Rayonier Inc (RYN) 2002 Q1 法說會逐字稿

Good day everyone and welcome to the Rayonier First Quarter Earnings Release Conference Call. Today's call is being recorded by Rayonier and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes implied consent. Please hang up now if you do not consent to being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to the Senior Vice President and Chief Financial Officer, Mr. Gerald Pollack. Please go ahead sir.

Thank you and good afternoon. I would like to once again welcome everybody to Rayonier's Analyst Teleconference, this time covering our earnings for the first quarter of 2002. Earnings statements were released yesterday and supplemental materials soon thereafter. If you have not received this material, please call Parag Bhansali, our Vice President of Investor Relations, at 904-357-9155 and he will add you to our mailing list. This conference is being broadcast live over the Internet and is open to all shareholders and interested investors. Instructions on accessing the live web-cast were given in our press release. With me today is Lee Nutter, Chairman, President and CEO.

We will be following our typical routine with Lee opening the formal presentation followed by my review of the financial highlights for the quarter. Lee will then cover markets and operations, and I will close our formal presentation with a discussion of earnings per share trends. In these presentations, we include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Security Litigation Format. Our 10-K and press release list some of those factors, which do change from time to time and which may cause actual results to differ from those projected. Please familiarize yourselves with them.

With that, let us start the program with opening comments from Lee Nutter. Lee?

Thank you Jerry. Let me begin by saying we are off to another good start for the year despite the very sluggish economic conditions facing most segments of this industry. In our first quarter financial statements, you see in yet another quarter the underlying strength of this company. Behind our earnings, there is EBITDA of $75 million or $2.68 per share, the free cash flow of $27 million or 94 cents per share and again, a $48 million reduction in our debt. This takes our net debt down to $794 million and puts our debt to capital ratio at 52.5 percent.

Some of you might recall that that debt on January 1, 2000, after the large timberland acquisition, was more than $1.1 billion and our debt to capital ratio was over 63 percent. As we said we would do and have done, using our strong free cash flow in the last nine quarters, we very consistently reduced that debt, which by the end of last month was down 30 percent. On an overall strategic basis, we will continue to push more of our performance fibers business into high value sale of specialties where in key markets, we hold 50 to 55 percent market share.

As you have seen, our land sales program is ongoing at two to four percent annually. Let me reiterate that this sales program is not a liquidation strategy, but a means of unlocking shareholder value. You see the results in our financials and the return to our shareholders. Again, when we find the right opportunities, we will make acquisitions necessary to sustain this program. Earlier this month, we announced the agreement to sell our 83,000-acre, East Coast timberland operation in New Zealand. This was done for no other reason than the price the buyer was willing to pay, very simply and very significantly, exceeded our value for holding it. We have better uses for that capital.

To wrap up here, let me just make a couple of comments relative to the economic conditions underlying markets for our products. On an overall basis, we have seen during the first quarter modest improvements in our markets and while we are far from euphoric, there is reason for some optimism. As I think you know, Rayonier is fundamentally a very strong and well-positioned company in our markets and while this year will again be difficult, we will continue our drive to unlock shareholder value. Let's go back to Jerry.

Let's start on Chart 2 and focus primarily on first quarter results as compared to the most immediate preceding quarter, that of the fourth quarter of 2001. Sales increased 3.4 percent to $276 million while operating income improved 11.5 percent to $28.2 million. As you will see in a few moments, major favorable variances occurred in our performance fibers business segment and the wood products lumbar unit.

Net income of $9.4 million represented a 19 percent increase over the prior fourth quarter, producing 33 cents in earnings per share compared to 28 cents in the fourth quarter. Results, however, were 12 cents per share lower than the year ago period, when we had earned 45 cents per share, but as we have discussed over time, declining fluff pulp prices and lower timber prices trended down throughout the sluggish 2001 fiscal year. Cash flow, as Lee indicated, however, remained strong with EBITDA per share of $2.68 comparing favorably with $2.33 per share in the fourth quarter.

Free cash flow of $27 million reflected strong improvement over the fourth quarter of last year. That quarter's cash flow had been adversely affected by a $10 million pension contribution required as a result of the abnormally low year-end discount rates having to be used for FAS-87 calculations. Nevertheless, we were able to decrease gross debt by $35 million to a level of $815 million, net debt down to $794 million and as Lee indicated, net debt to capital following suit, coming in at 52.5 percent at quarter end, a five and one-half percentage point decline from a year ago. We will continue this year to have some cash invested, as we paid off all of our short-term revolving debt and we will be building cash equivalents to pay off approximately $78 million in 1992 ten-year bonds, maturing in October.

Let us now take a look at the first quarter to fourth quarter comparison in a little more detail on Chart 3. On this particular chart, we analyzed the earnings per share trend increase from the fourth quarter of 2001's 28 cents per share to this quarter's 33 cents. The big story in performance fibers was not one necessarily of price movement, but of cost reduction.

As we approached the new fiscal year, many of our supply contracts came up and we were able to negotiate cost reductions in the area of processed chemicals and wood costs also trended down. Cost per ton is reported in the financials as $705 per metric ton compared to $736 in the fourth quarter and $710 last year. The other significant favorable variance occurred in our wood products lumbar operations with price being favorable to the fourth quarter, as well as conversion costs being lower.

Adversely impacting the quarter to quarter comparison was a return to a more normal effective tax rate of approximately 31 percent, 29 percent compared to an unusually low 19 percent last quarter when we realized certain foreign exchange-related tax benefits in New Zealand. I might note that in this first quarter, if you look at land sales, operating income and dollars per acre of land sold, as can be computed from the information supplied in Exhibits C and F to the press release, land sale margins as a percent to sales were lower than our past traditional realizations, as a result of one particular sale of a small forest in New Zealand that contributed $6 million in cash proceeds, but basically no margin on a US Dollar basis. Only 69 percent of that total acreage was plantable and only a further 34 percent was merchant-able.

This brought the average sale per acre on a consolidated basis down to approximately $1000 per acre when if this one transaction was excluded, the average sales value in the US would have been $2750 per acre, more in line with the lower end traditional HBU land sale values. All in all, the quarter reflected a bounce-up from the bottom with a 5 cents per share increase over the most immediate quarter, with favorable non-land activities offsetting a reduction in land sale income. To complete the financial highlights, let us take a quick look at the year over year comparisons to identify any particular items needing attention on Chart 4.

As I mentioned in last year's first quarter, we had 45 cents per share in earnings. Although earnings are on an uptake, the quarter reflected that 12 cents per share decline on a year over year basis. Statistically, fluff pulp prices declined 20 percent over the past 12 months and prices in volume of US timber were down 21 and 10 percent respectively from year ago levels. Demand for land sales, however, has more recently been strong and land sales income was able to offset 45 percent approximately of the impact of the decline in harvest results. In wood product lumbar results, both on a quarter sequential basis and year over year reflected higher prices and the reduced costs I talked about contributing significantly to the bottom line performance. In this year over year analysis, you can also see below operating income the significant impact of $4 million in lower interest expense with debt reduction, since the fall of 1999, as Lee indicated, a top priority. With that overview of the financial highlights, let me turn the conference over to Lee to cover markets and operations.

Thank you Jerry. Looking at page 6, I think the picture here is really quite clear. You see here the strength and stability of our high value sales specialties business, as well as the strength of those prices. As you move down the chart and looking at the fluff pulp market, you see prices held from the fourth quarter to the first after the continuous drop that seemed to go on all of last year. We are now beginning to see some firming in the commodity pulp markets, which should add some strength to fluff pulp pricing.

Today, our order books are full for fluff pulp and we are having to push sales and deliveries out into the future. If these conditions continue and with price increases in commodity pulps, we should expect some improved fluff pricing around mid year. Before leaving this page, let me just add one comment here on sale of specialties. The market for high value, the high value acetate pulps, which represent 67 percent of our high purity sales specialties volumes remain very strong in our worldwide markets and we are encouraged as we look for new opportunities in this business.

On page 7, you see a fairly typical quarter. Let me point out that here, you see mill shipments, whereas in the financial statements, which were attached to the earnings release you have seen, is based on sales. The difference is due to timing, as I said, of overseas sales. The movements in volume from the first to first quarter and fourth to first quarter, are due in large part to inventory or perhaps, availability thereof. As we look forward into the year, we expect to see overall shipments at levels consistent, really, with the last two years.

In closing in this performance fibers segment, let me once again point out the shift of our business mix into more cellulose specialties. This is the core of our performance fibers business and we will continue our push in the sale of the specialties area. Using our strong research and product quality, we think we are very favorably positioned.

Let us now look at some of the details in our timber and land business segments, starting on page 8 with the Northwest. Looking at the prices and volumes on this page, I think you can see our sales volume correlates quite well with the price curve. In each year, we sold the largest portion of our volume in the quarter with the strongest price. Our ownership is on the coast of western Washington and because of its low elevation, it is most in demand early in the year when supplies of higher elevation timber are reduced or less certain due to weather conditions.

I think the primary point to be made on this chart is the recent uptake or at least stabilization of prices after the long slide. As we move into the second quarter, we should see generally stable prices and a modest increase in our sales volume. Southeast timber sales, as I think you can see on page 9, is fairly self descriptive. Prices are basically holding at the levels we have seen over the last several quarters and while the first quarter volume is down from the levels of the first and second quarters of 2001, for the year 2002, you should see a much smoother quarterly flow of sales than you saw in either 2000 or 2001.

I want to remind you or everyone, as you look at this chart and the seemingly weak prices for timber that Rayonier is a net buyer of wood in the Southeast and what you might expect or see as a weak price on the timber side, is really, of course, a benefit on our performance fibers business. However, with that, let me hasten to remind you that there is no transfer pricing between our forest resource business and performance fibers. Any volume movement between these two businesses is based strictly on competitive bidding.

Looking at page 10 and New Zealand, you see a very consistent flow of volume as you look across the years. The slip in price from the levels of the last several quarters into the first quarter is really a function of mix and not a line by line drop in price. In fact, in the first quarter, export log prices moved up ten percent while the New Zealand log market held. However, with that price increase in export markets, we are seeing some increased levels of shipments, which may well lead to some erosion in that ten percent price gain. Let me conclude New Zealand by anticipating a question and say that with the sale of our East Coast holdings, our New Zealand timber harvest volume will be reduced approximately 50 percent beginning the second half of this year. However, and as you would expect, the average margin will increase due to the lower cost to harvest and deliver and the somewhat higher quality of the timber remaining on our 125,000 acres.

Turning to wood products and our lumbar business on page 11, as we all know, in the first quarter, markets and prices improved from the very depressed levels of the fourth quarter. The improvement in prices and the significantly improved operating performance, as Jerry mentioned earlier, have begun to favorably impact this business in the quarter. Obviously, we cannot impact prices, but we can and have made a meaningful improvement in the operating performance of this business, which we must and we will continue.

Finally, finishing my comments on markets and operations, let us just quickly look at MBF on page 12. You see pricing moved up somewhat, which is a function of both mix, as well as some strengthening in individual markets. The volumes reductions you see here, from fourth to first quarter, simply reflect the normal holiday shutdowns. Looking ahead, while we are carrying a strong order file, we are experiencing a market that appears to be in balance and thus, we do not see any significant price movements in the next few months. This is a stable business with a high quality product and good customer mix. It is operating on a P & L break-even basis, but with a very strong cash flow. Let us now go back to Jerry for a wrap-up before we get to questions.

Thanks Lee. We will close the formal part of our presentation with our earnings per share trend analysis shown on Chart 13. As you can see, once again, earnings per share for the first quarter of 33 cents was down from the first quarter of 2001, but up from the fourth quarter of that year. When reflecting about the second quarter comparison, please remember that in the second quarter of 2001, we had a very significant timberland sale contributing 75 cents in earnings per share. I am not saying that is the only item to take into account when comparing quarterly performance, but it is a significant one and as a base earnings excluding that one particular transaction, our base earnings were 39 cents per share.

For 2002 second quarter, with continued cost reduction possibilities in performance fibers, some higher harvest volumes in New Zealand and some higher margin land sales that are expected to close in the second quarter, we believe earnings per share will continue in upward trend from the first quarter, on a sequential basis, as well as on a year over year comparison. This outlook comparison also excludes the effect of the recently announced East Coast transaction Lee referred to, details of which will be disclosed once contract conditions are met. We expect the situation to clarify itself in the second quarter.

For the year, we are still reluctant to make any calls at this time, given both economic and geopolitical uncertainty around the world. Favorable movement of commodity market pulp prices, as Lee indicated, and subsequently, fluff pulp prices will obviously have a significant positive impact on second half performance. With that, let me close the formal part of the presentation and turn the conference over to the teleconference operator for questions from our audience.

Thank you. Our question and answer session is conducted electronically. If you would like to ask a question, please press the star key followed by the digit one on your touchtone phone. Again, that is star one if you would like to signal for a question and we will pause for a moment to give everyone a chance to signal. Gentleman, our first question will come from Matt ; he is at Morgan Stanley.

Hi thank you. Jerry, could you just go back to the cost situation on the pulp side and review the positive drivers there and give us a sense of what the outlook is on the cost side for 2Q and for the rest of the year, and then is there anything else going on in your pulp business? I think you have built up a larger R and D, new product development infrastructure. Did something change in the scope of the effort there and the way that you are accounting for that?

Matt, let me - well, I guess they are both accounting questions; I wanted to see where the second one was leading to, but as reflected on the... If you do the calculation on sales and operating income for performance fibers, you will see that the cost per ton, once again, went down from... went to about $710 a ton... I am sorry; let me just get the exact numbers on that one.

We have $705, but....

$705 compared to $736 on the fourth quarter and $710 last year. Now, once again, that is coming from chlorine, caustic, sodium chlorate prices, ammonia, a whole list of those process chemicals and as Lee indicated, on a wood buying basis, wood cost was down. So, we do expect, once again, continued favorable trends as we go through the year, at least, I will say right now, into the second quarter.

Now, last year, the trend, and I am not sure if this is normal, but actually, it held in 2001 and 2000, your cost trended up during the year.

Yeah, but last year, in the last half of the year, we had some performance problems at , operating problems that once again, you lose volume and your cost per ton goes up, but at this point, with the shutdowns that have taken place and improved cost performance, we do not expect that to occur, but Matt, you know, running a plant, anything can happen and you know, right now, all things being equal, we expect that favorable cost trend to continue. Your second question, R and D, I am not sure... I mean no. The answer, as far as I am aware, is there is no change in accounting. If something has picked up, that you picked up from the P&L, please let us know, but I do not know of any, I am not sure of where that symptom is coming from.

I also wanted to know if there is any change in the scope of your efforts in that area, of the new product development area.

Matt, this is Lee. No change in the scope, continuing to push that business further and further out of the commodities and up into higher value, so that is something that has been going on for the last couple of years, so no. I am not sure as to the question about any accounting treatment either because, you know, we are basically talking about an expense.

Correct.

So that has never changed. So, if I can elaborate, you can try now or you can give us a call later.

Let me just switch gears and get an update on your full year harvest guidance for your three respective regions.

Matt, this is Jerry Pollack and once again, for the Southeast, I think Lee indicated that you should see a pretty flat trend. If you multiply the first quarter by four, you will get about 4,800,000 in short tons for the Southeast and that should be the running rate. Obviously, if market conditions change, maybe toward the end of the year, you might see additional volume there.

I am sorry, you said 4.8?

Four million, eight.

So that is down quite a bit from last year.

I think, Matt, I am not sitting here with the numbers in front of me, but 90, I mean 2001 was a pretty, very strong year. I think if you look at 2000 and I think if you look at that year, you are looking pretty closely at what we are looking at for the year 2002. I think you are going to see volumes consistent across those two years.

I think you will also see in 2001, if I recall, you know, we purchased the timberland in the fall of 1999. We had a supply contract with them. They were running behind in 2000 and some of that volume carried over into 2001. There is some catch-up volume in that supply contract with .

Again, if I can, Matt, I think the volume in the Northwest may be very slightly under what the volume was in 2001.

Yep that is what we have.

Very slightly under 2001. As we look at 2002, and New Zealand is a little hard to call. We think, you know, obviously, if this sale goes as we have planned, the rate in the second half would be, you know, about half of what the total... Well, on an annualized basis, going forward, it will be about half of what it has been. In other words, annually, we were at about 1.4 to 1.5 million cubes. We will drop down to about 700 or 750 cubes.

OK and then lastly, on the timberland sales initiative, you did $52 million last year. I think that is the number we have. We must have stripped out the big one. Is $60 million a reasonable full year guesstimate for this year?

No I think...

That would be operating, oh, I'm sorry.

Yeah I know, timber operating income. I think once again, what we said when we announced the two to four percent program, we sort of really announced that if that two percent or so occurred in the Southeast, the traditional values, you would probably be talking about $35 to $40 million. If you add that to the old HBU land sale program, you know, you are probably talking $45 to $50, as a better range at this present time. Now, as Lee indicated, if a good opportunity comes down the pike, we are going to jump on it so I do not want to say that that is the firm number, but that would tie in with our, the guidance we have given in the past.

OK, so 45 to 50? And that is operating income, right?

That is correct.

Now what would the sales be approximately attached to that?

I would probably say somewhere in the $80 to $85 million range, $85 being a midpoint perhaps. I think last year, we had about $99, but once again, we had that pinhook transaction which was, you know, at the upper end of the range.

OK, great, thanks.

Next question comes from Mark ; he is at Goldman-Sachs.

Thank you. Lee, I was hoping maybe you could talk a little bit more about higher and better use opportunity going forward, particularly in Florida, as you have had much more time to assess the Home Properties. Looking out over the next several years, how big an opportunity do you think you have there?

Well, you know, without trying to drive an answer out of this market, or a hard answer, I guess what I would say is we were pleasantly surprised after we had gotten to look at that acquisition even further at the value of some of the properties we found. As we continue to look, particularly, over the Florida properties, but also now, be getting into the Southeastern George property, some of the acreage that we thought was just was valuable for growing trees, in fact, has turned out to be significantly more value for whether it be developments or strip malls or whether it to be areas in which people want greenbelts. I would be reluctant to give you a number Mark, other than to tell you that, you know, we continue to be surprised at what people are willing to pay and the interest level in our holdings.

OK and shifting gears to the pulp business. Can you give us any update on the competitive landscape with International Paper at and at and what is going on with those businesses and how that is affecting yours?

The first part of the question, Mark, I think you ought to ask those folks as to what their thoughts are on it? Let me just tell you from our perspective, I think everybody out there would recognize that Rayonier clearly is the premier supplier to those markets. I would tell you that if I were on one of those other companies, looking at that business, looking back at Rayonier. I think there is probably an interest on the part of our customers, as I would have if I were in their shoes, in maintaining a little bit of diversity of supply.

I would be somewhat reluctant to put 100 percent of my supply position in the hands of one producer. I think that that is a little bit of a barrier out there for us, but I think as we continue to push quality and the research that goes with our product, I think it continues to put us in a stronger and stronger position. I think realistically, if you look at the other two facilities that you mentioned, they are not core businesses for those people, as the cellulose specialty is for us. I think it certainly, in the minds of buyers, brings into question the long-term supply position from those facilities. And I, a couple of weeks ago, was in Asia and met with several key customers and certainly, the impression that they give you is there is no doubt as to our position, the strength of our position in that business.

OK great, thanks Lee.

Once again, that is star one if you would like to ask a question, star one. We will now go to Richard ; he is at Salomon-Smith-Barney.

Good afternoon guys. I had a quick question on the, a quick clarification on harvest volumes in the Northwest. I know that typically, you see a down tick from the first quarter and I was under the impression that that was more for seasonal reasons, spring break-up and difficult to get into the lands. Did I hear you correctly that volumes will be up in the second quarter in the Northwest versus the first quarter?

Well, I think that you will see a modest pick-up going from first to second quarter; I think that that is what we are looking at. I think if you go back, I guess what I was trying to say and I think that you have probably identified that you are not going to see the big drop-offs that we have seen in the last two years between the first and second quarters. In fact, you should see a modest increase and the harvest level throughout the year, as we are looking at it now, ought to be fairly consistent. So, you should not see the swings, particularly, as you saw in the year 2000 from first quarter to third quarter.

Gotcha. OK and then in the second half of the year, you are looking for a more typical, say second half?

I would say so.

OK.

Yep. You know, if you annualized first quarter, the harvest volume is going to be higher than that. Obviously, if you annualized first quarter, you would only come up with $280 million and it is, you know, it is 20 percent higher than that or close thereto.

hollahan. OK thank you.

Once again, star one to ask your questions, star one. We have a follow-up question from Matt , at Morgan Stanley.

Hi, I am sorry, Lee, I am just a little confused. I thought you said that the Northwest full year volume would be a little lower than full year 2001.

No, you are right, Matt. It is going to be slightly under and the number I gave Richard was too high. It will not be annualized at the $70 million. It will be pretty close to last year's level.

OK, so then there will be, at some point, a drop-off from...

There will be some modest and it will fall off a little bit in the second half, assuming the volumes move as we are currently looking at them in the second quarter, we will see some fall-off in the second half.

OK and then, can you give us an update on your new fiber that you have talked about, the new higher performance pulp?

The NovaThin or engineered absorbent material?

That is right.

Well, it is, you know, it is something that we continue to put a lot of research and development effort in and the key to us, and I think the key to most people that are working on it is to get it not just in the Fem-Care products, which I think we have done fairly well. That is, everybody is and we certainly are pushing to get it into diapers and we spent a fair amount of time both developing the product, as well as marketing it and at this stage of the game, I would say, we are about where we expected to be. Obviously, breaking into new markets is not the easiest thing to do, but I, you know, I think when we announced that we were going to do this, we said we would take a fairly conservative strategy.

We invested $15 million in a plant to produce about 12,000 tons, which was a quasi research and development facility, as well as commercial, and once we had the market or the product developed and the markets, we would then move up to a larger plant. At this stage of the game, we are just working particularly on product development. So, you know, I think it is going about as planned. We would like to see it go more quickly, but we are happy with the quality of our product and I think a fair number of our customers are.

Then you also had a fiber or pulp that was more, was it more absorbent?

Yes, we had a high acquisition fiber, which product that we continue to work on. You know, we are not ready to push it publicly and make a lot of announcements about it, but it is a product we think has a fair amount of promise and, you know, part of that is looking at that product to go both into our normal fluff pulp, if you will, as well as some would go into the new preform cores.

OK and then lastly, what do you attribute the strength in your fluff pulp business to? I would have thought that with the weakness of NBSK, that those producers who can switch the incremental ton to fluff would have done it.

I think over time, I think, you know, as we have all seen, I think that that is probably a risk that, you know, as we look at the business, we say do we want to stay in the business long-term with that threat out there? There is that price gap. I suspect, you know, you heard us say and I suspect probably others are sitting there with pretty full orders and continuing to push deliveries out a little further rather than just raise prices on the near term because when somebody starts to tell me that they are sort of overbooked, my first question is why did you not raise the price? And I think that probably hanging in the back of peoples' minds is not to go out and get too hot and get too greedy and there is, you know, just not a lot of security. People whose orders are back to producing, not Northern BKP, but Southern BKP.

Right.

So, you know, I think there is a lot of caution out there on the part of suppliers and not just, certainly us. I mean, you know, we are down to where we are an eight percent supplier to the market. We are not one of the big folks, so we are just pretty much in the position of a follower and that is, again, why we have done everything or are doing everything we can to gradually shift this business over into cellulose specialties.

OK and then just lastly, looking at longer term, there is clearly a disparity between fiber prices in the US and the rest of the world and I assume that that gap will get even bigger if we do put the duty on Canadian soft wood. How do you look at the long-term competitiveness of US fiber, given your large presence in the US fiber markets?

Well, there are two actually. We are talking about fiber being..

Timber.

Well, being timber?

Yeah.

Well, going specifically to timber, you know, certainly the export markets in the US are almost nonexistent from our West Coast operation, so then, you are turning around and I am going to say 90 percent of the harvest out there goes into domestic conversion and then in the Northwest, as you probably well know, the capacity to produce paper, bleached or unbleached, or newsprint, whichever you would like, is the . So, it, you know, it is dependent on the saw mill industry. Obviously, you have the secondary chip impact.

So, you know, you are on the domestic US housing market and if, you know, are we going to see imported lumbar come in for US framing? You know, other than Canada, I do not think so. In the Southeast, where probably in the end, 65 percent of the fiber coming off an acre, either directly as pulp wood or indirectly as chips, ends up coming back into the pulp and paper industry. You know, as the pulp and paper industry is impacted, you are going to see some impact there on pricing of fiber. I think what will happen then Matt, is if that begins to happen, instead of people using a 22-year rotation age, you will see them start to push the rotation age up to get more saw-able timber out of, wood out of a tree. So, I mean, you could see that begin to happen. You know, I do not think the impact is going to be huge, but, you know, certainly, it could be somewhat significant.

OK thanks.

Mr. Pollack, we have no other questions at this time, so I will turn it back to you for any closing comments, sir.

Before I just say a few words, I just want to correct something. Matt, I told you 2001 land sales were $99 million. The correct number is $84 for last year. Beyond that, there is really not much more to add to what we have said. It appears that we have passed the bottom of the cycle with reasonably positive and improving earnings, giving us a strong foundation for when fluff pulp and timber harvest demand regain their cyclical strengths. Thank you for joining us and please do not hesitate to call if you have any further questions. Thank you again.

Thank you. That does conclude our conference call. We do appreciate your participation. At this time, you may disconnect. Thank you.