Good day everyone and welcome to the Rayonier fourth quarter earnings release conference call. Today's call is being recorded by Rayonier and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes implied consent. Please hang up now if you do not consent to being recorded. At this time, for opening remarks and introduction, I would like to turn the call over to Senior Vice President, Mr. Hans Vanden Noort. Please go ahead sir.

Thank you and good afternoon. Welcome to Rayonier's investor teleconference covering fourth quarter and full year earnings. Our earnings statements and supplemental material for release this morning are available on our website at Rayonier.com. I would like to remind you that in each presentation, we include forward-looking statements made pursuant to the Safe Harbor provisions of the private securities litigation reform act of 1995 and other federal securities laws. Our earnings release as well as our form 10-k filed with the SEC with some of the factors, which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page 2 of our supplemental material. Please familiarize yourself with them. Also, this conference is being webcast and can be accessed through our home page. With that, let us start our teleconference with opening comments from Lee Thomas, Chairman, President and CEO. Lee.

Thanks Hans. First I will make a few overall comments. Hans will then take you through the financials after which Tim Brannon, Senior Vice President, Forest Resources, and Charlie Margiotta, Senior Vice President and head of our real estate business will review those two business segments. I will then take you through Performance Fibers, since Paul Boynton our Senior Vice President for Performance Fibers and Wood Products is traveling. As expected, each of our three core businesses contributed to a strong 2007 performance, despite the challenges from soft timber and residential real estate markets. In particular, results were driven by significant contribution from our performance fibers business, which capitalized on strong global markets to achieve record results. As I finished my first year as CEO at Rayonier, I feel good about our results in '07, the capability of our management team, and the position of our businesses going into '08. In timber, our strategy is to grow and upgrade our portfolio. We will continue to pursue Timberland acquisitions with a disciplined approach. As part of our strategy, we will initiate sales of non-strategic Timberlands, which Charlie will describe shortly. We have flexibility to adjust our timber sales mix and reaction to varying market conditions. Currently we see weakness in saw log markets, but demand for pulp wood remains high. Accordingly, we plan on selling Timber Tracts with a higher proportion of pulp wood, while preserving our high value sawtimber until markets improve. In real estate, we are staying the course with our strategy of entitling our strategic development properties to drive long-term shareholder value. In addition, we see continued interest in our rural properties from a wide variety of buyers. In Performance fibers, our strategy focuses on product differentiation and operational excellence. We expect even better results in 2008 due to favorable market conditions for both cellulose specialty and fluff pulp as well as our cost reduction efforts. Overall, we expect another good year in 2008. With that, let me turn it over to Hans for review of the financial results.

Okay, let us start on page 3 with the overall financial highlights. As Lee noted, we finished the year with a quarter that was essentially in line with our guidance. Sales totaled $290 million resulting in operating income of $43 million, and net income of $34 million, or $0.44 per share on a GAAP basis. There was one special item this quarter, which is a $0.01 per share charge for our final accounting of the writedown of timber damaged by the second quarter wild fires in Georgia and Florida that we previously reported on. On the bottom of Page 3, we provided an outline of cash and liquidity for the full year. The overall message here is strong cash flows, adjusted EBITDA of $419 million, was $49 million above the prior year, driven by strong real estate and Performance Fiber results. Cash available for distribution of $241 million was well above last year's $178 million. We will look at CAD a little bit later. Our debt and debt to capital ratio were slightly above last year due to the $300 million of fourth quarter 3.75% convertible debt notes issued from the TRS and $55 million of temporary debt at the REIT, which has since been repaid. We ended the quarter with approximately $181 million in cash. So, on a net debt basis, we finished at $569 million, $50 million below last year. We will turn now to page 4. Here we prepare the sequential quarterly variance analysis. Major drivers here are significant reduction in real estate operating income due to timing of transactions within the year. Moving down to Performance Fiber, you can see a $7 million negative variance in the cost to mix line, with a bulk of this due to operational issues that resulted from one plant downtime.…

Thanks Hans. For the west on page 8, as expected volumes were down sequentially as well as versus year ago levels reflecting the impact of a strong first half and somewhat softer demand in the second half of the year. Prices however improved compared to third quarter due to the mix of tracts harvested, but declined when compared against fourth quarter 2006. For the first quarter, volumes are expected to be up slightly on a sequential basis, but well below first quarter 2007 levels due primarily to the soft housing market. Prices are expected to be weaker sequentially as well as compared to first quarter 2007. Of course the northwest is primarily a saw timber market with the current softness in lumber stumpage prices on average for 2008 are expected to be lower by 15% to 20% compared to 2007. As a result, we plan to reduce our 2008 harvest volume by 10% to 15% from 2007 levels, but we'll continue to monitor selling prices and make further volume adjustments as is prudent. Moving onto the east on page 9, volumes were up sequentially as well as compared to fourth quarter 2006. Prices as expected were higher compared to third quarter as we completed our fire salvage operations in Georgia and Florida. Compared to fourth quarter 2006, prices were lower reflecting our shift in product mix, in response to the strong demand for lower valued pulpwood. We continue to experience strong pulpwood demand due to favorable global pulp markets and the lack of residual chips from saw mills. Great markets remain depressed due to lumber mill curtailments driven by the weak housing market. As a result, we have shifted our product focus towards pulpwood and our harvest volume to areas of greatest market strength. Our 2006 Timberland acquisitions performed well, and that mix of volume helped buoy our overall average pricing in 2007. Our larger operating area provides us with flexibility to shift into markets that are more favorable and reduces the need to sell wood into poor markets. For the first quarter 2008, volumes in the east are expected to be down sequentially and compared to first quarter of 2007. Prices are expected to be below first quarter 2007. However, they are expected to move higher from the fire salvage impacted prices in the fourth quarter. For the year, volumes are expected to be down 12% to 15% reflecting the additional 680,000 tons of fire salvage volume that was harvested in Georgia and Florida in 2007, and a generally softer saw timber market. Average prices for the year are expected to be about flat too slightly up and compared with our fire impacted prices for 2007. With that let me turn it over to Charlie Margiotta to review real estate business.

Thanks Tim. I will make a few overall comments on our real estate business, review charts 10 through 12, and then offer review on the 2008 real estate outlook. The strength of our results is driven by the quality and geographic diversity of our holdings and our ability to sell properties in a number of markets for a variety of end users. However, our real estate business is very much a tale of two markets. While weak housing has impacted and will continue to impact the sale of development acres, the world market remains very active. As we have discussed in the past, our strategy for highest value development property is to pursue and obtain entitlements and enter joint ventures rather than sell that land in bulk. Currently we sense that the climate for obtaining entitlements is favorable. Turning to chart 12, the fourth quarter development sales are relatively low and primarily to regional developers. However, price of nearly $17,000 per acre was strong. For the year, we sold approximately 4400 acres at an average price of $8600 per acre. Chart 11 describes the activity on our strategic development projects. For the fourth quarter, we received entitlements on a 3300-acre property South of Savannah, Georgia for 10,700 residential units and 6.9 million square feet of industrial and commercial. This property has I-95 in real frontage and we recently completed a 90-acre school site donation, which will be a catalyst for residential developments. Chart 12 is real sales. The fourth quarter was very light, driven entirely by the timing of transactions within the year. As you can see, per acre prices were very good. For the year, we sold 11,700 acres at an average price of $6300 per acre, which was positively impacted by the large third quarter industrial sale. However, even without that sale the average price for the year was a solid $3200 per acre. Regarding our 2008 outlook, our focus will be on pursuing entitlements for our strategic properties. Reflecting this strategy and the overall weak housing markets, we plan to sell significantly fewer acres… development acres in 2007. In our world program on the other hand, we are planning an increase in acres sold at prices comparable to 2007, excluding the impact of the significant third quarter industrial transactions. We continue to be optimistic regarding the sale of world properties. Finally, as we mentioned we have initiated a program to identify and sell non-strategic Timberland as part of our strategy to continually upgrade the quality of Rayonier's Timberland portfolio. In 2008, we expect to sell approximately $20 million to $30 million of non-strategic Timberland properties. We report these sales separately from real, since we expect more Timberland like prices. With that, let me turn it over to Lee who will review Performance Fibers.

Thanks Charlie. Performance Fibers had a very solid year as I said earlier, and we expect to see further strengthening of the business as we move into 2008. On page 13, you can see the strong pricing for cellulose specialties, which represented about 64% of our volume. For the first quarter, we should see the average price for these products move up 6% to 8% sequentially. For the year, we expect prices to be up in the range of about 8% to 10%. Looking at absorbent materials or fluff pulp shown in the lower part of the graph, the average price in the fourth quarter reflects continued improvement due to favorable market conditions. For the first quarter, we expect fluff prices to be up about 1% to 3% sequentially as the worldwide market remains tight. For the year, we expect an overall slight improvement over 2007. Moving onto page 14 and looking at volumes, you can see the sequential improvement, but a decline from the fourth quarter last year due to unplanned down time related to operational issues. These issues included recovery boiler problems at both of our mills as well as a major power supply disruption from our public utility at our Jesup Mill. The recovery boiler problem at our Jesup Mill continued into the first week of this month as well. We initiated corrective actions including additional capital expenditures and plan to fully resolve these issues during our plan maintenance shutdowns. For the first quarter, you should see the typical sequentially lower quarter. Compared to the first quarter of 2007, we expect cellulose specialties volumes to be 6% to 7% down due to an unusually high first quarter last year and the impact of our unplanned downtime. However, for the full year we expect cellulose specialties volume to be 3% to 5% above 2007 and absorbent materials volumes to be comparable. In summary, we expect to see even better results in 2008, and as I mentioned, we will increase our capital investment in this business and focus on the reliability and operational excellence. Now let me turn it back to Hans.

Thanks Lee. Let's turn to page 15 to review earnings trends. Based on current market conditions, we expect full year 2008 earnings to be slightly below 2007 pro forma EPS of $2.35 per share with stronger Performance Fibers earnings essentially offsetting lower timber and real estate results. We expect first quarter earnings to be comparable to prior year's first quarter pro forma earnings of $0.45 per share as improved Performance Fibers and real estate results are expected to offset lower timber volume in prices. I now would like to share a few key statistics to assist you in developing your model for Rayonier. First for 2008, we expect depreciation, depletion and amortization of $135 million, and the non-cash cost basis of land sold of $12 million were approximately $147 million in total, which would be a net $16 million decrease from 2007. DD&A is expected to decrease $19 million driven mainly by Performance Fibers and lower planned volumes in our Timber segment. The non-cash cost to land sold is expected to increase $3 million over 2007. Capital expenditures excluding acquisitions are expected to range between $105 million and $110 million, $8 million to $13 million above 2007, with this increased focus in Performance Fibers, on operational and reliability improvements and environmental projects. With respect to our investments in New Zealand for the year, we expect $2 million of equity income from the JV and cash flow in the $6 million to $8 million range. For interest expense, net of interest income, we expect that to range between $42 million and $44 million. Finally, we ended 2007 with an effective tax rate of 13.5% before discrete items. As we have seen throughout the year, the effective rate can vary significantly based on the mix of income between our REIT and TRS businesses and like-kind exchange benefits. With that said, we expect the 2008 effective tax rate to be up significantly to the 17% to 19% range reflecting the increased contribution of Performance Fibers. When we put all these elements together, we anticipate another strong cash flow year, although CAD will be below last year primarily due to higher capital expenditures and cash taxes. Overall, we expect CAD to be well above our forecasted 2008 dividend requirements. Now, let me turn back to Lee for some closing comments.

Let me conclude here by saying that we continued to benefit from the diversity and balance of our three core businesses. Despite a challenging economic environment, we're well positioned to generate favorable results. That combined with our strong balance sheet, tax-efficient REIT structure, will allow us to continue to focus on building shareholder value for the long-term. With that, I would like to close the formal part of the presentation and turn the teleconference back to the conference operator for questions from the audience. Question and Answer

Thank you. The question-and-answer session will be conducted electronically. [Operator Instructions]. We will take our first question from Claudia Hueston with JPMorgan.

Hi, thanks very much. I was just wondering if you could help a little bit about the volumes in the Southeast in the quarter. They were a little bit higher than expected. Just wonder what happened there, what really drove that increase?

Tim.

The volumes in the Southeast part of course was due to the fire-related damage that we have, a bit more volume that we picked up as a result of that, and also the push that we had, the good demand that we saw from pulp wood, additional finnings [ph] and pushing product into that market worked out quite well for us. So, that was basically the addition that you saw in the fourth quarter.

Okay. And then just in terms of the Performance Fibers business and the unplanned downtime there, I think you mentioned that Jesup boilers, you are still persisting, but are the other issues pretty much taken care of there, and is there anyway to sort of quantify the impact of that downtime?

Actually the issues at both mills have been resolved in terms of operational mills, they are both operating quite well. We will during the annual maintenance shut down soon do some additional work on the boilers at both mills. We had planned to do that anyway. As far as quantifying the effect, we did have an effect on both our cellulose specialties and our absorbent materials, and I think it was about 8,000 tons in each, 15,000 to 16,000 tons total.

Great. That's really helpful. Thanks a lot.

Thank you. We will take our next question from Chip Dillon with Citi.

Yes, good afternoon.

Hello Chip.

Hi there. First question is on the fire and drought situation… I know, and by the way if you have addressed this, I apologize. I came a little bit late, but I know there are still tough conditions down in Georgia, Florida in particular. And is this affecting your plan or your ability to get wood out of the forest this year?

You know, it is not and actually the rain in Northern Florida and Southern Georgia has been somewhat better than it has in Northern Georgia or Northern Alabama. We still clearly have a drought situation, but it has not affected our ability to get wood, and I would say on hard wood, it actually improves the situation for hard wood. Tim, you want to add anything to that?

No, I would agree with you, Lee that the moisture that we have gotten of late has actually been beneficial to us in terms of our planting season this year. So, that's been favorable as far as getting wood out of the forest is concerned, it has been relatively normal December, January. So, we are in good shape.

Okay. And then when you look at the… you mentioned you are going to sell about $20 million to $30 million of non-strategic timberlands this year. I am just curious is that why this would be a good time to do that. Are these lands that are just more strategic to other... are they closer to people with other paper mills or other timber owners or what is sort of driving this?

It is a part of an overall strategy of looking to upgrade the portfolio at timberland. So, we look at classifying our timberland and as we look to acquire timberland, we also look to sell what I would consider fourth quartile timberland. In other words, the land that we don't feel really meets the kind of return criteria that we want on an overall timberland. So, as we go through that process and it really is a continuing process that we have begun, I think you will see us on an annual basis not only acquire new timberland, which we feel upgrades the portfolio, but moves some timberland out that we feel aren’t really hitting our investment criteria... our return criteria.

And just so I understand, why would someone pay a price that would make it at a level that, you know, for a land that is not such a great quality land, is it because you are trying to balance the maturity and annual growth in... I mean you are trying to make consistent the growth and cut rate of your land or is there some other consideration?

I think different people have different criteria. It may be locations as it relates to their land and how this fits in with, it might be the age class on the property and how it fits with the buyer versus how it fits with us. There are a variety of reasons that we feel it may be more valuable for our buyer than it is for us to hold it.

And then as you look to buy on the other side to upgrade the portfolio, what's the market place like right now. I mean we've now been through a year or two or at least a year where the end market certainly at least for lumber has been very weak, and we are starting to even see some of the paper guys complain about the lack of lumber production, therefore the lack of chips. And yet it just doesn’t seem like we've seen that much impact on the actual price of timberland itself, is that... is that starting to change or maybe that could be a opportunity for you as a potential buyer?

I have not seen it change so far. We've looked at a lot of timberland and continue to look at a lot of timberland. I think we're disciplined in the way we look at it and the kind of returns we expect from that. Of course we have the opportunity to kind of exchange, get additional benefit often times when we're buying timberland, but I have not seen a lack of demand for timberland, and therefore I have not really seen a change in the kind of high prices that we have seen over the last couple of years.

Got you. And then lastly, just one last quick question. I know this is quickly evolving, Lee, but what are you seeing… are you seeing more and more interest and more and more potential, tangible interest from these new sources of demand in the biofuels areas. Are we actually seeing plants been built in places that could actually benefit you, has that started yet?

I think Chip we see a continuing interest in biofuels and we see announcements like a cellulosic ethanol plant in Georgia that was announced this past year. I think that's a technology that's still going to require a real technical breakthrough before we see much more of it. We've seen... as a matter of fact, I saw today a biofuel facility that is being announced over in the Panhandle of Florida, a small one. So I mean, we still see some of those things, but it is not at a point yet that I think is having any kind of real impact as far as demand for our product.

Okay, and I'm sorry, just I... just thought of one quickie. The Performance Fibers business, which is just… I'm sure is a delight and especially in these times on the wood side. Is there any concern, have you stress tested sort of how good could it get, where you would have any question about having to take more structural steps to maintain your weak status?

No. And I think a key issue there is our ability to look at two things, one is the net asset value in our weak subsidiary. So, in other words it is both... and that's where we have quite a bit of our debt, and it's also our ability to control the dividend from the subsidiary up to the wheat. In both cases, we don't feel we will see any problems as we look forward even though as you stated, our Performance Fiber's business is doing very well and we anticipate it will continue to do very well.

Got you. Thanks very much.

Thank you. We'll take our next question from Ross Gilardi with Merrill Lynch.

Good afternoon, thank you. Lee, I don't know the question on the performance Fibers business. I mean looking at your press release, it looks like you operated at full capacity despite the outage, the market is sold out and seems to have been sold out for a while now, prices are rising. Are you considering major capacity expansion at your existing facilities or abroad... and if not just curious why?

We're not considering capacity expansion Ross. We continue to work on incremental improvements by debottlenecking as well as mix improvements between our absorbent materials and cellulose specialties, and we'll do that in 2008. But when we look at the strategy for the company, we really feel like within our restructure and with the ability, we've got a good steady long-term gains from our real estate and timber business and we're better... we will provide better value for our shareholders by investing in timber and continuing to ensure good returns from that and maintaining the good strong performance fiber business with the capacity we've got.

Okay, and then if I could just ask Charlie a question. Charlie, I mean you've talked about continued strong demand for rural lands, and I know this is a lumpy business and the timing of transactions can impact, in the quarterly numbers, quite a bit. But you kind of have been very selective where you sell land. You sold only 500 acres of rural land during the quarter albeit at a very good price. Still, I mean… where if anywhere are you seeing softening demand in that market, and do you think it's a risk that we finally will see a slow down, if consumer spending does really ease into 2008, there is a lot of people obviously worried about?

Yes Ross, I mean there is always a risk and I would say the softest market is probably Georgia, where a lot of people bought Timberland and are trying to return some of it. But we continue to see surprisingly good interest in Florida, Alabama, Texas, got a small and growing program in Washington State. And so we have not seen a slowdown in demand and prices seem to be holding right around that. I think I indicated prices similar to '07 without that one major sale we had in the $3000 an acre range. So, we're pretty confident in spite of this sterile housing market that the real program will hold up really well in '08 and we're off to a pretty good start.

So, the low volume of acreage that you've sold is really, just purely, a timing issue.

It's entirely a timing issue.

Okay. All right, thanks a lot.

Thank you. We'll take our next question from Mark Weintraub with Buckingham Research.

Thank you. Lee, a couple of questions. First, on the 20 million to 30 million of non-strategic lands, are those going to be relatively low basis lands or they are going to be relatively high basis lands or could you give us a sense as to what type of profit contribution you are anticipating to get from that? I assume that is included in your earnings number when you gave us the '08, '07 thinking.

It is. Charlie, you want to continue?

Yes. We really don't have much high basis land. So I call it average basis. But saying that we expect “Timberland” like prices, not real prices. So, the margin or operating income contribution will be less than a typical land sale, but still meaningful.

Yes, that is correct. I mean, there is… as you said, there is not much difference in the basis.

We are not here to predict what those are going to sell for. We are optimistic about that program also. But again it'll be more Timberland like prices.

So, the 50% type of operating margins, a reasonable starting point for somebody from the outside to be using.

Yes, I'll expect slightly north of that. There will be some depletion associated with these as well. But yes, we'd hopefully be north of that.

Yes. Okay, great. And then separately, Charlie, you had indicated how… I believe you'd mentioned that it was actually a favorable entitlement environment when you were going over that page 12 in the presentation. I thought if you could expand a little bit on that and maybe more specifically where you stand on those three projects that you listed and what are... while I certainly understand you can’t know specifically when things are going to happen, what are time ranges for these projects?

Well, we have three major projects that we're working on and titling, one in Georgia and two in Florida. I will point out that particularly in Florida, it's a multi-year process. The comment about more favorable… frankly it is related to the housing market. It is a very weak housing market, there are not a lot of projects coming forward right now, and it is just that kind of climate, where I believe at least in some counties they are looking more favorably to growth projects. So, the climate... although I can't predict when we will have entitlements again in Florida, it's a multi-year process, we just feel a little better today than we did say a year ago about our ability to get our properties entitled.

I would say, just a little more specific on that... as you know Mark, we did receive the entitlements on the Georgia property this past year. So, we're now at a point of working through the development of that property and working to identify partners for that. We also are in the midst of working through a joint venture approach on our flagular property and continuing to pursue the entitlement process there, and we are making good progress on both fronts. And in '08, I would say on the Nasso [ph] property, which is the biggest and most complex of the three projects, we will be working through a joint venture approach... should have that completed this year as well as making additional progress. We've finished a good comprehensive planning process for that property, and I think we will make more progress on the entitlement process there, but I am anticipating that is another two to three years to get through the final entitlement process on the Nasso property.

Okay. That is just great. And just following up on a couple of things. In the case of Georgia, are you primarily now... the pace of things are going to be dictated by your sense of the market as opposed to red tape or entitlement issues?

Absolutely. The market and our ability to put together some sort of partnership arrangement, those two are the factors now; obviously no longer is it our ability to get entitlement since we have gotten them.

And then on the case of Nasso, is it fair that you would likely enter into a JV arrangement prior to gaining entitlement?

Yes, very likely we would like to enter the entitlement process there with our partner at our side.

Great. Okay, very helpful. Thank you.

Thank you. We will take our next question from Peter Ruschmeier with Lehman Brothers.

Thanks, good afternoon. Just a couple of... most of the questions were answered, but on the DD&A guidance, you gave $335 million plus $12 million of non-cash. I want to make sure this is apples and apples, so $147 million is consistent with $163 million, I believe you did in 2007, is that correct and...

That is correct Peter. Yes.

And remind us if you could, just the variance, the $16 million variance between '07 and '08?

Yes, that was about $90 million less DD&A and $3 million of additional non-cash cost to land.

Okay and I am sorry, the reason now for $19 million of DD&A, it is down.

Yes, it occurred in both our Timber and our Performance Fibers segments. Performance Fiber is strictly some older assets coming off fully depreciated and in timber, the EOP basis, essentially, it is a lower volume that we spoke about.

Got it. Okay. Question on the pulp business if I could. Can you refresh our memory on… without giving the specifics, just the nature of how you typically do the pricing. I believe you have a slug of your business that is contractual, and if I'm not mistaken, I think it's kind of year end isn't it when you have some of those annual talks, and so do you expect kind of a step change as we go through the year on pricing or should we expect it to be more gradual?

We do, Peter we do most of our business through long-term contracts, particularly on the cellulose specialty side. But we use contracts on both and we do generally or most of those contracts have an annual price negotiation. You can expect… as I indicated most of the price increases taking place in the first quarter on cellulose specialties, and you'll see it realized… I think I used an 8% to 10% increase for the year, slightly less than that in the first quarter, but most of it will be will take place by the end of the first quarter. And on the absorbent materials, it is more fluid than that largely based on how the market price of that fluff pulp fluctuates during the year.

Okay, that's helpful and just to confirm I mean, maybe a hypothetical question. If we were to get into a softer pulp market, is it fair to suggest that the cellulose… at least we basically know what we're dealing with for the next four quarters or is it possible that a different pulp environment could in fact impact the pricing of cellulose in 2Q, 3Q, 4Q.

No, I don't anticipate it would, I think we pretty well know what we are dealing with for the year.

Okay and maybe last question if I could on the pulp business as well. Is it reasonable to look at the 725,000 tons in '07, maybe add that to 16,000 tons for the outage and call it flat. So, is that a reasonable expectation going into ‘08 for 740,000 tons roughly give or take performance.

No, I am expecting a little better than that. '07 was lower actually, we had an extended outage at Fernandina in '07. So, your number would need to go up a little. As a matter of fact, I think I indicted about a 3% to 5% improvement in volume.

Okay, that's on the base of what you reported as opposed to pro forming that number, is that correct?

Yes.

Got it. Pretty helpful, thanks guys.

Thanks.

Thank you. We'll take our next question from Christopher Chun with Deutsche Bank.

Yes, thanks. Good morning guys or good afternoon I should say.

Hi Chris.

Hans, can you explain to us why there was an income tax benefit in the quarter?

Yes, basically as we went through the final quarter, we had a couple of items come through. We had some deferred tax adjustments coming from the reduction in our… what we call our built in games tax reserve. That just relates from our conversion to fleet. So, we had a true up there of about $2 million and we had some other miscellaneous kind of FIN 48 adjustments based on final settlement with the taxing authorities for closed audits. So, those were kind of the discrete items, about $4 million in a quarter. Now, the second part really came through, because the performance fibers results for the fourth quarter were lower than what we had expected at the end of nine months. We had little bit of a rate shift if you will, and that was the other part of the benefit that came through.

Okay and then on real estate, Charlie could you talk a little bit about the location where you had above the development sales and the real sales and talk about maybe the land attributes that were involved that allowed you to get a fairly good per acre tax position [ph]?

Sure, the development sale… actually there was sales, as I said regional developers both in Georgia and Florida, and that it was just a nature of the property sold, they are relatively small sale to small growth to regional developers. All I would like to say is that we got an excellent price, these small regional developers who want to continue to bill can pay an awfully good price. On the real sale, there wasn’t anything real special there. We had a sale in Alachua County for instance to a utility, a small sale to utility at a very high price, so it averaged up. That’s about all I can say.

Okay, but for example, the development sales wasn’t on water fronts of any type or…

No, it's just… you know when you think about what a developer can convert this into, that is obviously why we wanted more joint ventures in development. They will put two to three units per acre on some of these properties, and so on a lock price, these kinds of per acre prices make a whole lot of sense.

Okay and what County was that in?

One of the sales is in, the small sale in Bryan County and another sale was small sale in St. John’s County in Florida.

Okay and then turning to timber, Tim did you say that in the west, you were expecting prices to be down like 15% to 20% this year?

Yes that's right, year-over-year.

Right and then looking at the slide, the price trends over the last couple of years, it really seems like, despite the fact that wood product markets have been weak now for well over a year, prices have held up reasonably well for now, can you talk about why it is suddenly starting to collapse a little bit?

Well, we kind of have to look back to last year, our method of selling, stop [ph] selling the dominant share of our volume on the West on the stop. Markets were still pretty good, as we were looking during last winter, let’s say and so we were selling a fair amount of our volume. So, as that volume was cut over the year then, we benefited from the fact that people basically locked into prices earlier in the year. The other thing that helped us was that the export market had taken a bit of a resurgence in the latter part of 2006, early 2007, and that helped again to kind of bully prices up and give us a little bit more competition from the [inaudible] that we were putting on the market. What we are seeing now is that while export markets are okay, they are not as probably as good as they were back in the early part of '07, and certainly housing is far worse than it was at that point. So, as a result, as we are getting into our selling season now, we are not seeing that price support. So, as a result we are pulling back on our volume, and we are just not putting as much out there. We don’t intend to put as much out there as we had last year.

Okay and in performance, Lee, thanks for the detailed guidance on both price and volume expectation. I was just wondering if you had much visibility on the cost side and [inaudible].

Well, clearly we see the input cost going up on commodities, chemical cost, energy cost. So, we are anticipating and including in our expectations cost increases on those items.

Okay, do you have sort of an order of magnitude that you are expecting?

Probably in the 3% to 4% range.

Okay.

Year-over-year.

Okay, that is fair and then just in terms of looking at the 4Q results, I know that there is that unplanned outage, but just looking at the slide, does it seem like the mix was relatively weak in the sense that it was more [inaudible] fluff as opposed to specialties. Can you talk about what happened there?

It largely had to do with the particular downtime we would take in. As you know, Fernandina is all specialties, and so the Fernandina downtime, which was heavy in the fourth quarter was all specialties, and then the power outage at Jesup affected both specialties and fluff. So, between the two, you had more impact really on the specialty side?

Okay, great thanks for your help guys.

[Operator Instructions] We will take our next question from Steve Chercover from DA Davidson. Steve Chercover – DA Davidson: Thanks. I guess I feel at lot quicker on that star one. My questions I guess are kind of perhaps knit picky, but on the sales line starting with other operating income, that $2.7 million, is that from New Zealand?

Yes, that comes from New Zealand in there. Steve Chercover – DA Davidson: And should we look at that kind of as a run rate, we will see something in that vicinity every quarter more or less.

Yes I think you will see roughly that rate. That has also got some of our income that we generally like planning leases, things like that Steve Chercover – DA Davidson: Got you. And skipping down a few more lines, the interest in other income also was up substantially… sequentially. Was that just a function of the financing and therefore you have some cash balance.

That is exactly… we had the $300 million offering and we couldn't pay down the $112.5 million until December 31. Steve Chercover – DA Davidson: Got it, so it is going to be back down.

When you let those two out, you will be in that $42 million to $43 million range I mentioned earlier. Steve Chercover – DA Davidson: Okay, and to the extent that you know in advance that you will have like a positive tax rate, can you give us a heads up on that? Is that something that you know?

Actually, we always have to just look to what we expect the rate to be for the year and so through nine months, that was what had been recorded, and as I mentioned, we got some real pretty specific fourth quarter discrete items that came through. And then because of the problems we have in performance fibers, the taxable income went down. Of course that changed the mix. So, you had quite a change there that came through in the fourth quarter. We try to predict as well as we can, but there are a lot of moving pieces. Steve Chercover – DA Davidson: And switching gears, a follow-up to one of the earlier questions. On this... the performance fibers, does there come a point where your internal capacity creep is just not enough to satisfy your customers, and you've either got to bite the bullet, do something big, or seed some of the market. Are we close to that?

I think what we do is, we really work with our customers to ensure that we can match their growth. So, it means that our overall portfolio of customers doesn't expand that much. But the volume with individual customers does as their volume grows. As you know, we've had long-term relationships with customers, some as long as over 75 years. So, I think that it is a… not a sales strategy, of trying to increase a large volume of customers, but in fact to work with the customers that we've, and we've been able to do quite well with that. Steve Chercover – DA Davidson: Great. Thanks very much.

And we'll take a follow up from Mark Weintraub with Buckingham Research.

Real quick, do you make no assumptions on LKEs, when you are giving those tax rate assumptions?

Well, we assume certain levels of LKEs, but that's again one of the items that can be quite fluid during the year. So, I mean you see this year we had about $4 million of benefit. It's fully going to depend on how successful we are as we look at various acquisition opportunities.

Sure, presumably you're saying you're looking at acquisitions. So, if you end up doing more acquisitions and given that you've got the non-strategic lintels and other things going on, then that would have an impact on what you've laid out?

Yes, we have assumed a certain level of LKEs, and so if we do more than that, yes we should have a benefit. If we don't do that, we may have a slight detriment.

Fair enough, okay. Thanks

Thank you.

And we'll take another follow up from Ross Gilardi with Merrill Lynch.

Thanks a lot. Lee, do you have a sense to where viscose rayon pricing is these days?

Yes, it's very strong. As a matter of fact, the overall viscose market is very strong. We've have got continued steady increase in demand over the last few years, which has at least as we know forward at the demand drivers, it looks like it will continue to be very strong. As you notice some additional capacity coming on which we think will go wide at that commodity viscose market, because it's very strong.

Is it actually at a premium to the acetate? Is price actually premium with the acetate market right now?

I would say, in some places, particularly on a spot basis, it probably is.

And given that, would you actually have the ability to raise prices? I mean… because my understanding is that acetate prices are usually at premium by at least couple of hundred dollars at a time over viscose. Was there anything preventing you from raising prices even more than you did this year?

Well you know, we have long-term contracts with our customers where we work through an overall volume commitment with our customers and an overall pricing approach. And we feel that indeed is the preferable approach both for us and our customers in terms of real value for both as opposed to trying to go up and down dramatically as the market changes.

Okay. Thank you.

And we'll take our next question from Richard Paoli with ABP Investments.

Hi guys. Just a couple of quick ones. Could you give me a quick update on the balance sheet? What was the fixed charge coverage ratio for the quarter and then with respect to any type of major debt maturities in 2008, and I have one other follow-up.

Yes we have about $23 million coming due in October, and that's really it for debt maturity. They don’t have a fixed charge.

The approximate rate on that debt that is maturing?

I guess it is around 4%. I think it is tax exempt, if I remember right.

Okay, and then the other question is, there seems to be a pretty considerable I guess coverage ratio on the dividend over tab, and what is the [inaudible] just give me what is the mind of management is with respect to all this retaining cash flow and then the dividend?

Well, we are continuing to look at timberland acquisitions, and as you know that's our key part of our strategy. We feel there are some good opportunities as we look at that. Second thing is our board takes a look at our dividend on a frequent basis, and they would do that again this year. But I would say the primary view at this point in time is not different than we have had for the last couple of years, which is we feel additional timberland acquisitions is where we should focus.

Okay and then just my last question, and I guess for the less [inaudible], what level do you get to when you statutorily, in order to maintain your dividend, you have reached the status [inaudible] bump up the dividend more aggressively. Did you know that number off hand?

Well, it's going to be fluid every year Rich. It just is going to depend on the characteristic of the income in any one year. In our case, our income from a REIT perspective is not ordinary, but it's capital and so typically you have to distribute 95% of that. Otherwise you run into a 4% what we call excise tax, and so far we haven't bumped up against that, but it is going to be a year-to-year calculation.

Okay thanks again.

All right thanks.

And with no further questions in the queue, I would like to turn the conference back to Mr. Vanden Noort for any additional or closing comments.

Okay, thanks. I like to thank everybody for joining us and please contact Carl Kraus with any follow-up questions. Thanks again.