Welcome and thank you for joining Rayonier's Third Quarter 2012 Teleconference Call. (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. Carl Kraus, Senior Vice President, Finance. 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 would 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-Qs and 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 materials. With that, let's start our teleconference with opening comments from Paul Boynton, Chairman, President and CEO. Paul?

Thanks, Carl. Carl is sitting in today for Hans Vanden Noort, CFO, who was unfortunately called out of town on a family concern. I'm going to make a few overall comments before turning it back over to Carl to review our financial results. Then I'm going ask Lynn Wilson, Senior Vice President, U.S. Forest Resources, to comment on our timber results. Following our review of Forest Resources, Charlie Margiotta, Senior Vice President of Real Estate, will discuss our land sales results and then Jack Kriesel, Senior Vice President, Performance Fibers, will take us through the cellulose fibers business. We had another strong quarter, and pleased to report earnings of share of $0.62 in line with our expectations. This quarter's earnings were below the prior year period primarily because 2011 included a $16 million non-routine tax benefit and a large non-strategic real estate sale. Year-to-date cash available for distribution grew to $261 million compared to $242 million in 2011 which provides added support for our recently increased dividend. This solid performance stems from the continued focus on execution of our strategy. With that let me turn it back over to Carl, for our a review of our financials.

Let's start on page 3, with an overall financial highlight. As Paul noted, we had a strong third quarter with sales of $409 million, operating income of $113 million and net income of $81 million or $0.62 per share. We didn't have any special items this quarter but last year we had one special item in the third quarter, a $60 million benefit from reversing a reserve established back in 2009 relating to the alternative fuel mixture credit. This reversal reflected the successful completion of an IRS audit, covering 2009, and was excluded to arrive at third quarter and year-to-date amounts used for the comparisons throughout this call. On the bottom of page 3, we provide an outline of cash resources and liquidity, our year-to-date cash flow was strong with EBITDA of $398 million and cash available for distribution of $261 million. We ended the quarter with approximately $1 billion of debt, and $215 million in cash so the net debt was $794 million. Now let's run through the variance analysis. Turning to page 4, we have prepared our typical sequential quarterly variance analysis. In Forest Resources, third quarter operating income improved compared to the second quarter as higher volumes in all regions offset lower prices in the Gulf and Atlantic regions due to mix. Real Estate income increased by $2 million, due to higher volumes primarily from non-strategic sales. Moving to Performance Fibers. Improved results were driven by significant cellulose specialties volume increases due to the timing of customer orders. And lower third quarter cost because certain expenses associated with adjusted mill shut down, were incurred in the second quarter. Our wood products operating income declined by $2 million as result of somewhat lower prices and a kiln fire at one of our mills which necessitated a $1 million…

Thank you, Carl. Good afternoon. Let's start with page 8 and the Northern region, which is primarily our Washington state operation. Prices declined in the third quarter compared to the prior year period, due primarily to softness in Asian export demand, but were comparable to the second quarter. While we are beginning to see modest increased demand for exports to China, prices remained lower than the prior year but are still above 2010, overall we expect delivered log prices in 2012 to be somewhat below 2011. Volume improved compared to both the prior third quarter and the second quarter reflecting increased domestic demand, with exports remaining at 27% this quarter. Based upon a relative strength of the market we expect to increase overall volume approximately 15% in 2012, over 2011. In the Atlantic and Gulf region, on page 9, prices were higher than the same period last year as fire salvage wood negatively impacted last year's market pricing. Pine stumpage prices declined from second quarter levels due to mix, reflecting strong demand for lower value pulpwood and higher thinning volumes. Harvest volumes were higher than the prior quarter but comparable to the third quarter of the prior year. For the full year, both pine harvest volume and prices are expected to be approximately 6% to 7% higher than 2011. Overall Forest Resources operating income should be comparable to 2011. Now, let me turn it over to Charlie Margiotta to cover Real Estate.

Thanks, Lynn. Real Estage results for the third quarter were slightly improved compared to the second quarter, primarily due to increased sales of non-strategic property. Page 10 details rural and development sales. Volumes slowed from prior quarters, due primarily to the timing of closing. Rural land markets are steady. Page 11 details per acre pricing. The 2552 rural per acre price, reflects a good geographic mix including sales in East Texas and Louisiana. We continue to expect operating income to be below 2011, which included a 6300 acre nonstrategic sale in Washington state for $25 million in the previously mentioned property tax settlement. Let me turn it over to Jack Kriesel.

Thanks, Charlie. Performance Fibers achieved record quarterly earnings driven by strong sales specialties demand and good operating performance. On page 12, you see net selling prices for our two Performance Fibers product lines, compared to the same quarter in the prior year, cellulose specialty prices were up $253 per ton, or 16% primarily due to improved pricing and mix. Third quarter cellulose specialty prices were comparable to the second quarter, for 2012 we continue to expect an increase in cellulose specialty prices of 12% to 13% over the prior year. Prices for absorbent materials which consists principally of fluff pulp, declined $117 per ton, or 14% from the same quarter in the prior year and when comparable to the previous quarter. As a result of weak commodity paper pulp prices coupled with increased global fluff capacity, we believe fluff prices were weakened in the fourth quarter. Moving on to page 13, and looking at volumes. Our third quarter sales of specialties sales volumes increased to 4000 tons or 3% compared to the third quarter of 2011. Year-to-date shipments were comparable to 2011. However, we are now expecting full year's sales volumes to be 1% to 2% above 2011 due to the timing of the customer orders. Third quarter 2012 absorbent materials sales volumes were comparable to the prior year period for the full year we expect volumes to be approximately 6% below prior year, overall we expect another record year for performance fibers with sales specially price improvements more than offsetting cost increases in lower absorbent material prices. We continued to make good progress on our key strategic projects. The cellulose specialties expansion project at Jesup mill is still expected to start up in mid-2013. Total cost however have moved above our original $300 million budget. We'll have much better cost detail after our final engineering is completed later this year and we'll provide an update on our January call. Despite its expected cost escalation, we believe the project return will stay within our original 17% to 20% range. Carl will be providing additional information on expected future sales volumes and cost estimates in a moment. Shifting to our Fernandina mill earlier this month we commissioned our new 22 megawatts turbine generator making us energy self-sufficient and able to sale approximately 2 megawatts of green power into the grid. Now, let me turn back over to Carl.

Thanks, Jack. Now I would like to update some key statistics to assist you in refining your models for Rayonier. We expect depreciation, depletion and amortization of $146 million and a non-cash cost basis of land sold of about $5 million or approximately $151 million in total, which is consistent with our prior guidance. Capital expenditures, excluding strategic investments for timberland acquisitions in the cellulose specialties expansion are expected to be about $154 million compared to 2011 spending of $145 million. This increase will occur primarily in performance fibers on cost reduction and efficiency projects and in silviculture investments in our newly acquired property. We expect 2012 spending on the cellulose specialty expansion to range between $195 million and $200 million. For the full year, we expect interest expense, net of interest income of about $46 million. Now let me update you on some recent developments pertaining to our debt. In October, we amended our $450 million revolving credit agreement to provide for improved pricing additional borrowing capacity and enhanced flexibility the transfer assets among our subsidiaries. Also in October, the TRS 3.75% exchangeable notes principal balance of $300 million was paid with cash funded from our revolver. We expect to refinance this $300 million borrowing with long-term debt before year end. We anticipate our effective tax rate to be in the 23% to 25% range. When you put all these elements together we again anticipate very strong cash flow. We continue to expect EBITDA and operating income to be about 10% to 12% above 2011 and CAD to be between $295 million and $310 million. We are maintaining full-year EPS guidance comparable to 2011. As promised we are provided on page 15, estimated sales mix volumes and cost increases for 2013 and 2014 related to the Jesup C-Mill conversion.…

Hey, thanks Carl. Our performance through the in the first nine months positions us well for another strong year. In Forest Resources we will continue to capitalize on local market opportunities. As Lynn mentioned we've seen some recent increase in the Asian demand for Northwest timber, but we have not realize the improvement we have been expecting in the second half. However, we remain confident about the mid to long-term benefits from the Chinese export market and are well positioned to increase harvest volumes as markets improve. In Performance Fibers, we anticipate another record year driven by strong cellulose specialty market. Also as Jack noted, we expect to complete our cellulose specialties expansion project by mid 2013. And we're very pleased with our new installed $25 million 22 megawatt turbine generator in Fernandina, which allows us to achieve electrical self sufficiency as part of our renewable energy strategy. And as we look forward our Forest Resources, Real Estate and Wood Products businesses have substantial upside from an improving housing market. While we'll benefit in 2012 from improved lumber and have seen some localized indications of stronger sawlog market, we have not yet realized significant benefit from the early stages of the home building recovery. With our deferrals of sawlog harvests in recent years in our holdings of HBU real estate copies. We are well positioned to derive substantial gain as the home market recovery builds momentum. Providing a secured and growing dividend to our shareholders remains a key objective and we anticipate full year cash available for distribution to be substantially above are recently increased dividend. As we execute our strategy, we will continue to invest in timberlands that meet our investment criteria and in performance fibers to drive dividend growth and total shareholder returns. Now with that, I'd like to close our formal part of the presentation and turn the call back to the operator for questions.

Thank you, sir. (Operator instructions) And sir, our first question today comes from Michael Roxland from Bank of America Merrill Lynch.

Thanks very much. Good afternoon, guys. And first question please questioned, we've heard some commentary from some of our contacts about slowing pricing for cellulose specialties. Can you give us a sense on what's happening on the pricing front in the [broader] market for cellulose specialties and how 2013 pricing is shaping up?

Mike, I'll turn this over to Jack, we usually give our guidance on 2013 pricing in our January call, we'll stay to that. But Jack can give you a little bit of flavor to what you're seeing out there in the market today just overall in demand.

I think, generally if you look at to CS that prices and demand continues to be strong. The areas that have seen some weakness are in tire cord, a little bit in the automotive filtration also, but also remember that we have very small percentage of our business in that sector, it's less than 5% of our total CS business.

Got you. And so in the pricing and demand for your key acetate and your participation to less degree in ethers as well, how has that held up?

Yeah that continues to be very strong. Ethers, I mean when you look primarily at the food and pharma section of that. Its demand is growing upwards of 10% in that area on the acetate side and specifically filter applications that's growing at about 2% or so. There's little bit of weakness in the LCD section right now and we expect that turn around.

Got you. And then just last question, I really appreciate all the additional disclosure on your C-Mill conversion. I had originally thought that your production of the commodity viscose was going to be temporary and just used as production sale until you qualifying the product of the C-Mill [tower], it seems like there's it seems like you intend to produce commodity viscose on an on-going basis even if it's a smaller degree, do I have that correct?

You know as we've been sharing with you we've all along have been planning to feather in our viscose or acetate into the market and the 85% level that we've been communicating to you is still consistent and in fact when you look at it from on grade production basis that number is upwards of 90% in 2014 in terms of commitments to the customers.

But Mike, you do see the viscose to help there as we talk about, would be part of our standard startup, again we have to qualify our product for our customers in 2013 and then of course '14 we'll continue to add a lot more volume as noted here in the charts. But Jack's right, we diminish our - most of the viscose out of this in the plan as we go on and did '15, '16, and '17 so there is still some small amount of viscose because we're trying to keep a little bit of buffer there, for our customers growth plan, but by and large we won't have a viscose business.

Got you. Thanks, Paul, thanks Jack.

Thank you. Our next question comes from Joshua Barber from Stifel Nicolaus

Hi, thanks. Good afternoon. Jack you mentioned almost in passing that -- it seems that the cost on the C-Mill conversion has gone up a bit. Can you give us a little bit of range on that is that going up by 2% to 3%. There is going up by you know 10 to 15%.

Josh, you know as I mentioned we're going to have a much better idea what that number is by the end of this year. We'll have all of the detail engineering completed at that point in time so we can give you a good figure in the January call.

Josh, just to add to that we are still comfortable even with some cost escalation that we're still well within 17% to 20% return range on the project.

Okay, thanks. You also had made some comments and we've heard from some competitors about the weakness in the tire cord markets which you referenced check. I know you got to talk before about some of your - on the CS expansion that some of that had to do with entering more into the ethers market and into the high strength viscose market, is that in area of concern today, is any of the volume that's pre-committed that have to be more with high strength viscose than it does with acetates and ethers.

Yeah, I guess two parts for that, one, it is a part of our growth plan with the CS expansion and but that plan doesn't really kick in until 2014 and in a meaningful volumes and we still see both those sectors has been relatively strong. I think if you talk to our customers growth in the tire cord and filtration is 0% to 1% on a long-term basis. So this temporary - this drop right now that they've seen. I think it's just a temporary issue.

Josh as for currently about 79% of our cellulose special reproduction is acetate and even though we'll diversify in our various products still probably mid 70% of the future volume will be in acetate.

Okay. I think Mike had asked about that before, but any primary, excuse me, any preliminary indications on 2013 pricing, as we're going into negotiations is demand still remaining strong or most, is virtually everything going to be sold out? And are you seeing any additional supply that might be pressuring prices into 2013 especially on your very high grades?

I think the key thing you mentioned there Josh, is that we're sold out. We were sold out in 2012 and we were sold out in 2013, so our order schedule is very tight and again the overall demand and our acetates segment and the ether segments continue to be very strong.

Great. Last question, you mentioned the [convert] refinancing currently on the line, can you just give us some idea when you talk about longer term debt, is that more likely to be replaced with a convertible, would you guys trying to go out, 10, 15 maybe longer years in terms of pushing at your - get the right side of your balance sheet?

It's most likely to be a term loan of 7 to 10 years and we'll give you more color - commentary on that it's unlikely to be an exchangeable note or a convert, Josh.

Alright. Thanks very much, guys, good luck.

Thanks, Josh.

Thank you. Our next question comes from Mark Wilde with Deutsche Bank.

Good afternoon.

Good Afternoon, Mark.

Hi Mark.

Lynn, is there any changing - give us just a sense on the ground of what you are seeing in the terms of any flow through from pick up in lumber volumes and lumber pricing that we're seeing.

Yes. Back to the stump what we're seeing is from anywhere between $155 per ton at this point in time but it's still modest and it's been very spot basis and depending on which market that you're going to cross the south, at this point in time we have not seen a continued shift to higher pricing.

Okay, what would you expect to see - you're looking forward over the next year or two because I guess, there are different schools of thought here, one that says there may be a lot of inventory out there. A lot of people have travelled back on their harvest volumes over the last 5 years because volume has been so week. Another school of thought looks up at Canada and sees a lot less wood coming out of Canada maybe the response maybe little quicker, so what's your view?

What we see that the additional upside will come in line with the housing starts. So as you see that ramp up, we have that built into our models between now and 2015 so it's directly in line with housing starts on the domestic side and both domestic and export pricing will be supported by not in time we though, we firmly believe in the midterm that harvest levels are going to drop, due to mountain pine beetles mortality and the decline of the resources and we expect upside there due to that volume not being able to come into our U.S. markets from housing recovery happens.

Okay, and then over on Real Estate side, are you guys seeing any sensing any pick up in inquiries for the land along the coast there and Georgia and Florida?

Yeah. Clearly we're seeing a pickup in interest particularly from, what I'd call regional and local developer builders having translated into a whole lot of sales yet, but clearly increased interest from a year or two ago. So stay tuned we're getting more optimistic and lot of conversation so yeah,, clearly pick up an interest.

Okay, and do you have any sense Charlie, for how long you think it - that might be before we know we start actually see some results in your numbers?

Yeah, obviously hard to call what - if there's good news its builders, developers need a year or two lag time to get a lot in place say to sell pads and so they're - they've got to look out a year or two. What we've also have seen is lot of excess inventory in this area along the coast in purchased. So there's a lot less lots supplied than there was a say two years ago. But still hard to make that call about when we'll see it translate into land sales.

Okay right, that's very helpful. Thank you and good luck in the fourth quarter and as we look into the next year.

Thanks, Mark

Thanks, Mark.

Our next question comes from Steve Chercover from D.A. Davidson

Thanks and thanks to Carl for all the help over the years

Oh, you're welcome.

The creep in costs at Jesup. I'm just wondering if there have been any benefits associated as well I know the return threshold is just pretty much the same but have they found any incremental capacity that they can provide as well?

Steve, I assume you're referring to CSE project and then cost associated with that, that Jack mentioned?

Yes.

Yeah, the [cards] are primarily related to pipe fabrication that type of engineering delays but there is no changes in terms of improving the overall performance of that project it still remains as we planned.

Which is of 1,90,000 metric tons of CS capacity, Jack

Correct

Great thanks, and perhaps the still 80% sold out going forward.

Well actually when we look at this project as I explained that if you take out the upgrade production growing upwards 90% sold out and as following categorical we wanna keep percentage of that unsold so that we can meet our customer growth.

And Steve to your numbers of 80% so you it's really good what we said in the past is 85 and Jack take out which is standard line, if the so it not about a room even as look it for in coming years on that line available for clear additional sales. And your final question on that one, the you know we are not to concerned you will be abled to have replicate the sell your specialty formulas given its pretty much duplicate of your existing line adjusted any difficulty in just getting to the Kamali West Coast had a slam down

Oh no that's very financially very different level of achievement it's much easier to achieve yeah I mean that what would be producing for the first few months on their lines as we work out all the bugs in it

The team near Steve is been making very small amounts for long time so may know there product very well I think to cause point as a company we started a long time ago so we are pretty in history and have something we want to be long term we can come up and shoot down to make that very reflecting

Okay. And speaking of things you want to be in for long term it's nice to lumber strongly making contribution you know are those assets still core assets could you say?

You see we have said that you know, these are the good assets for us we continue to maintain them well and up we expect that they are not core to our business so just leave it at that.

Okay, thanks very much

Thank you, our next question comes from Collin Mings from Raymond James

Hey good afternoon. Most my questions are been answered but just can be acquisitions front a few quarter to go you provided a interesting breakdown of like deals value aided bid on actually close, can be up they look like now you are 2012 I mean looks like you guys kicked up few million dollars of timberlines during the quarter.

I can't exactly updated we been we have been active looking we obviously have been successful or we would have been talking about it, it continues to be very competitive out there and we seem so compression and discount rate we always looking

We will get back to you on an update of those specific numbers.

Okay I need do you guys few million dollars of worth of acres during the quarter

I know the closing in the quarter prior quarter possibly.

Okay, in back you guys worried about that option at that huge by just that fire upon your Saw mills in Georgia and can impact your results going forward

Saw mills the burned that should be back on line by mid year or early second half and the core operating about 45% capacity of that line so its putting about 50-55 million board feet year at that rate compared to the 125 million board feet capacity

Thanks Collin.

Thank you our next question comes from Stuart Benway from S&P Capital IQ Stuart Benway - S&P Capital IQ: Thank you. I was just wondering if you could just give us some details about the timing you said that, the I guess the third quarter benefit is from specialties

Well Stuart well we were saying is that when you look throughout the year the third and fourth quarter and performance typically is highest with the volume and sometimes the recognition depends upon we have lot of goods that are shipped on the ocean, so the timing is some time effected there. Stuart Benway - S&P Capital IQ: So what the Jack said is for the full year the volume would be up 1-2% over 2011, so we just take the year of the date from 1 percent to last year you would be able to triangulate into what the fourth quarter is. In fact we given it to you on page 15 okay right.

I am hearing different things about Europe depending upon I guess what sectors but its not huge for you. But what you seeing out of your opinion can demand this point, overall when we look again at the business that is down somewhat but again that we have not seen any of our orders change at all whether order or in filtration site on the more of graph offer construction segment market, again that's not our area we focus on we focus on Food and Pharma section of so that demand continues to be strong But you certainly Jack evidence of it slow down the economy in Europe which just like everybody else and this we were just been Asia's recently as not customers but just again this the evidence that you know Europe has slow down as china allowed just trading partners so this really haven't seen any effect on our business fortunately. Stuart Benway - S&P Capital IQ: And how about Asia I guess it probably little more stable because it's more

Asia continues to be strong and we look at China and primarily that still growing 2-3% or so in China Stuart Benway - S&P Capital IQ: And do you think there is going to be any positive interact on your demand for on in I guess demand for from the potential shortage of (Inaudible) fire there?

Well unfortunate incident at and it might have an impact depends on how long our facility is I believe its supplies roughly 20% of the SAP worldwide and as no SAP goes into any kind of sanitary product so the longer there out, the more the shortage there is in that product we for short term basis. Stuart Benway - S&P Capital IQ: Okay one question on tax rate, so I guess I mean because of this year to be more normal tax rate and last year was low so that next year would be more like this year than 2011?

Yeah we will update you on effective tax rate for 2013 on January call but directionally, yes 2013 will be closer to 2012's effective tax rate and the primary driver is how much, what is the relative contribution from the taxable REIT subsidiary compared to the REIT and the year-to-year comparisons are sometimes impacted by some non-recurring items Stewart. Stuart Benway - S&P Capital IQ: Okay, thank you. Carl I just want to wish you the best of luck in your retirement.

Well thank you sir.

Thank you. Our next question comes from Chip Dillon from Vertical Research.

Hey good afternoon.

Hi Chip.

Carl it seems like and Paul you guys have done a good job when you have - in the financing practices - it was interesting that you mentioned that you would not consider convert and you have always been able to do these converts with very high conversion premiums. I am just wondering why you wouldn't consider that now is it just that those opportunities don't exist right now or you like the cost to straight money wouldn't rate so low?

There is a couple of reasons. One, we manage our capital structure by entity. For example, this debt resides in the taxable REIT subsidiary and our projection is that we'll be generating significant free cash flow in the near-term in the taxable REIT subsidiary. So we wanted to have the ability to pay down debt without significant make hold provisions, so that's one reason why a term loan maybe more acceptable in this particular situation. The good news is we have all sorts of financing available to us. We could access the long-term bond market, the convert market or the term loan market. So we have put all of that on the table for valuation but are leaning towards the term loan, because it offers more flexibility in the near term.

Got you and then as we look at the next couple of year, in the, completion of the CS project. Can you give us and let make sure I get this right, you are basically saying CapEx this year is 349 to 354 all-in, so just verify that. And what should we kind of expect it to be in '13 and '14 barring any major changes?

Well the way we think about it Chip is let's segregate the strategic capital from the ongoing capital. So this year we said approximately $150 million to $155 million will be the ongoing CapEx and remember again that that includes some value add projects. Jacks Performance Fibers business for example this year included the remaining dollars with the new generator etcetera. So, and then as Lynn's business grows her investment in replantings etcetera will rise a bit. So probably I think we have said in the next several years with respect to a comparable number to the 150. You know think about probably 125 to 150, and we'll update you on that on the call. Also we'll update you on the remainder for the cellulose specialty expansion project, the remaining spend for 2013 on the January call, but with respect to Timberland acquisitions, that's always lumpy and it's very hard for us to predict how much capital will be employed in those acquisitions at particular year. So I think its useful Chip to separate the strategic capital from the ongoing capital.

Got you. I know the last thing you guys need to probably do is expand your TRS operations, given that you are doing that now. But any thought to - are there any strategic possibilities that it may make sense to [actually would] integrate into a saw mill or tube and beyond what you have now, especially given that we are seeing evidence that the margins and I know this might be temporal and maybe not that the margins at the mill level seem to be quite strong?

Yeah, Chip I think the short answer to that is no there may be some opportunities out there. Again as you see our business and our strategy move forward, we continue to migrate to less commodity focused manufacturing business into a higher value, higher specialty type of products that gives our shareholders a good steady and attractive return. So moving into a greater position on saw mills is probably not something we would pursue. Although there is probably is some opportunities out there for someone.

Got you. Okay, thank you.

Thanks Chip.

Thank you. Our next question comes from Paul Quinn with RBC Capital Markets.

Yeah thanks. Thanks for actually taking the question. Just I guess we'll wait for the next quarters results and to give us an indication on specialty dissolving pulp pricing but maybe if you could give us a feel of what you are seeing in the commodity, do you see markets right now.

Paul in the commodity viscose markets, right now we are seeing prices in the range of $900 to $1,000 a ton. And then at that price range the majority of the converted Chinese facilities. They are into cash, as far as we know, because it's a very expensive self. It almost might be considered to be a floor at that level.

Okay and do you see the market picking up. Going forward here as you while you are producing that product.

I think generally people think that the commodity viscose market grows at upwards of 10% per year and so you would see some pickup, but as everyone knows there is a lot of capacity out there now and so I am not certain that even if the demand picked up slightly that you would see much of a change in pricing in 2013.

Jack, just you gave some guidance on lower fluff pulp pricing in Q4 and I think a competitor came out and said, they expected a $3 a ton drop. Is that sort of in the ballpark that you are looking at?

Yeah I think so $20 to $30.

Then just switching over to Forestry for Lynn. I sort of missed this when you were talking about the northern region, it sounded like you are seeing modest increase in demand from China, but you expect 2012 to be below 2011 even though volumes will be up.

Yes our pricing will be lower Paul. So total will have upside on our volume. We will have harvested 15% more volume, but a portion of that has moved to the domestic market and our overall pricing is going to be somewhat lower on a per ton or per MBF basis than 2011.

Okay that lower contribution is that a function of mix or is that a function of less export sales?

It's less export sales.

Okay, great thanks very much guys.

Thank you. Our next question comes from Joshua Barber from Stiffel Nicolaus.

Just one quick follow-up. When we are looking at your cost expectations in 2013 and especially in 2014 on the CS side. What they are assuming about logs, especially vis-a-vis what you are expecting from a housing recovery for the next couple of years?

I don't know. If we are going to push speculation out there, but I think we just have some standard inflationary measures built into that logging pricing going out into 2013 or '14. We can give you more color on that in the next time follow through in January. I don't think we have anything out there that we disclose at this point.

Lynn always wants more and Jack wants less Josh.

We don't like to have less on the fiber side and more on the timber side, but I don't know that that happens..

As you know its weather dependent in terms of log pricing versus fiber pricing, so assuming normal weather patterns, which is normal inflation type levels, diesel cost things like that.

Josh keep in mind most of our [procurement] is of hardwood and not softwood so it's not a quite a direct trade off towards and then just looking at in terms of her business as well.

Okay, great. Thanks again and Carl good luck.

Thanks Josh.

Thank you. Our next question comes from Mark Wilde from Deutsche Bank

I'd just, I would like to come back to that C-Mill conversion for a minute for next year, because it - and maybe you can just help us a little more with kind of puts and takes as we think about what this means financially next year, because it looks to me like if the transition year here is going to be a drag at least on earnings coming out of the C-Mill and I wondered if you can just help us think about sort of, you'll get some benefit it looks like from moving some of the volume from (Inaudible) at least commodity viscose. Looks like that's probably worth about $200 a ton right now, but at the same time there is less volume and there is higher cost per ton.

Well we'll put all the dots together in January for you Mark, but you know that obviously the missing variable here is what will cellulose specialties pricing be for 2013, but we would rather not speculate as to what the bottom-line will be until we get a little, until we get on the call in January, but I think you have enough data here to do some what if's with various assumptions Mark.

It almost seems like Carl that cellulose specialties volumes that you have laid out here for 2013, you they are pretty modest. This is only 5,000 tons, so that probably the bigger issues might be to what kind of commodity viscose price we can assume for next year, because that's going to be a much bigger piece of the mix and where the price for pulp is.

There is no question 2013 will be a transitional year. When we gave you the, what the overall outlook is once we are stabilized you know out there 2015, 2016, remember back to the Investor Day charts and in all material respects the return are still within that 17% to 20% range and this ramp up is very consistent with our model.

Mark, again you look at - I know you are trying to narrow down on the variables here with, certainly we got it there on total volume and that's one variable for the teams ability to do better than that. There is some upside and of course there is on the flipside of that. Then as you noted CFs volume could be potential more than the 5,000, yes and Jack's comment I think he guided a bit more than that and that's a possibility out there. Then the other one certainly is just viscose pricing where that will be in 2013. So they part of the key variable pieces that you put your model together.

Okay, alright that's helpful Paul. Carl, and till your retirement is this the last call, so to speak.

This is my last call, yes.

Well listen enjoy whatever you'll end up doing.

Thank you sir.

With that I should add to everybody benefit. We thank Carl for his time. He is stepping down at year end as our Vice President, Finance. He has done a tremendous job for the Company and a tremendous job for creating value for our shareholders. So we do thank Carl for everything he has done.

Thank you, Paul.

(Operator Instructions) Our next question comes from Mark Weintraub from Buckingham Research Group

You kind of were getting to, I too was going to ask on the math on the C-Mill conversion in 2013, because I mean it did seem to me as well, you would probably need commodity viscose to be up several $100 from where it is. For just the C-Mill conversion part not to be a drag in 2013, of course that doesn't include benefits you might get from higher chem sell prices. I don't think you said anything that would, whether you are trying to dissuade mew from that in answering Marks prior question. Is that fair?

We would rather not comment specifically, you know there are obviously variables on the pricing side that we haven't commented on today and we think it's premature for us to go there Mark.

When you had the commodity viscose that you referred to as being in the $900 to $1000 range. Is that the 60,000 tons that you would likely be selling is that the same product.

Yes it is.

Okay. Thanks very much. Good luck Carl.

Thanks Mark.

Thank you and at this time I am showing no further questions.

Okay, thank you everybody. I would like to thank everybody for joining us today and if you have any follow-up questions please contact Ed Kiker or me. Thanks again and have a great day.

This does conclude today's conference. Thank you so much for joining, you may disconnect at this time.