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Rayonier Inc. (NYSE:RYN)

Q1 2009 Earnings Call

April 30, 2009 2:00 pm ET

Executives

Hans E. Vanden Noort - Chief Financial Officer

Lee M. Thomas - Chairman, President, and Chief Executive Officer

Timothy H. Brannon - Senior Vice President, Forest Resources

Charles Margiotta - Senior Vice President, Real Estate, TerraPointe Services Inc.

Paul G. Boynton - Senior Vice President, Performance Fibers & Wood Products

Analysts

Peter Ruschmeier - Barclays Capital

Christopher Chun - Deutsche Bank

Claudia Hueston - J.P. Morgan

Mark Weintraub - Buckingham Research

Steven Chercover - D. A. Davidson & Co.

Operator

Welcome and thank you for joining Rayonier’s first quarter analysts’ teleconference call. (Operator instructions). Now, I will turn the meeting over to Mr. Hans Vanden Noort, CFO.

Hans E. Vanden Noort

Good afternoon. Welcome to Rayonier’s investor teleconference covering first quarter earnings. Our earning statements and presentation materials were released this morning and are available on our website at www.rayonier.com. I would like to remind you that in these presentations we include forward-looking statements made pursuant to the Safe Harbor Provisions of Federal Securities Laws. Our earnings release as well as our Form 10-K filed with the SEC lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They’re also referenced on page 2 of our presentation material.

With that, let’s start our teleconference with opening comments from Lee Thomas, Chairman, President, and CEO.

Lee M. Thomas

I’ll make a few overall comments for the first quarter of 2009, then Hans will take you through the financials after which Tim Brannon our Senior Vice President of Forest Resources, Charles Margiotta our Senior Vice President and head of our real estate business, and Paul G. Boynton our Senior Vice President of Performance Fibers & Wood Products, will review those business segments.

Overall, we are pleased with our first quarter results given the weak economic conditions and the unprecedented drop in housing starts. Softness in our tissue business and lower rural HBU sales were balanced by strong demand in our Performance Fibers products and continued interest in our non-strategic timberland.

Our timber results reflect the impact of weak housing market on overall pricing as well as our decision to continue to reduce harvest levels. Our real estate business benefited from non-strategic timberland sales of 19,000 acres which generated $23 million in revenue during the quarter. The lower rural sales are really a matter of timing of sales rather than a lack of interest. In Performance Fibers, results were driven by increased cellulose specialty pricing which was largely offset by higher caustic cost which I believe appear to have peaked during the quarter.

In summary, the strength of our business mix and the good execution by our people resulted in a good quarter despite weak economic conditions and the softness in the housing market. We generated good cash flow and remain well positioned to manage due to current recession.

With that, let me turn it over to Hans for a review of the financials.

Hans E. Vanden Noort

Let’s start on page 3 with our overall financial highlights. As Lee noted, we had a good first quarter, sales totaled $274 million resulting in operating income of $44 million and net income of $26 million or $0.33 per share. On the bottom of page 3, we provided an outline of cash resources and liquidity.

Our first quarter cash flow was relatively strong with adjusted EBITDA of $85 million and cash available for distribution of $54 million. Our debt and debt-to-capital ratios were comparable year end levels. We ended the quarter with approximately $57 million in cash, while on a net debt basis; we finished at $692 million.

Note that our current quarter and comparative period results reflect a required accounting change for our senior exchangeable notes, whereby additional interest expenses accrued to represent what interest expense would have been without the conversion feature. This reduced earnings per share by about $0.01 per share in all periods presented. This accounting change also reduced the carrying amount of debt by about $22 million by re-classifying the value of the conversion feature from debt to equity.

Let’s now run through the variance analysis. On page 4, we prepared a year-over-year quarter variance analysis. In timber, we experienced reduced prices for both pulp wood and soft timber across the board. Volume in our western region was well below last year, reflecting our decision to reduce harvest levels in this environment. Additionally, results in the east reflect a significant increase in the mix of pulp wood versus soft timber. Real estate income decline $7 million, due primarily to the timing of rural HBU sales which more than offset increased non-strategic timberland acres sold.

Moving to Performance Fibers, we see a $21 million price improvement reflecting the annual cellulose specialty price increase less the impact of reduced fluff pricing. However, this benefit was largely offset by increased cost, primarily caustic.

We move on now to page 5 in the sequential variance. In general, the sequential timber results follow the trends noted on the previous chart. Prices softened for all grades in both of our regions. Additionally, results declined due to seasonally lower hunting license and other recreational income which is largely recognized in the fourth quarter. In real estate, the variance was driven by fewer non-strategic timberland acres sold and lower per-acre prices.

Finally, in Performance Fibers, increased cellulose specialty prices and reduced input costs more than offset lower volumes for both cellulose specialties and absorbent materials. Last quarter’s results also included a $4 million mark-to-market charge for fuel oil hedges.

Turning now to page 6, on this page we reconcile from cash provided by operating activities which is a GAAP measure to our non-GAAP metric of cash available for distribution or CAD. Our cash flow remains strong with CAD at $54 million, about 11% below last year’s first quarter but well above our dividend requirement.

Moving on now to page 7, our debt maturity schedule; our next major maturity is $122 million installment note due on December 31, 2009. We expect to pay down a portion of this note using operating cash flows and to then refinance the balance using either our existing revolver or a new term note. Our $250 million revolving credit facility has $145 million of remaining capacity which is available at an interest rate of LIBOR plus 40 basis points. This facility does not expire until August 2011.

All in all, we believe our strong balance sheet, conservative credit profile, and strong and consistent cash generation provide liquidity which will position us well to manage the continuing turmoil in the credit markets.

With that, let me turn the conference over to Tim Brannon to cover Forest Resources.

Timothy H. Brannon

Timber markets are very weak. Housing starts remain depressed, so soft timber demand is soft. In addition, the slow-down in the commodity pulp and paper industry which we began seeing in the fourth quarter has continued, resulting in lower pulp wood requirement.

In the west as shown on page 9, our soft timber harvest is at historically low levels. We have a limited volume that we are supplying into the export market, which at present is reasonably firm, but lumber mills in the domestic market have curtailed operations and many mills are operating sporadically; so as a result, volume and price are quite soft. Accordingly, we are holding back volume until markets strengthen. Sequentially, volume is down 32% and prices are off 7%.

In the east as shown on page 10, soft timber markets are also depressed. Sawmill curtailments and closures have weakened log demand. Fortunately, our thinning program remained robust and we have continued to supply pulp wood and small logs despite the slow-down in the commodity, pulp, and paper industry. Our first quarter pine volume was 9% above first quarter of 2008 and reflects a significantly higher mix of pulp wood versus soft timber from 65% to 78%.

As you can see, stumpage prices remained relatively flat in the east during the last three quarters of 2008, but the higher mix of thinnings in the first quarter of 2009 combined with lower demand and price for soft timber resulted in price deterioration of 14% sequentially.

For the balance of 2009, US market weakness is likely to persist. We expect a very modest seasonal uptake in lumber pricing during the year, but we think it will have little to no impact on timber prices. In the west, we plan to let our high value timber grow and have reduced our harvest to a level of 40% to 45% below what we would expect to harvest under more normal market conditions, and 35% below 2008. In addition, we are considering further harvest reductions as markets dictate.

Prices for the year in the west will be down around 10% year-over-year due to weaker saw-log demand as well as unfavorable species and market mix. In the east we currently project that our pine volume will be down modestly year-over-year. However, we will be monitoring the pulp wood market closely and may consider a further volume reduction depending upon price and demand.

Since we will continue to hold soft timber off the market, thinnings and pulp reduction will be a higher proportion of our pine volume in 2009 than in 2008. Lower soft timber prices combined with this mix shift lower value pulp wood will result in a stumpage price deterioration of 15% to 20% year-over-year.

With regards to the sale of joint venture estate in New Zealand, we are engaged with due diligence with several interested parties.

With that, let me turn it over to Charlie Margiotta to review our real estate business.

Charles Margiotta

Our real estate activity continues at a steady pace. Rural markets have shown active interest and timberland markets continue to prove resilient. We continue to make progress on our key strategic development projects with activity predominantly focused on planning and gaining entitlement in Florida and Georgia.

Chart 11 shows the rural and development acres sold by quarter. First quarter sales of nearly 1400 acres were low due to the timing of contract closings. However, based on buyer interest, we expect acres sold in 2009 to be in line with 2008. The most active markets are Georgia and Alabama, and note that in April we completed our first roll sale from our recently purchased New York property.

Chart 12 describes development in rural per acre prices. The rural price of nearly $2800 per acre represented sales across the number of states at price levels within the respect of markets consistent with the last 12 to 24 months. We see no erosion in per acre prices, and in fact, there is some evidence of improving availability of credit for land buyers.

Moving to our non-strategic timberland sales results as shown in chart 13, we continue to experience serious buyer interests from parties with available capital. Timberland buyers have become more targeted. However, solid demand still exists. Results of our first quarter non-strategic timberland sales were at per acre prices generally below what was achieved in 2008 due in part to property attributes and to some extent market forces. The first quarter sales of about 19,000 acres at a price of nearly $1200 per acre represented predominantly properties located in Alabama. We expect that non-strategic sales acres in 2009 will be at or above prior year albeit at somewhat lower per acre prices.

With that, let me turn it over to Paul to review Performance Fibers.

Paul G. Boynton

Performance Fibers stated 2009 with a solid first quarter due principally to strong demand for our unique cellulose specialties products.

On page 14, you see net selling prices for our two Performance Fibers product lines. We increased our cellulose specialty prices year-over-year due to both strong demand for these products and significant raw material cost pressure. In line with our guidance, first quarter cellulose specialty prices increased 8% sequentially and 17% above the same quarter prior year. Looking at absorbent materials which consist principally of fluff pulp, prices dropped as anticipated 6% sequentially and 3% below the same quarter prior year.

Moving on to page 15 and looking at volumes, we can see our first quarter cellulose specialty sales were comparable to the same quarter prior year. Fortunately, demand for our unique cellulose specialty fibers has been relatively strong. While we have seen the anticipated softening of demand in smaller segments such as applications for engine filtration, additives for automotive paint coatings, and plastics for LCD screen, demand remains stable for the majority of our product in-use applications such as food, pharmaceuticals, and filter tow.

Absorbent material volume of 65,000 tons was 16% above the same quarter prior year due to both strong production and the absence of reliability constraints than challenged us last year. These combined business factors, particularly cellulose specialty pricing generated improvement in the year-over-year sequential operating income.

We anticipate that our second quarter cellulose specialties volume will be below this quarter as certain key customers complete their inventory draw-down efforts which will affect the timing of orders. For the year, we believe that our cellulose specialties volumes will be comparable to the prior year.

For the second quarter and full year we expect absorbent materials sales volume to increase approximately 30% and 14% respectively compared to 2008. We expect prices to decline 15% to 20% year-over-year.

During our last teleconference I commented that we could see our largest single chemical caustic cost increase more than $80 million year-over-year as a set of very favorable 4-eyar contracts expired at the end of 2008; and indeed if we annualize our first quarter caustic spend, it would approximate $80 million. However, we become optimistic that caustic prices will ease through the balance of the year much as other input costs have already done.

Our cellulose specialty business typically has fixed prices for the year; however, last year, we made an exception and asked our customers to support a price surcharge due to rapidly escalating cost. Now with falling cost, we see the potential opportunity to effectively give back last year’s surcharge that was essentially built into the price increase for 2009. As a result, cellulose specialties year-to-year annual price increase will range significantly but should average about 13%, slightly below the guidance I gave you last quarter.

In summary, we are off to a solid start in both operational performance and financial results, and despite global economic pressures, demand for our cellulose specialties products remains solid, which should support our business well for 2009.

Now, let me turn it back to Hans.

Hans E. Vanden Noort

Before I update our full year guidance, I’d like to provide a status update with respect to the alternative fuel tax credit.

Our two Performance Fibers mills were certified by the IRS as alternative fuel mixers in early April. Through the first quarter, we believe that approximately $40 million of tax credits were generated. However, since the certification was not received until April, this amount was not recognized in the first quarter financial statements and will instead be recognized as other operating income in the second quarter. As of today, we believe that the generated credit has increased to approximately $60 million.

We expect to apply the year end tax credits against our 2009 and 2010 TRS income tax liability. So, we expect to have no cash taxes payable at the TRS this year or next year. Any excess credit above our tax liability will be realized as a refund in 2010 after filing our 2009 tax return.

Because this credit has been subject to so much public and political debate, we are not going to speculate on the ultimate benefit to be generated or the credit’s prospect to last through 2009 as the law is currently written.

Now, I’d like to update some key statistics to assist you in refining your model for Rayonier. As mentioned last quarter, I’ll only be touching on full year statistics and guidance given the variability and timing around our timber and non-strategic timberland sales and the overall volatility in the financial markets. Further, please note that this guidance does not include any benefit from the alternative fuel credit.

We expect depreciation, depletion, and amortization of $156 million and the non-cash cost base of lands sold of $11 million or approximately $167 million in total. This is $16 million below previous guidance, driven primarily by lower depletion due to the reduced harvest levels and a mix change within non-strategic timberland sales.

Capital expenditures excluding acquisitions are expected to range between $85 million and $88 million, $10 million below previous guidance as we work to conserve capital. We expect interest expense net of interest income of about $50 million versus $49 million in 2008, both of these amounts reflect the new accounting for convertible debt as previously noted.

Finally, our effective tax rate is expected to range between 18% and 20%, which is above our prior guidance and the 2008 effective rate of 11%. This reflects the increase in the mix of income of our TRS businesses as well as the planned volume reductions in timber.

When you put all of these elements together, we continue to anticipate strong cash flow despite the adverse conditions facing our timber business. We’re still comfortable with guidance provided on our last call of EBITDA about 10% to 15% below 2008 and EPS 20% to 25% below 2008. However, we expect CAD to improve now to be only slightly below 2008 and well above our current dividend of $3.00 per share.

Now let me turn it back to Lee for some summary comments.

Lee M. Thomas

Let me conclude here by saying that we believe we’ll perform well in 2009 in spite of the challenging economic condition. In timber; in response to the soft market we anticipate reducing harvest volumes and plan to let our high-value timber grow until market conditions improve. Real estate; we anticipate ongoing demand for non-strategic timberlands encouraged by the interest we’re seeing in our rural and conservation markets. Additionally, as Charlie noted, we continue to make good progress towards entitling our development properties in Florida and Georgia. Our Performance Fibers earnings are expected to be comparable to 2008 as increased cellulose specialty prices are offset by declining absorbent material prices and higher caustic costs.

Overall, I believe with our diverse business mix, prudent management of costs, and conservative debt levels, we’re well positioned to continue to perform well in 2009 and build shareholder value for the long term.

With that I’d like to close the formal part of the presentation and turn the teleconference back to the conference operator for questions from the audience.

Question-and-Answer Session

Operator

(Operator Instructions). Your first question comes from Peter Ruschmeier - Barclays Capital.

Peter Ruschmeier - Barclays Capital

A couple of question; I was curious in the specialty pulp area, I understand that there were some reversals perhaps of the surcharges from last year; has that completely been reversed or is there some potential that that could continue even further in future quarters?

Paul G. Boynton

It is our plan that as we look at falling costs to go ahead and return some of that surcharge that we had last year this year, but other than that I don’t think I’d comment anything more specifically.

Peter Ruschmeier - Barclays Capital

The fluff pulp price for the quarter was a little higher than I thought; I am curious if you can comment on recent trends or maybe where prices today might be relative to the first quarter average?

Paul G. Boynton

I think out there in the marketplace you see fluff spot pulp prices at the bottom and I think what you see is some of the contracted volume and prices with that gravitating in that direction; we didn’t anticipate through the course of the year some decline in fluff pulp prices.

Peter Ruschmeier - Barclays Capital

Also related to the pulp business, I guess the credits that you can apply for and receive are from the pulp business; I am curious if you can help us on how much wood fluff pulp consumes per ton of output relative to dissolving. My understanding is that dissolving is quite a bit more? I am trying to understand how many tons of green wood do you consume per ton of dissolving pup relative to green tons consumed per ton of fluff pulp.

Paul G. Boynton

If you look at our cellulose specialty side of business, we may use up to 6 green tons per ton of pulp and if you look at fluff pulp, it would be somewhat less than that; 4 to 5.

Peter Ruschmeier - Barclays Capital

Shifting to the timber business; I think you mentioned the western harvest about 40% to 45% below normal levels. I am curious if you could share the same figure for the south?

Timothy H. Brannon

Actually, in the south we expect to be off modestly from last year at least to this point. As I mentioned, we’re watching the commodity pulp market closely and seeing what may happen there, but at this point we’ll be down from last year modestly, but because of the amount of thinnings that we’ve been able to do, up to about 78% of our harvest in the first quarter, it has been positive for us. So, we’ve been able to continue to supply that market.

Peter Ruschmeier - Barclays Capital

Tim, but if you broke that down and just looked at the soft timber piece, it would be down substantially.

Timothy H. Brannon

Soft timber piece would be down substantially, right.

Paul G. Boynton

We’re normally about 50-50 mix in a normal pricing environment.

Timothy H. Brannon

We’re running more like a 75-25 mix.

Operator

Your next question comes from Christopher Chun - Deutsche Bank.

Christopher Chun - Deutsche Bank

First of all I had a couple of question on the Performance Fibers business. Congratulations on the good performance. Paul, can you tell us where caustic soda costs now compared to the ones you average?

Paul G. Boynton

As commented, Q1 came in as anticipated and if we annualize Q1 relative to Q1 prior year, we’d be up in the $80 million mark. Right now we’re certainly sitting below that and we anticipate that to be the case and continuing throughout the course of the year. As far as nailing down that number, I think I’m a bit reluctant at this time.

Christopher Chun - Deutsche Bank

Could you give us an order of magnitude though; if caustic soda costs remain similar to where they are now, would that $80 million number turn into $60 million or $40 million?

Paul G. Boynton

I think Chris maybe it is best if you look at our overall cash costs and we’ve commented on this in the past and we thought we’d be well into the double digits for the year; right now as I look at it we’re hopeful to be in the single digits for the balance of the year, but again, it’s a little bit premature to pin that down.

Lee M. Thomas

One of the thing on caustic I think that makes it difficult the way I see it; we were coming off of these contracts that ended up in addition to contracted volume going forward, we’re also buying on the stock market. So to some extent it depends on how much and for how long we’re able to find product on the stock market.

Christopher Chun - Deutsche Bank

So, before this year you were on contract and now are you all on spot or do you have some contracts on the spot?

Lee M. Thomas

We actually had some on spot at the end of last year, most was on contract, but that spot was very very high. This year what we are is on bulk contract, but also more on spot and what we’re finding is with the imports coming in particularly from Asia, that spot is giving us a benefit.

Christopher Chun - Deutsche Bank

Can you tell us, let’s say per ton of pulp output, how much caustic soda you use?

Hans E. Vanden Noort

I don’t think that’s a number we’re going to put out there. I am so sorry.

Christopher Chun - Deutsche Bank

Okay, I am sorry; I am going to keep asking though. In terms of pricing, obviously we see the industry prices published on fluff; is that consistent with what you guys realize on a quarterly basis or is there some lag involved?

Hans E. Vanden Noort

Yes, there is a bit of lag to what you see out there in the marketplace, and a lot of our contracts are constructed in such a way that you’re going to see a couple or three months type of lag to the market.

Christopher Chun - Deutsche Bank

Switching gears to the timber side; Tim, I was just wondering if you could tell us what percent of your north-west sales now are into the export market?

Timothy H. Brannon

Chris, it’s in the 7% or maybe as high as 10%, but let me just be clear; we don’t export directly. This is sales that we make to others who then put it over the wharf. So, as I say it’s a relatively small amount, but I am saying this market, you know, any glimmer of hope is a good thing. Hopefully somewhere, we’re pleased that at least it’s firm. It’s not robust, but at least it’s firm.

Christopher Chun - Deutsche Bank

Are you on a stumpage model out there or delivered log?

Timothy H. Brannon

We do both.

Christopher Chun - Deutsche Bank

How much difference is there in terms of your cost to delivered to, let’s say a port, versus a typical lumber producer within the region?

Timothy H. Brannon

It’s not necessarily a large amount, but even having said that we’re by and large supplying to folks who may be consolidating wood at a given spot. In some cases we may be delivering to the port, but there’s not a great deal of difference between the type of delivery in terms of the cost from the forest to that point.

Christopher Chun - Deutsche Bank

Do you know which countries the logs go into?

Timothy H. Brannon

All into Asian countries.

Christopher Chun - Deutsche Bank

Can you be specific; whether it’s China or Japan or other countries?

Timothy H. Brannon

Typically the wood that we’re selling is going into Korea.

Christopher Chun - Deutsche Bank

What species is that?

Timothy H. Brannon

Hemlock.

Christopher Chun - Deutsche Bank

Finally, on the real estate side; you mentioned that you’re really not seeing evidence of price erosion, but the realizations of non-strategic sides are going to be a bit lower. Can you give us some more color on what the land attributes are that are causing that?

Charles Margiotta

What we said was that timberland prices were resilient. We believe we had record high timberland prices in ’07 and particularly in ’08, and we’ve come off that some, but the change in price say from third or fourth quarter of ’08 to ’09 is some market, but also some property attributes. We do think the market has come down a bit, a 10% move on price, but that’s about all we’ve seen.

Operator

Your next question comes from Claudia Hueston - J.P. Morgan.

Claudia Hueston - J.P. Morgan

On the real estate side, I was hoping if you could just provide a little bit of color on the kinds of or the types of buyers or interested persons who are looking at land right now and looking at your assets?

Paul G. Boynton

Certainly on the timberland side, it’s predominantly TIMOs; it’s not exclusively. On the rural land side, as always, it’s a real mix of adjoining land owners, buyers, we’re starting to see some buyers that had gone out of the market the last 6 or 9 months because of credit slowly moving back in, and we’re starting to see a slight pick up in interest from conservation.

Claudia Hueston - J.P. Morgan

Lee, I don’t know if you wanted to address priorities for cash, particularly you had a good quarter this quarter and now with the fuel credit cash coming through as well how are you thinking about cash going forward?

Lee M. Thomas

Claudia, even without the fuel credit as Hans indicated we feel like we’ve got good cash available for distribution this year, probably just slightly below last year. Obviously the dividend is a very important part of our cash distribution. Maintaining our facilities as far as capital is concerned, insuring that we keep our debt conservative, and as Hans mentioned we’ve got a note coming due at the end of this year and we intend to use some of our available cash to pay down that note, at least partially pay it down if not totally pay it down depending on what kind of cash we got available; those are the kind of things we’ll look at this year in terms of priorities.

Claudia Hueston - J.P. Morgan

I notice that it didn’t like acquisitions were on that list at this point; so it’s really more a year of just cash generation and debt pay-down.

Lee M. Thomas

I think those are the priorities although I would not rule out acquisitions. As Charlie indicated, we have seen a little reduction in timberland prices from last year, not a large one, but if we see a good opportunity, we would still take a look at potential acquisition. We’re always looking and at the same time we’re talking to people about buying our properties.

Operator

Your next question comes from Mark Weintraub - Buckingham Research.

Mark Weintraub - Buckingham Research

Just want to make sure I was doing the math right here; Black Liquor credit, it seems that it’s running at about $20 million a month now, is that right; for the 8 months yet to come can we just take the $20 million and multiply it by 8 and get a ballpark type of number?

Lee M. Thomas

Mark, we just are really not going to speculate on anything going forward. There’s just too much uncertainty about all of that.

Mark Weintraub - Buckingham Research

Can you just confirm that that $20 million for the month of April is what was indicated in the Q, is that correct?

Hans E. Vanden Noort

That is correct.

Mark Weintraub - Buckingham Research

You also said on the call and I just wanted to make sure I understood it that the way you would use the credit would be as a tax rate of sorts of what would have been essentially offsetting taxes you would be paying or would it be a credit that you then have to pay tax on? I just wasn’t fully clear whether or not the credits, the way you were going to handle them, would be taxable or not?

Hans E. Vanden Noort

I did say that our intent right now would be to apply it as an offset to taxes that TRS would otherwise have to pay, and so our understanding is that would apply to the ’09 payments and ’10 payments until the ’09 tax return was filed. So, that’s what our intent is now given what we know today.

Mark Weintraub - Buckingham Research

Shifting gears quickly, on the New Zealand business you’ve just mentioned, you were in negotiations with several interested parties; is there any more color that you can provide? I know it’s on the books at about $45 million or so; is that order of magnitude, and I realize that you’re not going to want to get specific, but some timberland sometimes are on the books at magnitudes below what they might be worth; has that been adjusted to approximate the value or can we not really pay any attention to what is on the books and trying to assess its value.

Hans E. Vanden Noort

I think that latter statement is more accurate Mark. This is just on a historical basis and so it hasn’t been adjusted in any form or fashion to market per se, something like that.

Operator

Your next question comes from Steven Chercover - D. A. Davidson & Co.

Steven Chercover - D. A. Davidson & Co.

Most of my questions have been already responded to, but do you have any 1031 exchange that you’re compelled to try and offset this year?

Hans E. Vanden Noort

No, we really don’t have anything that we’re compelled to offset. As we look at the sales are made out, we always evaluate whether it makes sense to try to match it up or not, but we really don’t have anything that would be compelling it.

Operator

At this time there are no further questions.

Hans E. Vanden Noort

I’d like to thank everybody for listening in and please contact Carl Kraus if you have any followup questions.

Operator

This does conclude today’s conference. Thank you for attending.

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