and mixed logs during the quarter.

Corporate Administration including interest expense totaled $17.6 million for the quarter and would be representative of our future expectations. Interest expense totaled $7.2 million for the quarter. Upon the closing of the Wisconsin land purchase in January, we borrowed $30 million on our revolving credit agreement which will add approximately $465,000 of interest expense per quarter until we match like-kind exchange sales to provide cash to pay down the revolver.

EBITDA totaled $90.7 million in the fourth quarter versus versus $40.7 million in the third quarter and $40.6 million in the fourth quarter of 2005. Funds from operations or FFO for the quarter totaled $71 million versus $38 million sequentially and and $32.7 million a year ago. Funds available for distribution or FAD for the full year totaled totaled $119.9 million and we paid normal annual distributions totaling $76.1 million. All comparison on this page are positively impacted in the fourth quarter by the lumber settlement of $39.3 million before tax as mentioned previously.

The next page, five, provides additional details by segment to the variances I have described.

Now before I turn some time over to Mike to provide some additional comments about our operations, including an overview of our markets, I would like to point out a couple of accounting changes impacting our financial statements. The first is the change in pension accounting rules causing a reduction in shareholder equity at year-end by $119.1 million. This non-cash charge results from the requirement under SFAS 158 to show the total effect of funding using the projected benefit obligation previously described in the footnotes to our financial statements.

The second change will be reflected in future financial statements and is related to accounting for major maintenance costs. Previously, the accrual method for accounting for these costs was allowable and used by Potlatch, the effect being to smooth these costs over the entire year. Going forward, these costs will be recorded as incurred. In 2006, these costs totaled $17.9 million. We expect these costs in 2007 to total, by quarter, $9.1 million, $1.4 million, $7.5 million, and $1.1 million for a total of $19.1 million for the year.

One other point to make before I turn it over to Mike is that in the first quarter, we had a Resource reorganization and we expect that the costs related to that reorganization would total approximately $2.6 million in the first quarter.

Now I'd like to turn it over to Mike for some additional comments. Mike?

Thanks, Jerry. Good morning. As we begin 2007, Potlatch is well positioned to improve the strong operating results we reported this morning for 2006. We expect that three of our five business segments will improve operating results and cash flow in 2007.

In our largest and most valuable business segment, Resource, we expect to increase harvest levels in Arkansas and from our new land base in Wisconsin. We are mindful that a protracted lag in the housing sector may eventually lead to weaker log pricing. However, to date, log prices and demand in our regional markets remain relatively strong with the exception of Minnesota. As that appropriate, we will defer harvest if market conditions dictate that it's more prudent to leave mature timber standing to grow in size and value just as we did last year in Arkansas.

Following our investor presentation in December, we have taken the brakes off of our Land Sales program that we identified earlier in the year, especially land that has higher value or that is non-strategic to our core timber land holdings. Gerry mentioned that we plan to sell up to 20,000 acres in 2007. We expect this to be a lumpy business on a quarterly basis, partly due to our efforts to match Land Sales with tax efficient 1031 like-kind exchanges.

We expect continued improvement in our Consumer Products segment, or our tissue business, in 2007. Our converting capacity has increased by 7% in 2007 with the addition of a new bathroom tissue line in Chicago at our facility in Elwood, Illinois. Despite high Pulp costs, we expect to have lower freight and energy costs in 2007 and we expect to see benefit from continued creep in sheet count reductions for the products we sell.

Our Pulp and Paperboard business earnings are expected to slip in 2007 due to higher western fiber costs at our Lewiston, Idaho mill. We expect strong pulp pricing in SBS paperboard prices to hold at current levels. We continue to make steady progress in quality and production improvement in both our Arkansas and our Idaho mill.

Our new coated, two-sided product line at Lewiston has been well accepted by our customers and we expect to sell about 25,000 tons in 2007. That's up from only 3,000 tons late in the fourth quarter of 2006.

Over the last four years, our paperboard production at our Arkansas mill has increased at an annual rate of about 3% per year. Helping offset rising costs were labor, energy, chemicals and freight.

As we stated before, we're not optimistic about our recovery in the housing market in 2007 and a subsequent increases in lumber prices. Our western cedar business in Idaho remains strong and our two stud mills in Minnesota and Michigan are expected to contribute meaningfully in 2007 to segment earnings due to high productivity at both mills and log costs that have declined regionally.

In 2007, we expect total capital spending to be about about $55 million. That's in line with 2006 but down approximately $50 million from 2005. Roughly half of our capital spending is allocated to discretionary projects, evenly split between our TRS businesses. One of our largest single projects is approximately $3 million and that's to reduce energy costs and install an energy management system at our Lewiston paperboard mill.

We're very pleased with the results from our first year operating as a REIT. We began 2007 with a new management team focused on growing the value of Potlatch. Six of the ten senior people in the Company are either new to their roles or new to the Company in the last 12 months. We've demonstrated that the REIT structure works, that we can unlock value through land stratification and sales process and that we can grow our largest and most valuable asset, our timberland base, through acquisitions.

Fab, we will now take questions from participants.

Thank you. [OPERATOR INSTRUCTIONS] And your first question is from the line of Rich Schneider with UBS.

Good morning. Very good quarter. I was wondering if you could talk a little bit about harvest levels in 2007 and I know it's a bit of a moving target and a lot depends upon getting the right price, but could you give us any idea of volume that, roughly ranges we could expect at both the northern and southern regions compared to what you showed in 2006?

Good morning, Rich. This is Mike. I'll make a stab at it, perhaps more qualitatively than quantitatively. As we mentioned in December and we still believe that markets have improved enough in Arkansas, at least from a demand standpoint, that our harvest levels in Arkansas will come back up in 2006, probably approach the 2005 level. That's our expectation at this point. In our northern region as I mentioned on the call, we've seen a large decline in the prices of aspen in the state of Minnesota, partly due to curtailments, a low SP capacity in the state. We expect to harvest less timber in Minnesota for that reason, and as we've talked for some time now, we had begun to increase our harvest levels in Idaho in 2006, actually late 2005. They stepped up again in '06. We actually cut a little bit more in '06 than we thought and so the year-over-year change in Idaho won't be as great as we thought but it will still stay quite high so the northern segment will stay fairly close to the 2006 levels, perhaps slip a little bit due to Minnesota, and then an incremental volume from our new ownership in Wisconsin. That's part of the northern segment, and off the top of my head I don't have the volume number for that, but that's only a land base of about 75,000 acres. It's not hugely material.

So northern Resource may be a little bit upside coming from Wisconsin and then maybe the southern region, we get back to something in the neighborhood of 1.3 million tons that you did in 05?

Yes, I think that's our general sense at this point but as you said in your comment, certainly that depends on markets and we intend to be flexible if we need to be.

Could you give us an idea of, you've got a slow recovery view on Wood Products. Do you think log prices can remain? They've come down but do you think they can hold in reasonably well in that kind of environment? In other words, what's holding it up right now and not seeing how any further declines in log prices than you've already experienced?

Well, I think what's holding it up is I think is the responsiveness of the market to supply. A lot of private landowners, land holders, when they see a lumber market like we have today just don't believe that's a good time to sell timber and they withtract, withdraw timber from the marketplace. That tends to hold up the rest of the markets for that reason. I think we haven't seen a large change in sawmill operating rates as we've moved through the holiday. There was holiday curtailments, I think , maybe even more extensively than were reported, but as we've come into January, we've not seen a lot of new announced capacity withdrawals on the lumber or plywood side of things so I guess I expect the margin squeeze to continue. I don't see a reason that timber prices are going to fall dramatically despite the fact that lumber prices are weak. I think you'll just see people withdraw timber from the market if that begins to happen. Log pricing will stay pretty strong.

A couple other quick questions. Could you give us an idea what the wood chip costs were for you in Pulp and Paperboard segment or incrementally what it cost you in the fourth quarter and is that going to be worse or stabilize at that level?

Well, our incremental costs in the fourth quarter were $6 million. Almost all of that was in Idaho, Rich. It's really a bifurcated situation in the south where our Cypress Bend, Arkansas mill. We've seen what I would consider to be normal prices for round wood chips and pulpwood logs. They've not changed dramatically. The impact has all been on the west where we depend heavily on residual chips from sawmills. That $6 million impact that we felt from third quarter to fourth quarter, our belief is we've kind of, we think we're about at the top of that. We're not optimistic that it's going to fall quickly but we don't see a lot more creep coming in that. Things seem to have stabilized, albeit at a very high level.

Okay. And the LIFO adjustment you mentioned, how much was that?

Gerry is getting that.

Yes, let me dig back through --.

Okay. While you're finding that, one last question. The $2.6 million restructuring you're doing in Resources, could you go through what you're doing there?

Well, in general, we have brought a new person into the organization in the third quarter of the year who took a look at our total Resource organization as we're staffed in our three operating areas of Arkansas, the lake states, and in Idaho and to some degree Oregon, and as we looked at how we take logs to market and service customers and try to grow value in the business, we felt that we had just become, had a stronger headcount than was needed so we reduced the headcount in our Resource business by approximately 25%. The $2.6 million charge is related to the severance and expenses related to that activity.

Great.

I didn't really put a number on it, Rich, but we would have expected the numbers similar to what we normally have which would have been a negative adjustment in the quarter, ordinarily just through the build-up of logs, but I didn't actually put a number on it. I don't even know off the top of my head what it is.

We'll get one to you.

Okay, thank you.

You're welcome.

Your next question is from the line of George Staphos with Banc of America Securities.

Hi, everyone. Good morning. I guess following on on the question of fiber, is there anything else that you can do in Lewiston at this juncture to offset the cost pressure from fiber? Obviously fiber is so important but anything else that you'll be tweaking in the process or on the cost side as we go through the year?

Well, this is Mike. There's a number of things. All of them or none of them make a huge difference in and of themselves but added together they begin to make a difference. Obviously, we try to run as much sawdust as we can in our MND pulp digesters as opposed to residual chips. Sawdust is typically less expensive than round wood chips. We are not able to run that currently at maximum capacity. We're trying to ramp that up and find more sources of of sawdust. We're looking at some reload activities by barge in the Portland area where we can come up the Columbia River system very cost effectively to our Lewiston, Idaho mill. We've also begun to run more chips out of our hybrid poplar tree farm in Oregon which we can also use as a replacement for sawdust, so there's a number of small things. We've also got access to round wood chips from defective pulp logs that are in our Idaho forest and we've stepped up the harvest of those as well.

Okay, but Mike, presumably sawdust will move pretty much in concert with residual chips, right? I mean you're not going to find some pocket of sawdust that wouldn't normally exist without residual chips as well, correct?

Well, that's partly true, but we have a number of people that we buy chip, residual chips from that are sawmill manufacturers that perhaps we're not buying their sawdust for whatever reason. We're trying to expand that program as well as the reach that I mentioned into the Portland, Oregon area is certainly a market we don't normally tie into.

Okay. In terms of the 8.3% tax rate, again how should we interpret that as the go forward operating rate for 2007? What's in there? What's not?

Well, the 8.3% is pretty much clear of anything else, so really the, we would expect kind of single digit rates. The 8.3% is indicative of being able to do like-kind exchanges efficiently and not suffer an additional 39% tax on any of our land sales. If you see us having land sales and not able to match them off with purchases, then that rate will go up.

Got you.

It's also dependent on TRS performance, the manufacturing performance similar to this year. If we have a very, very good year, much better, then the tax rate, or the effective tax rate will go up.

Right.

If we have a much worse year, then the tax rate will go down and approach zero.

So I just to make sure so you're assuming pretty much flat in the TRS business in '07 versus '06?

Well, if in fact you're going to enjoy that kind of tax rate, yes.

Understand.

Not necessarily assuming that's going to be our performance.

Understand. Two last questions. I'll turn it over. I appreciate the detail on the harvest levels. Any chance we'll be getting the quarterlies from last year other than when you put out your quarters over the course of this year, and also just a quick update on what you're seeing in terms of market activity in tissue realizing that you're more private label, obviously. Thanks, guys.

Let me do the first one and that is to say, we will be filing an 8-K in the first quarter to describe the maintenance impact that I discussed and that will be by quarter going backwards as well for '06, so it's easy to do the same thing for harvest levels.

Okay.

We tend to disclose them going forward so we might as well do it now.

Yes, we'll do it -- 8-K.

But -- and on tissue?

Sure, regarding -- this is Mike. Regarding the tissue business in our private label, activity as it relates to the brands. There are small initiatives still to achieve sheet count reductions, change perf lengths on tissue, a number of things that allow us to put less paper in a case of goods. We expect that continued demand has been, in our product lines has been fairly robust with the large grocery store chains that we serve and our expanded capacity allows us to put even more of the through air-dried paper into the marketplace in a converted, in a high-end premium product which we think will help enhance our sales returns this year, so we're fairly optimistic that year-over-year, we're going to see another strong year with better performance on our part due to, partly due to costs and partly due to mix.

Okay. Thanks, guys.

Your next question is from the line of Steven Chercover with D.A. Davidson.

Good morning, guys.

Good morning, Steve.

First question, I guess you might have partially addressed it in discussing it with Rich. When you discuss Wisconsin coming on and yet Minnesota being weak, is there any difference between the actual markets that you're serving there or it's just the incremental land that provides some upside in an otherwise weak market for OSB logs?

Steve, this is is Mike. The markets are very different. They're separated by roughly 250 miles. The Minnesota market for us is almost exclusively aspen and pine trees, which are sold in basically stud mill applications. The aspen is used almost exclusively in either pulp and paper or OSB and the Wisconsin property that we purchased, the land is predominantly northern, high quality, hardwoods, maple and birch, much of which is very mature that goes into end use markets for cabinetry, flooring, furniture applications. A smaller percentage of it goes in the form of pulp wood to PCA and that area, but they're very different markets. So therefore, as I mentioned, as we see the weakness in Minnesota, we will take some volume off the market, at least at this point. We're just getting started in Wisconsin. We don't perceive that same market risk there.

Great. Well that's very helpful. Switching gears a wee bit, the losses in Boardman that were down, is that because the costs are down or it's becoming -- getting closer to being commercial and can you give us an update on where that stands?

Yes, well it's a whole host of things. We're trying to drive costs out of that business as much as we can since we're in an operating loss situation. That had an impact but the more significant issue for us in the fourth quarter versus other periods in the year, as I mentioned I think to George's question, we are chipping more of the product to go into either our pulp mills or to customers' pulp mills and the price of wood chips, the poplar chip, has risen along with the rest of the market and so as a result, our operating losses have dropped. We do not believe the wood chip prices alone are adequate to cover all of our costs at Boardman. It still depends on an output eventually that ends up in a saw log or a veneer application and we still continue to work with a number of people that are interested in providing that kind of capacity at Boardman.

Got you. And then final question, or I guess as part of a wish list, we appreciate the segmented data that you give us in the appendix. Will you start to add Land Sales volumes in that chart?

Yes. I think once we have a, as you know, we really, the conservation easement is about the only significant thing we did last year. As we begin this program to sell 20,000 acres this year, on a quarterly basis, I think we'll provide some statistics about the acres that were sold and the price per acre. How much we disclose by region we haven't thought through yet.

That's great. Well, we look forward to that. Thank you.

You're welcome.

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

Thank you. First, Mike, in terms of the Idaho harvest, I think that you were going to go up by order of magnitude 25% over a several year period. Have you gotten to that point yet or are you just talking a pause and under different market conditions, could step up some more?

We're -- without knowing this, giving you the specific numbers, I just don't have them off the top of my head, we're probably, we've done 20% of the 25% we planned on already, and so there's a little bit more to go. We're going to see how markets behave after the spring break-up period here this summer, but we've done more in 2006 than we planned. Markets were pretty strong. We had pretty good pricing so we just have a little bit left to go.

Okay. And then in terms of the 15,000 to 20,000 acres that you expect to sell in 2007, can you give us any sense on geography or whether these are going to be HBU versus non-core, or if you're willing even give us kind of an overall sense of what you think the proceeds from those sales or whatever other way to help us kind of model for the year ahead, you'd be willing to share?

Well, at this point, since we're just kicking off the program, I think we may give a little more color on how we see the business in the next quarterly call but at this juncture as we're just coming out of the chutes, I'm reluctant to do that. As we said in our investor tour in December, we think that it's going to be skewed a little bit more to the second half than the first half of the year. There's going to be a little bit more dependence on HBU than there will the non-strategic portfolio, and I think it's going to be equally spread between all three operating areas. We don't see it skewed to Idaho more than another area although just by definition, the HBU component is stronger in Minnesota and Idaho than it is in Arkansas. So I think if you go back through the investor presentation that we had, you can make some estimates about where we'll be. We'll provide a little more on that after we get a quarter behind us.

Okay, great. And then lastly, could you revisit with us the metrics that you focus on when establishing the appropriate dividend level and how we should try to gauge where your mind might be on that topic?

Well, the dividend was initially established more than a year ago by our Board, prior to my joining the Company, and the focus at the time was to look at the cash flows from our Resource based businesses and I view that as the timber and land business. The land component probably wasn't as much on the radar screen as it is today. But to establish the dividend based on the cash flows from those businesses, with the thinking behind that being that as we're seeing this year, lumber markets go up and down, pulp and paper markets go up and down, but the timber business is fairly stable, so we wanted to establish a dividend where we had a comfortable level that over time, as that business grew in size and profitability, we could grow the dividend without risks from cyclical factors and our other businesses affecting that. That was the philosophy behind the establishment of the dividend, and not only will we look at FAD and FFO which were strong this year but also partly influenced by the Canadian settlement, I think we'll still, as we review with our Board, establishing a dividend level for this year, if any changes are made to it, we'll again focus on our Resource and Land business.

So would it be fair to say that since the time the dividend was established, perhaps the biggest change might have been in your view on the land values? It would seem probably that the timber markets have had a little bit of up the and a little bit of downs but the biggest change would have been on the land side, is that fair?

I think that's fair. I also think we've added a bit of acreage to our land base which adds to the cash flows from that business. We believe it was accretive so that adds a little bit, and we've -- and I think we've -- the Idaho harvest level increase was -- the Board was aware of that at the time they established the initial dividend but as we see opportunities in Arkansas, we don't have that fully flushed out yet. That's another incremental piece over and above the Land Sales business as well.

Okay, thank you.

You're welcome.

[OPERATOR INSTRUCTIONS] Your next question comes from the line of Richard Paoli with ABP Investments.

Good morning, guys. You might have covered this when you did your road show back in December but unfortunately, I couldn't take a meeting. Could you just walk through me some of the logic in terms of your or maybe process with respect to forest land purchases? In other words, what type of hurdle rates are you looking at on this Wisconsin acquisition and could you just give a little more description on the stand itself, what you think the organic growth rate is, the age of the stock there. You gave some good color on what the consistency by type was.

Good morning. This is Mike. Well, some of the things you've asked for, we don't disclose I think for competitive reasons but I think if you look at the universe of competitive timber purchases and acquisitions over the last part of last year, or even all of last year, I think we see cap rates that are in the 5% to 6% range depending on the buyers. That seems to be the pattern in the marketplace. The prices per acre obviously are heavily dependent on stocking. The Wisconsin property that we purchased, about half of it was encumbered by a conservation easement which forbids development. The other half was unrestricted. The timber had been managed for a long, long time by really a company that was focused on pulpwood and so consequently, there's an above-average stocking of over-mature or larger timber, larger size class timber than what you might normally expect which we think prevents or provides cash flow opportunities over the next decade to take some of that to the marketplace while we continue to harvest pulpwood. I think that kind of covers our thinking about acquisitions in terms of a criteria as it needs to be cash flow accretive. In order to be competitive, I think you have to be in that kind of 6% ballpark and at least that seems to be the flavor right now.

Okay. So somewhere around 6-ish is your cash, I guess your cash flow hurdle, is that about right? And that 6%, do you look at that on an after CapEx basis or is that on a, is that just on a current yield?

Well, that typically I think most people would look at that on a current yield basis. The CapEx, the CapEx for a timberland investment, especially in a northern hardwoods operating area where you'd depend heavily on natural regeneration, in other words you don't have to plant trees, the forest regenerates itself, the CapEx requirements are quite minimal.

Right. Okay, my next question is had you guys taken a look or even taken a shot at longview fiber? It seems like today that there's a buyer that's interested in a much higher price than where the market had at trading?

We don't comment on our acquisition efforts. Sorry.

Okay, thank you.

You're welcome.

There are no further questions in the queue at this time. I would now like to turn the call back over to management for closing remarks.

Okay. Thank you, Fab and thank you all for joining us. We appreciate you taking part in this with us and we'll look forward to talking to you next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a wonderful day.