Welcome and thank you for joining Rayonier’s Third Quarter 2010 Teleconference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) Today’s conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Hans Vanden Noort, CFO. Sir, you may begin.

Thank you, and good afternoon. Welcome to Rayonier’s investor teleconference covering third quarter earnings. Our earnings statements and presentation materials were released this morning and are available on our website at rayonier.com. I’d like to remind you that in these presentations we 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 filed with the SEC, lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They’re also referenced on page two of our presentation material. With that, let’s start our teleconference with opening comments from Lee Thomas, Chairman and CEO. Lee?

Thanks, Hans. I’ll make a few overall comments before turning it back overt to Hans to review our financial results. Then I’ll ask Paul Boynton, our President and Chief Operating Officer, to review the results of each of our businesses. When we finish our prepared remarks, I’m going to ask Lynn Wilson, our new Vice President of Forest Resources; Charlie Margiotta, our Senior Vice President of Real Estate; and Jack Kriesel, our Senior Vice President of Performance Fibers to join us in responding to any questions you may have. It was a good strong quarter, and I felt we continued to execute well, reporting earnings per share of $0.77 with strong cash flows from operations. The performance reflects actions we’ve taken both this quarter and earlier in the year to create value. We’ve adjusted harvest levels and product mix to respond to specific opportunities in the pulpwood and export markets, and have worked to meet our customers’ increased demand for our sale of specialty products. You should note that in our real estate business, a $10 million conservation sale closed in the quarter, which we had previously expected to close in the fourth quarter. I believe our balanced business mix allows us to manage for the long term. With a slow pace in the housing recovery, we’ve maintained pricing discipline in our land sales program and continued to defer harvest of more valuable sawlogs. The actions our businesses are taking not only drove strong results this quarter, they were also leading to our expectation that our 2010 results will be at the upper end of our guidance for the year. Our confidence in our future cash flows, ample liquidity, strong balance sheet, were all key consideration in our board’s decision to increase our dividend 8%, the fifth increase since our announcement to convert to a REIT in 2003. Now with that let me turn it back over to Hans to review our financials.

Let’s start on page three with the overall financial highlights. As we noted, we had a very strong third quarter. Sales totaled 378 million, operating income totaled 92 million, net income was 63 million or $0.77 per share. We had no special items in the third quarter. However last year’s results include the benefit of the alternative fuel mixture credit, which increased third quarter operating income by 56 million and net income by 49 million or $0.61 per share, and year-to-date operating income by 142 million and net income by 129 million or $1.61 per share. And the first quarter of 2010 included a $12 million gain, or $0.15 per share from the sale of a portion of our New Zealand joint venture. These items are excluded to arrive at the pro forma amounts, which will be used for the comparisons throughout this call. On the bottom of page three, we provide an outline of capital resources and liquidity. Our year-to-date cash flow was strong, with adjusted EBITDA of 335 million and cash available for distribution of 400 million, which includes receipt of $189 million in April from the alternative fuel mixture credit. Our debt and debt-to-capital ratios were above year-end levels, reflecting a $75 million five-year term note from a group of banks. We ended the quarter with approximately $406 million in cash. So, on a net debt basis we finished at a very manageable $360 million. Let’s now run through the variance analysis. On page four, we’ve prepared a sequential quarterly variance analysis. In Timber, operating income was comparable, and a stronger pricing was offset by lower volumes in our Eastern region and weaker earnings from New Zealand. Real Estate income increased $27 million, due primarily to having more non-strategic timberland sales this quarter, and as we mentioned,…

Thanks, Hans. In forest resources we were pleased to report operating income of $9.2 million for the third quarter compared to $1 million, for the same period in 2009. On page eight you will notice that prices for our Western timber stumpage continued their upward trend and increased 25% in the third quarter over the second quarter, and we’re up 90% over the prior year period. Now, since a substantial portion of our volume is currently generated from delivered logs, we have also included the corresponding price trend, which you can see has a similar pattern. Continued strong export demand, driven mainly by China, served as a price support for the market and lifted prices into the third quarter. However, with prices still well below historical levels and domestic sawlog demand soft, we will continue to defer approximately 30% of our sustainable harvest levels in 2010 to preserve value. In the East on page nine, pine prices declined slightly from the second quarter levels due to lower sawlog demand. However, prices were 26% above third quarter 2009. We continued to manage our harvest mix to capitalize on strong regional pulpwood demand. As mentioned last quarter, we pulled volumes forward in the first half of this year, allowing us to back off volume in the third quarter. 2010 pine harvest volume is forecasted to be below that of 2009 as thinnings return to more normal levels. Overall, Forest Resources operating income for 2010 should be substantially above 2009. Now, let’s turn to our real estate business. Operating income for the third quarter of almost $31 million was very strong due to the timing of land sales transactions. Page 10 highlights HBU acres sold. Third quarter rural sales of over 10,000 acres were driven by a 6,900-acre conservation sale to the state…

Thanks, Paul. Before I provide our typical update to key statistics, I’ll take a minute to run through the cellulosic biofuel tax credit and expected benefit to us. As you may be aware, on October 15th, the IRS issued guidance on the interaction of the cellulosic biofuel producer credit and the alternative fuel mixture credit, clarifying that both can be claimed in the same tax year on different volumes of black liquor. We expect to receive IRS approval of our CBPC registration in the fourth quarter, at which time we’ll recognize an after-tax benefit of about $23 million or $0.28 a share. This additional benefit from black liquor relates to the period during 2009 when we were not mixing black liquor as an alternative fuel. We’ll filed an amended 2009 federal income tax return to claim the cellulosic credit. We expect to realize the entire cash benefit during 2011 via refund of 2009 and 2010 taxes and offsetting 2011 estimated taxes. In addition, we’re studying options for maximizing the benefit from black liquor beyond this initial claim. Now, I’ll go forward with an update on some of the key statistics to assist you in refining your 2010 model. We expect depreciation, depletion and amortization of about 143 million and the non-cash cost basis of land sold of about 7 million or approximately $150 million in total. Capital expenditures, excluding acquisitions, are expected to total about 143 million versus 92 million in 2009 at a more normalized run rate of about 110 million to 120 million. This significant increase will primarily occur in Performance Fibers along cost reduction and efficiency projects as well on some environmental projects. We still expect interest expense, net of interest income to total about $50 million. Our pension expense for the year should come in at about $11 million. With respect to funding, last week, we contributed $50 million to our pension plans, in line with our prior guidance. Finally, our full year effective tax rate, exclusive of any cellulosic producer credit, is expected to range between 16% and 18%, consistent with our prior guidance. When you put all these elements together, with the AFMC refund received in April, we anticipate very strong cash flow even with the deferral of 3 million of real estate sales into 2011 to avoid that built-in gains tax, as Paul previously mentioned. We expect adjusted EBITDA to be well above ‘09 and CAD should also be well above 2009 and in the $360 million to $380 million range, reflecting the AFMC refund, net of the higher capital expenditures and the $50 million pension contribution. And we expect pro forma EPS to be at the upper end of our prior guidance of $2.05 to $2.20 a share. That’s excluding the gain in New Zealand and any fourth quarter cellulosic tax credit benefit. Now, let me turn it back to Lee for some closing comments.

Well, as you’ve heard from Paul and Hans, our actions to create value continue to drive strong results. With our stock’s outperformance this year, we believe that our strategy of providing an attractive dividend, while investing to grow the future cash flows of our businesses is paying off for shareholders. We’ve increased our dividend and we’re actively evaluating opportunities to expand our timberland holdings, our top priority for investing strategic capital. And as the world’s leading supplier of cellulose specialties products, our customers are asking us for more volume as they see their businesses grow. Our unique business mix, conservative balance sheet and substantial liquidity enable us to take advantage of these opportunities for growth. In short, we remain confident in the ability of our businesses to drive value creation going forward. Now, with that, I’d like to close the formal part of the presentation and turn the call back to the operator for your questions.

Thank you. (Operator Instructions) Your first question comes from Michael Roxland, Bank of America. Your line is open.

Just want to come back to the 2010 guidance, if I heard you right, it doesn’t really seem to be a slowdown, maybe some of the real estate sales got shifted into 3Q and a portion is getting deferred into 2011. Performance Fibers are doing fairly well from a volume and pricing standpoint. And basically, looking back over the past ten years or so, the only other time where earnings significantly declined sequentially was around 4Q ‘07, and that also related to a strong decline in real estate sales. Why are you guiding to a greater drop than based on history? It looks like the drop is, I know you don’t guide for 4Q, but you guide for the full year, and basically the full year guidance applies a quarterly decline of around $0.40 to $0.55 sequentially. So I’m just wondering why you’re guiding to that type of drop.

Mike, it’s really related to the conservation sale that we talked about closing in the third quarter as opposed to the fourth quarter. I think when we gave you guidance for the year last time; we gave the 205 to 220. The businesses are all performing quite well. That’s why we are guiding to the upper end of that range, but it just has to do with when that transaction closed in the third quarter versus the fourth.

And nothing I guess, there’s no weakness that you’re currently seeing with respect to Performance Fibers demand.

Not at all. As a matter of fact, that continues to be very strong. And as Paul indicated, the fact that our customers are extending their long-term contracts, we’ve got very strong demand in that business.

Got you. And any sense on where Cellulose Specialties pricing is headed? Have you started talks with your customers for 2011?

We clearly have started talks with our customers for 2011. We typically negotiate those prices in the end of the third, beginning of the fourth quarter. And we use that as a part of our guidance that we’ll give you in our January call.

Got you. Last question, I guess, what’s next on your priorities for cash? You have net debt at around 360 million; you’ve just increased the dividend, contributed to the pension. Is the top strategic priority going to be looking for acquisition opportunities in timberland? And if so, what do you currently think of in terms of have you come across any properties that are particularly attractive to you?

That is our highest priority for strategic capital. That’s investing in additional timberland. The market is pretty tight, I’d say. There’s not a lot of land coming on the market. We’ve had an opportunity to look at some, both in this country and outside this country, and we continue to do that. We’re active out in the field, looking at property, some of which we think is attractive, and hopefully, we will be able to close transactions. We’re pretty disciplined in how we look at it, but that is clearly a high priority for us. I’d say the second thing is our sale of specialties business. We continue to have strong demand for our customers. We basically have sold out our capacity. We gradually increase just through productivity improvement, but our customers are really demanding more than that. So we’re taking a hard look at where there may be opportunities to invest there as well.

Your next question comes from Dan Cooney, KBW. Your line is open.

I was hoping you could share with us what you are hearing on Amendment 4 in Florida, I think the last story I read suggested that support was weakening a little bit in Florida. I don’t know if you guys just had any incremental color there.

The latest we’ve heard is it’s been fairly steady. It’s quite a campaign. The latest thing we’ve heard is favorable from our point of view. And that is that we are anxious for that Amendment not to pass and everything we’ve seen looks like it’s favorable in that regard, but it is quite a campaign on both sides of it. And I think will be right up to the wire.

And if you guys could give a little color on the Cosmopolis mill refurbishment, how that might impact pricing in that state market maybe over the next few years and I guess just how you guys are looking at that?

Paul, you and Jack want to take that one? Go ahead, Jack.

This is Jack. You know that mill was formerly owned by Weyerhauser and it is now owned by an investment firm by Gores and it’s called Cosmo. They’re going to bring in roughly to our understanding about 140,000 tons of dissolving pulp, the majority of which will be viscose pulp which is a lower purity pulp and which we don’t participate in, in terms of our products. So demand for that overall product is high and so I think that they will be able to sell their product well into the viscose market. And then they’ve also intended to gradually move into the higher purity end uses, which with our overall demand there will be no problem absorbing that volume.

Your next question comes from Peter Ruschmeier of Barclays Capital. Your line is open.

I wanted to follow-up, Lee, on your comments in terms of being sold out on specialty cellulose, looking at opportunities to grow, but so far it looks like your capital projects are really aimed at costs. Well, not presumably, do you plan to grow with your customers or do you think you may be willing to give up share? And can you further elaborate; are there ways that you can grow incrementally to keep up? Or are you considering some larger projects to grow?

Well, Peter, we have invested primarily around cost reduction projects, some have given us some incremental capacity, but in small amounts. We think there’s an opportunity for us to do two things. One is to really continue a strategy we’ve had of diversification in the specialty area that is, to grow substantially in areas beyond our leadership position in acetate. So in ethers, high-tenacity and a number of different categories where we’ve got positions, but we think they’re good opportunities to grow, stronger positions, as well as grow with our customers in the acetate area. In order to do that, we’ve got to find more than just small incremental capacity So we’re taking a look at, should we convert some of our absorbent material capacity over to specialty capacity and how we could do that and over what period of time we could do that. But that’s an analysis that we have underway currently.

Anything you can share on a preliminary basis or should we wait for that in terms of how much capital might such a plan entail and what timeframe might that incur?

Well, I think we’ve got to wait on that. The analysis will take us quite a while. So I would say, over some time next year, I can give you a much more definitive answer as to what we’re going to do, whether we’re going to do it, if we do it what it would cost.

Okay, that’s very helpful. Then shifting to slide eight where you have some stumpage prices. If I’m reading the slide correctly, it looks like you’re Western stumpage prices are up more than 100% from the trough last year. I am curious if you could comment, is this, how much of that is a function of log mix versus the actual market price? And how do these price levels today of stumpage compare to prior peak levels and maybe elaborate on what you think is driving that?

Lynn, do you want to get that?

Sure. Peter, this is Lynn, yes. Right now, we’re seeing a strong export market that’s supporting not only our domestic log pricing, but that percentage, so it’s not based on mix. It’s actually on our ability to take to market the export logs and support our local log pricing contracts. And when you look at historical pricing, we’re still not at the peak, which dates back to 2006, but we are recovering back to where we were in first quarter 2008.

Okay. That’s helpful. And then maybe just lastly, maybe a question for Charlie, I am curious you mentioned some shift in land use classifications for some of your properties, can you elaborate on that? And are there other opportunities within your, say, Florida-Georgia portfolio to shift the land use classification?

Sure. Well, we have three major projects in Florida, two of which Paul mentioned, the Crawford Industrial got the Department of Community Affairs [DCA] approval, which is a really big deal. And then the Neoga Lakes project received the regional and city approval and it has been forwarded to DCA, so another major step forward. The large Nassau project is in progress and actually it’s just gone to DCA for a major land use change, but we haven’t heard back from them yet. So all three projects in Florida have made a lot of progress. Of course, our two projects in Georgia already have land use changes granted by the state.

And Charlie, you may want to talk about what you’re doing up at the industrial project in Georgia?

Yes, what we call now our Belfast Commerce Center. We’ve made a lot of progress on getting gas to the site. A transmission line is in progress going to the site and we’re currently working on a service agreement for sewer and water. And so with the entitlements in place, we hope to begin to go to market in ‘11 and ‘12.

Your next question comes from Christopher Chun, Deutsche Bank. Your line is open.

I just wanted to follow-up on the Western timber business a little more. Can you tell us about what percentage of your sales mix is exports?

You got that, Lynn?

Yes. So our current mix is 18% export logs currently.

Okay. And are you able to provide us with information about how profitable that export business would be compared to domestic?

How what, Chris?

How profitable?

Part of the overall pricing range.

Its part of the overall pricing mix that you see in slide 8, Chris.

Okay. I’ll leave that. And then in Performance Fibers, I was very impressed at the earnings level. That’s a big number compared to what you guys have done historically. I was just wondering to what extent there might have been anything unusual going on in the quarter that would impact the earnings numbers. So I’m just wondering to what extent should we be looking at that number as a realistic run rate earnings level for the business going forward.

I think we’ve both got good solid pricing on Cellulose Specialties and good strong pricing on Absorbent Material in this quarter. But Jack, do you want to comment any more on that?

No, other than it looks like it will continue to be so.

Yes. We certainly see going forward that we’ve good strength now in the fourth quarter, same kind of good solid price.

Yes, that’s very impressive. And then finally, on the real estate side, obviously, you had very strong volumes this quarter and you mentioned that in 4Q that’s going to go the other way quite a bit. But just to get a big picture sense, I was wondering how you guys think about what’s the right level of sales volume is in real estate?

I’m going to let Charlie comment on that. My own reaction is, though, and I think we talked about this previously, we’ve got and have had pretty steady rural HBU sales, and that’s both recreation type property, conservation property. And I think we see that as going forward a good steady program for us. I think the non-strategic sales, at least over the next few years; I think are going to come down substantially from where they were. And because that was a part of our overall classification of property we owned, I think the entitled property that Charlie was talking about is going to begin to pick up as we see the economy recover, as we see demand pickup for entitled properties. And so I think you’ll see somewhat of a shift between that non-strategic and the entitled or development properties over the next several years as far as our portfolio is concerned. But Charlie...

You’ve hit most of it, Lee. The only thing I’d add is we don’t really have a target acre. So we really think about it as a value creation business, where we can create real value materially above the whole value of the land as timberland we’ll act. And if we can’t, we won’t. But we don’t have a bogie or a specific acres we’re trying to hit. It’s all about pricing discipline and creating value, again, well above the timberland whole value.

Okay. Given the fact that the housing market recovery appears to be a long, slow slog, to what extent do you think there is a risk that the business is going to take a hit in earnings because the non-strategic sales volume drops off faster than maybe the development land sales may pick up?

Well, I really don’t see that, Chris. As a matter of fact, we just finished our annual five year review. We do a long range plan review every year with our Board, and that is certainly not in our forecast. We think that you’re right about housing recovery being gradual, but our estimate as far as land sales are concerned is we think we’ll have a good steady land sales program that will contribute well. And I think Charlie stated it right in terms of how we think about our land sales program. But we think we continue to have good solid opportunities out there.

(Operator Instructions). Your next question comes from Steve Chercover, D. A. Davidson. Your line is open.

Most of my questions have been answered actually, but given the difficulty in identifying attractive land domestically, are you willing to look offshore or north of the border again?

I would say not north of the border, but clearly we’ve been looking offshore. Paul, do you want to comment on it because I know you’ve led some efforts particularly in New Zealand and Australia?

Yes. Steve, hi. This is Paul. We will continue as you know, it’s been quiet out there and we recognize that. And as Lee said earlier, we’ve got a pretty disciplined process that we’ll continue to work through. But we’re pretty optimistic that domestically things will materialize at some point. And just like a sale, it’s a kind of a lumpy business, but we expect that and we think that over time will prove successful. But in parallel, we continue to look offshore, particularly as Lee said, in New Zealand, Australia area and we think we’ll see some developments there as well that could be attractive in the coming timeframe. And that’s probably really our principle focus, is domestic and then the Asia-Pacific base and they are particularly New Zealand and Australia.

And just the restructuring that you’ve done with your joint ventures in New Zealand makes things more complicated if you start growing it again?

No. I don’t think so. I think we manage that entire property with an independent Rayonier team and so we’re pretty nimble and ready to go if we see the right opportunity.

Your next question comes from Chip Dillon, Credit Suisse. Your line is open.

Hi, guys. It’s James for Chip. A quick question on the Absorbent Materials. With NBSK coming off slightly, are you seeing any of the weakness in fluff pricing or is that market holding up pretty well?

It seems to be holding up quite well and there’s very strong demand for it. Jack, have you seen anything?

It looks like through the fourth quarter it will continue to be strong.

Yes, so we hadn’t seen any of that.

Okay, very good. And then switching gears a little, are you guys seeing any major bio-energy projects that go beyond wood waste in any localized markets. For instance, are you seeing these energy projects go up into the pulpwood and maybe even into the sawlogs to source fiber? What are you seeing there?

I don’t think we’ve seen anything go up to sawlogs, but we clearly think that the large pellet plants a facility, for instance, is going to take a million tons a year is going to take pulpwood in addition to waste. And we’ve seen that with the plants that both exist as well as those that are being planned.

In those localized regions, are you seeing upward pressure on pulpwood pricing?

Yes, we are. We’re seeing that. It’s creating a tension in that basket and we’d expect that would continue not only for the facility that we talked about, but as new ones come on. They will create a bit of tension as they come about

And it’s clearly in a localized area as you would expect.

Your last question comes from Mark Weintraub, Buckingham Research. Your line is open.

Thank you. Lee, given that you’ve just come off some long range planning meetings, I thought I’d ask you this question. When you came on board, I think, back in February of ‘07, I believe it was at that point in time, and correct me if I’m wrong, the thought process is that you would be managing at the helm for a few years, several years and then there would be a transition. Can you update us as you’ve kind of been here now for 3.5 years, where the thought process there is?

It’s still the same, Mark. I’m managing for several years and then there will be a transition.

Okay. Several years from now or several years from when you came on board.

We haven’t decided. I haven’t decided, the Board hasn’t decided. Things are going very well for all of us, but we do have a good, solid succession planning process in this company. I think we’ve strengthened it over the last several years. We work effective with the Board. So I think when the right time is there, there will be a good, smooth transition here in the company.

I’m now turning the call back to Mr. Vanden Noort for closing comments.

Hi, great. Well, appreciate everybody coming on board. Please contact Carl Kraus with any follow-up questions. Thank you.

This does conclude today’s conference. Thank you for attending. You may disconnect at this time.