Rayonier Inc. REIT

Welcome, and thank you for joining Rainier's first quarter 2020 teleconference call. At this time, all participants are in a listen-only mode. During the question and answer session, please press star 1 on your touchtone phone. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Mark McHugh, Senior Vice President and CFO. Sir, you may begin.

Thank you, and good morning. Welcome to Rainier's investor teleconference covering first quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rainier.com. I would like to remind you that in these presentations, we include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release in Form 10-K, filed with the SEC, lists some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page two of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure in our earnings release and supplemental materials. With that, let's start our teleconference with opening comments from Dave Nunez, President and CEO. Dave?

Thanks, Mark, and good morning, everyone. First, I'll make some high-level comments before turning it back over to Mark to review our consolidated financial results. Then we'll ask Doug Long, our Senior Vice President of Forest Resources, to comment on our U.S. and New Zealand timber results. and following the review of our timber segments, Mark will discuss our real estate results as well as our outlook for the remainder of 2020. Before discussing our results for the quarter, I'd like to briefly address our response to COVID-19 as well as provide an update on the Pope Resources merger and recent financing transactions. First, on behalf of our company, I'd like to extend our sympathies and best wishes to all of those who've been impacted by this global pandemic. Here at Rainier, we've responded by prioritizing the health and safety of our employees and contractors, as well as their families, while working to ensure business continuity. In mid-March, we implemented a work-from-home model for all office employees and instituted enhanced safety guidelines for field employees in an effort to do our part as a company to mitigate the spread of COVID-19. On March 19, the U.S. Department of Homeland Security issued a memorandum providing guidance on the essential critical infrastructure workforce, which designated the forest products industry as a critical infrastructure industry with a responsibility to continue operating during the response to the COVID-19 emergency. This designation was important to allow our industry to continue to supply critical items such as tissue paper, cardboard boxes, and construction-grade lumber to end users as we manage through this crisis. In New Zealand, however, the government instituted more stringent lockdown measures across a broader range of businesses, including forestry, beginning in late March. New Zealand ended these lockdown measures effective April 28, and we are currently in the process of restarting our operations there on a phased basis. Overall, while this has certainly been a tumultuous period, we believe we are managing through it well. I'm very proud of how our employees have answered the call to keep our business running amid this pandemic while observing the necessary social distancing and safety protocols to mitigate the further spread of COVID-19. On a more positive note, our previously announced merger with Pope Resources is proceeding as planned, and we expect to close the transaction on May 8th. pending a successful vote of Pope's unit holders at a special meeting scheduled for May 5th. I'm also pleased to report that we recently completed a series of transactions to secure financing for the cash component of the merger consideration, which Mark will discuss later in more detail. Additionally, during the first quarter, we closed a large disposition consisting of roughly 67,000 acres in Mississippi for net proceeds of $116 million. Taken together, these transactions significantly strengthened our balance sheet, bolstered our liquidity position, and completed the financing required to close the Pope acquisition. I'm extremely proud of our team for their dedication and focus on completing these transactions over the last several weeks, especially given the unprecedented market conditions that we were facing. I'd also like to thank the team at Pope for their perseverance as we've worked through our integration planning process, primarily via phone calls and video conferencing. I can't speak highly enough about their professionalism in the midst of very unusual circumstances, and I'm very excited to welcome them into our Rainier family. Working through this integration process has really reinforced the strong cultural fit between our respective companies, and we're all very excited about the future prospects and a number of other members of our combined organization. With that, I'd like to now switch gears to briefly discuss our quarterly results. For the first quarter, we reported adjusted EBITDA of $47 million and pro forma net loss of $300,000 or roughly break-even EPS. Overall, I'm pleased with how our team navigated challenging market conditions amid the COVID-19 pandemic to deliver strong operational results across our timber segments. Our southern timber segment reported adjusted EBITDA of $33 million for the quarter, which was below the prior year quarter but well above the last three quarters and generally in line with our expectations and prior guidance. We enjoyed another strong first quarter volume result driven by continued strong pulpwood demand. Overall, our southern timber segment continues to enjoy very high margins and relatively low cash flow volatility. In our Pacific Northwest timber segment, we achieved adjusted EBITDA of $10 million, which is our strongest quarterly result since the second quarter of 2018. While delivered pricing stayed relatively flat versus 2019, we enjoyed some very strong stumpage sales early in the quarter, reflecting a significant pickup in domestic mill demand. Market conditions understandably deteriorated towards the end of the quarter with COVID-19 related mill shutdowns. So we're very happy to have taken advantage of these strong stumpage sale opportunities early in the year. In our New Zealand timber segment, we reported adjusted EBITDA of $10 million, which represents a significant decline from the prior year quarter. The New Zealand timber segment experienced significant headwinds in the export market in Q1 as China instituted strict lockdown measures to contend with the impacts of COVID-19, which significantly limited the flow of export logs. Later in the quarter, as China reopened its markets and demand came back online, New Zealand implemented its own lockdown measures to contain the spread of COVID-19, which further limited our ability to move volumes. As discussed earlier, we're currently in the process of restarting operations in New Zealand and are encouraged by the near-term demand response. Lastly, our real estate segment reported first quarter adjusted EBITDA of negative $1 million as we sold fewer than 1,000 acres during the quarter, excluding our large disposition in Mississippi. While this result is certainly below our average run rate expectations for the year, we had anticipated a very light first quarter in real estate due to the timing of closings. And we further expect a significant pickup in transaction volume in the second quarter. With that, let me turn it back over to Mark for a detailed review of our consolidated financial results.