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Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the PotlatchDeltic First Quarter 2019 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you.
I would now like to turn the call over to Mr. Jerry Richards, Vice President and Chief Financial Officer, for opening remarks. Sir, you may proceed.
Thank you, Rob, and good morning. Welcome to PotlatchDeltic's investor call and webcast covering our first quarter 2019 earnings. With me in the room are Mike Covey, Chairman and Chief Executive Officer; and Eric Cremers, President and Chief Operating Officer.
This call will contain forward-looking statements. Please review the warning statements in our press release, on the presentation slides, and in our filings with the SEC concerning the risks associated with these forward-looking statements. Also, please note that a reconciliation of non-GAAP measures can be found on our website at www.potlatchdeltic.com.
I'll now turn the call over to Mike for some comments, and then I will cover our first quarter results and our outlook.
Thanks, Jerry, and good morning. We generated adjusted EBITDDA of $30 million in the first quarter excluding our MDF operations. Our Resource segment operated well, allowing us to capture price premiums in the South due to weather-related log shortages.
Conversely, all of our Idaho customers built substantial log decks early in the quarter in anticipation of spring breakup and log deliveries were curtailed in the latter half of the quarter. Our annual harvest plan remains intact with the shift of deliveries into the second half of the year to account for the first quarter shortfall in Idaho.
As expected, log prices in Idaho fell in the first quarter due to our indexing arrangements. Real Estate development sales were down seasonally as expected. We continue to be excited about rural land sales opportunities on the legacy Deltic timberlands in Arkansas. Lumber prices are a key driver given that we are the timber REIT with the most leverage to lumber prices. Our average lumber price increased 4% in the first quarter, which was just under the 5% level that we'd expected.
A series of external issues hampered our ability to manufacture and ship lumber during the quarter, including a train derailment in the West; extraordinary rainfall in the South, which resulted in log shortages; and extreme cold weather in the Lake States.
Improvement in lumber prices stalled in the first quarter as the spring building season was delayed by incredibly wet weather in many regions of the country. While current lumber inventory throughout the system is adequate for many customers to obtain just-in- time deliveries, markets could tighten based on further developments in Canadian supply-related issues.
We remain optimistic that lumber prices will improve in the near term once the delayed building season gets underway in earnest, and we were encouraged by the improvement in Western lumber prices reported by Random Lengths last week.
Strong builder confidence, the recent drop in mortgage rates, stronger new home sales, and solid growth in repair and remodel spending all underpin our confidence. During the first quarter, we closed on the previously announced sale of our El Dorado, Arkansas MDF business to Roseburg Forest Products.
After paying taxes and assigning $29 million of revenue bonds, net proceeds were approximately $43 million. Our balance sheet remains strong and provides flexibility to grow shareholder value. Share repurchases were our main priority for our excess cash during the quarter. We used $10 million to repurchase 279,000 shares at an average price of $36 per share in the first quarter.
Our stock continues to trade at a significant discount to our net asset value in addition to yielding over 2%. I'll now turn it over to Jerry to discuss the quarter and talk about our outlook, and then we'll take questions.
Thanks, Mike. I'll start with Page 4 of the slides. Excluding results of the MDF mill, total adjusted EBITDDA was $30.1 million in the first quarter compared to $34.5 million in the fourth quarter. sequential decline in EBITDDA is due to seasonally lower Real Estate sales and harvest volumes, partially offset by a modest improvement in lumber prices.
I'll now review each of our operating segments and provide more color on the first quarter results. Information for our Resource segment is displayed on slides 5 through 7. The segment's adjusted EBITDDA was $26.9 million in the first quarter compared to $29.8 million in the fourth quarter.
We harvested 374,000 tons of sawlogs in the North in the first quarter. This is down seasonally from the 388,000 tons that we harvested in the fourth quarter. Northern sawlog prices were 9% lower on a per ton basis in the first quarter compared to the fourth quarter. Roughly half of the price decline reflects the lagged effect of lower Q4 lumber prices and the other half was due to the seasonal increase in the density of logs.
Turning to the South, we harvested 828,000 tons in the quarter. This was down seasonally from the 912,000 tons that we harvested in the fourth quarter but was slightly higher than we had planned. Our employees did a good job managing through a wet quarter, which captured a small premium caused by log shortages.
Our Southern sawlog prices were 3% higher this quarter. The weather-related premium we realized on pine sawlog sales was more than offset by the effect of a seasonal decline in hardwood sawlog harvest activity. We think that Southern pine sawlog prices will revert to normal trading levels once conditions dry out and logs are more readily available.
I’ll now shift to Wood Products, which is covered on slides 8 and 9. Excluding results of the MDF mill, the segment's adjusted EBITDDA was $9 million compared to $1.7 million in the fourth quarter.
Our average lumber prices increased 4% from $367 per thousand board feet in the fourth quarter to $380 per thousand board feet in the first quarter. Lumber shipments decreased 27 million board feet to 238 million board feet in the first quarter, which was well below our plan for the quarter.
As Mike mentioned, we experienced shipping and operational challenges in the first quarter. This included disruption caused by a train derailment in the Pacific Northwest, log shortages in the South due to the wet weather and the effect of the polar vortex on our Lake States mills. We're on track to make up most of the shortfall in the second quarter and still expect to ship approximately 1.1 billion board feet of lumber for the year.
I'll now cover our Real Estate segment on slides 10 and 11. Real Estate's adjusted EBITDDA decreased $9.9 million in the first quarter. Chenal residential lot sales were seasonally lower. In addition, there were no commercial land sales in Chenal in the first quarter compared to $4.5 million of commercial land sales in the fourth quarter. There continues to be good interest in commercial acres.
Shifting to financial items, which are summarized on Slide 12, we ended the quarter with $105 million of cash. We closed the previously announced sale of the Deltic MDF mill in February. The buyer assumed $29 million of industrial revenue bonds related to the mill, and we expect to net approximately $43 million of cash once we pay taxes on the transaction. We used $10.2 million of cash to repurchase $279,000 of our shares in the quarter.
The average price was just over $36 per share. Our dividend is well covered. Excluding Deltic merger costs and the voluntary pension contribution that we made in the third quarter of 2018, our payout ratio was 67% on an LTM basis. As a reminder, we completed the refinance of our $150 million senior notes in the first quarter. This reduces our interest expense $4.4 million on an annual basis.
We expect the first annual Farm Credit patronage payment related to this debt to reduce interest expense a further $1 million beginning in the first quarter of 2020. Capital expenditures were $9.8 million in the first quarter. Note that this amount includes $1.8 million of Real Estate development expenditures which are included in cash from operations in our cash flow statement.
We continue to expect that total capital expenditures, including Real Estate development, will be in the range of $65 million to $70 million for 2019. I'll now provide some high-level outlook comments. The details are presented on Slide 13. Harvest volumes in the North are expected to be seasonally lower in the second quarter compared to the first quarter due to spring breakup.
We expect Northern sawlog prices to increase about 10% in the second quarter due both to resetting the price of index volume to reflect improved Q1 lumber prices and seasonally lighter logs. Harvest volumes in the South are expected to increase 10% to 15% in the second quarter assuming dryer conditions.
We expect Southern sawlog prices to be flat sequentially as a seasonal increase in the mix of higher priced hardwood logs offsets elimination of a wet weather premium for pine sawlogs. Our average lumber price is currently about $400 per thousand board feet on a spot basis, which is about 5% higher than the average lumber price that we'd realized in the first quarter.
We expect further improvement in lumber prices, and our internal forecast estimates our average second quarter lumber price to be about $410 per thousand board feet. As a reminder, a $10 per thousand board foot change in price represents about $12 million in total adjusted EBITDDA on an annual basis. We expect to ship $280 million to $295 million board feet of lumber in the second quarter.
Shifting to Real Estate. We closed on the sale of 8,000 acres of nonstrategic timberland in Minnesota to a conversation entity yesterday at the price of just over $800 per acre. This transaction was contemplated in our plan to sell approximately 20,000 acres of rural land this year.
Overall, we expect an improvement in lumber prices, a seasonal increase in Southern harvest volume and sale of more rural acres to result in higher second quarter adjusted EBITDDA compared to the first quarter. That concludes our prepared remarks.
Rob, I would now like to open the call up to Q&A.
Thank you. [Operator Instructions] Your first question comes from the line of John Babcock from Bank of America. Your line is open.
Hi, good afternoon. Just want to start out on the lumber front. I was wondering if you could talk about overall conditions in the market and where inventory stand right now, and ultimately, how optimistic you are for prices kind of moving higher from here.
Yeah John, this is Eric. Good morning or afternoon depending upon where you're at. What happened in lumber prices in Q1, well, as we discussed back in Q4, we thought that prices had bottomed and that we would move higher as we got into Q1. Sure enough, in Q1, prices did move higher as Mike and Jerry spoke about earlier. We were generally in line with Random Lengths for the quarter. We did slightly better than the Random Lengths' Index, but we're not the same product mix, so that's to be expected.
So what happened to lumber prices since Q1 ended? Well, the increase in lumber prices that we've seen since December has now paused as we got out into April and it varies by market. Western markets showed a little bit of an increase over the last week or so with a lot of announced curtailments, but we haven't seen a similar response from Southern markets or from the Lake States studs.
Inclement weather in the first quarter held back housing starts. I think it's been -- there's been a lot of press that builders have been destocking their inventories starting middle of last year. As they saw interest rates moving higher and affordability issues come into play, they started pulling down their inventories and that just reverberated itself all through the supply chain. But we're now starting to see signs of improvement.
You saw the new home sales that were announced, what, I guess it was late last week. We're actually the second-highest monthly number since the Great Recession. And that has come from both more affordable houses with interest rates coming down, but also builders now making houses smaller and therefore more affordable. So our view is that lumber markets are starting to firm up, but we'll see how that plays out as we move through the year.
And just to confirm, did I hear correct that you guys, at least within the forecast, are expecting $410 per million board feet – or per thousand board feet?
That’s correct John.
Okay, thank you. And then if you could just talk a little bit about essentially kind of the operational impacts from the vortex and also kind of the train derailment. If you can just below provide a little more detail on that, and also if there was any carryover into April.
Yes. So as Mike and Jerry spoke about, our lumber shipments were impacted pretty significantly by some really tough weather conditions in the first quarter. Actually, it was a number of different factors that held back shipments by 25 million to 30 million feet in a quarter. Weather was roughly 30 million feet of that shortfall. Some of that was due to running out of logs down in Arkansas due to the wet weather.
And some of that was due to the polar vortex in the Lake States. That impact shipments by about 8 million feet. We also had a train derailment out in Eastern Washington that backed up inventory in our St. Maries mill. That held back shipments about 5 million feet. And also due to other transportation challenges, we had about 5 million feet that was above normal in transit shipments to the quarter.
So they shipped they left the mill but they hadn't arrived at the customer's location so they couldn't be booked as a sale. So all in, the tough weather really impacted us 25 million to 30 million in the quarter. But moving into Q2, things have eased quite a bit and transportation issues have really gone away.
So the majority of that was resolved in 1Q, so we don't really have to worry about much of that this quarter?
That’s correct.
And then I just wanted to confirm. I thought the guidance, if I'm not mistaken, was around kind of 6 million to 6.1 million tons for the year in the Resource segment. Can you just kind of provide an update on what you're thinking as far as volumes there?
So, we’re still planning on 6 million, 6.1 million tons for the year. We're off to, I would say, a little bit of a slow start this year. In the North, mills are relatively full right now and pricing is on the weak side, so we're not anxious to force wood into an oversupplied market. But we'll go through the normal seasonal increases that we go through each year in Q3 and even into Q4, and we expect to hit our harvest targets of about 1.8 million tons in the North.
In the South, the tough weather conditions have held us back a little bit. We are running a little bit behind. That being said, we had a pretty solid Q1. Our teams did a great job taking advantage of relatively high sawlog and pulpwood prices and got over 800,000 tons into the market. And we expect them to get just under 1 million tons in Q2. They're still some wet conditions in the South. It's impacting one of our districts in Arkansas in particular.
But nonetheless, we expect these things to dry out moving into Q3 and Q4, we will hit our harvest targets for the year.
Okay, thank you. That’s very helpful.
Your next question comes from the line of Chip Dillon from Vertical Research. Your line is open.
This is Salvator Tiano in for Chip. How are you.
Good.
So my first question is on the MDF plant. Just trying to understand a little bit now that it's sold how your revenues and operating profitability would look like. And if I understood correctly, essentially you're saying plant generated an EBITDDA loss in Q1. So can you elaborate a little bit on that? And how we should think about the foregoing EBITDDA for the remaining of the year.
Yes. So to start with, Salvator, first part of your question is yes, there was an EBITDDA loss of $1.8 million for the quarter for MDF. There was a fair number charges and kind of housekeeping type unusual expenses that we incurred leading up to the sale. So that is correct. In terms of EBITDDA for the mill, I mean, we haven't recorded it separately in the past. Back under Deltic, it was probably in the $8 million to $10 million EBITDDA range.
In terms of revenue, it's probably somewhere in the – probably the $40 million range or so, maybe $30 million, something in that range. So that will give you some sense as to what the go-forward business looks like.
So essentially, the fact that had an EBITDDA loss doesn't mean you're going to benefit in the next few quarters from the sale, right? Just a onetime items maybe.
Okay. Great. MDF totally gone as of the point we closed the transaction in February.
Yeah, and the second question is on capital allocation and buybacks. This is the quarter where you build the cash essentially, and I think your net debt is down by over $50 million from where it was in the end of the year. So I'm thinking a little bit, if the stock price already $39, it was $35, $36, how do you think about buybacks about the rest of the year? And was there any – and how are you thinking about M&A versus that especially given that the stock price was up at pretty attractive level earlier as you were getting the cash, which only $10 million worth of shares being bought back?
So in terms of capital allocation, I mean, first off, you're correct, we continue to trade at a pretty sizable discount. Our stock price especially when you factor on a 4% dividend yield on top of it, is at a really attractive level. I think part of what you touched on in your question was how do we think about buybacks versus acquisitions. And certainly right now, I think the implied – the math this morning and the implied value of our trees that's trading in the public market is about $1,400 an acre, which is well below what those trees are worth on average.
So when you think about buying trees, ours are much more attractive at the current point that any outside trees. So we would continue prioritize share repurchases over any acquisitions. And it's a situation where we'll continue to be opportunistic and we certainly have plenty of available cash to continue to execute against that program.
Great. And just one last one, you do mention you're a net log buyer in the U.S. South, right. And many companies noted how due to weather, sawlog price were a little bit higher. What's the impact on your Wood Product operations from these natural position material to this $2 million EBIT generation? Or was it immaterial and won't really help next quarter?
No, it was an immaterial impact. And those inventories turn over quickly this time of year when we only have a couple of days of inventory at each mill. So it was immaterial and it won't have an impact on 2Q.
Okay, thank you very much.
I would add, Salvador, is again, being almost perfectly hedged where it's a plus in one segment. So Resource this quarter, it's offsets the negative in the Wood Products largely. So that's part of the color behind why it's immaterial.
Okay, great. Thanks.
Your next question comes from the line of Ketan Mamtora from BMO Capital Markets. Your line is open.
Thank you. And congrats on a good start to 2019.
Thank you.
The first question, on the Wood Products side, can you talk a little bit about debottlenecking projects that may be going on at your sawmills? And what kind of capacity that you may have at the end of 2019 on the lumber side?
Sure.
Yes. So Ketan, we've got a number of different projects underway at our different mills to try to debottleneck to improve or increase production. At St. Maries, we're in the process of trying to install a new kiln out there. We have been held up getting a permit from the EPA to construct and install that kiln. We hope to have that done and installed and operating by the end of the year. We think that'll improve production at our St. Maries mill, who knows, 15 million, 20 million feet a year.
We also are installing at our Waldo sawmill down in the South. We've had shipping challenges as we've talked about over the last year or so with rail issues. We're not getting enough cars. So we're going to install another rail spur at our Waldo mill, which will help us increase our shipping capacity and lower our freight cost at our Waldo mill.
And in addition at the same Waldo mill, we're going to install a new green stacker, which will allow us to improve our cut per hour and reduce labor and other related costs. And we think that's going to allow us to expand our Waldo mill another 15 million to 20 million feet. And then finally at our Warren sawmill, I think we've spoken about this previously, but we're installing two new continuous kilns at our Warren sawmill.
And that, too, will allow us to drive more lumber, have higher quality and will improve shipments there another, who knows, 15 million, 20 million feet. So all in, we hope to get shipments up to a little over 1.1 million this year, and then we intend to grow shipments from there another 2% or so as we look out into 2020. Although I don't – I'm low to give you guidance on 2020 because we haven't done all our detailed planning yet.
No, that's fair. But this is very helpful. And then turning to the cedar markets up North. Can you provide any update on what you're seeing there in terms of how the markets are right now and where current cedar log prices are?
Yes. So as we talked about in the last call, cedar prices have been under a little bit of pressure. We had really high prices back in 2017, I think was the peak year for cedar. A lot of cedar logs came out of the woods, so to speak and mill inventory has got relatively full based upon those high prices. And if you look at cedar prices, our forecast for this year versus last year, we expect cedar prices to be down about 18% full year over full year.
And that may sound like a lot, but if you take a look at Northern sawlogs, excluding cedar, which will be stuff like Doug fir and Hem-Fir, those prices are expected to be up about 17% full year over full year. So it's really experiencing something similar that we're seeing in our regular Northern Resource business unit.
Now if we look specifically by quarter, our cedar prices here in Q1 versus Q4 were down 15%. But in Q2, we expect them to go up 14% and then in Q3 another 16%. . So it feels to us like prices have now bottomed.
Got it. And what would be the driver of those big increases in the second quarter and the third quarter, Eric?
What would be the driver of what?
Yes, of those big jumps.
Well, it's just our outlook for what we're hearing from customers on – these are deals that we're cutting as we speak.
Got it. Understood. That's helpful as well. And then just turning to Southern log prices. Obviously, Q1 had a weather element in it. But outside of that, are you seeing kind of signs of pricing tension in any of the wood baskets that you guys operate in?
Very little tension. I mean we're getting a nice lift today. That may last through the end of Q2. But we expect prices to move back lower again as we got around to Q3 and Q4.
Understood. And then just one final question, more of a clarification, Jerry. On Q1 share repurchases, was there any limiting factors like blackout period or anything of that kind which prevented you from buying back more shares?
Yes. So we had an open window. I mean like we talked about in our last quarter's call that it opened second day after we released earnings. So we certainly had an open window to work through and then there's the normal SEC guidelines on restrictions. But when you look at the level we purchased, no, it was not constraint relative to what we could have done.
Understood. Okay, that’s super helpful. Good luck for the rest of 2019. Thank you.
Thank you.
Your next question comes from the line of Collin Mings from Raymond James. Your line is open.
Hey, good morning out there. Just a couple of questions from me. First, just really a point of clarification just – you touched on this in the prepared remarks and in an earlier question. But as far as the anticipation that pricing in the U.S. South will revert to lower levels as wet weather conditions subsided, have you actually seen that pricing tension ease in recent weeks? Or is that just an expectation as you kind of move through the quarter?
No, I'd say it's an expectation, Collin. We think there's a chance that these had better prices with mill log decks being relatively low. There's a chance that these – I call them elevated, but up $2 or $3 a ton isn't really all that elevated. There's a chance it's going to last through Q2, but then we think it's going to move back lower as we get out into Q3.
Okay, that’s helpful clarification there. And then just – I want to talk a little bit more about just cost pressures more broadly. Just recognizing obviously you guys have been focused and remain focused on projects that will improve efficiency and your cost structure, again, both kind of within the mill operations as well as different things that we've identified through merger on the Deltic side. But just maybe can you expand on kind of what you're seeing out there in terms of cost pressures on the labor or transportation front as we kind of move through this year, particularly given some of the weather conditions?
Yes, Collin, I would say the inflationary – the pressures that we're feeling on the cost side, they're really just inflationary. It's nothing extraordinary. Transportation issues seem to come and go based on the season. The winter months tend to be really tough on rail and even some trucking problems. Then you get out into this climate we're in today, things are – transportation issues are I wouldn't say nonexistent, but they are not all that significant. As we get out into the summer months, we're going to have to start competing with produce shipments.
That's certainly going to be an issue for trucks in the South. We see truck pricing issues in Idaho in the Resource business, that's becoming tougher and tougher occupation to get people to go into. But these are all relatively small cost pressures at the end of the day. The typical inflationary kinds of things, 2% to 4% per year, I wouldn't describe it as anything beyond that.
Okay. Okay. That's helpful. Bigger picture, just as it relates to trade relations between the U.S. and Canada on the lumber front, maybe just an update and kind of an update recognizing part of the U.S. Lumber Coalition following some of the WTO proceedings.
Well, there've been some kind of technical rulings as you know in the last few weeks. We continue to think that's going to take several months if not a year or more to sort its way through the system with WTO hearings later this – late in the fall of this year or perhaps into next year. Election season in both countries, all those things point to the fact that it's going to take a long time for this trade dispute to work its way through the legal process. We continue to believe that a negotiated settlement between the countries that's quota-based makes the most sense.
Okay. Sounds like not really expecting much to change on that in the near-term at least.
No.
One last question. Just, Jerry, more housekeeping. Just – it looks like there was a big swing in deferred taxes in 1Q. Just what was going on with that line item? I don't know if there's maybe something I missed in one of the footnotes. But just if you can provide some color on that, that would be helpful.
You bet, Collin. So that swing in deferred taxes is really related to the MDF sale. So when we – so we had very low carryover basis in the assets when we merged with Deltic. So we set up a pretty sizable deferred tax liability in purchase accounting. And now that we sold that mill, I mean, the cash taxes become due and that's why you're seeing that flip.
Okay, all right. Thank you all very much.
Your next question comes from the line of Steve Chercover from Davidson. Your line is open.
Thanks. And forgive me, I was kind of toggling between a couple of things. But in the South, the sawlog and pulpwood prices were elevated due to wet weather and you expect it to be flat in Q2. Is that because there's continued wet weather? Or are we seeing any tightening? Because I think I also heard you say it could reverse in Q3.
Yes. So Steve, this is Jerry. So what you heard Eric talk about is there's still elevated but we expect that pine sawlog prices will moderate during the quarter as mills rebuild inventories. The offsetting factor is hardwood seasonally increases as part of the mix of the harvest volume in Q2. And hardwood sells for a significant higher price than pine sawlog.
Sure. Now – I mean, this is probably almost speculative. But there's been on and off chatter about a huge mill in Arkansas. Have you heard any updates on that and would it benefit you?
Absolutely, it would benefit us. It's a pulp mill that's expected to be cited in our Arkadelphia, Arkansas, which is very proximate to our ownership. But it remains what I would consider to be speculative at this point. Construction permits, environmental permits to our knowledge have not been issued, although the investor continues to work on the process. But if it were to happen, I think we're talking about years away, not quarters away.
Certainly. Thanks. And then – and finally, again, forgive me if you mentioned it. But can you quantify how much you have outstanding on the repo even by dollar value or number of shares?
Yes, Steve. So we – so the overall authorization is $100 million. We used $10 million in the quarter, so we have, round numbers, $90 million that's left under the authorization.
Thanks Jerry. Okay, thank you.
Your next question comes from the line of Mark Weintraub from Seaport Global. Your line is open.
Thank you. First, you had mentioned early in your remarks regarding lumber that Western Canadian supply factors you thought would come into play. Is that just a reference to the recent curtailment announcements? Or could you expound on that a little bit more, please?
Yes, Mark. This is Eric. So you've seen a number of curtailment and closure announcements both in the Pacific Northwest and up in British Columbia. I think I heard the tally totaled something like 40 mills now. Our Western dimensional lumber business competes directly with those products and so we – there has been an improvement in pricing particularly for Western lumber. We haven't seen the same impact over into Lake States in our stud mill business over there or in Southern Yellow Pine, but that may yet be coming.
Okay. So what – is the reference to what is happening now not necessarily something that would be happening in the future? Just – I just wanted to clarify that.
Yes. What has happened is Western has improved and we have not yet seen improvement in pricing in either the Lake States or the South. But that may be coming.
Okay. And also thanks for the updates on harvest and lumber shipments. I guess the one area – any updates in terms of the outlook on Real Estate vis-à-vis sales and expected acres sold and average prices. It's somewhat noticeable that the second quarter, quite a few acres being sold at a relatively moderate price.
Yes, Mark. So I would say our Real Estate business is kind of back-half loaded, if you will, both in rural land sales as well as on the development side, particularly on the development side. We have more lots, two-thirds of our lots will be sold in the second half of the year and our commercial acres also generally tend to be sold late in the year. So the Real Estate business is skewed towards the second half versus first half.
Just a comment on the – let me just comment on the large plant sale, the one that we just closed in Minnesota. That is a multiyear commitment that we have with a conservation group in Minnesota to sell very rural land. I think this latest tranche was sold at $800 an acre. I think the one last year was around $900 an acre. It depends on appraisals annually. But that's still a significant premium to us embedded to the land value and it makes a lot of sense for us. So I don't think you should get overly concerned about the $800 an acre number. It made good sense for a small transaction.
Okay. And the full year outlook which you provided last quarter is a good starting point for this year still?
That’s correct, Mark.
For Real Estate, okay. Super. And then I guess just one last one if you – so it's interesting. You have – seems pretty good visibility on cedar logs. So you're certainly – you're cutting deals now for second and third quarter. Do you also have that type of visibility on the other Northern logs? Or is it just really all lumber indexed? Or is there some component that's not lumber indexed?
No, it's more lumber indexed. I mean there is a small portion that is not indexed. But when you start looking at taking out cedar, which is not part of the indexed arrangements, it's pretty small.
So maybe you're not the best people to ask on this. So is that – the type of variation you are seeing in cedar, I mean, is that likely to be happening in Northern log markets in general outside – again, outside of the stuff that you have indexed? Or is that kind of not a window you have a view on?
No, I don't think it's a window we have a view on it, Mark. I mean that 70%, you tell me what lumber prices are going to do and I'll tell you what log prices are going to do. And that other – the nonindexed portion tends to go up and down along with the indexed, but they're not going to move exactly the same.
Okay, thanks very much.
Your next question comes from the line of Paul Quinn from RBC Capital Markets. Your line is open.
Thanks very much. I think I heard clearly that you're more interested in buybacks than M&A given the current valuation. But just wondering if you can comment on M&A opportunities, what you're seeing out there. It seems like there's still a third of properties that are available to purchase.
Paul, it's been quite quiet. There's a couple of smaller transactions that are out in the marketplace I'm sure most industry players have looked at, but they're small in size, kind of under 50,000 acres. So the market's been pretty quiet.
Okay. And then just on the lumber side for capacity additions in the U.S. So what you're seeing in your areas, are you seeing any activity, anything slowing down given the drop in lumber prices?
Not really. We've heard anecdotally – well, it's not just anecdotally, some the equipment vendors now have slots in production queues that are available that weren't available six months ago. So that would indicate that some people perhaps are postponing or canceling projects. But it hasn't had a material impact on the capacity announcements. The mill projects that are underway in our operating areas in Alabama, Mississippi and Arkansas are all continuing as planned as far as we know, with the largest one of those being Interfor's project in Monticello, Arkansas, which will have a big impact for us favorably.
And that project is nearing completion, right?
I think so. Yes, I think midsummer.
All right, that’s all I had. Best of luck, guys. Thanks.
Thanks.
Thanks Paul.
[Operator Instructions] Your next question comes from the line of Chip Dillon from Vertical Research. Your line is open.
Hi, Salvator Tiano here again. Just a quick couple of follow-ups. Number one, we talked about M&A in timberlands, which you said you don't see as a crisis. Is there by any chance with all these mills, especially in the West or South, is there any opportunity to expand your sawmill presence? Or is it something you will not consider?
Well, we would not consider an expansion of our Wood Products manufacturing footprint without kind of an adjacent timberland transaction to go with it because as a timber lead, that only makes sense for us to expand our footprint in both timber and manufacturing just like we did would with the Deltic merger. But a standalone Wood Products purchase is not likely to happen.
Okay, great that makes a lot of sense. And secondly, I know we're still almost in May. Just is there a direction about your CapEx budget for next year assuming, I guess, that it would go lower following all this sawmill upgrades.
Salvator this is Jerry. It's way too early to give guidance on 2020. We have not gone through our capital planning or budgeting process for the year. So that's something that we usually talk about on the fourth quarter call of the year.
Thank you very much.
At this time, I am showing there are no more questions. I'll now turn it back over to Jerry Richards.
Thanks, Rob. And we certainly appreciate everyone's interest in PotlatchDeltic and participating on the call. We'll be available for any detailed modeling questions the rest of the day. I hope everybody has a good day.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call. You may now disconnect.