Plum Creek Timber Company, Inc. (PCL)

PCL 
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Industry: Consumer Services
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Plum Creek Timber (PCL)

Q4 2011 Earnings Call

January 30, 2012 5:00 pm ET

Executives

John B. Hobbs - Vice President of Investor Relations

Rick R. Holley - Chief Executive Officer, President and Director

David W. Lambert - Chief Financial Officer and Senior Vice President

Analysts

Gail S. Glazerman - UBS Investment Bank, Research Division

George L. Staphos - BofA Merrill Lynch, Research Division

Joshua A. Barber - Stifel, Nicolaus & Co., Inc., Research Division

Anthony Pettinari - Citigroup Inc, Research Division

Mark Wilde - Deutsche Bank AG, Research Division

Mark A. Weintraub - Buckingham Research Group, Inc.

Chip A. Dillon - Vertical Research Partners Inc.

Steven Chercover - D.A. Davidson & Co., Research Division

Presentation

Operator

Good afternoon. My name is Kristen, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Plum Creek Fourth Quarter and 2011 Conference Call. [Operator Instructions] At this time, I'd like to turn the call over to our host, Mr. John Hobbs, Vice President of Investor Relations. Please go ahead.

John B. Hobbs

Thank you, Kristen. Good afternoon, ladies and gentlemen, and welcome to the Year-End 2011 Conference Call for Plum Creek. I'm John Hobbs, Vice President of Investor Relations for the company. Today, we have on the line Rick Holley, President and CEO; and David Lambert, Senior Vice President and CFO.

This call is open to all investors and members of the media; however, the Q&A portion of the call is intended for the professional investment community only. We ask that other participants please follow up with any questions by calling me at 1 (800) 858-5347. I encourage you to visit our website, plumcreek.com. There you will find our press release and supplemental financial statements for the full year and the fourth quarter of 2011.

Before we begin, I'd like to take this time to remind everyone that certain of our statements today will be forward looking, involving known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ from those expressed or implied. These risks and factors are routinely detailed in our filings with the Securities and Exchange Commission. Following today's prepared remarks, we'll open up the call for your questions.

Now I'll turn the call over to Rick.

Rick R. Holley

Good afternoon. Despite a challenging economic environment and a continued weak housing market, Plum Creek had another good year in 2011. We produced $374 million of cash flow from operations, more than enough to pay an attractive dividend, fully reinvest in our business and maintain our strong balance sheet.

We ended the year with more than $0.5 billion available to us between our cash balance and undrawn line of credit, so we have ample liquidity, excellent financial flexibility as we enter 2012. While we're not anticipating a significant rebound in the economy or housing in 2012, we do expect our cash flow to grow this year by more than $50 million and provide ample coverage of our dividend and capital needs for the year. We expect cash flow from our Southern Resources segment to improve in 2012, while we expect cash flow from our other business segments to be generally stable.

The company is in very good financial shape, and we are looking forward to continued growth in 2012 and beyond. Over the course of the past year, we continued to manage all of our assets with a goal of maximizing the long-term value of an investment in Plum Creek. In our timber businesses, maintaining a nimble stance, quickly responding to changes in market conditions. In the south where prices were weak, we kept our sawlog harvest low and continued to focus on conducting harvest in stands that allowed us to maximize pulpwood output in market where prices remain reasonably attractive.

In the Pacific Northwest, we responded to increased sawlog demand, attractive pricing in export markets. As a result, we increased our sawlog harvest in Oregon, sold approximately 17% of that harvest to export customers in 2011.

Within our Real Estate segment, we protected and grew the value of our most valuable properties. We continue to hold onto our higher-value recreational real estate in Florida, Georgia and Montana. At the same time, we created value by pursuing entitlements with some of our development lands in Georgia and Florida. These properties will be well positioned when the real estate market recovers.

In our Manufacturing business, we focused on serving the needs of our specialty and industrial customers. Serving these demanding markets with premium products generates positive cash flow and has kept this business profitable when commodity manufacturers continue to struggle with red ink.

We also grew the value of our non-timber resource business. This business generates income largely from the collection of royalties from subsurface assets such as oil, natural gas, aggregates and industrial minerals. These assets are developed and brought to market by third parties. We made significant strides during the year to grow the future cash flow of this business. We leased approximately 64,000 acres in Louisiana for shale oil exploration and received an upfront bonus payment of $21 million. If the exploration is successful, these lands could make a meaningful contribution to the growth of this segment.

We also acquired $12 million of operating aggregate reserves in 2011. This asset is providing the company with very attractive returns already. We continue to evaluate growth opportunities from other construction material assets when they can be acquired at attractive return profiles.

We continue to fully invest in our businesses during 2011. Our $70 million of capital expenditures maintained all of our businesses. We planted 63 million seedlings and we improved the productivity of our timberlands. During the past year, we also repurchased approximately $25 million of common stock at about $35 per share. Over the last 6 years, we've repurchased nearly 25 million shares or 13.5% of our shares outstanding.

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