Plum Creek Timber Co. Inc. Earnings Call Nuggets: Manufacturing Pricing, Timber Deed
Michael Roxland – Bank of America Merrill Lynch: This is actually Mike Roxland in for George. Just quickly on the manufacturing segment, is there anything that was unexpected during the quarter? I know it’s neither here nor there, but pricing came in a bit weaker than we were expecting. Results also seem to be a bit weaker than what some of your competitors have posted given the run up in wood products prices. I just wanted to get your thoughts on what you saw transpire during the quarter?
A Closer Look: Plum Creek Timber Earnings Cheat Sheet>>
Rick R. Holley – President and CEO: We actually thought that, especially our panels business did quite well. I mean prices were up just a bit. We had much higher volumes and therefore profitability was above certainly where we expected it to be for the quarter. Our lumber business did not do as well as some of the other lumber businesses you’ve read about because it’s kind of non-commodity lumber business. It makes pine boards, go into the Home Depot’s of the world and the prices there did not change as dramatically as prices for Southern yellow pine, lumber products and more commodity products here on the Coast. So in good times we maybe don’t get as much up lift in our lumber business, but in bad times we’ve made money where others haven’t. So I think it is just the nature of the markets that we serve.
Michael Roxland – Bank of America Merrill Lynch: With respect to the other – do you have contracts those products such that is there a lag there or you will receive the benefit of the run up in lumber maybe a quarter or two out?
Rick R. Holley – President and CEO: No, not really. I mean we price it at the time of the shipment to customers. I mean we might have a contract but it’s for X volume that’s going to ship next week. So these are not long-term contracts where they re-price quarterly or that sort of thing like we do in some of our supply agreements in the log business.
Michael Roxland – Bank of America Merrill Lynch: Just a quick last question. Wondering if you can give us a sense of what the log decks look like sequentially? Think on the last call, Rick you had mentioned that or suggested that the log decks in the U.S. South were potentially elevated certainly relative to the North. So obviously in the sense what they look like today?
Rick R. Holley – President and CEO: I think in say the Georgia, Florida area because they are so many logs available due to the dry weather I think log decks they can fill them pretty readily, whereas on the west side of the South, Louisiana, Arkansas, Mississippi, would have had more rainfall, log decks are removed at short run supply in both paper and lumber mills. So I think there’s a little bit more concern by customers on that side as compared to the Gulf – the Atlantic South. In Oregon we seen the same thing, we would have some wet weather and therefore log decks are a little shorter than they were and therefore that’s why we are seeing some pickup in domestic prices here.
Joshua Barber – Stifel Nicolaus: I’m wondering if you guys could explain to us a little bit the mechanism with the timber deed now that its – I guess you are using the credit line with the term loan to finance it. How does that pay down as you are recognizing the interest and the cash flow from that? will that just be you are paying down a portion of that term loan and then returning the excess cash in form of a dividend or does it all sweep to pay down the credit line initially.
David W. Lambert – SVP and CFO: There is no sweep or tie to the credit line we just finance the timber deed using the credit line front and there is no scheduled payments. So cash flows from than that can be used for any form.
Joshua Barber – Stifel Nicolaus: Would you be planning to actually use some of that to pay down or would you assuming now the deed is finished you would have the line paid down is that correct.
David W. Lambert – SVP and CFO: Yes. We look at our debt profile and try to keep it at appropriate levels at all times and that, but we would expect to pay down some of that over that time period.
Joshua Barber – Stifel Nicolaus: So there would be some form of cash that’s either returned in the form of dividend and the rest would be simply be going for principal repayments.
David W. Lambert – SVP and CFO: That’s correct.
Joshua Barber – Stifel Nicolaus: When it comes to the real estate sales, is there a target acreage mix that you guys have to sell for this year and what would you expect the mix between the nonstrategic both large and small versus HBU development and rural real estate for the rest of the year.
David W. Lambert – SVP and CFO: The mix we would expect virtually no development land. So most of the development activities as you know is really going through an entitlement process and those markets come back and these properties are entitled they’ll be sold at that point in time. If you look at the mix of nonstrategic and higher and better use I suspect its conservation there as well as probably half age beaten conservation and half will be nonstrategic as far as acreage go. Generally the HBU are little higher value therefore they’ll be a little proportion of our total revenue.