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Plum Creek Timber Company, Inc. (NYSE:PCL)

Q1 2014 Earnings Conference Call

April 28, 2014 17:00 ET

Executives

John Hobbs - Vice President, Investor Relations

Rick Holley - Chief Executive Officer

David Lambert - Senior Vice President and Chief Financial Officer

Analysts

George Staphos - Bank of America/Merrill Lynch

Paul Quinn - RBC Capital Markets

Anthony Pettinari - Citi

Mark Weintraub - Buckingham Research

Gail Glazerman - UBS

Chip Dillon - Vertical Research

Operator

Good day, ladies and gentlemen and welcome to Plum Creek’s First Quarter Conference Call for 2014. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call maybe recorded.

I would now like to hand the conference over to Mr. John Hobbs, Vice President, Investor Relations. Sir, you may begin.

John Hobbs

Thank you. Good afternoon, ladies and gentlemen and welcome to the first quarter 2014 conference call for Plum Creek. I am John Hobbs, Vice President of Investor Relations for the company. Today, we have on the line Rick Holley, Chief Executive Officer and David Lambert, Senior Vice President and Chief Financial Officer.

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 any other participants please follow-up with any questions by calling me at 1800-858-5347. I encourage you to visit our website plumcreek.com. There you will find our press release, supplemental financial statements and any reconciliations to non-GAAP financial measures for the first quarter of 2014.

Before we begin, I would 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 will open up the call for your questions. Rick?

Rick Holley

Good afternoon. We started 2014 off with a very good first quarter. Earnings were at the high end of our initial expectations despite difficult weather conditions, which much of the country experienced. The fundamental trends in our businesses continued to improve as housing construction moves towards a demographically supported 1.5 million start level. Demand for wood products in North America will grow significantly.

Given the South’s low cost position and the supply challenges facing the other wood producing regions in North America, it is clear that the U.S. South will be asked to satisfy a disproportionate share of this demand growth. We are not the only ones who see these trends. Domestic producers, Canadian producers and others are investing today to expand lumber production at both existing mills and Greenfield locations throughout the South. If anything, we have witnessed the pace of this investment intensify over the past six months. This further strengthens our conviction that future Southern log demand and therefore log pricing will increase significantly. We have successfully integrated the 500,000 acres of timberland and other assets we acquired from MeadWestvaco in December into our operations.

Our foresters are executing on our harvest plan and the newly acquired lands contribute about 550,000 tons to our first quarter harvest. Harvest will increase throughout the remainder of the year and approach 3 million tons. We are actively reviewing these timberlands to identify properties with higher recreational values and have received inbound calls from individuals interested in specific properties. We expect that as we will close on several recreational real estate transaction related to these properties later this year.

Overall, we are encouraged by the early performance and the quality of the MeadWestvaco assets. First quarter results are in line with our initial expectations, especially since difficult weather hampered operations across the South. As we expected, the acquisition will be cash flow accretive on a per share basis, but earnings dilutive in 2014. As the demand for lumber and log prices grows, we expect cash flow accretion for these assets to increase further over the coming years. Cash flow from our aggregate investments had been in line with our expectations as well. We expect to receive over $15 million in cash from these assets in 2014 and expect returns will expand as volumes increased with the recovery.

David will now review our first quarter performance and discuss our expectations for the second quarter with you. David?

David Lambert

Thank you, Rick. We had a good first quarter as earnings grew in our timber, manufacturing, and energy and natural resources businesses compared to the fourth quarter. As expected, real estate earnings were seasonally lower.

Northern Resources’ $16 million operating profit was approximately $8 million higher than the fourth quarter. A $5 per ton increase in sawlog prices coupled with increased harvest volumes from the newly acquired West Virginia timberlands drove earnings growth over the prior quarter. Average pulpwood prices were unchanged from the fourth quarter.

We experienced another strong quarter of sawlog prices, particularly in the west, where domestic mills competed with export markets for available logs. We continue to direct our harvest volume almost exclusively to domestic customers. Sawlog prices have surged past pre-recession levels. By the end of the first quarter, customer log decks had recovered and lower frame in lumber prices were compressing margins of West Coast lumber producers. As log supply expands seasonally with improved timberland access on the West Coast, we expect a $2 to $3 per ton decline in Northern sawlog prices. Pulpwood demand in our hardwood regions remains attractive and prices are expected to remain stable.

The second quarter is a seasonally slow period for the Northern Resources segment as thawing spring conditions turned logging roads muddy and limited timberland access in Montana and the Northeast. As a result, we expect Northern harvest volumes to be about 750,000 tons or a third lower than the first quarter. We expect sawlogs will be between 60% and 65% of our Northern harvest during the second quarter a richer mix than the first quarter. We continue to expect the 2014 Northern harvest to be a little less than 4 million tons.

The Southern Resources’ $31 million operating profit was $3 million lower than the $34 million reported in the fourth quarter of 2013. Snow and ice in the south closed sawmills and halted deliveries for 5 to 6 days during the quarter. As a result, our Southern harvest volumes were about 400,000 tons or 10% lower than we had planned. Sawlog prices were unchanged during the quarter. Pulpwood demand from our packaging customers across the South was strong and our pulpwood prices were unchanged from the fourth quarter as well. As we enter the second quarter, mills throughout the South have adequate log decks. With seasonally improving harvest conditions, we expect second quarter sawlog and pulpwood prices will hold at first quarter levels with price growth expected later in the year.

Despite the first quarter’s harvest being lower than planned, the outlook for our full year Southern harvest of 16 million to 17 million tons has not changed. We expect to make up the volume during the remainder the year. The harvest mix for the full year is forecast to be approximately 45% sawlogs and 55% pulpwood. The second quarter’s harvest is expected to be between 4.2 million and 4.3 million tons.

Our first quarter real estate segment sales were $23 million, in line with our initial expectations. Operating income was $12 million. During the quarter, the company sold over 4,000 acres of recreational lands for $2,200 per acre, 34,000 acres of conservation lands at $1,685 an acre, and approximately 3,000 acres of small non-strategic lands capturing approximately $1,300 per acre. The balance of the first quarter’s revenue came from a $4 million conservation easement placed on about 10,000 acres in New Hampshire.

Prices during the first quarter were better than we have recorded over the past few quarters. This is more a function of the specific properties sold rather than a marked increase in land values. We believe interest in rural lands remains good. However, customer traffic in the first quarter was hampered by the unusually harsh winter weather conditions.

We continue to expect Real Estate segment revenues to range between $240 million and $280 million in 2014, but most of the sales closing in the second half of the year. The second quarter real estate sales are expected to be between $60 million and $80 million. We estimate that land basis for the year will range between 30% and 35% of sales. Results from the real estate joint venture with MeadWestvaco are accounted for using the equity method of accounting and are captured below the operating line. For the first quarter we recognized $1 million loss related to our share of the operating costs of these ventures. As during the quarter, there was no sales activity. For the full year we expect positive cash flows from our JV investments.

Our Manufacturing segment reported a $9 million operating income, up $1 million from the fourth quarter as profitability in our panel businesses was slightly better than the prior quarter. Lumber prices strengthened due to appearance grade board markets improving. We had expected further growth in our manufacturing business during the quarter, however, plywood production and MDF shipments were adversely impacted by extreme weather and rail shipment challenges. Second quarter manufacturing earnings should advance as MDF shipments increase. Pricing for our mix of specialty products is expected to remain firm at first quarter levels. We continue to expect our manufacturing business will post another year of strong earnings and cash flow.

Operating income from our Energy and Natural Resources segment was $6 million, up $1 million from the fourth quarter due to the newly acquired coal and wind assets. Importantly we expect our ENR adjusted EBITDA in 2014 to grow to over $30 million, an $8 million increase over the 2013 level. Growth from construction materials, coal and wind assets were more than offset expected lower contributions from natural gas assets. Third party interest expense for the second quarter is expected to be $27 million, unchanged from the level of the first quarter. There was no tax expense in the first quarter and we are expecting a modest $1 million of tax expense during the second quarter.

Our full year earnings guidance for 2014 is unchanged. We expect net income to be between $1.30 and $1.50 per share for the year and we expect our second quarter results to be between $0.27 and $0.32 per year. Capital expenditures for the first quarter were $16 million. We continue to expect capital expenditures for all business segments to total between $85 million and $90 million during 2014. Looking at our balance sheet, we remain in good shape with 4% cost of debt and no maturities scheduled until late 2015. Liquidity remains excellent at over $600 million and we are positioned to maintain our commitment to our shareholders and grow our business. Rick?

Rick Holley

One of the key initiatives for the company over the past several years has been the entitlement of our most valuable development properties. Through the pursuit of these entitlements, we change the very nature of these assets and create long-term value for shareholders. We do not intend to pursue vertical development or invest a significant amount of capital into these properties. Rather our strategy is to spend time and effort to move these properties up the value chains through entitlement and capture that value.

We have been particularly busy in the last several years in U.S. South where a number of these projects are underway. Our nearest term opportunity is in Columbia County, Florida about 60 miles West of Jacksonville. Here near the intersection of Interstate 10 and 75, we own 2,600 acres with state highway frontage and Class 1 rail line access. We have secured more than 8 million square feet in industrial zoning for this property, which is known as the North Florida Intermodal Park. The entitlements, designations and certifications we have secured combined with the location’s excellent access to road and rail transportation, make it particularly attractive assets for a variety of potential tenants. The Rockefeller Group is developing marketing plans for this property and we expect to have it ready for the market by the end of this year.

We are also working on a second industrial site in Laurens County, Georgia. This 2,000 acre property has excellent access to Interstate 16 and is about 100 miles West of Savannah. Here we began zoning and mega site certification work for the heart of Georgia mega site. We expect this property to be ready to go to market within the next two years. Our largest development opportunity is in Alachua County, Florida, home to the University of Florida and the city of Gainesville. We are the largest landowner in the county with 65,000 acres. We have been engaged in a community on appropriate outcomes for this large land area. The plan, which involves a diversified mix of land uses has generated a lot of positive interest and energy within the Gainesville community and University of Florida. We have started the entitlement phase of the effort and have submitted a sector plan application and expect to have public hearings this summer and approval within the next 12 to 18 months.

In early 2012, we secured 17,000 acres of development rights in the Moosehead Lake region of Maine, while placing 363,000 acres into a permanent conservation easement which is being operated as a working forest. These rights include resort, residential, commercial and industrial development properties. The Maine plan protected our long-term property rights there and will become actionable once the market in that region recovers. Throughout the South, log demand is set to increase as capital investments have been announced. The pace in investment activity is accelerating. Greenfield projects like the Klausner mill in Suwannee County, Florida have broken ground. At that site, utilities have been installed, steel is going up and the company is hiring employees. Canadian lumber producers continue to purchase and recapitalize mills throughout the South, increasing their positions and exposure to Southern markets. Many existing producers are expanding through a variety of capital projects aimed at increasing capacity in advance of growing demand. Each of these developments sends a clear signal that additional lumber production and stronger log demand are coming to the South.

Physical evidence of the capital investment in the pellet markets is also taking shape. Construction is well underway at the Drax mills in Louisiana and Mississippi. Plum Creek’s first deliveries to these mills will start in early third quarter of this year. In Central Louisiana, German Pellets, another large scale producer of pellets is converting a former Georgia Pacific plywood plant site to a pellet mill, capable of producing about 1 million tons of wood pellets per year. These pellet mills are expected to reintroduce healthy competition for pulpwood into the markets where they are located. The combination of ongoing capacity projects and startup of both Greenfield lumber and pellet plants should increase the demand in prices of sawlogs and pulpwood in the markets we operate in the South.

Despite the headwinds of the slowing recovery in housing market, 2014 is shaping up to be a good year for Plum Creek. We expect that the winter weather’s impact on the first quarter will be temporary and will continue to believe that housing will approach the 1.1 million mark this year. The fundamentals of our North American supply-demand thesis are on track and we feel we are in a better position than ever to benefit from the economic recovery.

Now we will open it up for your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And our first question comes from George Staphos from Bank of America/Merrill Lynch. Your line is open. Please go ahead.

George Staphos - Bank of America/Merrill Lynch

Thanks everyone. Good afternoon. Congratulations on the progress. I guess the first question I had, Ricky touched on it a little bit you are evaluating the MeadWestvaco land. Are there any qualitative comments you can make perhaps as an update in terms of the HBU potential from some of these lands given what you found over the last three months or so?

Rick Holley

Yes. I think that our takeaway is that the quality of the timberland itself is better than we even saw when we did our due diligence. That was a positive. And the other takeaway is we have gone across the entire 500,000 acres and looked at HBU opportunities, there are number of really high-value properties, which the former owner MeadWestvaco had put some money in to enhance the value from a buyer standpoint. So, I think our takeaway is these lands are even more attractive both from a timberland and an HBU or recreational land perspective than we initially thought. The other thing we are finding is, as you know, as a side business we have is kind of recreational lease business, hunting lease business and we are finding great opportunities there as well. So, all the way across the board, we are very pleased with this acquisition.

George Staphos - Bank of America/Merrill Lynch

Understanding that’s still early days for you, do you think you will be in a position next quarter or maybe the third quarter to put some additional stakes in the ground in terms of what those opportunities are relative to what your initial expectations were?

Rick Holley

Yes, I think that’s a fair assessment. When we announced this in December, we had no idea how many acres might be in the HBU category. And I think by our next call, we should be able to weigh some of that out for you and give you a clear idea of how we see some of this playing out over the next two to three years. We plan to do that.

George Staphos - Bank of America/Merrill Lynch

Okay, thank you. Next question I had just generally realizing that it’s difficult to parse this sort of thing, can you have an estimate in terms of what the weather being abnormally bad this past quarter cost you from a harvesting standpoint in either the North or the South?

David Lambert

As we indicated earlier in the South, we ran 4,000 tons below our earlier indication and we would attribute really all of that to weather. In the North, we didn’t end up with any real shortage for weather.

George Staphos - Bank of America/Merrill Lynch

Okay. Sorry, Rick – sorry, David I missed that. When we look at the lack of lift in Southern sawlog prices despite all the demand improvement and reasons to be optimistic in terms of investment that’s occurring and for that matter given the supply constraint that this last quarter provide, are you disappointed you are not seeing a bigger lift in sawlog price in the South right now, and if not, why not?

David Lambert

I think typically you will see stronger prices here in the first quarter. What was abnormal about this quarter is normally when you have wet weather, the Plum Creek’s footprint, we are really better than the average competitors in moving the wood to the market. We are able to take advantage of that. This year was a little bit different. When we talked about us being closed out of the woods for 5 or 6 days, the sawmill customers their mills were frozen, their log yards weren’t working and they were shutting down. So, it was both us and our customers losing those days of production and that really kind of stopped us from getting that early start. Housing has been a little slower than we had expected. Part of that might be even weather driven as well. But as we continue to look on a longer term basis, as Rick outlined, we don’t see any issues with the pieces that we have laid out.

Rick Holley

And George, a lot of these capacity expansions, some of these mills bought by Canadian producers and they are enhancing their capabilities of those mills as we speak. I think we are going to start to see some impact in those markets really in the second half of this year, where you should see Southern sawlog prices up a couple of dollars or so a ton, just because that demand, that capacity is going to be in line, therefore the demand for logs will go up. And we are also seeing a number of both U.S. and Canadian producers looking at different sites across the U.S. South to increase production capacity. Some of these are going to be sites that have been shutdown for a while and some will be Greenfield sites as well. So, I think as we look ahead to the balance of this year and next year you are going to see that capacity expansion come online. We should start to see the benefit of that from a pricing standpoint.

George Staphos - Bank of America/Merrill Lynch

Okay. I will turn it over and I will come back in queue. Thanks.

Rick Holley

Thanks.

Operator

Thank you. And our next question comes from Paul Quinn from RBC Capital Markets. Your line is open. Please go ahead.

Paul Quinn - RBC Capital Markets

Yes, thanks very much and good afternoon. Just a question on Northern Resources, it looks like prices were up 11% year-over-year and you are citing strong export growth and domestic lumber activity. The indications I get from Chinese sources is inventories are rather high in that, are you seeing the same thing and what do you expect for the balance of the year?

Rick Holley

Yes, Paul, this is Rick Holley. Yes, inventories are high. Typically in China, the inventory will be 2.5 to 2.6 cubic meters in the ports. I think at the end of the year that’s kind of where it was at the end of the first quarter, it was up around 4 million cubic meters. Last week, it was – it’s come down a bit from there and it’s kind of dropping at about 60,000 cubic meters a day. So, we are starting to see the – after the New Year’s period, we are starting to see activity pickup and the inventories come down, but there is a fair amount of inventory in the ports. That said, we still see from customers here both in the Pacific Northwest and also increasing on the U.S. South, strong demand for logs are going to China. So, I think we still feel pretty good about that business there, but inventories at least as of the end of the first quarter were quite high.

Paul Quinn - RBC Capital Markets

Okay. And then just piggybacking on George’s question on the U.S. South and you are citing the sawmill capacity additions, is there a regional aspect of where you see the capacity additions, i.e., how does that translate back to you in terms of regional pickup in sawlog prices? And is there, more – have you got a flavor on timing? I mean, you said the back half of the year will be better, but is there a point in say ‘15 when you think all this capacity comes online and looks even better?

Rick Holley

Well, clearly in ‘15 I think some of this – Interfor and others have bought some mills on kind of the, what we call, the Atlantic South and they will make some investments in those mills and increase their productive capacity and that’s going on right now. On the Gulf side, which is really Mississippi, Arkansas and to a lesser extent Louisiana, that’s where we expect to see a number of mills that have been shutdown for quite a while, come back online with a new owner to probably recapitalize. And we also have some potential customers looking at Greenfield plants. So those will be kind of in Mississippi and Arkansas, where as you know log prices have kind of – have been quite a bit lower than they have on the Atlantic South side. So, that’s why they are there. There is a lot of logs in the marketplace and prices have historically been a bit lower. So, that’s where they are looking to cite those plants. And as those plants come online and all the equipment guys are way back up now, so that’s one of the challenges some of these guys have is just getting equipment, because everybody is trying to expand right now. So, I clearly expect by the second half of 2015, you should see quite an impact from this capacity expansion on both sides of the South.

Paul Quinn - RBC Capital Markets

Again, last question, just because you cited it on the Drax Mills that are coming up and then you are going to be supplying in Q3 of this year. I saw an article last week stating that Drax was launching legal proceedings against the government there, because it look like they were eligible for both facilities to be able to convert from coal to pellets and now it looks like from last week’s, I guess, wording if it’s only one of them. Do you see that as a potential to slowdown pellet manufacturing in the U.S. South and does that materially change anything for you guys?

Rick Holley

Yes, what it was is – actually Drax has six boilers and they have announced that they are going to convert three from coal to basically biomass wood pellets predominantly. And the government, I guess, recently said they were going to disallow one of those three and that’s why Drax filed the lawsuit against the UK government. I think it was last week on that, because they had already gotten it approved. Now, they are kind of taking it away. But given the carbon tax and everything that they have today in the UK, we expect that Drax will still convert all three units and it should not affect our supply to Drax whatsoever. I mean, their demand even on those three units is significantly above what our supply agreement is. So, I think you will continue to see the traction in the marketplace for pellets. For instance, German pellets whose building the mill, they have one in Texas and they are building the second one in Louisiana. All those pellets basically go to a different market in Europe and Germany, in particular, where it’s kind of a home market where people in their homes burn wood pellets for energy as opposed to natural gas or other forms or oil, if you will. So, they don’t rely on any of these subsidies or other things out of the UK marketplace. So, we continue to feel very good about the pellet business.

Paul Quinn - RBC Capital Markets

Great, thanks very much. Strong quarter. Congratulations.

Rick Holley

Thanks, Paul

Operator

Thank you. And our next question comes from Anthony Pettinari from Citi. Your line is open. Please go ahead.

Anthony Pettinari - Citi

Good afternoon.

Rick Holley

Good afternoon.

Anthony Pettinari - Citi

Rick when you look at the performance of the stock over the past six months, it’s come off a bit and presumably the private market value of your land hasn’t really fallen at that rate. And I am wondering given there is maybe a discount to private market value that has widened, is there a way that you can take advantage of that disconnect by selling land in the private market and maybe buying back some stock or generally can you talk about how you think about share repurchases given your land appears to be trading at a discount to private market value?

Rick Holley

Well, and it does and so you are right. And as you know, we to do this acquisition which we are very pleased with by the way we issued some stock in the month of December of 2013 at $45 a share and we did not find that price attractive. And clearly, we traded down since then so we find it even less attractive. We look at our shares being cheap at this price and that they are traded at kind of 10% below what we just issued them for $45, so you get down around $40 a share, you will see us buy the stock back. We think it’s very compelling to do. I mean clearly at $43 a share, we won’t buy it back, so we just issued at $45, but it clearly makes sense as we approach that to do that very thing. So capital allocation is kind of what we do around here. We think about and talk about it all the time and so a disappointing performance of our stock we think it’s clearly worth more on a private market value. And from time-to-time you have seen us do that to sell somewhat we like the Oregon timberlands where we have been approached and we have sold some Oregon timberlands over the last couple of years at some very, very attractive prices. So we will continue to look for opportunities to just create value by buying and selling, whether it’s our stock, whether it’s our assets or even acquisitions like we did in December.

Anthony Pettinari - Citi

Okay, that’s helpful. And then maybe just a follow-up question on Southern sawlogs, I think when you have spoken previously about full your guidance, you have expected kind of a double digit increase for 2014 on a stumpage basis. And so I am wondering is that still intact for the full year, given the guidance on Southern log prices seems to be a little back end weighted to the second half and the sequential flatness from 1Q to 2Q for Southern sawlog prices, is that just the capacity hasn’t started up yet or is it lingering impacts from the weather or maybe housing starts are a little bit weaker than expected, if there is anything you can add there?

David Lambert

Yes, I think we will be closer to 10% versus 20% range that Southern sawlog prices will be up this year. And again a lot of it has to do with the second half of the year only because some of these capacity expansions will be fully in place then, which will certainly help in some of these markets. The second quarter, it’s a function of housing has been a bit slower than we thought starting the year and clearly weather conditions have been poor. I mean you got this weather front coming across the Midwest and to the Southern United States again this week and this one after another. So it’s just – hopefully by the end of second quarter we will start to see some pickup, but that’s just our expectation to be pretty flat from first to second quarter.

Anthony Pettinari - Citi

Okay, that’s helpful. I will turn it over.

David Lambert

Thank you, Anthony.

Operator

Thank you. And our next question comes from the Chip Dillon from Vertical Research. Your line is open. Please go ahead. Pardon me. Chip Dillon, your line is open. Please go ahead. If you have your phone line on mute, can you un-mute please? And your next question comes from Mark Weintraub from Buckingham Research. Your line is open. Please go ahead.

Mark Weintraub - Buckingham Research

Thank you. I was hoping to get just a clarification on the MeadWestvaco acquired lands, where you are looking at potential recreational opportunities later this year, is that included in your guidance or could potentially that be incremental?

David Lambert

That’s included in our guidance for the year.

Mark Weintraub - Buckingham Research

Okay. And as you had some opportunity to look at those lands, I think in the past you have indicated that your long-term harvest, you believe would be something on the order of 23 million tons, maybe a little bit better, does that still look like a good number or as you have noticed, you have been very impressed with the productivity, might there even upside to that number, how should we be thinking about the long-term harvest?

David Lambert

I think we have indicated before that we would grow the harvest at just 22 million tons per year based on the current footprint, but that would take into account selling up to 1.1 million acres. So absent with the smaller land sale program, you could certainly see a much higher harvest outlook in the future.

Mark Weintraub - Buckingham Research

Okay. And just to clarify, so that $22 million, is that including the MeadWestvaco lands acquired or not?

David Lambert

Yes.

Mark Weintraub - Buckingham Research

Okay. And then lastly if I could, on the Columbia County as you know and you got 2,600 of high value, that’s a lot of land, is there a way you can help us think about how that might get valued and is that if I understood you correctly, is that something you are expecting to likely monetize next year?

Rick Holley

Yes, the Columbia County property will likely go to market later this year. We have already talked to Rockefeller Group on our behalf and talked to potential tenants for that, and they will be industrial kind of tenants for that particular property. I think the way you think of it is going to be like there is really no capital going to it. It’s the site is ready to go and it’s the several times what timberland values are in that region. And we don’t have an expectation for price yet. But we are certainly very excited about it given that location and all the designations that it’s gotten from the state. So we should have it in the market by the end of this year.

Mark Weintraub - Buckingham Research

Okay. And just to clarify, are you – so you are expecting to realize some or all those proceeds this year or next year?

Rick Holley

I think it’s nothing, none of it’s in the forecast so – or our expectations. So I think you are considering go to the market by the end of this year and it will be in next year’s numbers.

Mark Weintraub - Buckingham Research

Okay, thank you.

Rick Holley

Thanks Mark.

Operator

Thank you. (Operator Instructions) And your next question comes from Gail Glazerman from UBS. Your line is open, please go ahead.

Gail Glazerman - UBS

Hi, good afternoon.

Rick Holley

Hi Gail.

Gail Glazerman - UBS

Just maybe following-up on that quickly, when you have talked about like $200 million of land sale income going forward, that’s also including the expected income you would get from $200 million of revenue. The revenue you will get from development property, is that part of the step-up in value and decline in acres sold?

Rick Holley

That’s correct.

Gail Glazerman - UBS

Okay, just talking a little bit near-term, I guess, you have referenced maybe seasonal softness in the West, but I am just wondering if you can give a little bit more color on what’s been going on there, Loglines have showed some declines, is that China stepping, I mean China and Japan stepping away a little bit, easing tension or is that just normal seasonality?

David Lambert

I think a lot of it is just normal seasonality. You would see typically non-industrial private owners bringing higher flows to the market come spring and summer. And right now, we have adequate inventories at the mills and so that increased flow, we typically see prices roll off after the first quarter a little bit.

Gail Glazerman - UBS

Okay. And harvest conditions up there, would that pulling in kind of the farmer a little bit earlier or are the conditions like that or...?

David Lambert

I mean, we are coming into that part of the year when harvesting conditions improve, companies can get up to some of their higher elevation timberlands that they weren’t in earlier in the year as well.

Gail Glazerman - UBS

Okay. And I mean are you seeing, it sounded like you are kind of hoping to see the spring emerge later, but I mean are there are any concrete plans that you are seeing of the building season emerging in either region?

David Lambert

Just what we are seeing housing starts have been relatively flat. I think we are right at that point where both from an end used demand pull in building activity what people are doing on-site, this is the time of year we would expect it to start accelerating.

Gail Glazerman - UBS

Okay. And just kind of looking at the industrial timberline market, can you just give any sense of what you are seeing I guess there are a couple of large transactions in the South during the quarter are those types of things that you would – that you are looking at and do you feel having just done the acquisition, you would be in the position to pull the trigger and just in general the level of activity and interest that’s out there?

Rick Holley

Yes, again, we look at everything that comes to market and to the right opportunity that we believe it’s accretive to value and cash flow for this company, we have the capability and we would pull the trigger. As you have seen lately as a lot of these 40,000 and 50,000 acre type of transactions in the marketplace, Deltic announced one recently and there was another one by a new company, I forgot the name, but anyway a small a new REIT in the South. So there has been a couple of smaller transactions, but – and we looked at both of those transactions, so we are very familiar with them.

Gail Glazerman - UBS

Okay, but I mean, is there – I mean it is more weighted towards that I mean, obviously in Weyerhaeuser we did quite large transactions last year, so is there level of those type of deals more or less than kind of what you have been seeing?

Rick Holley

Yes, that’s kind of what we are seeing that side of the transaction in the marketplace. A lot of these obviously are coming from the TIMOs and their capital sources, which are institutionally driven and they tend to bring these packages to market. And I guess, they are 40,000 or 50,000 acres because there is more potential buyers at that level. We have really not seen any other than the transaction with Brookfield that Weyerhaeuser did and the MeadWestvaco deal. There hasn’t been anything large in the marketplace for some time. Forest Capital was a couple of years ago and really traded between Forest Capital, which is a TIMO and Hancock which is another TIMO. So I think over the next period of time, you are going to see a lot of these investments roll off due to their completion of their 10 or 12 or 15-year time horizon and you are going to continue to see these kinds of things trade, whether you see any large ones or not, I don’t know but I think you can always see these 40,000 or 50,000 acre deals in the market.

Gail Glazerman - UBS

Okay, thank you.

Rick Holley

Thanks Gail.

Operator

Thank you. And our next question comes from Chip Dillon from Vertical Research. Your line is open. Please go ahead sir.

Chip Dillon - Vertical Research

Yes, sir. And I am here. Good afternoon.

Rick Holley

Good afternoon.

Chip Dillon - Vertical Research

First question is as we think longer term about the development land you have given us some pretty good roadmap – pretty good roadmap in terms of some of the lands in Florida and Georgia, what kind of range or revenues could we kind of see in the 2015-2016 time horizon? And if you could also address sort of when do you think the Edisto lands that are really high value added in South Carolina could start to matter? Is that more like five years away or could it be sooner than that?

Rick Holley

Well, it’s hard for us to give you guidance on these development properties, but clearly we should see some development revenues, some significant on the Columbia County project in 2015. The one we mentioned in Georgia is kind of a 2016 one. Alachua County, which is going to be a huge value uplift, that’s probably over the next five years. So, it’s a little longer term, because it’s another 12 to 18 months to get it through the approval phases, which we will expect to. The Edisto property, which is very attractive and as we are getting our hands around that, we will try next quarter to give you more guidance on that, but I think it’s probably more of the 3 to 5-year time horizon. I mean, some of that may come out over time, but clearly it’s kind of in that mid-term time horizon. It’s not long-term. They are very, very attractive lands. But as you know, there is a lot going around in Charleston, where there is a lot of building activity in Charleston too. So, this is kind of on the fringe just outside kind of the natural circle, if you will.

Chip Dillon - Vertical Research

Got it. And then just one quick one for Dave, could you just let us know what the timber deed EBITDA was in the quarter and maybe how much the aggregates business contributed either on maybe on an income and an EBITDA basis?

David Lambert

Sure, Chip. EBITDA for the timber deed was just over $2 million in the quarter. And EBITDA associated with the aggregates business in the quarter was just over $2 million as well.

Chip Dillon - Vertical Research

Got it. Okay, thank you. That’s very helpful.

Rick Holley

Thanks Chip.

Operator

Thank you. And our next question comes from George Staphos from Bank of America/Merrill Lynch. Your line is open. Please go ahead.

George Staphos - Bank of America/Merrill Lynch

Thanks. Hi, guys. Maybe one last one to follow on here, in the past, we have talked about being a longer term risk being that as timber began to continue to grow on the stand in the South in particular that there was a chance that you would get timber that would be too large for a lot of the mills and processors to use down the South. Now, we are a couple of years down the road. We are still not seeing quite the lift in harvesting and I know – and you have a fair amount of investment going in, into the South as you pointed out. So, do you worry at all about the risk that these logs are going to be too large to be processed by the mills that are going to be running in the next several years or do you think that will be managed either, because the risk really wasn’t ever there and b) the capital investments going in will take care of that? Thank you.

Rick Holley

Yes. George, it’s not a risk for us whatsoever. I mean, virtually, all of our lands are managed on a plantation basis today and whether we cut Southern Yellow Pine sawlog at age 25 or age 30, it’s not going to get too big for any of these mills. Now, these are high-speed mills that want a certain type of log, certain size, but you are talking about logs, trees that are 40, 50 years old in the South to be at a size that these guys couldn’t economically cut and really wouldn’t pay you anything for. So, that’s really not a risk, certainly not for Plum Creek.

George Staphos - Bank of America/Merrill Lynch

Understood. Thanks and good luck in the quarter guys.

Rick Holley

Yes, thanks George.

Operator

Thank you. I am showing no further questions at this time. I would like to hand the conference back over to Mr. Rick Holley for closing remarks.

Rick Holley

Well, thank you everyone and we will talk to you next quarter and let’s hope the weather gets better everywhere. Have a good day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This concludes our program. You may all disconnect. And have a wonderful day.

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