Welcome and thank you for joining Rayonier's Second Quarter 2015 Teleconference Call. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections you may disconnect at this time. Now I'll turn the meeting over to Mr. Mark McHugh, Senior Vice President and CFO. Sir, you may begin.

Thank you and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. Our earning statements and financial supplement were released yesterday afternoon 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 and Form 10-K filed with the SEC lists some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page two of our financial supplement. With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO. Dave?

Thanks. I'll make a few overall comments before turning it back over Mark to review our financial results and then we'll ask Doug Long, our Vice President of U.S. Operations to comment on U.S. Timber results. I'll discuss our New Zealand results. And following the review of our Timber segment, Chris Corr, our Senior Vice President for Real Estate will discuss Real Estate results. While we remain on track to achieve our full year adjusted EBITDA guidance, our second quarter results were well below last quarter and the prior-year quarter as we had anticipated and discussed on last quarter's call. Our Southern Timber segment had another solid quarter as we continued to see strong pulpwood demand in our core market areas and slowly improving demand for sawtimber. Wet weather conditions across the South benefited pricing, but it also restricted harvesting in certain areas. In the Pacific Northwest Timber segment, we generated lower volumes as we continued to implement our previously announced strategy. Pricing in both the Pacific Northwest and New Zealand continued to be challenged by weaker demand coming from China. Real Estate results declined significantly this quarter as anticipated, primarily due to the timing of closings and the absence of large, non-strategic timber sales. During the quarter, we continued to make progress in executing our strategy to enhance the value and marketability of selected development properties. Yesterday we also announced that we've closed on $550 million of new credit facilities, which will be used to refinance existing debt and to fund an anticipated recapitalization of our New Zealand joint venture. By way of background, our New Zealand JV which we've consolidated since increasing our equity stake to 65% in 2013 was saddled with relatively expensive debt at a rate of about 6.5%. The fact that this debt resided in a subsidiary level and was denominated in New Zealand dollars also added unnecessary complexity to our capital structure. We recently made the decision in consultation with our minority equity partner to recapitalize the joint venture with an equity infusion. We were pleased that we were able to provide the full amount of this equity infusion and thereby increase our stake in the JV at what we believe is a favorable valuation, as well as foreign currency exchange rate. Pro forma following the equity infusion, the JV will be debt free and Rayonier will own approximately 77% of the entity. On a consolidated basis, we estimate that this recapitalization will yield approximately $5 million in interest expense savings annually. This transaction values the JV at approximately NZD 706 million or $466 million at an assumed exchange rate of $0.66 per New Zealand dollar. So with that, let me turn it back over to Mark for a brief review of our financial results.

Thanks, Dave. Let's start on page five with our financial highlights. Sales for the quarter totaled $116 million while operating income was $6.5 million and our net loss was $1.5 million or a loss of $0.01 per share. On a pro forma basis, we are breakeven for the quarter. For comparison purposes, our income from continuing operations excludes the income of the discontinued Performance Fibers business which was spun-off in June of last year. Our pro forma results also exclude a second quarter 2014 adjustment of $3.8 million for costs related to the spin-off and a second quarter 2015 adjustment of $1.5 million for costs related to our ongoing securities litigation. The reconciliation of our pro forma results to the nearest GAAP metrics is provided on page 17 of the financial supplement. Adjusted EBITDA of $33 million for the quarter was well below last quarter and the prior year quarter, reflecting lower income in our Pacific Northwest and New Zealand Timber segments, as well as lower income in our Real Estate segment due to the timing of closings and the absence of any significant non-strategic timberland sales. On the bottom of page five, we provide an overview of our capital resources and liquidity at quarter-end as well as a comparison to prior period. Our cash available for distribution, or CAD, for the first six months was $52 million compared to $40 million in the prior year which included tax payments related to the Performance Fibers business and cash interest paid on a higher level of pre-spin debt. A reconciliation of CAD to cash provided by operating activities and other GAAP metrics is provided on page nine of the financial supplement. We closed the quarter with $92 million of cash and $752 million of debt. Our net debt of $661 million…

Thank you, Mark. Good morning. Let's start with page 10 in the Southern Timber segment. We had a solid second quarter in Southern Timber with adjusted EBITDA of $24 million versus $20 million in the prior year quarter. Total volume was approximately 1.3 million tons versus 1.1 million tons in the prior year period. Pine volume was favorable due to stronger markets on the Atlantic Coast partially offset by reduced volumes in Texas and Louisiana as a result of unseasonably wet weather. Our percentage mix of sawtimber was approximately 30% which is 3% less than the prior-year period as we focused delivered crews more heavily on thinning. Pine sawtimber prices were up 4.5% and pine pulpwood prices were up 1% over the prior year period. Wet weather conditions in Texas and Louisiana during the quarter restricted supply allowing us to capture some favorable spot stumpage pricing, which contributed to the sawtimber price improvements over prior-year periods. Improvement in pine pulpwood prices was primarily driven by a change in geographic mix resulting from a reduction of pulpwood volume from our Alabama and Mississippi markets which have a lower price point than our Atlantic Coast markets. Non-timber income in the Southern Timber segment also improved by about $1.9 million primarily as a result of recognizing our hunting lease income ratably over the full year as discussed on last quarter's call and from some increased mineral income. Although we did see an expected decrease in volume in Q2 versus Q1 2015, we still anticipate reaching our 2015 goal of 5 million tons of pine and 360,000 tons of hardwood. Improved ground conditions in the Gulf area are boosting production and we expect to see an increase in the volume in third quarter. Now moving to Pacific Northwest Timber on page 11. In the…

Thanks, Doug. Page 12 shows results of key operating metrics for our joint venture New Zealand. Adjusted EBITDA of $6.2 million decreased from $9.9 million in the prior year quarter as an 11% increase in harvest volume was more than offset by lower domestic and export product prices and a reduction in the New Zealand dollar exchange rate. Export and domestic prices declined significantly in the second quarter due to weaker demand from China. As we progress through the balance of the year, we expect continued near-term demand pressure in China based on some stubbornly high log and lumber inventories, as well as tight credit. Offsetting this is a strong market in Korea and reduced shipments to China from both New Zealand and the U.S. Pacific Northwest. Following what we expect to be a slightly softer market conditions in the third quarter, we anticipate markets improving by the end of the year to current levels. We also continue to expect that total 2015 volume will be roughly flat versus 2014. In our Trading business, volumes and prices were lower compared to last quarter and the prior year quarter due to continued weak demand in China. I'll now turn this over to Chris to cover Real Estate.

Thanks, Dave. Let's turn over to page 14. As we anticipated and discussed on our call last quarter, second quarter sales for the Real Estate business were light due to timing of larger transactions. In the Improved Development category, we closed our second sale in the Belfast Commerce Centre, the Caesarstone totaling 19 acres. Recall that the Belfast Commerce Centre is a 936-acre rail-served, Class A industrial park located approximately 20 miles south of Savannah, Georgia. Caesarstone, an Israeli-based international company leading the countertop market selected the Belfast Commerce Centre for construction of its third plant which is its first plant in the U.S. near the end of 2013 after considering dozens of alternatives across the Southeast. After more than a year of construction, Caesarstone opened its new 285,000 square foot manufacturing facility in May and is already making plans to expand. We think it is a great anchor and has validated the Belfast Commerce Centre in the marketplace. To say it another way, it has put us on the map. The project is getting a lot of attention as a result, and interest by new prospects has been high since Caesarstone's opening. Now let me shift to provide a brief update on the East Nassau mixed-use project that we announced on our call last quarter. As a reminder, East Nassau is a proposed mixed-use community located north of Jacksonville near the interchange of Interstate 95 and Florida State Road A1A at the gateway to Amelia Island and only 13 miles to the Jacksonville International Airport. The project is a 285 net acres in size and is planned for both residential and commercial uses. Progress continues on securing final regulatory approvals for the overall project and we are on track with the development of the 27-acre site for a new…

Thanks, Chris. First I'll make a few comments to update you on timberland acquisitions. We previously announced the acquisition of two high quality properties totaling 18,000 acres, including a little over 12,000 acres in Louisiana for $25.5 million and 5,600 acres in Northwest Oregon for $34 million. These properties are both very well stocked properties and highly productive that will be accretive to CAD. Specifically, the Louisiana property has a sustainable yield of roughly 3.7 tons per acre per year relative to our Southern portfolio average of 2.9 tons per acre per year or about 25% higher. While the Oregon property has a sustainable yield of roughly 780 board feet per acre per year relative to our Northwest portfolio average of 430 board feet per acre per year, or about 80% higher. We continue to believe that focusing our acquisition efforts on high quality, highly productive properties such as these will generate the best long-term returns. These transactions reflect our disciplined growth strategy to focus on select acquisitions that upgrade our land portfolio, grow our sustainable harvest, and contribute to growth in cash flows. During the quarter, we also closed on three smaller transactions in Florida, Georgia and Mississippi, totaling just under 4,600 acres for approximately $6 million. Year-to-date we've closed on eight transactions totaling 35,000 acres for approximately $88 million. We continue to see an active timberland market and we'll follow a disciplined process to evaluate acquisition opportunities as we execute our growth strategy. As we look through the remainder of 2015, we expect continued strong pulpwood demand in our core markets and improving saw timber prices over the long-term, but limited upside in the near-term as end market lumber prices continue to be constrained. We also anticipate continued near-term weakness in the China log export markets, but slowly improving conditions later in the year. Long term we're confident that China will remain an important source of additional demand from our logs from the Pacific Northwest and New Zealand and we like our exposure to these markets and the optionality they provide. In our Real Estate business, we are excited about the strategy to unlock value in our coastal corridor property and are encouraged by the progress we're seeing within those, both our Belfast Commerce Centre and East Nassau projects. Finally we are pleased to have closed on our new debt facilities. We expect that they will enable the recapitalization of our New Zealand JV and increase our long-term exposure in the strategic asset and its market, simplify its structure, result in material reduction in interest expense and enhance our strategic flexibility going forward. I'd like to now close the formal part of the presentation and turn the call back to the operator for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from the line of Ketan Mamtora of BMO. Sir, your line is now open.

Good morning.

Morning.

Morning.

Just first question on New Zealand. Can you just talk about why you think this is sort of the best use of capital, and over time, do you think the plan is to gain 100% ownership there?

Well, I think there's two pieces to the question. The first is recognize that we were – we were really looking to improve our interest expense over there. With a 6.5% debt, we felt that we could improve upon that by essentially taking out that debt in the U.S. and so that's the main element to that. In the process of that, we were able to increase our ownership by paying the full amount of the capital infusion. And again, I just repeat that we feel that this is a good market for us to be in from a diversification standpoint. It improves our optionality, whether we stay at the existing ownership level or increase it. We feel that we're doing this transaction in U.S. dollars, taking out New Zealand denominated debt at a point where the exchange rate is about a five-year low. And so, we feel like that was a very advantageous timing for us. And we also recognize that New Zealand is in the early stages of some discount rate compression as offshore capital has flowed into that market, not dissimilar from the U.S. and we feel that increasing our equity stake gives us more exposure to that trend as it continues to evolve.

Got you. That's very helpful. And second question on Russia. Have you seen any change in competitive dynamics over the last three months to six months, especially given where the ruble is right now? I know last quarter you talked about not seeing any increase in shipments via ocean. Have you seen any change there?

We continue to see that same trend where the Russian supply has not been able to respond to market conditions, and I think that's just a function, as we discussed before, of some challenging infrastructure. And so Russian supply has not been gaining market share.

Okay. That's helpful. And over the next three to five years, do you think is it possible they could improve infrastructure, and shipments could increase quite a bit, especially if the ruble stays at current levels. Do you think that's a realistic risk?

No. I think the infrastructure issues are much deeper and longer-term in nature. So I think it's going to take a considerably longer time to see any material improvement that would translate to more shipments.

That's very helpful. Last question, you've given the U.S. Timber CapEx in the presentation. I'm sorry if I missed this, but can you break that out between the Pacific Northwest and U.S. South?

I'm sorry could you repeat the question? We're not getting much volume on this end.

Oh, I'm sorry. My question was on the U.S. Timber CapEx. I saw that you've given that in the presentation. I'm sorry if I missed it. But do you have a breakdown between Pacific Northwest and U.S. South?

We don't provide the breakdown. We provide it between USFR, or U.S. Forest Resources and New Zealand. We can certainly provide some guidance around that. I mean, the reforestation expenses I would say would be roughly equivalent between the two regions as it relates to the acreage in each. It's more expensive to replant an acre in the Pacific Northwest, but you're replanting fewer acres as a percentage of your total acreage in that region. And so I would say that it's roughly equivalent between the two. The property taxes and lease payments would be the significant majority, those would be in the U.S. South. The property taxes are generally much lower in the Pacific Northwest and we don't have any leased property there. And the allocated overhead would be roughly equivalent to kind of an allocation based on sales.

Got you. That's very helpful. I'll turn it over. Thank you.

Thank you. Our next question comes from Mr. George Staphos of Bank of America Merrill Lynch. Sir, your line is now open.

Hi, everyone. Good morning. Thanks for taking my question. I guess maybe starting off with New Zealand, those numbers are not huge in the whole of Rayonier but I noticed your export volumes were up quite a bit. I think something around 30% or so, yet you mentioned in your presentation and certainly you had in your slide deck that prices were down quite a bit. And so can you help us reconcile why you're meeting demand in the market and supplying as prices are down quite significantly? And would there be any thought to maybe removing some supply from the market given what's been happening with prices?

Well, I think to some degree, this gets back to the operational flexibility that we felt the recapitalization provides. The New Zealand joint venture had debt of roughly a third of its asset value and that does preclude some operational flexibility. And one of the reasons that we felt it was important to make this change from a capital structure standpoint is it does give us greater flexibility going forward in weaker market conditions to fluctuate harvest in a downward direction. And that flexibility was less available to us in the past.

Okay. I mean, that's fine and I understand that greater flexibility is better than less flexibility, but just specifically and perhaps I'm just missing it. Again, volumes were up, roughly speaking, 50,000 tons in the second quarter and again that's roughly 30%. Why would you do that with prices being down roughly speaking $30 a ton? Aside from the operational flexibility, why is that a good operating decision from the Rayonier standpoint, guys? Just curious.

Well I think we're looking at this market-by-market. So I don't think the volume increase is quite that large.

And I think it's also fair to say that we've talked a lot in the past about operational flexibility and the ability to kind of modulate harvest to market condition. But there is there some limit to that. I mean, you have a harvest schedule, you have harvest crews that you're employing that you have to keep busy or they go elsewhere. And so, while you do try to flex volume up or down dependent on market conditions, there are some limitations on the magnitude to which you can do that. And so, specifically, as it relates to export sawtimber in New Zealand, I'd have to get back to you on kind of how those factors impacted it. But again, you can't just decide we're not going to be in the market this month because that's just not how the business operates.

Okay.

And recognize too that you're dealing with – we're selling wood on a delivered basis. So you're dealing with very material reduction in ocean freight charges that have reduced, or that have eaten into a fair bit of that price reduction.

Okay. That's clear and I appreciate the additional clarity on it and your patience with the question. Second question I had, just on Southern prices. I want to make sure that I heard you or read it correctly. So should we assume that Southern sawlog prices are relatively flat sequentially over the balance of the year, or flat on a year-on-year basis versus 2014 levels in third quarter and fourth quarter, again, to the extent that you can predict anything like this?

Sure. I'll take that question. Basically, we do see sawlog prices being relatively comparable to the second quarter of this year. It's a real dynamic market right now, and across our geography, we're seeing pricing impacted by a lot of different local factors including mill curtailments, improvements and used products for customers and log availability from fire restrictions in the Pacific Northwest or whether in the South. So, our teams look at these markets every week and try to do their best to match what they think is going to be the value there. So we do think that overall that taking up all the variables at play, look in these local markets, and what can happen that we'll see comparable pricing for Q2.

And would it be safe to say, given that the weather-related supply restriction that you had in 2Q, that's now a thing of the past, right? There should not be much if any benefit from that in 3Q?

In the South, it has reduced. Although we did sell stumpage in Q2 that will be harvested in Q3. So we'll still have some of the benefits of those pricing that we sold at that time. So the sales will still be harvested into Q3 and Q4. When we saw the opportunity, we did sell stumpage for it. One of the benefits of stumpage market is being able to sell that wood at a time and then have that harvested. And then in the Northwest, we have more other restrictions from a fire that we're seeing particularly impacting prices.

Sure. Two questions from me and then I'll turn it over. First of all from your vantage point, are you seeing any reduction in the pace of growth in multi-family projects, or demand for land for multi-family versus single-family and residential. Are you seeing a continued shift as we've been seeing in the broader macro data? Again, from what you see within your land for multi-family. And then, my other question, can you remind us the Northwestern Oregon purchase, that was a relatively large price per acre. You mentioned that they're well stocked but was there anything else that was particularly attracted to you about those lands? Thank you.

Hey, George. This is Chris. On the question about multi-family, we are not seeing any slowdown. We've got a site within our project. We expect it to be an early part of the project and we've got strong interest in it. And so from our vantage point in Northeast Florida, it's still the strongest segment.

And we're still seeing the multi-family leading the recovery here from a mix standpoint.

And this is Mark. I'll take the question on the acquisitions and I'll let Dave add any additional color. But really, what's driving those outside values, because it was a high per acre price, is not so much of the inventory stocking but the productivity. There tends to be a view in this space that values are really kind of driven by inventory stocking. And while it's good to get a property that's well stocked, it's really the underlying factory and the productivity of that factory that has a – it's a much more significant driver of value. And so, if you have a property that's overstocked and you have sort of a one-time inventory take down opportunity, that's going to be sort of a fixed value as opposed to a perpetual value. What was unique about the property in Oregon was really its productivity. As Dave mentioned in his prepared comments, that property is generating a sustainable yield of about 780 board feet per acre per year relative to our existing Northwest portfolio, which is about 430 board feet per acre per year. So it's about 80% more productive than the rest of the Northwest portfolio. And I would say relative to any comparable large site portfolio in the Pacific Northwest, it's going to have a significantly higher productivity. It was also almost exclusively Douglas-fir, I believe 95% Douglas-fir. And the inventory stocking on that particular property can be a little bit misleading, because keep in mind, we don't count inventory as merchantable in the Northwest until it's 35 years old. This property has such a high site index and such high productivity that a lot of the harvest is actually occurring on that property inside of 35 years. And so a lot of property – or a lot of that standing inventory may not even sort of reach an age 35 before it gets harvested, or if it does it's getting harvested relatively quickly thereafter. And so if you looked at a pure inventory stocking, kind of merchantable inventory per acre, it may not look that advantageous relative to the rest of the portfolio, but you have to keep in mind the proportion of it that's actually going to be over 35 years because of the productivity.

And it's also very close to Longview, which is the largest export port and some very good domestic mills.

Okay. Well, that makes sense too as well. I'll turn it over. Thanks very much.

Thank you. Our next question comes from Mr. Collin Mings of Raymond James & Associates. Sir, your line is now open. Collin P. Mings - Raymond James & Associates, Inc.: Hey, good morning guys. Couple of questions. I guess first, Dave, just – really a lot of activity over the last few months. I mean you've been buying timberland, repurchasing shares, now increasing your investment in New Zealand. Just particularly with shares now trading well below NAV, just curious your thoughts about how you're thinking about capital allocation priorities from here?

This is certainly one of the reasons that we launched a share buyback program in the month of June. That program is on a 10b-18 program. So while we're in a trading window, that can't be – or closed window that certainly can't be altered. But we view that as one of the capital allocation elements that we want to focus on during this time when we believe the shares are trading below NAV. Having said that, we also think it's important to be looking for opportunities on the acquisition front where we can improve the quality of our assets and improve our cash flow per share. And we really feel that they both have a role in our capital allocation priorities, and that's why you see us continuing to allocate dollars to both. But, I think, this is a very dynamic equation. We continue to have these types of discussions with our board every time we get together. Collin P. Mings - Raymond James & Associates, Inc.: Okay. So going forward even with the share price where it is now kind of expect a balance of both repurchases as well as acquisitions. Is that fair?

Yeah. I mean, Collin, I think it's hard to specify precise targets. We want to be nimble. We want to be opportunistic. Obviously when the share price is lower, that trade-off can shift the balance in share repurchases. When we're seeing really good opportunities for CAD accretion on a particular acquisition, we may still take advantage of those opportunities. And so, it's hard to specify precise targets other than to say we want to be nimble, we want to be opportunistic and it's an ongoing evaluation for us. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Well, I guess, Mark, maybe just in context of balancing these different priorities and kind of the increase in leverage. Maybe just can you talk to us about what metrics you're trying to manage the balance sheet around?

Yeah. I can talk about the metrics that I think that we want to manage the balance sheet around, but then there're also metrics that I think we have to manage them around to be consistent with how the rating agencies are looking at the company. And so I think that in terms of leverage, and in terms of our comfort with leverage, I would say that we tend to look at it as a sort of a debt to asset value. I think that's fairly consistent with how the real estate sector as a whole would tend to look at leverage and comfort levels. Now on that basis, we're very lowly levered. I mean, even if you looked at our enterprise value, which I don't think is reflective of our asset value, I think it's below, but we are 17% net debt to enterprise value at quarter-end. And so I certainly think we have some room for increased leverage there. On your point about leverage having increased, I do think it's important to note that by virtue of these transactions that we announced yesterday, our leverage didn't really increase. It was essentially all for refinancing of debt. The capital infusion in New Zealand, keep in mind, was being used exclusively to repay New Zealand denominated debt that was consolidated in our balance sheet. And so, again, the agencies look at that as debt of Rayonier. The outside market looks at it as debt of Rayonier because it is consolidated. And so while we did provide 100% of the capital infusion to essentially take out our JV partner's share of that debt, it was not a levering event per se. And so about $160 million is being use to repay that NZD 235 million of debt which came at a very attractive exchange ratio. Again, as Dave mentioned, we're at a five-year low on the exchange ratio. It wasn't too far back that that was over NZD 0.80 and now it's at about NZD 0.66 or NZD 0.65. $131 million was going to refinance our exchangeable notes which are coming due later in August. Those are at a 4.5% coupon relative to 3.3% that we got on the new facilities. And about $45 million was being used to repay debt outstanding under our existing credit facility. And so again it's important to note it wasn't a levering event, it was effectively leverage-neutral. Collin P. Mings - Raymond James & Associates, Inc.: Okay. That's a fair point, Mark. And then, I guess maybe just putting that in context of interest expense. What are you thinking about as far as kind of a run rate for interest expense going forward?

Well, I think if you look at our current capital structure on a cash basis, I mean we really simplified the capital structure quite a bit. I mean we now have two significant pieces of debt outstanding; our outstanding senior notes and the new bank facility that we just put in place. And so if you take the two of those and then we've got some other modest debt, some debt that came with an acquisition and I think some revenue bonds that are outstanding, our run rate – interest expense based on today's pro forma capital structure, keep in mind that we haven't deployed the capital in New Zealand yet, but assuming pro forma for all these transactions, it's going to be right about $26 million. Collin P. Mings - Raymond James & Associates, Inc.: Okay. That's helpful. And then I guess just switching gears a little bit. Doug and Dave, I mean in the press release and in the prepared remarks you just highlighted again kind of the weak export market, but then talked a little bit more about domestically potentially getting some lift as it relates to the fire restrictions and some restrictions on log supply. I mean just from current levels, what type of overall lift are you thinking about in the Pacific Northwest going into the fourth quarter? Because it does sound like you think that there is going to be a lift going into the fourth quarter, but can you maybe put some color around what sort of magnitude of a lift you're expecting?

Yeah. Collin, this is Doug. I think what we're seeing is with the potential weakness that we talked about in Q3 with the export market and then the potential upside that it might have on the fire in the Pacific Northwest, we're really looking at it also being very comparable to the second quarter basically. So we do think there'll be some potential uplift but there's some puts and takes in there with those markets. So as I said before kind of very localized right now and very dynamic market. So really, we're looking at things being comparable to where we are in the second quarter with overall pricing, just differences between domestic and export offsetting. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Are you thinking that (38:33) for the third quarter and the fourth quarter, or are you just kind of providing color on third quarter right now?

Primarily color on third quarter but – primarily color on third quarter. I think I'd leave it at that right now and I'll let Dave talk to you.

Yeah. And I would say too, Collin, keep in mind that the U.S. Pacific Northwest has taken a large part of the volume reductions coming into China. Typically, you're going to see 10 to 12 boats a month coming out of the Pacific Northwest. That's down to about four right now and that's a mixture of market and some of the impact from these fire closures. And so it really is going to depend on how extensive these are, how long they last, and the role that domestic mills have from an inventory standpoint. I think a lot of mills have loaded up on inventory and so we're likely not to see an effect for quite some time, but we're certainly not banking on any material changes in price as we go through the balance of the year, just based in part on the situation in the domestic housing market. Collin P. Mings - Raymond James & Associates, Inc.: Okay. All right. And then just one last one for me and then I'll turn it over. As far as just on the litigation expenses, I know it can be kind of lumpy quarter-to-quarter but is the amount registered this quarter close to a fair run-rate? And then, maybe just if you can provide any update on the proceedings on that front.

Yeah. There's not a lot that we can speak to from a run rate standpoint. I mean recognize, there's three components to this. There is a class-action lawsuit. There has been a lot of work on that associated with an upcoming motion to dismiss that case. And so, we're certainly seeing some activity there. Then the second component of it is a derivatives claim, and that has its own course of action. And then the third piece is the SEC investigation. And all three of these pieces have different characteristics that contribute to that run rate, but it's a very hard thing for us to make a projection on at this juncture. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Thanks. I'll jump back in the queue. Thanks.

Thank you. Our next question comes from Mr. Paul Quinn of RBC Capital Markets. Sir, your line is now open.

Yeah. Thanks very much and good morning. Just a few questions here. If you could help me reconcile on the New Zealand, I guess, increased ownership. In 2013, you spent the $140 million for the 39%. We spent $160 million now for 12%. What am I missing here?

The $160 million is for the full repayment of the debt. So it's really more like $55 million U.S. for the 12%.

Yeah. And even that, Paul, is not directly comparable because keep in mind when we bought the 39%, we were buying it from an existing equity partner in the JV. And that JV was significantly levered at the time. This was a capital infusion into the JV to repay the debt. So the pro forma equity value of the JV reflects that repayment of debt. And so you can't look at it on sort of an apples-to-apples basis or kind of look at what we paid per percent relative to what we paid per percent in this transaction because of the different nature, the primary equity versus purchasing secondary equity of a levered entity. That's why we try to provide a breakout of the math, but on a U.S. dollar basis, we think that this was a more advantageous acquisition than the one we made in 2013.

Okay. That's helpful. And then just on the U.S. South, it sounds like you're expecting flat prices in the near-term. One of your competitors is out there expecting the market to turn when you get starts at around 1.3 million tons. Have you done any similar analysis? And what are you expecting sort of mid to long-term?

Yeah, we have. If you look in our latest investor deck, there's an interesting regression in there that looks at housing starts and pricing and it really does confirm that 1.3 million housing start inflection point. And sort of below that you tend to see a lot of data points that are below trend, above that above trend. And so, I think you got two things to focus on. One is as we get closer to that inflection point, we should start to see more price elasticity. And then the second piece gets back to the mix between multi and single-family, and that's another key piece of this, is as we increase starts we're likely to see that mix start to improve from a single-family standpoint. And that probably reflects on that regression in terms of the demand for lumber.

Okay. And hazard a guess as to when we get to the 1.3 million tons?

Well, I mean this has been a delayed housing recovery for quite a few years. And I think that we still feel that we're some ways off when you just look at some of the broader demographics around job creation, income growth and the like. And so, we certainly don't see this as a near-term activity and we're planning for it to occur, but not banking on it occurring fast.

Okay. And then just on real estate, it sounds like Chris is comfortable with beating (44:19) the 2015 guidance. If you could give me a recollection what that guidance is in 2015 for real estate? And how that splits between Q3 and Q4?

Yeah. This is Mark. Going back to the guidance that we provided after Q4, adjusted EBITDA guidance for real estate was $47 million to $57 million. I'd say right now we're trending toward the higher end of that and we're anticipating a comparatively strong third quarter.

Okay. That's great. And then just lastly I too was mystified with New Zealand harvest up with prices down. You said it increased flexibility. I don't quite understand that, because you've got majority control of the JV. How do you have increased flexibility now that you've got a higher percentage?

Well, keep in mind we had bank debt at the New Zealand joint venture, and it was a heavily levered JV at a pretty healthy rate of interest, 6.5%. And so there were operational constraints related to debt covenant.

Ah! Okay. Got it.

And that's saying (45:35) we've alleviated those now with this refinancing.

Thanks very much. Best of luck.

Thank you. Our next question comes from Mr. Chip Dillon of Vertical Research Partners. Sir, your line is now open.

Yes. Good morning.

Good morning.

Can you all hear me?

Yep.

Hi there. Yes. Yeah, first question has to do with, when we look at the New Zealand joint venture, maybe this will simplify it. But basically the way I look at it is, is that the equity is NZD 706 million, and now the debt, if you capitalize the fees, that's NZD 242 million. And we're just going to stick to NZD, (46:17) New Zealand dollars here. So you obviously own 77% of the equity, which is NZD 706 million times 77%, or NZD 544 million. And you, in essence, own or are owed the entire debt of $242 million. So if I look at the enterprise value, it looks like you're capitalizing it at NZD 948 million, and that Rayonier is either owed or owns 83% of that which again is your 77% of the equity and all of the debt. Am I missing something there?

Yeah. I'm not following you on the NZD 900 million. So I mean, pro forma for the debt repayment, the net asset value which is effectively equivalent to the enterprise value because it's now unlevered, is NZD 706 million. That was the valuation at which the capital was invested. And again, it gets a little confusing...

I see.

...because this wasn't a purchase of third-party equity. It was a capital infusion. And so, the right way to think about it is the investment was made at $706 million enterprise value which is effectively the same as net asset value because there's no debt on the entity and we own 70% of that pro forma for the infusion.

I see. So that would then suggest the higher equity value was below NZD 500 million, right? In other words $706 million minus the $235 million?

Yes. The $706 million minus the $235 million would have been the equity value before it is capital infusion. If the total equity value before year end is (47:49) 65%.

Okay. So you basically paid off, Rayonier decided to take it upon themselves to pay off that $235 million, that's all on your balance sheet right now, but you're only getting $85 million more of the value of the company. Tell me why that's wrong or not wrong?

Well, because the entity is now unlevered. And so if you took $706 million minus $235 million and you took our 65%, that would calculate the value. Yeah, we've now invested the $240 million, paid off the debt. So our equity value has increased by that amount of the capital infusion.

Okay. All right. That makes sense.

(48:38) pre-infusion and post-infusion because the net asset value, or the equity value so to speak was lower before this infusion.

And we essentially transferred that debt into the U.S. at both a better interest rate and a favorable exchange conversion.

Yeah. And it's important to note that this debt, even though we control the JV, we own 65%. I think that the rating agencies look at it as a segment of Rayonier, they've looked at that debt, we consolidated a 100% of the debt, consolidated 100% of the interest expense. And so this has been looked at as debt of Rayonier even though the JV was less than wholly owned. And so really we saw this as an opportunity to clean up the balance sheet of New Zealand, provide that operational flexibility and get very significant interest cost savings in the process and increase our ownership stake in the entity because we provided 100% of that capital infusion.

Got you. Okay, that's very helpful. And were there any tax – obviously you're getting or paying effectively a lower interest rate, but if I have this right, I guess well, given the new debt, does that have any tax advantages of any type, having reached – or is it just all the lower interest rate and the flexibility on operations?

There aren't tax advantages per se, because we're not a corporate taxpayer other than the operations within our TRS. So there wasn't a tax advantage necessarily to the new debt, but we do have quite a bit of NOLs at the New Zealand joint venture, and so the New Zealand joint venture we don't anticipate will be a cash taxpayer for some time as well.

Got you. And obviously with no interest expense at the New Zealand venture, you would presume that you'll be able to use those up faster than if you had to pay interest there.

Correct.

Yes, that's right.

Okay. And then last thing is, I think if I heard you right, you mentioned the buyback and that you started it in mid-June. Did you actually buy $10 million worth just in the last two weeks of the month? Or does that buyback, I guess, what you were saying, right?

Yeah. That's through the end of June.

Got you. And is it your intention to actually – well, I guess it's a little unfair to ask it quite as aggressively as I was about to, but do you have a timeframe, I'll ask that. Is this like something you want to get done in a year, or is it more open-ended than that based on the opportunities you see?

It's a 10b-18 program and so it's really a function of the guidelines under that, but I think it was important. When we launched this program, we didn't want to launch it to launch it. We wanted to launch it and we wanted to make a meaningful dent in that repurchase authorization.

Okay. And then last question, do you view the dividend and share buyback as sort of alternatives, or do you think that your view of the dividend is irrespective of the buyback activity?

Well, I think they certainly are both, a form of returning cash to shareholders. I think as it relates to the dividend, we're more focused at this juncture on having that be funded from our continuing timber and rural Real Estate sales operations. And so, we think about it in a slightly different manner, even though they're both forms of cash that's going back to shareholders.

I see. Well, thanks very much.

Thank you. Our next question comes from Mr. Steve Chercover of Davidson. Sir, your line is now open. Steven Chercover - D.A. Davidson & Co.: Thank you, and good morning. I guess it's a little bit late in the session, so hopefully these aren't redundant. But I was actually wondering why your New Zealand partners are allowing you to dilute them, or did they have a say in the matter?

Well, our partner is Phaunos Timber Fund and it's effectively a closed-end publicly traded fund in London. And quite candidly I don't think that they had the capital available to fund their pro rata share. And so it gave us an opportunity to increase our stake there which we were happy to do.

And from their standpoint, Steve, it was also a case where by paying this debt off, it will free up at a joint venture level roughly NZD 15 million of interest expense. And so they're going to see more of a steady dividend flow going forward and that was important to them. And so, that all factored into the decision from their standpoint. Steven Chercover - D.A. Davidson & Co.: Okay. And perhaps I should know this, but I'm assuming the sales out of New Zealand are denominated in Kiwi dollars. And therefore, when you repatriate it, we just faced almost a 20% headwind in terms of both revenues and earnings?

Steve, this is Mark. I'll take that. New Zealand is actually interesting as it relates to currency, because it's not all denominated in New Zealand dollars. A good portion of their volume – all the export volume is actually denominated in U.S. dollars. And so, currency fluctuations have a much less significant impact on the profitability of New Zealand than you may otherwise think, because again keep in mind roughly 40% of the volume is going into the export market at U.S. dollar prices. There's also a portion of the export freight that's in U.S. dollars, but then all of the domestic sales and the domestic costs are in New Zealand dollars. And so there's sort of a natural hedge that's built into the entity such that purely changes in exchange rates actually don't have a very material impact on the U.S. dollar income. Steven Chercover - D.A. Davidson & Co.: So to a certain extent, New Zealand has become less competitive in the global markets compared to, for instance, the Russians or someone else with a currency that's declined?

Well I mean, I think the New Zealand currency has declined. Steven Chercover - D.A. Davidson & Co.: But the price of the logs hasn't. I mean, they're kind of more like it's analogous to being in Washington or Oregon as opposed to being in British Columbia?

But the U.S. dollars are now converting into more New Zealand dollars. Steven Chercover - D.A. Davidson & Co.: Yeah. But I'm saying I guess from the buyer's perspective?

Yeah. Steven Chercover - D.A. Davidson & Co.: Okay. And then, also on the repo, I mean it's the first one to the best of my knowledge in Rayonier's history, let alone Rayonier Version 2.0. I mean, do you think you've got financial flexibility to be aggressive on the repo and to participate in lumber market or timber markets in size?

I guess it depends on what you mean by being aggressive. But we feel as though we have ample leverage capacity. I don't want to put a fine point on that because candidly, it depends on whether it's a buyback or an acquisition, because obviously with acquisitions, you're increasing your cash flow and your EBITDA, whereas with buybacks you're not. And so that's going to be a more levering event than, say, an acquisition on a dollar-for-dollar basis. But we think at 17% net debt to enterprise value, probably well inside of that on a debt to market value of assets. We certainly feel like we're in a position to increase leverage at least modestly. Steven Chercover - D.A. Davidson & Co.: Okay. Do you want to throw out a figure that kind of delineates where you think net asset value is?

We don't publish our own internal view of NAV, but we can certainly help you walk through the different components of it. Steven Chercover - D.A. Davidson & Co.: All right. I'll phone you to make sure mine's right. Okay. Thank you very much.

Thank you.

Thank you. Our next question comes from Mr. Mark Weintraub of Buckingham Research. Sir, your line is now open.

Thank you. A couple of follow-up questions. First, just on the debt capacity, I recognize the difference between share repurchase and acquisitions. But on your current footprint, could you give us a sense of how much additional debt capacity you feel you might have?

It's a bit of a loaded question. The reason being – I think that there's a leverage level at which we would be very comfortable operating just because of the predictability of our cash flows and the way that we operate the business. Look, for timber assets, it's not an asset that lends itself to a lot of leverage, whereas in the commercial real estate space, commercial REITs may be very comfortable taking on 40% to 50% leverage. That's certainly too high for a timber REIT because you want some operational flexibility to operate the business. But right now, if you use enterprise value as just a rough proxy for market value, we're at 17%. I certainly think we could be higher than that. In terms of where our comfort level is, I think we said in the past that we think 30%. We could certainly comfortably operate at that level. Kind of over 35%, I would say, would start to push our comfort level. And so we have some room to run, but we also have to be sensitive to what that implies in terms of debt to EBITDA and the rating implications of that. And so, again, it's one of these things that's a constant evaluation process working with the agencies. The agencies still lump us with the paper and forest products sector as opposed to the REIT sector, and so whereas commercial REITs, investment grade commercial REITs might see debt to EBITDA six to eight times, the paper and forest products space. The prescriptive debt to EBITDA to be investment grade company in that space is more in the sort of 3 to 3.5 times leverage. And so we kind of have to balance the two. And there's a recognition amongst the agencies that timber is different and there's an asset coverage that makes it a more attractive credit profile, but again, from an operational standpoint, I think we could very comfortably get to 30% leverage. I don't know that we would do that in one fell swoop because of the potential rating implications.

Understood. And presumably it's an ongoing conversation with the rating agencies and hence some reluctance to get a little bit more specific?

I think, that's fair. I mean the rating agencies publish pretty detailed views of the companies that they cover. And so they've effectively both sort of put out kind of four times debt to EBITDA levels at which they would relook at the credit if we were to exceed that. And so that's something that we're sensitive to, but again, I'd say it's also an ongoing dialogue in kind of helping to understand the different nature of timberland as an asset class and the higher EBITDA to free cash flow conversion they would have relative to a paper mill.

Okay. That is very helpful. Then, also, are there perhaps timberland assets in the portfolio which would be viewed as less core, that perhaps don't have the characteristics that you're seeking for the portfolio to the same extent? And might that be considered as the source of financing for either growth through acquisition and/or through share repurchase?

Couple points there. First of all, we completed a detailed assessment last year on our land classification. Roughly, 4% to 5% of our timber portfolio is in that non-core category. As it relates to sales, though, keep in mind that unless you're doing a 1031 type of transaction, you essentially have to distribute that capital out to shareholders, and you're left really just with the basis of that property to be able to utilize from a capital allocation standpoint.

Understood. But would there be anything that would preclude you from doing 1031s, given that you have been in the market acquiring timberland, the size of the transaction?

No, not at all. And certainly, we have an active 1031 program.

Okay. And just following-up on the New Zealand harvest. I understand your explanations as to what was going on in the decision-making process up until now. But given that there now won't be debt on the New Zealand operation, given that the markets have continued to be pretty weak, would it be your intent to reduce the harvest and let the crews know, et cetera, on a go-forward basis for a while? Or what is the prospective thought process for New Zealand?

Well, as Mark said, it's dynamic and you've got harvesting crews that you're managing. The other thing to keep in mind is we have a fair bit of market flexibility right now. The Korean market is as strong as it's been for quite a number of years and we've shifted our mix away from China and into that Korean market at stronger pricing. And so that's where really what we've focused on in a near-term sense.

And I think it's also important to note that we haven't yet closed the New Zealand transaction. And so any operational constraints by virtue of debt covenants are effectively still in place until we close that transaction. And really, the timing obstacle there is the regulatory approval in New Zealand.

Fair enough. And I'm sorry, had you mentioned when you thought that would get completed?

We said we expect by the end of the year, but we'll continue to update on that. Again, we don't have a clear sense of the New Zealand OIO approval timeline just yet.

Right. And one last one. Don't want to be picky, but I wasn't quite sure. I think you'd mentioned that reducing the debt would free up $15 million of interest expense. I was kind of thinking it's more $10 million at the JV level or at the...

No. $15 million...

That was New Zealand.

It was New Zealand, yeah.

New Zealand. Okay. But US$160 million, the interest – and it was at 6.6%?

Yeah. Effectively on a consolidated basis in U.S. dollars we're saving about a little over 300 basis points on $160 million (01:04:34)

Got it. Okay. You were saying New Zealand dollars.

Roughly $5 million (01:04:34) of consolidated interest expense.

Okay. Okay. It's just a change in the currencies.

in Kiwi (01:04:39) dollars.

Totally understood. Okay. Thank you.

Thank you. Our next question comes from Mr. Collin Mings of Raymond James & Associates. Sir, your line is now open. Collin P. Mings - Raymond James & Associates, Inc.: First, just going back to Chip's question. I know you guys established a dividend with potential tax consequences in mind kind of just given your REIT status last year. Anything on that front changed? Do you still feel comfortable with the current distribution?

We do. Collin P. Mings - Raymond James & Associates, Inc.: Okay. And then the second question is just going back – all the conversation again between New Zealand, the outlook there and kind of some of the balance in price and volumes. Just how do you rank potential incremental investment in New Zealand from here versus domestic acquisitions?

Well, I mean a lot of it is a function of when we're looking at any acquisitions, we're looking for return. We're looking at markets. We're looking at productivity of the land. I'd say that the New Zealand market has generally has had a higher discount rate from a valuation standpoint than the U.S. market, but as we've seen, it also is more volatile. Collin P. Mings - Raymond James & Associates, Inc.: Okay. So you're trying to strike a – I mean I guess to take that another way, you're still looking at both domestic and incremental investment in New Zealand?

Yeah. I think that's fair. And again, I think that this was a unique opportunity as it relates to New Zealand. We did feel as though there was a need to restructure the capital profile there. And we had an opportunity to increase our stake there. But I think we're still more focused, I'd say, on domestic opportunities as it relates to M&A. Collin P. Mings - Raymond James & Associates, Inc.: Okay. Great. Thanks, guys.

Thank you. At this time speakers, we don't have any questions on the queue. I would now like to hand the call back to you.

All right. This is Mark McHugh. I'd like to thank everybody for joining us and your interest in Rayonier. Please contact me with any follow-up questions.

Thank you. That concludes today's conference. Thank you all for participating. You may now disconnect.