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CatchMark Timber Trust Inc  (NYSE:CTT)
Q2 2019 Earnings Call
Aug. 02, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to the CatchMark Timber Trust Second Quarter 2019 Earnings Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Brian Davis, President and Chief Financial Officer. Please go ahead.

Brian M. Davis -- President & Chief Financial Officer

Thank you, Debbie. Good morning, and thank you for joining us for our review of CatchMark Timber Trust Results for Second Quarter 2019. I am Brian Davis, President and Chief Financial Officer of CatchMark. Joining me today on the call are Chief Executive Officer, Jerry Barag; Senior Vice President of Forest Resources, Todd Reitz; and John Rasor, President of Triple T.

During this call, CatchMark management will make forward-looking statements. These forward-looking statements are based on management's current beliefs and information currently available. CatchMark's actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations. For more information about the factors that could cause such differences, we refer you to our 2018 Annual Report on Form 10-K and subsequent reports that we file with the SEC.

Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our earnings release, which is posted on our website and our Form 10-Q filed with the SEC yesterday, Thursday, August 1st, 2019. After our presentation, Jerry, Todd, John and I will be pleased to answer any of your questions.

Now, I turn over the call to Jerry Barag to cover CatchMark's second quarter 2019 results.

Jerrold Barag -- Chief Executive Officer & Director

Thanks, Brian. Good morning, everybody, and thank you for joining us today. We were very pleased with second quarter performance, highlighted by increases in total revenues and adjusted EBITDA year-over-year. The results point to the strength of CatchMark's underlying operating strategy, focused on assembling prime timberlands in select leading mill markets and benefiting from our delivered wood sales model and supply agreements with blue chip customers.

Significant contributors to quarterly results were asset management fees primarily from Triple T and HBU timberland sales. Our high demand mill markets, again, enabled CatchMark to realize better-than-market average pricing for timber sales compared to TimberMart-South. In relation to our previous results, we also continued to generate significant year-over-year timber pricing increases. Our prices were 3% higher for sawtimber and 2% higher for pulpwood second quarter year-over-year, and 4% higher for sawtimber and 3% higher for pulpwood for the six months period ending year-over-year. We were also pleased to see resilient prices in our sawtimber from first quarter to second quarter. In addition, last year's Pacific Northwest Bandon acquisition, stepped up operations during the quarter, producing $1.2 million in timber sales revenue meeting plan. And we remain very much on track to meet our full-year harvest volume target of 2.2 million tons to 2.4 million tons.

As noted, asset management fees were a major second quarter contributor to CatchMark's operating results with Triple T producing $2.8 million in revenues, Operationally, the Triple T joint venture is also doing well. The joint venture's operations exceeded budget for the quarter and year-to-date. Contributing to these excellent joint venture results, we are fully meeting our wood supply obligations with our two primary Triple T customers. We disproportionately benefited from wet weather related local pricing as conditions depressed local mill inventories, leading to increased demand and price increases for our Triple T pine harvest. Triple T land sales are on track to meet 2019 targets, and we are benefiting from strong surface used revenues generated by oil and gas related activities.

The Dawsonville Bluffs joint venture has been another asset management success story as it reaches its culmination in less than 2.5 years since formation. The joint venture has registered exceptional returns with an investment multiple to date of 1.3 times invested capital and produced results at the top end of 2019 guidance. That guidance anticipated the joint venture delivering $3 million to $5 million of adjusted EBITDA. And keeping with our strategic management plan for the joint venture, we have recently sold down substantially all of the remaining 4,400 acres of Dawsonville. That $8.7 million transaction was completed on July 15 and provided CatchMark with a $4.4 million cash distribution during the third quarter. The distribution includes a performance-based management promote in recognition of the joint venture exceeding investment hurdles.

Moving back to CatchMark's second quarter results, our HBU timberland sales also met plan and the execution contributed to improved year-over-year performance. We sold approximately 4,000 acres of timberland for $8.2 million compared to 3,100 acres for $6.8 million during the second quarter 2018.

The company's cash flow remained solid, and yesterday, we declared a quarterly cash dividend of $0.135 per share for common stockholders of record on August 30, 2019, payable on September 13, 2019. Year-to-date dividends have been fully covered with cash available for distribution.

Taking a closer look at CatchMark's second quarter operating results, we increased revenues by 9% to $28.7 million compared to the second quarter ending June 30, 2018. We incurred a net loss of $30.6 million on a GAAP basis, primarily due to a $28.6 million allocated loss from Triple T. We increased adjusted EBITDA by 8% year-over-year to $15.1 million. We generated gross timber sales revenue of $16.3 million, an 8% year-over-year decrease, resulting primarily from a 12% reduction in timber sales volumes, which was mitigated by the higher pricing previously discussed. We sold approximately 4,000 acres of timberland for $8.2 million. We completed a $5.5 million timberland disposition to recycle capital, which paid down $5.3 million in debt after quarter's end, and Brian will talk more about our recycling efforts in a moment.

We earned $2.8 million in asset management fees, and finally, we paid a dividend of $0.135 per share to stockholders on June 14, 2019. Overall, we had a very good quarter and continue to meet expectations for adjusted EBITDA within the range of $52 million to $60 million.

So now, I will turn it over to Brian to discuss the balance sheet and capital recycling.

Brian M. Davis -- President & Chief Financial Officer

Thank you, Jerry. During the second quarter and since the quarter's close, we have made significant progress on our capital recycling program, spearheaded by selective larger land sales. These sales and subsequent debt repayments are returning us toward targeted debt levels. The proceeds also provide additional capital for share repurchases, acquisitions of prime timberlands and potentially entering into new joint ventures. There are two transactions that we completed recently. In late June, we sold 3,600 acres of less productive wholly owned Georgia timberlands, receiving $5.3 million in net proceeds, which were used in early July to pay down existing debt on CatchMark's multi-draw term facility. We realized a GAAP gain of $764,000 on the sale.

Last month, we also executed a $19.9 million sale of 10,800 wholly owned acres in Georgia and Alabama, and used proceeds to repay $15 million of our outstanding debt balance on the multi-draw term facility. We expect to use the remaining proceeds from this sale to fund general corporate purposes, including share repurchases. This sale achieved attractive pricing in timberlands just outside of CatchMark's desired procurement range. These transactions will be fully reflected in third quarter results. If you include last year's Southwest disposition, which facilitated the Bandon acquisition, we have now completed nearly $105 million in capital recycling transactions.

Turning to our balance sheet, in the wake of the large timberland sales and after consideration of the debt repayments, which occurred since the end of the second quarter, we have $185 million available under our credit facilities for acquisitions, working capital and share repurchases. We maintain appropriate debt mix of 76% fixed to 24% floating rate, and the pricing of our low-cost debt remains highly favorable at 3.5% net of patronage.

With regard to share repurchases, under CatchMark's $30 million share repurchase program, we repurchased $1.4 million worth of common stock in open market transactions during the second quarter. As of June 30th, 2019, CatchMark may repurchase up to an additional $16.3 million worth of shares under the program. By all indicators, we have been successful in our capital allocation as demonstrated by our fully covered dividend, the opportunistic share repurchases, funding of capital expenditures from cash from operations, the management of our long-dated, well-staggered debt maturities, our low floating rate debt exposure and a very attractive low cost of our debt.

And now, we'll turn it over to Todd, for a review of operations.

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Thanks, Brian. Our second quarter harvest volume and pricing played out largely as we anticipated in our 2019 plan and guidance, even though harvest volume decreased compared to prior year results. We have prepared for the seasonal mill outages and wet weather in the US South, which decreased harvest volumes during the quarter across the region. From a favorable standpoint, wet weather conditions in the Southeast also contributed to increased pricing across our products, as Jerry pointed out earlier. We were able to capitalize through our delivered sales strategy as well as through opportunistic stumpage sales in our select outperforming markets. As a result, pricing for all our pine products has remained substantially above TimberMart-South south wide averages.

In the second quarter, CatchMark's pulpwood averaged $14 versus $9.51, and our sawtimber averaged almost $25 versus $20.87 for TimberMart-South. Our resulting higher per ton gross timber sales revenue helped mitigate the decline in harvest volumes and kept us on track to meet full-year guidance. In the southeast, we continue to be well positioned with our fiber supply partners and our delivered sales customers to have a productive third quarter. The ongoing shift of lumber capacity from British Columbia to the US South, further improves our outlook. Overall, US South position is dominant, North American timber region has been enhanced, and we are extremely well situated to take advantage long term. The economy is holding its own, and in the short term, lower mortgage rates should help improve home purchasing and potentially new construction as well. For the second half of the year, we anticipate increases in volumes as compared with the first half, and we have proved, we are well positioned to secure pricing premiums in our markets. In the Pacific Northwest, the recently acquired Bandon property stepped up operations in the second quarter, and we harvested 14,500 tons of which 90% was sawtimber, generating approximately $1.2 million in gross timber sales revenue. Bandon harvest volumes will continue to increase over the remainder of the year, enhancing our overall sawtimber harvest mix as well. So we have good reason for confidence about our operating results going forward and expect to meet our harvest plans. Jerry?

Jerrold Barag -- Chief Executive Officer & Director

Thanks, Todd. As Brian discussed, in the second quarter, our main focus was on capital recycling, paying down debt to return to targeted levels after last year's substantial investment activity. We continue to monitor our investment pipeline and evaluate opportunities that will augment our high-quality portfolio, focusing on premier properties in the most liquid markets.

At present, however, there are a few acquisition opportunities as new offerings have dwindled to a trickle. So in summary, the year is playing out as we planned, and our results have been on target despite volatility in the lumber markets and with lumber prices. The wet weather conditions and mill maintenance outages are abating, and we are on track to see improved demand across our markets that will lead to greater harvest volumes.

As a result, we remain confident about meeting company guidance for full year results. Our strategic focus provides us a strong foundation for the future, based on disciplined acquisitions of the highest quality timberlands, which will produce durable revenue growth, locations in high demand mill markets, which provide reliable outlets for available merchantable inventory at favorable pricing, and superior management operations, which seek to maximize cash flow throughout the business cycle. This strategy underlies the positive results we have delivered, including the pricing premiums we have been able to attain. Our asset management business is delivering as promised.

Dawsonville Bluffs produced not only superior investment returns and asset management fees but also a very attractive performance based promote. We profitably managed and sold down the assets in a shorter-than-expected investment period and generated a return significantly above expectations. Triple T asset management fees, which are not volatile, have helped diversify our revenue streams, and the joint venture is operationally performing better than expectations.

Timberland sales are comfortably on track with plan for the remainder of the year. Our capital recycling program has helped to achieve our goal of reducing outstanding leverage as well as supplemented our available resources for further share repurchases and for new investments. Our capital position is sound, and our capital allocation has favorably positioned us to cover our dividend, undertake share repurchases and manage our debt in terms of cost, staggered maturities and floating interest rate exposure. We continue to monitor acquisitions and joint venture opportunities in prime timberland investments that can expand our extremely high-quality portfolio, but remain disciplined regarding purchases in this opportunity constrained market. And we continue to deliver a reliable, fully covered quarterly dividend. All of us at CatchMark maintain a total focus on growing sustainable cash flow and supporting our dividend by executing a strategy based on performance excellence.

Thank you again, for joining us today, your time and attention has been appreciated. One last thing before we conclude and take questions, I just wanted to take the opportunity to thank Henry Zigtema for his service and dedication to CatchMark over the past seven years. Earlier in the week, Henry retired as an Independent Director and the chair of our Audit Committee. Thank you, Henry, and all of us on the management team extend our sincere appreciation.

Now Brian, Todd and I, and John, will take your questions.

Questions and Answers:

Operator

[Operator Instructions] The first question comes from Collin Mings with Raymond James. Please go ahead.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Thank you good morning guys.

Jerrold Barag -- Chief Executive Officer & Director

Hey Collin.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

First question for me, just on Triple T. What's the latest update on the sawlog supply agreement negotiations, and any update in terms of the timing on when we could get some more visibility on that front?

Jerrold Barag -- Chief Executive Officer & Director

Collin, this is Jerry. So we are still working through it. As we've said, it's a complex issue, and it's taking a lot of time and attention. And we are still on track, as we've previously said to conclude, up or down, whether we're going to get there, but we're still working through the issues with GP.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. Shifting gears to guidance. Just to make sure I understand the prepared remarks, we should still think about adjusted EBITDA and call it the $52 million to $60 million range for the full year, but potentially toward the upper end of that range, just given the contribution from Dawsonville now?

Brian M. Davis -- President & Chief Financial Officer

Collin, we're not changing, our guidance range, it's still going to be $52 million to $60 million of adjusted EBITDA. We'll defer to you regarding what part of that range we're going to hit.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. Well, maybe coming at this a different way, recognizing you're keeping the harvest numbers the same, the contribution that you're expecting from Dawsonville, is that above or below what you were thinking to start the year?

Brian M. Davis -- President & Chief Financial Officer

Dawsonville Bluffs will perform at the high end of the range for adjusted EBITDA at the beginning of the year, we anticipate a range of $3 million to $5 million for Dawsonville.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Got it, OK. And then to -- just recognizing you guys have done a lot of work here, call it, end of second quarter and into the third quarter on the asset sale front, just curious, do you have any other timberlands under contract to sell on kind of that large disposition bucket, as you think about it?

Jerrold Barag -- Chief Executive Officer & Director

No. We've completed what we had initially planned kind of at the beginning of the year, and we continuously evaluate opportunities to do that. But there is nothing pending right now.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. And then just one last one, I'll turn it over. Just curious, Jerry your thoughts on why deal flow has slowed so significantly. And given that maybe normal course deal flow has slowed so meaningfully this year, does that maybe increase the opportunity or appetite, particularly now with Dawsonville winding down for an additional kind of joint venture partnership or some other opportunities on that front, just given that maybe more traditional acquisition opportunities aren't really emerging?

Jerrold Barag -- Chief Executive Officer & Director

Yes. So, my observation, and this kind of pervades all aspects of what's going on in the timberland market and whether it's fair or not, people can decide for themselves. Sentiment has just gotten very, very negative around the sector, primarily as a result of all of the volatility, which is for the most part been to the downside in the lumber markets. And the lumber markets have been very unsettled. My personal belief is they are about to find some footing and the foundation to build off of, particularly in the West, which is not only the Pacific Northwest, but goes into the Canadian West, and that will be helpful. I think owners of timberland -- it has not been unnoticed by owners of Timberland to think that the potential optimism around timber prices given the volatility in the lumber prices might be hard to produce at this point. So they had just, quite frankly, chosen to fill in their hands and wait out the volatility that's in the lumber markets and presumably a better backdrop for optimism about -- the timberland markets. Now, again, the US South has been far and away the shining light in that part of the market. And we have seen a couple of smaller sized transactions -- smaller to medium-sized transactions that had been at very, very buoyant prices. In one case, we've seen one that's been at eye-popping prices in the US South. And so there's been a kind of a rotation through North America of where Timberland transactions had some support, which for the last couple of years have really been primarily in the Pacific Northwest. And today, it's really more focused on the US South, which is gratifying to us, given the composition and the makeup of the portfolio that we have. We also think that, potentially, there is some opportunity on a go-forward basis. And as you said, Collin, we're going to evaluate those opportunities, and as Dawsonville is winding down, we would love to find a new opportunity on the joint venture front, but it's going to be disciplined, based on what the dynamics in the market is and what opportunities are there from a pricing standpoint.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. I'll turn it over. Thank you for the extra color there, Jerry.

Brian M. Davis -- President & Chief Financial Officer

Thanks, Collin.

Jerrold Barag -- Chief Executive Officer & Director

Thank you.

Operator

The next question is from Anthony Pettinari, with Citibank.

Randy Devin Toth -- Citigroup Inc, -- Analyst

Good morning, guys. This is actually Randy Toth sitting in for Anthony.

Brian M. Davis -- President & Chief Financial Officer

Good morning, Randy.

Randy Devin Toth -- Citigroup Inc, -- Analyst

Good morning. Just doing the quick math on the divestitures you announced and winding down of Dawsonville and using the midpoint of EBITDA guidance, I'm getting something just under 8 times leverage. And I think you guys said previously, you were looking to end the year had something with the 7 handle sort of -- should I take that as capital recycling will ease in the second half? Or how should I think about that? Thank you.

Brian M. Davis -- President & Chief Financial Officer

You've come up with the right math, Randy. That does come up with something that begins with a 7 in front of it, but as Jerry alluded to, our mindset's always to review our portfolio for capital recycling opportunities that ultimately lead to an upgrade of our asset base, but we don't have anything currently under contract.

Randy Devin Toth -- Citigroup Inc, -- Analyst

Okay, fair enough. Thank you. And then switching gears, you've had the Bandon property for nearly a year now, is there anything that has surprised you or wasn't expected about operating your business model in the Pacific Northwest versus the US South?

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Hey, Randy. This is Todd. Nothing really surprising. There's been some timing where you've had to work with, like, say the BLM on road access agreements and issues there. The one thing that we had no control over was the government shutdown that slowed up some of that process, getting things in place there. But overall, it's a market we were familiar with, I had familiar within previous places I had worked. So no major surprises in that regard, just having to get things in place, working with AFM, our manager out there, as they got folks in place on the ground. So now looking forward, as that continues to move forward and trying to plan the harvest out of court in the market and timing with fire season and those kind of things as well.

Jerrold Barag -- Chief Executive Officer & Director

Yes. I mean fortuitously around the -- when we bought the property and made plans for its integration during 2019, it was meant to be more heavily loaded toward the second half of the year just to get contractors and management operations up and running out there. And so, obviously, from pricing standpoint, there's been a lot more volatility that has gone on and expected when we bought the property, but it seems that the markets are readjusting out there and we'll get back to a more normal operating environment during the course of the second half of 2019.

Randy Devin Toth -- Citigroup Inc, -- Analyst

Okay, that's very helpful. Thank you. Maybe just one last one. Can you talk about your US South micro markets. Just any anecdotes about tightness or price improvements. I know we have had a couple of sawmills ramping up in the past six months, so just curious your thoughts there.

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Sure. It's -- what we have seen, coming out of Q2, you had a lot of the maintenance outages that were in place. You had -- additionally had some saw mills that we're continuing to work through some of their capital placement and getting their mills up and running at a continuous consistent rate. That was a little slow coming out of Q2, but the Q3 outlook and what we're seeing is very positive. Maintenance outages are over, pulp mills are going to run really strong, that's what we're hearing from everybody and have planned around that. We're beginning to see some extra production coming out of various customers, sawmill customers that is, and been able to secure good volume, solid production as part of our Q3 plan.

And so, we feel very good about that, and our pricing really quarter-over-quarter, Q1, Q2, were relatively flat coming in. We haven't seen any major drops. We've had a couple of upticks in a few places, but from a market perspective, we're being -- we're seeing very consistent pricing quarter-over-quarter.

Jerrold Barag -- Chief Executive Officer & Director

Yes. So if you recall, we had some pretty significant sizable price increases during the first quarter of 2019. Some of that was demand related, some of that was weather related. And, think, we're really pleased that the weather-related portion of those price increases has really not abated through the second quarter. So, we've held pricing pretty much first to second quarter, slightly up or more significantly up over the last six months. And from a market-by-market aspect, we're really pleased with pricing that's going on in the Texas markets, and I think that's reflective of what you see in terms of operating results out of Triple T. And Southern Georgia has been really strong from an operational standpoint, from a pricing standpoint as well. Those would be kind of the two standout markets in the US South. South Carolina has improved over this quarter as we've gone through, there's been some significant maintenance operations and outages that were rolling through there earlier this year. And so as those will come back online, demand's picked up in that market as well. But outside of those three markets and maybe portions of North Carolina, people are feeling better, but we haven't necessarily seen it translate into the actual numbers so much.

Randy Devin Toth -- Citigroup Inc, -- Analyst

Got you. That's very helpful. Thank you. I'll turn it over.

Brian M. Davis -- President & Chief Financial Officer

Thanks, Randy.

Operator

The next question comes from Paul Quinn with RBC Capital Markets. Please go ahead.

Paul Quinn -- RBC Capital Markets -- Analyst

Hi, guys. It's [Indecipherable] on for Paul. Thank you for taking my question. First off, I just wanted to ask a little bit about your mix that you're seeing between sawlogs and pulpwood in the South? And how you see that changing over the second half of the year and toward 2020?

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Sure. Coming out of Q2, we had an increase in some of the pulp production as we started to see more of our standing operations come online. But going forward, the balance of the year, we'll see a little higher mix of sawtimber and chip-n-saw product being moved. So as we look out, we'll be meeting the kind of the guidance line we had there of that moving more toward a 50-50 mix there in the southern region. Additionally, we can't overlook the Pacific Northwest addition to the overall program for us, which when that all rolls in, we'll be closer to probably, say, 45% sawtimber as compared to previous years.

Jerrold Barag -- Chief Executive Officer & Director

So, I mean there is some seasonality there, which as the wet weather is abated, there's less -- wet weather has abated and box demand has kind of flattened out a little bit. So there's not nearly as much pressure from a demand standpoint on the pulp and paper side, call it -- or pulpwood side for the balance of the year. But we continue, at least in the operating regions, where we own properties, we continue to see capital investments deliver at lumber mills that are increasing procurement and demand for timber, and that's definitely putting a positive outlook on our ability to, from a volume standpoint, to sell more timber into those markets during the second half of 2019.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay, thank you. That's very helpful. The timber side, we've seen timber transactions in the marketplace has been very light over the past few years. I was wondering if you guys could touch a little bit upon the changes in valuation. If you're seeing any changes or if you're seeing them being stable for the past few years?

Jerrold Barag -- Chief Executive Officer & Director

So valuation has been, for the most part pretty stable for us, which is underlined by the fact that we have very high-quality premier properties, and they have been sought after type of properties. And so, the appraisers I believe have started to get more discerning from a price standpoint and a valuation standpoint of the difference between markets and quality of properties. And we think that is entirely appropriate. We kind of monitor price values as it stands, and it's an important concept for us with respect to our lending agreements that have covenants about appraisal. And in fact, they have been pretty much flat for us for the last couple of years.

And our expectation going into the revaluation process that will be under way later this year is that those property valuations would remain more or less flat for the better quality properties. I think you will see some further declines in worse markets and poor quality properties, and that will become -- may become a headline, but it should become more evident across the industry by the end of this year.

Paul Quinn -- RBC Capital Markets -- Analyst

Perfect, thank you. And just one last one for me. Can you talk a little bit about what you're seeing in the repair and remodeling market. We are getting some different reports, so I'm suggesting that the market is probably not as strong as it was. Just from what you're seeing from your customers, how do you see that market going over the next year?

Jerrold Barag -- Chief Executive Officer & Director

It looks like, again, it's -- I'd probably categorize it in a similar fashion to what's going on in the box market and containerboard, where it seems to have leveled out. There's not nearly as much potential growth. I mean it's not continuing to grow at the same rate and it clearly is leveling out or sagging just a little bit, but the dynamic, which is really the important one to keep track of is the fact that lumber usage out of the repair and remodel market has now eclipsed lumber used for new housing. And we don't see that really going backwards anytime soon. I mean, they're not that far away from parity, but clearly, repair and remodel has taken the lead in terms of lumber usage, lumber demand.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. Thank you guys. That was very helpful. I'll turn it over have a good luck for the next quarter.

Brian M. Davis -- President & Chief Financial Officer

Thank you appreciate it.

Operator

The next question comes from Dave Rogers with Baird. Please go ahead.

David Bryan Rodgers -- Robert W. Baird & Co. Inc -- Analyst

Yeah, good morning, Jerry. Maybe just to tie in some of those comments. Pricing being pretty stable, it seems like it's a good asset and pricing may be declining or set to decline at the lower quality assets, but you guys have had the view of kind of rising prices over the next couple of years. So I guess, one, what do you expect for pricing in the second half now that you'll be kind of hitting higher volumes, and maybe a little more specifically on that. And then, two, just -- you're obviously seeing something the market isn't or maybe more hopeful that the market is regarding kind of long term pricing. So if you can kind of update us on your thoughts regarding long-term lumber pricing -- or timber pricing?

Jerrold Barag -- Chief Executive Officer & Director

Sure. Okay. I'm going to have to separate the comments by region, so -- because the reasons are operating fairly differently between the US South and Pacific Northwest. So in the US South, where we were doing business, where we primarily do business in those markets where we do business. We have -- I'm not going to tell you, we projected this at the beginning of the year, but it's the way the market has played out, is that the combination of more capacity leading to more demand, especially on the sawtimber side and wet weather made price increases during the first quarter or the first and the beginning of the second quarter pretty good for us. And that was, by and large, either as much or in some cases more than the price increases that we would've expected for the full year.

So the goal for us at this point is to maintain pricing where we have got it to for the balance of the year. It is not necessarily to be pushing on pricing or have the expectation that we're pushing on pricing in those markets for the rest of the year. And as you can see by the numbers, we were really successful in doing that for the second quarter because by and large, the wet weather conditions portion of the price increases should abate because it should dry out. Now, if you lived in Atlanta last night, it went very dry. But having said that, we're feeling pretty confident that we should be able to maintain. We're not seeing anything on the horizon. We're not having customers come at us trying to drive down prices in the markets we operate and in the south. And so, we're feeling pretty good about that right now. But in terms of setting expectations,, it shouldn't necessarily be this expectation that we're building quarter-over-quarter during 2019 for price increases. We've got -- we had a happy experience of kind of getting it upfront in the US South.

Pacific Northwest is really kind of the opposite story. It's dramatic how different it is and how quickly it's earned. And a lot of that is coming as the result of dislocations that are coming out of Western Canada, particularly in the interior of British Columbia where you've had the beetle kill. And now, you've had somewhere plus or minus 2 billion [Phonetic] board feet of capacity that's been permanently shuttered. The dynamic there has been that lumber prices were exceptionally high, they came down, timber prices got high and sympathy with those lumber prices, they were a little bit slower to come down.

And that's created a lot of dislocation around the lumber manufacturers in the Pacific Northwest. So you have seen and across the board pull back in the manufacturing capacity that is going on in the Pacific Northwest and all the way into Canada, and it's rightsizing itself right now. And the market and the participants in that market, I think, are conducting themselves rationally, and it's recalibrating itself. And my experience would tell me that when a market needs to recalibrate, it's not usually a even and happy experience. And I would probably tell you that, that's exactly what you're seeing right now today in the Pacific Northwest markets. The good news is that they will get themselves back to what I believe is the right basis, and where timber prices are today, specifically in the Pacific Northwest is below where I think they should be for the new reality of where lumber production and lumber prices will end up in the Pacific Northwest.

Now, the variable that's involved in that whole situation is how long is it going to take to get there. Okay? And I can tell you that it's not tomorrow, and our experience on the small property that we have in the Pacific Northwest tells us that it's not tomorrow, but it feels like it is later in 2019 for the market to regain its footing, where you'll see lumber prices get better as lumber inventories draw down. And as those lumber prices get better, you're also going to see timber prices that get better because long-term supply/demand fundamentals of timber in the Pacific Northwest are still really positive. There is no excess supply of timber, and so we don't see that those shouldn't react the same way that lumber prices do once the inventory issue out in the West resolve themselves.

David Bryan Rodgers -- Robert W. Baird & Co. Inc -- Analyst

Thanks for the added detail and appreciate that. And maybe just a follow-up for Brian. Brian, can you kind of talk about capacity maybe in two senses, one is iterative acquisition capacity, if you were able to find some things that you like to do. And then on the flip side of that, maybe the iterative stock buyback capacity that you have and your thoughts around buying stock back, given you've done some and the stock remains pretty weak?

Brian M. Davis -- President & Chief Financial Officer

Yes. So there's a couple of things in there. So first, as we think about acquisitions, we messaged beginning this year, we had a very active 2018. And as Jerry alluded to, we're monitoring all opportunities out in the marketplace today and we have plenty of liquidity, we have $185 million of capital capacity, including availability for acquisitions and share repurchases. So from our standpoint, right now we're monitoring. Our bias is actually to delever, given, again, that activity that we had during 2018. So really, the question is becoming how we think about the application of proceeds toward our capital recycling program. And really, our bias right now is for supply against our outstanding debt, which allows us to remain in position to take advantage of future growth opportunities. And then consistent with our past practices, we'll look to be opportunistic with our share repurchase program, which we were active in the second quarter, as you noted.

But really, we want to do it on a leverage-neutral basis. For example, with this last quarter, we had about $25 million in the quarter as well as subsequent to quarter end, about $25 million in capital recycling activity, which we target an allocation of about 80% of debt reduction, which brings us within our target levels on a net debt-to-adjusted EBITDA basis, with the remaining 20% of proceeds applied toward share repurchases. And as you noted, Dave, given our share price during the second quarter and a dividend yield that's over 5.25% versus our cost of debt around 3.5%, we believe a certain amount of share repurchases is a prudent capital allocation strategy. Hopefully, that gives you the color you're looking for.

David Bryan Rodgers -- Robert W. Baird & Co. Inc -- Analyst

Yeah, great. Thank guys.

Brian M. Davis -- President & Chief Financial Officer

Thanks, Dave.

Operator

[Operator Instructions] Next we have a follow-up question from Collin Mings with Raymond James. Please go ahead.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Thank you. Two follow-ups from me. Just one on, as far as latest -- thinking about your latest thoughts regarding log export activity out of the US South, just in context of, obviously, the tariffs currently in place, but then also the long-term desire and effort on CatchMark's part to maintain a presence in the Asian markets. So just maybe talk a little bit more about that effort and initiative if you can.

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Sure, Colin. This is Todd. That main area of the South that we've operated in has primarily been out of Savannah, and we've seen that pull way back, really, when the tariff went into effect. We saw a slowdown and then that's just continued to pull back a little bit. Again, that has been a really small portion of what we do, so the overall impact to our -- as far as market presence with those has been minimal. In those areas -- as you know, that's a really strong area within the country and it's one of those things that, while the tension is nice to be there, the market is strong enough that it absorbed any of that volume that was there. So we haven't seen a major pushback on overall market pricing and the overall scheme of things. We've maintained a little bit of a presence where customers have stayed in just to keep your foot in the door, so to speak. But again, at a very, very light level, long term, if they get the whole trade and tariff discussions squared away, and that can come back strong, we'd love to see it. But ultimately, it hasn't been a major impact for us there.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Got it. So some of the customers you're selling into still play in that export market, but it's pretty de minimis at this point in terms of impact. But I guess the -- if I'm interpreting your comments correctly, there really hasn't been a big shift in pricing dynamics in those markets.

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

That's correct. There has not.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. And then, Brian, I had -- I was just curious from -- going back to a little bit to the guidance discussion as well as just the asset sales. I mean are there any additional metrics or guidepost that you can provide us regarding the dilution versus the accretion associated with the asset sales that you completed in 2Q and 3Q? I know last year, you were able to provide obviously a much larger transaction, but some great detail around how to think about the -- entering to the Pacific Northwest and kind of the impact to that to the financials. So just curious, recognizing these are much smaller transactions, but any other guideposts because I know that when the asset sale capital recycling discussions has come up before, the goal is to minimize dilution from asset sales. So any additional guidepost on that front would be helpful.

Brian M. Davis -- President & Chief Financial Officer

Yes. You're correct, Colin. You were listening to us. Our goal is really a neutral or better on a CAD per share impact basis, and we're not changing anything with that mindset. These two assets had distinct characteristics about them. The $5.5 million transaction that closed during the second quarter was really low stocking with kind of a poor mix, had a stocking per acre basis about 20 tons per acre. The other transaction was -- had stocking levels that were consistent with our portfolio, but was selected due to really operational challenges associated with everything from topography to proximity to urban areas and longer-than-average haul distances, resulting in lower realized product pricing. But end of the day, given the price in which we realized associated with that asset sale, this ultimately brings us a full circle back to really minimal to slightly better on a CAD per share impact, given that our application of those...

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. In other words, at least over the next couple of years, there is not really, these asset sales don't really swing around that, your cash flow very much one way or the other. But maybe, if anything, given the interest expense savings, maybe slightly beneficial, is that fair?

Brian M. Davis -- President & Chief Financial Officer

That's fair.

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Okay. All right, I appreciate it. Thank you.

Brian M. Davis -- President & Chief Financial Officer

Great, thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Jerry Barag, the CEO, with any closing remarks. Please go ahead.

Jerrold Barag -- Chief Executive Officer & Director

Thanks again for joining us today. I wish you that -- I hope you enjoy the rest of your summer, and we will be back with you for third quarter.

Operator

[Operator Closing Remarks]

Duration: 47 minutes

Call participants:

Brian M. Davis -- President & Chief Financial Officer

Jerrold Barag -- Chief Executive Officer & Director

Todd P. Reitz -- Senior VP of Forest Resources & Principal Operating Officer

Collin Philip Mings -- Raymond James & Associates, Inc., -- Analyst

Randy Devin Toth -- Citigroup Inc, -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

David Bryan Rodgers -- Robert W. Baird & Co. Inc -- Analyst

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