Potlatchdeltic Corp (PCH) 2007 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the First Quarter 2007 Potlatch Earnings Conference Call. My name is Dan and I'll be your operator for today. (OPERATOR INSTRUCTIONS) I would now like to turn the call over to Mr. Gerald Zuehlke, Chief Financial Officer. Please proceed, sir.

Thank you, Dan. Joining me today on the call will be Mike Covey, our CEO and Chairman of the Board.

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 address 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 the actual results to differ from the results anticipated, please refer to Potlatch's recent filings with the SEC.

The question-and-answer portion of this call is open to the analysts and investors only. Media inquiries should be directed to the company.

Also, before we begin, please note that supplemental financial data and a reconcilement 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 first quarter results, after which Mike Covey will provide some additional comments, including an overview of our markets.

We reported a first quarter 2007 loss of $29.8 million, or $0.76 per share, as shown on page 3 of the slides accompanying this presentation. Excluding the loss on the sale of our Boardman hybrid poplar tree farm and the Resource segment reorganization costs discussed on our fourth quarter call in February, net income from continuing operations totaled $5.6 million, or $0.14 per share. In the fourth quarter, we had nonrecurring, after-tax adjustment to earnings of $24 million for the Canadian lumber settlement and a partially offsetting deferred tax adjustment of $3.9 million resulting from a transfer of assets from the REIT to the TRS. As a result, net income for comparison purposes would have been $25.2 million, or $0.65 per share, in the fourth quarter.

Net income for the first quarter of 2006 totaled $65.7 million, which included a net tax benefit of $51.2 million related to our January 1, 2006 REIT conversion. Excluding the tax benefit, earnings would have been $14.5 million, or $0.49 per share.

If you will turn with me to page 4 of the slides, I would like to discuss first quarter 2007 results from our operations.

Our Resource segment results were lower than both the fourth quarter of 2006 and the first quarter of 2006. The current quarter included the $2.8 million charge for the Resource segment reorganization. We expect this organizational change to reduce annual operating expenses by $2.5 million annually. Lower fee harvest in the Northern region versus both comparative periods and slightly lower log selling prices versus the fourth quarter, were the main drivers to lower performance. Fee harvest levels in the Southern region recovered from the lower fourth quarter 2006 levels, partially offsetting the sequential comparison.

Our Real Estate segment had very little sales activity during the first quarter of this year. We do still anticipate 2007 activity at the levels we have discussed previously. The segment's net income of $9.1 million in the fourth quarter of 2006 was primarily accounted for by the sale of a conservation easement in Arkansas for $6.7 million. There were no significant transactions in 2006 first quarter.

Wood Products' operating income of $2.2 million represented significant improvement over the prior quarter loss of $5.7 million, excluding the Canadian lumber settlement. The improved sequential performance is due primarily to an improved mix of higher value cedar lumber and higher shipments for all products. Sales volume declined during the quarter compared to one year ago due to a decrease in operating hours at our southern sawmills.

The Pulp and Paperboard segment lost $6 million during the first quarter of 2007 versus earnings of $9.2 million during the fourth quarter of 2006 and income of $3 million during the first quarter of 2006. The current quarter loss included maintenance expenses of $9.2 million. As we discussed in the fourth quarter call, beginning this year, maintenance costs must be expensed in the period incurred, whereas we had previously accrued for them throughout the year. We filed an 8-K earlier this week detailing the reclasses by quarter for the 2006 periods.

Due to the planned maintenance outage, shipments of both market pulp and paperboard were lower than both comparable periods. Pricing, however, has continued to improve for both pulp and paperboard and has increased by $164 and $42 per ton, respectively, compared to one year ago.

Our Consumer Products segment reported income of $4.8 million in the quarter, which was less than both comparable periods. Average selling prices for our tissue products have risen by $131 per ton compared to one year ago. However, as I noted, pulp prices have increased more. Costs related to the Lewiston major maintenance outage and an outage for maintenance to our Las Vegas tissue machine totaled approximately $500,000 during the quarter.

Corporate Administration expense, including interest expense, totaled $18.5 million for the quarter. Interest expense totaled $7.6 million, which will decline by approximately $465,000 per quarter after we close the sale of the Boardman poplar tree farm and pay down borrowings related to the Wisconsin land purchase that we closed in January.

EBITDA totaled $27.1 million in the first quarter versus $92.2 million in the fourth quarter and $45.8 million in last year's first quarter. Funds from operations for continuing operations, FFO for the quarter, totaled $24.8 million versus $71.6 million sequentially and $37.8 million a year ago. On March 21, we paid our regular quarterly dividend of $19.1 million.

The next page, number 5, provides additional details by segment for the variances I have described.

I would now like to turn some time over to Mike to provide some additional comments about our operations, including an overview of our markets. Mike?

Thank you, Jerry, and good morning.

Market conditions during the first quarter shaped up about as we expected. Despite weak lumber pricing with the broad lumber market off more than 20% compared to one year ago, our log prices and cash flow from the Resource segment remained strong. Setting aside mix shifts related to high-value cedar logs and lower-value pulpwood, we have not seen saw log price erosion in our key markets in the last quarter. This speaks well to the strength of the market area where our timberland is located. The inland west and southern Arkansas have well-established sawmills, plywood and OSB plants operated by some of the most efficient industry leaders. Our outlook for the balance of 2007 is for little change in log or lumber pricing, outside of short market spurts that fizzle after a few weeks, which is typical in the spring.

Relatively weak housing starts, large backlogs of unsold housing inventory and plentiful idle production capacity throughout North America's manufacturing sector will serve as a strong governor on product prices for the balance of the year.

We have no plans to change our 2007 harvest levels with the exception of Minnesota. Persistent weakness in the OSB market, coupled with weak demand for Aspen logs, prompted us to reduce planned harvest levels by approximately 20% until market conditions change. Aspen margins are low relative to other log types in other regions, and the deferral of 2007 harvest will have little impact on our 2007 results. Harvest deferrals are one of the tools that we use to maximize resource cash flow over market cycles. Aspen trees mature in about 40 years, and there's no reason to make a short-term harvesting decision during a weak market.

Our Pulp and Paperboard markets continue to improve. Bleached Softwood Kraft prices are at an 11-year high. With no major maintenance outages planned during the second quarter, we expect to have very strong cash flow from both our Idaho and Arkansas paperboard mills. We are also seeing evidence in Idaho that residual fiber costs are dropping by approximately 10% last month, which is a reversal of a three-quarter trend of increases. With adequate spring log inventories at most mills in the inland West and few shift curtailments, chip supplies are more plentiful. We expect a continual, gradual decline in chip prices through the year.

Our tissue business continues to provide consistent cash flow despite rising pulp costs. First quarter pulp costs were about $8 million higher than they were one year ago. We've managed to offset most of the pulp increase with higher volumes of converted product, improved mix and lower freight costs. Our strategy to shift converting capacity closer to the customer base is working. Last month, we produced over 5,000 cases of tissue products at our Elwood facility outside of Chicago. This production rate will continue to climb as we move up the startup curve on our new bathroom tissue line which began in January of this year. At the same time, we've been able to idle an older, less efficient bath tissue converting line in Lewiston, Idaho, all part of our plan to move converting capacity closer to the final market.

Our Wood Products business made money in the quarter solely due to a rich product mix of Western Red Cedar at our Idaho lumber mills. Cedar prices are at record highs, which reflects the demand for this product in the high-end second home market, especially in resort locations such as Jackson Hole, Sun Valley and the resorts of Colorado. Coupled with our resort business is a strong increase in sales of lumber certified by the Forest Stewardship Council, or FSC. Potlatch remains the only publicly-traded company to have certified all of our timberland and most of our mills to meet FSC requirements. Our first quarter 2007 FSC lumber sales were nearly equal to the volume sold in all of 2006, which experienced a four-fold increase over the volume activity of 2005. All of these transactions were completed at significant price premiums compared to traditional print pricing.

I would now like to comment on a couple of strategic initiatives. First, following a rollout of our land stratification program last December, we shifted to listing property for sale during the first quarter. As expected, property valuation, entitlement and listing take time, especially during the winter months on our northern ownerships in Idaho and Minnesota. We have numerous properties in various stages of negotiation and expect to close 30 to 40% of our planned annual program during the second quarter. As we've said, this is a lumpy business, and it's difficult to predict quarterly results. We expect to sell approximately $20 million of higher and better use and non-strategic land in 2007, primarily in Minnesota and Idaho. That's consistent with our prior guidance.

Most importantly, we expect to match the sale of our Boardman -- the planned sale of our Boardman, Oregon property with the purchase of our newly-acquired Wisconsin timberland to execute a tax-efficient 1031 Exchange. Assuming the Boardman sale closes, we will be able to transfer Boardman's very low tax basis to the Wisconsin property. As you can also see from the earnings release, following the sale of Boardman, we expect our quarterly earnings to improve by approximately $2.2 million. The loss is currently flowing through our Resource operating statement.

We have successfully closed the Wisconsin transaction and expect cash flow from this acquisition to be approximately 6 to $7 million on an annual basis.

We remain comfortable that our quarterly distribution of $0.49 per share, or $1.96 annually, is sustainable, and we're focused on growing it gradually over time. Despite the quarterly ebb and flow of market from the timing of real estate sales, we have taken three steps over the last quarter to improve cash flow going forward. Transitioning the Boardman property toward new ownership and purchasing the Wisconsin timberland are examples of actions that are accretive to our cash flow. And most importantly, we have increased the timber harvest in Idaho and Arkansas and expect these increases to be sustainable for several years while market conditions remain strong.

Dan, that concludes our comments, and we'll now take questions from the participants.

(OPERATOR INSTRUCTIONS) The first question comes from the line of Richard Schneider from UBS. Please proceed, sir.

Good morning, Mike. I was wondering if you could talk about your Wood Products operation. What percentage of your lumber is cedar, and then -- I'm not sure if I'm overlapping here -- but how much is FSC-certified in terms of your total sales -- both categories?

I'll take the first part, Rich. We produce cedar lumber at both of our Idaho facilities in Lewiston and in St. Mary's, Idaho. Our other lumber manufacturing facilities -- the two large dimension mills in the South -- obviously make no cedar, nor do our two stud mills in Minnesota and Michigan. So -- and in our Idaho mills, cedar is roughly half of our mix. So it's roughly half the mix at two of our six sawmills. We can follow up and give you an exact percentage.

Okay.

And as I said, pricing in that segment is very, very high. Regarding FSC sales, they are -- as I mentioned, they're growing quite rapidly, up four-fold from 2006 over 2005 and again, this quarter, almost equal to all of 2006 activity. It is now beginning to become a meaningful piece of our business where it wasn't before. FSC sales in total are still less than 10% of our total sales.

And what kind of premium do you seek for those sales?

We have not disclosed that publicly just due to, I think, kind of the leading position that we have in this niche as being one of the few companies that can provide that, but in all cases, Rich, in the lumber business, we have been able to command a premium over random like print pricing, but we haven't given out the amount.

Okay. And just on the crop and chip prices in Idaho, does that -- is that at all a double-edged sword? Does that reduce what you can get for pulpwood selling out of your Resource segment in Idaho?

Well, it's true. There's a correlation between the value of pulpwood and what happens with residual chips, but for us, in Idaho, our pulpwood segment is basically de minimus. Of the amount of tons that we harvest on an annual basis in Idaho, the pulpwood piece of that is fairly insignificant. So we certainly have a net benefit for the company for a reduction in residual chip prices. And unlike the situation in Arkansas where the situation would probably be almost reversed, the company benefits there from a rising pulpwood market because a lot of our southern harvest is in pulpwood, but that's not the case in Idaho.

Okay. I was wondering about the -- and just to clarify -- the $2.8 million of restructuring costs. If we didn't include it, that would have caused your Resource segment to earn $16 million in the quarter? Just to clarify that.

That is correct.

Okay.

The annual savings of that reorganization effort, we believe are about $2.5 million.

Okay. And the -- Jerry, just a last question. On the elimination, that was a large addition in the quarter. What went on there? I know that's intercompany transfers and other things. Could you explain that?

Sure. I'd be happy to, Rich. As I stated in our fourth quarter call, we normally would build quite a large log inventory to carry us through the springtime and the breakup where we can't actually log and provide logs to our operations. And normally, that would have been a negative in the fourth quarter, although even in the fourth quarter, we had a fair amount of cedar running through the mills, and thus, we had a positive impact which offset some of that logbuilding. The normal for the first quarter would be that we would be going through those log decks and that built-in profit and inventory from selling those logs from Resource into our divisions would be recognized as those logs are converted and sold to outside parties, and then you can recognize the gain that you have built-in. In the first quarter, we got a lot more benefit than is normal because we had a lot of cedar going through the mills, and as Mike spoke to, those cedar logs are even the highest margin logs that we have. So it was quite a benefit in the first quarter as we processed that cedar through the system and got it to outside customers.

And then -- what? Normally in the second quarter, it moves into a deficit situation or --

Well, no, not necessarily. We're still cutting -- or excuse me, we're still converting a lot of those logs, although the bulk of the cedar that we had built is -- has made it through the system, so it would be a much smaller number in the second quarter that we would anticipate, because the build-up of cedar has been gone through pretty much.

Terrific. Thank you.

Your next question comes from the line of Mike Roxland from Banc of America Securities. Please proceed.

Hi, everyone. I'm speaking on behalf of George Staphos. Just a couple quick questions. Looking at the Pulp and Paperboard segment, I noticed that in your press release you said that the number was $9.2 million in terms of the charge. That's about $8.3 million higher than last year. Wondering why that had occurred, if you can explain why there's such a high discrepancy versus last year.

Yes, as we mentioned before, accounting conventions last year allowed us to take whole year's of planned expenditures for major maintenance. We typically have two major outages at our paper mills per year. This last one was 13 days long. Last year, that would have been extended -- or distributed over 12 months. Conventions now require us to expense that in the month it occurred, so the $9.2 million includes not only repair and maintenance charges for the 13-day outage in March at our Idaho mill. It also includes some component of down time that cost us in the month.

Yes, and let me add a little bit to that, Mike. Last year, we did have a nominal amount after we reclassed. What you'd want to do is go to that 8-K that I mentioned that we filed earlier this week, and there is a reconciliation and a reclass of the difference between accruing over the whole year last year and putting on an apples-to-apples basis to what will happen this year on a quarter-by-quarter basis. And when you took the accruals out and added the actual expense in for last year, that's the difference we referred to in the press release. And if you'd like, you can call Doug and he can go through that with you and help you.

Gotcha. Moving on to the Consumer Products, I noticed that there was a 35% decline in margins year-over-year. I was wondering if you could speak to how much of that decline is fiber-based.

I'm sorry. Dan the operator, we had trouble hearing the question.

I'm sorry. Can you hear me now?

Yes.

Okay. Noticed that in your Consumer Products that margins were down 30+% year-over-year. Wondering how much of that is actually due to fiber.

Fiber costs were up $8 million year-over-year. That had a significant impact.

The biggest really -- the biggest decline comes from fiber? It's not really associated with maybe pricing or trade promotions?

No. The most significant impact by far is related to the pulp costs which is the raw material component for our -- to make the tissue. If you look at page 7 of the prepared exhibits that we've distributed and you'll see the Consumer Products prices year-over-year, about $2,338 a case in the first quarter of 2007 and -- excuse me, per ton -- and the first quarter same period in 2006 was $2,207. So actually, pricing is up slightly, but it's been eroded by an enormous increase in pulp costs.

I gotcha. So it really has -- there's been, I guess, minimal impact, if any, from like trade promotions or what-not.

Yes. We haven't seen a lot of change in promotions. We continue to see creep in things like sheet count reductions per [flanks], square footage of product in a case of towels, continues to go down slightly. All of those things serve to hold up the sales realization on a per-ton basis, but the erosion on this business has largely been primarily due, in our case, to pulp costs. Just recently, in the last few weeks, we began to see an increase in freight as diesel prices have gone up, but that pales in comparison to pulp costs.

Gotcha. Turning now to the Real Estate segment --

Can you speak up please?

I'm sorry. My apologies. Turning to the Real Estate segment, I was wondering -- obviously, there were no land sales in 1Q and I'm wondering if that's just -- whether you're finally seeing the real estate market slowing or whether that's just basically due to, like, timing?

No. As we mentioned, it's solely due to timing. We announced in December that we were going to sell approximately 20,000 acres of higher and better use of nonstrategic land this year --

Right.

And there's just a period of time required for listings and to secure entitlements, complete appraisal process and get the properties on the market, negotiate closings, and we expect to see 30 to 40% of those closings happen during the second quarter. It's solely just due to timing. We've seen nothing that says there's been a turn in value for rural land prices. Quite the contrary. The market seems quite strong for the land types that we sell.

Okay. Alright. My final question -- you may have said it already, but if you could just refresh my memory as to what regions you're seeing strength in terms of log markets?

Well, if you look year-over-year and just were to pick up kind of a benchmark number, our log prices are down somewhere in the neighborhood of 6 to 10%, depending on region, year-over-year. That's against a backdrop of lumber pricing that's down approximately 24%. So log prices have come down. There are some trends in there that are just the opposite. Our cedar log pricing has increased in this same period. Southern pulpwood year-over-year is up almost 50%. So there are -- it's not all drifted down. But Southern log pricing, western log pricing's down 6 to 10% year-over-year. In the last quarter, it's basically been flat, and we expect it to hold in that same -- roughly the same level it's been in the fourth and first quarter for the balance of the year.

You're basically seeing cedar log pricing increase higher, Southern plywood -- Southern pulpwood higher but declining in Western logs.

Yes. As I said, the increase really happened kind of in the -- or the decrease really happened mostly in the third quarter of last year and it's held pretty steady since.

Okay. Thank you very much.

You're welcome.

Your next question comes from the line of Steve Chercover from D.A. Davidson. Please proceed, sir.

First question, Mike. You alluded to throttling back your -- I think it was Aspen sales in Minnesota, but is there any corresponding drop in Wisconsin or are they really two different markets?

Good morning, Steve. No, they're very different. We have Aspen in Minnesota. The Wisconsin property that we purchased is almost all quality Northern mixed hardwoods of maple, birch, basswood, species that don't have an end-use market targeted OSB, whereas the Minnesota property is either targeted at stud mills or at OSB.

Okay. Gotcha. Now on Consumer Products, I guess it was a year ago or so, there were still some pretty substantial inventories of parent rolls. Have you managed to work those down now?

Yes. We completed that inventory reduction program and got our parent roll inventories where we feel are at a targeted amount to run our business. We completed that in December of '06. We sold a few more parent rolls in this quarter than what we'd planned to as we idled some bathroom tissue capacity here in the West and shifted converting to our Chicago facility. But we do not expect to be on the market in any material way with parent roll sales throughout the balance of the year.

Okay. And two more quick ones. Do you have any initiatives on the front or back burners in terms of biomass?

Yes and no. We have worked for a long period of time -- for a couple of years -- on a large facility adjacent to our Cypress Bend, Arkansas paper mill where we may partner with somebody. We would be the raw materials supplier to install a biorefinery in that Cypress Bend location. There are still people looking at that. Potlatch will not be an investor in that, but we may be a supplier. That's the yes part of your question. The no part of it is we are not engaged, other than in some just industry-wide coalitions and initiatives to review the potential for cellulosic biomass opportunities, but we don't -- we're not actively engaged in any discussions.

Okay. And last one, and this might be more of a wish list than an actual question, but you now have two friends left in the timber REIT business, one having departed last Friday, and they both give fairly granular guidance, both on a quarterly and full-year basis. Are you guys going to try and get towards that?

Well, there's lots of things that set us apart from the other two timber REIT's and that's one and we don't plan to change that. So we don't plan to give guidance, Steve.

Gotcha. Thanks very much.

You're welcome.

Your next question comes from the line of Mark Weintraub from Buckingham Research. Please proceed, sir.

Thank you. I know you had indicated previously there is about $9 million in maintenance costs expensed in the first quarter. Was there much in the way of costs -- and I apologize if you already said this -- but was there much in the way of costs at Lewiston above and beyond that $9 million?

Well, Mark, this is Mike. Certainly, I think you should know our wood fiber costs year-over-year continue to be a major variance in the Lewiston facility. That would -- in addition to the maintenance outage, which was a major event in the first quarter, wood costs continue to be high.

I guess I'm trying to foot the various -- even if I give back that $9 million in pulp and paper, would have made $3 million in the quarter. Yet you described the operations as experiencing favorable market conditions, and obviously, even $3 million in the first quarter would be adequate-type returns. So what needs to happen at this business for it to be performing at adequate ongoing levels?

Well, the business is really -- as I think you've heard us speak to -- it's -- although it's one pulp and paperboard business, it's characterized by two very different facilities. Our facility in Cypress Bend in southeastern Arkansas is consistently very profitable. It's solely focused on folding carton grades and consistently generates significant cash flow and very favorable returns on investment. Our Lewiston, Idaho facility has a more complicated grade mix. It's an older facility. And it has been under more earnings pressure than the other facility. And it makes it more of a complement of grade than just folding cartons. There's been two significant initiatives to improve that in Lewiston. One is the addition of a capability to coat both sides of the sheet and participate in the commercial print market which is emerging, and that has had a substantial impact on what we believe are attractive long-term returns. The other thing to point out in the quarter, in addition to the maintenance shut, was we had a 13-day outage and we did not produce the same quantity of pulp and paperboard. So it's not as simple as just adding back $9 million in maintenance costs and saying we would have made 3 in the quarter. There's more to it than that.

Okay. And given that the current strength in the pulp market, in curiosity, do you flex and make more pulp? Is that something that can improve the profitability at this point in the cycle? Is that something you're looking at?

We make as much pulp as we possibly can given the capacity of the pulp dryers that we have in our Lewiston, Idaho facility. We do not have pulp -- we do not have the capability to make and sell market pulp in Arkansas, and we have limited capability in Lewiston. And we believe in almost all circumstances, it's better to maximize our paperboard capacity first where we have increased margins over making pulp, and whatever's left over we sell market-based pulp out of Idaho.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Peter Ruschmeier from Lehman Brothers. Please proceed, sir.

Thanks. Good morning. I had a question for Mike, if you wouldn't mind expanding on your comments on cellulosic ethanol and kind of what you've learned to date, in terms of feasibility of it, productivity of using wood fiber, and just some of the related issues that could impact it, such as scalability and timing-related issues.

Sure, Peter. My comments will have to be confined to our experience in Arkansas because that's the only place we've really done any extensive work. And I guess a couple of things we've learned. One is the collection systems for collecting wood fiber residue and waste out of the forest to serve as the [feed] stock are very expensive. Our estimates of what it costs to do that continue to increase, and we're really talking about a component of the tree that's not equivalent to pulpwood but it's more the limbs and the slash, stumps and the leftover products. So there's some learnings there. I think the second side of that is on the -- as you look at the manufacturing installation of large facilities, the capital cost to operate those continues to go up, or at least our view of that is it continues to rise. So it begins to be a question of the balance between alternative energy costs -- whether it's natural gas or oil pricing -- relative to what it costs to produce the biofuel.

Okay. That's helpful. Shifting gears, I was curious if you could, using cedar as an example, kind of a niche log product, do you see other opportunities of developing specialty markets over time? I guess I'm kind of thinking about some of the hardwoods over time, or is that not a trend that you'd be anticipating?

No. I think it's very much a trend. We'd certainly like to have more cedar. We're looking for opportunities to increase the cedar component of not only what we own, but what we can put through our facilities. And on your (inaudible) of hardwood logs, that's one of the very reasons that we were attracted to the northern Wisconsin timberland property that we purchased in January, is the complement of maple and birch logs that end up in all kind of specialty use markets and sports floors, flooring, high-end homes there, as we find that very attractive, and that's an area of the business we hope to expand.

Okay. And just last, if I could, on your harvest, you mentioned that some of the prices comparisons. Can you comment more on the mix? In particular, are you harvesting -- for example, on the saw log side, is it smaller diameter saw logs? Is it a similar mix of diameter saw logs you're harvesting now versus a year ago? Any change in the trend that you see there?

Well, a year ago, we curtailed significantly the harvest of Southern pine saw logs in Arkansas because we felt it was a very weak market. We have now shifted gears and have increased the harvest of our Southern pine saw logs and pulpwood because, relatively, the pricing's quite attractive compared to what it was a year ago. So there's been a shift there. In Idaho, there's really no concentrated mix shift. We're concentrating on as much cedar as we can but, setting aside that, it's a very similar product mix in terms of size.

Okay. That's very helpful. Thanks. Bye.

You're welcome.

(OPERATOR INSTRUCTIONS) At this time, there are no further questions in the queue.

Great. Dan, thank you very much, and thank you all for joining us on the call and we look forward to talking to you next quarter.

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