Q1 2020 Earnings Call
Good morning.
And welcome to.
The catchmark.
Trust first quarter 2020, <unk> earnings conference call and webcast.
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After todays presentation will be an opportunity to ask Washington.
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I'd like to turn the conference over to Miss Ursula Good <unk>. Please go ahead.
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Dave.
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Good morning, and thank you for going after every deal Cats My timber Trust, we sold for first quarter 2020, and report on basis related impact of the ongoing Colgate 19 endemic.
Or some other knowing chief financial officer of Catchmark, joining me today on the call our Chief Executive Officer, Brian Davis, Chief resources topic hurt <unk> right.
And John Rasor precedent of Cookie Kimberly.
During this call Catholic management will make forward looking statement.
These forward looking statements are based on management's current beliefs and the information currently available.
That's my actual result will be affected by certain risk and uncertainties that are beyond its control or ability to predict and could cause our actual results could differ materially from expectation.
For more information about the factors that could cause such differences. We refer you to like 2019 annual report on form 10-K, and subsequent reports that we filed with the FCC, including our quarterly report on form 10-Q, four the first quarter 2020.
Today's presentation includes certain non-GAAP financial measure.
Conciliation to be measurement or included in our earnings release, which is posted on our website <unk>.
I've got a presentation, Brian Todd John and I will be pleased to answer any of your question.
Now I turn over the call to Chief Executive Officer, Brian Davis.
Thank you Arsenal and thank you all for joining US. This morning, our call today are chemo review Catchmarks excellent first quarter 2020 results discuss your liquidity and the impacts of Cobot 19 on Catchmarks operations in provider updated 2020 guidance as a result of recent events.
To begin all about say Catchmark hope you are well unsafe and that your friends family and colleagues at managed to stay healthy during this unprecedented time.
Catchmark, we're focused on working to ensure necessary social distancing for safety Oliver employees customers vendors and business associates.
In the field operations have not been materially affected given how harvesting work has undertaken discussing as part of that equation.
We have been extremely disciplined maintaining frequent communications and connectivity with our customers to be as responsive as possible to their supply chain needs.
Her fiber supply agreements and delivered with sales relationships provide an edge and facilitating customer supply chain requirements and keeping catchmark first in line for meeting demand.
Our business model strategy put in place since the IPO continue to serve US well, we remain focused on owning pine timberlands in high demand no markets in managing operations degenerate predictable and stable cash flow throughout the business cycle.
As a result, Catchmark recorded very strong first quarter performance.
We registered a substantial year over year increase in total revenues and a significant increase in adjusted EBITDA timber sales harvest EBITDA and cash flow from operations.
These results exceeded our expectations and we're not materially affected by cobot 19.
Strong performance was driven by higher year over year harvest volumes, timberland sales and asset management fees.
Once again, our high quality timberlands and superior mill markets delivered.
And in the U.S. out our pricing continued to register premiums well about regional averages.
And yesterday, we declared a second quarter 13, and half cent per share dividend for stockholders of record on May 29, 2020 payable on June 15th.
We expect to cover a dividend from operating cash flows and cash on hand for the rest of the year.
Before we discuss the first quarter and our outlook for the remainder of the year I want to provide some overall observations about the impact of cobot Nineteena catchmark.
Manufacturers have been hard hit by the sharp drop in lumber prices in demand volatility impacting their operations says we're not a manufacturer we have not been subject to the shocks in the same way.
We're not a developer either so we have also not been impacted add directly by curtailment in that activity.
Our delivered what sales model and fiber supply agreements continue to support pulpwood harvest volume targets.
I see no drop off in demand for pulpwood and our superior U.S. out no markets and have adjusted or harvest plans to meet this demand stepping up thing activity, which was part of our seasonal plan in any case and this is good news for US is bulk was 50% to 60% of our harvest mix.
Sawtimber demand has begun to recover after a significant three weeks slowdown in early April no customers and Catchmark markets has started a bill new orders based on supply chain demand.
We expect a gradual rebound between now and ended the year based on what happens in the housing markets and with commercial construction.
We're completing timberland sales NAV closed on $1 million of timberland sales to date and the second quarter, we anticipate additional transactions during the quarter and our pipeline remains active for the remainder of the year. Other transactions are generally taking a bit longer to complete.
The triple the joint venture is operating to plan and provides a significant and reliable asset management fees.
Company liquidity is down thanks to the deleveraging we have undertaken over the past 18 months.
In addition, we've just completed an amendment to our credit agreement to loosen financial covenants and increased working capital liquidity by $25 million or 250%.
We also have no near term exposure to refinancing or maturity risk.
And as already noted we expect to cover a dividend with cash flow from operations and if needed with cash on hand for the remainder of the year.
Cobot 19 is having a profound effect on the economy for Catchmark, particularly with regard to sawtimber the impacts related deferring some revenue not losing revenue arteries are still growing into force and the raw materials, we provide caused us to be an essential business.
Our operating model based on owning and investing in the highest quality timberlands near superior middle markets and working with credit worthy Counterparties has positioned us to manage through this period.
Our recent capital redeployment and deleveraging is also paying off and providing us ample liquidity I.
I will discuss our outlook for the remainder of the year later, but now want to turn it over to Ersland tied to cover first quarter results operations in capital position in greater depth Ursula.
Thank you Brian its main highlighted pathmark had an excellent first quarter delivering significant year over year game with minimal impact from cobot 19.
We increased revenues grew $27 million and 19% gain over first quarter 29 can.
We decreased net loss to $4.2 million, primarily due to decreased losses allocated from the triple B joint venture.
We increased adjusted EBITDA to $12.9 million at 27% gain over first quarter 2019.
Timber sales revenue increased by 10% to $18.2 million net timber revenues increased by 18% to $10.9 million and harvest EBITDA increased by 19% for $8.6 million compared to first quarter 2019.
All these gains were driven by higher hybrid volumes led by the U.S. out where volumes increased by 18% year over year to nearly 570000 time driven by opportunistic epic sale.
Specific northwest harvest volume increased to 25000 time from 4800 times in first quarter 2019.
We generated $3 million in asset management fee revenues from Triple tea, and often doublet joint venture, including incentive based promote forgotten the blast exceeding return hurdle.
We sold 3000 acres of timberland for $4.8 million compared to 900 acres for $2.1 million in first quarter 29 team.
The lower year over year per acre sales price resulted from lower average merchantable inventory stocking levels 15 times breaker compared to Catchmarks portfolio average of 42 turns per acre and also from Catchmark retaining through timber reservation over 90000 times of merchantable inventory with a 49%.
Timber Nick.
Completed a 21.3 million dollar large disposition of 14400 acres, recognizing a gain of $1.3 million and paying down debt by $20.9 million with the proceeds.
And we paid a dividend of 13 and a half centsper share to stockholders of record on March 16 2020.
Asset management fee provide a reliable revenue stream for Catchmark again, largely from Triple Pete.
Of the $3 million in asset management fees realized during the quarter Dolphin, Tubeless, which has lot, which has largely one down gelatin incentive based promote for exceeding investment hurdles.
We also received $400000 in cash distributions from Dolphin Douglas.
Had a mitigation bank with a book basis of $2.6 million remaining in his portfolio as of the end of the first quarter.
Since inception in April 2017 through the end of the first quarter past my direct received $13.7 million in cash distributions from extended a half million dollar investment into joint venture.
The leveraging has been a primary management objective and we continue that process in the first quarter.
We paid down outstanding debt on our multi draw term facility by $20.9 million with net proceeds from the Georgia Timberland largest decision completed in January.
Also.
During the first quarter in prior to the onset of that and then we move to increase our working capital and lose an existing financial covenants by amending our credit facility.
We completed that amendment, just last week, increasing working capital liquidity by $25 million or by two and a half time.
The amendment to the credit facility has also reduce our acquisition line of credit from $200 million to $150 million, which lowers our unused commitment fees, while still providing ample investment liquidity for future growth opportunities.
As of today Catchmark has access to nearly $156 million of additional borrowing capacity under our credit facility.
Today, we have not drawn down on the revolver and do not anticipate doing so.
We also have no maturity or refinancing risk on our long dated that.
And over the past year, we took advantage of low interest rates to do to reduce our borrowing cost.
In addition, catchmark had a cash balance of $10.4 million as of March 31st 2020.
During the quarter, Catchmark repurchased 296000 shares or $1.9 million under the company's share repurchase program.
The program at $13.8 million available for future repurchases at quarter's end.
Taken all together be leveraging capital recycling fourth quarter 2019 execution of our interest rate risk management strategy. The recent credit facility Amendment and our projector operation. We believe catchmark is well positioned to manage cobot 19.
Liquidity is ample.
Now to provide greater insights into operation I want to hand, it over to Tom.
Thanks Ursula.
Looking at first quarter operations, although year over year pricing for timber sales was lower as expected catchmark benefited from achieving relative pricing premiums in our prime middle markets. As you may recall, there was a weather related spike in prices during first quarter 2019, as a result, our first quarter 2020 realize stumpage prices pulpwood and saw.
Timber lower 11% and 6% respectively than first quarter, 2018, trending with 15% and 8% decreases in regional average pulpwood and sawtimber stumpage prices.
Compared to timber Mart, south southwest averages catchmark realized a 50% premium and pulpwood pricing and a 21% premium and sawtimber pricing.
We opportunistically increase stumpage sales to capitalize on customer demand, while maintaining sales and our delivered would program and fiber supply agreements, which provide a reliable source of demand from credit worthy counterparties.
That increased our harvest volumes and boosted our overall quarterly results.
We began to see the impacts of the cobot 19 pandemic only at the very end of the quarter and the negative effects concentrated in soft timber markets, which experienced a significant slowdown.
Pulpwood demand has remained strong and this advantageous lead dovetailed with our plan to execute on seasonal spending priorities.
Since residual chip production from saw mills has been reduced one low supply our stepped up pulpwood harvest can help fill the void and meet increasing demand from Paul facilities.
In short sales under our supply agreements on the pulpwood side have not dropped off and we're in constant communication with our counterparties to meet their needs. In addition, our delivered would model also positions us favorably in the supply chain.
By mid April sawmills began to restart activity and we began to fill new orders that are closely aligned with now increasing supply chain demand.
The immense number of unemployment claims and stock market losses, and investment portfolios way down housing market demand at least where the short term it remains to be seen how to gauge of housing rebound and in particular, the velocity of a rebound in sawtimber demand, but indications are that commercial and residential building contractors will be give.
We returned to work in most states as social distancing restrictions or east. So we're cautiously optimistic about measured improvement based on renewed construction as well as repair and remodeling activity.
Of course is all depends on the virus and how further spread is controlled for now sawmills remain cautious and understandably are not ready to start rebuilding inventories we're continually modifying our volumes to keep in sync with mill quotas, which appear to be increasing on a day to day basis at least for now.
Again are always strong connectivities through our delivered would model helps us maintain or opportunistically increased volumes and such problematic and volatile market conditions with all this in view our return it back to Brian to discuss how we see the rest of the year playing out.
As Todd just referenced our business model bolsters, our confidence in meeting current challenges in our continuous monitoring of our mill markets in contact with customers and counterparties indicate trending improvements underway in sawtimber demand.
We also gained confidence from our liquidity position, but we must balance. These positives were the ongoing uncertainty about containment of the virus in unpredictability about its course hurdles almost certainly lie ahead and is demanding time.
So let me address guidance.
As a result of the pandemic driven economic downturns and assuming a moderate economic rebound over the remainder of the year, we have revised part of our guidance for full year 2020.
We now project, a GAAP net loss of between 10.2 and $12.2 million.
Adjusted EBITDA between 43, and $50 million harvest volumes between 2.2 in 2.4 million tons, a reduction of less than 10% due to lower sawtimber volumes.
And timberland sales of $13 million to $15 million.
Our original 2020 full year guidance has not changed for pulpwood volumes harvest volumes derived from the us South region, which remain approximately 95%.
Sawtimber mix, which remains at approximately 40% and the USL approximately 80% in the Pacific Northwest.
And asset management fee revenue, which remains between 11 and $12 million.
Despite the Pandemics toll on the overall economy, we expect to continue to meet our goal of delivering attractive dividend fully covered by cash flow from operations and cash on hand.
To sum up taking all we have considered into account and compared to many other industries and companies our team at Catchmark leaves, we're well positioned given the demanding environment. We're in essential business. We have a superior business model that we have developed an expanded since our IPO.
We had a very strong first quarter substantially increasing revenues and adjusted EBITDA year over year. Our deleveraging strategy is increased liquidity improved our capital structure, helping meet head on the challenges covert 19.
Our paper, all working remotely or in the field with little or no disruption to our operations social distancing is working for US and everyone has remained safe which is most important.
Our board market demand remained strong and we've been nimble to adjust harvest to meet that demand triple to you will continue to deliver steady asset management fees and is operating plan.
Timberland sales continue timberland valuations historically do not fluctuate that much and our assets continue to whole value in the for us.
Some sawtimber harvest, maybe deferred in the near term, but future harvests ever assets will produce solid revenues as markets improve.
Those revenues have not been lost and we expect to meet our key objective to stockholders are generating durable and predictable cash flows, we anticipate being able to deliver attractive dividend for the remainder of the year.
Before we move to questions all of us on the Catchmark team want to recognize a remarkable guidance. We have received from our chairman Willis spots, who is retiring from the board at our annual meeting in June.
We also want to acknowledge with deep appreciation distinguished service of Don Moss, who is also retiring from the board in June. Thank you so much wells and Don for all your contributions over the last 14 years.
We also look forward to continue to work closely with their new Chairman, Doug Rubinstein, who will succeed will us upon his retirement.
Joined the board as an independent director and we expected.
Thanks.
Seven years ago is any as provided valuable insights and direction since that time.
We also want to welcome our two new independent directors Dent Benson and Jim to Cosmo together, Tim and Jim brings broad leadership industry and financial experience to further strengthen our board and their contributions will be especially valuable given the times wherein with all this in mind. We hope you are all remain healthy and safe and now we take your questions.
We'll now begin the question answer session to ask question like Press Star then one on your Touchtone phone for use in the speakerphone. Please.
Please pick up your handset before pressing the keys to withdraw your question. Please press Star then too.
At this time, we'll pause momentarily to assemble a roster.
First question comes from Collin Mings of Raymond James. Please go ahead.
Thanks, Good morning.
Good morning gone.
To start Brian capital allocation priorities are clearly in the spotlight right now just given the uncertain operating environment in turmoil in the financial markets you touched on your commitment to the dividend in the press release as well as the prepared remarks, but maybe thinking about it a little bit differently, what would have to change for you to strongly reevaluate your payout.
For us, it's really a because while one there is weve couch. This rights Kobin 19 uncertainty surrounding magnitude and duration of the outbreak and social distancing measures, we don't over to be or you are w. recovery and so from our standpoint, we're going to be taking a read regarding our liquidity.
Around our business and about the impact that we are having on our cash flows you've really took a look at two parts of our business that has that volatility one solid tumor demand, which Todd has alluded to and I'm sure will discuss more in the queue in a and land sales. Both of these are timing differences and so you've heard the confidence associated from tied and the team or regarding.
Execution of that and our and our business model is pretty simple we grow treason business is good so what would cause us to take a look at our dividend would have to have a material impact we would have to see a material reduction and the performance over over operations, which were not anticipating seeing at this point in time and besides that we have a period of time.
Where we can quote be wrong from standpoint of our business because we have sufficient liquidity to smooth out those periods of time and I think ultimately thats. What you pay management teams do is to go through these volatile times and execute on a business strategy.
Got it and maybe just while we're talking about capital allocation Party just given clip again correct me if I'm wrong. It sounds like the focus is dividends over share buybacks here, but just given the uncertain outlook going forward and the reduction in guidance, how active do you plan to be repurchasing shares.
Environment.
Hi, Bob give you this rank of importance after dividends it goes liquidity.
At reductions share repurchases and then acquisitions in that order.
Understood.
Switching gears Todd just curious as you look across the U.S. south and reflect on the last few months, our variances in demand and pricing becoming more pronounced in the current environment. Just as you look at different wood basket.
Students sure.
Really as you think about where we sit.
With our ownership in the where it's been built are really in some of the strongest markets as we've talked about over the years.
Early in the country and definitely in the south and so being able to purpose build an ownership. If you will hit allows you to.
Weather the storm a little better if you will right now so from a pricing standpoint, real we really havent seen and and really aren't anticipating a whole lot of price drops or other than maybe some seasonal changes as you might expect around the pulpwood side.
From a from a sawtimber component as far as F. concerned you might see a moderate one or two dollar drop you know during this time period, and then tend to level out over the course of the year.
For US right now as we think about supply and what we have in place, it's really about whereas our volume coming from.
As we noted we've got a ramped up spending program if you will.
In that we already had first stands and everything else cute, but we've been doing some additional saying a thinning and doing all we can to keep production moving.
With that you have some added costs from thinning and little maybe increase haul distances those kind of thing. So we anticipate seeing a little bit of impact maybe on net margin for the quarter, but again these things beginning to level out or smoothed out over the course of the year.
Really we havent, we've been very fortunate from a demand perspective and in particular speaking of sawtimber here. We never saw any mills completely go down we saw some pullback production in order to reduce their finished product inventory. If you will in the very early onset of this since that time, we have seen orders recover.
Come back into place.
Not to the full level pre covered by any means but.
If you wanted to put a range around you know maybe looking at 60 70, 80% depending on where you are within these micro markets that we operate in so we have a lot of confidence moving forward and the strength of our business strength of our Counterparties and so we havent seen maybe as severe drop as some of the other regions across the U.S. So.
Understood and maybe just sticking with what you're seeing out of the U.S. South right. Now can you update us on log export efforts sounds like there could be some positive momentum reemerging on that front based on common terms appears.
Yes, absolutely. So again, we small percentage of what we do as we've talked about in its really focused on the coastal Georgia Savannah.
South Carolina area.
In up and down the coast, there, but we have seen.
Little bit of an uptick there were previously there were say three operators primarily running in that that segment. If you will that had gone down to one.
When all of the tariffs hit and as I've come off we've seen a couple of producers come back in.
A little bit of demand picking up from them, which has been great.
So again, we're we're participating as best we can there based on its a small percentage of what we do and where it sits in the ownership, but again, great to see the attention and good to see that returning.
Okay, I will turn it over and jump back in queue. Thank you.
Thanks gone.
Thank you next question comes from Dave Rodgers of Baird. Please go ahead.
Yeah good morning.
Brian maybe talk a little bit about the land sale guidance that you guys provided maybe would have expected to see a little bit of weakness, even though it may be the pricing doesn't have that much volatility like you said in your prepared comments, but just in terms of access to capital for buyers and kind of the consistency of that numbers and maybe address that a little further if you would.
Sure David from our standpoint, we're still seeing good business activity first quarter, obviously reporters and strong numbers and we indicated that we've closed on 1 million.
As of today, and we still have a pretty good pipeline for the second quarter in of itself. What we're really talking about is a delay in the activity or only about 40% to 50% of our dispositions are actually financed and so by virtue of that process.
You are seeing some slowdown the business people are still working deals together people are still interested in a real asset typically this is really wholesale to retail and so that retail activity has remained remain active and so our cautiousness around there are number by bringing down ever so slightly as really an issue associated with timing.
Not an issue on demand.
Okay. That's helpful. And then you the Triple C operations really continued as expected in the quarter.
But obviously the outstanding promote in the structure there any updated thoughts.
As you get into the year and do you anticipate any impacts from Govan 19, and just go the volumes there at all.
Well as it relates to our supply agreement under Triple T. with our counterparty, we have to supply agreements one with international paper that I want to Georgia Pacific the activity levels. There have been on top of the volumes, we have not any slowdown.
We sell our product at a very competitive rate relative to market prices and as a result, we've been a preferred supplier going into those mills, we anticipate and continue to anticipate operating at or above plan for the remainder of the year for triple team.
And then with regard to the structure and kind of promote opportunity there any updated thoughts.
Yes, what we've been very active dialogue with the Mark counterparty at Georgia Pacific when those slowdown in the negotiations attributed to the pandemic.
We feel very good about the progress we've made over the last six to eight weeks as it relates to the renegotiation at a WSA as Weve discussed before David.
The discussion associated WSA in closing on something like that moves us and acceleration associated with the.
With the joint venture itself.
And so by virtue of those actions, we feel comfortable where we are today actually excited to about where we are I would cautious ourselves our optimism associated with that because things change in and nothing has been signed and we have to reach a mutually agreeable terms condition associated with that and ultimately if necessary. We can run the asset to the jury.
Ration of the joint venture.
Okay, great. Thank you.
Thank you.
Thank you next question comes from Paul Quinn of RBC. Please go ahead.
Yes, thanks, good morning.
On a ball.
Just just overall question does the high level, we've had all the other to reach.
Wearables so core.
Got it would be in the bolus end of the spectrum. So what gives you that low with alternative.
So from our perspective, Paul it's really about our business model I think we're seeing a lot of the same things that some of our peers are seeing as it relates to salt timber volumes in of itself.
But that's just one part of our business again, we go back to we are in the tree growing business and we have to we have put our capital in the top markets in the US out those was the Pacific northwest and so our bullish view is based upon actual results I think you heard Todd talking about the activity that we've seen over.
Over the last couple of weeks regarding increasing no orders in the themselves. It goes back to where we put the where we put the capital and who are Counterparties are we're not in the manufacturing business. We're not in the developed lot development business and so by virtue of those things that's where our confidence comes from the comes from the people.
They also are required in order to execute our great business model.
Okay, Let me call qualification gene extensive multilane accrue, which is expected run rate in April.
Yes, Hi, Paul Good morning disappear, so I'll take that question.
From ideally standpoint, you're right for your first quarter Eduardo.
$3.9 million versus last year.
Three and a half with that is really related to the.
Post employment benefits associated with every timing of that prior CEO.
And so when you're looking at.
DNA for the year really what you should anticipate is at the gross Danny is going to go up by that number three and half but from a cash.
Standpoint, it's really going to be pretty flat year over year.
So it's all okay.
Great. Thanks, Paul.
Again, if we have a question. Please press star then one.
Our next question follow up from Golar means of Raymond James. Please go ahead.
Thank you.
I just wanted to go back to actually Paul's question. There may follow up a little bit more talk specific specifically for you just as you discussed the operating environment with customers. Just how concerned are you about the sustainability of that positive momentum you discussed over the last couple of weeks on solid demand. So recognize there was probably a period, where things really got really really weak.
For a period of time and things are starting to bounce back out. The how concerned are you that this is just maybe a short lived up bounce.
Sure so to your point in maybe a little anecdotally here for you as examples you know we've seen to your point no. When all this really started to hit if we were running at wide open and let's call. It 100 loads a week and then all of sudden we started seeing some of that drop down by call. It 60, 70% it flattened out.
No.
For a couple of weeks and then we've seen that begin to ease back up to where orders or are growing back in that call. It 70, 75, maybe 80% and so.
We are positioned where the capital has been spent on facilities. So you have very efficient mills that are operating now you're beginning to see the benefit of the capital they've placed and so from that.
Well, maybe alum and we'll call it as a across the US you may have had some announcements were facilities are customers were going down 70, 80%, 30% here there that's not applied equally across the landscape. If you will so where we are positioned those mills or maybe getting a little bit more the lions share of the overall production for poor customer in their told.
Will land or their total footprint of their mills, if you will and so from that we've been able to capitalize on the fact that we've got to deliver program, we tend to be closer to the front line as far as getting orders in place and again. It also goes back to you were not 100% focus just on the sawmills side, Yes, 50, 60% of what we're doing is on the pulp side.
Those customers are all well positioned and running very very well.
As you know, you've probably heard or seen where outages have been extended further out in the year, they're not taking them right now so their run rate as a little more consistent we're able to fill those orders on a more consistent basis.
And with less interruption, if you will so what we're seeing right now looking forward it feels as though.
Back to the sawmill customers they have a little more clarity if you will looking down the road orders Theyre going to fill previously it was maybe one or two days in advance of weak at best we're hearing from several now that its two three weeks out they are seeing orders so they're feeling a little better about it they've added some hours back at their facilities.
And while we feel really good about I, we recognize are still long road in front of US we still need to see what's going to happen Q3, and four and and all the other improvements that we need to come with that but as we sit right now we feel very good about counterparties, we have and what we're hearing from as far as their overall run rate going forward.
So call on that thanks, Todd so call it from that standpoint here the conviction associated with we're talking about these no orders and I understand your question regarding sustainability.
We're really asking is it of the you w. type of recovery, we can react to what we're reacting to which is what the activity is associated with the middle markets.
From a duration standpoint, we have to put the liquidity necessary in place we have sufficient cash on hand, we're active we continue to close on land sales will continue to move product in the pulpwood side and so all those elements provide us the backbones deals are nerves associated with our business model and then you combine that with the people would execute associated.
With that we feel very confident about where we are today and that comes it may come across as bullish but you know when you get to the line as Graham Agency in you call. The replay you feel pretty good about it based upon the results and you saw those results based upon our business model in the first quarter.
Appreciate the the extra color there I think just Q2 points on that I want to follow up on real quickly just on the on the pulpwood side and again going back to the seller prepared remarks. It seems like again demand there clearly remains pretty solid, but not maybe maybe not as much pricing power as some would expect given the less.
Or the pure residuals coming from some saw mills given the downtime. So maybe just talk a little bit about the pricing dynamic on the pulpwood side a little bit.
Sure column. So as you can imagine you know, we're we're not the older ones moving towards putting additional volume into pull facilities. So that'd be great. If we were the only one you can demand greater greater price out of all your Counterparties are the main thing is they're being stable and consistent moving forward.
They are seeing their orders being consistent so.
Where you maybe would see a little bit of a price improvement as some facilities that we operate with may have a.
Stud mill or something associated with it therefore, they can still.
Bring in additional residuals as needed from that side of their business, but it's where it's not coupled up that we're seeing some opportunity there.
But for the most part it's a it's a pretty stable unsteady view going forward from our customers that Additionally, though with their added added volume flow.
Other measures, they're taking to make sure about as being safe per the.
Cobot guidance that everybody is seeing with no contact and less interaction with with scale house people and one thing or another it delivers can be a little slower into mills, although they are still taking him and we still fully expect to meet our orders for the quarter.
There's not that additional boost if you will make thing is we're we're staying right on track and pricing is staying in line with that.
Alright, and then second part of kind of follow ups to the commentary was just recognizing the delivered model.
Just trying to get maybe hand on maybe some of the relative success or the relative to optimism that again, Paul Paul alluded to is some of that you think a byproduct of some of the optionality within your mills or maybe asked me a little bit differently.
Differently is there more outlets that you are kind of having to move between in the current environment as far as maybe some some customers. If one is taking downtime you're able to to move to another customer maybe just expand upon that dynamic is that does that maybe contributing to some of that relative optimism.
Sure enough you know the.
Excuse me as we.
We have talked about and multiple years and meetings and one thing or another is that having a delivered model that you have greater control over and greater connectivity with not only your fiber supply agreement partners, but any and all customers in each of these regions that we operate in you tend to be more of a first phone call. If you will answer.
You can read and react more quickly or even be proactive with customers.
Because of the nature of the markets were in there's one thing we don't really we haven't talked much about is that there is not only your your bigger players in these markets you have some.
Call, a mom and pop or mills that are regional orders have one or two operations there'll still running very well they didnt see the build up in their inventory of coming into all of this.
So they've been a little more consistent and we've been able to.
Continue to participate in those areas. Additionally, because of the delivered model.
We have other other customers that have seen volume go away because you know maybe it was it was flowing from only stumpage sales that they had with with other locations and so the delivery model has opened up it continues to open up doors for us and allows us to be.
Again, proactively customers and being able to move producers around to fill needs.
A very timely manner.
Appreciate the extra color there Todd.
Brian and recognizing you listed it.
The last thing on kind of the capital allocation priorities. There are really towards the bottom of that list was just acquisitions, but just maybe bigger picture recognizing what 60 days or so into the pandemic, but just on the transaction front, what if anything are you seeing in terms of.
Larger acquisition opportunities or.
Large disposition opportunities in the context the current environment.
Sure gone so first as context, right at seven or $8 a share it's hard to put acquisitions in front of the line. So that's an important considerations as it relates to acquisition activity.
We actually had developed a pretty decent pipeline in our kind of targeted range of that the smaller end of the spectrum associated with acquisitions.
Again, we were seeing wells stock properties, we essentially going through this process, we hit bit of the pause button, which Steve will still seeing some deals in the marketplace. We're still actively engaging some conversations, albeit that they've strung out.
There is capital in the marketplace I can tell you that.
We are we are seeing.
Participants, who have capital were inquiring about potential properties and larger dispositions theres nothing notable out in the marketplace. Today I think everybody is trying to figure out how thick dices before they venture out further out on the lake in regards to.
Disposition or acquisition activity of any notable size.
Appreciate the time this morning, they say.
Thank you so much appreciate it take care. Thank you.
And we'll be able question. Please press Star then one.
This concludes our question answer session on the Holic that they're good conference over to Mr., Brian Davis CEO for any closing remarks.
Great. Thank you for your time and we hope you in your loved ones remain healthy and safe and we look forward to talking to you next time.
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