Q1 2024 PotlatchDeltic Corp Earnings Call

Operator: Good morning, my name is Dee, and I will be your conference operator today. At this time, I would like to welcome everyone to the PotlatchDeltic First Quarter 2024 conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is D and it'll be a conference operator today at this time I would like to welcome everyone to the Potlatch <unk> first quarter 'twenty as many park conference call. All lines have been placed on mute to prevent any background nice after the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. Wayne Wasechek, Vice President and Chief Financial Officer, for opening remarks. Sir, you may proceed.

Wayne Wasechek: I'm simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press. The pound key. Thank you I would now like to turn the call over to Mr. Wayne ways check Vice President and Chief Financial Officer for opening remarks, Sir you May proceed.

Wayne Wasechek: Good morning, and welcome to PotlatchDeltic's first quarter 2024 earnings conference call. Joining me on the call is Eric Cremers. PotlatchDeltic's President and Chief Executive 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 regarding the risks associated with these four statements. Also, please note that a reconciliation of non-GAAP measures can be found in the appendix to the presentation slides.

Wayne Wasechek: Good morning, and welcome to Potlatch <unk> first quarter 2024 earnings conference call.

Wayne Wasechek: Joining me on the call is Eric Cremers, Potlatch, <unk>, President and Chief Executive Officer.

Wayne Wasechek: This call will contain forward looking statements.

Wayne Wasechek: Please review the warning statements in our press release.

Wayne Wasechek: On the presentation slides and in our filings with the SEC regarding the risks associated with these forward statements.

Wayne Wasechek: Please note that a reconciliation of non-GAAP measures can be found in the appendix to the presentation slides and on our website at www Dot Potlatch Delta Dot com.

Wayne Wasechek: and on our website at www....

Wayne Wasechek: I'll turn the call over to Eric for some comments, and then I will review our first quarter results and our outlook. Well, thank you, Wayne, and good morning, everyone. Looking at our first quarter results, we reported total adjusted EBITDA of $30 million after the market closed yesterday. I'm pleased with the solid operational performance delivered by our team, despite market and weather-related challenges during the quarter. Our Timberlands segment generated adjusted EBITDA of $35 million in the first quarter. We harvested 1.9 million tons, achieving the upper range of our Q1 harvest plan. Our wood product segment's adjusted EBITDA was break-even in the first quarter compared to a loss of $6 million in the fourth quarter.

Wayne Wasechek: I will turn the call over to Eric for some comments and then I will review, our first quarter results and our outlook.

Eric: Well, thank you Wayne and good morning, everyone.

Wayne Wasechek: Looking at our first quarter results, we reported total adjusted EBITDA of $30 million after the market closed yesterday.

Eric: I am pleased with the solid operational performance delivered by our team despite market and weather related challenges during the quarter.

Wayne Wasechek: Our timberlands segment generated adjusted EBITDA of $35 million in the first quarter, we harvested $1 9 million tonnes, achieving the upper range of our Q1 harvest plan.

Wayne Wasechek: Our wood products segment, adjusted EBITDA was breakeven in the first quarter compared to a loss of $6 million in the fourth quarter.

Eric J. Cremers: The year kicked off to a challenging start for lumber markets as severe weather across the country restricted construction activity in January. Despite this difficult start to the typical inventory building season, lumber prices modestly trended upward throughout the first quarter, driving the improvement in our wood products results. As for our Elevated 2024 Capital Plan, we are approaching the final phases of our $131 million Waldo, Arkansas sawmill modernization and expansion project. Vertical construction and equipment installation are well underway, with project completion continuing to remain on track and within budget for startup early in the third quarter.

Wayne Wasechek: The year kicked off to a challenging start for lumber markets as severe weather across the country restricted construction activity in January.

Eric J. Cremers: Despite this difficult start to the typical inventory building season lumber prices modestly trended upward throughout the first quarter driving the improvement in our wood products results.

Eric J. Cremers: As for our elevated 2024 capital plan, we are approaching the final phases of our $131 million Waldo, Arkansas sawmill modernization and expansion project.

Eric J. Cremers: Vertical construction and equipment installation is well underway with project completion, continuing to remain on track and within budget for startup early in the third quarter.

Eric J. Cremers: Following completion of the project, we anticipate a ramp-up in production through Q4 and into next year. Based on other brownfield additions in the industry we have seen, we expect it will take 6 to 12 months to reach the mill's new capacity of 275 million board feet per year. As a reminder, the project will increase the mill's annual capacity by $85 million. It will improve recovery by 6% and reduce cash processing costs by about 30%.

Eric J. Cremers: Following completion of the project, we anticipate a ramp up in production through Q4 and into next year.

Eric J. Cremers: Based on another brownfield additions in the industry. We have seen we expect it will take six to 12 months to reach the mill's new capacity of 275 million board feet per year.

Eric J. Cremers: As a reminder of the project will increase the mill's annual capacity by 85 million board feet, It will improve recovery by 6% and reduce cash processing costs by about 30%.

Eric J. Cremers: Once the ramp-up phase is completed, we expect the mill to generate approximately $25 million of incremental EBITDA annually. Our real estate segment generated $6 million of adjusted EBITDA in the first quarter. On the development side of the business, we sold 24 residential lots at an average price of about $120,000 per lot in our Chenal Valley Master Plan community in Little Rock, Arkansas. On the rural side of our real estate business, we completed this sale of 1,800 acres at nearly $3,100 an acre.

Eric J. Cremers: Once the ramp up phase is completed we expect the mill to generate approximately $25 million of incremental EBITDA annually.

Eric J. Cremers: Our real estate segment generated $6 million of adjusted EBITDA in the first quarter on the development side of the business. We sold 24 residential lots at an average price of about $120000 per lot in Arsenal Valley Master planned community in little Rock, Arkansas.

Eric J. Cremers: On the rural side of our real estate business, we completed the sale of 800 acres at nearly $3100 an acre.

Eric J. Cremers: It is important to note that the volume of transactions in real estate can fluctuate significantly from quarter to quarter. Although we experienced a subdued level of rural real estate transactions in this period, we expect the sales pace to accelerate as we move through the second quarter. The interest in our rural land remains quite high. The highlight of our anticipated rural real estate activity in the upcoming second quarter includes the previously announced deal to sell 34,000 acres of southern plantation timberlands, which have an average age of just under four years, for a total of $58 million, or $1,700 per acre. Now, let me transition to our emerging natural climate solutions business. Our collaboration with solar developers continues to grow, as evidenced by the optioning of an additional solar deal in the first quarter.

Eric J. Cremers: It is important to note that the volume of transactions and rural real estate can fluctuate significantly from quarter to quarter.

Eric J. Cremers: Although we experienced a subdued level of rural real estate transactions in this period, we expect this sales pace to accelerate as we move through the second quarter.

Eric J. Cremers: The interest in our rural land remains quite high.

Eric J. Cremers: Highlight of our anticipated rural real estate activity in the upcoming second quarter includes the previously announced deal to sell 34000 acres of southern plantation Timberlands, which haven't have an average age of just under four years for a total of $58 million or seven $700 per acre.

Eric J. Cremers: Now, let me transition to our emerging natural climate solutions business.

Eric J. Cremers: Our collaboration with solar developers continues to grow as evidenced by the optioning of an additional solar deal in the first quarter.

Eric J. Cremers: Currently, our option contracts for solar land sales and leases are valued at nearly $200 million on a net present value basis, representing roughly 1% of our total timberland ownership. Additionally, we are in the process of finalizing negotiations on several more lease options. At the end of 2024, we expect to have approximately 30,000 acres of solar land sale and lease options under contract, valued at over $300 million on a net present value basis.

Eric J. Cremers: Currently our option contracts for solar land sales and leases are valued at nearly $200 million on a net present value basis, representing roughly 1% of our total timberland ownership.

Eric J. Cremers: Additionally, we are in the process of finalizing negotiations on several more lease options.

Eric J. Cremers: At the end of 2024, we expect to have approximately 30000 acres of solar land sale and lease options under contract valued at over $300 million on a net present value basis.

Eric J. Cremers: Our Southern Timberland Carbon Credit Initiative continues to move forward. We're anticipating generating in excess of 500,000 carbon credits in the first year, with an estimated 100,000 credits each year for at least a decade thereafter. The extensive scope and high-quality nature of these credits necessitate a thorough verification process, which is lengthy and complex.

Eric J. Cremers: Our southern Timberland carbon credit initiatives continues to move forward, we anticipating generating in excess of 500000 carbon credits in the first year with an estimated 100000 credits each year for at least a decade thereafter.

Eric J. Cremers: The extensive scope and high quality nature of these credits necessitates a thorough verification process, which is lengthy and complex. We have initiated preliminary marketing activities and are targeting placement and sale of credits in the market towards the end of the year.

Eric J. Cremers: We have initiated preliminary marketing activities and are targeting placement and sale of credits in the market towards the end of the year. However, the completion of this project timeline is heavily dependent on various third parties involved in the accreditation process. We have also identified potentially valuable prospects in carbon capture and storage, as well as bioenergy. These opportunities, along with other natural climate solutions, are currently under discussion with various other parties. Although they are not imminent, we are optimistic as to their potential value.

Eric J. Cremers: Nonetheless, the completion of this project timeline is heavily dependent on various third parties involved in the accreditation process.

Eric J. Cremers: We have also identified potentially valuable prospects in carbon capture and storage as well as bioenergy. These opportunities along with other natural climate solutions are currently under discussion with various other parties. Although they are not imminent, we are optimistic as to their potential value. Furthermore, we continue to build.

Eric J. Cremers: Furthermore, we continue to believe that all of these natural climate solutions opportunities will boost the demand for rural land, likely driving timberland values higher. Moving to capital allocation, we continue to be committed to our disciplined and opportunistic approach, and we constantly evaluate all our capital allocation opportunities to grow shareholder value over time. Timberland M&A was our main priority during the quarter. As we previously announced, in Q1, we acquired 16,000 acres of high-quality mature timberland in Arkansas through a privately negotiated one-on-one transaction for $31 million, or about $1,900 per acre.

Eric J. Cremers: That all of these natural climate solutions opportunities will boost the demand for our rural land likely driving timberland values higher.

Eric J. Cremers: Moving to capital allocation, we continue to be committed to our disciplined and opportunistic approach and we constantly evaluate all our capital allocation opportunities to grow shareholder value over time.

Eric J. Cremers: Timberland M&A was our main priority during the quarter as.

Eric J. Cremers: As we previously announced in Q1, we acquired 16000 acres of high quality mature timberlands in Arkansas through a privately negotiated one on one transaction for $31 million or about $900 per acre also the acquired timberland has strong rural real estate potential including solar opportunities.

Eric J. Cremers: Also, the acquired timberland has strong rural real estate potential, including solar opportunities. We employ stringent criteria when evaluating timberland M&A, and for this particular transaction, we expect to achieve an approximate 8% real IRR, which is well above our cost of capital. We did not purchase any shares in the first quarter.

Eric J. Cremers: <unk>.

Eric J. Cremers: We employ stringent criteria when evaluating timberland M&A and for this particular transaction, we expect to achieve an approximate 8% real IRR, which is well above our cost of capital.

Eric J. Cremers: We did not purchase any shares in the first quarter. However.

Eric J. Cremers: However, share repurchases remain an important component of our capital allocation strategy, especially when we are trading well below our estimated NAV. We consistently assess and prioritize our capital allocation options, taking into consideration the economic backdrop. We have $125 million remaining on our $200 million share repurchase authorization. Turning our attention to the U.S. housing market, existing home inventories for sale continue to persistently hover at historically low levels. The scarcity in this segment of the market poses challenges in meeting housing demands.

Eric J. Cremers: However share repurchases remain an important component of our capital allocation strategy, especially when we are trading well below our estimated NAV.

Eric J. Cremers: We consistently assess and prioritize our capital allocation options taking into consideration the economic backdrop.

Eric J. Cremers: We have $125 million remaining on our $200 million share repurchase authorization.

Eric J. Cremers: Turning our attention to the U S housing market existing home inventories for sale continue to persistently Hoover at historically low levels.

Eric J. Cremers: The scarcity in this segment of the market poses challenges of meeting housing demand.

Eric J. Cremers: However, new housing has emerged with an affordability advantage over existing housing. Large home builders are enticing buyers with rate-buy-down incentives, making new home construction more financially attractive, especially given today's mortgage-rate environment. Consequently, new single-family residential construction demonstrated resilience by maintaining over 1 million starts for the fifth consecutive month, providing some level of stability to the market. In addition, homebuilder confidence has been steady and in positive territory in spite of the recent uptick in mortgage rates.

Eric J. Cremers: However, new housing has emerged within affordability advantage over existing housing.

Eric J. Cremers: Homebuilders are enticing buyers with rate buy down incentives, making new home construction more financially attractive, especially given today's mortgage rate environment.

Eric J. Cremers: Consequently, new single family residential construction demonstrated resilience by maintaining over 1 million starts for the fifth consecutive month, providing some level of stability to the market in.

Eric J. Cremers: In addition, homebuilder confidence has been steady and in positive territory in spite of the recent uptick in mortgage rates.

Eric J. Cremers: Nonetheless, new residential construction continues to underperform as challenges in the economy persist, driven by the uncertainty of inflation and the direction of interest rates. In particular, the multifamily segment of new residential housing has been under pressure, in large part due to excessive financing costs. The timing and pace of potential rate cuts by the Federal Reserve add to the level of uncertainty.

Eric J. Cremers: Nonetheless, new residential construction continues to underperform as challenges in the economy persists driven by the uncertainty of inflation in the direction of interest rates in particular, the multifamily segment of new residential housing has been under pressure.

Eric J. Cremers: In large part due to excessive financing costs, the timing and pace of potential rate cuts by the federal reserve add to the level of uncertainty.

Eric J. Cremers: However, we anticipate that once rates begin to decline, possibly later this year, it will likely spur pent-up housing demand, ultimately benefiting lumber markets. Longer term, we retain a positive outlook on housing fundamentals; an underlying shortage of housing stock, which some pundits estimate at 4 million units, and favorable demographic trends will provide tailwinds to the housing market. We continue to expect that U.S. housing starts will return to levels above the long-term average of 1.5 million units per year once mortgage rates decline and homes become more affordable.

Eric J. Cremers: However, we anticipate that once rate cuts begin to decline once rates begin to decline, possibly later this year it will likely spur pent up housing demand ultimately benefiting lumber markets.

Eric J. Cremers: Longer term, we retain a positive outlook on housing fundamentals and underlying shortage of housing stock stock, which some pundits estimated 4 million units and favorable demographic trends will provide tailwind to the housing market.

Eric J. Cremers: We continue to expect that U S housing starts will return to levels above the long term average of one 5 million units per year once mortgage rates decline in homes become more affordable.

Eric J. Cremers: Turning to the repair and remodel segment, demand for this market appears to have moderated somewhat with some weakness in the DIY segment. That said, our home center business remains solid. The overall resilience of the repair and remodel market is underpinned by several factors, including strong consumer balance sheets, record home equity levels across the U.S., steady labor markets, and existing homeowners staying in their homes due to the prevailing higher interest rate environment.

Eric J. Cremers: Turning to the repair and remodel segment demand in this market appears to have moderated somewhat with some weakness in the DIY segment.

Eric J. Cremers: That said our home center business remains solid the overall resilience in the repair and remodel market is underpinned by several factors, including strong consumer balance sheets record home equity levels across the U S steady labor markets and existing homeowners staying in their homes due to the prevailing higher interest rate environment.

Eric J. Cremers: Looking ahead, long-term trends indicate that the fundamentals of the repair and model market will be favorable. This optimism is bolstered by an aging housing stock leading to increased repair activity as well as elevated home equity levels and the ongoing prevalence of remote work.

Eric J. Cremers: Looking ahead long term trends indicate that the fundamentals of the repair and remodel market will be favorable. This optimism is bolstered by an aging housing stock leading to increased repair activity as well as elevated home equity levels and the ongoing prevalence towards remote work.

Eric J. Cremers: In closing, we remain committed to enhancing operational and financial performance across all of our business segments. As part of this commitment, we are diligently focused on completing our strategic modernization and expansion project at the Waldo Sawmill on schedule and within budget. Also, returning capital to our shareholders remains a core tenet of this strategy.

Eric J. Cremers: In closing, we remain committed to enhancing operational and financial performance across all of our business segments. As part of this commitment. We are diligently focused on completing our strategic modernization and expansion project at the Waldo sawmill on schedule and within budget.

Eric J. Cremers: Also returning capital to our shareholders remains a core tenet of this strategy with.

Eric J. Cremers: With our investment grade balance sheet and ample liquidity, we possess the flexibility and the solid foundation to continue creating long-term shareholder value. I will now turn it over to Wayne to discuss our first quarter results and our outlook. Thank you, Eric.

Eric J. Cremers: With our investment grade balance sheet and ample liquidity, we possess the flexibility and a solid foundation to continue creating long term shareholder value.

Eric J. Cremers: I will now turn it over to Wayne to discuss our first quarter results and our outlook.

Eric J. Cremers: Yes.

Wayne Wasechek: Thank you Eric.

Wayne Wasechek: Starting with page 4 of the slides, adjusted EBITDA was $30 million in the first quarter compared to $41 million in the fourth quarter. The sequential quarter-over-quarter decline in EBITDA resulted from fewer rural real estate sales, partially offset by improved wood product segment results stemming from higher average lumber... I will now review each of our operating segments and provide more color on our first quarter results.

Wayne Wasechek: Starting with page four of the slides adjusted EBITDA was $30 million in the first quarter compared to $41 million in the fourth quarter.

Wayne Wasechek: The sequential quarter over quarter decline in EBITDA resulted from fewer rural real estate sales, partially offset by improved wood products segment results stemming from higher average lumber prices.

Wayne Wasechek: I will now review each of our operating segments and provide more color on our first quarter results.

Wayne Wasechek: Information for our Timberland segment is displayed on slides 5 through 7. The segment suggested EBITDA increase from $33 million in the fourth quarter to $35 million in the first quarter, even having benefited from improved per-unit log and haul costs and seasonally lower forest management costs, which more than offset a decline in Idaho saw log prices. Our SAR log harvest volume in Idaho was 327,000 tons in the first quarter, which is consistent with our fourth quarter harvest volume. Harvest volumes in the first quarter were adversely impacted by mild winter weather, limiting available holidays.

Wayne Wasechek: Information for our Timberland segment is displayed on slides five through seven.

Wayne Wasechek: The segment's adjusted EBITDA increased from $33 million in the fourth quarter to $35 million in the first quarter.

Wayne Wasechek: EBITDA benefited from improved per unit log and haul costs and seasonally lower forest management costs, which more than offset a decline in Idaho saw log prices.

Wayne Wasechek: Our saw log harvest volume in Idaho was 327000 tons in the first quarter, which is consistent with our fourth quarter harvest volume.

Wayne Wasechek: Harvest volumes in the first quarter were adversely impacted by mild winter weather limiting available holidays.

Wayne Wasechek: Our Idaho saw log prices were 5% lower on a per ton basis in the first quarter compared to the fourth quarter. The price decline is primarily a result of the effect of seasonally heavier logs. Turning to the south, we harvested 1.6 million tons in the first quarter. This level of activity slightly exceeded our Q1 plant harvest volume as we benefited from favorable logging conditions. Additionally, demand for saw logs and pulpwood in the south generally remains stable throughout the quarters.

Wayne Wasechek: Our Idaho saw log prices were 5% lower on a per ton basis in the first quarter compared to the fourth quarter.

Wayne Wasechek: The price decline is primarily a result of the effect of seasonally heavier logs.

Wayne Wasechek: Turning to the South <unk>.

Wayne Wasechek: We harvested $1 6 million tons in the first quarter.

Wayne Wasechek: This level of activity slightly exceeded our Q1 planned harvest volume as we benefited from favorable logging conditions.

Wayne Wasechek: Denali demand for saw logs and pulpwood in the south generally remained stable throughout the quarter.

Wayne Wasechek: Our southern sawlog prices were 3% lower in the first quarter compared to the fourth quarter. The decline was primarily driven by a seasonally lower mix of hardwood saw logs and a higher mix of smaller diameter softwood saw logs. Moving to wood products on slides eight and nine.

Wayne Wasechek: Our southern saw log prices were 3% lower in the first quarter compared to the fourth quarter.

Wayne Wasechek: The decline was primarily driven by a seasonally lower mix of hardwood saw logs and higher mix of smaller diameter softwood saw logs.

Wayne Wasechek: Moving to wood products on slides eight and nine <unk>.

Wayne Wasechek: Adjusted EBITDA increased from a loss of $6 million in the fourth quarter to break even in the first quarter. Higher average lumber prices and lower per-unit cash processing costs drove the improvement. Our average lumber price realizations increased $15 per thousand board feet, or approximately 4% in the quarter. This price increase is comparable to the Random Lengths Framing Lumber Composite on a percentage basis. Our lumber prices increased each month during the quarter.

Wayne Wasechek: Adjusted EBITDA increased from a loss of $6 million in the fourth quarter to breakeven in the first quarter.

Wayne Wasechek: Higher average lumber prices and lower per unit cash processing cost drove the improvement.

Wayne Wasechek: Our average lumber price realizations increased $15 per thousand board feet or approximately 4% in the quarter.

Wayne Wasechek: This price increase is comparable to the random lengths framer framing lumber composite on a percentage basis.

Wayne Wasechek: Our lumber prices increased each month during the quarter, specifically, our average lumber price realizations per thousand board feet were $405 in January $427 in February and $443 in March.

Wayne Wasechek: Specifically, our average lumber price realizations per 1,000 board feet were $405 in January, $427 in February, and $443 in March. Lumber shipments in Q1 totaled 271 million board feet compared to 285 million board feet in Q4 of last year. The sequentially lower shipment volume in Q1 was influenced by seasonal factors, but nonetheless marks the company's second-highest Q1 shipment volume on record.

Wayne Wasechek: Lumber shipments in Q1 totaled 271 million board feet compared to 285 million board feet in Q4 of last year.

Wayne Wasechek: The sequentially lower shipment volume in Q1 was influenced by seasonal factors, but nonetheless marks the company's second highest Q1 shipment volume on record.

Wayne Wasechek: Shifting to real estate on slides 10 and 11, the segments' adjusted EBITDA was $6 million in the first quarter, compared to $22 million in the fourth quarter, even if generated by a rural real estate business, decreased due to the sale of fewer acres. EBITDA generated by our Shenala Valley Master Plan community declined primarily due to the lack of commercial land sales this quarter.

Wayne Wasechek: Shifting to real estate on slides 10, and 11, the segment's adjusted EBITDA was $6 million in the first quarter compared to $22 million in the fourth quarter.

Wayne Wasechek: EBITDA generated by our rural real estate business decreased due to the sale of fewer acres.

Wayne Wasechek: EBIT generated by our <unk> Valley Master planned community declined primarily due to the lack of commercial land sales this quarter.

Wayne Wasechek: Commercial sales tend to be lumpy, but our pipeline of potential future land sale opportunities continues to remain attractive. We closed on the sale of 24 residential lots in the first quarter at a 12% higher average price than in the fourth quarter due to a different mix of lot prices. Turning to capital structure, which is summarized on slide 12, our total liquidity was $479 million.

Wayne Wasechek: <unk> sales tend to be lumpy, but our pipeline of potential future land sale opportunities continues to remain attractive.

Wayne Wasechek: We closed on the sale of 24 residential lots in the first quarter at a 12% higher average price than in the fourth quarter due to a different mix of lot price points.

Wayne Wasechek: Turning to capital structure, which is summarized on slide 12, our total liquidity was $479 million.

Wayne Wasechek: This amount includes $180 million of cash on our balance sheet as well as availability on our Undrawn Revolver. This level of liquidity is after utilizing cash on hand to acquire 16,000 acres of bolt-on timberlands in Arkansas for $31 million, as Eric previously discussed. We have $176 million of debt that is scheduled to mature in October and November of this year. Our decision to pay off a portion or refinance all this debt will occur later this year. We still have $200 million of notional forward swaps valued at $36 million on our balance sheet, which we can deploy to issue debt at below market rates. Capital expenditures were $14 million in the first quarter.

Wayne Wasechek: This amount includes $180 million of cash on our balance sheet as well as availability on our undrawn revolver.

Wayne Wasechek: This level of liquidity is after utilizing cash on hand to acquire 16000 acres of bolt on timberlands in Arkansas for $31 million as Eric previously discussed.

Wayne Wasechek: We have $176 million of debt that is scheduled to mature in October and November of this year, our decision to pay off a portion of refinanced all of this that will occur later this year.

Wayne Wasechek: We still have $200 million of notional forward swaps valued at $36 million on our balance sheet, which we can deploy to issue debt at below market rates.

Wayne Wasechek: Capital expenditures were $14 million in the first quarter that amount includes real estate development expenditures, which are included in cash from operations and our cash flow statement.

Wayne Wasechek: That amount includes real estate development expenditures, which are included in cash from operations and our cash. For the full year, we continue to expect CapEx spend of $100 to $110 million, excluding potential Timberland acquisitions. That estimate includes approximately $44 million for the final installments on the Waldo, Arkansas Sawmill Modernization Expansion Project. I will now provide some high-level Outlook comments.

Wayne Wasechek: For the full year, we continue to expect capex spend of $100 million to $110 million, excluding potential timberland acquisitions.

Wayne Wasechek: That estimate includes approximately $44 million for the final installments on the Waldo, Arkansas sawmill modernization and expansion project.

Wayne Wasechek: I will now provide some high level outlook comments. The details are presented on slide 13.

Wayne Wasechek: The details are presented on slide 13. Harvest volumes in the north are planned to be seasonally lower in the second quarter compared to the first quarter due to spring break-up. We expect northern saw log prices to increase approximately 6% in the second quarter due to the resetting of the price of index volume to reflect improved Q1 lumber prices and seasonally lighter logs. In the South, we plan to harvest approximately 1.4 million tons in the second quarter.

Wayne Wasechek: Harvest volumes in the north are planned to be seasonally lower in the second quarter compared to the first quarter due to spring breakup.

Wayne Wasechek: We expect northern <unk> prices to increase approximately 6% in the second quarter due to resetting the price index volume to reflect improved Q1 lumber prices and seasonally lighter logs.

Wayne Wasechek: In the South we plan to harvest approximately one 4 million tons in the second quarter, we expect our southern saw log prices to decrease modestly primarily due to seasonally smaller saw logs in the mix.

Wayne Wasechek: We expect our southern saw log prices to decrease modestly, primarily due to seasonally smaller saw logs in the mix. We plan to ship 275 million to 285 million board feet of lumber in the second quarter. Our average lumber price thus far in the second quarter is flat compared to our first quarter average lumber price. This is based on approximately 115 million board feet of lumber. As a reminder, a $10 per thousand board foot change in lumber price equals approximately $12 million of consolidated EBITDA for us on an annual basis.

Wayne Wasechek: We plan to ship 275 to 285 million board feet of lumber in the second quarter.

Wayne Wasechek: Our average lumber prices, thus far in the second quarter is flat compared to our first quarter average lumber price.

Wayne Wasechek: This is based on approximately 115 million board feet of lumber as.

Wayne Wasechek: As a reminder, a $10 per thousand board foot change in lumber price equals approximately $12 million of consolidated EBITDA for us on an annual basis.

Operator: Moving to real estate, we expect to sell approximately 43,000 acres of rural land, which includes the sale of 34,000 southern acres for $58 million, as Eric previously mentioned. Additionally, we expect to sell approximately 24 Chennau Valley residential lots in the second quarter. Additional real estate details are provided on the slide. Overall, we expect our total adjusted EBITDA will be higher in the second quarter, primarily attributable to more rural land sales, driven by the Southern Land sale to FIA. That concludes our prepared remarks. I would now like to open the call to Q&A.

Wayne Wasechek: Shifting to real estate we.

Wayne Wasechek: We expect to sell approximately 43000 acres of rural land, which includes the sale of 34000 southern acres for $58 million as as Eric previously mentioned.

Operator: Additionally, we expect to sell approximately 24 Chanel valley residential lots in the second quarter additional real estate details are provided on the slide.

Operator: Overall, we expect our total adjusted EBITDA will be higher in the second quarter, primarily attributable to more rural land sales driven by the southern land sale to FIA.

Operator: That concludes our prepared remarks.

Speaker Change: I would now like to open the call to Q&A.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question or are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of Anthony Pettinari from Citi.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad duration hand in China Q. If you would like to withdraw your question simply press Star. One again, if you are called upon to ask your question or listening via loud speaker in your device. Please speak.

Operator: Seth ensure that youre fully step in year, two and asking your questions.

Operator: Press Star one to join the queue and your first question comes from the line of Anthony Pettinari from Citi. Please ask your question.

Anthony James Pettinari: Hey, you know, obviously, lumber prices are pretty dynamic, and it's early in the year. But I'm just wondering, as you think about the kind of cash flow that you could generate this year and with the spending on Waldo, could you just talk a little bit more about kind of capital allocation and, you know, supporting the dividend, potential opportunities to de-lever, you know, at a time when the stock does seem like it's trading at, you know, maybe a near record discount to NAV? Just wondering if you could talk a little bit more about that, given, you know, it seems like there's a few options here.

Anthony James Pettinari: Hi, good morning.

Operator: Alright.

Speaker Change: Hey al.

Anthony James Pettinari: Obviously lumber prices are pretty dynamic and it's early in the year, but I'm. Just wondering as you think about the kind of cash flow that you could generate this year and with just spending on Waldo can you just talk a little bit more around kind of capital allocation and supporting the dividend potential opportunities to delever.

Anthony James Pettinari: Sure.

Anthony James Pettinari: At a time when the stock does seem like it's trading at.

Anthony James Pettinari: Maybe near record discount to NAV, just wondering if you talk a little bit more about that.

Anthony James Pettinari: Given that it seems like there are few options here.

Eric J. Cremers: Yeah, thanks for the question, Anthony. So, you know, regarding capital allocation, you know, I think first and foremost, we're going to protect our balance sheet. You know, we're going to maintain investment grade status. But, you know, moving beyond that, you know, as a REIT, we view our dividend as sacrosanct or nearly sacrosanct. So that's always going to be the highest priority for us.

Eric J. Cremers: Yes. Thanks for the question Anthony So regarding capital allocation I think first and foremost we're going to we're going to protect our balance sheet.

Eric J. Cremers: We're going to maintain investment grade grades status, but moving moving beyond that.

Eric J. Cremers: As a REIT, we view our dividend is sacrosanct or nearly sacrosanct.

Eric J. Cremers: So that's always going to be the highest priority for us.

Eric J. Cremers: I will say that, you know, as our stock drifts lower in a tough lumber market environment, share repurchases look more attractive to us than otherwise. But I would also say that we're constantly thinking about M&A, and in the first quarter, we completed what we call Project Ridgewood, our $31 million acquisition in Arkansas. And I think that kind of pushed share repurchases to the back burner a little bit. We also like investing in our mills quite a bit.

Eric J. Cremers: I will say that as our stock drifts lower in a tough lumber market environment.

Eric J. Cremers: Share repurchases.

Eric J. Cremers: Look more attractive to us than otherwise.

Eric J. Cremers: But I would also say that we're constantly thinking about M&A and in the first quarter.

Eric J. Cremers: We completed what we call project, Ridgewood or $31 million acquisition in Arkansas.

Eric J. Cremers: And I think that kind of pushed share repurchases to the back burner a little bit.

Eric J. Cremers: We also like investing in our mills quite a bit we like wood products Capex obviously.

Eric J. Cremers: We like wood products and CapEx. Obviously, it might not feel good doing it right now when we're in such a tough lumber price environment, but lumber prices are historically very volatile, and this too shall pass. The industry cannot continue to run at break-even, or, for a lot of mills, below break-even levels.

Eric J. Cremers: Mike.

Eric J. Cremers: Might not feel good doing it right now and work in such a tough lumber price environment, but.

Eric J. Cremers: Lumber prices are historically very volatile and.

Eric J. Cremers: This too shall pass the industry cannot continue to run at breakeven or for a lot of mills below below breakeven levels. So.

Anthony James Pettinari: So continuing to keep our fleet of mills as first or second quartile mills is always going to be our objective, assuming we can find projects to generate the needed returns. So I think that CapEx is always given strong consideration amongst our capital allocation levers. Regarding debt pay-down, you know, I think it all comes down to what our refinance costs are gonna be and how those refinance costs compare to other options that we have.

Eric J. Cremers: Continuing to keep our fleet of mills as first or second quartile mills is always going to be our objective, assuming we can find projects projects to generate.

Anthony James Pettinari: The needed returns so.

Anthony James Pettinari: I think Thats Capex is.

Anthony James Pettinari: As always given strong consideration amongst our capital allocation levers regarding debt pay down.

Anthony James Pettinari: I think it all comes down to what our refinance costs are going to be and how do those refinance cost compared to other options that we have.

Anthony James Pettinari: We're just now getting into those discussions with our banking partners, and so it's a little premature to speak to de-levering at this point. And we also have those, you know, as Wayne mentioned, we still have 200 million in swaps sitting on our balance sheet that we can deploy to bring down our borrowing costs. So it's a little bit premature to talk about delevering at this point, but certainly that'll be in the mix of our capital allocation decisions.

Anthony James Pettinari: We're just now really getting into those discussions with our banking partners.

Anthony James Pettinari: And so it's a little premature to speak to Delevering at this point.

Anthony James Pettinari: And we also have those.

Anthony James Pettinari: As Wayne mentioned, we still have $200 million of swaps sitting on our balance sheet that we can deploy.

Anthony James Pettinari: To bring down our borrowing costs.

Anthony James Pettinari: So it's a little bit premature to talk about delevering at this point, but certainly that'll be that'll be in the mix of our capital allocation decisions.

Eric J. Cremers: Got it, got it. That's very helpful.

Speaker Change: Got it got it that's very helpful. And then just picking up on one thing you mentioned I mean, if youre running EBITDA breakeven in lumber, presumably there is a lot of other producers who are burning cash year, and obviously not asking you to speak for other competitors here, but I'm just wondering if you.

Anthony James Pettinari: And then just picking up on one thing you mentioned, I mean, if you're running EBITDA breakeven in lumber, presumably there are a lot of other producers who are burning cash here. And, you know, obviously not asking you to speak for other, you know, competitors here. But I'm just wondering if you are surprised that we haven't seen more capacity curtailments in lumber, you know, year to date? Are you starting to see them?

Anthony James Pettinari: We are surprised that we haven't seen more capacity curtailments in lumber year to date are you starting to see them and just any kind of industry dynamics that would keep.

Anthony James Pettinari: And just any kind of industry dynamics that would keep some of this capacity on maybe for longer? Is there an import dynamic? I'm just wondering if you could talk generally about the supply side of supply and demand in lumber.

Anthony James Pettinari: Keep some of this capacity on maybe for longer is there an important dynamic I'm. Just wondering if you could talk generally about the supply side.

Eric J. Cremers: Yeah, that's a great question, Anthony. You know, capacity utilization across the industry is running in the high 70% kind of range, which is, you know, frankly quite low. It hasn't been this low since, I don't know, 2012, 2013, something like that. Relative to demand, there is a lot of excess supply in the industry, particularly in southern Yellow Pine, where we've seen a lot of new capacity come online. So far this year, we have seen nine mills close. And, you know, several were in B.C., but you also had some in the Pacific Northwest, and then you had some in the south.

Anthony James Pettinari: The supply demand in lumber.

Eric J. Cremers: Yes, that's a great question, Anthony so so capacity utilization across the industry.

Eric J. Cremers: I think it's running in the high 70% kind of range, which is frankly quite low it hasn't been this low since I don't want to 2012 2013, something like that.

Eric J. Cremers: Relative to demand there is a lot of excess supply in the industry, particularly.

Eric J. Cremers: And southern yellow pine, where we've seen a lot of new capacity come online.

Eric J. Cremers: So far this year, we have seen nine mills close up.

Eric J. Cremers: And several of our NBC, which had some in the Pacific Northwest and then you had some in the south.

Eric J. Cremers: But, you know, given where we sit today with pricing, where it's at today, and I've seen cost curves for the industry, there's no doubt that there are a lot of mills that are hemorrhaging cash right now. And so I would not be surprised if we see more curtailments in the coming months, especially when you take into consideration the fact that duties are going up on Canadian lumber, from 8% to 14% here in just a couple months.

Eric J. Cremers: But given where we sit today with pricing where it's at today.

Eric J. Cremers: And I've seen cost curves for the industry.

Eric J. Cremers: There is no doubt that there are a lot of mills that are hemorrhaging cash right now.

Eric J. Cremers: No I would not be surprised if we see more curtailments in the coming months.

Eric J. Cremers: Especially when you take into consideration the fact that duties are going up on Canadian lumber.

Eric J. Cremers: From 8% to 14% here in just a couple of months, so theres still still more more pain yet to be felt.

Eric J. Cremers: So, yeah, to answer your question, I'm almost certain there will be more cuts. Everybody's got to make their own decision, but nobody likes hemorrhaging cash, that's for sure.

Eric J. Cremers: So yeah to answer your question there I'm almost certain there'll be more curtailments, everybody has got to make their own decision, but nobody likes hemorrhaging cash that's for sure.

Anthony James Pettinari: Got it, got it. That's very helpful. I'll turn it over.

Speaker Change: Got it got it that's very helpful I'll turn it over.

Anthony James Pettinari: Yes.

Operator: Our next question comes from the line of Ketan Mamtora from BMO Capital Markets. Please ask your question.

Speaker Change: Our next question comes from the line of Keith John Montara from BMO capital markets. Please ask your question.

Ketan Mamtora: Thank you and good morning, everyone. Can you talk a little bit about your operating rate in lumber for the first quarter and perhaps talk about how your order books are trending thus far, given that we are pretty close to, if not already in, the busiest time of the year?

Ketan Mamtora: Thank you Anne.

Ketan Mamtora: Morning, everyone.

Speaker Change: Good morning.

Ketan Mamtora: Can you talk a little bit about sort of your operating rates in lumber in the first quarter.

Ketan Mamtora: And perhaps talk about sort of.

Ketan Mamtora: <unk> order books are trending thus far given that beyond.

Ketan Mamtora: Pretty close if not already in the busiest time of the year.

Eric J. Cremers: Yeah, so Ketan, we've been running our mills as hard as we possibly can, producing as much volume as we can, and it's because we've got good efficient mills. Now you might look at it and say, wow, you have break-even EBITDA, you know, why would you bother running so hard?

Speaker Change: Yeah. So so we've been running our mills as hard as we possibly can.

Eric J. Cremers: Producing as much volume as we can and it's because we've got good efficient mills now you might look at it and say Wow you had breakeven EBITDA.

Eric J. Cremers: Would you why would you bother running so hard.

Eric J. Cremers: But you have to take it one step further because there are administration costs for running your mills. If you look at each mill individually, each mill can make money. But then you add up the earnings from those individual mills, and they have to offset administration costs. And after you offset those administration costs, we ran at a break-even level in the first quarter. So the point is that the mills themselves, individually, are doing just fine, barely doing just fine.

Eric J. Cremers: But you have to take it one step further because of our administration costs are running your mills, if you look at each mill individually.

Eric J. Cremers: Each mill individually can make money.

Eric J. Cremers: But then you add up the earnings from those individual mills and they have to offset administration costs.

Eric J. Cremers: After you offset those administration cost we ran at a breakeven level in the first quarter. So the point is that the mills themselves are individually are doing just fine barely doing just fine.

Eric J. Cremers: But in this environment, it still makes sense for us to run as hard as we can. Now, I will say, our mills are better than a lot of mills, and I generally know where they sit on the cost curve as it relates to, you know, industry-wide competition. And I know that there are a lot of mills that are not covering their cash variable costs, and those are the mills that I'm sure the owners are having tough discussions about what to do. So you know, for us, we're continuing to run as hard as we can, but I'm sure it's a different discussion at other mills.

Eric J. Cremers: But in this environment it still makes sense for us to run as hard as we can now I will say.

Eric J. Cremers: Our mills are better than a lot of mills and.

Eric J. Cremers: I generally nowhere they sit on the on the on the cost curve as it relates to.

Eric J. Cremers: Industry wide competition, and I know that there are a lot of mills that are not covering their cash variable costs.

Eric J. Cremers: And those are the mills that I'm sure. The owners are having tough discussions about about what to do.

Eric J. Cremers: So for US we're continuing to run as hard as we can but I'm sure. It's a different discussion that at other mills.

Eric J. Cremers: Got it. Now that's helpful. And how are your order books for this time of the year, Eric, in lumber?

Speaker Change: Got it that's helpful and how are your order books for this time of Dr. Eric and lumber.

Eric J. Cremers: You know, I would say our order books are adequate. They're not, you know, what will generally happen is when we have a point of view that markets are going to get better, we'll keep our order book short, you know, basically saving lumber that we can sell at what we think is going to be a higher price. When prices are really strong, we tend to extend our order books and sell lumber as much as, I don't know, four weeks out into the future.

Eric: I would say our order books are adequate theyre not what will generally happen is when we have a point of view that markets are going to get better we will keep our order book short.

Eric J. Cremers: Basically saving lumber that we can sell at what we think is going to be out at a higher price. When prices are really strong will tend to extend our order books and sell lumber out as much as I don't know four weeks out into the future.

Eric J. Cremers: Today our order books are relatively short, and the reason it's short is not necessarily because of lack of demand; it's because our sense is that things are bottoming, and we want to save lumber to sell at a higher price in the future. Does that make sense?

Eric J. Cremers: Our order books are relatively short and the reason, it's short is not necessarily because of lack of demand.

Eric J. Cremers: Our sense is that things are bottoming.

Eric J. Cremers: And we want to save lumber to sell at a future higher price that makes sense.

Ketan Mamtora: It does. No, that's helpful. And then just one last one from me.

Speaker Change: No. That's helpful. And then just one last one from me I wanted to come back to capital allocation again.

Ketan Mamtora: I want to come back to capital allocation again. You talked about during Q1, you were going through the asset purchase and, to some degree, that, you know, sort of pushed the share you purchased to the back burner. So as we sort of think about, you know, as you move past that, how do you approach that? And I'm just curious, how does this sort of net leverage, which is, of course, driven by depressed lumber prices, which are sitting at, you know, 5X right now, how does that sort of influence your decision as you think about the share you purchased in particular?

Ketan Mamtora: You talked about during Q1.

Ketan Mamtora: Going to the asset purchase.

Ketan Mamtora: And to that.

Ketan Mamtora: To some degree that sort of pushed.

Ketan Mamtora: Pushed the share repurchases to the back burner.

Ketan Mamtora: So as we think about you know as.

Ketan Mamtora: As you move past that.

Ketan Mamtora: So how do you approach that.

Ketan Mamtora: Just curious how does that sort of the net leverage.

Ketan Mamtora: Which is of course, driven by depressed lumber prices, which is sitting at <unk> <unk> right now how does that sort of influence.

Ketan Mamtora: Sorry, if your decision as you think about share repurchases in particular.

Eric J. Cremers: Yeah. So, Ketan, we started out the year pretty optimistic about where markets were headed. You know, I think the market was expecting six interest rate cuts by the Federal Reserve by the end of the year. Suddenly, that went to three interest rate cuts.

Speaker Change: Yeah. So we started out the year.

Eric J. Cremers: We were pretty optimistic on where markets were headed you think back.

Eric J. Cremers: I think the market was expecting six interest rate cuts by the federal reserve by the end of the year.

Eric J. Cremers: Suddenly that went to three interest rate cuts.

Eric J. Cremers: Last I heard, we were down to maybe one interest rate cut, perhaps in December. And I don't know, after some employment cost index data this morning, we may be at zero cuts for the year. So, you know, what kind of an economic environment are we in? Is this – are we going to have a hard landing? Are we going to have a soft landing? Is there going to be no landing?

Eric J. Cremers: Last I heard we were down to maybe one rate cut perhaps in December and I don't know ill. After some employment cost index data. This morning, we may be at zero cuts for the year. So what kind of an economic environment are we in is this we can have a hard landing and I have a soft landing is there going to be no landing.

Eric J. Cremers: It's really murky what the outlook for the economy is right now. And so, it's hard to have a lot of conviction about where markets are headed with this kind of a backdrop. So, you know, I think that's one of the factors that weighed into the discussion.

Eric J. Cremers: It's really murky what the outlook for the economy is right now and so.

Eric J. Cremers: It's hard to have a lot of conviction about where markets are headed.

Eric J. Cremers: And with this kind of a kind of a backdrop.

Eric J. Cremers: So I think that's one of the factors that weighed into the discussion the board meets every quarter to talk about.

Eric J. Cremers: Again, the board meets every quarter to talk about share repurchases, and certainly that'll be a topic of conversation at an upcoming board meeting. Now, I would also tell you that what we look at, we don't – we think about our five-year plan, our five-year model for what our dividend ought to be and what our leverage ought to be. There are going to be periods of time when markets are blowing up and going like they were during COVID, and there are going to be periods of time when the industry gets stressed, and we get stressed like we are right now. This, too, will pass.

Eric J. Cremers: Share repurchases and.

Eric J. Cremers: And certainly that'll that'll be a topic of conversation at an upcoming board meeting now I would I would also tell you that what we look at we don't.

Eric J. Cremers: We think about.

Eric J. Cremers: Our five year plan, our five year model for what our dividend ought to be and what leverage ought to be they're going to be periods of time, where markets are blowing and going like they were during COVID-19 and theyre going to be periods of time, where the industry gets stressed and we get stress like we are right now.

Eric J. Cremers: I do think the markets are going to get better. I do think lumber markets are going to get better. I do think supply is going to come down, but I do think demand is going to come back. Capacity utilization in the industry will come back, and earnings are going to come back to our wooden products business. And I would also add that, as I think about, you know, interest coverage and leverage and all that, our current forecast has our cash balances running higher than where they are today by the end of the year. So I feel pretty good about where we are in the environment. The only question I have is, where is the economy headed? It's very unclear at this stage.

Eric J. Cremers: This too shall pass.

Eric J. Cremers: I do think markets are going to get better I do think lumber markets are going to get better I do think supply is going to come down I do think demand is going to come back.

Eric J. Cremers: Past the utilization in the industry will come back and earnings are going to come back to our wood products business.

Eric J. Cremers: And I would also add that you know as I think about.

Eric J. Cremers: Interest coverage and leverage and all that.

Eric J. Cremers: Our current forecast has our cash balances running are running higher than where they are today by the end of the year. So I feel pretty good about where we're at in the environment.

Eric J. Cremers: The only question I have is where is the economy headed it's very very unclear at this stage.

Eric J. Cremers: That's fair. And do you still have a 10B51 program in place, Eric?

Speaker Change: That's fair and do you still have a <unk> program in place Eric.

Eric J. Cremers: Yeah, we still have one in place. Perfect.

Eric: Yes, we still have one in place.

Ketan Mamtora: Okay, perfect. I'll turn it over. Thanks for all the clarification.

Speaker Change: Okay perfect.

Speaker Change: Turn it over thanks for all the other <unk>.

Ketan Mamtora: Modifications.

Operator: Our next question comes from the line of Mark Weintraub from Seaport Research Partners. Please go ahead.

Speaker Change: Yes. Thanks.

Operator: Our next question comes from the line of Mark Weintraub from Seaport Research Barclays. Please go ahead.

Mark Adam Weintraub: Thank you. First question, so on the slides, it indicates you're expecting higher lumber prices in QV1Q. You mentioned that they're to date flat, and presumably, the spot is lower than where it was on average, so that seems to convey some optimism that there's going to be some improvement. Can you kind of just clarify, because that would be pretty soon? I totally understand the conversation about why we're at lows or toward lows over the cycle. What gives me confidence that we're going to get some improvement, hopefully sooner rather than later?

Mark Adam Weintraub: Thank you first question so in the slides it indicates youre expecting higher lumber prices to <unk>, you mentioned that there.

Mark Adam Weintraub: Date flat and presumably the the spot.

Mark Adam Weintraub: Is lower than where it was on average so that seems to convey some optimism that there's going to be some improvement.

Mark Adam Weintraub: Can you kind of just clarify because that'd be pretty soon I totally understand the conversation about why we're at Lowe's or toward lows over the cycle what gives the confidence that we're going to get some improvement hopefully sooner rather than later.

Eric J. Cremers: Yeah, we do expect prices to improve, and we do think we're feeling some weakness right now, particularly multifamily; we've seen project finance costs move up. Also, R&R and treated markets, in particular in the South, are under a bit of pressure. I think the one thing that gives me hope or optimism, Mark, is that we are moving into the spring demand build time of the year. Things haven't completely fallen out of bed.

Speaker Change: Yes, we do expect prices to improve and we do think we're feeling some some weakness right now, particularly in multifamily.

Eric J. Cremers: We've seen project finance costs move up.

Eric J. Cremers: So R&R and treated markets in particular in the south is under under a bit of pressure.

Eric J. Cremers: I think the one thing that gives me hope or optimism Mark is that we.

Eric J. Cremers: We are moving into the spring demand build time of the year.

Eric J. Cremers: Markets haven't completely fallen out of bed demand has not fallen completely out of bed single family starts are hanging in there at over $1 million as we said for several months in a row now.

Eric J. Cremers: Demand has not fallen completely out of bed. Single family starts are hanging in there at over a million, as we said, for several months in a row now. I think Home Depot said their comp store sales are going to be down 1% for the year. And I think Lowe's was maybe minus 2% to minus 3% for the year. So things haven't completely fallen out of bed, and as we get into the summertime and people start taking on more and more repair and remodeling, I think demand will come back, and there's an opportunity for prices to move higher. It's hard for me to see prices not getting better, given that so many mills across North America are below break-even right now.

Eric J. Cremers: I think home depot said their comp store sales are going to be down 1% for the year I think Lowe's was maybe minus two to minus 3% for the year.

Eric J. Cremers: So things haven't completely fallen out of bed.

Eric J. Cremers: And as we get into the summertime when people start taking on more and more.

Eric J. Cremers: Repair and remodel projects and I think demand will come back and there is an opportunity for prices to move higher.

Eric J. Cremers: It's hard for me to see prices not getting better given that so many mills across North America.

Eric J. Cremers: Our below breakeven right now.

Mark Adam Weintraub: Totally understood but just so there's nothing though that you're seeing right now. I'm over reading it if I conclude that you're seeing something that's going to lead to a near-term improvement necessarily. The reasons you gave are all very valid, although the timing I guess unclear on most of them, or am I misinterpreting?

Speaker Change: Totally understood, but just so theres nothing though that youre seeing right at this moment.

Mark Adam Weintraub: I'm over reading it if I if I conclude that you are seeing something that's going to lead to like a near term improvement necessarily reasons. You gave all very valid although the timing I guess unclear on most of that or am I missing something.

Eric J. Cremers: Yeah, I mean, our forecast is that things dip in May and then they come back in June. We'll see.

Mark Adam Weintraub: Yes.

Eric J. Cremers: <unk> says things dip in May and then they come back in June we will say okay.

Mark Adam Weintraub: And then second, kind of on almost the flip side of this, the NYSE SOLOG price is expected to be up 6%. I guess the strength that we've seen in the West, I would have thought there would have been a bigger increase given the way it lags through. Maybe if there was just a word on the dynamics or if there's something that's going on there that wouldn't be obviously apparent.

Eric J. Cremers: And then second kind of on the almost the flip side of that is nicely saw log prices expected to be up 6% I guess the strength that we've seen in the west.

Mark Adam Weintraub: I would have thought there would have been a bigger increase given.

Mark Adam Weintraub: The way it lags through.

Mark Adam Weintraub: Maybe if there is just a word on the dynamics or if there is something that's going on there that wouldn't be obviously apparent.

Wayne Wasechek: Yeah, I mean, looking at the North on the saw log prices, I think it did actually trend pretty close to where we see the, you know, when you lag the right random lengths to where we came out, I think it paralleled pretty close. So the really the story was for the quarter, just the dynamics around, you know, heavier logs; it was really the density issue more than, you know, indexing pricing.

Wayne Wasechek: Yes, I mean looking at the north on the solid prices I think it did actually trend pretty close to where we see the when you lag the reg random lengths to where to where we came out I think it parallel fairly close actually so.

Wayne Wasechek: But really the story was for the quarter just the dynamics around.

Wayne Wasechek: Heavier logs it was really the density issue more than.

Wayne Wasechek: The indexing pricing itself, yes, I apologize I meant the that the second quarter outlook, the 6% improvement when I would've thought you would been position.

Mark Adam Weintraub: Yeah, Wayne, I apologize. I meant the second quarter outlook, the 6% improvement, when I would have thought you would have been positioned for a bigger increase given what happened with, you know, inland Hemlock, et cetera, over, and then the last. I apologize; we can take this offline and go through it.

Mark Adam Weintraub: Positioned for a bigger increase given what happened in like.

Mark Adam Weintraub: Inland.

Mark Adam Weintraub: Hemlock and et cetera.

Mark Adam Weintraub: And then the lag.

Speaker Change: I apologize if we can take this offline and go through yet.

Wayne Wasechek: Yeah, well, I mean, as it looks for the outlook, you know, where we head into Q2, I think there is again, you've got the seasonal lighter log mix, and there is an improvement. But I think the other consideration is there is the lag there, but you also have to think about where spring breakup is, and you know, there's no hauling in that period as well. And so the timing of the lag is a bit extended. So I think that factors in.

Wayne Wasechek: Yes, I mean as it looks for the outlook, where we head into Q Q2, I think there is again.

Wayne Wasechek: Get the seasonal lighter log mix there is an improvement.

Wayne Wasechek: But I think the other consideration is there is the lag there, but you also have to think about where spring breakup is theirs.

Wayne Wasechek: No.

Wayne Wasechek: Calling in that period as well.

Wayne Wasechek: So the timing lag, it's a bit extended so I think that factors in.

Speaker Change: Okay, and then lastly.

Mark Adam Weintraub: And then lastly, when is the FIA sale expected to be completed? Second quarter. Yeah. Can you give us kind of more specifically within the quarter? Is that very soon, or might it be toward the end of the quarter?

Speaker Change: So when is the FIA sales expected to be completed.

Speaker Change: Second quarter, yes.

Speaker Change: Can you give us kind of more specifically within the quarter or is that very soon or it might be towards the end of the quarter.

Eric J. Cremers: I mean, mid to later in the quarter is the expectation.

Speaker Change: I mean mid to later in the quarter is the expectation.

Eric J. Cremers: Great and then.

Mark Adam Weintraub: Okay, great. And then... Presumably, is that likely to put share repurchase more on the front burner, given the explanation in the first quarter that you had the acquisition and now the share price is lower, and you'd have the monies coming in, or is the consideration of how things work with the refi need to be kept in as a part of the equation as well? How would you like us to understand your sentiment on priorities as that $58 million comes in?

Eric J. Cremers: Presumably.

Mark Adam Weintraub: <unk>.

Mark Adam Weintraub: Does that then.

Mark Adam Weintraub: Likely to put share repurchase more to the front burner given.

Mark Adam Weintraub: Yes, you've given the explanation in the first quarter that you had the acquisition.

Mark Adam Weintraub: And now the share price is lower than you would have the money's coming in or if the consideration of how things work with the refi needs to be kept in.

Mark Adam Weintraub: As a part of the equation as well.

Mark Adam Weintraub: How would you have us kind of understand your sentiment on priorities that.

Mark Adam Weintraub: That $58 million comes in.

Eric J. Cremers: I think that that clearly moves the likelihood of share repurchase a little bit more forward, but you got to remember there's a couple other big factors that are in the back of our minds. One is the Waldo startup. How does that go?

Mark Adam Weintraub: I think that clearly is a moves the likelihood of share repurchases a little bit more forward.

Eric J. Cremers: But you got to remember Theres a couple of other big factors that are in the back of our minds. One is the Waldo startup.

Eric J. Cremers: How does how does that go because we've seen some mills in the south have disastrous startups and others have gone well, we expect ours to go well, but that remains a little bit of an unknown.

Eric J. Cremers: Because we've seen some mills in the south have disastrous startup experiences, and others have gone well. We expect ours to go well, but that remains a little bit of an unknown. I'd also like to see lumber markets improve. We'll see how that goes, and then part of it's going to be what happens with the refinance equation. What happens to our view on our expected borrowing costs? So there's a couple of moving pieces there, but certainly, all things equal, completing the FIA sale will de-risk things for us.

Eric J. Cremers: I'd also like to see lumber markets improve.

Eric J. Cremers: We'll see how we will see how that goes and then part of it is going to be what happens with the with the refinance equation.

Eric J. Cremers: Happens to our view on our expected borrowing costs.

Eric J. Cremers: There's a couple of moving a couple of moving pieces, there, but certainly all things equal completing the Fi a sale would derisk things for us.

Mark Adam Weintraub: Okay, I appreciate that. Thank you.

Speaker Change: Okay I appreciate that thank you.

Operator: Our next question comes from the line of Matthew McKellar from RBC Capital Markets. Please go ahead.

Mark Adam Weintraub: Our next question comes from the line of Matthew Mckellar from RBC capital markets. Please go ahead.

Matthew McKellar: Hi. Good morning. Thanks for taking my questions. Good morning.

Matthew McKellar: Hi, good morning, Thanks for taking my questions.

Operator: I think last quarter you talked about modest signs of slowing and the take-up of lots in Chanel Valley. Your guidance for 24 lots in Q2 and 130 lots for 2024 seems to imply a significant pickup in sales in the second half of the year. Can you just talk about the visibility you might have to stronger sales in Q3 and Q4.

Matthew McKellar: Good morning, I think last quarter, you talked about modest signs of slowing and take up of lots and Chanel Valley.

Operator: Guidance for 'twenty four lots in Q2, and $1 30 lots for 2024, it seems to imply a significant pickup in sales in the second half of the year can you just talk about the visibility you might have to stronger sales in Q3 and Q4.

Wayne Wasechek: Yeah, Matt, this is Wayne. You know, we, the timing of our outlook on real estate lots is really driven by inventory availability. So we expect to bring more lots to market in the latter half of the year. I mean, we try to, we really closely manage our CapEx for real estate. You know, we don't try to get out of our skis and create excess inventory. So we really try to stay just in front of demand.

Operator: Yes, Matt this is Wayne.

Wayne Wasechek: The.

Wayne Wasechek: Timing of our outlook on real estate lots is really driven off of inventory availability.

Wayne Wasechek: So we expect to bring more lots to market in the later half of the year.

Wayne Wasechek: We try to we really closely manage are.

Wayne Wasechek: Capex for real estate, we don't try to get out over our skis and create excess inventories that we really try to stay just in front of demand and our outlook for the rest of the years. When we were bringing a couple sub developments to the market and those will be completed here in the coming months and then be.

Wayne Wasechek: And yeah, our outlook for the rest of the year is when we're bringing a couple sub-developments to the market, those will be completed here in the coming months and then be available for market later this year. So that's really a lot of availability and what we're bringing to market, and that's what's driving the timing.

Wayne Wasechek: Be available for for market later this year, so that's really it.

Wayne Wasechek: It's.

Wayne Wasechek: Lot availability, and what we're bringing to market and Thats whats driving the timing.

Matthew McKellar: Great, thanks for the detail there. And then I was wondering if you could just provide a bit more commentary on the state of the Timberlands markets for M&A, maybe just what you're seeing, whether there's been any changes in sentiments in the markets, and what you have, maybe since your last update.

Speaker Change: Great. Thanks for the detail there and then.

Matthew McKellar: I was wonder if you could just provide a bit more commentary on the state of the timberlands markets for M&A maybe.

Matthew McKellar: Maybe just what youre seeing whether there's been any changes as estimates in our markets and what have you.

Matthew McKellar: Maybe since your last update.

Eric J. Cremers: Yeah, so I think the best way to describe it is that the market is relatively quiet right now. I would say, in general, three to four billion dollars of Timberland change hands each year, and, you know, we'll see where we wind up this year, but I think it's going to wind up being a relatively light year so far. The trade rags in the industry have highlighted the fact that we've had four busted deals in the industry so far this year, deals that did not get done.

Speaker Change: Yes, so so I think the best way to describe it is that the market is relatively quiet right now.

Eric J. Cremers: I would say in general $3 billion to $4 billion of timberland changes hands each year.

Eric J. Cremers: We will see where we wind up this year, but I think it's going to wind up being a relatively light year.

Eric J. Cremers: So far.

Eric J. Cremers: The trade rags in the industry have highlighted the fact that.

Eric J. Cremers: We've had four busted deals in the industry. So far this year deals that did not get done now.

Eric J. Cremers: Now, I would also say that, generally speaking, from what I know about them, they were very low-quality deals, so it's no surprise that they didn't get done. But I do think demand for high-quality Timberland remains quite high, and it's just that right now there isn't a lot of high-quality Timberland on the market. So we'll see how the market shakes out, but I think there's no doubt demand is still out there.

Eric J. Cremers: Now I would also say that they were generally speaking from what I know about them. They were very low quality deals. So it's no surprise that they didn't get done.

Eric J. Cremers: But I do think demand for high quality timberland remains quite high.

Eric J. Cremers: And it's just that right now there isn't a lot of high quality timberland on the market.

Eric J. Cremers: So we'll see how the market shakes out, but I think theres no doubt demand is still out there.

Matthew McKellar: Great. Thanks for that. That's all on my end. I'll turn it back on. Thanks.

Speaker Change: Great Thanks for that.

Speaker Change: And I'll turn it back thanks.

Matthew McKellar: Thanks.

Operator: Our next question comes from the line of Nico Picini from TruWest Securities. Please ask your question.

Matthew McKellar: Our next question comes from the line of Nicole <unk> from two risk Securities. Please ask your question.

Nico Picini: Hi guys, this is Nico on for Michael Roxland today. Morning, Justin. Morning. First off, can you talk about any early indications of demand for carbon credits, realizing that you're a little ways away from actually placing them in the market? And then has that changed at all since you began pursuing forced carbon credits?

Nico Picini: Hi, guys. This is nico on for Mike rational today.

Speaker Change: Good morning, Justin.

Nico Picini: First off can you talk about any early indications on demand for carbon credits, realizing that youre, a little ways away from actually placing in the market.

Nico Picini: And then as that changed at all since you begin pursuing a course carbon credits.

Eric J. Cremers: Now, you know, our carbon credit deal. It's going to be a voluntary project. And, you know, we've had price discussions with our broker and with the party that we think is going to wind up buying them. And we think the price talk is still in this, you know, $20 to $30 a ton range. And we feel pretty good about it. I don't know, Wayne, do you have anything to add to that?

Nico Picini: No.

Nico Picini: Our carbon credit deal, it's going to be a voluntary project and the we've had price discussions with our broker and with the party that we think is going to wind up buying them in.

Wayne Wasechek: We think the price stock is still in this.

Wayne Wasechek: And on 20% to $30 a ton range and.

Eric J. Cremers: We feel pretty good about it I don't Wayne do you have anything to add to that.

Wayne Wasechek: Yeah, no, I think, Ken, it's more of the updates we gave in the past. We're still on track and, and, you know, moving the project forward, trying to target later this year, but we'll see. You know, it's complex, and we're developing high-quality credits. And, you know, that takes time. And we're also dependent on, you know, third parties that are involved in the accreditation process. So we'll, ultimately, that'll drive completion, but yeah, definitely. We think there's strong demand for them there.

Wayne Wasechek: Yes, no I think Ken it's more of.

Wayne Wasechek: The updates we gave in the past we're still on track.

Wayne Wasechek: Moving the project forward trying to target later this year, but we'll see.

Wayne Wasechek: Complex and we are developing high quality credits and that takes time.

Wayne Wasechek: We're also dependent on third parties that are involved in the accreditation process.

Wayne Wasechek: Ultimately that will drive completion, but but yes definitely.

Wayne Wasechek: We think theres strong demand there.

Nico Picini: Understanding that so far, solar and carbon credits seem to be the more mature NCS initiatives, not just for potlatch, but in the industry. Is there any update or maybe an estimate of when we might see those other initiatives come into play, like bioenergy or carbon capture and sequestration?

Speaker Change: Understood. Thank you for that and just realizing that so far is solar and carbon credits seem to be the more mature.

Nico Picini: It is.

Nico Picini: Not just for pilots and the industry.

Nico Picini: Is there any can you give any update or maybe an estimate of when we might see those other initiatives coming to platelet biology.

Nico Picini: Carbon capture and sequestration.

Wayne Wasechek: Yeah, I mean, certainly we're in the early innings on, you know, biomass, maybe, you know, brine, lithium; we're looking at, you know, carbon storage and sequestration. Yeah, those are, you know, we're developing all those opportunities. We continue to make progress. I think it's difficult to put an exact time frame on where we would see monetizing some of these types of projects, but we're all, you know, very active in each one of those and pursuing each of those opportunities with outside parties.

Nico Picini: Yes.

Wayne Wasechek: Certainly we're in the early innings on biomass.

Wayne Wasechek: Maybe Brian lithium we're looking at.

Wayne Wasechek: Carbon storage and sequestration.

Wayne Wasechek: Yes.

Wayne Wasechek: We're developing all of those opportunities we continue to make progress I think it's difficult to put a exact timeframe on when we would see monetizing some of these type of projects, but we're all we're very active in each one of those and.

Wayne Wasechek: Pursuing.

Wayne Wasechek: Pursuing each of those opportunities with outside parties.

Wayne Wasechek: You know, we're under some NDAs as it relates to CCS as we continue to look at that opportunity. I think we estimate at CCS we may have, you know, around or up to about 150,000 acres that are suitable for CCS, and we're active in looking at geological formations that I think will support CCS. So we're active in all those areas and, you know, aggressively pursuing each of those opportunities.

Wayne Wasechek: Under some NDA is as it relates to Ccs as we continue to look at that opportunity I think we estimate at Ccs. We may have a router up to about 150000 acres that are suitable for Ccs and we're active in looking at that geological.

Wayne Wasechek: Formations that I think will support Ccs. So we're active in all of those areas.

Wayne Wasechek: Aggressively pursuing each of those opportunities.

Nico Picini: Got it. Thank you, guys. I'll turn it over.

Speaker Change: Got it. Thank you guys I'll turn it over.

Nico Picini: Thanks.

Operator: Our next question comes from the line of George Staphos from Bank of America. Please ask your question. Hi, thanks.

Nico Picini: Our next question comes from the line of charge Staphos from Bank of America. Please ask your question.

George Leon Staphos: Hi. Thanks, everybody. Good morning. Good morning. I just want to come and see you. How are you doing?

George Leon Staphos: Hi, Thanks, everybody good morning.

George Leon Staphos: Good morning, I wanted to come how are you doing.

George Leon Staphos: So the harvest levels in the first quarter were a touch better than your initial guidance. Was that just a weight issue, or were there other things that were driving the slightly better harvest profile? And then, you know, maybe staying on that same, you know, topic, as we look to the south... And again, we all know that these are local markets. We can't look monolithically.

George Leon Staphos: So the harvest levels in the first quarter were a touch better I think than your initial guidance was that just a weight issue or are there other things that were driving the slightly better <unk>.

George Leon Staphos: Our risk profile and then maybe staying on that same topic as we look to the south.

George Leon Staphos: And.

George Leon Staphos: Again, we all know that these are local markets. We can't look monolithically Nonetheless pricing remains relatively flat in the south it's been relatively flat for a long time.

George Leon Staphos: Nonetheless, pricing remains relatively flat in the South. It's been relatively flat for a long time. When do you see the inflection coming in timber pricing in the South?

George Leon Staphos: When do you see the inflection coming in timber pricing in the south.

Wayne Wasechek: Yeah, George, so your first question on harvest volume. Yeah, we were, I would say, slightly ahead in the south this first quarter compared to what we had planned. And we had just favorable harvest conditions, and we took advantage of those conditions, and it drove a slight uptick in our harvest volume. But we continue to maintain, you know, our overall outlook for harvest volumes for the year, you know, somewhere around 1.6 million. Yeah, so there's no real change there.

Speaker Change: Yes, George So your first question on harvest volume, Yes, we were I would say slightly ahead.

Wayne Wasechek: This first quarter compared to what we had planned and we had just favorable harvest conditions and we took advantage of those conditions.

Wayne Wasechek: <unk> drove a slight uptick in our in our harvest volume, but we continue to maintain our overall outlook for harvest volumes for the year somewhere around probably $1 $6 million. Yeah. So no no real change there I think it's just taking advantage of conditions when you can.

Wayne Wasechek: I think it's just taking advantage of conditions when you can. And as far as pricing is concerned, yeah, I think you're right. You know, we've been in a pretty stable environment. I think that's our near-term outlook, both on the demand side and the pricing side. Even when we look across, you know, kind of digging deeper into both of our markets, whether that's, you know, kind of on the Gulf South side or the Southeast.

Wayne Wasechek: And as far as pricing is concerned, yes, I think youre right.

Wayne Wasechek: We've been in a pretty stable environment I think that's our near term outlook, both on the demand side and the pricing side, even when we look across kind of digging deeper into both of our markets, whether thats kind of on the Gulf Gulf South side or the southeast I think we see.

Wayne Wasechek: I think we see, you know, pricing relatively stable across the board. You know when that can turn. Yeah, I think, you know, as markets continue to tension, especially on the southeast side where we see a premium because markets are more tension, I think when lumber demand picks up in those tension markets, you'll see a bigger increase in pricing in that region, probably compared to where we're a little bit less tension in the Gulf South region.

Wayne Wasechek: Pricing relatively stable.

Wayne Wasechek: Cross the board.

Wayne Wasechek: When that can turn yes, I think.

Wayne Wasechek: As markets continued attention, especially in the South east side, where we see a premium because markets are more attention.

Wayne Wasechek: When lumber demand picks up those tension markets youll see a bigger increase in pricing in that region, probably compared to where we're a little bit less tension in the Gulf South region. So that will probably lag, but there is additional capacity coming online so.

Wayne Wasechek: So that'll probably lag. But, you know, there is additional capacity coming in line. So, timing is difficult to ultimately say, but we do think those markets will tighten over time as well. But yeah, I think as soon as we see demand picking up, you could see those, especially those tight markets, really turning around quicker.

Wayne Wasechek: Timing's difficult to ultimately say, but we do think those markets will tension over time as well but.

Wayne Wasechek: Yes, I think as soon as we see demand picking up you could see those especially those tension market is really turning around much quicker.

George Leon Staphos: I mean, the log and lumber markets have decoupled in the South for a long time. Is your view that we're getting to a point, maybe within the next year, where they will recouple? And so as we start to see lumber prices moving higher, we will actually see a higher propensity to pay for logs, or is that still kind of too hard to call? Yeah, I wouldn't hold it against you if that was the answer.

Wayne Wasechek: I mean, the log and lumber markets have decoupled in the south for for a long time as you have.

George Leon Staphos: View that we're getting to a point maybe in within the next year that they will re couple.

George Leon Staphos: So as we start to see lumber prices moving higher we actually you will see a higher propensity to pay for.

George Leon Staphos: <unk>.

George Leon Staphos: Or is that still kind of too hard to call at this juncture.

George Leon Staphos: Yes.

Wayne Wasechek: Yeah, I think that's a bit difficult. I mean, look, we... We haven't, prices haven't been fairly stable, you know, when we saw the historic run-up in lumber prices, we didn't see a huge increase in log prices in the South. I mean, but, you know, we continue to add capacity in the South, and, you know, I think as these tensions continue, you'll see prices come up over time, but it's difficult to, I mean, there are a lot of variables involved.

Speaker Change: That was the answer yes.

Speaker Change: Yes, I think thats the difficult let me look.

Wayne Wasechek: We havent prices have been fairly stable when we saw the historic run up in lumber prices, we didn't see a huge increase in.

Wayne Wasechek: Log prices in the south I mean, but.

Wayne Wasechek: We continue to add capacity in the south and I think as those tension you'll see prices come up over time, but it's difficult to pinpoint exactly when that will be I mean, there's a lot of variables involved but I think George you got it you got to step back and think about like what happened after the great financial crisis, all of those mills closed in the south.

Eric J. Cremers: And I think, George, you got to step back and think about, like, what happened after the Great Financial crisis, all those mills closed in the South, and you think about what happened to growth draining. You know, the forest was growing much faster than the harvest each year, and so a lot of standing inventory went on the stump each and every year for 15 years. And the latest industry data that I saw, it had drain actually equaling or maybe even slightly exceeding growth.

Eric J. Cremers: When you think about what happened to growth to drain.

Eric J. Cremers: Force was growing much faster than the harvests each year and so a lot of standing inventory went on the stump each and every year for 15 years.

Eric J. Cremers: And the latest industry data that I saw.

Eric J. Cremers: It had drain actually equaling or maybe even slightly exceeding growth. So now the standing timber inventory in the south has now reached an equilibrium.

Eric J. Cremers: So now the standing timber inventory in the South has now reached an equilibrium, and if you look out over the next five years, in fact, the drain is going to be higher than growth. So you'll start to see those standing inventories come back down again. Now to Wayne's point, every market is going to be a little bit different, right? The already-tensioned markets are going to show more tension, you know, assuming lumber demand continues to improve, and you'll see those tension markets show better price appreciation than the non-tension markets. But the reality is even the non-tension markets are expected to get better over the coming years as the drain exceeds growth.

Eric J. Cremers: And if you look out over the next five years in fact drain is going to be higher than growth. So you'll start to see those standing inventories come.

Eric J. Cremers: Come back down again now to Wayne's point every market is going to be a little bit different right. They already tension markets are.

Eric J. Cremers: We're going to show more attention assuming lumber demand continues to improve.

Eric J. Cremers: And Youll see those tension market show better price appreciation on the non tension markets, but the reality is even the non tension markets are expected to get to get better.

Eric J. Cremers: Over the over the coming years as drain exceeds growth.

Eric J. Cremers: Would you be maybe more willing now than in past years to consider selling and areas, where youre not going to see that tension in the next several years given that again were 15 plus years since the crisis.

George Leon Staphos: Would you be maybe more willing now than in previous years to consider selling in areas where you're not going to see that tension in the next several years, given that, you know, again, we're, you know, 15 plus years since the crisis?

Wayne Wasechek: Well as portfolio managers, we're always open to selling I mean, just take a look at our FIA transaction, where we sold four year old trees for 1700 Bucks an acre.

Eric J. Cremers: Well, you know, as portfolio managers, we're always open to selling. I mean, just take a look at our FIA transaction where we sold four-year-old trees for $1,700 an acre. That's good core timberland for sure, but it's just really young trees that have no cash flows or virtually no cash flows for 20-some years.

Eric J. Cremers: Thats good core timberland for sure, but it's just really young trees that have no cash flows or virtually no cash flows for 20 some years.

Eric J. Cremers: So we're always opening open to the idea of selling.

Eric J. Cremers: But I think that.

Eric J. Cremers: The thing you've got to keep in mind as you don't want to be just in the tension markets look at the pullback that we've just had over the past year or two.

George Leon Staphos: So we're always open to the idea of selling. But, you know, I think the thing you got to keep in mind is you don't want to be just in the high-tension markets. Look at the pullback that we've just had over the past year or two. Which markets have taken it the hardest in the South? It's been the most tensioned markets because those are the areas where capacity comes out first. So I think you want to play in both tensioned and non-tensioned markets, frankly.

Eric J. Cremers: Which markets have taken at the harvest in the south it's been those most tension to markets because those are the areas where capacity comes out first.

George Leon Staphos: So I think you want to play in both tension and non tension markets frankly.

George Leon Staphos: The saw mill expansions the additions that we're seeing they tend to be more of the weaker markets and the fact that capacity is going in those weaker markets is what in turn is going to drive log prices higher.

George Leon Staphos: The sawmill expansions, the additions that we're seeing, they tend to be in more of the weaker markets. And the fact that capacity is going into those weaker markets is what, in turn, is going to drive log prices higher. But at the end of the day, like I said at the start, we're portfolio managers. You know, at the right price, we'll sell just about anything.

George Leon Staphos: But at the end of the day like I said at the start we're portfolio managers at the right price, we'll sell just about anything.

Speaker Change: No understood and I appreciate the thoughts on that Erik I guess my final question I'll turn it over.

George Leon Staphos: Recognizing the land sales will make for a nicely improved <unk> versus <unk>. If we hold that aside we will look to sell timberlands and wood products.

George Leon Staphos: Wood products lumber.

Eric J. Cremers: No, understood. And I appreciate the thoughts on that, Eric.

George Leon Staphos: I guess my final question, I'll turn it over, recognizing the land sales will make for a nicely improved 2Q versus 1Q. But if we hold that aside, and we look just at timberlands and wood products. You know, wood products, lumber volumes might be up a touch from what we saw in the first quarter, but pricing right now is relatively stable. And actually, May, you're expecting it to be lower. In Timberlands, you know, Horace lines are, you know, recognizing that you're gonna be opportunistic, and will be a touch lower than the first quarter, where you've got Northern prices up, Southern prices down. So it seems like, you know, operationally, EBITDA's kind of flat, 2Q versus 1Q. Would you agree with that, that very, very quick analysis?

George Leon Staphos: <unk> might be up a touch from what we saw in the first quarter, but.

George Leon Staphos: But pricing right now is relatively stable and actually may youre expecting to be lower.

Speaker Change: And timberlands.

George Leon Staphos: Horace lines are recognizing that youre going to be opportunistic, we'll be a touch lower than the first quarter, where <unk> got northern prices up southern prices down so it seems like operationally.

George Leon Staphos: EBITDA is kind of flat to Q versus <unk> would you agree with that very very quick analysis.

George Leon Staphos: I think that was pretty pretty quick analysis I mean, my expectation is yes lumber markets are weak.

George Leon Staphos: We actually had a decent April not a great April but it was certainly better than say the first quarter.

George Leon Staphos: So I think wood products could be could be a little bit better.

Speaker Change: I think timberlands.

Eric J. Cremers: I think that was a pretty quick analysis. My expectation is, yeah, lumber markets are weak. We actually had a decent April, not a great April, but it was certainly better than, say, the first quarter. I think wood products could be a little bit better. I think timberlands, I don't know, they may be flattish, but yeah, real estate should be up significantly.

Speaker Change: I don't know it may be flattish, but yes real estate should be up significantly.

Speaker Change: Okay. Thank you very much guys for the thoughts and good luck in the quarter.

Eric J. Cremers: Thanks.

Eric J. Cremers: At this time I'm showing there are no more questions I'll now turn the call back over to Wayne Racetrack.

Speaker Change: Thank you for your questions and your interest in Potlatch Delta that concludes our call.

Speaker Change: Ladies and gentlemen.

George Leon Staphos: Okay. Thank you very much, guys, for the thoughts. Good luck in the quarter. Thanks.

Speaker Change: Today's call. Thank you all for Jamie you May now disconnect.

Wayne Wasechek: At this time, I'm showing that there are no more questions. I'll now turn the call back over to Wayne Wasechek.

Wayne Wasechek: Please wait the conference will begin shortly.

Operator: Thank you for your questions and your interest in PotlatchDeltic. That concludes our call.

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Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining us. You may now disconnect.

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