Ed Kiker – CFO Paul Boynton – Chairman, President and CEO Lynn Wilson – EVP, Forest Resources Chris Corr – SVP, Real Estate Jack Kriesel – SVP, Performance Fibers.

Mike Roxland – Bank of America Merrill Lynch Chip Dillon – Vertical Research Partners Paul Quinn – RBC Capital Markets Steve Chercover – D. A. Davidson Mark Weintraub – Buckingham Research Group Collin Mings – Raymond James & Associates.

Welcome. And thank you for joining Rayonier’s First Quarter 2014 Teleconference Call. At this time all participants are in listen-only mode. (Operator Instructions). Today’s conference is being recorded, if you have objections you may disconnect at this time. Now I’d like to turn the meeting over to Mr. Hans Vanden Noort, CFO. Sir, you may begin..

Actually this is Ed Kiker and thank you and good morning. Welcome to Rayonier’s investor teleconference, covering first quarter earnings. Our earning statements and presentation materials were released this morning and are available on our website at rayonier.com.

I would like to remind you that these presentations will include forward looking statements made pursuant to the Safe Harbor provisions of Federal Securities laws.

Our earnings release as well as our Form 10-K filled with the SEC lists some of the factors, which may cause actual results to differ materially from the forward-looking statements we may make. There are also referenced on page 2 of our presentation materials.

With that, let’s start teleconference with opening comments from Paul Boynton, Chairman, President and CEO.

Paul?.

Hey. Thanks, Ed. I am going to make some overall comments before turning it back over to review our financial results. Then we are going to ask Lynn Wilson, Executive Vice President, Forest Resources to comment on our timber results.

Following our review of timber; Chris Corr, Senior Vice President of Real Estate will discuss our land sales results; and Jack Kriesel, Senior Vice President, Performance Fibers will take us through the results of our cellulose fibers business. First let me welcome Ed Kiker to the role of CFO for Rayonier.

Ed has been with Rayonier for 12 years and I worked with Ed his entire tenure. He has held a series of senior financial roles and most recently was our Vice President of Investor Relations. Ed replaces Hans Vanden Noort. Hans decided to retire from Rayonier and we thank Hans’s role as time with the company and we wish him well on retirement.

Again, welcome Ed. This morning, we reported first quarter earnings of $43 million or $0.34 per share. Forest Resources had an excellent quarter with the highest operating income since second quarter 2006 and 170% above a year ago. We are encouraged by improving demand and prices for timber in the U.S.

South where we see rise in saw log demand as well as tight supply due to wet weather. We are pleased with the continued strength of the domestic and export markets for our Washington State and New Zealand timberlands. We are fortunate to have significant assets that can leverage a continued debt deficit of soft wood logs in the Asia Pacific basin.

The modest real estate results this quarter demonstrate a lumpy nature of our real estate business and the variability we can see quarter-to-quarter. We did not plan to offer any nonstrategic properties for sale in the first quarter and sales were additionally impacted by both the timing of closings and severe weather across the U.S.

that kept buyers away. However, as Chris will discuss, we are certainly seeing above average activity on most all of our property now in the U.S. Southeast and we still expect full year results to be somewhat comparable to 2013. Additionally, we are making great progress on strategic initiatives regarding our development property.

Performance Fibers results were soft driven by one our plan to extended maintenance shut down which we move forward from 2015 to some onetime Jesup mill operational issues which impacted the timing of customer shipment and three higher cost which were mainly weather related.

In the quarter, we continue to generate solid operating cash flows and cash available for distribution which were greater than prior year period and above our $0.49 per share dividend.

In addition, we made significant progress on key strategic initiatives including successfully qualifying production from our cellulose specialties expansion with major customers and progressing towards the separation of the performance Fibers business which I will comment on in my summary.

Now, let me turn it back over to Ed for reviewing the financials..

Thanks, Paul. Let us start on page three with our financial highlights. Overall, as Paul noted, we had a mixed first quarter which each of the business unit leaders will cover in more detail. Sales totaled $387 million while operating income totaled $65 million and net income $43 million.

There was one special item in this quarter, $3 million, after tax and transition cost related to the separation of our performance Fibers business. The fourth quarter included one special item, a $2 million approval for discontinued operations.

These items along with results and gain on sale of our wood products business in the prior year quarter had been excluded to arrive with pro-forma amounts used for the comparisons throughout this call. On the bottom of page 3, we provided an outline of capital resources and liquidity in comparison to first quarter of 2013.

We closed the quarter with $156 million of cash, our debt balance declined to $1.5 billion. Our usual variance analyses are provided on pages 4 and 5 of the financial presentation material and cash available for distribution is shown on page 6. We are now going to move right into markets operations on page 8.

So let me turn the teleconference over to Lynn Wilson to cover Forest Resources..

Thank you, Ed. Good morning. I’ll start with page 8 and the Northern region which comprises our Washington State operation. Delivered log prices remained strong throughout the quarter continuing to run at peak levels and were 14% higher than last year’s first quarter, driven by strong domestic and export demand especially to China.

This quarter, 27% of our delivered saw logs were sold into the export market. We expect second quarter prices to be slightly higher than the first quarter of 2014.

Although, we are beginning to see rise in log inventories in China port, which should exert some downward pressure on prices in the early third quarter before rebounding again for the balance of the year.

For the full year, we believe overall demand will remain strong in the Northern region driven by improved domestic log markets and sustained demand from Asia. Based on current market conditions, we expect delivered log prices to increase at least 5% to 10% in 2014. We also anticipate that 2014 volumes will be slightly higher than 2013.

In the Atlantic and Gulf regions on Page 9, average client stumpage prices increased substantially from the fourth quarter, due to increased pulpwood and saw log demand coupled with restricted supply as a result of wet weather across the south.

Prices were above the same period last year for both saw logs and pulpwood, as demand increased for all products. Pine saw timber stumpage price increased 11% from the prior year quarter as additional wood products capacity in our key markets is driving increased demand.

We anticipate that 2014 pine harvest volume will be slightly higher than 2013 based on current stumpage sales results we anticipate south-wide pine prices will be 10% to 15% above 2013, reflecting improving saw log demand and continued strong pulpwood demand.

Now on page 10, let’s focus on our joint venture in New Zealand in which we owned 65% interest. Export prices continue to increase during the quarter even though the chart shows $1 per ton decline, this is due customer mix whereby a higher percentage of logs were also delivered to the New Zealand port versus our Asian port.

Domestic pricing although lagging export pricing also increased from the fourth quarter and prior year quarter by 5% and 10% respectively. For the full year, we believe strong export demand will continue to drive higher pricing although second quarter pricing may be down somewhat due to the higher inventory levels at the China port.

Overall Forest Resources operating income as expected to be 30% to 35% above 2013 due to strong demand across all markets. Now, I will provide a brief update on timberland acquisitions. So far, this year, we have evaluated in excess of 250,000 acres in both acquired or have under-contract six packages totaling 31,00 acres or $46 million.

We anticipate purchasing only a limited number of the properties we evaluate in 2014 as we follow our disciplined acquisition process. Now, let me turn it over to Chris Corr to cover Real Estate..

Thank you Lynn and good morning everyone.

First quarter earnings were modest for our Real Estate business and this was no surprise to us as the early months of the year are typically a slower time for real estate traffic compared to the better weather season from spring to summer and second we did not offer any non-strategic timberlands to the market.

So we plan for a small quarter and had one and it wasn’t a surprise with the exception may be of the winter weather which was more relentless than anyone expected.

But overall, we are upbeat about traffic and interest now that the sun has come back out and while real estate results can vary substantially from quarter to quarter, we still expect results for the full year to be somewhat comparable to 2013.

Page 11 details rural and development sales volume, while we sold fewer rural HBU acres this quarter than we did last quarter, sales were higher than in the same quarter of 2013, this was largely due to the stronger markets in Texas. Moving ahead as shown on Page 12, rural HBU pricing was favorable to both the prior year period and prior quarter.

The increased price reflected the disposition of a former tree nursery site in Georgia.

I mentioned earlier that we did not offer any non-strategic timberland to the market in the first quarter so as seen on page 13, non-strategic timberland sales volumes were significantly lower than the prior quarter and the prior year quarters, we are however working on the larger non-strategic timberland package in the second quarter with closing expected in the second or third quarter.

Now let me provide a brief update on progress in our development segment. Earlier this month, we executed a contract with a regional developer to sale 13,029 acres in St. John’s County Florida, south of Jacksonville.

The sale was planned in two closings with the first expected in late 2015 and the second in 2017 and is subject to the purchaser obtaining land use entitlements.

This planned sale was adjacent to a 600 acre track that we entered into contract last year to sale to a national home builder which we previously announced to you, the 600 acre sale will take place in four closings with the first expected to be fourth quarter of this year contingent on the purchaser security entitlements.

Note, I can now disclose that the purchaser of the 600 acre parcel is Toll Brothers; one of the nation's leading home builders. Toll Brothers is active in the Northeast part of the market and is currently advancing this project to the entitlements process.

We consider our relationship with Toll Brothers to be a key strategic alliance that has a potential to grow in the future. So with today’s sale announcement, we now have approximately 2,000 acres in St.

John’s County under contract with developers at development market pricing with multiple closings expected contingent on entitlements over the next four years.

Also, in our development segment, we are excited that last week we entered into an agreement with Nassau County, Florida District Schools to provide land for the construction of a new K5 elementary school in the heart of our property in the East Nassau sector of the county which is North of Jacksonville.

The Nassau District School Board adopted an agreement that provides for the planning, design and construction of an elementary school and road and utilities to service it. The school district investments in our East Nassau planning area is estimated to be approximately $20 million and the school is expected to open in the fall of 2017.

This is an important milestone as we know from experience and market research that a school can be a very powerful driver of demand for residential real estate. Over the past few months, we have been focusing on master planning, the wider area to optimize the location of the school and the program adjacent properties for complementary uses.

We have been coordinating with higher quality community developers and home builder to develop a strategy and are encouraged by the interest we are receiving. So in summary, in the first quarter, we continue to advance our real estate strategy with the execution of a contract with the develop in St.

John’s County Florida and by reaching agreement with Nassau District School to construct a new K5 elementary school on a land in Nassau County, Florida.

For the balance of the year, we anticipate an improving run rate of sales based upon transactions in the pipeline and therefore as we have noted still expect 2014 results to be somewhat comparable to 2013. Now, let me turn it over to Jack Kriesel to cover performance Fibers..

Thanks Chris and good morning. During the first quarter, we made significant progress against our plan to qualify filter tow customers on the new Cellulose Specialties line. To date, we have about 75% of our volume qualify. We also successfully completed the annual maintenance shutdown at our Fernandina mill.

However, the quarter’s earnings were negatively impacted primarily by the timing of shipments and higher costs. On Page 14, you see net selling prices for our two Performance Fibers product lines.

Cellulose Specialties prices were down $51 at time or 3% compared to the same quarter prior year, a $117 at time or 6% from the fourth quarter of 2013 as expected.

Moving onto Page 15 and looking at volumes, our first quarter cellulose specialty sales volume was approximately 19,000 tons below the first quarter of 2013 reflecting the timing of customer shipments as a result of our planned extended annual outage at the Jesup mill for boiler maintenance and lower production due to one-off equipment issues.

Recall that we moved the boiler maintenance up from 2015 to better manage production and market dynamics. The work involved the replacement of boiler tubes that are original to the 1981 boiler.

The combined impact on production from the extended outage and the equipment issues have led to tight delivery schedules in the near term that are requiring careful management of shipments. Overall, Cellulose Specialties markets remain healthy with an average annual demand rate of 3% or approximately 55,00 tons per year.

Demand for acetate remains solid while demand for ethers is growing 4% to 6% annually. We expect demand for high strength viscose and Specialty Fibers to improve as the European automotive markets are slowly climbing back from the recent bottom. As a result, we continue to believe the cellulose specialties long term demand drivers remain attractive.

With the recent capacity additions, primarily from our own new capacity, the cellulose specialty markets are currently in transition. We believe that our 2013 base volume will increase modestly in 2014.

We continue to feather in new volume to reach the low end of our previously announced 2014 volume guidance but we will do so only as the market will accept it without disrupting pricing. Over the long term, we expect to obtain our share of the market’s growth.

Cost for the quarter increased as wet weather continue to effect wood prices and cold weather impacted for price and availability of natural gas. In addition, cost increased as a result of the production issues and the shift to higher cost cellulose specialties and commodity viscose.

Consequently, provided we reach the low-end of our volume guidance range, we expect operating income and EBITDA to be approximately 25% and 15% below the prior year respectively. Now, let me turn it over to Ed..

Okay. Thanks, Jack. The financial summary on page 16 provides updated 2014 guidance for key financial metrics for our business unit. As we still expect the separation would be complete by a mid-year goal, we would not provide a consolidated Rayonier guidance.

The business unit guidance shown the summary table excludes estimated corporate expenses for each company. We expect that normalized annual corporate expenses after the separation, will approximately $20 million for Rayonier and $25 million for Rayonier Advance Materials. I will now turn it over to Paul for final comments..

Thanks, Ed. So as you have heard, we are excited about the strength for the First Resources business with the depth in class timberland portfolio a longer term prospects for significant improvement in timber prices and mix that housing continues to recover.

And real estate we’re confident that a strategic direction premium well situated HBU properties and improving demand will generate long term shareholder value.

And finally, despite a weak first quarter, we remain excited of the long-term growth opportunities for the Performance Fibers business with its recently increased high value cellulose specialty capacity and market leading capabilities.

We are confident that this planned separation will position the new company now named Rayonier Advanced Materials to grow and to expand into the specialty chemical markets that are a good fit with its capabilities.

Yesterday we announced the separation of Rayonier Advanced Materials is on track and commented on the progress we've made on milestones towards our midyear goal. I'm very pleased to say that we're on the final stages of our Rayonier COO search process and expect to announce the identified candidate in a couple of weeks.

We're also making excellent progress on the capital structures for each company and are pleased that current debt market are so favorable. As we get closure to the separation, we will announce with the both the final capital structures which we expect to be generally consistent with our previous announcement and the dividends to each Company.

We anticipate this earnings teleconference will be in the last once for the combined Rayonier before we begin to this exciting new chapter in Rayonier's 88 year history. With spinoff of the performance Fiber’s business and the creation of Rayonier Advanced Materials.

We anticipate the second quarter teleconference is in July will be conducted separately by the management teams of each Company. I'm trying to verbally accomplish the Rayonier over its many years and I'm excited of the long term prospects that each Company has to create shareholder value.

As we've continued in our transaction toward separation, we are even more convinced that this is the right mood at the right time for the Company and its shareholders. Now with that I would like to close the formal part of the presentation and turn the call back over to the operation for questions..

(Operator Instructions). First question comes from Mike Roxland, Bank of America Merrill Lynch. Your line is open..

Thanks very much and congrats on the progress you are making with this transition.

Paul or Jack, can you talk about the progression or performance Fibers pricing, I know that your guidance, last quarter it indicates the prices would be down 7% to 8% this year, you are only down around 2.5% to 3% in Q1 which implies more significant declines for the remaining quarters.

Why is that the case and is that just the matter of the ways your contracts are structured with the customers?.

Mike this is Jack, that's really just timing related, we still expect the percentage as we communicated before 7% to 8% before the full year..

Right, to the back half or the final two quarters of the quarter, showed more significant decline than what we saw in Q1?.

So Mike, this is Paul, again to Jack's comment. It’s really just on the timing of shipments.

In the first quarter, we always have a slower decline because we still have remaining shipments from the year prior coming in and so that artificially lift that but as it balances out that the prices are set for the year and you'll see that consistently 7% to 8% that we have previously communicated..

Got it, I appreciate it.

I may have missed it but can you elaborate about the equipment issues you experienced at Jessup and have those been rectify at this point?.

Yeah, we had a series of issues at Jessup, they all really one off type things, some of them are related to the power boiler, a particular line sales and we've some agitator sale and whenever you have something like that happen on the power boiler, it requires, you take to power boiler and then you lose volume.

We also had some one of issues around our B machine as well as our new C machine as where learning on the learning for the particularly on the C machine. And one thing we did during our mid-year shutdown last year on our B line was to put in a specific piece of equipment on the B drying machine that cause some problem.

So these have all been resolved and we look forward to coming out of our shutdown strong..

Got it and just the last question and I'll turn it over.

Obviously on Real Estate, Real Estate was impacted was impacted by the inclement weather, now Chris what gives you confidence that bounce back is likely, maybe you can give us some sense what you are seeing just on 2Q?.

Well sure, Mike. Yes, traffic is back and the pipeline is filling so I just, with the level of that activity we are confident we are on track..

Got it and good luck in the quarter..

Thanks Mike..

Next question Chip Dillon, Vertical Research Partners. Your line is open..

Yes and good morning and best of luck as you guys split up.

I guess one question I just had both Company still be a headquartered in Jacksonville and is it going to be a physical separation of the headquarters?.

Yes, Chip, to achieve a tax free spend, we have that physical separation. So the answer is yes and the answer is yes, will both be located here in Jacksonville but in different buildings..

Got you, okay. And the second question is you mentioned corporate expense for the companies together and would be about 45 million annualized which was a little less in the last couple of years probably I would guess because you had some a good stock performance and that kind of came in to the mix.

So, is it fair to say that sort of the incentive compensation component that could come into the corporate lines would not be part of that or do you make some assumption for that?.

Actually, Chip this is Ed. Our corporate expense over the last several years has been running kind of in the mid-30 so this is does represent low to mid-30, so this does represent an increment over recent year run rate..

It must be the way I do my model. I apologize. I probably include some other things.

So on a comparable basis, it's about $10 million more?.

Right, it depends on which year but that's directionally correct..

Okay. And then one quick question on the real estate, I think, if I heard you correctly, some of the entitlement work you've done in, I believe mostly Florida you said there could be upwards of 2,000 acres over the next four years that could flow through the income statement at sort of development values.

Is something in the ballpark of like $20,000 an acre a good place to be or would it, on an average, would it be higher than that, lower than that?.

Yes, Chip its Chris. We think the range for that Real Estate and St. John’s County Florida is in the $15,000 to $20,000 gross range, so you are right..

Okay. I got you.

And is that sort of I know it'll be lumpy, but should we expect there to be much of that more in the back end of this period? Could it be in the front end or kind of evenly spread?.

The per sale the first closing that we expect this year in the fourth quarter and you get this will be spread throughout the balance for those three years..

Okay. And then just last one on Performance Fibers, I was hunting for my schedule here and I must I just haven't located before you caught on me but could you remind us what sort of the range of the higher end dissolving pulp sales are aimed to be this year and do you think I think, ultimately, you were planning to be sold out by 2018.

Are you concerned that could slip a little bit, given that you're now looking at the lower end of whatever that range is for this year?.

Yes, Chip this is Jack. The range we have was --.

30,000 to 50,000 tons, up..

Up from our prior year and I think we have communicated last time that we were looking at a 2017, 2018 timeframe and I think we are so firm with that overall timeframe..

Got you. Okay. Thank you..

Next question Paul Quinn, RBC Capital Markets. Your line is open..

Yeah, thanks very much and Good morning.

Just question on, I guess stick with performance obliviously just on the commodity viscose and other, just seeing the pricing drop while benchmark fluff prices were up sort of 2% in commodity DP was down only 1% what drove that drop that 6.5% quarter-over-quarter drop is that a mix change in and if so what is that mix?.

In our pricing, when you look at to drop off viscose. It also includes upgrade in that number. So it’s a little bit skewed. I think generally speaking of this goes pricing in the market, it has dropped around $25 or so quarter to quarter, or around 850 to 825 ranges currently or as the prior quarter it was a little bit higher..

Okay.

And the volumes expected for 2014 on that side?.

We're looking at in the rage of about a 140,000 to 150,000 total times of commodity product. Now that's going to be flexed between viscose and fluff as we look at the margins for each where it will producing both of those grades..

Okay. And just switching over to the resource section, and just trying to understand the China comment that you made, Lynn. You expressed high inventories in China, which is consistent with your information. You expect prices to drop in Q2, but then rebound in Q3.

Is that the way I've got it?.

Correct we are seeing in our New Zealand operations, pricing drop this quarter but we still have contract in place so we don’t expect to see the impact until Q3 but we do see that the market price have started to decline and then we expect by the time we get to the end of third quarter that pricing will rebound by the end of that quarter..

Okay. That's helpful. And then just in the Atlantic and Gulf side, you've given us guidance on a 10% to 15% increase in pricing.

Just wondering where that's coming from or what gives you the confidence level of that, given that lumber prices are falling in Q2 here?.

Number one, we have increased capacity come online in our key markets, the markets are very local Paul so within that 75 miles radius. So if you think about our Atlantic region that coastal corridor between Savannah and Daytona.

So the markets are very strong with many mills running very strong both on the (inaudible) and on the shipping side as well as in the Gulf State, East Taxes and the Louisiana which has several, number one either restart or increase their capacity so we've had market really come back in certain key facilities but the other pieces driving that is that wet weather so that really brings all of our pricing up particularly on the low end of the chip and saw, so rises up all those prices..

Okay. .

And Paul just to remind you that (inaudible) that we operate a pretty flexible model between stumpage and delivery and as this wet weather is out there right, Rayonier team has done great job of securing pricing beyond this period for the year so I give the team that confidence on where pricings going for the balance of the year..

Great. Thanks for the additional color..

Next question Steve Chercover - D. A. Davidson. Your line is open..

Thank you and good morning every one. First of all, on Performance Fibers, Jack said that Fernandina had its annual maintenance and Jesup, also, had that advanced maintenance.

So, are we going to see you running relatively full for the remainder of the year?.

Yeah, Fernandina average was around 16 day average in the late February early March timeframe and they actually started a little bit a head schedule and (inaudible) have been running very strong, so we see them operating continuing to review as we do with Jesup and this shutdown the Jesup has been (inaudible) which is typical because we have three lines there tow lines are operating as we speak and the third line will be up and running in early to mid May timeframe..

Okay. So there's still some residual maintenance in the current quarter.

Are you able to quantify the impact of the weather on specialty cellulose?.

The biggest impact is in the area of Fiber and just roughly speaking you can look at it from year-over-year quarter to quarter the hardware process are dramatically in the 25% to 30% range.

So that's the biggest impact obviously it impacted natural gas supply and both in price and availability as well as for its real traffic North East (inaudible) a lot of delays associated with not only all private but suppliers related to products coming into are now..

So absent, if it would have been just a normal, wet winter, do think your results might've been $5 million higher? At a good ballpark?.

Yes, Steve this Paul. Just quick look at obviously and (inaudible). Yeah, I think at least within that range if not quite a bit above so I think five the minimum and maybe even (inaudible).

Particularly when you having energy into that..

Okay, that's helpful. And then switching gears back to real estate, it sounds like one of the competing REITs has now got some mega sites in both Florida and Georgia.

Do you know how close they are to your sites? Do have kind of a first mover advantage or does that change the outlook at all for your sites in Jacksonville and Savannah?.

Yes, Steve its Chris I know (inaudible) I think what projects you are speaking about and don’t consider them primarily competition to the sites we have (inaudible) industrial site, the mega site and that's account Florida kind of completely different proposition and then Bryan County Georgia the Belfast Commerce Center were Caesarstone or first user is under construction on a 265,000 square foot plan but this schedule to open next year is a different strategic location as well.

So I don't see those as big factors..

That's great.

Any updates in terms of commitments on those sites? We appreciate what you told us on the residential front?.

Yes.

We could know real update other than good traffic, we have good interest in both places the State of Florida's economic development organization enterprise Florida is consistently market and then (inaudible) prospects at (inaudible) diamond and the same is true for the State of Georgia in the Bryan County economic development organization at Belfast.

That sides are constructions own right now, a lot of infrastructure in the ground, the water and (inaudible) utility is the growth that are going under (inaudible) serve and additional 500 acres and additional of the 40 acre Belfast Caesarstone sites.

So it's getting setup nicely we had good prospects and visits there as we also have a marketing agreement with an international broker to raise exposure there too. So just a lot of energy in marketing voices a lot of energy and construction of Belfast..

Great. Best wishes to Hans, if he's on the line, and good luck with both enterprises going forward. Thank you. .

Thank you..

Next question Mark Weintraub, Buckingham Research Group. Your line is open..

Thank you.

On some other development property sales, can you share with us the tax treatment on those sales? What would they likely be?.

Mark, this is Hans. The development properties will be in (inaudible) so when we transfer those from a REITs to a (inaudible) so we can undertake real estate development retransfer those that are (inaudible) value so do have a higher tax basis higher tax basis than our historical book basis in most cases almost all cases.

So there would be some tax although we have some other offset. So we would have to have those substantial level of sales for there to be any significant tax from sale of HBU properties. So if we had number of acre, some number of acre sold at very high development prices, we potentially could have some level of tax in the normal statutory rates..

Okay. Great.

When you make that transfer, that initial transfer, at market price, that's because it's beyond the 10 years, so there's no tax impact at that point?.

The 10 year horizon related to the building gain stakes which is now gone we are out of that build and gain period but we do transfer copies to a taxable REIT subsidiary that becomes the new tax bases and they are subject to income tax and may be gains over that tax basis..

Okay.

When you're thinking about the distribution or the dividend from the business, would you be including the cash flows being generated from these development-type properties in the thought process or do you tend to base the dividend off of the income coming from harvesting activities?.

We certainly look first and foremost off our everyday income off of our harvesting activity on first resources, many factor in.

Things that we can know, we know and they can count on the real estate side of things and again a lot of that business is actually fairly predictable where year to year we have got a pretty good costing flow of sales coming from real and conservations and we look at that first and foremost and then you have, say okay what do you look at on the balance, in fact level of dividend but we were tend not be and really want to go well that there were depended on anything that we couldn’t readily predict into our dividend model..

Okay. Helpful.

Lastly, on the Performance Fibers business, can you share with us maybe how much volume was just delayed on the timing basis? The observation is that, actually, in each of the last three quarters, this quarter you were down 14% year-over-year in the cellulose specialties and if you take the last three quarters, you were actually down 14%.

What exactly is going on there? Was this quarter really just a function of delayed shipments? Is it the overall market has been softer by almost that magnitude? Have there been share shifts?.

Yes, the delay is really kind of multiple fold but if you look at the conversion from AM to CS that you are going to have a change over in that overall volume level..

So Mark, keep in mind again we modify that C-line that Jack just talked about in that conversion and by doing that, we purposely took down the volume that you can produce from 260,000 to 270,000 to 490 so part of the volume decrease that you are referring to, it certainly started last year when we made the final conversion on over and took basically that 80,000 tons of capacity out of the business.

So that is by design and when the balance that Jack referred to this year, is kind of a delay on shipments because of some of our extended shut down and operational struggles..

Okay. Thank you..

Thank you (Operator Instructions). Next question comes from Collin Mings, Raymond James & Associates..

Good morning, first up, again congrats on your new position, Ed and if you're listening, Hans, our best wishes to you. Just quickly Lynn, just you talked a lot about timberland acquisitions.

Thank you for that overview but can you talk a little bit more about just who you're seeing more of the deal flow coming from, can you put a little bit more parameters around what you have under contract and just a little bit more detail on that acquisition front..

Certainly, Collin. Good morning.

One of the things that we are seeing is a series of packages coming out from the TMOs, so those are throughout each of the region so those are multiple packages from multiple TMOs that's one side on the bid process and then the other aspect that we are seeing from internally from our team is the significant outreach and a ramp up of our effort.

We are really focused on small private land owners that are adjacent or within our target markets and so some of the properties that we closed on are in that 5,000 acre to 10,000 acre range in both Florida and Georgia with one small property in Washington state that are within our current footprint where we were aware of a private land owner that had a quality property for sale.

So once that we closed on so far has been in Baker County, Florida and a small property in Washington state and then a small property in Georgia, the other ones that we have under contract and are working towards closing are in East Texas and those from small private land owners..

Okay. Great, Lynn. Thanks for that level of detail.

Just, making about transaction pricing and recognizing all the caveat of like no two pieces of timberland are the same but what do think as far what you're seeing as far as in the pricing environment when you would you say that kind of a comparable piece of timberland has gone up in value, call it in the US south, this year relative to last year or is there any way that you guys would think about that?.

Its gone up slightly, Collin. They are over year and I think that's consistent what we are seeing in the wood market with the saw log pricing coming up as well in people’s viewpoint but its only slight up..

Okay. That's helpful and then just one last one for you Lynn, before kind of switching gears, I know that we've heard a lot from the other timber REITs just about and I think you mentioned it little bit in your prepared remarks about the Canadian investment in the U.S. South.

Can you update us on how, going forward how you think about partnering with some of those companies, I think we've heard from some of those players that they would be looking, as they make more investments in the U.S. South to look at trying to establish more supply agreements, things like that.

Can you just update us on how you guys are thinking about that and those potential relationships?.

Certainly, we have a unique approach within our own organization where we really try to work closely with potential customers so that they understand where our footprint is, what our current available volume is, what our outlook is and provide them technical information and work with some behind the scenes very quietly but because of our general mix of both stumpage and delivered contracts, we generally do not enter into those longer agreement because we see there are market capacity in our strategic key focus to capture price is in that stumpage model balanced with some delivered volume.

For example, this year, as I referenced earlier and Paul commented on that we are already over 70% sold in the majority of our markets because prices were so high in the first quarter which will carry us through right into the end of third quarter but we do look at our strategic customers and if a commitment is required for a new investment, certainly we work with them one-on-one but also very confidentially..

Okay. I appreciate that. Switching gears, Paul, just any thoughts from you or as kind of you're having the conversations with the Board, on just ways to help support the share price of Rayonier Advanced Materials, I think we all acknowledge that there's likely going to be a shift in the shareholder base following the spinoff.

Is there any thought about allocating some capital, recognizing the first priority's to pay down debt, but allocating maybe some capital through share repurchases or things like that, to help put some support on that Rayonier Advanced Materials?.

Yes, Collin, we'll get more of that discussion with our new Board going forward. Certainly, the best thing we do on that share price is to execute on our plan and that's where we are fully aligned and focused in on. We have got a lot of flexibility, we will talk more about our debt structure coming forward.

I think you guys will see that very favorably and again we will give lot of flexibility to have a host of, kind of capital allocation options as we see it. So I think you just kind of stay tuned on that one, Collin..

Okay, okay.

and then just one last one Chris and may be have missed this but just on the 1300 acres that you guys are working with, as far as the developer would that just be a complete outright sale or is there any potential to structure that as any sort of JV where you capture, I know one of you guys talked about in the past about capturing some revenue, also kind of developer as they progress to development, the pipeline there, can you just, is just an outright sale or is there some other moving pieces to that..

Hey Collin, it’s a sale. That is conditioned on the purchase or security and entitlements so it’s an entitled site. They’ll go through the entitlement process and then close in a couple of pieces once successful..

Okay, okay. Thank you guys and good luck in the quarter..

Thank, Collin..

Thank you. At this time I have no further questions. I would now like to turn the call back over to Mr. Ed Kiker. .

I’d like to thank everyone for joining. Please contact me with any follow up questions. Thanks again..

Okay. Thank you. That does conclude the call for today. You may disconnect your phone lines at this time..