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Plum Creek Timbe (PCL)

Q3 2010 Earnings Call

October 25, 2010 5:00 pm ET


David Lambert - Chief Financial Officer and Senior Vice President

Rick Holley - Chief Executive Officer, President and Executive Director

John Hobbs - Vice President of Investor Relations


Daniel Cooney - Keefe, Bruyette, & Woods, Inc.

Peter Ruschmeier - Barclays Capital

Joshua Zaret - Longbow Research LLC

Christopher Chun - Deutsche Bank AG

Mark Weintraub - Buckingham Research Group

George Staphos

Richard Skidmore - Goldman Sachs Group Inc.

Steven Chercover - D.A. Davidson & Co.

Chip Dillon - Crédit Suisse AG

Gail Glazerman - UBS Investment Bank


Question-and-Answer Session

Rick Holley

If you take Real Estate and our guidance is $320 million to $340 million and you take out the $89 million from Montana,that kind of gets you in the mid-200s. And I don't think that's a bad number as we look ahead to 2011. As we look at our harvest level for next year, we're at 15.2 million tons this year. My guess it will be up a bit but unless we see very strong prices, you're not going to see it north of 16 million tons. So, it's probably somewhere between where it is now and 16 million tons. So all that volume we've been deferring, we will not bring it back to market these price suggest. So, now, if market improves more rapidly, and we see better housing and we see higher prices, then we'll advise you guys and adjust it appropriately. And we would expect with even slightly improving housing situation that we'll see as good or not better performance from our Resource business in 2011.

Gail Glazerman - UBS Investment Bank

I think there was some news flow on the BCAP program last week. I was just wondering if you could give us an update and is there anything that we should really be thinking about for 2011?

Rick Holley

They've come out with a new rule and basically, the value of product in the BCAP program is the same as it previously was. But they've limited the amount of products. It's really waste and it's fire-damaged timber and those kinds of residuals that are available to the program. So going forward, it's going to be a much smaller program for the industry, and we really look at it as a way for the industry to kind of build a supply chain in anticipation of down the road of the bigger bio-energy business as we get renewable energy and other opportunities in the marketplace. So I wouldn't build a lot of value on it. As we see that change, we'll clearly give you guys some indication what it means to us. But it's going to be fairly modest.


Our next question will come from Christopher Chun from Deutsche Bank.

Christopher Chun - Deutsche Bank AG

I was fairly impressed with the per acre price that you guys had on the conservation sale. Could you give us a little more color on that?

David Lambert

There were a handful of different sales. It was not one particular transaction, and they were spread out in a number of regions. Just, for example, there's like a 400-acre sale down just the outside of Mount Rainier National Park, and we $2,500 an acre for that. And there were a number of other transactions in kind of that range. Typically, sometimes in the past, our conversation sales will come from like the Lake States region, where they're generally a lower value property, so you might only be doing $1,100 or $1,200 per acre for the conservation.

Christopher Chun - Deutsche Bank AG

So it was largely a mix issue?

David Lambert


Christopher Chun - Deutsche Bank AG

Do you see any trend that's different lately compared to what you've been seeing in recent quarters in terms of per acre prices on the land sales?

David Lambert

No, we saw our higher and better-used land sales, they're up about $100 compared to the second quarter. But, I mean, we've really seen those prices remain flat throughout the entire year. And by region, if you look at the percent of sales coming from the Gulf South and the Lake States area, that's been holding in at about 2/3 of sales, which is not -- these are our lower value regions. As we kind of move back to a more normalized program, you would expect that to kind of flip flop and you'd see strength coming out of the Montana and Georgia, Florida markets. And so we'll have a better sales realization once you return back to normal markets. Right now, it's being driven by these lower-value regions.

Christopher Chun - Deutsche Bank AG

Then in terms of the market for timberland. Rick, I believe that earlier this year, you commented that you thought that values were down perhaps 10% to 15% from the peak and that may be discount rates that private buyers were using might be up about one percentage point. Do you still feel that way or do you see anything different that has developed in recent months?

Rick Holley

No, Chris, there really hasn't been any transactions. I don't think there were any other than that one property that was quickly resold at IP, transact in the second quarter. There was no transactions of size in the third quarter at all. So, I think, our best evidence in stuff that we've looked at over the last few months would say, the markets are up 10% to 15%. The buyers that we talked to said their discount rates are up 100 basis points, and so that's the best we have to go on. But even today, not only there haven't been no transactions, there's nothing in the market that is quality, if you will, that we would be interested in.

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