Potlatchdeltic Corp (PCH) 2016 Q1 法說會逐字稿

Good morning, my name is Angie and I will be your conference operator today. At this time, I would like to welcome everyone to the Potlatch first-quarter 2016 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, Angie and good morning.

Welcome to Potlatch's investor call and webcast covering the sale of our central Idaho Timberlands and our first-quarter 2016 earnings. With me in the room are Mike Covey, Chairman and Chief Executive Officer; and Eric Cremers, President and Chief Operating Officer.

This call will contain 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 a reconciliation of non-GAAP measures can be found on our website at www.PotlachCorp.com.

I will now turn the call over to Mike for some comments and then I'll cover our first-quarter results and outlook.

Thank you, Jerry and good morning.

We announced this morning that we have sold 172,000 acres of timberlands in central Idaho for $114 million. As many of you know, central Idaho is our least strategic timberland holding, based on productivity and location.

The rationale for acquiring the central Idaho property in 2007 was based on generating returns from both the traditional resource business as well as from real estate sales and development. The timberland thesis has played out as planned, generating resource EBITDA of around $4 million per year. However, the real estate market in the McCall area has declined significantly since 2008 due to the recession and the bankruptcy of the Tamarack ski resort.

Prices for recreational undeveloped real estate tracks, 20 acres in size and larger, have dropped up to 90% which significantly affected the real estate opportunity. We do not expect the real estate market in central Idaho to recover anytime soon.

The central Idaho Timberlands are attractive, but are worth much less per acre as illustrated by the metrics disclosed on page 5 of the supplemental slides. The site index or timber-growing productivity of the land is much higher in northern Idaho. This is part of the reason why stocking levels of our northern Idaho Timberlands are nearly two times that of central Idaho on a per-acre basis. In addition, the truck-haul distance is shorter in northern Idaho, which results in much higher stumpage values than central Idaho.

For these reasons, our northern Idaho property generates $117 of EBITDA per acre, which is over five times that of central Idaho. As you know we had an appraisal completed in 2012, when log prices were much lower, that concluded that 352,000 acres of our ownership in northern Idaho were worth $2,000 per acre.

This attractive sale provides the opportunity to take advantage of the dislocation in our public-equity value. Our board has authorized the repurchase of up to $60 million of our shares.

Not only do we have a current opportunity to buy our shares at a discount to net-asset value, we would get an immediate return of 4.4%, which is the current dividend yield on our shares. Our stock price has increased approximately 30% since the middle of February and 13% year to date. We will consider many factors, including our view on future lumber and log prices, the degree to which our shares trade at a discount to NAV, and returns that could be generated by alternative uses of cash as part of executing on our share repurchase authorization.

The sale will also allow us to reduce leverage, which is an important part of our goal to retain our investment-grade rating. We plan to use $42.6 million of the proceeds to pay off our 5.9% Minnesota tax-exempt bonds.

Turning to economic factors, we continue to expect housing starts to increase to at least 1.2 million units this year. The year began well with actual housing up about 15% in the first quarter on a year-over-year basis.

Mild winter weather, in some regions, allowed builders to ramp up activity early. This has been helpful, given well-publicized construction-labor constraints and low inventories of housing stock.

We are encouraged that lumber prices increased about $30 per thousand board feet over an 11-week period in the first quarter. As a top-10 lumber manufacturer in the United States, our sales force participates in the lumber market daily. We believe that lumber-inventory levels in the supply chain remain low, which provides the opportunity for lumber prices to increase further as we move into the heart of the building season this spring.

The Canadian dollar is strengthened almost 10% against the US dollar so far this year. That benefits lumber manufacturers located in the United States by reversing some of the competitive advantage that has accrued to Canadian producers over the last year. Our Wood Product segment returned to profitability in the first quarter. Resource and Real Estate continue to be steady contributors.

In summary, factors that drive our earnings have improved and we expect to post better results in 2016 than we did last year. The sale of the central Idaho property provides the ability to return capital to shareholders tax efficiently and make progress on our goal of reducing leverage.

I will now turn it back to Jerry to discuss the quarterly results, and then we will take questions.

Beginning with page 8 of the slides accompanying this call, our net income was $200,000 or zero cents per diluted share in the first quarter. This compares to net income of $3.5 million or $0.09 per diluted share in the fourth quarter. The decline in earnings was largely due to seasonally lower harvest volumes.

On the right-hand side of slide 8, we have added new disclosure of EBITDA for northern and southern resource. This is part of our ongoing effort to add disclosures useful to the investment community and we plan to continue to provide this EBITDDA breakdown in the future.

I will now review the results of our operating segments. Information for our Resource segment is displayed on slides 9 through 11. Operating income for the segment was $10.2 million in the first quarter compared to $16.1 million last quarter. We harvested 925,000 tons in the first quarter, which is 18% lower than the harvest volume in the fourth quarter, but is 50,000 tons higher than the range we discussed on last quarter's call.

Turning to slide 10, we delivered 367,000 tons of sawlogs in the north in the first quarter. This is lower than the 452,000 tons of sawlogs that we delivered in the first quarter of 2015. As we discussed on the fourth quarter earnings call, it was an unseasonably warm winter in Idaho, which resulted in sawlog deliveries being lower than planned in the North.

Hauling activities have resumed earlier than normal in the second quarter due to conditions remaining warm and logging roads drying out. As a result, we expect to make up the shortfall in sawlog volume in the second quarter.

Northern sawlog prices declined 6% on a per-ton basis in the first quarter. This was due to seasonally heavier logs due to higher moisture content. As discussed in prior quarters, log prices are set on a dimensional basis in Idaho not based on weight. The price of sawlogs was flat on a dimensional basis in Idaho in the first quarter compared to the fourth quarter.

Moving to the South, on slide 11, harvest volumes exceeded our plan in the first quarter despite heavy rains that periodically interrupted operations. Our team did a good job taking advantage of market demand and available logging capacity. Sawlog prices in the South declined 7% and pulp wood prices declined 2%, both due primarily to a seasonally lower volume of hardwood logs in the sales mix.

Results for the Wood Products segment are displayed on slides 12 and 13. As Mike mentioned in his comments, wood products returned to profitability in the first quarter and this is the second quarter in a row in which the segment's results have improved.

Operating income was $1 million in the quarter, compared to an operating loss of $1.3 million in the fourth quarter. Our average lumber prices increased 3% in the first quarter. Lumber shipments were 2% lower in the quarter.

Our St. Maries, Idaho sawmill took 11 days of downtime in the quarter, due to log shortages caused by an unseasonably warm winter. This negatively affected earnings particularly given the strong increase in lumber prices in the quarter.

Shifting to our Real Estate segment on slides 14 and 15, operating income was $2.1 million in the first quarter down slightly from the $2.5 million earned in the fourth quarter. Our sales volume is typically the lightest during the winter months. While acres sold were down 24% in the first quarter relative to the fourth quarter, a larger proportion of the first-quarter sales mix was comprised of properties with a lower cost basis.

Turning to the central Idaho sale, we estimate that the transaction will result in a cash tax refund that will add $10 million to the proceeds we received last week. As Mike mentioned in his comments, we plan to repay our $42.6 million Minnesota tax-exempt bonds, which bear interest at 5.9%. We have provided notice of redemption and expect repayment to occur in June. As a result of the repayment, we expect interest expense to decline $1.3 million this year and $2.5 million per year through the third quarter of 2026.

Speaking of interest expense, it was unusually low in the first quarter. We received the full amount of our Farm Credit patronage distribution of $2.2 million this quarter. Patronage is akin to a co-op dividend and is based on the amount of interest that we pay to the Farm Credit banks. The distribution was much higher this year because 2015 was the first full year that our acquisition financing was outstanding and it was received a quarter earlier than expected.

Capital expenditures were $3.2 million in the first quarter. We continue to expect that capital expenditures will be $19 million for the year.

Now I'd like to comment on our outlook, which is summarized on slide 17. We plan to harvest approximately 850,000 tons in the second quarter with about 55% of the volume in the South and 45% of the volume in the North. Sawlogs are expected to comprise approximately 45% of the second-quarter harvest in the South including stumpage and 90% of the second-quarter harvest in the North.

We expect stumpage volume in the South in the second quarter to be comparable to the first quarter. Estimated harvest volume for the second quarter includes the catchup in Idaho sawlog volumes that I referred to earlier and takes into effect the central Idaho timberland sale. We harvested 222,000 tons off of the Central Idaho Timberlands in 2015. As a result of this sale, we expect that our harvest will decline approximately 200,000 tons in 2016 to 2 million tons in the northern region and 4.2 million tons in total for the full year. We expect northern sawlog prices to increase up to 10% in the second quarter to reflect higher lumber prices on a lag basis and due to seasonally lighter logs resulting from lower moisture content.

In the South, we expect sawlog prices to increase 2% and pulp wood prices to increase 1% in the second quarter, due to a seasonal increase in the volume of hardwood logs in the sales mix. At these seasonally lower volumes and higher prices, we expect Resource earnings to be up slightly in the second quarter compared to the first quarter.

Turning to Wood Products, we expect lumber shipments to increase 7% sequentially to 174 million board feet in the second quarter. Our forecast assumes that the average lumber price realized will be 10% higher in the second quarter. Spot prices, thus far in April, have been about 7% higher than the average lumber price that we realized in the first quarter. Wood-products earnings would increase to $5 million to $7 million in the second quarter at these volumes and prices.

I will now shift to Real Estate. We plan to report a book loss on the central Idaho timberland sale of $49 million before tax in Real Estate's results in the second quarter. Given that the rural recreational real-estate market in central Idaho continues to be depressed, the Timberland sale will not cause the number of acres sold by Real Estate to decline to any noticeable extent over the next several quarters.

Excluding the central Idaho transaction we expect Real Estate to sell about 4,000 acres in the second quarter at an average price of $1,400 per acre. We estimate that land basis in the quarter will be 25% to 30%. We expect the corporate expenses will be $9 million and that interest expense will be a little over $8 million in the second quarter.

Income taxes in the second quarter are expected to include a tax benefit of $13 million related to the central Idaho transaction. The tax benefit includes a cash tax refund of $10 million and removal of a $3 million deferred-tax liability. We estimate that the book loss on the sale will be $36 million, net of the tax benefit, or $0.87 per diluted share.

Excluding the transaction, we estimate that the consolidated effective tax rate will be an expense of 35% to 40% of pretax earnings in the second quarter. This is higher than the 10% to 15% rate we expect for the full year because of the seasonably low harvest and improving Wood Products earnings in the second quarter.

To summarize, we expect better results from recurring operations in the second quarter, despite it being our seasonably weakest quarter. We are encouraged by the recent improvement in lumber prices and look forward to redeploying the capital unlocked by the central Idaho transaction.

That concludes our prepared remarks. Angie, I'd now like to open the call up to Q&A.

(Operator Instructions)

George Staphos, BofA Merrill Lynch

Hi everyone, thanks for the details. Congratulations on the quarter progress. I only had a couple of questions. First thing, can you comment on what kind of activity you are seeing early in Q2 in terms of lumber pricing, where you think customers' inventories are? And, recognizing this is one of the great unknowables in life, what do you make of the slowdown we have seen in housing activity, whether it's permits or starts. I think, even in the case, Case-Shiller, was a little bit less in terms of growth this month than had been expected. Whether you are seeing any kind of change in field activity and I had a follow-on.

Hi George, thanks, this is Eric. We have seen a nice run in lumber prices here over the past couple of months about $30 per thousand or so and we think that's due to a number of factors, including relatively mild weather.

There has been some good housing data if you go back past this most recent set of data. We have seen a weaker US dollar; we have seen some curtailments by Eastern Canadian manufacturers; and there relatively lean inventories throughout the distribution system. So we have seen a real nice run in lumber prices.

Our expectation from here is for continued very modest gains in pricing. We are not really yet to the heart of the building season. And with the US dollar continuing to be relatively weak, we think that bodes well for the future, but we don't have huge expectations for price increases going forward; they're rather modest.

I think as it relates to your question on the recent housing data, you know, frankly, the housing data is always volatile month to month. And there's no doubt that there's issues finding labor to build houses; there is also a lot of availability issues that we hear builders speak of from time to time.

But we think the housing market continues to grind its way higher. And most pundits are forecasting housing starts between 1.2 million and 1.3 million this year, which is a relatively healthy increase over last year. So we are relatively optimistic going forward.

And Eric, you have not seen, what I heard from you is you have not seen any change in the market that would be reflected or reflective of the slowdown in the macro data which again as you point out is pretty noisy. So it's been pretty much steady as you go into the second quarter from your Q1 run rates, would that be fair?

We did see a little bit of a hiccup when that housing data came. If you're a lumber buyer, out there in the marketplace, you might have paused for a while before getting back into the market to buy lumber, so there was a little bit of a pause. Prices did roll over a little bit, but I would not say precipitously.

Two questions, not to overstay my welcome, then I'll turn it over. On inventories, recognizing this is not a quantified or precise testament, if you had to index normal inventories at your customers or the distributors and broadly at 100, where would you say inventories are right now, at least from your trade checks? And then, on leverage, it's nice to see you repaying these notes, what other activity would you remind us of that you have in mind relative to maturities you have coming up into 2019?

I will take the first question and then I will let Jerry speak to the second question. Your question regarding inventories, is that lumber inventory?

Correct.

Or is that log inventories at mills?

I was really referring more to lumber inventories at dealers.

It is hard to get good data on where things stand out in the distribution network. Our general feeling is that dealers have learned to operate with very low inventories; it's more of a just-in-time kind of business now. So any change in the outlook or demand for lumber for housing starts shows up very rapidly in the form of a price increase or decrease. I think it's fair to say that inventories, they're at relatively low levels although we think they are going to continue to be at low levels for the foreseeable future.

So George, in terms of your question on leverage, as Mike mentioned this morning, one of our objectives is to retain our investment-grade rating with one of the agencies that rates us. I think over time our goal would be to pay down more debt, but we don't have anything to announce this morning beyond repayment of the $42.6 million Minnesota bonds that we have already announced.

Do you think more of the maturity being contended with by 2019 will be dealt with through land sale or do you think the cycle will provide the additional pricing and cash flow to be able to deal with maturity at that point in time? Or how much do you think you will wind up refinancing?

Hard to predict at this point, George, in terms of what proportion of those 2019 maturities we would refinance as opposed to paying off. We certainly continue to be very encouraged by housing markets and the macro tailwinds behind us. So time will tell in terms of what that mix ends up being.

Thank you.

Collin Mings, Raymond James & Associates

Good morning.

Good morning.

First question for me, just to clarify, given the comments you made regarding the recent move in the stock. To be clear, would you be buying back stock at today's price?

Hey Collin, we still think that we trade at a significant discount to net-asset value based on estimates by you and other analysts. We think that discount is still attractive and that was the thesis behind the land sale. This was maybe not the land sale everybody expected, but, strategically, we think it's the one that made the most sense and gave us capital to put in the market and begin to execute on our share repurchase which we intend to begin shortly after the window opens in a couple of days.

Thanks for the clarification there. Next question, as it relates to the land sale, how does that really impact? Or have you analyzed exactly the impact on that harvest run rate? You have talked before about cutting somewhere between 4 million to 4.8 million tons per year over the next few years, depending upon market conditions. Does that reset that run rate a little bit lower or was this land really productive enough to even move the needle?

Every acre of land contributes to that baseline harvest of 4 million to 4.8 million that you referenced. So, we said on the call script that we would be dropping our harvest level about 200,000 tons a year, post sale here. So, correspondingly then, we would think of the harvest range to being reset between 3.8 million tons to 4.6 million tons because of this land sale and I'd also remind you that, for some time, we have stated that we have been harvesting in Idaho a very over-mature forest which has been certainly the right thing to do financially. But, as the years go by, we will begin to start ratcheting down the harvest levels in northern Idaho as we near the completion of that process and hopefully our southern Timberlands will kick into gear and we can make up the difference there. That is why the range sits between 3.8 and 4.6 with the expectation this year, to reiterate, that we expect to harvest 4.2 million tons.

Helpful on that front and that leads me to my next question. On slide 5, you referenced that $2,000 per acre appraisal for 350,000 acres of northern Idaho Timberlands. Just curious, the teams thoughts about how appropriate or valid that appraisal, that data point would still be, given to your point about maybe hitting the lands more aggressively given the maturity profile of the acreage in northern Idaho. How much comp is that or how much sense does that four-year old comp make at this point?

Collin, this is Eric. I was the CFO way back when we had that appraisal done. And, as you may recall, we had that appraisal done because our revolver was collateralized. We had no choice but to go do an appraisal and put some acres in the collateral pool. We think those acres are representative of what our North Idaho pool of acres looks like.

We chose those 352,000 acres specifically because we thought they were the corest of the corest of the core of this Company's Timberlands. In other words, we were going to have those acres with us to the very bitter end, so to speak. Not for any other reason, like they were super well-stocked or super-high indexed or anything like, were loaded with HBU or anything like that; they were just good acres that we knew were going to be with us for the long haul.

Now in that appraisal, I'm sure the forecaster, the appraiser assumed that lumber prices were going to be moving higher and log prices along with it and that's exactly what has happened. But, if I had to guess, I would say that appraisal is still very accurate and if we had another appraisal done today, it would be very consistent with the appraisal that was done back in 2012.

So would it be fair to think then Eric, that maybe some of the trade-off has occurred as we've had a higher lumber-price environment which obviously has led to higher log price in the region, maybe offset by the fact that you have been relatively more aggressive at harvesting some of that land. Is that a fair way to think about it?

I think that is a fair way to think about it.

Okay.

Just so we're clear, that revolver is no longer collateralized, so there has not been a need to refresh the appraisal.

Understood. And then one other one for me and then I will turn it over. As you think about this transaction, should we think about another proportionate shift within your kind of your HBU development rule nonstrategic buckets or, as you think about this acreage that was sold, although not all nonstrategic before this announcement or this deal getting completed, how should we think about how that moves those buckets around that you have highlighted before?

So, Collin, this is Jerry. In terms of the effect on our HBU buckets, of the 172,000 acres that we sold, roughly 60,000 were in HBU and the rest was in core Timberlands. And then, when you think about the effect on the categories, there is a little bit of a reduction in each one, but nothing real significant. We will provide more updated information on that later today when we file our 10-Q.

Okay. Very helpful, I'll turn it over. Thank you for the new disclosures as well.

You're welcome.

Chip Dillon, Vertical Research.

Good morning, gentlemen. First question is on the timing of the sale of the Idaho lands. Was the ten year situation and built-in profits taxes and all that, did that have a bearing on the timing of this sale at all and does it help you or hurt you that it is post that 10-year point?

Chip, this is Jerry, I will take that one. In terms of the 10 year built-in gains, make sure we are all level set, that did expire January 1, 2016. This particular property, because of the HBU component and the historical accounting really was high basis, so I think the built-in gains tax would have applied, but probably in a lesser degree than if we just sold another piece of property in the past.

Okay, maybe I will ask it differently. You sold it for what you sold it for. You're going to get a $10 million refund check from the government. Would that refund check have been any different if this had closed prior to this year?

There would have been an effect, Chip, because not all of those acres were in our taxable REIT subsidiary, some were in the REIT, and those would have been subject to built-in gains tax. However, given the basis, it would not have been significant or as significant as some of our other acres would have been.

So you're saying, if I hear you right, that there's really no difference as to whether you sold it in 2014 or today assuming the price is the same. Is that a fair, there is no tax differential between selling it this year and selling it last year?

I think it is fair to say, Chip, that the tax differential would not have been overly material.

Okay. But, to the extent it is not really material, to the extent there is a difference, is it better now or was it worse to wait?

In terms of, when you think about the tax component of this, that does not really drive the timing. I think if you step back when we first started talking about this arbitrage opportunity. The combination of factors are our stock price had run down; we had very strong private market valuations for Timberlands, and that really kind of kicked off the strategy, if you will, to sell Timberlands and then buy our own trees at a very cheap price. So I think that is probably the backdrop I would focus on. This became the most attractive piece of property from a strategic standpoint as Mike has already commented on this morning.

Okay. And then, on the last questions, and I appreciate the help here, I know in the K, I believe, it said you guys owned a total of 791,000 acres in Idaho. So you take away this 172, I believe it is, you are down to 619. The way I should think about it is that the appraisal acres done back in 2012 would have been over half of that 619. In other words, you appraised, I think you said, 352 which means, and I know you have probably sold some acres here and there, but the remainder that was not appraised would be 267. And it's your belief that that 267 is comparable to what was appraised. Is that all fair?

Yes, that is all fair. We sold very few acres in northern Idaho, so I think that's fair.

Okay. And again, the acquisition was done back in 2007; I guess that was before the Clearwater split. Do you remember what the thought was when you did that? There was this belief that the recreational activity in Idaho was going to pick up. Was that a big part of that decision? And you guys might not have even been there, so I don't know if you can even answer that, but what do you recall the decision process there?

Certainly I was here in fairness. Our thought in 2007 is Idaho was one of the fastest-growing states in the country, the Boise metropolitan area was a very robust market. This Tamarack ski resort had just opened; it had big headliners behind it. Andre Agassi and Steffi Graf were part of the new Fairmont Hotel there and prices were going through the roof. The core timberland was good and we felt that there was going to be a recreation real estate market that made sense for us and certainly we were the largest landowner in Idaho already, and so we brought the property and paid about $1,200 per acre for it.

And shortly after that, the whole world changed with the financial recession and the real estate market fell out from underneath us. The core real estate or the core timber properties that had been true to form since the start, we thought we would make about $4 million per year when we bought it and that has held true, but the real estate market just totally collapsed. We think that one day that will recover in central Idaho; it is still a very desirable area. And the Tamarack resort will probably work its way through bankruptcy, but we think that timeline is very long and it made no sense to wait, so we thought we'd unload the property today.

Thanks, that's very helpful. When you look at the southern lands, I don't know if you would venture a guess here, but we saw recently, actually four state-pension plans step up and buy land across seven states. I am sure you are familiar with what I am talking about, at an implied value of $2,150 per acre. Are there reasons why your lands in the South would be not comparable to those lands in terms of what you think the value would be?

Every acre in the South, of course, as markets are different and productivity of the acres is different. I think, collectively, as we looked at that property that was transacted, I think it was about 250,000 acres in five states; the site index was slightly higher than some of our land, in general.

Stocking levels were perhaps slightly higher, some of it in the Carolinas and Georgia probably is in better stronger markets than, say, Mississippi or Alabama. But, on average, I think our property is fairly comparable, perhaps slightly less, but not much. I think, certainly, we said southern timberland roughly is worth $2,000 per acre and I think ours would stack up comparable to that.

Last question is, as you've been involved with talking to folks involved in timberland, five years ago, our view was that, well it's inevitable that rates go up and the pension obligations need to be paid out, so there's going to be an overhang. I'm not so sure about the pension obligations, but what we do see, of course, is, not only continued low rates, but even negative rates in other parts of the world which makes, obviously, the current return on timberland just a tremendous positive relative to being a German pension plan and getting basically 20 basis points in a 10-year bond.

With that backdrop, would you say that looking at various sales situations, that it's a lot more active on the buyer's side in US timberland than say 2 to 3 years ago? Are you seeing more interest and, therefore, that what's makes you more of a seller than a buyer at this point?

Well there are two questions there. The reason that we are a seller is we felt that the best opportunity to buy Timberlands was to buy our own trees that we think are dramatically undervalued when the stock has been trading in the $30 to $35 price range when our net-asset value is roughly $45 according to analysts.

The best opportunity for us has been to buy our own stock and, in order to do that, we felt it made sense to sell land. In terms of the number of-- there's certainly a number of properties that are going to be coming onto the market as some of these TIMO funds mature. We think that there is ready capital there to be deployed. I don't think there's any more today than there was three years ago. I think the amount has been fairly stable.

There has been for high-quality property, and if you think broadly about the Pacific Northwest or the South, if it goes into an auction format, I think you can expect to have multiple bidders for every transaction. And sellers get full value for the property, with discount rates that we think are still between 5% and 6%.

Okay, that is helpful.

Mark Weintraub, Buckingham Research Group

First a quick one. Do you happen to have the EBIT contribution last year from the Central Idaho properties?

Yes. Let me, why don't you go ahead and ask another question Mark and I will look that up real quick.

And then, obviously this is a significant move on that private market public market arbitrage fund, are you contemplating additional timberland sales or are you-- essentially you looked through the portfolio, this is the one that made the most sense at this juncture and this phase of the strategy is complete.

I think it is really the latter. This one made the most sense. I think this phase of the strategy is complete; we will execute on our $60 million share repurchase; we will pay down the $42 million in debt; and we will see where the stock sits when that process is complete, which will take several months, given the trading volume of our stock. And if we get to that point and we find that our stock is still dramatically undervalued and we have not found another way to raise funds, then we'll revisit it again.

Mark, in terms of EBIT for Central Idaho, last year it was a negative $2 million.

So from an earnings perspective, while the harvest is going down by 10%, presumably the EBIT that one may expect from the properties relative to what you were previously doing, might not change at anything or even go up a little bit?

Yes, I think it would go up a little bit.

Harvest has gone down about 5%, not 10%.

I thought it was 2.2 million going to 2 million. Did I mishear that?

For the North you are right, it is 10%.

I'm sorry. I was just talking about the North. Got it. Thank you.

At this time, there are no further questions. I would like to turn the call back to management for any additional or closing remarks.

Thank you, Angie and I certainly appreciate all of the interest in Potlatch and look forward to talking to you again next quarter.

Thank you for participating in today's conference call. You may now disconnect your lines at this time and have a wonderful day.