Potlatchdeltic Corp (PCH) 2013 Q4 法說會逐字稿

Good afternoon. My name is Selina and I will be your conference operator today. At this time, I would like to welcome everyone to the Potlatch Q4 earnings conference call.

(Operator Instructions)

I would now like to turn the call over to Mr. Jerry Richards, Vice President and Chief Financial Officer, for opening remarks. Sir, you may proceed.

Thank you, Selina, and good morning.

Welcome to Potlatch's investor call and webcast covering our fourth-quarter 2013 earnings. With me in the room are Mike Covey, Chairman and Chief Executive Officer, and Eric Cremers, President and Chief Operating Officer.

Before we begin, I'd like to remind you that this call contains forward-looking statements. Please review the warning statements in our press release, on the presentation slides, and in our filings with the SEC concerning the risks associated with these forward-looking statements. Also, please note that segment information as well as a reconciliation of non-GAAP measures can be found on our website, www.potlatchcorp.com, as part of the webcast for this call.

I will now turn the call over to Mike to make some introductory remarks and then I will review our fourth-quarter results in detail.

Thanks, Jerry.

We are very pleased with our performance as we cap off a very strong year, led by the improvement in lumber prices and higher log prices in Idaho. Our Resource segment income increased 48% year over year or $24 million on flat harvest levels. Our one challenge in resource was the lack of any improvement in Southern pine sawlog prices. They remain flat and at historically low levels. Our Wood Products segment continues to perform well above -- perform well, and posted its highest level of earnings in nearly a decade.

EBITDA from our five facilities was $65 million for the year, a $13 million improvement over 2012. Much of this improvement came from our Southern pine saw mill in Arkansas, where we benefit from continued low log prices relative to the overall improvement in Southern yellow pine lumber prices.

Results for our Real Estate segment continued to be solid and -- continue to be solid and made a solid contribution to earnings driven by a steady demand for HBU and rural recreational properties. We expect higher earnings from each of our business segments in 2014. According to industry forecasts, total demand for North American lumber is anticipated to increase an additional 4 billion board feet or approximately 7% from 2013 levels. The majority of the growth is expected in the new home construction market segment as the US housing market continues its gradual recovery.

Factors such as home price increases, the cost of new mortgages, the mortgage approval process, and the availability of desirable building lots will continue to play into the pace of the housing recovery. Participation by first time home buyers has been low to this point in the recovery by historical standards, and, if this trend reemerges, it should provide a boost to demand.

Although we expect Southern pine sawlog prices will remain flat in 2014, we believe they will eventually increase as the backlog of deferred harvest declines. Until lumber prices realized by Southern saw mills trade back to the stump, our saw mill in Warren, Arkansas, is expected to continue to post profits at record levels.

As you are all aware, we raised our dividend 13% in December. This reflects our Board's confidence in Potlatch's capacity to generate healthy cash flow to support this higher dividend, as well as provide the ability to grow it sustainably over time.

Now I'd like to turn the call back over to Jerry to discuss the quarterly results and our 2014 outlook.

Thank you, Mike.

I'm going to start on page 3 of the slides accompanying this call. Our fourth-quarter net income was $13.7 million or $0.34 per diluted share. This compares to net income of $22.2 million in the third quarter, or $0.54 per diluted share.

Third quarter results included an aftertax environmental remediation charge that reduced earnings $0.02 per diluted share. As mentioned on our third quarter call, the physical cleanup activities at the site have been completed. Corporate administrative costs, excluding net cash interest expense, were $10.5 million, compared to $10.8 million last quarter. Both quarters were higher than our base run rate of about $9 million per quarter, due to incentive compensation and mark-to-market adjustments related to our deferred compensation plans.

Our income tax provision totaled $1.3 million for the fourth quarter, down from $3.2 million in the third quarter, as a result of lower earnings generated by our taxable REIT subsidiary. Our effective tax rate for the year was 17% at a consolidated level, and 32% at a taxable REIT subsidiary level.

I'll now review the results of our operating segments for the quarter. Information regarding our Resource operations is depicted on pages 4 to 6. The segment generated income of $18 million in the fourth quarter, compared to $25.4 million in the third quarter. The third quarter is typically the strongest seasonally for the division because the best harvest conditions during the year occur in the summer.

The drop off in the fourth quarter was less pronounced this year, partly because some of the harvest planned in the third quarter was pulled forward into the first half of the year to take advantage of strong log markets in Idaho. Northern region sawlog prices declined 8% as expected, largely due to lower lumber prices realized in the third quarter relative to the second quarter. About two-thirds of our sawlog pricing agreements in Idaho are indexed to lumber prices with a lag of one to three months.

As you can see on the page, 2013 sawlog prices were higher than prices in the prior two years. Sawlog volumes in the Northern region were down 17% from the third quarter, due to typical seasonality. Pulpwood production during the quarter was minimized due to weak demand.

Southern sawlog prices declined $2 per ton or 5% from the third quarter, primarily due to a lower mix of higher priced hardwood sawlogs. Southern pine sawlog prices were essentially flat quarter over quarter. Southern region sawlog volumes declined 19% from the prior quarter, due to less favorable harvest conditions, which is typical for the fourth quarter. Southern region pulpwood prices and volumes declined 2% and 8% respectively, due to a lower mix of hardwood pulpwood and seasonality.

The performance of our Wood Products operation is displayed on pages 7 and 8. Operating income for the quarter totaled $9 million, compared to $11.3 million last quarter. Fourth quarter lumber shipments were 6% lower than the prior quarter which were elevated as inventory that built as a result of softening markets at the end of the second quarter were sold in the third quarter. Our average lumber price realized for the quarter continued the upward trend that started in the third quarter and increased 3% quarter over quarter. Thin field inventories coupled with steady demand continue to provide good market conditions.

The results of our Real Estate division are covered on page 9. Operating income for the quarter was $4.6 million, compared to $6.5 million in the third quarter. Margins declined slightly due to mix. We sold more non strategic timberland in the fourth quarter compared to the third quarter. It sells at a lower price per acre than rural recreational and HBU real estate. Interest in our rural recreational and HBU land continues to be robust. We closed 41 transactions during the fourth quarter, which brought the annual closings total to an even 200, the highest transaction count in the division's history.

Turning to page 10, I'll touch on some financial highlights. Our balance sheet remains solid with $57.8 million of cash and short-term investments on hand at the end of 2013. We also have $250 million available on our revolver and do not have any debt that's coming due in 2014.

Capital expenditures were $6.7 million for the quarter, bringing the total for the year to $23.6 million. Our pension liability declined $57 million as of the end of the year, due to a 95 basis point increase in the discount rate and solid returns on plant assets in 2014. We expect to contribute $3 million to the pension trust in 2014.

Next I'd like to make a few comments about our outlook for 2014. Although we have the ability to sustainably increase harvest to capture stronger log prices, we do not anticipate any material change in Southern pine sawlog prices in our operating area in south central Arkansas. We are planning to harvest 3.8 million tons in 2014, largely consistent with our 2013 annual harvest. That amount is comprised of 2.1 million tons in Idaho, 1.5 million tons in Arkansas, and the remainder in Minnesota. We expect quarterly harvest volumes to follow typical seasonal patterns.

We expect Northern sawlog prices to increase in the first quarter, although the increase will not be as pronounced as the increase in lumber prices in the fourth quarter. Logs tend to be heavier due to moisture in the winter. Industry practice in Idaho is to set log prices based on dimensional volume, which means log buyers do not pay for the seasonal increase in weight. We expect Southern sawlog prices to decline slightly due to a lower mix of hardwood sawlogs. We do not anticipate any change in the price of Southern pine sawlogs or chip and sawlogs.

Pulpwood prices should be up slightly in the north and flat in the south. Logging costs in both regions are anticipated to be comparable with 2013 costs. We expect continued strong earnings from our wood products manufacturing facilities. US housing starts are anticipated to improve approximately 20% with most estimates around 1.1 million starts in 2014.

We anticipate the subsequent increased demand for manufactured wood products will bode well for lumber pricing, and expect moderate growth in our overall lumber sales realization, which is aligned with most industry forecasts. Consistent with our Resource guidance, we anticipate increased log input costs in Idaho, which will offset some of the product pricing gains.

To date in 2014, markets for our wood products are improved since year end. Local demand is strong. Field inventories remain low, and our order files are solid. In our Real Estate division, we plan to sell between 30,000 and 35,000 acres in 2014, with approximately 70% rural recreational real estate, 20% non strategic timberland, and 10% HBU. Last week, we closed on the sale of 11,000 acres of scattered rural recreation parcels in Idaho that were previously harvested and may close a larger conservation transaction in Minnesota in the second quarter.

These two transactions drive the increase in the number of acres and are expected to result in an overall average price of $1,100 to $1,200 per acre in 2014. We estimate the basis of land sold would be 25% to 30% of land sales revenues for the year. We expect a higher proportion of our consolidated earnings to be generated by our taxable REIT subsidiary in 2014 and estimate an annual tax rate of 20% to 25% for the year. Given seasonality in Resource earnings, almost all of which are in the REIT, and higher wood products and Real Estate earnings, we expect to be at the high end of that range in the first quarter.

Capital expenditures are expected to total $28 million in 2014. Approximately $13 million of capital spending has been earmarked for our resource operations, primarily for typical logging road construction and reforestation costs. Another $13 million is planned for our wood products division. We plan to invest in a handful of high return projects that offer improved operating efficiencies and increased production. In conclusion, we are pleased by the results achieved in 2013 and look forward to another strong year in 2014.

That concludes our prepared remarks. Selina, I would now like to open up the call for Q&A.

The first question comes from the line of Gail Glazerman.

Hi, good morning.

Good morning, Gail.

Just to start, in terms of some of the first-quarter guidance, can you give us any color on to what the price trend would be based on what you know about where lumber prices are versus where they were in the prior quarter?

Gail, are you talking about lumber price outlook or log price outlook?

I'm sorry, log price outlook given the contractual pass-through in the north -- just help us think about that movement.

Yes, so, in the northern region -- I think Jerry had mentioned that we're seeing slightly improved log prices in the first quarter in the northern region for sawlogs. We've seen higher lumber prices, but not all of it's going to translate through to higher log prices.

I'm just wondering if you can help us think about the magnitudes based on what you know to date?

I would guess -- it's pretty early in the quarter, but I'd say probably low-single digits.

Okay. And stepping back more strategically, so, relatively flat, slight uptick in harvest. Can you just remind us what your current view is of the long-term sustainable rate? Is it still around the $4.3-million range?

And were housing activity or southern log prices to improve this year, how much do you think you could swing it versus your harvest plan? Are there constraints for what you could pick up?

Gail, this is Mike. The bulk of our harvest deferral has taken place in the US south over the last several years. And we have the ability to flex that for a period of time with better markets, and we've been patient and are waiting for those markets to improve.

We don't feel like there's huge constraints to our ability to ramp up the harvest related to logging capacity. It's more an issue of finding customers that are willing to take the volume at future attractive prices. So, I think, as we begin to see southern markets improve, we have the ability to ramp up harvest over a period of, say, four to six quarters pretty quickly.

Okay. And just any view or anecdotes from speaking to your customers? You highlighted record margins and performance that you're seeing from your sawmills. What is holding them back?

Do they just not have access to capital? Have they just been so burned that they're really of just in that wary? Any sense that there's momentum starting to build?

Well, I think that there are -- it depends on what basket and market area that you're in. As we focus west of the Mississippi River, and then south-central Arkansas, there's been a sawmill or two that have been under discussions to restart. And we have not seen that announced yet, but we know that there are buyers and discussions to restart mills.

I think there's a lot of very disciplined owners of sawmills in the south now with West Fraser and Georgia Pacific and others that have added capacity on a two-shift basis, but haven't ramped up beyond that, and enjoying attractive margins. And I think it will continue on that kind of an operating pace.

Okay. And just a couple more quick questions. In terms of the real estate activity, and I guess that Idaho transaction, is there any color or detail that you can help us think about as we model the first quarter, I guess if it's already a done deal?

Yes, Gail. It's Eric. Yes, you will see our acres for the year -- as Jerry mentioned, 30,000 to 35,000, that will skew towards the first half of the year. And so, if I had to pencil in a number, it might be around 13,000, 14,000 acres for the first quarter, with the bulk of that being the large transaction that Jerry referred to.

Okay. And would that transaction have been somewhere within the magnitude of the full-year guidance that you've given or -- in terms of value per acre?

Yes, it will be somewhere around $1,100 an acre -- is the average kind of number for the year.

Okay. And just one last question. Have you had any impact on operations from some of the crazy weather we've had so far this year?

Yes, we have -- the cold weather certainly is not helping our sawmill operations, in particular. We have seen slower production; those really cold days make it challenging to run the mills.

But that being said, we've taken steps to recapture some of that lost volume, if you will, and so far we're back on track. But if that cold weather continues, it will impact first-quarter operations.

Okay. And actually just one last one. I apologize if I missed it, but any more specific items that you could give in terms of harvest activity in the first quarter relative to the whole year?

Yes, so, I think Jerry had mentioned 3.8 million tons for the full year. We're looking at roughly 800,000 in the first quarter. That's down from 900,000 last year.

But you may recall, in 2013, we pulled forward some volume for the year to try to capture better pricing opportunities. So, our outlook this year is for about 800,000 tons in the first quarter.

Okay. Thanks very much.

Thank you.

Next question comes from the line of Mike Roxland.

Thanks very much. Just a question on southern sawlog prices. Some of your peers have been indicating higher southern sawlog prices, and they pointed out that they're beginning to see some sawmills add additional shifts. Weather did have an impact to some extent, but they've all started to see, like I said, some sawmills start adding additional shifts in some areas. Are you just not seeing prices move higher, or are you just being conservative with your 2014 forecast?

Good morning, Mike. It's Mike.

Hi, Mike.

I think the answer to your question is both. We are not seeing prices west of the Mississippi River and south-central Arkansas for southern pine sawlogs change at all. And we have no evidence looking forward that there's a catalyst to make those change this year. So, I guess you could say we're conservative, but I think we're fairly practical about that.

I think if you look at the strength south-wide, the Atlantic seaboard, I think, has the strongest markets both due to the presence of paper pellet mills and sawlog manufacturers. The Gulf south across through Texas is probably the second strongest. And the heart of the central south is the weakest, and that's, I think, largely due to the fact that there's a lot of deferred harvest in that area, and there have been mill closures during the downturn that haven't come back.

Got you. I guess, as with real estate, just depends on your location.

It does.

Got it. Okay. Appreciate the color there.

Can you talk just a little bit about the lumber inventories in the channel? I think you mentioned it in the opening remarks that they're pretty lean. Just trying to get a sense of what's been driving the improvement in lumber prices that we saw through most of 4Q?

Obviously, they were more -- the increase that we've seen were more reasonable than we've seen the last two or three years during this period of time. Nevertheless, prices increased, and that's actually -- that trend has persisted into the early part of this year. So, is it just dealers restocking to get ahead of the Spring selling season for home construction, or is it due to mill downtime? Just trying to figure out what's really tightened up, or if inventories have really tightened sufficiently to drive prices higher?

Mike, I don't know that it's any one factor that's driving those prices higher. At the end of the day, demand is outpacing supply. We continue to see strong takeaway from China, for both logs and lumber. I think dealers went into the end of the year with relatively low inventory levels because they didn't -- that is generally the way they operate through the Winter months.

Now, everybody's looking at housing starts moving up 20%, more or less, year over year with pretty strong repair/remodel markets. And people are excited about home building for the coming year. So, now they're starting to get back out in the market and bid again. And there hasn't been a whole lot of new capacity that's been put in place.

So, I don't know that it's any one factor. It's really a host of issues.

With the outlook that we shared with you for housing starts of around 1.1 million, that translates into 4 billion additional board feet of lumber that's going to be consumed with that kind of a housing outlook. That's a pretty significant ramp-up without an attendant increase in capacity in the short term.

Got it. I appreciate that.

Just the last question on capital allocation. Back in December, obviously, Mike, you mentioned that you raised the dividend to $0.35 a share on a quarterly basis. Now that that dividend increase is behind you, how should we think about capital allocation? Obviously, your goal, as you mentioned, is to grow the dividend, but how should we think about how you prioritize capital from here on out?

Second question is following up: How do you think about a dividend going forward? I know I asked this question of you before, but is there a particular target that you could put around, or some mile posts to put around the dividend, whether it be a certain percentage of FAD or something similar?

Paying a sustainable dividend, and one that we can grow over time is, I think, the most important priority for us and the Board as we think about capital allocation. So we look to increase the dividend over time.

One of the hallmarks or one of the benchmarks in our Business that we're waiting to see is this improvement in southern pine markets. Hopefully that will translate into the ability to support a higher dividend going forward, as that materializes over the next few years -- several quarters at least.

We have stepped up our spending on our capital allocation for expenditures in our mills with a bit of incremental spending, up to $13-million level this year for some higher-return capital projects in our mills. And we continue to be focused on acquisition opportunities. And we continue to bid on a number of small- to medium-size deals. And hopefully we'll have a success this year, and ability to grow the Company and the acreage base going forward. So those are kind of how we think about capital, and kind of rank order of priority currently.

I appreciate it. Good luck in the quarter and the year.

Next question comes from Chip Dillon.

Yes, good morning. Could you first update us on how you think about the real estate program. You mentioned, at least for 2014, that we should see 30,000 to 35,000 acres sold in your program. How should that evolve over time, assuming no radical change in your footprint? Is that a steady-state number we could see more or less for five years, or would it tend to trend up or trend down?

Chip, this is Eric. As you know, real estate transactions can be really, really lumpy. I think our run rate, if you will -- we call it same-store sales -- kind of what we think we can do year in and year out is probably in the 20,000 to 25,000 acres a year kind of range.

But what I would tell you is that, from time to time, we can be opportunistic and take advantage of what we consider to be attractive pricing with our real estate sales. And here in 2014, we've already got one transaction closed, and then another -- there's another one that has a strong possibility of closing. We think we're going to obtain pricing that's far above what the underlying timberland values were. So this year, it will be a bit above the normal run rate, but I think for modeling purposes, the 20,000 to 25,000 is more realistic.

And those transactions you mentioned, I forget, what region are they in?

The one in the first quarter is in Idaho, and the one in the second quarter is in Minnesota.

Got you, okay. And then, I know in the past you've talked about -- I think around a 4.5 or maybe 4.2- to 4.4-million ton as a level of harvest that you could eventually get to. Is all of that increment over 3.8 -- would that be in Arkansas, or could we see Minnesota and/or Idaho pick up as well, in future years?

The bulk of the increment in future years as we see market opportunities will occur in the US south.

Okay. Got you.

And then getting back to -- on CapEx, I know $28 million -- I think that's more than you've been spending over time on average. And as you explained, there are high costs, or high payback, I should say, opportunities in the sawmills.

What do you think the CapEx number will go to as we go out over the next few years, assuming times are good. Would you see it come back down a little bit, or is that sort of a new steady state -- the high-$20s million?

Chip, this is Jerry Richards. I would say that that $28 million is probably a bit higher than our steady state going forward. Again, as Mike mentioned, there's some really high-return projects and quite frankly, we deferred some spending a little bit in wood products as well. So that will probably moderate in future years.

Got you. Okay. Thank you.

Next question will come from Mark Weintraub.

Thank you. I was hoping to get a little bit more information on the Arkansas business. So, would you expect to roughly have about 700 million board feet of saw timber again in 2014, similar to 2013?

Yes, Mark, this is Eric. Yes, for the year, we're expecting roughly 700,000 tons of sawlog -- roughly flat year over year.

Right. And how much saw timber do you actually purchase for your sawmilling operations?

In the south, you're talking about?

Yes.

Roughly half and half, more or less. It varies from time of the year, from quarter to quarter, but it's more or less in the 50%, 60% range.

From fee lands, and half of it from the open market. The quantity that we purchase is about 700,000 tons.

Okay. So you actually purchase about the same amount that you are currently selling?

Yes, that's correct. So if you think about price movement, for every dollar a ton that sawlogs go up in the south, we make $700,000 more in the resource business, but we give it back in the wood products business.

Okay. So basically the benefit of higher pricing for sawlogs will really flow through to you when you are harvesting more than the 700,00 that you're doing now and/or if lumber prices were to go up as well?

That's correct.

Okay. Thanks so much.

The next question will come from the line of Steve Chercover.

Good morning, happy new year, everyone. Couple quick ones. You indicated that Warren's having just record returns, but do you think that if competing mills came online in Arkansas, would they bid up fiber and depress lumber prices? In other words, are you kind of agnostic about the recovery in Arkansas?

Yes, I mean, I think we want to see higher log and lumber prices over time. Eventually, the way the industry works is higher lumber prices trade back to the stump. We do have an opportunity on the resource side to ramp up harvest volumes. We're very sensitive to cash flows coming from that volume.

So, I think, today, we're probably agnostic. Higher prices would prompt us to harvest more, which would generate a lot more cash flow.

Can you cherry pick your customers? If GP was to restart Crossett, could you say: Happy to sell you peeler logs but not sawlogs.

Yes, we can certainly do that.

All right. And just switching gears, again, if I'm not mistaken, I think it was already several years ago, you had whittled down Potlatch to a size where you didn't really want to shrink anymore. Obviously, it makes sense to sell HBU land for multiples of timberland values, but are you in a position to get back on offense?

Steve, I think to a smaller degree, we have. The acreage base of Potlatch today is just about equivalent to where it was in 2006, yet we've sold a significant amount of land over that period. We did some acquisitions in 2007, 2008. Last year, at the end -- the beginning of 2013, the end of 2012, we purchased more land in Arkansas, and we continue to look for opportunities to do that.

And in regard to the right size for the Company, I do think that the land base we have today is more valuable than the one we had in 2006. It happens to be about the same size, but it's a better land base today.

Great. Thank you very much.

Thank you.

The next question will come from Paul Quinn.

Yes, thanks very much for taking my call. Just a couple questions -- just following up on the CapEx. You mentioned a $13-million spend in the wood products side. Just trying to get an area of magnitude on what the returns are going to be. Are they less than two-year paybacks? And in terms of increased production, what kind of increase are we seeing?

Paul, this is Eric. We are going above and beyond kind of maintenance CapEx levels of spend for our wood products business this year, just like we did last year. And our biggest project will be a new in-feed system out at our stud mill in Bemidji. It's about a $5-million capital investment. It will increase production roughly 25 million feet going forward, per year.

You won't really see much of that in 2014, as the project -- we hope to get it completed, say, late third quarter. So you'll see that incremental volume starting next year. And our estimate of the returns are probably in the 25% to 30% kind of range.

Okay. That's helpful.

And then, back to the question over bid at long-term harvest level -- just your ability to ramp up -- it sounds, from your comments, Mike, that you've got quite a bit of ability to ramp that up over four or six quarters. In terms of percentage, is that like a 20%, 25% harvest increase over that period of time?

And then, when do you expect to be able to get to that long-term sustainable rate that you've been deferring for a while? Is that a 2015, 2016, 2017 event?

Given our outlook for southern pine sawlog prices currently, which we expect to be flat in 2014, sitting here today I hope it's a 2015 and a 2016 event. But we'll have to wait and see what southern sawlog prices do at that point.

We do have harvest flexibility to go up, but it's not for an indefinite period of time. We've always mentioned that we have a lot of harvest flexibility, particularly in the south, to raise harvest levels. But then they'll have to come back down over a longer period of time as we get into the next decade to manage them on a sustainable level with our current acreage base. Obviously, we hope to grow that acreage base over time, so that doesn't become a factor.

Last question I had is: We've seen a material shift in the Canadian dollar, basically since the end of 2013. And just trying to understand what you think that effect will have on lumber prices going forward? Will that bring lumber prices down, and you're expecting additional volumes out of Canada?

Yes, Paul, it's Eric. Near term, we don't see a lot of material change from Canada. If you think about kind of what west side, up in BC, what producers up there -- what they're selling and where they're selling it to, it's really economy going to China, by and large, and it's priced in US dollars. We don't think an exchange rate drop in the Canadian dollar relative to the US dollar makes an impact to that business, by and large.

Now, over on the eastern side of Canada, Canadians will be a little bit more competitive. Of course, there's allowable cut issues on the eastern side of Canada. I think if the Canadian dollar continues to stay weak for an extended period of time, I think there is an opportunity for Canadians in the eastern provinces to put in capital and ramp up production. But again, it comes back to: Is there the timber for them to cut, given the allowable cut is coming down?

Okay. Thanks very much for the help. Best of luck.

Thank you.

And the final question comes from Collin Mings.

Good morning out there, guys. Just quickly following up on just the acquisition environment. I don't know if you guys can talk just a little bit more about what you're seeing out there as far as competition. I know you've highlighted that you're bidding on some different assets, but are you seeing any upward movement in pricing?

I know last year when we were talking about the potential to go out and acquire more timberland, you were talking about just your -- the debt upgrades and a more competitive cost of capital. I'm just curious how you're thinking about the deals that you're seeing currently, and the pricing environment out there.

Well, our competitive position has improved over the last year, Collin. I think clearly with an upgrade on the debt, and we have a stronger balance sheet than what we had, and an untapped revolver -- all those things are favorable.

On the flip side, the deals that have been closed -- I think whether you point to transactions in the west or the US south, the price per acre continues to inch up, in our view. I don't know if that's a reflection of people having a more optimistic look of future pricing, or if they're just assuming lower discount rates. But whether it's either one of those factors, or both, we think deals are becoming more expensive and more competitive all the time.

Okay. And then just on that theme, I know one thing that you guys have talked about that's probably a little bit different than some of the other timber REITs has been a willingness to maybe take on some timberland that's also including some wood products facilities as well. Are you seeing any opportunities like that to expand both platforms -- emerge?

I wouldn't say that we've seen anything emerge, but certainly families and other enterprises that own both timberlands and manufacturing operations are enjoying better returns from the wood products manufacturing part of the business. I think they feel a little healthier and a little more optimistic about their business. And we continue to pursue opportunities to grow both our converting business and our timberland business simultaneously. I do think that differentiates us from some of the peers.

All right. Well, good luck in 2014, guys.

Thank you.

There are no further questions at this time. I will now turn the conference call back over to management for closing remarks.

Thank you for joining our call today, and we look forward to seeing many of you at events this Spring. In the first quarter, we're planning to be at the Longbow conference in New York on the 25th of February; the Raymond James conference in Orlando on the 5th of March; and the UBS Investor Day in Seattle on the 26th of March. So, again, thank you for your interest in Potlatch, and hope to talk to you soon.

Thank you. This will conclude today's conference call. You may now disconnect your lines.