Plum Creek Timber's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Plum Creek Timber (PCL)

Q1 2012 Earnings Call

April 30, 2012 5:00 pm ET

Executives

John B. Hobbs - Vice President of Investor Relations

Rick R. Holley - Chief Executive Officer, President and Director

David W. Lambert - Chief Financial Officer and Senior Vice President

Analysts

Michael A. Roxland - BofA Merrill Lynch, Research Division

Joshua A. Barber - Stifel, Nicolaus & Co., Inc., Research Division

Anthony Pettinari - Citigroup Inc, Research Division

Gail S. Glazerman - UBS Investment Bank, Research Division

Chip A. Dillon - Vertical Research Partners Inc.

Mark Wilde - Deutsche Bank AG, Research Division

Mark A. Weintraub - The Buckingham Research Group Incorporated

Steven Chercover - D.A. Davidson & Co., Research Division

Presentation

Operator

Good afternoon. My name is Jamaria, and I will be your conference operator today. At this time, I would like to welcome everyone to the Plum Creek First Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Mr. John Hobbs, Vice President of Investor Relations. Sir, you may begin your conference.

John B. Hobbs

Thank you, Jamaria. Good afternoon, ladies and gentlemen, and welcome to the first quarter conference call for Plum Creek. I'm John Hobbs, Vice President of Investor Relations. Today, we have on the line Rick Holley, President and CEO; and David Lambert, Senior Vice President and CFO.

This call is open to all investors and members of the media. However, the Q&A portion of the call is intended for the professional investment community only. We ask that other participants please follow up with any questions by calling me at 1 (800) 858-5347. I encourage you to visit our website, www.plumcreek.com. There you will find our press release and supplemental financial statements for the first quarter of 2012.

Before we begin, I'd like to take this time to remind everyone that certain of our statements today will be forward looking, involving known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ from those expressed or implied. These risks and factors are routinely detailed in our filings with the Securities and Exchange Commission. Following today's prepared remarks, we'll open up the call for your questions.

Now I'll turn the call over to Rick.

Rick R. Holley

Good afternoon. Plum Creek performed well in the first quarter. We took advantage of attractive pulpwood markets in the U.S. South and began harvesting our recently acquired timber deed in the Gulf South region.

Our manufacturing segment continued to perform well with improving demand for panels and lumber. Performance in our timber business was generally as we expected, although pulpwood prices were better than we initially thought and sawlog prices a bit weaker.

Timing differences in sales from our Real Estate segment led us to the shortfall of our initial expectations for the quarter. This will resolve itself over the course of the year, so our outlook for the year with respect to both earnings and real estate sales remains unchanged.

We believe there's good case to be made for a long-term growth of wood products exports from the United States. Thanks to a combination of globally-priced competitive softwood fiber and growing demand in emerging markets. The impact of Chinese demand on West Coast markets has been meaningful over the last 2 years. We have always experienced and continue to expect significant short-term variation in Chinese demand from one period to the next. However, we believe that their economies' continued growth will require a long-term presence in North American timber and lumber markets to meet their economies' needs.

We continue to work to facilitate the development of export markets for both sawlogs and biomass, which will go to Western Europe, China, India and Turkey. Our goal is to bring this incremental demand to the geographic markets where we have a presence.

During the first quarter, we exported approximately 55,000 tons to China from Oregon, 30,000 tons to Turkey from the U.S. South. We believe that in 2012, we can grow our export sawlog business to 300,000 tons or more, roughly a 50% increase from 2011 levels.

We continue to actively manage our timberland portfolio. Late in the first quarter, we completed a large non-strategic timberland sale of approximately $84 million. The property sold consisted of 70,000 acres of Southern timberlands located primarily in the Florida panhandle. The price of over -- just over $1,200 per acre is a good value for these lands and reflects the young age of the forest, the local timber market and a higher proportion of hardwood lands when compared to Plum Creek's typical southern forest.

We continue to evaluate timberlands for both purchase and sale. During the quarter, we capped the bank markets to refinance our revolving credit agreement, and we replaced the maturing term loan agreement. As you can see from our press release, both financings were priced very attractively. The 5-year revolving credit agreement at LIBOR plus 1.25%, and the 7-year term loan priced an effective net interest cost of LIBOR plus 1%.

With these refinancings complete, we have a well-laddered debt maturity schedule at very attractive rates. Our balance sheet is in great shape, and we have excellent liquidity.

Now David will talk about the quarter and our outlook for you.

David W. Lambert

Thank you, Rick. Our first quarter results of $0.18 were about $0.05 below the midpoint of our guidance range, while the reduction is attributable to the timing of sales from our Real Estate segment. We closed on $100 million of sales during the quarter rather than the $120 million as we initially expected.

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