Potlatchdeltic Corp

NASDAQ:PCH

Earnings Call Transcript 2019-Q4

[Operator]

Good morning. My name is Lindsey and I will be your conference operator today. At this time, I would like to welcome everyone to the PotlatchDeltic Fourth Quarter 2019 Conference Call. [Operator Instructions]

Thank you. I would now like to turn the call over to Mr. Jerry Richards, Vice President and Chief Financial Officer, for opening remarks.

Sir, you may proceed.

[Jerry Richards, Vice President and Chief Financial Officer]

Thank you, Lindsey, and good morning. Welcome to PotlatchDeltic's fourth quarter 2019 earnings conference call. With me in the room are Mike Covey, Chairman and Chief Executive Officer and Eric Cremers, President and Chief Operating Officer.

This call will contain forward-looking statements. Please review the warning statements in our press release on the presentation slides and in our filings with the SEC concerning the risks associated with these forward-looking statements. Also, please note that a reconciliation of non-GAAP measures can be found on our website at www.potlatchdeltic.com.

I'll now turn the call over to Mike for some comments. And then I will cover our fourth quarter results and our outlook.

[Mike Covey, Chairman and Chief Executive Officer]

Thanks, Jerry, and good morning everyone. We generated adjusted EBITDA of $179 million in 2019, which is our third highest level of annual EBITDA since electing REIT status in 2006. We accomplished this despite a relatively weak lumber pricing environment, which reflects the stronger Company that has been created through the 2018 Deltic merger.

We are pleased with the performance of our real estate business this year. Our real estate team did an excellent job identifying and executing on rural land sales opportunities from the legacy Deltic Timberlands. Sale of Timberlands near Little Rock, Arkansas for $11,000 per acre and revenue of $9 million for commercial land sales were two key factors that drove more EBITDA at better margins than we had planned.

Turning to Timberlands; our focus this year was catching up harvest volumes against our plan in both of our main operating regions. This situation existed in Idaho because customers in the region entered the spring break-up period with higher than normal log inventories.

Our Timberlands team successfully shifted sawlog volume to the second half of the year and the Idaho log deliveries ended the year slightly ahead of plan. Our Southern harvest volumes fell short this year. Rainfall was double normal levels in our Arkansas operating areas in the first half of the year which restricted the supply of sawlogs.

We discussed on last quarter's call that we would not be able to make up the shortfall in Southern volume because the resulting price and supplier response in the second half of the year led to oversupplied log inventories at mills in the region. Southern pine sawlog prices have normalized and we expect our harvest volumes to return to normal higher levels in 2020.

Wood Products successfully completed its elevated capital project plan in 2019. Notable projects included; new kilns at two of our sawmills, the green lumber stacker, and a lumber grade scanner, with the primary benefits of these projects are extended -- expanded capacity and improved grade realization.

We have scaled back the 2020 capital project plan to let our mills focus on operating well in what we expect will be improved market conditions. Other 2019 highlights included the sale of the Deltic -- legacy Deltic MDF facility and the refinance of a $100 million of debt, which lowered our interest cost by roughly 80 basis points.

Our balance sheet remains strong and provides the flexibility to continue to grow shareholder value. We returned $133 million of cash to shareholders in 2019, including $25 million of share repurchases at an average price of $37 per share. Our stock currently trades approximately 16% above the average repurchase price and we did not buy any shares in the fourth quarter.

Looking forward to 2020, improving U.S. housing market fundamentals bode well for lumber demand. Homebuilders continue to report healthy additions to their order files and housing starts have increased meaningfully, which are two key leading indicators. U.S. housing starts remained on an upward trend through December and are at their highest levels since 2006 on a seasonally adjusted basis.

Customer confidence, low unemployment, affordable mortgages, low inventory of existing homes for sale, and the fact that Millennials, the largest demographic cohort in the US are entering the prime home buying years are additional factors that underpin our optimism in 2020.

Turning to lumber supply, several capacity curtailment or closures were announced in 2019. It is estimated that these decisions removed over 2 billion board feet of North American lumber capacity in aggregate and offsets a portion of the sawmill capacity that's been added in the U.S. South in the last few years. The news yesterday that Canadian lumber duties are likely to decrease as a result of U.S. Commerce's first annual administrative review was not unexpected.

Any change would not go into effect until August of this year and we do not believe that a reduction in the duty will result in Canadian lumber producers restarting mills. PotlatchDeltic is well positioned to benefit from favorable lumber supply and demand fundamentals through our leverage to lumber prices

And I'll now turn it over to Jerry to discuss the quarter and our outlook for the year.

[Jerry Richards, Vice President and Chief Financial Officer]

Thank you, Mike. Starting with Page 4 of the slides. Total adjusted EBITDA was $47 million in the fourth quarter compared to $55 million in the third quarter. The sequential decrease in EBITDA is due primarily to lower harvest and lumber shipment volumes. I'll now review each of our operating segments and provide more color on the fourth quarter results.

Information for our Timberlands segment is displayed on Slides 5 through 7. The segment's adjusted EBITDA was $38 million in the fourth quarter compared to $43 million in the third quarter. We harvested 473,000 tons of sawlogs in the North in the fourth quarter. This is down seasonally from the 529,000 tons that we harvested in the third quarter.

Northern sawlog prices were 4% lower on a per ton basis in the fourth quarter compared to the third quarter. The effect of a normal seasonal increase in the density of logs was partially offset by a slightly higher percent of cedar sawlogs in the mix and slightly higher index prices.

In the South, our harvest volume was flat quarter-over-quarter at about 1 million tons. Our Southern sawlog prices were 7% lower in the fourth quarter compared to the third quarter. The decline was due to a seasonally lower proportion of hardwood sawlogs in the mix and the absence of a wet weather related premium on Southern pine sawlog prices that we experienced into the third quarter.

Turning to Wood Products on Slides 8 and 9, adjusted EBITDA of $1.8 million in the fourth quarter was $4.1 million lower from the third quarter. Production was scaled back in the fourth quarter for a variety of operational and market reasons, which negatively affected fixed cost absorption. For example, start-up of the new continuous dry kilns at our Warren Arkansas sawmill took longer than anticipated. The new kilns were all operating well by the end of the year.

In a second example, we ran less over time than we had planned given market conditions. Log costs were higher in this segment, primarily in Idaho, due to an increase in index log prices.

Moving to Real Estate on Slides 10 and 11; the segment's adjusted EBITDA of $14 million in the fourth quarter was down slightly from $14.7 million in the third quarter. An increase in commercial land sales in Chenal Valley mostly offset the sale of fewer rural acres quarter-over-quarter.

Shifting to financial items which are summarized on Slide 12. We ended the year with $83 million of cash. We refinanced the $40 million term loan that was scheduled to mature in December. But the new loan matures in November 2029 and the interest rate, net of patronage, is about 2.5%. Interest savings will be modest relative to the variable rate on the old term loan.

We have another $46 million in term loans that are scheduled to mature in December 2020. Interest rates remain attractive, which plays a key role as we evaluate refinancing or repaying this debt. Capital expenditures were $21.4 million in the fourth quarter and $66 million for the full year. Note that these amounts include real estate development expenditures, which were included in cash from operations in our cash flow statement.

Details of our 2020 outlook are presented on Slide 13. We expect to harvest about 6 million tons in our Timberlands segment in 2020 with approximately 70% of the volume in the South. Harvest volumes in the North are planned to be seasonally lower in the first quarter compared to the fourth quarter. We expect Northern sawlog prices to decrease modestly in the first quarter, due primarily to seasonally heavier logs and fewer cedar sawlogs in the mix.

Harvest volumes in the South are planned to be seasonally lower. We expect Southern sawlog prices to decline modestly in the first quarter, due primarily to a seasonally lower mix of hardwood sawlogs. We plan to ship just over 1.1 billion board feet of lumber in 2020.

We expect average first quarter lumber prices to be modestly higher than the fourth quarter and to ship 270 million to 280 million board feet of lumber in the first quarter. Our average lumber price in January is approximately $18 higher than our fourth quarter average lumber price.

Our average spot lumber price is currently $30 higher than our fourth quarter average lumber price. As a reminder, a $10 per thousand board foot change in lumber price equals approximately $12 million of consolidated EBITDA for us on an annual basis.

Shifting to Real Estate, we expect to sell 20,000 acres to 25,000 acres of rural land, and a 140 Chenal Valley lots in 2020. Additional real estate details are provided on the slide.

Our non-cash, non-operating pension and post-retirement expense will increase approximately $10 million this year. The change is largely because an $8 million per year credit related to restructuring of post-retirement plans in 2010 was fully amortized as of the end of 2019. We estimate that cash contributions to the pension and post-retirement plans will be $11 million in 2020.

Our interest expense will be lower than normal in the first quarter, because that is when we'll receive our annual patronage payment from the Farm Credit Banks. We estimate that interest expense will be $3 million in the first quarter and $8 million to $9 million per quarter for the second, third and fourth quarters of 2020.

Our total capital expenditures are planned to be in the range of $42 million to $48 million, excluding acquisitions in 2020. We completed a series of large high-return projects in our mills last year and we plan to spend $20 million to $25 million less in our Wood Products segment in 2020. This will allow our mills to focus on operating well on what we expect will be improved market conditions.

Overall, we estimate that first quarter total adjusted EBITDA will be lower than fourth quarter, primarily due to a seasonal decrease in harvest volumes. We are encouraged by improving industry fundamentals and we expect 2020 to be a solid year.

That concludes our prepared remarks. Lindsey, I'd now like to open the call to Q&A.

[Operator]

[Operator Instructions] Our first question comes from John Babcock with Bank of America. Your line is now open.

[John Babcock, Bank of America]

Hey, good morning, and rather good afternoon as well, I guess. I guess starting now, you mentioned and confirmed I guess reports that the duties on Canadian lumber will be falling to the single digit later this year. What is the level on that? And then also, if you could kind of share your view on how you expect that to impact fundamentals?

[Mike Covey, Chairman and Chief Executive Officer]

Well, this is Mike. The duties are proposed to be cut in half roughly in about August, so on a per dollar per thousand board foot basis they fall from approximately $60 a thousand board feet today to about $30 per thousand board feet as we understand it. Remember duties, they move inversely with the price of lumber. They're going down because we had a really strong price here in 2018, which is the year that's under analysis.

And we would expect when the duties are reviewed in another year following this, they would go up because 2019 was a weak lumber price year. As we stated in the call, we do not expect that this is going to reverse the decisions that Canadians made to shutter sawmills permanently. Although the margins certainly will improve for some Canadian producers, we don't think it will fundamentally effect supply of lumber in North America today.

[John Babcock, Bank of America]

Thanks for that. And then you talked a little bit about the capital projects basically pushing off some in 2020. Do you expect those projects to be completed in 2021, also can you just generally provide some color on what those capital projects were and also what projects you have planned for this year?

[Mike Covey, Chairman and Chief Executive Officer]

Well, Eric can expand on this. We didn't really push any off. I think it was a matter of, we completed the highest priority projects we had. All of those are going to have positive impacts on our ability to produce more lumber, as well as higher grade realizations in our mills and we expected this year to be a better year for lumber pricing. We want to be able to operate at full capacity and run full blast and not be as distracted by capital projects. So that's really what we've done. I would really say we postponed anything. We probably will just shift some to 2021.

[John Babcock, Bank of America]

Thank you. And then a last question before I turnover. It looked like commercial acre sales were pretty strong in the quarter, how much commercial acreage do you have remaining in the portfolio at this juncture?

[Eric Cremers, President and Chief Operating Officer]

So John, this is Eric. You know Chenal is a 4,800 acre master plan community. When first developed, it had over 800 acres of commercial property available. And I think we're now down about 370 acres remaining. So we still got a pretty good inventory of commercial acres left to sell.

[Operator]

Our next question comes from the line of Collin Mings with Raymond James. Your line is now open.

[Collin Mings, Raymond James]

Thanks and good morning, guys. First question for me, just sticking with the capital expenditure guidance for the year. As we think about the $42 million to $48 million number, is that pretty much all kind of recurring maintenance capex or is there still some component of that that is some of these higher return projects? Again, I appreciate the comments about scaling back some of that activity relative to last year. Just trying to get a better sense of what that kind of run rate maintenance capex number looks like?

[Eric Cremers, President and Chief Operating Officer]

Collin, this is Eric. We're not at a strictly maintenance level of capital spending for our mills. We had five large projects go in in 2019, including the two kilns at our Warren facility that were a $15 million install. For 2020, we've got three meaningful projects planned. A stacker at St. Mary's, a stacker at our Gwinn mill and a debarker going in our Ola mill.

And collectively adds about another, who knows $5 million or $6 million. So we're still at a level of investment spending in our mills and we're still above maintenance spending. So don't get the wrong impression there.

[Collin Mings, Raymond James]

Okay. That's actually very helpful color there. Maybe just sticking with capital allocation, I know it's been discussed on a number of calls recently but just maybe just current thoughts as we enter the New Year here on potential for bolt-on acquisition opportunities?

I know that has been the focus of the Company and again going back Mike, to your prepared comments of where the stock price is, was inactive during the fourth quarter on the repurchase front. So maybe just talk a little bit about the timberland acquisition markets and the opportunities you are or are not seeing right now?

[Mike Covey, Chairman and Chief Executive Officer]

The market in 2019 was, I would consider it average in terms of what traded. I think we continue to see a pattern that high quality timberlands continue to trade at a very full price whether that's in the Pacific Northwest or in the U.S. South. If it's well-stocked, productive, good quality ground, roughly speaking is selling for $2,000 an acre in the South and $4,000 an acre in the Northwest.

We've seen some lower quality kind of Class B and C properties that have sold for much less than that, but that wasn't unexpected. So there is no steals to be had in the timberland M&A market and that puts more emphasis for us on bolt-on acquisitions where we do have some advantage or synergy where someone else might not have it with adjacent property. For us that would be in Mississippi, Alabama, Arkansas, perhaps Louisiana and parts of Texas. But there is very little property on the market currently.

[Collin Mings, Raymond James]

Okay. And then, just switching over to the Timberland business real quick. Just -- can you provide a quick update on the cedar log pricing and demand you're seeing on that front?

[Eric Cremers, President and Chief Operating Officer]

Yes. So Collins, it's Eric again. We mentioned on our last call that we thought cedar prices had bottomed in 2019. We have since seen a real nice rebound in cedar prices. They are up about 10% to 15% compared to where they were for most of last year. And a couple of different things have changed to improve market fundamentals.

Number one, cedar mill log inventory levels are now down. They were running pretty high most of last year. So demand was relatively low because their decks were full. That's the first thing.

The second thing is, we have taken steps to diversify our markets for our cedar logs. So we are intentionally getting cedar logs out of the Inland region that's improving the supply/demand dynamic here in the area.

And then lastly, there is a strike going on at Western Forest Products up in Canada, which produces a lot of cedar and that's probably favorably impacting cedar prices here in the U.S. We've seen a real nice rebound in cedar log prices.

[Operator]

Our next question comes from Steve Chercover with D. A. Davidson. Your line is now open.

[Steve Chercover, D.A. Davidson]

So you did explain part of the reason that the lumber volumes were down in Q4. Just wondering, was any of the reduction due -- in an effort to get inventories to their desired levels and how would you characterize your order files now? And finally, what's the last three projects that are completed in 2020? Do you believe that you could be cash flow positive in most any normal lumber operating environment?

[Eric Cremers, President and Chief Operating Officer]

Yeah Steve, this is Eric. No, I'd tell you what happened to our Wood Products business in the fourth quarter as we candidly just did not run well for a variety of reasons. At our Warren sawmill, we had kiln start-up issues like Jerry spoke about. Our Waldo mill down in Arkansas has up-time challenges during the quarter.

Our Ola mill which, half of its volume is timbers, prices were so low for timbers last year that we were below variable cost in the fourth -- much of the fourth quarter. So we had to hold back production volumes there and that negatively impacted fixed cost absorption.

So a whole bunch of different reasons really hit us in the fourth quarter. What I would tell you now that we're one month into 2020 is that our mills are operating very well to start the year. We're optimistic that we continue on this trajectory, but we have seen a nice turn in that business.

On your other question about, do we think we'll operate in the black? We do think we'll operate in the black. We regularly benchmark our mills and our mills we believe are, generally speaking, first or second quartile mills. And if I look at our margin performance compared to our leading peers, while there is occasionally an issue, which can impact a quarter or two, over the long term, we tend to track very well with our large peers in the industry. So we do think we're going to be black at the bottom, so to speak.

[Steve Chercover, D.A. Davidson]

Okay, thank you for that. And then switching to Real Estate, which is by definition lumpy and I suppose opportunistic. Is there a base load cash costs that we should assume, because even prior to the Deltic combination in 2018, I think you guys ran at about $20 million in EBIT, give or take a few and if I'm not mistaken 2020 might be below that. So I'm just wondering, are we missing something? Or is that accurate that this year, you're really holding back?

[Eric Cremers, President and Chief Operating Officer]

No, you're talking about which part of our Real Estate business, the development side or the rural side?

[Steve Chercover, D.A. Davidson]

Well, really the -- well, both, I mean you -- we know what Chenal Valley is going to do given the lots and the average. So I guess it's more on the HBU non-core timber side?

[Eric Cremers, President and Chief Operating Officer]

No, I think Jerry's comments were that we'll sell 20,000 to 25,000 rural acres for the year and I think that's very consistent. We had a great year last year with the large transaction just outside of Little Rock. But the 20,000 to 25,000 acres is very consistent with what we've done in the past.

[Steve Chercover, D.A. Davidson]

Okay, and final question. I guess you kind of touched it in the context of Timberlands. But there was a fairly large transaction announced last month, and I was wondering if you guys took a look under the hood?

[Mike Covey, Chairman and Chief Executive Officer]

We can't comment on that Steve. Since it's been announced, I guess our observations are it's sold at a full price and it's encouraging to see that Timberland still trades at a premium value, particularly in the Pacific Northwest.

[Steve Chercover, D.A. Davidson]

Okay, thanks, Mike.

[Operator]

Our next question comes from Mark Weintraub with Seaport. Your line is now open.

[Mark Weintraub, Seaport]

Thank you. First, I was just hoping to get your thoughts on lumber market dynamics in terms of channel inventories and any recent sense you have in demand trends?

[Eric Cremers, President and Chief Operating Officer]

Yes. So Mark, it's Eric. Yes, we're pleased to see lumber prices finally turnaround here. As you know there are a number of curtailments, closures last year that really didn't happen until the fourth quarter as mills had to wind down log and lumber inventories. And -- so we have seen a lot of supply come off the market and that's against the backdrop of improving demand.

We saw really strong home sales in the month of December and we're seeing really strong order files out of the homebuilders. If you take a look at the publicly traded homebuilders whether Pulte, DR Horton, Lennar, MDC, they're all -- they're all showing like plus 30% kind of order growth numbers.

So we think there is better times ahead for our lumber and our wood products business. But getting back to your point about inventories in the channel, we think they continue to be low. They've been low for a couple of years now as distributors dealers can kind of live with short order files.

[Mark Weintraub, Seaport]

And are you seeing a pickup in lumber orders? I mean you talked about obviously, the home sales having been improving, are you seeing that begin to translate into more demand for your lumber in the last few weeks?

[Eric Cremers, President and Chief Operating Officer]

Well, we sell what we produce, and I'd say given that the prices have been -- have been rising. We're feeling like we have a little bit more pricing power than we have in the recent past and there has been talk of the repair and the remodel markets rolling over. Candidly, we don't see that. Our home center business is doing great right now.

[Mark Weintraub, Seaport]

Okay. So when you're describing lumber pricing, you talked about it being up $18 versus the fourth quarter and January $30 spot, but you only -- if I heard you right, suggested that Q1 would be modestly higher than Q4. I'm just trying to understand, it sounded like it was -- even if we just sustained this, where the price is today, it sounds like that's more than modest improvement. So I just wanted to make sure I understood if there were some other dynamic at work?

[Eric Cremers, President and Chief Operating Officer]

No. So, we had a slow start to the year. The first part of January, prices were not responding as well as we would have liked or hoped. But here of late, we have seen a nice run-up. If you look at where FEA and RISI have their prices for the quarter. On average, they've got them up 6%. That's about what we think they're going to be for the quarter as well, if current trends stay in place.

[Mark Weintraub, Seaport]

So I guess I'm just trying to understand that. If I heard you right, you said January was up $18 versus the Q4 average. And then you said the current was up $30. And so if we stayed at the up $30, presumably, we'd be up somewhere between $20 and $30, closer to the $30 and that would, by my math, be somewhat more than the 6%.

[Jerry Richards, Vice President and Chief Financial Officer]

Yes, I mean, it could be 7%, Mark. I mean we're slicing pretty fine hairs here.

[Mark Weintraub, Seaport]

Okay. But OK -- and obviously prices could go higher from where they are today as well would be -- so that's certainly not built into to that, if I understood correctly?

[Jerry Richards, Vice President and Chief Financial Officer]

Correct. That's correct.

[Mark Weintraub, Seaport]

Fair enough. And then...

[Mike Covey, Chairman and Chief Executive Officer]

So maybe Mark, just to clarify maybe we're hung up around the term modest. I think, to put it on a finer point, the number that we mentioned here of, prices are up 6% or so is a more accurate statement than the word modest.

[Jerry Richards, Vice President and Chief Financial Officer]

That's correct.

[Mark Weintraub, Seaport]

Okay, super. And then on the lumber duties and the prospective change, just to make sure I fully understand. So there is no adjustment in the framework as you understand it. It's just the lower lumber duties that would come into effect potentially, starting August are entirely a function of where lumber prices averaged as opposed to any change in framework?

[Jerry Richards, Vice President and Chief Financial Officer]

Our understanding, and this is fresh news, is that there is no change in the framework whatsoever, nor will there be any a refund of deposits that are currently on file and in fact tariffs will continue to be collected and put in the U.S. Treasury going forward. So I don't think there is any framework that's changed.

It was not unexpected that the duties went down because we had a very high lumber price year in 2018, leading to less injury, if you will. Now as we look at the year of 2019 when that comes time for review, we don't have a negotiated settlement by then, and we would expect duties to go back up because lumber prices were much lower in '19 than '18.

[Mark Weintraub, Seaport]

Got it. Thank you. And just two quick ones. Beyond that, one is there's been a lot more talk about European Spruce going into China and that has knock-on impacts to global lumber and even timber flows, potentially. How do you see that affecting your business, if at all?

[Eric Cremers, President and Chief Operating Officer]

Well, little to nothing at the end of the day, Mark. As you know, we don't export really logs or lumber. Our inland business here, while we produce Western species, we're really indexed to the price of lumber here in the Inland region. So what happens with West Coast log prices really doesn't have an effect on us here.

So, bottom line is, we don't see it impacting us. And by the way, the amount of lumber coming in from Central Europe. What I've been reading, what I've been hearing is that those volumes look like they peaked. And so if you think that incremental export volume -- lumber volume coming out of Central Europe could push prices -- lumber prices here lower that doesn't seem to be the case.

[Mark Weintraub, Seaport]

Okay, great. And one last one was on the perspective that lower lumber duties wouldn't affect the supply side makes sense to me. I guess the one caveat being if there were sawmills that were prospectively going to be going down and they were still running perhaps while you would have thought they had already known that the duties were going to be going down, that could change the decision-making. To your knowledge though, is there much in the way of capacity that's been announced to go down, but hasn't gone down yet or are we at that point where the capacity that was announced to go down has already gone down?

[Jerry Richards, Vice President and Chief Financial Officer]

We think it's the latter. But honestly, we don't know. I haven't heard of really any. This is mostly a BC issue. We haven't heard of really any BC announcements that are pending for closure, most of them were announced last year. They wound down their log decks at the end of the calendar year and sold their inventory and now they're shut.

[Operator]

[Operator Instructions] Our next question comes from Paul Quinn with RBC Capital Markets. Your line is now open.

[Paul Quinn, RBC Capital Markets]

Hey, just a question on, just so I understand your lumber business a little bit better. I would have thought you had been a lot more levered to the South and you're talking about a price recovery and I've seen Southern Yellow Pine 2-by-4 go down over the last three weeks. So, is it better for us to look at Random Lengths composite or maybe you could give us a feel for what your size mix is between a 2-by-4, 2-by-6, 2-by-8, 2-by-10, just so we can track it better.

[Jerry Richards, Vice President and Chief Financial Officer]

Well, there really is no perfect index to compare to Paul. We -- our product mix really is a lot different than Random Lengths. Frankly, as we look at Random Lengths, I think is nearly 50% 2-by-4, we're 11% 2-by-4. Random Lengths is 0% timbers, we're 6% timbers. Random Lengths is 0% economy, we're 20% economy. Random Lengths is 30% Southern Yellow Pine, we're 50% Southern Yellow Pine.

So there's just so many puts and takes that there really isn't -- and the Random Lengths is not a perfect comparator, but it's about as good as you're going to get, and they're going to be periods of time like here recently, where we have underperformed the index, really due to incredibly weak timbers pricing. Timbers pricing was down 30% from March to October and in contrast the Random Lengths composite was up 3% from Q1 to Q4.

So that 30% price decline had an outsized impact on our overall reported prices, but I would also tell you there is periods of time when we're going to do a lot better than the index. And I think about '18 to '19 when Random Lengths was down $103, we were actually only down $86. So we did $17 better than the index. So they're going to be periods of time where we do better than the index and periods of time when we do worse than the index. But it's really about as good of a comparator as you can come up with.

[Paul Quinn, RBC Capital Markets]

Okay. So it sounds like Random Lengths lumber composite isn't the one, but given your 50% weighting in the Southern Yellow Pine, maybe that Southern Yellow pine composite might be a better fit of you. Have you tried that out for -- versus your realization?

[Eric Cremers, President and Chief Operating Officer]

Well, and then there's also within Southern Yellow Pine, there is wides and there is narrows and those two can move in different directions as well. So again, I guess, I would just encourage you to think about the Random Lengths as the best thing to use for pricing guidance.

[Paul Quinn, RBC Capital Markets]

Okay, I'll try that out. Yeah, thanks for that. And then maybe Mike, you were mentioning the reduction in duties just want -- that reduction will be in place for a year. Just wondering if that's going to change the thinking on the U.S. side in terms of potential negotiations between Canada and the U.S. to try to get a deal eventually?

[Mike Covey, Chairman and Chief Executive Officer]

Well, I don't know. Paul. It's an election year. There is no negotiations ongoing that I'm aware of between the U.S. and Canada. I think the coalition which we're members of, we all continue to believe that long-term a negotiated market-based settlement makes the most sense on market share, but it's early days.

[Paul Quinn, RBC Capital Markets]

What -- maybe you could give us just a summary of what are the individual NAFTA or WTO cases that are coming up that might actually move this case -- move this issue forward?

[Mike Covey, Chairman and Chief Executive Officer]

My level of expertise just fell off dramatically with that questions. So -- as this is such a complicated matter, I can't recite those off the top of my head. We can certainly follow-up at -- follow-up on a call with you to help with that.

[Paul Quinn, RBC Capital Markets]

Okay, that's helpful, thanks. That's all I had. Best of luck.

[Operator]

Our next question comes from Mark Weintraub with Seaport. Your line is now open.

[Mark Weintraub, Seaport]

Hi, thanks. Just one quick follow up post Paul's question was. I'm sorry, you said economy is like 20% in Timbers, what was that again, the percentage?

[Eric Cremers, President and Chief Operating Officer]

Timbers is 6% of our production.

[Mark Weintraub, Seaport]

Oh, Just 6%. Okay, and what...

[Mark Weintraub, Seaport]

Okay. And if we're looking at Random Lengths and I apologize I should know this, but where can I -- where can we find something that would track the economy or timber, is there a particular item to look for?

[Eric Cremers, President and Chief Operating Officer]

I think those numbers are buried in Random Lengths, Paul, but I'll have to get back to you on that.

[Mike Covey, Chairman and Chief Executive Officer]

Yeah Mark, there -- if you dive deeper into the Random Lengths' weekly pricing report there are line items for both timbers and economy lumber and the economy lumber is really a 2-by-4 stud product where we generate the economy.

[Mark Weintraub, Seaport]

Okay, great. I'll circle back to get details. Thanks so much.

[Mike Covey, Chairman and Chief Executive Officer]

You bet.

[Operator]

At this time, I'm showing there are no more questions. I'll turn the call back over to Jerry Richards.

[Jerry Richards, Vice President and Chief Financial Officer]

All right. Thank you, Lindsey, and thank you everybody for your interest in PotlatchDeltic. Certainly, as you heard on the call, a couple of follow-ups. But be happy to take your detailed modeling questions and be available the rest of the day and hope everybody has a good day.

[Operator]

This concludes today's conference call, you may now disconnect.