Rayonier Inc (RYN) 2004 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, and 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 2004, and our first after having effectively converted to a REIT as of January 1. Our earnings statement was released yesterday afternoon, and supplemental materials soon thereafter. If you have not received this material, please call our investor relations department at 904-357-9177, and we will add you to our fax or e-mail list.

This conference is being broadcast live over the Internet, and is open to all shareholders and interested investors. Instructions on accessing the live Webcast were given in our press release. Simply go to our Website at Rayonier.com and link to the conference.

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. We will then cover markets and operations, and I will close our presentation with a discussion of earnings per share trends.

As usual in these presentations, we include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act. Our 10-K and earnings release lists some of the factors which could cause actual results to differ from those projected, and which do change from time to time. Please familiarize yourselves with them.

Also in our earnings release and supplemental materials, and in this conference, we use non-GAAP measures, such as cash available for distribution and adjusted EBITDA. The definitions and reconciliations of these non-GAAP measures and others always accompany our presentations.

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

Thank you, Gerry. Before we get into details of today's call, let me make a few comments on our new status as a REIT, and the impact we have begun to see. With the first quarter now behind us, and looking ahead with the REIT in place, it certainly has strengthened our position in the Timber and Land business. We are much better positioned to increase the financial returns to our shareholders.

In considering the importance of a REIT to a strong cash flow and balance sheet, I think that is apparent in our first-quarter results. We paid a dividend of 28 million, ended the quarter with $63 million in cash and a strong balance sheet, with a debt-to-capital ratio of 44.6. As to our debt, that we plan to leave at about the $618 million level, which we feel is appropriate leverage for us as a REIT.

I will make a few comments on our first quarter, and then our outlook for the balance of the year. As you have seen, first-quarter results were strong pretty much across the board of our business segments. In Timber and Land, the harvest side was up, particularly with stumpage prices in the Southeast. As you can see in our first-quarter results, we took advantage of our January 1 conversion to push timber sales in the Northwest from the fourth quarter of 2003 into this year. Land sales were strong, as well, reflecting the quarter-to-quarter variability indicative of the continued high demand for our higher-value properties, particularly here in Florida. Last year, Performance Fibers was very disappointing for us. It is off to a much better start as we begin this year. Our hardwood costs are down almost 10 percent from fourth quarter of last year and, of equal importance, our inventory of that fiber is more than 40 percent above the level we held going into the fourth quarter.

This, combined with higher sale of specialties prices and much better -- or maybe I should say more normal -- operating performance has begun to turn this business around. We expect to see continued improvement in this business segments as we move further into the year.

Let me conclude here by reiterating that we're off to a solid start as a REIT. I think you have seen that in yesterday's announced results. Now, as a REIT, we should see not only our ability to continue to generate strong earnings and cash flow, but I think we will be much more active in building our timberland base to further strengthen that cash flow.

Let's go back to Gerry.

Thanks, Lee. As Lee indicated, the first quarter represented a strong recovery from relatively stagnant conditions during 2003, and reflected year-over-year improvement in all product areas, and strong fourth-quarter to first-quarter performance in our two core segments.

Let's take a look at the highlights of the quarter on page three of our supplemental material. Operating income for the first quarter of $43 million represented a $35 million and $23 million improvement over fourth quarter and last year's first quarter, respectively. Net income, as reported, was $76 million but included approximately $49.7 million in net positive tax benefits from two tax items relating to our conversion to a REIT.

As was discussed in our 10-K and our press release, we're reversing approximately $78 million of deferred tax liabilities that will no longer be required, as timber booked to tax differences will no longer create future cash obligations.

In addition, given the Company's revised strategy to focus most of its new timberland investment in the U.S. rather than overseas, we're anticipating that additional tax will be due on the the eventual repatriation of foreign undistributed earnings. However, I might note that we have no immediate plans to bring that offshore cash back, and it is possible that this obligation could be reduced in the future, through tax legislation which is currently being proposed and enacted.

Backing out the special net tax benefit, net income was $26 million or 51 cents per share, $24 million above the fourth quarter of 2003. We have always talked about Rayonier's strong cash flow, and first-quarter results continue that track record. Cash provided by operating activities was $82 million. Cash available for distribution was $63 million, an increase of $57 million and $39 million over fourth quarter and first quarter 2003, respectively.

I might note, however, that we pay interest semiannually on the outstanding timber acquisition and installment notes, so that approximately $20 million of interest expense is being held in reserve until its due date at the end of the second quarter. Second-quarter cash available for distribution will therefore be adversely affected by the six-month in-arrears payment.

This is probably a good time to indicate that quarterly cash flows in our business are not as important as cumulative and full-year results. Nevertheless, on a three-month-to-date basis, as already indicated, we ended the quarter with $63 million in cash and cash equivalents, and maintained, as per our current strategy, our debt level at approximately $618 million. Our deep-to-capital ratio, as we indicated, improved 1.9 percentage points, primarily due to the benefit on shareholders' equity of the special net tax benefit. You might recall that shareholders' equity was adversely affected in the fourth quarter by 2 percentage points as a result of the cash portion of our earnings and profits distribution that was required to precede our REIT conversion.

All in all, this represented a strong earnings and cash flow performance, clearly confirming our ability to support our targeted distribution of $2.24 per share this year, and positioning ourselves with financing and cash capacity for the opportunities to further increase shareholder value that Lee indicated.

Let's now move on to chart four, and take a look at some of the operational factors that were part of the strong recovery in this quarter. As is typical in this chart, we start with the prior quarter's net income of 4 cents per share, and work our way toward the actual operational result of 51 cents per share. As you can see, pricing environment in our timber harvest operations improved, with approximately a third of the timber volume increase representing the timber that might have been sold in the fourth quarter, but which was deferred into 2004, as we modified our contract sales terms for new offerings to meet REIT-qualifying aspects. So this quarter did have some catch-up buying (ph) associated with it. Land sales were also strong, with the sale of approximately 17,000 acres this quarter for $33 million, resulting in $17 million of higher pretax income. The prorate (ph) to sales value was close to $2,000. This compares to approximately 2,700 acres sold in the fourth quarter, with a value of $3,200 per acre. The dollar-per-acre results each quarter will vary, based upon whether there is a higher or lower proportion of timberland sold as timberland versus being sold as higher and better use property and/or for conservation use. Nevertheless, the close to $2,000 per acre result was impressive.

In our Performance Fibers segment, we also saw considerable improvement over fourth-quarter performance. Cellulose specialty prices increased, as contracts are typically renewed on January 1. And this year, with the closure of a competitor's mill recently, our negotiating posture got much stronger. Operationally, were also able to lower our costs from relatively poor performance in the fourth quarter, with wood, chemicals and energy costs all declining. Our Wood Products lumber business variants reflects a slight adverse decline from the fourth quarter, as prices moderated slightly in the first quarter, but as we know, pricing is still at levels substantially higher than a year ago.

There is not much else of material importance as we run down the P&L, so that with all the cumulative positives, we ended the quarter with 51 cents per share of net income, once again excluding the REIT-related 98 cent tax benefit.

Let's turn to chart five, and quickly review the year-over-year comparisons, as well. In this analysis, we begin with the first-quarter 2003 results of 17 cents per share, having factored in the effect of the 15 percent share dilution that occurred in the fourth quarter, as a result of the E&P distribution. Actual reported results were 20 cents per share. In this comparison, we see many of the same positive variances that showed up in the fourth-to-first-quarter trend analysis just covered. Timber pricing and volume improved, and the land sale contribution was also strong compared to last year. Last year's land sales, comprising 19,700 acres, but at slightly under $900 an acre, less than half of this year's 2,000-per-acre rate.

In Performance Fibers, both cellulose specialties and absorbent materials club prices (ph) showed improvement. Costs, though, remain above first-quarter levels, primarily due to the residual impact of higher hardwood costs and carryover inventory cost adjustments from the fourth quarter 2003's adverse operating performance. In this year-over-year chart, you can see the positive impact of pricing on our lumber results, while at the same time, we see MDF performance slightly adversely affected, mostly by the strong New Zealand dollar that was present for most of the first quarter, and some wood cost increases.

In the corporate/other line, we include our REIT conversion expenses, which this quarter were approximately $4.8 million, compared to no REIT expenses a year ago, since the project basically commenced late in the second quarter. In addition to the REIT expenses, we incurred higher legal, pension, and foreign exchange costs. The REIT conversion cost of $4.8 million this quarter does not show up explicitly in the analysis that we just covered in the prior chart, inasmuch as we had a similar amount of recourse in the fourth quarter of 2003 and therefore, for that quarter-to-quarter trend analysis, the REIT conversion cost differential was not a big factor. Nevertheless, overall operating income improved $23 million over last year, which along with lower interest resulted in pretax income of $32 million and earnings per share of 51 cents for the first quarter of 2004.

Before I pass on the baton to Lee to cover markets and operations, I would like to cover one extra chart that we have included as part of our formal presentation, relating to our tax provision and effective tax rate. As many of you inquired in the past about what effective tax rate to use in your models for our post-REIT status, I would like to walk you through the key elements that affected that rate in the first quarter. And I will make some comments about other factors that could influence the effective tax rate, and the taxes that we both booked and pay going forward.

Let's turn to chart six. This chart is a slightly simplified version of what we have typically provided in our 10-K and 10-Q, and will continue to do in our forthcoming filings. We start out with the income tax provision on pretax income at the U.S. statutory rate of 35 percent for typical C-corps. We then deduct REIT income that is not subject to federal tax, as long as the earnings are basically distributed. These nontaxable earnings primarily relate now only to the sale of timber cutting rights that occurs in the U.S. Timberland sale gains are still basically fully taxed. In the future, gains on timberland sales that exceed the built-in gain on January 1 will not be taxable, an amount which will build up over time. After 10 years, none of the timberland sale gains will then be taxed.

One adverse impact related to the REIT conversion is that the interest and corporate administrative expenses associated with REIT activities do not carry a tax shield. Although the expenses are deductible in computing the amount of earnings that need to be distributed, inasmuch as the REIT activities are not subject to tax, there is no tax offset. Finally, as has been typical in the past, state and local income taxes, permanent (ph) differences and foreign rate differentials tend, in most cases, to further reduce the tax provision and the effective tax rate. What we are showing, then, in the middle of this reconciliation is the income tax provision before discrete items of $6.3 million for the current quarter or a 19.4 percent effective tax rate. On an ongoing basis, I would expect the effective rate to range from 18 to 21 percent, absent certain transactions, upon which I will comment on in a moment. In this chart, we finalize our total tax provision by including the two discrete tax items related to the REIT conversion, bringing our overall income tax provision or, actually, a tax benefit of $43.4 million.

I just mentioned that there could be certain transactions that could lower our booked tax provision further. If we're able to consummate like-kind exchanges, whereby the proceeds from selling timberlands can be reinvested in properties from which we expect to harvest timber or sell timber rights, or into land that won't be sold for at least 10 years, then the booked tax provision and cash taxes payable on the sale would not be required. Also, in a similar fashion, any involuntary conversions that take place, whereby the conversion of the disposed property into new property will create timber harvest income, taxed by -- will also not occur. In this fashion, we can effectively use taxes that would otherwise be paid as permanent financing for replacing and expanding our land-based. In the future, we will probably include this chart in our appendix for reference purposes, and only relate to it if material changes influence the rate.

One final point on taxes relates to the actual cash taxes that might be paid each year. In the past, we have tended to indicate that we would have an approximately 8 to 10 percentage point lower effective cash tax rate, based upon typical book-to-tax differences. At the present time, however, on a post-REIT conversion basis, there are still a lot of moving parts to determine taxes payable from a tax planning standpoint. And, although we may provide book taxes in certain circumstances, we have had, in some cases, an additional ability to defer them based on the tax treatment of the specific event.

For example, we will be reporting in our upcoming 10-Q that one of the land sales in the first quarter was actually structured on an installment note basis, thereby allowing us to defer the tax for 15 years. Yet we were then able to monetize approximately 90 percent of the notes, getting most of the cash proceeds immediately. On the other hand, in order to ensure that we continue to meet REIT qualifying tests, and fairly separate timberland sold in a dealer status versus that which is sold on an unsolicited basis, it will be necessary for us to transfer land between the REIT and its taxable REIT subsidiary, and in some cases pay tax in advance of the land actually being sold to third parties.

As a result of all this, our cash taxes paid will probably vary more year to year than it has in the past. But excluding these periodic intercompany land sales that might trigger taxes early, our ongoing cash tax rate could average, on a multiyear basis, 6 to 8 percentage points below the book-to-provision rate. Over time, as more of the timberland gains come from post-January 1, 2004 appreciation, both the book and tax rate will go down.

I probably took a little longer then you would like discussing income tax rates, but it has been a question in the past, and it is a very important part of economics of our cash flow and our development of cash available for distribution.

With that, let me turn the presentation over to Lee for a review of markets and operations. Lee?

Thank you, Gerry. I will just take a few minutes to quickly review the markets and operations of our businesses, and give you some comments on the outlook for the second quarter and the balance of the year.

Let's start with Timber and Land business on page eight, but before I go into the timber harvest segment, I wanted to comment on land sales, since they are an integral part of our business. Operating income from land sales in the first quarter was higher than both the fourth and first quarter of 2003, and a solid complement to our timber harvest side of the business and a major contributor to our strong cash flow. Demand for higher and better use properties continues to be strong, particularly here in Florida. As the land sales in the second quarter, you may recall our January 14th announcement regarding a 5,500 acre sale of the timber harvest lease for $26 million. We indicated that we expect it to be a second-quarter close, and that should happen been very soon.

As we've said before, there's always going to be short-term variability in land sales, but on an annual basis, earnings and contributions of cash should be fairly constant. For 2004, we expect land sales to be somewhat below 2003 level, but well above that of 2002. Looking out to the timber business on page eight, you can see some of the impact of the sales we referred to earlier, in having shifted them from the fourth quarter of last year into this year. As we said before, this was done to take advantage of the January 1 conversion to a REIT, and has very significant tax advantages.

We moved lump sum sales that previously would have occurred in quarter four of last year, to pay-as-cuts this year, which gave us a stronger first quarter, as Gerry mentioned, and by their nature will take some time to work through the financials in the year in this second quarter and, to some extent, the third quarter. The advantage of shifting payable income from 2003 to REIT-qualified income in 2004, I think, is very apparent.

For the second quarter, we expect volumes to be down somewhat, as is typical, and be generally in line with last year's second quarter. Due to a mix change or mix-based adjustment, if you will, expected second-quarter sales should see some modest reductions in prices. For this year, as I noted in our last conference call, Northwest volumes should be up about 20 percent from the 2003 level, due in large part to the impact of last year's sales switching into 2004.

On page nine, you can see in our Southeast timber businesses sales volume in the first quarter was above both first quarter and fourth quarters of 2003. Prices held, and in some cases were up slightly. In looking at the average price line on this chart, let me remind you that these sales are pay-as-cut, which went to contract on an average of about six to nine months ago. As we usually see, second-quarter pine volumes should be down about 18 percent from first quarter of last year, and we're forecasting little change in prices, which for Rayonier is neutral to the Southeast business but is a positive, I might add, for our Performance Fibers business and our U.S. Wood Products as their costs, their largest single cost, holds as our manufacturing -- as our sales price improved somewhat, particularly in Performance Fibers. For this year, pine volume will likely be down 3 to 4 percent.

On page 10, you see the normal New Zealand harvest level reduction in the first quarter. The increase in prices is primarily a function of the currency translation from a stronger New Zealand dollar. However, with the recent decline in the New Zealand dollar, we have seen some increased demand from New Zealand Wood Products manufacturers. Export log markets have been a positive contributor there, and we have been encouraged by the recent trend, shifting volumes from what has become a somewhat oversupplied Korean market and now going to China. In the second quarter, you should see a meaningful pickup in volume, which we expect to reach above the second-quarter level of 2003. Prices due to inventory conversions will probably ease as the U.S. dollar gains some strength. For the year, and as I noted during our January 29th conference call, volumes in New Zealand should be up about 10 percent from the level of 2003, but we see little change on a U.S. dollar basis.

Moving on to Performance Fibers business and the information on pages 11 and 12, as you heard us say through most of last year, hardwood chip availability and their costs, coupled with operating performance, severely impacted this business. In the first quarter, hardwood costs were down almost 10 percent from the fourth-quarter level and, while higher than first quarter 2003, we are certainly encouraged with current price trends.

On page 11, you see cellulose specialty prices, which were up 6 to 7 percent, as contract and price adjustments negotiated last year went into effect in January. While, during the three months of the quarter, fluff prices generally moved up, the average price for the quarter was essentially flat to fourth quarter 2003.

Strong prices in cellulose specialties, combined with lower costs and the much improved operating conditions, translated into overall improvement in financial results for this segment. While operating income remains below a level we consider acceptable, Performance Fibers is a major cash contributor, with an EBITDA for the quarter of slightly over $24 million. Despite last year having an operating income of -6, EBITDA was 7 million and -- 2 million -- EBITDA was $114 million.

Fluff, as we have noted before, given the commodity nature of the product, is, as we look further into 2004, difficult to predict. However, as global economic growth picks up, and as commodity paper pulp prices continue to show strength, we should see further improvement in fluff prices.

On page 12, you see the usual lower sales volume for the first quarter. But, perhaps more importantly, you can see the results of our continuing effort to reduce product mix. Although we're close to reaching capacity, our capacity to shift this mix, we should see a slight gain this year over the level you saw last year.

In summary, for the second quarter and the rest of 2004, with our product we expect cellulose prices to remain at the current level. In this business, lower costs and higher prices should translate into substantially improved results year over year, as we have seen in the first quarter. While we're pleased with this performance, we remain convinced there is considerable room for performance here.

Pages 13 and 14, our Wood Products segment. There was a fourth-quarter-to-first-quarter basis of slight reduction in lumber prices and volumes, as Gerry mentioned earlier. However, we certainly are well above the first-quarter levels of last year. In the second quarter, while market conditions will dictate to a very large extent what happens here, we expect our volume to be up and prices to be flat, although prices through April -- our average is certainly up.

On page 14, you see some of our MDF business. Here, prices are up, as you can see, and volume reflects the normally lighter first quarter. For the second quarter, volumes and prices should be up sequentially from the levels of last year.

On an operating basis, while this business reflects a small loss, keep in mind that the weak U.S. dollar has a very large impact on our MDF results.

And with that, let me go back to Gerry.

Thanks, Lee. We wrap up our formal presentation with our typical view our typical review of earnings-per-share trends. In this chart 15, we're showing on the right side reported earnings per share for 2003, and in the middle column, the pro forma earnings, factoring in the 15 percent share dilution that occurred in the fourth quarter. In the first column, we start with the first quarter's actual results of 51 cents per share, and are indicating that we expect second-quarter results to be reasonably close to last year's second quarter of 65 cents per share, and therefore higher than the first quarter's.

We don't normally reflect on the full-year projection at this time, but given the strong performance in the first quarter, and what we are indicating will be strong performance compared to the current first-quarter consensus for the second quarter, we want to provide some guidance for the year, inasmuch as first-half variance analysis would clearly indicate that the $1.34 First Call annual consensus appears low. However, if you recall the quarterly distributions of our earnings last year, and the strength in the first half compared to the full year, one should be cautious in taking all of the first- and second-quarter variances that are showing up compared to prior expectations, and adding them to the full-year number. Based on our internal projections at this time, it would appear that more than 50 percent of our earnings for the year would come from the first six months.

With that, I would like to turn the conference over to the conference operator to take questions from our audience.

(OPERATOR INSTRUCTIONS). Mark Weintraub, Buckingham Research.

First, Lee, you had mentioned that, while land sales jump around quite a bit quarter to quarter, that you would expect them to be fairly constant on an annual basis. At what level would you expect them to be fairly constant, kind of order of magnitude?

Mark, what I suppose is a reasonable answer, and it's awfully difficult to sort of pick it, probably an average between what you have seen, perhaps, in '02 and '03. Mark, it's difficult to say, but I think that's sort of in the middle of what we might expect -- where we might expect to be.

If you could just clarify a little bit, again, what you were saying on this year's expectation, then?

Mark, this year's expectation right now -- and once again, we have got more than six months to go -- it looks like we will be slightly down from last year's level. Last year, the land sales were approximately $87 million, and at this point, we're looking at a lower number, but not materially.

And, obviously, '02, you were talking about a $47 million number? Is that kind of the range? It's obviously a pretty big range, 47 to 87, somewhere in between there is --

Well, you know, once again, Mark, it's based on opportunities. And with interest rates low, there's a lot of opportunity for project development people to go out and get higher and better use projects started. As interest rates go up, that could slow down a little bit. So, as Lee indicated, you really can't tell how the land sales will go either, quarter to quarter. But I think in the past, we have given a range of about 50 million, plus or minus, when we added the 2 to 4 percent program on top of our ongoing higher and better use program. We have seen much more strength last year and this year in activity and opportunity. We hope that will continue, but once again, individual land sales could be 20 to 25 million each, and all you have to do is miss one in a year, and your results will decline or pick up, too. So that's why the swing between 50 and 75 million, let's just say, should be an acceptable range.

Now, also, Lee, you mentioned getting much more active in building your timberland base. Can you give us a sense as to what type of transactions you would be focused at looking at? Are these smaller transactions, or potentially larger transactions, even of the Smurfit stone type that you did a few years back?

Well, I don't think that -- the Smurfit stone was probably more than we would do, certainly, in the near term. What we would look for are sales -- and I would say, in the midrange, if you will -- one of the things that is available to us here, Mark, is we do some of these land sales, we can do 1031 exchanges so we can move the tax, if you will, from a taxable land sale event into a timber purchase, and thus move from a tax payment to REIT income, qualified REIT income. So that's the first thing we're going to look to do.

And with some of these sales, it can take a fair amount of money -- or, I mean, timber purchases -- in order to cover that. So we will always try to pick up the 5,000/10,000 acre kind of pieces. But I think you'll see us move up into -- certainly not Smurfit-sized, but you'll probably see us move up into more significant sizes than you have seen since the Smurfit acquisition.

So, if you were kind of in the 75 to 80 million profit range this year, is that the type of amount that you would have in these 1031 exchanges programs that you would be looking to convert?

Well, I think we are looking at that kind of number perhaps this year, as to what we will have as we move into 2005. It's a little early to try to put a number on it, but we are certainly in that magnitude as we are sitting here today. And you have got sort of a fuse on that, as to how long you have before you can swap it out. And that's something we will certainly work on.

And maybe just lastly, how much of your pretax earnings went through your non-REIT taxable subsidiary this quarter? I know you put that tax line up, but maybe if you could just answer it?

Well, let me pull the schedules, Mark. One way to do it is to take a look at the operating income that we give you, which will give you a timber harvest or semi (ph) cutting rate component. But we have not broken out, actually, is the amount of land that is being sold from the REIT versus that which is being sold from the taxable REIT subsidiary. So I think what we need to do, and I would rather not respond right now. But I think that will be a question. I think it's important that we perhaps add that to our exhibits to our press release to break that component out. But right now, with land sales being such a big component, and we have not broken it out, I would like to make sure that we get full disclosure on that.

And I guess the direction of the question, obviously, is that I'm just trying to get comfort on meeting some of the REIT requirements, in terms of percentage of income going through the non-REIT taxable subsidiary. Are you still very comfortable as you're looking at this year, or what's the thought process, particularly with the Performance Fibers, earnings seeming to be heading in the right direction?

Mark, we look at the requalification test every time we do a monthly forecast, and there are quarterly tests and annual tests. And we knew going in, even though this year is coming out stronger than we expected, let's say last summer, when we were looking at the initial REIT projections. But there are many ways to manage that because, actually, it's the dividends from the taxable REIT subsidiary to the parent company that creates the income at the parent company. So that if we -- and we expect to have some good years in Performance Fibers. If that cash is retained for the time being down below, that it does not affect those tests. But we are not any (ph) far off from what we expected. We don't see any material changes or tightnesses. So that has not been and does not appear to be a limiting factor for -- I'll just say for several years, because we have looked at that on a multiyear basis.

(OPERATOR INSTRUCTIONS). Mark Weintraub.

Just a quick question for you, then, Lee. Have you announced increases on fluff pulp, or are your implementing increases on fluff pulp right now?

Well, as to the difference between announcing and implement, I suppose we're somewhere in between. But I think we have certainly given indication, as I understand, with several others, that we generally expect to see a fluff pulp price increase at the 1st of June.

For what amount is that out there?

From what I understand, I think everybody is probably looking at something like about $30 a ton.

(OPERATOR INSTRUCTIONS). It appears that we have no further questions at this time. Mr. Pollack, I'd like to turn the conference back over to you for any additional or closing comments.

Thank you. We have always been complemented on the transparency of our reporting, and I guess the lack of questions perhaps is just indicative of that.

I think there's a few more comments. I think the first quarter actual and second quarter outlook speak for themselves, and reflect the positive impact of the economic recovery in the United States, as well as the cash flow benefits from our conversion to a REIT. While the REIT legal structure has made some of our financial reporting a little more complex, on the other hand, it is offering us substantial new opportunities to increase our cash flow.

There may be new technical questions similar to what Mark had related to our business reporting model that you need answered. Please feel free to call Parag or myself, and we will either respond to you directly with clarification, or position ourselves in the next teleconference to expand on some of the nuances that maybe showing up and are important to you.

With that, I will close the presentation and thank everybody for joining us.

Thank you. Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation. You may disconnect at this time.