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CatchMark Timber Trust Inc (CTT)
Q2 2020 Earnings Call
Aug 4, 2020, 10:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Good day, and welcome to the CatchMark Timber Trust Second Quarter 2020 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, today's event is being recorded.

I would now like to turn the conference over to Ursula Godoy, Chief Financial Officer. Please go ahead.

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Good morning, and thank you for joining us for our review of CatchMark Timber Trust results for second quarter 2020. I am Ursula Godoy, Chief Financial Officer of CatchMark. Joining me today on the call are Chief Executive Officer, Brian Davis; Chief Resources Officer, Todd Reitz; and John Rasor, President of Triple T Timberlands.

During this call, CatchMark management will make forward-looking statements. These forward-looking statements are based on management's current beliefs and the 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 2019 annual report on Form 10-K, our quarterly report on Form 10-Q for the first quarter 2020 and subsequent reports that we filed with the SEC.

Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our earnings release and in our Form 10-Q filed with the SEC yesterday Monday, August 3, 2020, both of which are posted on our website. After our presentation, Brian, Todd, John and I will be pleased to answer any of your questions.

Now I turn over the call to Chief Executive Officer, Brian Davis.

Brian Davis -- President and Chief Executive Officer

Thank you, Ursula, and thank you all for joining us this morning. For CatchMark, second quarter 2020 reinforced the case of our business model, and we executed effectively to take advantage of its flexibility and resilience.

We are an essential business that so far has avoided many of the challenges faced in the pandemic by other companies and other industries. And we have managed through COVID-19 by opportunistically matching harvest plans through changing demand from mills and their timber product customers. As a result, we are on course to meet our revised plan for the year.

On our call today, our team will review CatchMark's solid second quarter 2020 results, punctuated by increased harvest activity year-over-year, discuss the positive developments around the completed renegotiation of the Georgia-Pacific wood supply agreement, which allows Triple T to achieve market-based pricing and sets the stage for recapitalizing the Triple T joint venture.

Review operations, where we took advantage of stepped up demand in our mill markets, leading to increase harvest volumes driven by strong stumpage sales with improvement throughout the quarter. Assess the impact of COVID-19 as some timberland sales were delayed to later in the year, primarily due to pandemic-related constraints in closing transactions.

With an active pipeline in place, we expect to normalize sales over the course of the second half of the year, with a concentration in the fourth quarter. Cover the amendment of our CoBank credit agreement, which among other things increases access to working capital. And of course, we will answer your questions at the conclusion.

To begin, all of us at CatchMark hope you remain well and safe, and everyone you know has been able to stay healthy during the ongoing pandemic. I am pleased to report that our headquarters and field operations have not been materially impacted. We continue to work remotely with team members recently rotating back into the office for key meetings and business needs.

Our personnel and business associates in the field are practicing social distancing, and we have remained safe. We continue to be extremely disciplined, maintaining frequent communications and connectivity with our customers to be as responsive as possible to their supply chain needs. And our fiber supply agreements and delivered wood sales relationships continue to provide us an advantage in fulfilling customer supply chain requirements and in meeting market demand.

As a result, we delivered a strong second quarter from our harvest operations. After initial pullbacks by customers, early in the pandemic, we were able to step up harvest during the quarter in the US South and Pacific Northwest to capitalize on consistent mill uptime and increased demand for both pulpwood and sawtimber products.

We have been especially encouraged about the quick rebound in the housing market and heightened activity in home remodeling and home improvements, which have generated strong demand in our mill markets.

And we remain cautiously optimistic about the remainder of the year for meeting our operating plan, understanding that COVID-19 creates considerable uncertainty about the national economy. To reiterate, as of now, we remain on track and our business model, execution and flexibility continue to provide us an advantage.

Comparing results for second quarter 2020 to second quarter 2019, as anticipated revenues and adjusted EBITDA were lower and net loss was substantially improved due to a significant decrease in net loss allocated from the Triple T joint venture.

Timber sales revenue was comparable to last year's second quarter and harvest EBITDA was up slightly year-over-year. Although some transactions were delayed, the result of administrative constraints due to the pandemic, we still closed nearly $2 million of timberland sales during the quarter, and we expect timberland sales to normalize by year-end given our active pipeline.

As a result, revenues have not been lost, only deferred. Trees continue to grow virus or no virus. Bolstered by an amendment to our credit agreement with CoBank, we also have access to working capital and ample liquidity to fund growth when investment opportunities present themselves.

And notably, we covered our second quarter dividend from cash from operations as measured on a GAAP basis. Yesterday, we also declared a third quarter dividend of $0.135 per share for stockholders of record on August 31, 2020, payable on September 15, 2020.

We continue to be rewarded by our operating model, investing and owning the highest quality timberlands, operating in superior mill markets and working with creditworthy counterparties. At the same time, we realized COVID-19 remains a wild card and we continue to focus on how it is affecting our operations, seeking to minimize any detrimental impact or take advantage of opportunities.

In a moment, Ursula and Todd will review the results and operations in greater detail. But first, the second quarter also brought to fruition a major accomplishment for CatchMark, which sets the stage for recapitalizing the Triple T joint venture.

Led by CatchMark, Triple T renegotiated its wood supply agreement with Georgia-Pacific. And as a result, Triple T can now achieve market-based pricing for its timber sales. It can sell sawtimber to other third parties as well as receive increased reimbursement for extended haul distances and Triple T has expanded its ability to sell large timberland parcels to third-party buyers.

Triple T paid Georgia-Pacific $145 million to amend the supply agreement, which was funded by $140 million of debt proceeds from Triple T's credit facility and an additional $5 million investment by CatchMark and the Triple T joint venture on the same terms and conditions as its existing investment.

In turn, the asset management agreement between CatchMark and Triple T was amended to increase CatchMark's asset management fees. This transaction was immediately CAD accretive for CatchMark. For additional details, please refer to the 8-K filed on June 24, 2020.

Triple T has always operated a plan, and now the renegotiated agreement with GP provides the opportunity to unlock additional revenues through market-based pricing in timber sales from these premium timberlands. These assets feature an above-average site index, 74 feet at age 25 and a maturing age class profile with access to top quartile mills and strong nearby end markets, including Austin, Dallas, and Houston.

Importantly, the renegotiated agreement paves the way for shifting our focus to recapitalizing Triple T and unlocking greater value as we plan at the onset of the investment. We now look to execute on this phase of our strategy to optimize returns for CatchMark and our institutional partners.

This plan fits with CatchMark's overriding objectives of expanding our ownership of prime timberlands in high-demand mill markets and managing our operations to generate predictable and stable cash flow throughout the business cycle, supporting our dividend.

So it was a busy and productive quarter. We've been opportunistic and agile and navigating through the uncertainty posed by COVID-19 and have managed to limit the downsides keeping on our revised plan.

Ursula will now detail second quarter and half year results.

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Thank you, Brian. For the quarter ended June 30, 2020, CatchMark generated revenues of $21.8 million compared to $28.7 million in second quarter 2019, a decreased primarily related to reduced timberland sales given constraints in completing transactions due to pandemic disruption.

A decreased net loss on a GAAP basis by $24.4 million year-over-year to $6.2 million, primarily due to a $26.3 million decrease in losses allocated from the Triple T joint venture.

We generated adjusted EBITDA of $9.4 million compared to $15.1 million in second quarter 2019, a decrease primarily resulting from lower timberland sales. For the second quarter, year-over-year harvest EBITDA increased by 1% to $7.4 million, real estate EBITDA decreased by 80% to $1.6 million due to lower timberland sale, and investment management EBITDA increased by 1% to $2.8 million.

We produced timber sales revenue of $16.2 million consistent with the $16.3 million generated in second quarter 2019. We increased total harvest volumes by 15% to 568,000 tons, primarily by capitalizing on increased mill demand driven by robust sales of home remodeling and improvement products during the pandemic.

We sold 1,100 acres of timberlands for $1.7 million compared to 4,000 acres for $8.2 million in second quarter 2019. A lower per-acre sales price resulted from selling timberlands with a lower percentage of pine plantations and retaining timber reservations.

We generated $2.9 million in asset management fee revenues from the Triple T and Dawsonville Bluffs joint ventures, consistent with the prior year period. We paid a dividend of $0.135 per share to stockholders of record on June 15, 2020, which was fully covered by GAAP cash from operations.

For the six months ended June 30, 2020, CatchMark generated revenues of $48.7 million compared to $51.2 million for the first six months of 2019 as higher timber sales revenue from increased harvest volumes was offset by reduced timberland sales revenue.

We incurred a net loss of $10.4 million on a GAAP basis compared to $61 million in the first half of 2019, primarily due to a $53.8 million decrease in losses allocated from the Triple T joint venture.

We realized adjusted EBITDA of $22.3 million compared to $25.2 million for the first half of 2019. Harvest EBITDA increased by 10% to $16 million over the first half of 2019 due to increased timber sales from higher harvest volumes.

Real estate EBITDA declined to $6.1 million from $9.8 million due to reduced timberland sales; and investment management EBITDA decreased to $5.7 million from $6.2 million as a result of lower income from the Dawsonville Bluffs joint venture, which effectively roundtripped in the third quarter of 2019.

We increased timber sales revenue by 5% to $34.3 million up from $32.8 million for the first six months of 2019 as timber sales volume increased by 18% to 1.2 million tons. We sold 4,100 acres of timberlands for $6.5 million compared to 4,900 acres for $10.3 million in the first half of 2019.

The lower year-over-year, per-acre sales price resulted from lower average merchantable inventory stocking levels. 20 tons per acre compared to 31 tons per acre for prior year sales as well as from CatchMark retaining through timber reservations 115,000 tons of merchantable inventory with a 52% sawtimber mix.

We generated $5.8 million in asset management fee revenues from the Triple T and Dawsonville Bluffs joint ventures, a 3% increase over same quarter 2019 due to earning incentive-based promotes for Dawsonville Bluffs.

Looking overall at the second quarter and first half of the year, financial results held up well considering the pandemic constraint economy. The late timberland sales where the major contributor to decreases in revenues and adjusted EBITDA year-over-year, and as the transaction pipeline gets us confidence that we will normalize timberland sales over the course of the second half weighted to the fourth quarter.

Now turning to our capital position. The major development for CatchMark during the second quarter, involved amending our credit agreement with CoBank. The amendment removed the reduction in the LTV ratio covenant which would have been effective at the end of 2021.

It increase working capital by removing the minimum liquidity balance covenant, and enabled additional investments in joint ventures. The multi-draw term facility commitment was reduced from $200 million to $150 million which lowered unused commitment fees.

During the quarter, CatchMark borrowed $5 million under the multi-draw term facility to fund its additional equity investment in the Triple T joint venture. After these amendments and transactions, we continue to have ample liquidity for future growth initiatives in other capital allocation priorities, including direct acquisitions and joint venture investments.

As of the end of the second quarter, we had over $150 million of borrowing capacity under our credit facilities. Over $115 million from the multi-draw term facility and $35 million under the revolving credit facility. In addition, we had cash on hand at quarter end of $9.4 million.

During in the quarter, CatchMark repurchased 8,648 shares under our share repurchase program for $67,000 and has $13.7 million remaining in the program for future repurchases as of June 30, 2020.

In summary, our capital position is strong. We have excellent liquidity in our deleveraging efforts over the past two years where well-timed. As discussed last quarter, we also have no maturity or refinancing risks on our long-dated debt. It's an advantageous position given the current state of the economy in general pandemic-related uncertainty.

Now Todd will cover a very good quarter for our harvest operations.

Todd Reitz -- Senior Vice President and Chief Resources Officer

Thanks, Ursula. Operations during the quarter ran very well. Our property management partners did an excellent job, managing our harvest and remaining quick to respond to our customer's needs in order to fill orders and maintain continuity of deliveries.

Sawmills ran better than anticipated and orders recovered more quickly than expected, driven by exceptional do-it-yourself business with the big box stores like Lowe's and Home Depot. In particular, sawmills focus in the US South was more heavily weighted toward two backhaul [Phonetic] production, while mill operations were very diligent about maintaining tight inventories of logs and finished product.

In many cases, inventories were down to no more than three days, so if a producer didn't deliver as planned, or if there was a weather event, it could create an opportunity for a producer like CatchMark to fill the need, harnessing our strong delivery program. We were able to capitalize on this opportunity by using our fiber supply and delivered wood relationships to meet demand and increase our harvest volumes.

We positioned delivered crews to respond to mill needs that lined up well with our harvesting plans. Pulp mills also continued to run very well during the quarter, especially containerboard and fluff pulp producers. In many cases, retain mill maintenance outages were delayed and moved to later in the year in order to take advantage of the increased demand.

Mills ran very consistently. We are also able to capture stumpage sales volume that moves sooner rather than later in the year. As a result, the increase in stumpage sales during the second quarter helped drive a 14% increase in harvest volume year-over-year in the US South.

CatchMark's second quarter 2020 realized stumpage prices for pulpwood and sawtimber continued to hold a significant premium over Southwide averages as a result of our assembling prime timberlands in strong micro markets. Our realized stumpage prices for pulpwood and sawtimber were 12% and 8% lower, respectively, compared to second quarter 2019, trending with 12% and 13% decreases in Southwide average prices tracked by TimberMart-South.

Pacific Northwest harvest volumes for the quarter also increased ahead of plan about 46% in the three months ended June 30, 2020 from prior year as improving fundamentals created an opportunity to sell into demand from key regional players. And our presence in strong mill markets and our emphasis on delivered wood sales gave us an advantage in supplying mills in a very tight inventory environment.

We remain cautiously optimistic about the US housing market and returning builder confidence. As an essential business and an essential sector, the demand for our products should remain strong for the second half of the year. But in the meantime, the length of the pandemic, the pace of business reopenings and the willingness of the government to maintain stimulus remain overriding concerns. We will move quickly to take advantage of changes in market demand and protect future revenues, continuing to adjust harvest plans as necessary.

With all this in view, I'll return it back to Brian to discuss how we see the rest of the year playing out.

Brian Davis -- President and Chief Executive Officer

Thanks, Todd. The elements of our business model, prime timberlands, leading mill markets, wood supply agreements, delivered sales, creditworthy counterparties provide CatchMark an edge in managing through the current volatile economic landscape. The nimbleness of our harvest operations was on full display in the second quarter, and we will continue to seek every advantage in maximizing our results to support our dividend while protecting the long-term value of our assets.

We remain on track to meet our plan for the rest of the year and anticipate a rebound in timberland sales to more normal levels weighted to the fourth quarter as transaction markets recover. Our balance sheet is strong and we have ample liquidity to advance our business objectives, making direct timberland acquisitions and new investments at the appropriate opportunity.

The renegotiated wood supply agreement with Georgia-Pacific is an important achievement for our Triple T investment. Not only does it allow Triple T to capture market pricing on timber sales, but we are also moving forward expeditiously to unlock the full value for our institutional partners and CatchMark shareholders through recapitalization strategy. This is an exceptional opportunity.

Most importantly, we continue to expect to deliver an attractive dividend, fully covered by cash flow from operations. To sum up, the second quarter and first half produced solid results especially from our harvest operations and timber sales. Over the course of the second half, timberland sales should normalize from depressed second quarter levels.

Asset management fees will continue from our -- amended agreement with the Triple T joint venture. Our liquidity position is extremely sound and we are comfortable with our financial covenants.

We will continue to review recycling opportunities to balance leverage reduction, share repurchases and growth opportunities, and from all indications, the value of our high quality assets is holding has market interest and premium assets provide support.

We remain focused on keeping everyone safe and healthy while continuing to run our business and execute our strategy without interruption. And we expect to continue to meet our key objective with stockholders, generating durable and predictable cash flows to deliver an attractive dividend through the remainder of the year in an ongoing basis.

As previously announced, our veteran Board member, Doug Rubenstein, succeeded Willis Potts as Board Chairman at our June annual meeting. We want to again extend a warm welcome to Doug in his new role.

To all of you on the call, please remain healthy and safe. And now we will take your questions.

Questions and Answers:


Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Anthony Pettinari with Citi. Please go ahead.

Randy Toth -- Citigroup Global Markets, Inc. -- Analyst

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

Brian Davis -- President and Chief Executive Officer

Good morning, Randy.

Todd Reitz -- Senior Vice President and Chief Resources Officer

Good morning.

Randy Toth -- Citigroup Global Markets, Inc. -- Analyst

Good morning. Just on the renegotiated Triple T wood supply agreement. Can you provide additional details on your expectations for the asset management fee over the next two years? I think previously it was like $11 million to $12 million range annually?

Brian Davis -- President and Chief Executive Officer

Well, this is Brian. Good morning. So we're excited to complete this phase of the Triple T joint venture. First step was really to buy this premier property at a low cost basis, then to run it to plan, to demonstrate our capabilities under the delivered wood model and as an asset manager.

And ultimately, what we're talking about now is fixing the supply agreement to enhance the liquidity for the asset. Nothing materially has changed associated with the asset management fee. It's a pretty specific in the Q that we had filed on June 24 of 2020, the specific asset management fee numbers. We can work with you offline to help you find those specific asset management fee amounts.

Randy Toth -- Citigroup Global Markets, Inc. -- Analyst

Okay, understood. And then maybe just switching gears, moving to the US South. The TimberMart-South pricing data saw prices fall nearly 10% for sawtimber while you guys were down only 3% on a gross basis. Can you just talk about what you're seeing on the pricing side and what you're seeing in the various micro-markets? Thank you.

Todd Reitz -- Senior Vice President and Chief Resources Officer

Sure. Randy, this is Todd. I think what you're seeing is a reflection of the strength of the micro-markets that we operate in, really, as we've talked about over and over and the ability to build out the ownership in the strongest markets in the South. And so it was a reflection of mills coming back online very strong throughout the quarter, a reflection of capital that was infused into these facilities over the last several years and the ability to be efficient, low-cost operators and being able to match that up with our delivered program is a real key for us. So that's what's really driving a lot of the enhanced value that we see quarter-over-quarter by comparison.

Looking forward out really anticipate pricing being fairly stable moving through the quarter and that's -- honestly, that would probably carry on through the year as mills continue to come on, production continues to be consistent. As we see it right now, again, as Brian stated early on, there's still a lot of hurdles to clear out there, but the outlook right now with mill order files being stable and steady out through August and probably into early September. That's all very encouraging for us. And so we anticipate being able to capitalize on that opportunity moving forward.

Randy Toth -- Citigroup Global Markets, Inc. -- Analyst

Understood. Thank you. I'll turn it over.

Brian Davis -- President and Chief Executive Officer

Thanks, Randy.


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

David Rodgers -- Robert W. Baird. -- Analyst

Yes. Good morning, guys. Thanks for all the details. I guess just on your comments, thought about pricing in the second half of the year kind of being more stable. Obviously, there's a lot in the news about the mills running at now full capacity. Obviously, the volume is suggesting that they're taking down more supply from you guys and others.

So why wouldn't we expect to see maybe a little bit better pricing in this environment where we're catching up from a couple of months of being maybe down at the mills and why doesn't that give you more confidence as you look to the better half of -- the second half of this year and in the early half of 2021?

Todd Reitz -- Senior Vice President and Chief Resources Officer

Sure. So really and it's in certain local markets we are seeing some upticks here and there. But honestly, as mills are running, while they are running at a strong capacity right now, you're also seeing still a tight inventory at the facilities, three to four days worth of either finished product or log supply. So that being the case, you're ability to surge in and out of those markets is going to be somewhat limited. And so we've seen several customers, if they get too much inventory, they will actually slow the mill down or not buy for a few days until they work through that.

And while lumber pricing is actually going through the roof, as you know, there's still ample supply out there. So while the mills are running well, there's still a lot of supply logs on the market, and so they don't have to continue to price to get the supply that they need in order to run their facilities. Additionally, with the efficiencies of the mills that we're seeing out there, they're able to run a little bit smaller log efficiently, therefore that pricing isn't going to be as high as your traditional sawtimber piece that had been going into the marketplace.

Brian Davis -- President and Chief Executive Officer

Dave, this is Brian. Just to add on to that from the standpoint. As we began 2020 in February, our expectation was for some price appreciation in the mid-single digits at the end of this year. I think what happened during the second quarter, trees grow, so we don't have lost revenues. You have deferred revenue. So from a growth drain standpoint, Dave, we look at some pricing tension more into 2021 than the second half of this year.

David Rodgers -- Robert W. Baird. -- Analyst

Okay. Helpful. Thank you both for that. And maybe on the acquisition side, acquisitions had been quiet for a while. Some of that for you guys is a function of capital, but also the market had been quieter as it's opening back up in the mill demand is stabilizing or are you seeing more offerings out there in the market and properties that you would be attracted to buying?

Brian Davis -- President and Chief Executive Officer

Dave, as you pointed out at sub $10 a share, it's hard to put acquisitions in front of the capital allocation line. So that is an important consideration for us. As it relates to acquisition activity, we continue to develop a pretty decent pipeline in our targeted range in the smaller end of that kind of $3 million to $10 million size.

We see -- well our stock properties in our prime markets, which we currently operate in. We're seeing higher per acre prices then in the weaker markets. And we're still actively engaged in some conversations albeit that they've strong out given capital allocation perspectives.

As it relates to capital in the market, we're seeing market participants who have capital and they're requiring about potential properties and larger dispositions. And that's really what's great about timberland as an investment. Trees have biological growth irrespective of who's President or what's happening in the stock market. They provide inflation protection through product price appreciation and long-term demand fundamentals from increased use of this renewable resource provides for a very bright future.

So from that standpoint, I think it ultimately comes back to market sentiment. From a social distancing standpoint, there's a lot of clunkiness as it relates to deals coming on to the marketplace. But there we believe that there's a bit of a pent-up demand or opportunities that we should be starting to see once there's a little bit more visibility into product price appreciation and the continuation of the mill activity.

David Rodgers -- Robert W. Baird. -- Analyst

With the stock up off the low Brian, I guess how do you guys think about then the balance between new stock buyback and then the new acquisitions to kind of bulk up the size overall in the EBITDA of the company?

Brian Davis -- President and Chief Executive Officer

Well, I would ultimately say from our standpoint, it's always been about supporting our dividend, maintaining ample liquidity, and really in front of that, Dave is really reducing leverage then opportunistic share repurchase, and lastly, acquisition. Obviously, we'll be taking a look at running our business on a long-term basis. Ultimately, what we're looking to do is really part of what we talked about, why we're excited about.

The Triple T renegotiation of the wood supply agreement because this allows us to maximize the value of our Triple T investment. And then also you combine that with exploring capital recycling opportunities with ultimate goal is to simplify our business, improve our capital structure, and most importantly, put us in the best position to grow our cash flow per share over the long-term. And so we look at all these things and triangulate those of what's the right thing to do on a long-term basis. And so we're continuing -- challenging ourselves regarding that allocation of capital, but that's where we stand today.

David Rodgers -- Robert W. Baird. -- Analyst

Okay. Great. Thank you.


[Operator Instructions] Today's next question comes from Paul Quinn with RBC. Please go ahead.

Paul Quinn -- RBC Capital Markets -- Analyst

Thanks very much. Good morning, guys. You've done a decent job of lowering your debt, but leverage is so high. Do you have a net debt target or a leverage target that we should be holding accountable for?

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Good morning, Paul. This is Ursula. So this is a longer term issue, as we have no maturity or refinancing risk on our long-dated debt, we don't have our first tranche coming in due until 2024 and couple that with our cost of debt being very competitive at sub 2.5 times. Additionally, you've seen over the last two years, we have continued to work toward a lower leverage number. And as Brian has already mentioned from a capital allocation standpoint, this is one of our top priorities.

That said, and for reference, our historical net debt-to-EBITDA has been in the 5.5 times to 11 times range with an average of 8 times, which is where we are today. And as Brian has noted, we don't really have a specific target with a specific timeline, but we do want to continue to move down the lower end of that range.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. And then it sounds like operations are doing well. Are you noticing a pickup in US South [Indecipherable] exports is that having any kind of impact on the market on those micro-markets that are around those export terminals?

Todd Reitz -- Senior Vice President and Chief Resources Officer

Hi, Paul, it's Todd. No, actually we've seen that kind of level out if you will. There was a little bit of a bump that happened. Q2, we saw a few spots, a few market or yards opened back up if you will. But since that time period, we've seen a couple of them actually pull back and that not being a major driver in what's going on in these micro-markets. For us, it's always been a very, very small part of our business to begin with.

While it's nice to have the attention when it's there, really the demand pool that we're seeing is more really from the domestic side, if you will as you can dealt with. The pricing of lumber right now going so well. The export hasn't been a big part of what we're seeing out there. We are hearing some news that there will probably be some other activities we moved throughout the second half of the year, but it just hasn't materialized at this point.

Paul Quinn -- RBC Capital Markets -- Analyst

Okay. And lastly, and this maybe a harder one, but you guys look at in the US South primarily growth drain ratios, we're at record lumber prices, and there doesn't seem to be any pull through. What's going to take you guys [Indecipherable]?

Todd Reitz -- Senior Vice President and Chief Resources Officer

Right. So really see that as -- I think Brian touched on, moving forward into 2021, we were anticipating -- taking a step back, we were anticipating a nice bump coming. In 2020, the pre-COVID event with housing numbers being where they were projected to go. I really feel like that's been delayed, and this is going to be more of a 2021 event.

If housing continues to improve, as we're seeing right now, these mills really get to where they can add maybe even a third shift, therefore, that demand pool will really hit up until that time. I really feel that's probably going to be one of your biggest drivers to success going forward. Until then we'll see a steady move throughout the rest of the quarter and probably into Q4.

Brian Davis -- President and Chief Executive Officer

And we're really talking about the markets which we operate in, Paul because we've been very selective since this time of 2013 picking what we believe the best mill markets to operate in. And as you noted, Paul, that there is a delineation between markets and growth drain ratios and we do study those things.

And that's why really during the second quarter from our standpoint, taking a view point of where we were in April and early May and taking a look at our counterparties associated with that business. They've been very strong. They're well-capitalized and good partners. And so from the standpoint, what Todd is alluding to is trees only can travel so far. And so from that standpoint, our growth drain our expectations starting to see that tension in 2021 given these near-term factors.

Paul Quinn -- RBC Capital Markets -- Analyst

Good. That's all I had. Thanks.

Brian Davis -- President and Chief Executive Officer

Thanks Paul.


And our next question today comes from Craig Kucera with B. Riley FBR. Please go ahead.

Craig Kucera -- B. Riley FBR, Inc. -- Analyst

Hey, good morning.

Brian Davis -- President and Chief Executive Officer

Good morning, Craig.

Craig Kucera -- B. Riley FBR, Inc. -- Analyst

Brian, I know you're going to recapitalize the Triple T joint venture, but asset sales are also on the table. Do you have a sense of what point you pull the plug on pursuing a recap and maybe start selling assets to take out some of those non-strategic investors?

Brian Davis -- President and Chief Executive Officer

I would say given the current market conditions, it'd be difficult to provide an indication of timing or strategy. It is a great asset, it's great market, strong counterparties, and recent enhancement should improve the liquidity for it. Our recap can come in various forms. It can come from a traditional recap. It can come from opportunities timber sales, disposition or a substantial portion of the timberlands are really a combination of all the after mentioned. So it's hard for us to really put a timeline on it and where we are on an acceleration associated with that.

Craig Kucera -- B. Riley FBR, Inc. -- Analyst

Got it. And I may have missed this, but was there any update or change to the existing 2020 guidance you guys put out in the first quarter?

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Hey. Good morning, Craig. No, we are reaffirming our guidance, which we have published back in May, so there's no changes there too.

Craig Kucera -- B. Riley FBR, Inc. -- Analyst

Okay. Terrific. Thank you.

Brian Davis -- President and Chief Executive Officer

Thanks, Craig.


And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to Brian Davis for any closing remarks.

Brian Davis -- President and Chief Executive Officer

Thank you, Rocco, and thank you for your time. And we hope you remain healthy and safe. We'll talk to you in the third quarter.


[Operator Closing Remarks].

Duration: 38 minutes

Call participants:

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Brian Davis -- President and Chief Executive Officer

Todd Reitz -- Senior Vice President and Chief Resources Officer

Randy Toth -- Citigroup Global Markets, Inc. -- Analyst

David Rodgers -- Robert W. Baird. -- Analyst

Paul Quinn -- RBC Capital Markets -- Analyst

Craig Kucera -- B. Riley FBR, Inc. -- Analyst

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