CatchMark Timber Trust, Inc. Class A

Good morning and welcome to the Catchmark Timber Trust's results for the first quarter 2021. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Ursula Godoy, Chief Financial Officer of Catchmark. Please go ahead.

Good morning, and thank you for joining us for our review of Catchmark Timber Trust results for first quarter 2021. I am Ursula Godoy, Chief Financial Officer of Catchmark. Joining me today on the call are Chief Executive Officer Brian David, Chief Resources Officer Todd Wright, and John Racer, President of Triple T Timberland. During this call, Catchmark management will make forward-looking statements. These forward-looking statements are based on management's current beliefs and the information currently available. Catchmark's actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations. For more information about the factors that could cause such differences, we refer you to our 2020 Annual Report on Form 10-K and subsequent reports that we filed with the SEC. Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our first quarter 2021 earnings release and financial supplement, which are posted on our website and in our Form 10-Q filed with the SEC yesterday, May 6, 2021. After our presentation, Brian, Todd, John, and I will be pleased to answer any of your questions. Now, I turn over the call to Chief Executive Officer Brian Davis.

Thanks, Ursula, and thank you all for being on the call with us today. All of us at Catchmark hope you, your colleagues, families, and friends continue to stay healthy and safe. 2021 got off to an exceptionally strong start for Catchmark, driven by higher timber prices, both in the U.S. South and Pacific Northwest, and we continue to achieve significant pricing premiums over Southwide market averages for our harvests in the U.S. South while capturing prices significantly higher year-over-year in the Pacific Northwest. Low interest rates, strong housing market demand, and increased home repair and remodeling activity together with continued strong mill activity resulted in higher timber prices during the quarter. As discussed in our last call, the market has been building to a point of price inflection for some time. This began with British Columbia mill closures a couple of years ago the relocation of capital and corresponding mill capacity expansion in the U.S. South, and now the potential for a more sustained and durable housing recovery. These factors are all now driving improved product pricing in select southern micro-markets, and a resilient housing market is encouraging consumption of wood products, reducing the log oversupply in the U.S. South. Various demographic trends, including millennials forming households and aging-in-place baby boomers, are helping generate demand for housing that is outstripping supply and igniting new construction. In fact, privately owned housing units authorized by building permits were at a seasonally adjusted annual rate of nearly 1.8 million in March, more than 30% above the level a year ago and the highest since 2006. Add in the ongoing significant economic stimulus, and the result is a buoyant timber product market, which Catchmark is benefiting from. In addition, we should continue to gain from pricing premiums we consistently achieve from our prime timberlands located in premier mill markets, as well as our standing as a preferred and reliable supplier to our customer base as we utilize a differentiated operating model. employing delivered sales supplemented by our opportunistic stumpage sales. We believe our business model is particularly well-suited to excel in the current market. For the first quarter, tracking long-standing company performance, Catchmark realized increases in U.S. South Pulpwood and Salt Timber stumpage prices of 8% and 9%, respectively, compared to prior year quarter, outpacing 3% and 4% increases in U.S. Southwide average prices. Our Pacific Northwest salt timber price increased 15% year-over-year due to continued strong demand fundamentals. As planned, total harvest volumes during the quarter were lower year-over-year. Importantly, harvest volumes remain on track to meet full-year guidance as we maintain consistent annual productivity on a per-acre basis with the potential to sustain current strong timber pricing. Timberland sales are also on course to meet full-year guidance. Although first quarter timberland sales were lower year over year due to selling 40% fewer acres, per acre timberland sales pricing increased significantly, and we expect to complete a substantial number of sales in the second quarter. Investment management results improved during the quarter due to contributions from the Dawsonville Bluffs Joint Venture and last year's amended Triple T Asset Management Agreement. Dawsonville capitalized on the strong market demand for mitigation credits, while higher asset management fees earned from Triple T resulted from last year's successful renegotiation of the wood supply agreement with Georgia Pacific. We continue to make progress in pursuing recapitalization opportunities for Triple T in the wake of the renegotiated Georgia Pacific wood supply agreement, which allows Triple T to capture market-based pricing for harvests and expands Triple T's ability to sell harvests and timberlands to third parties. Since our investment with a consortium of institutional joint venture partners nearly three years ago, we believe we have significantly increased Triple T's per acre value and delivered improved financial performance through our superior operational management and as a result of the renegotiated Georgia Pacific Wood Supply Agreement increased opportunities to market products to third parties within Triple T's deep regional woodbasket, and enhanced forest management and silvicultural practices, which have improved forest attributes and standing forest inventory. Looking at our capital structure, there are no major changes during the quarter. We maintain healthy liquidity, stable leverage, and advantageous management of debt capital. Yesterday, we also declared a cash dividend of 13.5 cents per share for common stockholders of record as of May 28th, payable on June 15th. In sum, it was a very strong quarter. Timber sales, harvest EBITDA, investment management EBITDA, net loss, and adjusted EBITDA improved year over year. Again, most telling. Timber sales revenue increased on the strength of higher pricing, resulting from improving timber market dynamics. With a positive outlook for pricing, our business model can continue to leverage the benefits from the current operating environment, and we remain well positioned to generate predictable, stable cash flow and deliver fully covered dividends, our primary objectives. Now, Ursula will cover first quarter results in greater detail and review our capital position.

Thank you, Brian. We had an excellent quarter with results bolstered by our harvest operations. which not only benefited from higher pricing for timber sales, but also capture pricing, which comfortably outperform market averages in the US South, where we concentrate our activities. Our three business segments, harvest operations, real estate, and investment management are all performing well, and we are on plan to meet four year guidance. For the quarter ended March 31st, 2021, Kashmar generated revenues of $27.7 million compared to $27 million in first quarter 2020, a 3% increase. Timber sales revenue totaled $20.1 million, 11% higher than first quarter 2020 as a result of higher timber prices partially offset by lower harvest volume. As expected in our harvest plans, Total harvest volume decreased to 525,000 tons from 595,000 tons a year earlier. The planned year-over-year harvest volume reduction resulted from recent Timberland sales and strategic capital recycling initiatives as we have maintained consistent annual productivity on a per-acre basis. Net loss improved by 87% to $0.6 million compared to $4.2 million in first quarter 2020, driven by higher total revenues and lower expenses. Adjusted EBITDA of $12.9 million was comparable to first quarter 2020, despite lower harvest volume and fewer acres sold, highlighting strong pricing for timber and timberland sales. Breaking out adjusted EBITDA by segments. For the first quarter, harvest EBITDA was $8.9 million compared to $8.6 million in first quarter 2020, a 4% increase. Real estate EBITDA decreased 30% year-over-year to $3.1 million due to selling 1,200 fewer acres, but we achieved an 18% higher per acre price over first quarter 2020. Investment management EBITDA increased 32% year-over-year to $3.8 million, helped by strong market demand for Dawsonville Gloves mitigation credits and the increased asset management fees from Triple T. We also paid a dividend of 13.5 cents per share to stockholders on March 15th, which was fully covered by cash from operations. Now, let's turn to CashMart's capital position. We have maintained ample liquidity and built a strong capital foundation for growth. At the same time, we continue to evaluate strategic capital recycling opportunities to generate proceeds for funding desirable Timberland investments, paying down outstanding debt, repurchasing shares of our common stock, and taking on other capital allocation priorities. As of March 31st, 2021, The company had $151 million of borrowing capacity available under our credit facilities, consisting of $116 million under the multi-drill term facility and $35 million under the revolving credit facility. Attractive borrowing costs stagger long-term maturity in a favorable mix of fixed to floating rate debt continue to highlight our active debt and interest rate management strategy. As of March 31st, $13.7 million still remain in our share repurchase program for future common stock repurchases, as we did not repurchase any shares under the program during the quarter. Our overriding objective and commitment remain to deliver fully covered quarterly dividends. And during the quarter, stockholders receive $6.6 million in dividend distribution, fully covered by net cash provided by operating activities. Now, Todd will review operations, which, as we have highlighted, produce extremely solid results in the quarter. Todd?

Thank you, Ursula. As strong fourth quarter 2020 housing fundamentals carried over into the first quarter, Catchmark continues to benefit from prime timberland holdings and leading mill markets, both in the U.S. South and Pacific Northwest. as well as from our delivered wood model supplemented by opportunistic stumpage sales. Robust housing continued to drive strong sawmill production, which has been running at better than 90% capacity. Mills have not been building finished lumber inventories, but rather selling lumber product as quickly as they can produce it, with order files being filled four to six weeks out. New mill consumption helped generate increased delivery rates within our superior micro markets, which contributed to a 9% increase in harvest EBITDA per acre year over year. Wet weather also limited overall logging production, which contributed to light mill inventories and added pressure on both sawmills and pulp operators to meet market demand. In addition to our steady delivered production, we also capitalized on exceptional stumpage sale opportunities that captured excellent pricing, which helped boost our overall harvest EBITDA. Total timber sales revenue increased 11% year over year to $20.1 million, driven by a $3 million increase in the Pacific Northwest, offset by a $1.1 million decrease in the U.S. South, in line with the planned decrease in a regional harvest volume. In the U.S. South, we again realized stumpage prices for both pulpwood and saw timber at significant premiums to Timber Mart South's south-wide averages, 57% for saw timber and 27% for pulpwood. In the Pacific Northwest, Timber sales revenue increased 161% year-over-year to $4.9 million and harvest volume increased 96%. We capitalized on both favorable market conditions and our delivered wood sales model to generate a 15% increase in saw timber pricing. Now let's review timberland sales. Due to market timing, we sold fewer acres in first quarter 2021 compared to first quarter 2020. 1,800 acres versus 3,000 a year ago. But we achieved an 18% increase in average price per acre of $1,923. The improved per acre sales price resulted in part from higher year-over-year average merchantable timber stocking levels. While higher than first quarter 2020 sales, these stocking levels were still well below the company portfolio average, 21 tons per acre versus 41 tons per acre. The sales also generated an improved margin, 36% in first quarter 2021 versus 28% in first quarter 2020, as we continue to focus sales on acres that are less productive or have lower near-term cash flow potential. As a result of selling fewer acres, Timberland sales revenue and real estate EBITDA were down 30% year over year. However, we're benefiting from a strong pipeline of Timberland sales transactions in the second quarter and have closed on nearly $4.4 million in sales quarter to date. We could transact up to $10 million in total timberland sales for the full quarter. Market pricing remains favorable, and we are on track to meet disposition targets for the full year. Looking ahead, we expect sawmills to continue to run at near full capacity with the nation's housing market and the repair and remodeling business staying robust. In addition, export markets are reviving to compete with domestic markets for volume, creating more price tension in many of our micro markets, both in the US South and Pacific Northwest. Strong OSB markets also should help support pulpwood prices as we move into summer months when thinning activity occurs and prices typically trend down. We reiterate our full year guidance for harvest production of between 2 million and 2.2 million tons, reflecting consistent annual productivity on a per acre basis. We also continue to anticipate third quarter will be our highest production quarter, as seasonally tends to be the case. Regarding regional activity, we continue to expect 95% of full year harvest to come from the U.S. South and most of our Pacific Northwest harvest to occur during the first two quarters. In short, all signs point to a solid second quarter for Catchmark's harvest operations, supported by our delivered wood model and stumpage sales, with momentum carrying forward to meet full-year 2021 guidance.

Brian, back to you. Thanks, Todd. The United States appears to be emerging from the COVID-19 pandemic. The economy looks strong. Catchmark's timber sales are benefiting from the improving housing market, advantageous mill expansions in and around our micro-markets, and solid demand for pulpwood products. Our extremely focused and proven operating strategy using delivered wood sales and opportunistic stumpage sales continues to produce pricing premiums. We continue to benefit from concentrating our investments in Premier Timberlands and select leading mill markets. And we are profiting from superior execution of our strategy. During the year, we will continue to move forward on the Triple T recapitalization strategy. a prime objective since last year's renegotiated Georgia-Pacific Wood Supply Agreement. And we will continue to evaluate new growth opportunities while remaining committed to optimizing our portfolio and strengthening our balance sheet further, including through attractive capital recycling opportunities as they arise. As noted, we are on track to meet full-year guidance, deliver an attractive dividend fully covered by cash flow from operations, and continue to create long-term shareholder value through sustainable and responsible stewardship of our highly valuable timberlands. Thank you for your attention today. And now Ursula, Todd, John, and I will be happy to take your questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Anthony Petinari with Citi. Please go ahead.

Good morning, guys. This is actually Randy Tull sitting in for Anthony. You guys talked about – good morning, good morning. You talked about strong land sales pipeline with up to $10 million in sales and 2Q if everything goes well. Do you anticipate Timberland sales possibly exceeding the $13 to $15 million for the full year that you had guided to previously?

Hey, Raina, this is Todd. As it stands right now, that would get us right in line with kind of that 1% to 2% we target for the year, so we really don't see pushing beyond that.

Gotcha.

As we look at that, but no.

Okay, yes. So no additional volume. Got it. And then maybe just switching to actual timber sales. Can you just comment broadly on what you're hearing from mill customers to the extent you can? Maybe how are log decks at the mills? Are customers adding shifts? You know, just any color there would be very helpful.

Absolutely. So as far as kind of what the log decks look like. It's kind of a continuation of what we saw coming out of Q4 and rolling into Q1 in that they weren't really building a lot of inventory on either inbound or outbound because everything that was rolling in was being produced just as fast as they could. As we've worked through kind of the fall and winter months, you begin to see a little bit of log inventory building, not much. Lumber inventory still remains very light. And that's kind of across the board at any producer that we're looking at or working with at this point. Additionally, as you move into summer months, traditionally they do not carry a real heavy log inventory because you can run into, if you had, for some reason you weren't turning your inventory over, you could run into some blue stain issues and things like that. So really a lot of equilibrium in there right now between production out of the woods, also lining up with, you know, mill production there. So as far as adding shifts, you know, I think a lot of the producers would love to do that. They're running the shifts they have right now at kind of a max capacity, if you will. But the biggest constraint being labor. You know, we've heard multiple stories of, you know, employees walking in and kind of saying, hey, you know, I'm going to, I think I'm going to go home for a little while because my stimulus check has come in and, which is a little bit of a head-scratcher because these are pretty good-paying jobs in these areas that are $20 an hour, and these are typically in rural areas. So they are just labor-constrained in order to add additional shifts and capacity there. So running as hard as they can at this point, and should other shifts get added, that would definitely be an adder, and you would see an uptick in production. But right now, everything we're hearing and seeing is kind of the two shifts at near-max capacity for the mills right now.

Got it, got it. Maybe shifting over to freight, a lot of companies are reporting higher freight costs with expectations for that to continue into the summer. Are you seeing any impact from that and does the delivered log model kind of shield you from that because you're talking to the same guys or just any color there would be helpful as well?

Yeah, absolutely. And you kind of really hit the nail on the head there from another aspect of the delivered model. benefit that we see is, you know, it's not just to the end user and the customer. It goes back to the contractor force that we work with, you know, because there is the consistency day in, year over year kind of ability to know where you're working. You're going to have a steady place to go. It helps manage our costs a little better. From a customer standpoint, you know, we have quite a few fuel adjustment adders in place or you know, that can be positive or negative depending on what is going on with fuel at the time, but we have adjustments in place so that it's not something that has to be completely, you know, born on the landowner as far as covering that cost. So hauling traditionally, kind of to the root of your question here, you know, hauling tends to be the greatest bottleneck that we see in the industry, and it's been that way for a long time. Just trucking can be troublesome, and you've seen it go from where Producers own all their own trucks to where they contract it all out. It's been back and forth. You know, because of that and fuel costs being the biggest driver there, we do monitor this very closely. We work very proactively with producers so that, you know, we're not getting cut short on, you know, on the production side of things. So it's on our radar consistently, but fortunately we have some ways to mitigate some of that impact.

Got it. Okay. Yeah, that's very helpful. I'll turn it over. Thank you.

Oh, you bet. Thanks, Randy.

The next question comes from Paul Quinn with RBC. Please go ahead.

Thanks very much, Paul. Maybe you could give it some more color on these Timberland sales in the quarter. I mean, it looked like the stocking was down a higher percentage of hardwood. Is there something specific about the location that gave you that sort of quarter-over-quarter premium in price?

Yeah, so really it falls in line with the focus we've had of really trying to continue to focus on tracks that are maybe a little less productive, lower cash flow, near-term cash flow, as we've talked about. But the real driver behind it, it's been interesting, is that its adjacency owners, the joiners, want to own a little – bigger piece of the pie, if you will. You know, we're not growing any more land, so there's some scarcity there. You've got this greater demand of flight of folks coming out of cities, wanting to maybe have a little more space. So really, it's been a host of different buyers, from family trusts to individuals to those that just would rather place money in hard assets instead of, you know, potentially speculating on the market and those kind of things. So There's been some 1031 money that needed to be placed as well, and you're just seeing a greater demand. We knew Q1 would be a little light, and Q2 has come in very, very positive for us, and just kind of the supply-demand dynamics. There's nothing real unique about the location other than we have high-quality holdings on the front end that we've acquired, and that carries through to the back end, too, whenever you have a disposition opportunity.

Okay, so for the Q2 expected sales that are around the $10 million mark, that should be up at the $1,900 per acre as opposed to the high $1,600?

It's going to track higher than the $1,600. There's still a few deals pending and we're working through, but yes, we would anticipate that being stronger than anything around $1,600 and then probably closer to that $1,800, $1,900 mark. Okay. And then...

I guess back to Triple T, you know, I guess you're working through this recapitalization, but just wondering what are the main obstacles to be able to get that done? I mean, it seems like we've been talking for a while and just trying to understand that a little bit more.

Morning, Paul. This is Brian. Yeah, we have been talking through it. So you have to remember, you know, it is a sequencing of, you know, managing 1.1 million acres is not a small thing. So pretty much for the first year, we were getting that operation up and running. It was not performing as well. When we took it over with John Razor's leadership, we got that asset up and humming. The next step was getting a market-based wood supply agreement, which we completed last summer. The next part after that, Paul, you have to really think about is when you're a buyer for that asset, you want to make sure any amendments to the wood supply agreement are tracking to what you wrote down and what you negotiated. And so you have to demonstrate that track record that the wood supply agreement and the market price mechanism is working. And so really when the calendar turned is when we really worked in earnest. We engaged last year, Perrello Weinberg Partners, as well as Raymond James to help us with the execution of the recapitalization strategy. If you're familiar with Pro Weinberg Partners, the banker on that has represented this asset a couple of times, including the original disposition from the industrial ownership of this. And so we have a great team working on this. And so the next part of this is really, you know, the positive sentiment that has gone into the sector capital formation around this. And so anything of this size will take some time to close on and move on. It's not a 60,000 discreet acres sitting in western Alabama that can close inside of 90 days. So these things do take time. We indicated July of last year we're operating on a two-year clock. And we feel from a progressing standpoint, while it may not be as transparent to you or the market, we're encouraged by the amount of work that we've been able to complete internally. And we're on track to hit our hurdles. And so we're encouraged to the point in time where we can demonstrate that to the marketplace.

Okay. Thanks for that. And then just lastly, you know, we've had some of your peers on the Timberland Reefside report, you know, pretty much flat pricing in the U.S. South specifically. You know, for quite a while, you guys seem to have seen upticks. Just wondering how sustainable you think, you know, your – I guess price inflation is going to be going forward.

Right. So that's under the category. You won the battle. Are you going to win the war? Right. And so Paul, you've been following the sector as long as anyone else has. And, and everybody said it's been around the corner and, you know, we're cautiously optimistic. I think we talked about, um, on our last earnings call, we were expecting a price appreciation that kind of at mid three, 5% range. And obviously we outshot that on a positive basis. Um, but it's for all the reasons what we thought. It really is micro-market driven. You have the demand fundamentals. We show the heat maps. And there's nothing, as we sit here four weeks into this 13-week quarter, we still feel very confident of where we are relative to be able to reproduce the type of pricing that we showed in the first quarter. The sustainability on that, you have to sit there and think, well, what would cause something for it to go in the other direction is the only way we're really thinking about it. It is Is there another relapse associated with COVID? Is there a change in sentiment in housing? But when you sit here today, you listen to house builders. I read yesterday that one builder was able to pass along between January and March a 10% increase in sales price of their homes. And so you have this pent up demand element. We think this is a three to four year run, but we won't know until we get a chance to look back, Paul. So I'm cautious. But I do like where we are as we sit here during four weeks into the second quarter. Great.

Thanks for the color. Best of luck, guys.

Thanks, Paul.

Appreciate it.

Again, if you have a question, please press star then one. The next question comes from Dave Rogers with Baird. Please go ahead.

Yeah, good morning, everybody. I just wanted to follow up on some things you touched on earlier. I guess, you know, harvest revenues up 11%, EBITDA up only four, so it's costing you more to kind of get that product to market. I don't know if that's just a mix shift, if you're seeing more pressure on labor. And I guess I was curious on what you're seeing kind of as you move into the second quarter with kind of broader labor issues, not necessarily at the mills, but maybe getting your own product into market and if you'll be able to hold margin or if that's going to become a greater pressure as the year moves on.

Sure, Dave. You know, really what you saw on some of the cost side of things is a reflection of, as you know, we basically doubled quarterly production in the Pacific Northwest. We've got some higher inherent costs of logging out there. There was some additional road work and those kind of things, but kind of associated. And then also you did have some wet weather in the south, and so a little bit of increased cost to be able to keep production going, if you will. But nothing out there that says, hey, this is going to be a trend going forward. We still feel very much in line with kind of what we look at on an annual basis tied directly back to the total production that we have scheduled. So nothing alarming there or anything real trending a different way. In regards to labor, kind of goes back to Randy's question earlier around the hauling side. We're not seeing any real issues from a, let's call it a log production, you know, stump to truck. where there tend to be a little more pressure, a little bit more of the bottleneck is around the hauling side. And so just the ability to keep drivers in trucks has tended to always be a little bit of a challenge. Nothing that is causing us concern at this point in time, because we do have dedicated crews that we've been working with, you know, and these are crews that, you know, while we may work track to track, this is like 10, 15 year relationships with these guys. So you have a long track record history here. It's all about the relationship that we've built with them. And so a lot of them, knowing they have stability behind our business and what we're doing, if they're utilizing a lot of contract labor and that becomes an issue, they would have the ability, even though they may not want to, they would have the ability to go out and they could purchase their own trucking to fill in those gaps and have a steady employee in it. So it's an ebb and flow part of the business. We monitor it closely, but we are not really seeing anything that would lead us down the path of major increased costs. I mean, you'll have the seasonality of, you know, you do more thinning, you'll see some of your cut and haul costs go up just because there's more handling, a little more labor involved in moving that product. Should fuel begin to go up, what we would see pressure on, we'd have to work very closely with our end customers, is making sure those fuel adjustments are in place and that we're able to, you know, kind of pass some of that through the whole value chain and not trying to bear that cost all on our own.

That's helpful, Todd. Thanks for that. And then I guess, Brian, maybe just to follow up on the triple T question, and if I missed this part of the answer, I apologize. But you described the process. I guess I'd love to know where you are in the process in terms of, you know, are you actually negotiating with a small number of people? Is it still marketing? Is it still feelers? I guess any added color down that road might be a little more helpful.

Dave, great question. Do appreciate it and understand the desire to understand where we are in the process. How I would explain it is that we're in the, I would call it the bottom of the third inning, maybe early fourth inning as it relates to a nine-inning game. And hopefully that can help with you give some context around where we are in the process. All right. Thank you.

The next question comes from Albert Sebastian with Prospect Advisors. Please go ahead.

Thank you, and good morning.

Good morning, Al.

A couple questions. First, on the land that was sold in the quarter, you indicated 21 tons per acre versus your existing portfolio, 41 tons per acre. Can you give us some sort of indication, the EBITDA associated with the land sales?

Are you talking about the productivity from the land in which we would be selling?

Yeah, I'm just trying to get a feel, Brian, for sort of the multiple it was sold at on an EBITDA per basis, the 1,800 acres sold. Yeah.

Yeah, so we can work with you this offline, but the way to think about it is if you have an average portfolio of 41, that means we sold off 20 tons off of that asset. And so you've taken off the productivity associated with that asset in of itself. And so your near-term expectations on cash contribution would be limited really to recreational leases in which you'd be earning on that property, which would be offset by property taxes. And our approach to regular way retail sales is essentially we do a cash flow analysis, net present value of saying is it better to sell at these prices or hold it. And so essentially from a creative or dilutive basis, we feel like hitting the bid at those prices is actually creative to us. We can step it through for the mechanics that go along with that. Yeah.

No, it sounds like the EBITDA was pretty negligible. I mean, it's close to zero.

Correct.

That's a good thing to be able to sell land at very high multiples given where your share price is trading at. So I assume the land sales that you're going to have, the $10 million this quarter, sort of would be of a similar nature where the EBIT associated with the land sales is pretty low. Similar to the type of sales you had in the first quarter.

That's right. I don't see anything that we've got out there that's going to be, you know, drastically different than what we've already been moving to. It really fits into the model and kind of our approach and focus of what we're moving as far as a disposition program. So, yeah, I'd be very much in line.

Yeah, just touching on what others have asked about you know, higher costs. There's one thing I will say that does sort of stick out in your numbers here is, yeah, this contract logging and hauling costs went from, you know, up about $1.5 million in the quarter year over year. So just drilling down, what can we expect there? Is it going to be that – because you would expect, I mean, if you're – You know, if your harvest volumes are down, one would expect that your hauling costs would be maybe flat to down, but they were up actually quite a bit. So can you give us some sort of indication of where you think that's going to go for the remainder of the year?

Hey, Al. So on the contract logging and hauling side, you're right. The cost went up by about $1.5 million, but really that is driven by the mix, the regional mix, if you will. As Todd alluded to earlier, we increased our harvest volumes from the Pacific Northwest, which has a higher contract logging and hauling rate than in the southern region. And so really, it's really driven by the regional mix. In the prepared remarks Todd also touched on, we continue to expect that overall for the year, 95% of our harvest is going to come from the U.S. South. and the other 5% is coming from the Pacific Northwest. So hopefully that can still give you a little bit more guidance as to the remainder of the year and what you could expect.

Yeah, and Ursula, since I have you on the line, just one other quick question. I noticed that other liabilities was down quite a bit, $32 million to $15.8 million. Yep. Yeah. So, what was the reduction? That was just for the quarter. So, what was the reduction there?

Yeah. The reduction there really has to do with the mark-to-market on the swaps that we have in place. So, it's a non-cash.

Okay. Fantastic. Thank you. I appreciate it.

Thanks, Al.

This concludes our question and answer session. I would like to turn the conference back over to Brian Davis for any closing remarks.

Thanks, Andrew. And thank you for joining us today. And until our next call, have a great summer and remember to show your mom's appreciation this weekend. Take care.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.