Welcome and thank you for joining Rayonier's Fourth Quarter 2011 Teleconference Call. (Operator instructions) Today's conference is being recorded. If you have any objection, you may disconnect at this time. Now I'll turn the meeting over to your host, Mr. Hans Vanden Noort, CFO. You may begin.

Thank you and good afternoon. Welcome to Rayonier's investment teleconference covering fourth 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 the 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 are also referenced on Page 2 of our presentation material. With that, let's start our teleconference with opening comments from Paul Boynton, President and CEO. Paul?

Thank you, Hans, and good afternoon, everyone. I'd like to make a few overall comments before turning it back over to Hans to review our financial results. Then we're going to have Lynn Wilson, Vice President, Forest Resources comment on our timber results. Following our timber review, Charlie Margiotta, Senior Vice President, Real Estate, will discuss our land sales results. Finally, Jack Kriesel, Senior Vice President, Performance Fibers, will take us through the results of our cellulose fibers business. Let me start by saying we had a great year in 2011. We generated strong operating cash flow, well above our dividend, and increased pro forma earnings 42% to $2.11 per share. We believe that 32% total return on our shareholder realized last year reflects both the increasing value of our businesses as well as the strategic priority we placed on growing the dividend, which we raised 11% to $0.40 per share beginning in the third quarter, or $1.60 per year. I am particularly pleased with our timberland acquisitions in 2011. The 320,000 acres of highly productive timberlands we acquired served dynamic end markets in Alabama, Mississippi, Louisiana and Oklahoma. They also increased our geographic diversity and upgrade the quality of our portfolio. We see tremendous value in growing our timberland base, particularly with this rather young age class acquisition as we position ourselves for improved markets in the years to come. Now throughout 2011, the team did a great job of taking advantage of the specific opportunities in our markets to capture cash-flow. For example, we took advantage of strong Asian export markets. We leveraged the proximity of our coastal Washington timberland to five ports and adjusted our harvest plans to meet the growing Chinese demand. Our New Zealand joint venture also significantly increased log sales to China. While this market began to ease in the fourth quarter, we are seeing signs of strengthening and I expect it to be an important source of demand over the long term. Now at the same time we've maintained discipline in our land sales program, reducing the acreage sold and focusing on properties with more resilient values such as rural and recreation and conservation lands. Continued strong demand for our high purity cellulose specialties drove another record year in performance fibers. With our current volumes fully committed, we are working closely with our customers to provide a premium product which is a critical part of their value chain. Now, as such, we're making excellent progress on the 190,000 ton expansion in Jesup and we're on pace for completion by mid-2013. While we recognize the uncertainty still facing the domestic and global economies, including the housing market, we see ongoing operating momentum in our businesses that we anticipate will drive another great year in 2012. With that, let me turn it back over to Hans for a review of the financials.

Thanks, Paul. Let's start of Page 3 with our financial highlights. Overall, we had a very solid fourth quarter, sales totaling $388 million, while pro forma operating income totaled $88 million and pro forma net income was $60 million or $0.48 per share. We had one special item this quarter, which was a $6.5 million non-cash charge for estimated future clean-up costs at our former Port Angeles mill site. Last quarter, we also had one special item which was a $16 million benefit from reversing a tax reserve established back in 2009 relating to the alternative fuel mixture credit. Two thousand and ten had two special items; a fourth quarter $24 million tax benefit from the cellulosic biofuel producers credit and a first quarter $12 million gain on sale of a portion of our interest in our New Zealand joint venture. All of these items have been excluded to arrive at the pro forma amounts used for the comparisons throughout this call. On the bottom of Page 3, we provide net line of capital resources and liquidity and a comparison to 2010. Our full year cash flow was strong with adjusted EBITDA of $503 million and cash available for distribution of $287 million. Note that 2010's cash available for distribution included receipt of $189 million from the alternative fuel mixture credit. With respect to our debt, in the fourth quarter we paid off a $93 million 8.5% note that matured at the TRS, while at the REIT we borrowed a $150 million on a revolver in conjunction with our large timberland acquisition. We still closed the year $79 million of cash. Our debt balance was $847 million. So, on a net debt basis we finish as a very manageable $768 million. Let's now run through the variance analyses. Turning to…

We continued to be disciplined in the sale of our properties to preserve value until the markets improve. Overall, we expect 2012 operating income to be below 2011, due primarily to the reduction in non-strategic sales and the lack of the one-time property tax settlement last year. Let me turn the teleconference over to Jack Kriesel.

Thanks, Charlie. As a result of strong demand for Cellulose Specialties, Performance Fibers reported another record year. On Page 13, you see net selling prices for our chief performance product lines. Cellulose Specialty prices were comparable to the previous quarter. However, compared to the same quarter, prior year, prices were up $185 per ton due to the 2011 annual price increase in improved mix. As expected, absorbent material prices which is principally a fluff pulp declined $49 per ton or 6% from the previous quarter and $115 per ton or 13% from the same quarter in the prior year as market conditions weaken during the year. Moving on to Page 14 and looking at volumes, our fourth quarter Cellulose Specialty sales volume increased approximately 14,000 tons compared to the third quarter and total year sales volumes were 24,000 tons more than the prior year reflecting the timing of customer shipments and the production shift of absorbent materials to Cellulose Specialties. Absorbent materials volume increased from the previous quarter approximately 6,000 tons primarily as a result of the timing of customer orders. For the full year, sales volume declines approximately 10,000 tons due to production shift previously discussed. As we look into 2012, we are seeing continued strong demand for our Cellulose Specialties fibers. We expect 2012 Cellulose Specialty sales volume to be comparable to 2011 while base on completed negotiations, prices should average about 12% to 13% higher than 2011. In our absorbent material business, annual volumes are expected to be 8% lower with continued soft demand throughout the year. In general, we are expecting higher input cost due to increasing commodity prices. However, overall we are anticipating 2012 to be another strong year in a Performance Fibers business. As Paul mentioned, we are making great strides to with our project to expand CS capacity by 190,000 tons by mid-2013. Demolition and construction is well under way with an immediate focus on completing a number of project milestones during our first quarter maintenance shut down. We also continue to increase customer commitments against this new capacity. Since our investor day meeting in September, we have grown customer commitments from 70% to 85% and are in active discussions for the remaining volume. Now let me turn it back over to Hans.

Thank you very much, Jack. Now I would like to provide some key statistics to assist you in developing your 2012 model for Rayonier. I would like to start with the tax rate and our variance analysis on Page 15 since the year-over-year change is expected to be significant. This analysis begins with the statutory federal income tax rate of 35% and then adjusts for the rate income not subject to tax to arrive at income tax expense before any non-routine benefits. In 2011, this rate was 24.6%, which was well above 2010 due to a higher mix of TRS income predominately from Performance Fibers. We then had a number of specific non-routine benefits that we achieved in 2011 as follows: $11 million installment note prepayment benefit resulted from the one year suspension of built-in gains tax for 2011. In 2006, the REIT sold HBU property to TerraPointe on a 20-year installment note, thereby deferring the built-in gains tax. This year we received approval from the IRS that prepaying these notes during 2011 would also qualify for the built-in gains tax holiday. The 2006 sale terms included a make-whole amount to compensate the REIT for the acceleration of tax liability and lost investment yield due to a decline in interest rates. TerraPointe paid this make-whole benefit payment, which resulted in the tax benefit of $11 million in 2011. The second item is exchange of the AFMC black liquor credit for the cellulosic biofuel credit and that resulted in a $6million benefit. The third item was a built-in gains tax holiday benefit that we realized from real estate sales from the REIT. We also realized some individually smaller benefits during the year. So these items have the effect of reducing our 2011 taxes from $77 million or an effective tax rate…

Thanks, Hans. Well, you've heard we had a great year in 2011, and we anticipate another strong year in 2012. With robust demand for our unique Performance Fibers and timber sales driving improved operating income and cash flow. Our strategy remains constant. We plan to first expand our timberland holdings and optimize their value through exceptional management practices. Second, we'll monetize properties with higher and better uses than timberland, and finally, maintain our global leadership position and high purity Cellulose Specialties through investments to increase capacity, improve product quality and technical expertise. We remain committed to increasing our dividend over time funded by operating cash flows. And with our unique business mix and strong conservative balance sheet we will continue to target initiatives that create value and increase cash generation in the years ahead. With that I'd like to close the formal part of the presentation, turn the call back over to the operator for questions.

Thank you. (Operator instructions) Our first question comes from Mike Roxland with Bank of America Merrill Lynch. Your line is open.

Thanks very much. Good afternoon. A quick question on the Chinese demand for logs. Obviously, you mentioned that your expectation is that demand has now reversed course. You're starting to see a little bit of a pick up, but it will be more of a second-half event. What do you think is driving that demand and what are the trends that you're seeing out of New Zealand?

I'll take a shot at that, Mike, and then I'll turn it to Lynn for any additional comments. First of all, we've got a good perspective, I think, on China. Of course, we've got a team there on the ground. We've got a team in New Zealand is focused on it as well, of course, the folks in the Pacific Northwest in addition to another business in Performance Fibers.So, we saw a robust economics in China having a strong GDP and with that we saw kind of a overheating of inflation. I think it edged up to 6.5% by the July time frame and with that some policies went in place to put the brakes on to bring inflation back down to a target of 4%, which they achieved mainly and almost in the December time frame. I think they brought it back down to 4.1%.

Mike, let me turn that over to Jack, because we've got a plan to phase that in and maybe Jack can take you through that plan. It's much like you describe.

I don't see anything significantly different from what you're describing right now. However, bear in mind that this expansion is essentially the same sort of process we have on what we call our B Mill. So the qualification time should be minimal. But being conservative, we're looking at sales of viscose for the second half of 2013, during this qualification time. And obviously we're going to ramp that up as quickly as we can.

Thank you very much.

The next question comes from Chip Dillon with Vertical Research. Your line is open.

Good afternoon. You mentioned in the guidance $8 million in land basis, and I know this is counter intuitive in places. Carl and I talk about this a lot. But, does this mean at least on the release you suggested that last year your land basis, if I read this right, was only $4 million. Does this mean you're expecting more land to be sold, more acres, or is it just the lot differentials this big?

No, really what we're expecting is a little change in the mix, and more specifically we're already getting inquiries from some of the acquisitions that we just completed in 2011. And so, we obviously would expect to sell it at a reasonable margin above our basis. But this is much newer acquired properties, so it has a much higher basis let's say than some of the historical property that we've been selling.

So can you just sort of give us, some you might have done this sort of a rough acre number or range that you think we could kind of model in for 2012?

Our run rate in rural acres I think over the last three or four years has been right at about 15,000 acres. And I think we said it's going to be above, somewhere in the 15 to 20,000 acre range is what we're thinking about. As Hans said, a consistent program from our existing acres and timberland ownership, and the 300,000 acres that we acquired provides some opportunity to increase that.

And then second question, you mentioned the southern lands split between the Gulf and the Atlantic region, that the total volumes would be flat even with the acquisition. Would the decline be in the Atlantic area? Is that further, and I know it was discussed, about the stronger pulpwood in some areas, but is this mainly a further reduction in saw logs, or are you backing off in some areas and pulpwood as well?

We're primarily focused, Chip, on our saw log volume, and bringing that volume into the Gulf States. But what's not reflected in the summary is that we're adding additional hardwood pulpwood. So in total we're seeing consistent pinewood volumes but what we're seeing is a shift to some of our hardwood pulpwood.

Got you. I'm sorry?

No, sorry. I was just going to say and again, off-setting kind of a large surge of fire-damaged wood in the Atlantic region as well. That's a key part of that off-set. So we're definitely going up in the Gulf States as Lynn was talking about what you don't see our statistics there, a good part of that is the hardwood as Lynn mentioned. And then, of course, we're competing against less salvaged volume out of the Atlantic than we had in 2011.

Got you and then last question: you've obviously done a good job in selling the new capacity in performance fibers. Does this mean that as the mill is coming up, you would be expected to sell that committed volume as high-alpha right away as you can make it and maybe another point to add, I mean, not to put the cart before the horse, but one could assume that you're doing such a good job that maybe it would be all sold out, say, by the end of this year, but from what I hear you saying is that even though it may be committed, it may not be committed right away. Is that sort of the way to think about it? Like that 85% or whatever it turns out to be, some of that might phase in in '14 or '15?

Yeah. Chip, this is Jack. The way that's going to work is that, if you recall during investor day, we said we're going to be around 70% and now we're saying 85%. That increase is all due to high-value CS-type agreements. At that point in time I think we mentioned that we had roughly 30,000 tons or so in commodity-type viscose. That number hasn't changed. So we're keeping that number kind of constant for 2013. And then as we move into 2014 and beyond, that's when these volumes do ramp up rather significantly to high-value CS. So within a short period of time we will be 100% high-value CS. One other comment just to make is that when we're looking at this capacity of 190,000 tons, our intention is not to fully commit in long-term contracts that entire volume. We want to have some flexibility to be able to meet the surging demands, the changes that our customers might have.

Got you and I guess the last question is, given that there are some people trying, at least, to nip at your heels, a restart out West, Latin America, are you able to sort of add these new customers do feel at terms that are comparable to what your existing volume is moving at?

Yes, Chip, Paul. We feel very good about our additional volume that we've put on for 2014 and beyond. It's very consistent. It's high-quality and certainly we've got folks trying to get into our space but keep in mind, they've been doing that for 20-25 years pretty consistently. So not a new obstacle for us, we just got to continue to keep getting better and providing value to our customers, which is why you hear a lot about the projects that Jack and his teams are putting in place to improve our consistency and our quality. We'll continue to push on that and as we push on that we're able to achieve high quality commitments going into the future.

OK. Last little quick question. You gave us the number for the spending on the project of $200 to $210 million this year. I guess I could do some math, but maybe you could tell us how you view, right now, the remaining tail of that project in 2013. How much will be left for next year?

Well, we spent $43 this year, Chip, and so if we're at $210, then I think we're still on track for a $300 million project. So that's the balance that would be there in 2013.

OK. So like $50 million maybe. Got you. Thanks very much.

Our next question comes from Steve Chercover with D. A. Davidson. Your line is open. Steve Chercover - D. A. Davidson & Co.: Thanks. Good afternoon. First question on performance fibers. It seems like this is the first year in several where you won't have any incremental volume. Is that because you're absolutely maxed out until the conversion is on line?

I'll take a shot at it. I think we've been fairly consistent with our volumes, we surged to the extent we can and try and move whatever volume available and absorb materials, within reason, of our facility, over. Yeah, I would say that we've been fairly consistent with volumes over the last couple of years, and you're right, 2011, we probably pushed more, and surged a little bit more. But, you're right, it's hard until we get his incremental line up, to have any significant improvement until 2013. Steve Chercover - D. A. Davidson & Co.: And the 12% to 13% incremental price hike, is that based off the, kind of, $1634 terminal price in 2011?

Yeah. It's an average type price. If you look at it, that's about a $200, a little over $200 a ton, on that figure.

Year-to-year, Steve. Steve Chercover - D. A. Davidson & Co.: Yeah. And actually the full year average was right around the full level.

Yeah. Steve Chercover - D. A. Davidson & Co.: And if fluff volumes are going down 8%, is that just because it's not economic to sell it?

No. What's driving that really is we've taken advantage of the viscose market on our C mill to a limited extent. For example, we look to be making upwards of 20,000 tons or so of viscose pulp on that. When we do that, that offsets some of our fluff pulp. Again, the economics of doing that is all relative to fluff pulp, so if fluff pulp pricing has been dropping, commodity viscose pricing has been dropping, but still there's a relative advantage to doing that. So that's what's really driving the overall shift. Steve Chercover - D. A. Davidson & Co.: And two more quick questions. First of all, do you have a targeted distribution payout ratio?

Steve, we don't really have a targeted distribution payout ratio. If you look at our history, we typically run between 65% and 80%. When we review the dividend, it's typically after we've updated our 5-year long range plan, and we want to look out a couple years pretty hard and make sure any increase we make can be well supported and is not right up against our expected CAD, give us some operating flexibility for any opportunities to come up so that's pretty much our process in deciding the dividend increases. Steve Chercover - D. A. Davidson & Co.: Understood. And finally, did you discount any improvement in any wood products or residential activity in your guidance?

Pretty much. We can assume what product is going to be relatively flat and we certainly are not anticipating any rebound in the development HBU side of the business.

The next question comes from Mark Wilde with Deutsche Bank. Your line is open.

Good afternoon and really encouraging numbers in CS there. I'm really pleased by that. My first question is for Lynn. I wondered if can just talk a little about what you are expecting out of Russian export taxes as regards the Russian admission into the WTO because I'm hearing that as part of that admission they're going to have to significantly reduce the log export taxes but we really haven't seen any hard numbers yet.

Well, as you know, we're really not expecting to see an impact until June 15th or beyond, but right now it's unclear whether there's going to be reduction in the log tariff. Because as they implement the quotas, there is an opportunity there for them to extend that position so we really at this point are looking at the . . . our current internal expectations is that the tariffs will not materially impact the time to log or number markets. From our standpoint, it's operationally and from where the logs are located, not favorable to get those logs into China where the sawmill capacity is and that there will be a point where there will be movement, but we still see that the bulk of the logs will still come from New Zealand, the Pacific Northwest, British Columbia, and that trends will continue through 2012.

Mark, yes, the lack of infrastructure in Russia, we think, is a far bigger component than the drop in the tariff in our view and its form from a lot of conversations that we've had with folks in China. One individual we met with in December the head of the wood distribution in China. So we're getting that feedback. We tend to think its pretty good judgment. Although there's bound to be some change, but again, we don't think it's going to be significant that changes the overall dynamic and it's going to pull from the other sustainable markets outside of China, New Zealand, Australia, Canada, US.

OK. And what exactly are we going to see on June 15th? I'm just trying to understand what we should be looking for here.

They have to ratify the agreements and then it would become effective 30 days later. And that's the point where you would have to find that judgment whether it will materially impact the business at that point in time.

OK. The other question I had was just what we might expect in the first quarter and a little further into 2012 in terms of fluff pulp prices. It looks to me like you were just below $800 for the fourth quarter and we're hearing spot prices significantly below that over the last week or two, so I wondered if you had any thoughts on that?

Yes, as you know, fluff pulp prices kind of follow NBSK pricing and per RISI, NBSK looks like it going to bottom out early in the first quarter here. And typically fluff will lag for a couple of months or so. So we think that fluff pricing will start to turn up sometime in the second quarter. Now, again, in the past we've been wrong on these things, RISI's been wrong with fluff and NBSK pricing, so we'll wait and see where that goes, but you're right. Spot prices in China right now are around $620 and list price for fluff pulp is about $950 right now, but you got to discount that by about 20% or so to the actual transaction prices. I guess we see the pricing dropping down a little bit more here in Q1 on fluff, and then start to slowly pick up through the balance of the year.

And the last question I have Paul is a little longer term question. You seem to be doing an impressive job of selling out the CS expansion. I just wondered, given that, do you need to start thinking about sort of what your next move is in that business and what potential shapes that might take?

Mark, I think it's fair to say that we do have some conversations on that, but really, right now, the focus of the team is executing against the plan we've got in place and getting this up and running, and contributing to cash so we can distribute that to our shareholders. There will be more to follow. We'll keep you posted. We're certainly not in a position to talk about it at this time. We've got to get this thing up and going.

Yes, understandably. All right. Fair enough. Good luck in the quarter.

The next question comes from Joshua Barber with Stifel Nicolaus. Your line is open.

Hi. Good afternoon. I wanted to follow up on one of Chip's questions from before, when they were talking about the 2013 production, after that initial conversion. Jack, I think you had indicated that initially you had indicated that, by conservative estimates, you'd be producing viscose for most of the back half of 2013. But to directly answer, who would be getting that contracted volume? Would the contracts no kick in until you started producing the high-end specialty, and then you'd be selling the viscose on the spot market? Or would some of that be under the previously contracted high-end volume?

We've been working on contract extensions with all of our customers and have been essentially successful across the board on that. A lot of that will go to existing customers as we've extended those contracts out to as long as 2017, but we are also expanding and diversifying our base into the other product lines. Predominantly right now in acetate with some amount of product going into ethers, the high end ether applications. We want to grow in that area. The specialty fibers used in filtration, we want to grow in that area as well as in sausage casing. We'll be expanding our base more, beyond that, with current customers and with new customers.

OK. But for the back half of 2013, that would be under the contracted new volume, or it would not be?

The back half of 2013, that's largely just commodity viscose pulp with qualification times.

Got it.

Jack commented earlier, we'll work to collapse that to the extent possible and as he noted, the great thing here is that we're putting in a line that's the mirror image of our B mill, which is a well known product line to all our customers. So, again, we'll have more guidance in the future, but the way we've got it planned now, we modeled it now is viscose in the back half of 2013, yet hopefully able to collapse that to the extent possible. We won't have that type of information until a later point.

Understood. Following up on one of the previous questions. Do you think you'll get some benefit at least on your effective year-over-year fluff pulp pricing by the fact that some of your volumes will be commodity viscose?

Well, I think if you compare it to just fluff pulp, there is an advantage to it, or else we wouldn't be pursuing it. You know, viscose pricing isn't real high at the current time, but it's to our advantage to produce more into that product line versus fluff, versus spot fluff.

Got it. And last question. As you guys mentioned the cash balance has come down fairly sharply this quarter, but I think for reasons we all understood. What would be the ideal cash balance you guys would want to run at for the next two to three years on average?

Yes, Josh. I would say we would feel comfortable some where around $100 million or so. And don't forget we also have a $450 million revolver available to us as well.

Got it. Thank you very much.

Our next question comes from Paul Quinn with RBC Capital Markets. Your line is open.

Yeah, thanks very much. Very good results. Just a question on the specialty dissolving pulp price increase for 2012. The guidance of 12% to 13%, I think it's higher than what most people expected. Just wondering on the other side, on the cost side, what inflation you're expecting in the year?

If we look year-over-year, 2011 to 2012, we're looking at about 4% to 4.5% increase in costs.

OK. And then you mentioned the increase in pulp wood pricing. You've got significant upside in your mix for saw logs. Have we seen any start to increase pricing in saw logs?

Not at this time, Paul. We haven't seen any indications in the Southeast, or any uplift.

I was going to add to that. Just as we look and model our housing starts, I'd say we're pretty consistent with other folks out there if not conservative. We don't reach 1.2 million starts until the 2016 time frame. We see a moderate improvement in that housing market. The good news is that we're performing exceptionally well now and we see that as all upside to the future.

Right. Lastly, you conduct a REIT acid test on a quarterly basis. Are you guys well in a comfortable position?

We're just finishing up our year end test now, but we should be in pretty good shape. If you recall, in the fourth quarter we closed on the $330,000,000 Timberland acquisition. So $20,000,000 or so went to the TRS. The rest went into the REIT. That will obviously help the test.

Right. Thanks very much. Best of luck in 2012.

The next question comes from Mark Weintraub with Buckingham Research. Your line is open.

Thank you. I'm just trying to understand the math on the guidance big picture, because I think that you say that you expect operating profits to be up about 10% of 2012 versus 2011, which presumably is an order of magnitude, maybe a little bit more than that, $35 million. You talk about the chem cell pricing being up by, I think you said close to $200 a ton. You make about 500,000 tons of it, if I'm understanding things right. That would be almost $100 million Even I think through the 4 to 4.5% increase to cost, which I'd be curious to what drives that as well, if you could throw that in the answer. That would maybe seem to me like a $20 million type of offset. I still have a big gap. I realize there are a lot of other levers and movers here, but it's a big gap. Is there anything pretty big to explain the difference between the $80 million-ish improvement that's doing the back of the envelope calc versus the $35 million to $40 million that you've indicated?

Probably the big thing there, Mark, is the fluff of material prices year over year. We've modeled it in to be fairly significant, so that might be something you would take a look at in your model.

The other part, Mark, of course in that is that we've guided real estate down. So, that Charlie gave you some parameters to that. While rural sales will be up, we won't have a repeat of the non-strategic sale, and we won't have the benefit of the tax that we saw in the fourth quarter. That's probably the other component that you may be missing in your model. I think if you bring all those together, it should be close to the guidance we're given.

Very good. I think this year real estate was about $40 million. I apologize if I missed that.

It was $47 million of OI.

Of OI.? OK. And for 2012, were you specific or did you just gave parameters, and we'll work through them and come up with a number?

We just gave some parameters. One thing we did note is that we had that property tax settlement this year that benefited about $6 million. So that obviously is something that we don't expect to occur next year.

And I'm curious, the 4% to 4.5% in terms of cost inflation. We're seeing a lot of input costs actually coming down, be it natural gas, etc. What is behind that, what are the inputs that you're keying it on for the inflation guidance that you're giving?

I guess one of the big ones would be wood, driven primarily by softwood price increases. In the southeast, as Lynn has described, there are a number of drivers for that softwood fiber and that has caused it to increase. And last year we had a dry year from a hardwood perspective. And so, we're not as certain that we're going to be having a dry year and that has a big driver on costs for hardwood. Chemicals, caustic right now by CMAI is forecasting year over year up in pricing, as is with some other chemicals we are seeing some upward trends, at least for the forecast. So at this point in time, those are the big drivers. We also have some higher ALB-type costs associated with labor.

OK, it all makes sense. Just one clarification if I could. On the wood, is that fairly region specific or are you also expecting where you're getting the wood for the mill or are you also expecting higher, and I read that this is pulpwood versus the saw timber, are you expecting pulpwood across the board to be up, so also it would be benefiting you in one pocket as well?

We're expecting year over year our pulpwood across the south-wide regions of both the Atlantic and Gulf States Region to be up year over year. So, yes, we're benefiting from that within the Forest Resources business.

OK, thank you.

Again, keep in mind that's the largest driver in the Performance Fibers, the largest component cost is wood. If that's moving up, as Lynn said, it should and it will. And our facilities operate to Lynn's perspective in her Atlantic region, if you will. Although, of course, it's a separate business and we run it independently. But, same dynamics being driven there would affect Jack's input cost.

One other input in terms of the softwood price going up year over year is we had the fires last year that the pulp mills benefited from, enabling them to get some of their softwood fiber that we used and at a lower cost, which we don't anticipate happening this year.

I am showing no further questions.

Great. Well this is Hans Vanden Noort. I'd like to thank everybody for joining us and please contact Carl Kraus for any follow-up questions. Thanks again.

Thank you. This does conclude the conference. You may disconnect at this time.