CatchMark Timber Trust, Inc.
Q4 2015 Earnings Call Transcript

Published: 10 Mar 2016

[Operator:]

Good morning, everyone and welcome to the CatchMark Timber Trust Fourth Quarter 2015 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. At this time, I would like to turn the conference call over to Mr. Brian Davis, CatchMark’s Chief Financial Officer. Sir, you may begin.

[Brian Davis:]

Thank you, Jamie. Good morning and thank you for joining us for a review of CatchMark Timber Trust results for full year and fourth quarter 2015. I am Brian Davis, the Chief Financial Officer of CatchMark. Joining me are President and CEO, Jerry Barag; and Chief Operating Officer, John Rasor. During the course of 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 2015 Form 10-K and other reports that we file with the SEC. John Rasor and I will join Jerry to answer any of your questions after his presentation. Now, I turn over the call to Jerry Barag.

[Jerry Barag:]

Thanks Brian and good morning all. I’d like to thank each of you for joining us on this webcast today as we review an excellent overall 2015 full year result, a solid fourth quarter and our positive outlook for CatchMark's performance in 2016. Yesterday CatchMark reported strong full year results for year-over-year growth, which comfortably exceeded company guidance. The highlights included, we increase revenues by 27% over full year 2014, we increase adjusted EBITDA by 36% and we increase total harvest volumes by 35% to 1.84 million tons. For the year, acquisitions totaled $73.7 million for 43,000 acres, including expanding into two news states North and South Carolina. These new holdings very much fit our criteria for high quality and sustainable growth and the yearend 2015 CatchMark’s total owned interest in prime timberlands across the U.S. south has grown to 425,000 acres, that’s an 8% increase since the beginning of 2014. Timberland sales for the year met our targets. They totaled approximately 6400 acres for $11.8 million in 19 transactions. From a balance sheet prescriptive, at year end, the company reminded at a low rate of leverage and has ample liquidity for continued growth through well considered acquisitions. In December, we expanded our multi-draw term loan to $365 million giving us an additional $280 million available at yearend after consideration of the $85 million outstanding. As a result of the refinancing, CatchMark’s total credit facility increased by $90 million to approximately $0.5 billion, which includes an unfunded $35 million revolving line of credit and an outstanding balance of $100 million on the term loan. And while we focus on our capital allocations through acquisitions, which regard to the $30 million share repurchase program announced last summer, as of yearend, we had repurchased nearly 600,000 shares at an average price of $10.25 per share. Now shifting to year-over-year results for fourth quarter 2015, we generated total revenues of $17.1 million compared to $20.9 million for the fourth quarter 2014. Adjusted EBITDA was $6.9 million compared to $11.6 million for the fourth quarter 2014. In assessing the year-over-year comparison, you need to take into account that results during the fourth quarter 2014 contained a large industrial land sale, which had an outsize positive impact on quarterly revenue and adjusted EBITDA results. But from an operation standpoint, there were clearly gains achieved in year-over-year fourth quarter results. We increased gross timber sales revenues by 32% to $14.4 million from $11 million in the fourth quarter of 2014 and we increased total harvest volume by 47% to 509,000 tons. During the fourth quarter, we acquired 25,300 acres of new timberlands in four states of U.S. South for a total of $45.5 million and completed timberland sales of $1.5 million involving 800 acres. Also in December we paid a $0.125 per share dividend to stockholders and late last month, we announced our intention to pay another such dividend to shareholders later this month. We remain very disciplined and focused on executing our business strategy, which we believe paid off in 2015 and will again this year. Our operations had been particularly successful integrating acquisitions and maximizing current harvest volumes to match demand and have no markets. Integral to our long-term objectives is practicing intensive harvest management and applying silvicultural techniques to ensure durable earnings. We were particularly disciplined in allocating capital in a year that did not offer as much opportunity for transactions that meet our standards, which was the case in 2014. Our commitment is to build the highest quality timberland portfolio in the industry, well positioned to take advantage of long term growth opportunities and we will continue to be very deliberate in finding the best relative value and transactions to achieve those objectives. All our efforts remind devoted to increase an adjusted EBITDA which will allow us to raise the dividend and thereby create shareholder value. So let’s examine in a bit greater depth the fourth quarter and full year results. Revenues decreased to $17.1 million for the quarter ended December 31, 2015 from $20.9 million for the quarter ended December 31, 2014, primarily because of the aforementioned decrease in land sales revenues of $7.5 million. This was partially offset by an increase in timber sales revenue of $3.5 million. Timber sales revenue rose 32%, mainly as a result of an increase in harvest volume from properties acquired in the previous 12 months. And this noted timberland sales revenue decrease due to selling fewer acres during the quarter ended December 31, 2015. Also the average sales price per acre on timberland sales was down during the fourth quarter of 2015 as sales activities returned to the more normal world recreational type of sales as opposed to the industrial large land sale that incurred during the fourth quarter of 2014. For the full year revenues increased to $69.1 million for the year ended December 31, 2015 from $54.3 million for the year ended December 31, 2014, primarily due to an increase in timber sales revenue of $12.2 million, an increase in timber sales revenues of -- timberland sales revenues of $1.2 million and an increase of $1.4 million in other revenues. Timber sales revenues increased by 30%, mainly due to an increase in harvest volume as a result of incremental harvest on properties acquired in the previous 12 months. In regard to adjusted EBITDA, for the quarter ended December 31, 2015, adjusted EBITDA was $6.9 million, a $4.6 million decrease from the quarter ended December 31, 2014, primarily due to a $7.3 million decrease in revenue from that timberland sales offset by a $3.7 million increase in net timber sales. For the year ended December 31, 2015, adjusted EBITDA was $32.2 million, a $8.5 million increase over the year ended December 31, 2014, which was due primarily to a $9.6 million increase in that timber sales. So turning to 2016 outlook, we're extremely pleased with our 2015 results and I will peg the outlook as being -- for 2016 as being cautiously optimistic. The current trajectory of housing market recovery appears on track to exhibit nearly double-digit year-over-year growth, which has been predicted even at the low end of industry forecast. Nominally its pegged at about $1.2 million starts for this coming year. Given population trends and under-building during the last decade, we see several more years of housing growth ahead and in line with our past years. That said, the sector continues to work through some of its cumulative timber inventory from the recession. As the process moves forward, we expect supply-demand drivers to reach an inflection point, which will drive product pricing significantly higher. For the near term however, we expect product pricing to remain flat. Better dynamics in the healthiest markets are posed for outperformance compared to weaker markets across the U.S. South. CatchMark is exclusively invested in those stronger markets. Factoring in these trends, yesterday we announced earnings guidance for full year 2016. We expect an adjusted EBITDA between $31 million and $35 million, excluding the impact of new acquisitions. We're targeting increased harvest volumes in a range of 1.9 million to 2.1 million tons, also excluding that new acquisitions. We plan to continue to capitalize on our strategy of increasing high value inventory mix with a larger contribution from sawlogs, which registered just below 40% in 2015 and projected in access of that level per 2016. We remain steadily on course to meet our targeted long-term goal of reaching sustainable harvest mix of 50% sawlogs and 50% pulpwood. Planned land sales are expected to total between $11 million and $13 million comprising 1% to 2% of fee timberlands, which is very much in line with our ongoing land sales programs of recent years. We also forecast a net loss of between $10 million and $11.5 million primarily resulting from non-cash charges related to depletion expense driven by the higher full year harvest volume and change in product mix as well as higher interest expense related to fourth quarter acquisitions. So overall our core asset base across 425,000 acres is strong and positioned for growth, buttress by recent acquisitions. We're in excellent no markets and we've been very focused on managing harvest yields to meet market demands while maximizing our harvest full volumes. Of course acquisitions are a big part of our growth strategy. We see significant opportunity in our pipeline but as they continue to emphasize, we intend to be extremely disciplined in making deals based on careful underwriting of local market dynamics, sustainable productivity, merchantable inventory and targetable cash yield. The foundation of cash marks proposition is assembling the industry's highest quality portfolio and we do not want to deviate from that clear objective in allocating capital. Over the past two years, CatchMark has been able to demonstrate operational outperformance and great results in a generally flattish pricing environment. This has been the result of a disciplined strategy for growth coupled with tactical operating philosophy that has allowed us to maximize the value of our harvest. We expect similar conditions to prevail during 2016 and we are confident that we can deliver similar superior results based on our operating model of predictable and economically sustainable harvest volumes. In summing up, CatchMark had a strong year in 2015 when we met our targets and our business strategy is clearly working. We plan to continue on course in 2016, meeting demand in our middle markets to focus merchandising and supply chain management, maintaining our attention on sustainable foreign practices and prudently allocating capital to secure prime timberland to underpinned durable earnings growth. We believe this approach of disciplined capital allocation, coupled with tactical management will continue to deliver superior results as was the case last year and in 2014. Finally, we look forward to executing our plan in the year ahead. Thank you as always. Now John and Brian and I will be happy to take any of your questions.

[Operator:]

Ladies and gentlemen, at this time we'll begin the question-and-answer session [Operator Instructions] And our first question today comes from Collin Mings from Raymond James. Please go ahead with your question.

[Collin Mings:]

Hey, good morning guys.

[Jerry Barag:]

Good morning, Collin.

[Collin Mings:]

First question for me, just Jerry when you were going, in the prepared remarks you referenced just pretty optimistic tone about the deal pipeline. Can you just maybe update us on specifically where that stands right now? Do you have anything under contract or LOI and maybe just from a geographic perspective, I know obviously the focus has been on the U.S. South but are you starting to see any favorable risk reward profile to shake out in the Pacific North West.

[Jerry Barag:]

Okay. Let me take those one by one. The pipeline in general has based on what we are working on currently and what we expect to be coming based on conversations is nearing an all-time high for us certainly since 2014. It is poised to be a very active year for transactions during 2016. Now some of those transactions, some of those properties are highly desirable and some of them at least for us are not all that desirable and so we are trying to remain very focused and disciplined on working and securing the ones that work best for our business model. So high quality good inventory and very high productivity in terms of the property. We still remain focused on the U.S. South. Part of the question Collin was, do we have properties under contract? Data shows yes. We've been working fairly hard and are in the closing process on some of those, which will get announced in due time. We're also working on a number of transactions as has been the case for us, which have been privately negotiated and so there isn't a lot of visibility in the marketplace about a lot of the transactions we do to close higher proportion of what we historically have done and what we're currently working on tends to be privately negotiated transactions. There are a number of large publicly marketed deals that are out there today and we've participated in some extent with some of those and those processes tend to be somewhat long dated and so they will be occurring over time. Finally and I think I've got all the points to your question Collin, with respect to the Pacific Northwest, we're seeing kind of mixed messages come out of that marketplace and we're being very, very cautious about on a relative value basis, where prices seems to be shaking out there whether they are desirable or not and compared to what we forecast to be expected returns on U.S. South properties and other properties. And right now, I would tell you while we had some initial optimism that prices for probably on a long-term valuation standpoint coming back in line at the end of last year, there seems to be a renewed optimism which has buoyed prices out there or it may be the fact that several large transactions come to market in the Pacific Northwest that have spurred people's interest in the region. And as a result of that we think that pricing is moving back up even though the underlying market fundamentals have continued to weaken or at very best stay a level at in a significantly lower numbers or significantly lower demand that occurred during 2015.

[Collin Mings:]

Okay. That's helpful detail there. Just one more on this front on the acquisition deal pipeline, do you have maybe just -- as you think about you have under contract or what's entering the pipeline. Has there been any sign or any sort of downward pressure on timberland values and the fact just given that this timeline for a recovery in sawlog prices continues to extend longer than a lot of people would have underwritten two or three years ago?

[Jerry Barag:]

I would probably tell you that if there is downward pressure in the sector, it really is around the weaker markets across the U.S. South and so we've worked and looked at different transactions in different locals that seem to indicate that in some places where weaker markets are persistent today and that's a lot of markets across the U.S. South that deals are either not trading or they're trading at numbers that are off from what people's expectations may have been a year ago. Quite frankly on the stronger markets and where we're operating and where we're located we haven't seen any notion or reasonable trend of prices going down or valuations going down. They're in general pretty steady flat with some expectations that there still is future price increases coming especially in those stronger operating areas.

[Collin Mings:]

Okay. And then just I don't know if you can touch on, Molpus announced call it over 80,000 acre acquisition in the neck of the woods in the Florida, Georgia, Wood Baskets, can you just maybe touch on it if that was something that you guys looked at and maybe why that would be a transaction that would have gone to them versus you guys?

[Brian Davis:]

Yeah, we’ve actually looked at that deal multiple times and this is really the first time in a long time that, that transaction was brought out in a public process and its cleared. I think that the valuation that was that Molpus came up with was in line with a bunch of other similar transactions that happened for similar type property during 2015. So you have the fully transaction -- you had a large transaction between Plum Creek and Hancock and this transaction that were all plus or minus $1200 an acre and again very similar property, very similar markets, very similar inventories and that’s where the price was. From our standpoint that part of Northern Florida tends not to have the same desirable productivity characteristics that we have on a lot of the properties where we operate and so that’s what is really driving that price per acre and for our standpoint its juts not as desirable to us because it has those lower levels of productivity.

[Collin Mings:]

Okay. That’s helpful detail. And Brain just as we think about acquisitions, can you maybe just update us on what you feel the company has in the form of dry powder in just in the context where your debt capacity following the acquisitions in the fourth quarter?

[Brian Davis:]

Yeah, good morning Collin. I know your framework really focuses on a debt to enterprise value. What I would purpose for additional consideration would be the cash yield and the types of acquisitions that the team is looking at as well as the low cost of our debt profile. And so when you take those into consideration relative to $300 million or so of liquidity, we would be comfortable deploying about $200 million and we would be willing to push our leverage from that range for the right opportunity.

[Collin Mings:]

Okay. That’s helpful Brian. And then while I have you Brian, as far as on the guidance for the year just G&A expense that line item?

[Brian Davis:]

Yep, so we expect G&A to be about $8.5 million to $8.7 million and this is really an increase over 2015 that's solely driven by non-cash stock-based compensation expense related to our equity plan that was established at our IPO as well as a change in our director's stock plan that has a move from a multiyear vesting program to media investing grant. So we expect total stock-based expense in 2016 to be about $1.6 million to $1.8 million versus $900,000 last year, but importantly as really the cash component of our G&A expense in 2015 is around $7 million and for 2016 we anticipate a small increase to about $7.2 million to $7.4 million.

[Collin Mings:]

Okay. One big picture question then I will turn it over and jump back in the queue, just I’m curious from I guess John or Jerry’s perspective just the impact of the warehouse or Plum Creek merger, what has that meant for you guys? Have you seen any impact in the market place in early stages of that?

[John Rasor:]

I think everybody is still holding their breath trying to figure out what ultimately will come out of it. Through the announcements and what we've seen warehouse is still working through the integration process and that is probably going to happen continue for a little while. Quite frankly with respect to the legacy warehouser company, we didn’t have a big overlap in terms of our footprint and their footprint and at the end of the day this is -- the business is a very localized business. So there wasn’t much that from an interaction standpoint that we had clearly with Plump Creek. We do have more overlap, but from an operating standpoint really nothing has changed. Our biggest interaction with respect to the new company is the fact that we are large supplier to warehouses for our pulp mill. We sell them a lot of timber and we have been in constant communication with them. They are still -- they continue to be very interested in buying our timber and given the process with warehouser also include a spinoff of those operations in one shape or form. They’re very much interested in securing and maintaining their supplier relationships of which we're a key component and so we don’t expect any change with respect to that.

[Collin Mings:]

Okay. Very helpful. I'll jump back in the queue. Thanks guys.

[Brian Davis:]

Thanks Collin.

[Operator:]

[Operator Instructions] Our next question comes from David Rodgers from Baird. Please go ahead with your question.

[David Rodgers:]

Hey good morning guys. Jerry first question for you, you talked in your comments about the supply-demand inflection point. When is that? As you sit in underwrite acquisitions and you're putting money to work today, when do you see that particularly in the markets in which you operate?

[Jerry Barag:]

Good morning, Dave. It has become an increasingly more complex landscape two year out when that’s going to be. Convictional wisdom would have told you in prior cycles that at around 1.5 million housing starts or housing start equivalents, we would start to see that inflection point and again our contention is you will start to see that inflection point in the better markets much sooner than you will across the entire geography of the U.S. South. The noise around this whole thing has now become what’s happening with export volume particularly the China? It's also with the expiration of the software lumber agreement, the North American Softwood Lumber agreement with Canada we now have a lot of lumber that’s flowing back and forth across the border that is settling back into ranges that would be expected, but those are two very big dynamics that are going to ultimately have an impact on how quickly we get to that inflection point. So we still feel pretty good about where housing starts are headed and the demands out of that of the equation is really the hard one to fix and we’ve been waiting around the better part of the decade for that to write itself and it looks like it's on the right path. The supply side is -- well, I don’t want to lead anybody believe it's easy to fix that. It certainly is a lot easier to fix because it's controllable by the industry in general. So based on all of that, we are still looking at a market in the better parts of the U.S. South where we still believe an inflection point could be coming probably the earliest around 2018 and that assumes some fairly understandable and consistent trends now with respect to housing start gains a normalization of export volume to China and then finally a settling in of the cross-border trade between Canada and the U.S.

[David Rodgers:]

Based on the detail and your answer Jerry, I appreciate it and I guess with regard to the acquisitions, you obviously purposely didn't say the number you were under contract on, but can you give us an order of magnitude or ranges? Are we talking $20 million, $100 million, just give us a sense of kind of where you are?

[Jerry Barag:]

I’m little reluctant to do that because it's changing day by day and there are some big changes, but suffice it to say that it's an active year. It looks a lot more like 2014 then in did in 2015 and we're very excited and somewhat confident that as opposed to last year where we were scrambling around to reach acquisitions targets and goals this year it will be a lot easier for us to get there.

[David Rodgers:]

Okay. Thank you and then I guess in 4Q the bulk of the volume seem to go up beyond where we would have thought it was and I didn’t hear you address it specifically in your comments if you did, I apologize, did the 4Q pulpwood volume either surprise you or in any way kind of out of the normal for what you would have expected?

[Jerry Barag:]

Yeah, I’m going to let John Rasor answer that, but at the end of the day, it wasn’t completely planned, but it was executed to get the right result and John and his team did a great job doing that.

[John Rasor:]

Yeah for us the fourth quarter was pretty challenging with all the weather that we were enduring really across most of our operating region and we turned on the jet burners to be sure we had the ability to take advantage of the markets when they did open up and we had ground that we could get on to and operate. And in that whole process, we were also focused on getting a lot of our spending caught up. So net, net, it shows up as more forth move during that period of time that might normally have been but that momentum that we created in that fourth quarter has been helpful it turns a nice uplift as we get started here in the year 2016 as well.

[Jerry Barag:]

So David it’s been wet and that has created some challenges and its created some opportunities and we have been trying to take full advantage of the opportunities that the wet weather has provided with respect to pricing and so you can expect that when we get conditions like that, we’re going to turn up our harvest.

[David Rodgers:]

Let’s get to the last question and maybe this is for Brain, I’m not sure, but the timber inventory that was added or subtracted during the quarter through acquisitions and HBU sales, did you give that number?

[Brian Davis:]

We did not give that number, but in our K we did you the total number of inning inventory for the year for the number $16.8 million. I can forward you the link on the 10-Q after the call.

[David Rodgers:]

Perfect. All right. Thanks guys.

[Operator:]

[Operator Instructions] Our next question is a follow-up from Collin Mings from Raymond James. Please go ahead with your question.

[Collin Mings:]

Thanks. Just want to go back real quickly to an announcement you guys had made just as far as an addition to the Board, can you just maybe touch on that decision to expand your Board?

[Jerry Barag:]

Yeah, we brought on Paul Fisher who was former CEO of Centerpoint Properties and Paul is -- we think is a great addition to our Board not only because of the business background that he brings and having run a company that in many ways has similar dynamics to CatchMark and where we are in our lifecycle. But also Paul brings us wealth of knowledge from -- that comes from the fact that Centerpoint at one point or at some point and it’s duration was actually sold to Calpers and Paul has a pretty good background and understanding the challenges and the opportunities associated with investing alongside institutional investors, which as we said in the past has been one of their corporate initiatives here.

[Collin Mings:]

Okay. Do you pointed out any other additions or subtractions that you're looking at as far as for the Board over the next 12 to 18 months or you feel like it's the right size of the Board currently?

[Jerry Barag:]

We look at this all the time and I would expect that at different points of time we're going to see some flux in what goes on with the Board. We don’t have any current intention of expanding the Board at this point, but we're always planning for good succession and good governance at our Board level.

[Collin Mings:]

Okay. And then maybe John going back to just the comments about the weather and early questions about pulpwood volume just maybe touch on against from my perspective it looks like sawlog volume was higher than I had expected in the fourth quarter. Was that just again one of a function of weather and kind of what you end up in the harvest sector in the quarter or is that something as far as we think about the volume mix and how we should continue to expect here into the first half of 2016.

[John Rasor:]

Anyway it's more a function of weather and a number of sales that we had opened up in Texas and Louisiana that are trying to stay on enough ground that we could look from and as the weather dried up a bit towards the end of year, a lot of that volume that was the single biggest search we took advantage of some market opportunities here in Georgia as well and in combination that’s what you're looking at.

[Collin Mings:]

Okay. And then I just wanted to touch on I guess for Jerry and Brian, just go back to the dividend here just given that you guys completed roughly you just shy of $75 million of acquisitions in '15, what should we look for or think about as far as potential to increase the dividend here in 2016 and what would be -- what else are you looking forward to get some more confidence in may be inching that dividend upward?

[Brian Davis:]

Hey Collin, this is Brian. I'll take that. First of all I would like to having a conversation about potentially increasing a dividend in 2016 and today it's fully covered with the payout ratio right at REIT averages. So a couple of points, we have a very competitive pretax dividend yield when compared with our peer set as well as the REIT universe and while our Board does not have as stated dividend policy, it does review our prospectus quarterly during which time it did increase the dividend rate by nearly 14% in 2014. And lastly Jerry has noted our prospects for 2016 with a very robust pipeline with a backdrop of flat pricing. All this to say that this stage has been set and the topic is on our radar for continued discussion.

[Collin Mings:]

Okay. So there is not like a particular threshold either in terms of pricing or incremental acquisitions. You're just continuing to monitor that payout ratio depending upon what you incorporated in the portfolio?

[Brian Davis:]

Yeah, that’s correct Collin.

[Jerry Barag:]

Yeah and we are within the range that we have publically stated we want to be in which we're aiming towards the lower end of that range and that all bodes well, but at this point, we've taken a little bit more conservative approach to how we're going to book in increases in our dividend at least for the very near term.

[Collin Mings:]

Okay. And then just on that front given the average share price and you recognize the onus signal exactly what you want to do in the capital markets but call it the share price that you guys have bought back stock in 2015 was kind of around an average of $10.25 I believe. Is it safe to say that you still have an appetite given there is still a meaningful amount of that authorization still left if you continue to buy back stock into 2016 should this gap between what at least I believe and if you guys believe you NAV is versus where the stock price is. Is that safe to assume that will continue to be part of the capital allocation strategy?

[Brian Davis:]

Yeah, so -- hey Collin this is Brian. So really our capital allocation is focused on acquisitions and acquisitions that put us in position for dividend increases, that’s our front-footed approach relative to capital allocation. And as we position our share repurchase it's really opportunistic and as you can tell by the amount of capital we’ve deployed in the share repurchase is just around $6 million and at a share price, which we've done at $10.25, we believe that program is operating as anticipated, but again it all comes back to as Jerry has alluded to regarding the pipeline, that’s really where we would rather be deploying our capital.

[Collin Mings:]

Okay. So it maybe even a little bit more cautious as far as deploying capital towards share repurchases just give how robust that pipeline sounds like it is?

[Brian Davis:]

I think that’s a fair characterization.

[Jerry Barag:]

Yeah, and we've been -- we have a very disciplined buyback program. It has very specific metrics around it and we think it's worked very well conserving the way we set it up and we'll let it continue to operate pretty much as it did during 2015.

[Collin Mings:]

Okay. Just two more questions for me last I guess big picture one is just on as far as JV partnerships I know that’s something that's comp on a number of calls, just any progress there, anything specific as you think about what’s in that pipeline right now that you might look to bring on a JV partner? I know I think last year we talked Jerry and it sounded like on the last call that pursuing a Plum Creek type structure that's what they did with the twin creeks JV was not something that necessarily interested you guys, but maybe just update us on that JV front.

[Jerry Barag:]

Yeah, the answers are yes and yes.

[Collin Mings:]

Okay.

[Jerry Barag:]

Okay. Yes, we're making progress and yes, we have some specific things that we're working on.

[Collin Mings:]

Okay. And then one last one John, I was just curious as far as you look across the U.S. South and recognize again the overall tone being again cautiously optimistic for this year and that's really building a whole lot of upside into pricing this year on either pulpwood or sawlogs but as you look across the U.S. South are there any wood baskets that you're very encouraged that will net, net overall the balance might be flat there in some specific markets where there is going to be some more material lift in pricing this year.

[John Rasor:]

Certainly in Southeast Georgia we see that and that was very helpful to us even last fourth quarter in terms of some of the lift we got. We like the South Carolina markets and we’re steady as it goes in terms of the larger portion of our property, which is in Georgia and Eastern Alabama and we're also holding steady in Texas and Louisiana. So the lift is probably going to come first in the very South East.

[Collin Mings:]

Okay. Very helpful. Thanks guys.

[John Rasor:]

Thanks Collin.

[Jerry Barag:]

Thank you, Collin.

[Operator:]

[Operator Instructions] And our next question is also a follow-up Dave Rodgers from Baird. Please go ahead with your follow up.

[Dave Rodgers:]

Hey guys sorry, just one last one for me. On the HBU sales guidance, I think $11 million to $13 million for the adjusted EBITDA contribution for the year, it seems like its lower than I guess it has been or we would have expected given the larger size of the portfolio. So, I know its 1% to 2% of land inventory or are you just planning on selling off lower dollar volume parcels? Is there an impact there or am I not thinking about that correctly. Just any help would be great thanks.

[Brian Davis:]

Yes. Hey this is Brian. It’s really still within the 1% to 2%. I think if you look at the realized values, which we saw last year, we would anticipate seeing the same amount on realized value per acre basis in 2016.

[Dave Rodgers:]

Okay. Great. Thanks.

[Brian Davis:]

Thank you.

[Operator:]

And ladies and gentlemen, at this time, I’m showing no additional questions. That will conclude our question-and-answer session. I’d like to turn the conference call back over to Mr. Barag for any closing remarks.

[Jerry Barag:]

Thank you. Thanks again everybody for your interest in CatchMark and for your questions today. We as a management team look forward to 2016 and producing the same kind of results as we've been able to produce for the last two years. So we hope to talk to you in about 60 days. Thanks again.

[Operator:]

Ladies and gentlemen, that does conclude today’s conference call. We do thank you for attending today's presentation. You may now disconnect your telephone lines.