Feb 12, 2009
Executives
Eric J. Cremers - Vice President and Chief Financial Officer Michael J.
Covey - Chairman, President and Chief Executive Officer
Analysts
Hamzah Mazari - Credit Suisse George Staphos - Banc of America Zachary Turnage - Harbert Management Steve Chercover - D.A. Davidson
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Potlatch Fourth Quarter and Full Year 2008 Results Conference Call with Michael Covey, Chairman, President and Chief Executive Officer; and Eric Cremers, Vice President and Chief Financial Officer. 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).
I would now like to turn the conference over to Mr. Cremers.
Please go ahead sir.
Eric J. Cremers
Thank you and good morning. Welcome to Potlatch's investor teleconference covering our fourth quarter 2008 earnings.
Before we begin, let me remind you that this call may contain forward-looking statements within the meaning of the U.S. Securities laws.
These statements include statements about the company's future business prospects and anticipated performance in upcoming quarters. These statements are not guarantees of future performance and the company undertakes no duty to update them.
Although these statements reflect management's expectations today, they are subject to a number of business risks and uncertainties. Actual results may differ materially from those expressed or implied in this call.
For a discussion of certain factors that may cause actual results to differ from the results anticipated, please refer to Potlatch's recent filings with the SEC. Also, please note that segment information as well as the reconciliation of non-GAAP measures can be found on our website www.potlatchcorp.com as part of the webcast for this call.
I would now like to turn the call over to Mike Covey, our Chairman, President and CEO for opening comments.
Michael J. Covey
Thanks, Eric and good morning. 2008 marked the most significant change in Potlatch's strategic direction since the re-conversion in January of 2006.
With the spin-off of Clearwater Paper on December 16, 2008 Potlatch is now a pure play timber REIT with 1.6 million acres and three attractive geographic markets. We completed the tax-free spin-off of Clearwater Paper, which was the first spin-off ever done by a REIT in a very challenging market.
Although Potlatch is much smaller today than it was about two months ago, our revenue has shrunk by more than $1 billion and the employee base has decreased by 75%. We believe the company is more valuable today.
Going forward, the earnings stream for Potlatch will be less cyclical with the crisper focus on the long-term management of our superior timber and land assets. As such, we expect Potlatch shares to trade at higher multiples of earnings and cash flow and in fact that has been the case.
At the same time, through the spin-off, we delivered value to shareholders with the distribution of shares in a new public company that has competed successfully in the paperboard and tissue market. As planned, during 2008, we increased the harvest of financially over-matured timber by 11% or 400,000 tons.
Although log pricing late last year was weaker than we anticipated, we elected to complete planned deliveries to customers and modestly reduced overall harvest levels in the first quarter of this year, which we've done. We sold 18,000 acres of HBU and rural recreational land in 2008 at prices that were inline with our 2007 sales.
We also sold 43,000 acres of non-strategic timberland in Northern Minnesota in a tax-efficient like-kind exchange following the purchase of 179,000 acres in Central Idaho in 2007. On January 9, 2009 we announced the sale of 25,000 acres of non-strategic predominately immature timberland on the eastern periphery of our Arkansas ownership approximate to the Prescott sawmill which we closed in April last year.
The transaction price of $1,745 per acre validate that the timberland asset class continues to be attractively valued by private investors. 2009 was not without some disappointments.
Our Wood Products business lost $13.7 million for the year, including an $11.4 million loss in the fourth quarter. On a cash basis, this represented an EBITDA loss of $3.5 million for 2008.
Clearly we need to return our Wood Products business to profitability and at least breakeven on a cash basis in the near term. While we certainly expect to earn an economic profit in this business throughout the business cycle, it is unrealistic to expect that to happen in 2009, given the severity of the downturn in housing starts and the weak demand for building materials.
We began 2009 with a strong balance sheet and a $250 million revolver, which was renewed in December of 2009, excuse me, 2008. Outside of the $100 million credit-sensitive debt obligation which we expect Clearwater Paper to retire, we have less than $1 million of total debt maturities in the next 24 months.
After Eric covers our fourth quarter results and our outlook for 2009, I will comment on our dividend policy at the conclusion of his remarks.
Eric J. Cremers
Thanks, Mike. Let me begin by reviewing our fourth quarter results.
We reported net income from continuing operations in the fourth quarter of 2008 of $5.4 million or $0.14 per fully diluted share as can be seen on page three of the slides accompanying this presentation. This compares to net income from continuing operations of $24.4 million or $0.61 per fully diluted share in the third quarter of 2008 and $7.5 million or $0.19 per fully diluted share in the fourth quarter of last year.
As Mike mentioned, we completed the spin-off of Clearwater Paper in the fourth quarter of 2008. So those results including costs associated with completing the spin-off, corporate administrative costs directly associated with Clearwater, and interest expense for the debt assumed by Clearwater have now been moved to discontinued operations in all historical periods.
I'd now like to focus on our fourth quarter results, broken down by segment. Our Resource segment results for the fourth quarter of 2008 were above the fourth quarter of 2007, and below the third quarter of 2008.
Operating income in the fourth quarter of 2008 totaled $15.9 million compared to $10.6 million in the fourth quarter of last year and $30.7 million in the third quarter. Comparing fourth quarter 2008 to fourth quarter 2007, the higher operating earnings were driven by higher fee volume, offset by lower pricing.
As can be seen on page four of the supplemental materials, in the Northern region, sawlog fee volumes were up 25% comparing Q4 '08 to Q4 '07, as conditions were ideal for logging this year. But pricing was down 16% compared to fourth quarter of 2007.
Pulpwood volumes in the Northern region were down 10%, due to planned harvest mix changes in the Lake States, but pulpwood pricing improved 3% year-over-year. Turning to page five, in the Southern region, sawlog harvest volumes in the fourth quarter of 2008 were up 113% over the fourth quarter of 2007, primarily for two reasons.
First, harvest activity last year was curtailed in the fourth quarter to avoid unnecessary build-up of inventories and to avoid paying tax on undistributed REIT net income. Second; like the Northern region, logging conditions were very favorable in Q4, something you can't always count on in the south, so we took advantage of it.
Sawlog pricing in the south was down 16% comparing Q4 '08 to Q4 '07. Pulpwood volumes in the south were up 144% over Q4 '07 and pricing was basically flat compared to prior year.
Let me make a few comments regarding recent price trends. In the Northern region, we are experiencing some price weakness in both sawlogs and pulpwood.
However, in the south, prices appeared to be relatively firm for both sawlogs and pulpwood. Consequently, we anticipate moving some volume around from the north to the south as the year progress.
As always, we'll continue to monitor prices closely and we'll move volumes to the most attractive markets, which right now happens to be in the south. Turning to page six.
Our Real Estate segment closed 31 transactions in the fourth quarter, resulting in revenues and operating earnings of 2.9 million and $300,000 respectively. This compares to revenues and operating earnings of $11.8 million and $7.9 million respectively in last year's fourth quarter.
Page seven highlights the fact that in the fourth quarter, we sold just over 2,000 acres, roughly 75% of which was rural recreational land and the remaining 25% consisted of HBU type acreage. Page eight highlights our real estate pricing.
On average, our real estate sold at an average price of approximately $1,440 per acre in the fourth quarter, with HBU land selling for over $2,900 an acre and rural land selling for around $950 an acre. These land sales occurred in all three of our operating regions; Arkansas, the Lake States; Minnesota and Wisconsin, and Northern Idaho.
In spite of the bad economy, prices remain reasonably firm for HBU land, or were a little weak for rural land. A couple of comments about rural land pricing trends.
First, our real estate program is still relatively small. So the average price per acre can be skewed dramatically from quarter-to-quarter with the small number of transactions.
Second, we are seeing a little trading down to lower priced acreage in our rural land sales program. But interest in rural land remains intact.
The $300,000 of operating earnings in the fourth quarter compares to operating earnings of $3.2 million in the third quarter of 2008 and $7.9 million in last year's fourth quarter. Our Real Estate segment results are lumpy and can vary dramatically from quarter-to-quarter.
Our plan at the start of the year was to sell approximately 20,000 acres of HBU and rural recreational land in 2008. And excluding our non-strategic timberland sale in Minnesota, we in fact sold over 18,000 acres.
So in spite of the weak economy, our Real Estate results are encouraging. Our Wood Products business had a disappointing fourth quarter, producing an operating loss of $11.4 million in the fourth quarter of 2008, far worse than the $1.6 million of operating income in the third quarter of this year, and worse than the $5 million operating loss in the fourth quarter of 2007.
Page nine highlights price and volume trends in our Wood Products segment. The decline in both year-over-year and sequential performance was due primarily to lower lumber prices and shipments, partially offset by lower costs.
We are taking aggressive steps to mitigate the losses in this segment, including curtailing production. Returning to the P&L on page three, eliminations and adjustments had a $900,000 negative impact on operating income during the fourth quarter of 2008 compared to a positive impact of $3.3 million in last year's fourth quarter.
The main driver for the negative elimination entering the fourth quarter this year was a result of higher log inventories. The fourth quarter elimination should unwind as we move into the first and second quarter of 2009.
Corporate administration including interest expense, totaled $9 million for the fourth quarter, compared to $13.7 million in the third quarter and $16 million in last year's fourth quarter. The drop in corporate administrative costs from the third quarter of 2008 to the fourth quarter of 2008 is due to a number of one-time adjustments.
Net interest expense totaled $5.2 million in the fourth quarter of 2008, compared to $4.8 million in the third quarter, and $4.9 million in last year's fourth quarter. Recurring EBITDA totaled $9.5 million in the fourth quarter versus $34.8 million in the third quarter and $16.1 million in last year's fourth quarter.
Funds from continuing operations or FFO for the quarter totaled $14.9 million versus $35.9 million sequentially and $17.9 million a year ago. We paid our normal $0.51 per share distribution in the fourth quarter, totaling $20 million.
Pages 10 through 15 provide additional detail for the variances I have described. Now, a few comments about our balance sheet.
As we've discussed, Potlatch successfully spun off Clearwater Paper in the fourth quarter of 2008. Although the year-end 2008 balance sheet excludes Clearwater Paper assets and liabilities, the year-end 2007 balance sheet still includes those assets and liabilities.
Further, as part of the spin-off, Clearwater Paper retained the obligation to repay $100 million of credit-sensitive debentures which are on Potlatch's balance sheet. Since Potlatch is ultimately responsible for repayment of the debentures in the event Clearwater Paper fails to pay them when due, Potlatch will continue to represent the liability on its balance sheet as a current installment on long-term debt.
But it is offset by $100 million current note receivables in Clearwater Paper. Once Clearwater Paper repays the credit-sensitive debentures, both the liability and the asset will be removed from Potlatch's balance sheet.
Now, a few words about our outlook for 2009. Given the uncertain economic environment, like most companies, we find it very challenging to provide much in the way of guidance.
Nonetheless, I'll give you our latest thinking as it relates to our outlook for the year. As we've discussed, the primary driver behind Potlatch's cash flow generation and our timber business is our harvest volume and quality.
In total, we increased our fee volume harvest to 4.4 million tons in 2008, up 11% from 2007, which itself was up 20% versus our 2006 harvest. So as you can see, we have been executing on our plan to increase our harvest levels given the relative maturity of our timberland.
And our view is that over time, we can continue to increase the harvest up to around 5.1 million tons. But now is not the time to do it, given the current economic environment we're in.
So our current thinking is that we're going to hold the harvest volume relatively flat in 2009. And the mix between pulpwood and sawlogs is expected to be about the same in 2009, as it was in 2008.
We expect to increase the harvest to the 5.1 million ton range sometime over the next couple of years, as market conditions improve. Our harvest volume is dependent on pricing.
If prices turn much lower, we may well reduce the harvest. Conversely, if prices strengthen, we may well increase the harvest.
Also, we've geographic diversity to capitalize on price anomalies. For example, as I mentioned, we're currently experiencing pricing pressure in our Northern region.
The pricing in our Southern region is relatively stable. As such we anticipate moving some volume to the south, perhaps 200,000 to 300,000 tons.
If we see prices far more than what we've anticipated, we'll consider harvest deferrals beginning in the second half of 2009. Finally, lower diesel fuel costs will help our earnings from our Resource business in 2009, and we expect to save $4 million to $6 million versus last year.
Our Real State business is segmented into four primary products and the outlook for each varies. Regarding non-strategic timberland, the outlook remains favorable.
Prices are holding firm and we are continuing to explore a variety of opportunities. Also, while early in the year and as I mentioned earlier, the demand for rural tracts of recreational real estate remains relatively intact.
But it's still early in the year. As we approach late spring and summer, which is typically our most active period for prospective buyers, we will have a better view of price trends and demand.
Not surprisingly, HBU real estate has begun to show some signs of weakness. We will continue to be opportunistic regarding the execution of conservation easements as we have great lands for conservation outcomes and we will continue to explore them as they arise.
Excluding the 43,000 acre non-strategic timberland sale in Northern Minnesota last year, we completed 152 real estate transactions in 2008 at an average of $1,666 an acre. In total, our plan for our Real Estate business in 2009 is for revenues to be up roughly 40% to 50% over 2008, including the recent 25,000 acre Arkansas sale we just announced.
We are estimating that total acres sold will be down roughly one-third from 2008, but price per acre should be over double what we realized in 2008. Our Real Estate business is off to a strong start in 2009, as we've already announced our Arkansas transaction at a very attractive price.
The demand for smaller tracts of timberland like this one remains relatively high and we'll continue to search for ways to create value for our shareholders by selling non-strategic timberland if the economics of the deal make sense. As I mentioned earlier, our Wood Products business had a challenging 2008, and we expect this business to remain under pressure throughout 2009.
Our goal for the year is to get the business to cash breakeven, starting in the second quarter. This business will remain under pressure until housing improves.
Looking our way down the P&L, we expect corporate administration expense, excluding interest expense to total around $25 million for the year. Our defined benefit pension plans performed negatively during 2008, dropping by 29%.
As a result, we will require modest lending in 2009 of just under $1 million. Capital spending for the company excluding acquisitions is expected to be approximately $20 million in 2009, with roughly $15 million earmarked for our resource segment, which is primarily for reforestation costs, and the reminder is for our Real Estate and Wood Products businesses.
This $20 million total estimate for 2009 is very comparable to the $21 million we spent in 2008, after adjusting for the Clearwater spin-off and land acquisitions. Net interest expense is estimated to be roughly $20 million for the year.
Regarding taxes, we are estimating a roughly 10% effective tax rate for the year, which includes the effects of the built-in gains tax from our recent 25,000 acre Arkansas land sale, offset by tax benefits we expect to get from losses in our Wood Products business. DD&A should total approximately $30 million for the year, but of course will vary depending upon what we decide to do with our harvest level.
Note that the aforementioned DD&A number excludes the basis of our land sold which we expect to be roughly 10 to 15% of our land sales revenues and of course will vary depending upon the exact acreage we elect to sell. In summary, our Real Estate and Resource businesses performed very well last year, and we are cautiously optimistic in spite of the bad economy about their prospects in 2009.
Wood Products significantly underperformed last year, but we are taking steps to improve results, which we expect to happen. I would now like to turn the discussion over to Mike to provide some additional comments about the outlook for our dividend.
Michael J. Covey
Thank you, Eric. As we look at the outlook for 2009, we now expect our funds available for distribution, that is, FFO less capital expenditures to fall short of our current annual dividend level of $80 million, probably by $10 million to $20 million depending on what happens with log and lumber pricing later this year.
While we could readily increase the harvest in sawlogs into an over supplied market, we don't believe that is what shareholders expect us to do with the stewardship of long-lived assets like timber and land. Because we have ample liquidity to pay the dividend near-term and because we have a unique harvest profile of over-matured timber that will support higher harvest levels and thus higher dividends in stronger markets.
Our Board is comfortable leaving the quarterly dividend level set at $0.51 per share per quarter. Prior to the economic downturn, we fully expected our annual funds available for distribution to be covered by cash flow from operations.
As Eric mentioned, we will continue to explore other non-strategic timberland sales throughout the year. Our recent 25,000 acre sale in Arkansas highlights the arbitrage opportunity.
On an enterprise value basis, our lands in aggregate are valued at about $800 an acre. Now compare that to the nearly $1,750 an acre we got in our Arkansas deal.
As long as that value gap exists, and in our view, it continues to exist in earnest today, economic downturn or not, we'll continue to be net sellers in this market. And if completed at attractive prices, we believe that these sales make sense, whether the capital is deployed to pay down debt, repurchase shares which we believe are undervalued or to bridge funding the dividend until we work out of an unprecedented economic downturn.
April; that concludes our prepared remarks and we'll now take questions from the online participants.
Operator
Thank you, sir. (Operator Instructions).
Your first question comes from Hamzah Mazari with Credit Suisse.
Hamzah Mazari - Credit Suisse
Thank you. Just a couple of questions.
First, I'm curious just to see why you guys did not do a Section 1031 on the Arkansas sale? And then also you're bringing less land to market in 2009, but the dollar per acre price is higher.
Could you comment a little more on the mix there?
Eric Cremers
Yeah, Hamzah. I guess your first question with regards to why we didn't 1031.
I think it has to do with kind of our view of what the timberland market is like right now. Cap rates are awfully low and prices were getting bid up very high.
And as a result, it's tough to compete for acquisitions. So with regard to that Arkansas land sale, we took a look at it and said, the cash is king right now, and it's tough to find acquisitions.
So we'll just put the money in our pocket. Now regarding the outlook for our Real Estate business in the year, yeah, acreage is going to be down a little bit, roughly from I think 60,000 acres in 2008 to roughly 40,000 acres in 2009.
The volatile sale 25,000 acres, obviously non-strategic timberland, remaining 15 will be a mix of HBU and rural real estate. My guess is two-thirds split towards rural and one-third split towards HBU, but it's very early in the year.
Hamzah Mazari - Credit Suisse
Got you, that's helpful. And then, how do you guys decide in terms of how much worse does the sawlog market or wood products market need to get for you to decide, we are going to pull back harvest even more?
How much does sawlog pricing have to drop from where it is right now for you guys to pull back harvests?
Michael Covey
Well, this is Mike, Hamzah. The answer to that, I think part of it depends on how faster things are going to recover.
It's going to be a V-shaped recovery, a very long-term one. As you know, we have a backlog of over-matured timber.
It's not growing as fast biologically as some of the younger stands and with our higher cost of capital that these markets are brought, I think on a net present value basis, we can probably stand more of a price reduction today than we would have envisioned a couple of years ago as things have changed. But I think in the Northern region, we're approaching the point where we have to really look at the harvest in as we come out of the spring breakup period in May of this year when the snow melts and decide if it makes sense to continue at these levels or to pair back a bit.
We are very comfortable in the south. With pricing in the south, we will continue our harvest levels, and perhaps shift more volume there.
We have not seen an erosion of sawlog pricing there or of pulpwood pricing to any great degree. But I think on the Northern region, particularly in Idaho, we've got to keep a sharper focus on that.
Hamzah Mazari - Credit Suisse
Okay. And then just one last question.
Could you remind us again on your liquidity position right now and how much your pension contributions are going to be on a cash basis going forward?
Eric Cremers
Yeah, Hamzah. The pension contribution this year will be around $1 million.
It's going to be a little bit more in 2010, probably in the $6 million kind of range is what we're currently looking at. But we update those numbers as we move through the year.
So that's the answer to your first question. Regarding liquidity, I think the way to think of it is, we have a $250 million revolver.
If you look at the current notes payable that we reported on our December 31 balance sheet, it showed $129 million of drawings. Of that $129 million, roughly 20 of it was an IOU we drawn on our revolver, but Clearwater owed us roughly $20 million of this spin-off.
So our receivables were overstated a little bit at the end of the year, so that our revolver drawings right now are down to around $80 million. So, setting aside the $100 million that we have to keep open for the case where Clearwater doesn't pay off their credit sensitives, we've got about I don't know, $70 million or so of liquidity.
Hamzah Mazari - Credit Suisse
Okay, great. Thank you very much.
Eric Cremers
Yeah.
Operator
Your next question comes from George Staphos with Banc of America.
George Staphos - Banc of America
Thanks. Hi, everyone.
Good morning. Couple of questions.
First off, realizing that it's difficult to predict with certainty on the outlook, if conditions remained as they are now, Mike, would it be two quarters, two years, five years before you would have to think a little bit more critically about what dividend is, if you could just give us some rough idea?
Michael Covey
Well, against the backdrop, George, as Eric mentioned of our harvest level today, it's just over 4 million tons, and one that we think we can easily step up to 5 million tons for a good period. I think we'd have to see, I think we'd have some visibility that says this downturn is going to last more than a couple of years before we --
George Staphos - Banc of America
Okay.
Michael Covey
Before we felt we had to make changes.
George Staphos - Banc of America
Okay. That's fair enough.
Michael Covey
And we don't envision that today, but I guess we'll find out.
George Staphos - Banc of America
Well, I hope you're right and hopefully it isn't that longer downturn. Can you remind us is there any preclusion on your ability to use any of your land sales to support the dividend or share repurchase, just remind us what there may be there if anything?
Eric Cremers
We have to maintain the collateral pool, which is our revolver secured by the Idaho core timberlands. So what we've done with the revolver is we've carved out our core timberland in Idaho and it's got a value that provides enough collateral to support the revolver.
But we can do things in other areas.
George Staphos - Banc of America
Okay, that's fine.
Eric Cremers
And I should... one other thing I shall point out that we carved out the acres in Idaho that we anticipate being part of our real estate program.
So we're free to do with those acres what we wish as well.
George Staphos - Banc of America
Okay.
Michael Covey
With no restrictions on Minnesota or Arkansas or Wisconsin.
George Staphos - Banc of America
Okay, got it. Two last questions.
Can you just give us a bit more color in terms of why price is holding up a bit better in the south than what you're seeing in the Northern region? And then, longer term, obviously right now we have other things to worry about, but longer term, what effect do you think we may see on fiber demand and pulp price in particular and therefore demand and pricing for your product, based on what's been just tremendous demand destruction particular in printing and writing papers?
Thanks guys.
Michael Covey
Well, to take the first part, the south, why we see better markets. To be clear, for us, the south is really south central Arkansas, northern Louisiana and it's a very concentrated geographic market with a number of very well capitalized mills and what we feel are some of the best operators in the business with West Fraser and Georgia-Pacific continue to run saw mills and plywood plants in this market.
I think as compared to the west, which for us is principally Idaho, a number of very good sawmills but a lot more capacity is falling out of this market in Idaho, and hence the pricing weaknesses hit us a little quicker. The other part that's happened is the demand for cedar which, because you know we have about 20% of our product mix in Idaho is made up of cedar.
The demand for cedar logs which the lumbers are actually used in second homes has turned decidedly weak and that's depressed pricing as well. Regarding the broader second question George asked about fiber demand in general and what's happened, I think it's too early to say certainly with housing and the demand for wood and paper and all manner of things down markedly, I think it's hard to look and sit here today and think it's ever going to get better.
But fundamentally, we're still a strong believer that this country is going to build 1.5 million or 1.7 million houses a year once we recover and the GDP growth getting back on track in a couple of years, I think demand for fiber will return to what's it's been historically.
George Staphos - Banc of America
Thanks, Mike. I'll turn it over.
Operator
Your next question comes from Zach Turnage with Harbert Management.
Zachary Turnage - Harbert Management
Yes, I have two questions. The first is, I was wondering if you guys are going to have an update on your HBU land position.
And my second question is, looking at your stock price and where the private market is, why not be even more aggressive on land sales, particularly timberland sales just because that arbitrage is so large? Thank you.
Michael Covey
We stratified the company's ownership in December of 2006 and identified at that time about 300,000 acres of both rural recreational land and higher and better use land and some non-strategic land. We've since added a couple of 100,000 acres to the portfolio in the company with a couple of acquisitions.
So that pool today, we think is around 350,000 acres. The HBU portion of that, we haven't sold very many acres against that, probably only maybe 10,000 or 15,000 in the last couple of years.
So that pool hasn't markedly changed. We do plan to update that later this year with a fresh look and I think with what's happened in the economy, the definition of HBU may change a little bit.
So we may see some things change. That said, land that's near the metropolitan areas, land that's on lake and water front, I think will always have higher value, real estate outcomes for timberland.
The second point about why not take a larger advantage of the arbitrage opportunity between private market values and our public market values, I think it's a valid point. We continue to explore those today.
We try to find a way to do it, to act efficiently, if possible and that's difficult to do in this market unless you can find an acquisition, we don't think it makes sense to be a buyer today. So, I think, we balance those things and we're mindful of the opportunity that exists and we'll continue to search for it.
Zachary Turnage - Harbert Management
Thank you.
Operator
(Operator Instructions). Your next question comes from Steve Chercover with D.
A. Davidson.
Steve Chercover - D.A. Davidson
Thanks and good morning. First question, from Eric's comments on the corporate line, should we expect that it's going to go back towards 12 or 13 million per quarter normally?
Eric Cremers
No. I wouldn't.
Well, if you are including interest expense, it's going to go back to around $45 million for the whole year. So, yeah, it will go down, it will go backward to around $12 million kind of level, 11.5 million, 12 million.
Michael Covey
Interest expense about $20 million, Steve.
Eric Cremers
Yeah, that corporate number line that you're looking at, that's both corporate administration costs as well as net interest costs. The net number is roughly 25 for administration costs and roughly 20 for interests for the whole year.
Steve Chercover - D.A. Davidson
Okay, and thank you for that. And are there any charges associated with the Clearwater spin that impacted Q4 that you should call out?
Eric Cremers
They're all down in discontinued operations.
Steve Chercover - D.A. Davidson
Okay. And then, actually I don't think anyone on the call was around, but there were three OSB mills that some people thought may have some similarity within Minnesota that aren't running.
Does that have any impact on your ownership, your timber ownership in Minnesota?
Michael Covey
Steve, this is Mike. Well, certainly when you got that much demand to come out of the market, and its not been picked up by other sources, it certainly has had an impact.
However, I think all things have a way of kind of reaching equilibrium in the market and we've seen actually some of the pulp and paper companies in Minnesota reach out to us, for more aspen fiber and pay prices today that are offering us revenue enhancements over a premium over and above what the market is today to supply them, as they are desperate for both woodchips and round fibers. So the market's kind of, I guess settled, if you will.
Steve Chercover - D.A. Davidson
Okay, I mean you are well aware of the challenges there anyhow and I guess that's been discounted into your guidance if you want to call it that for the year.
Michael Covey
Yes
Steve Chercover - D.A. Davidson
Okay, thanks very much.
Michael Covey
Welcome
Eric Cremers
Thank you, Steve.
Operator
At this time, there are no further questions.
Michael Covey
Thank you. We'll speak to you next quarter.
Operator
Thank you. This does conclude today's Potlatch fourth quarter and full year 2008 results conference call.
You may now disconnect.