Rayonier (NYSE:RYN) today reported first quarter net income of
$35.1 million, or 45 cents per share. This compares to $55.2
million, or 71 cents per share, in fourth quarter 2006 and $23.2
million, or 30 cents per share, in first quarter 2006. Fourth
quarter 2006 results included special item gains of $9.0 million,
or 12 cents per share. (See Schedule H for details.) Lee Thomas,
President and CEO, said: �First quarter results were quite good.
Demand continued to be very strong and prices increased for our
Performance Fibers products; in Timber, volumes were up as some
customers advanced their harvests to take advantage of strong U.S.
pulp and Northwest log export markets; and Real Estate results
benefited from a sale that had been expected to close later in the
year.� First quarter income was below fourth quarter 2006,
excluding special items, primarily due to lower Real Estate and
Performance Fibers results partly offset by improved earnings in
Northwest timber. Earnings improved compared to first quarter 2006
primarily due to stronger Performance Fibers and Real Estate
results partly offset by weaker lumber markets. Sales for the first
quarter of $300 million were $29 million below fourth quarter 2006
but $23 million above first quarter 2006. Cash provided by
operating activities of $52 million was $1 million above first
quarter 2006. Cash Available for Distribution (CAD) of $61 million
was $37 million above first quarter 2006 mainly due to higher
operating earnings and lower capital expenditures. (CAD is a
non-GAAP measure defined and reconciled to GAAP in the attached
exhibits.) Debt of $671 million was $12 million above year-end
2006. The debt-to-capital ratio of 42.0 percent was comparable to
year-end 2006. Cash at March 31, 2007 was $28 million compared to
$40 million at December 31, 2006. Timber Sales of $65 million and
operating income of $26 million were $18 million and $7 million
above fourth quarter 2006, respectively, primarily due to higher
timber volumes driven by strong U.S. pulp and Northwest log export
markets. Compared to first quarter 2006, sales and operating income
increased $11 million and $2 million, respectively, mainly due to
stronger U.S. timber volumes. Volumes compared to both previous
quarters also increased due to harvesting on timberland we acquired
last year. Real Estate Sales of $21 million and operating income of
$15 million were $14 million and $15 million below fourth quarter
2006, respectively, primarily due to fewer development acres sold,
partially offset by an increase in rural acres sold. Compared to
first quarter 2006, sales and operating income increased $8 million
and $5 million, respectively, mainly due to an increase in rural
acres sold and improved overall prices partly offset by a decrease
in development acres sold. Performance Fibers Due primarily to
planned maintenance downtime, sales and operating income of $166
million and $27 million, respectively, were $30 million and $6
million below fourth quarter 2006, with lower volumes partially
offset by higher prices for both cellulose specialties and
absorbent materials. The operating income variance was also
impacted by a property tax settlement that benefited fourth quarter
2006 and higher manufacturing costs in the current quarter.
Compared to first quarter 2006, sales and operating income improved
$20 million and $17 million, respectively, largely due to higher
prices for both cellulose specialties and absorbent materials. Wood
Products Sales of $20 million were $2 million below fourth quarter
2006 due to a decline in volume, while the operating loss of $3
million was $1 million less than in the fourth quarter due to
slightly improved prices. Compared to first quarter 2006, sales and
operating income declined $12 million and $6 million, respectively,
due to significantly weaker prices partially offset by lower
manufacturing costs. Other Operations Sales of $28 million were $2
million below fourth quarter 2006 and $4 million lower than first
quarter 2006. The operating loss of $1 million was unfavorable by
$2 million compared to fourth quarter 2006 primarily due to the
impact of legal settlements in that quarter, and $1 million below
first quarter 2006. Other Items Corporate expenses of $9.1 million
were $2.2 million below fourth quarter 2006 mainly due to decreased
business development expenses but comparable to first quarter 2006.
Interest expense of $13.6 million was essentially unchanged from
fourth quarter 2006. Compared to first quarter 2006, interest
expense increased $1.4 million mainly due to higher debt partially
offset by lower interest rates. Interest and other income of $1.0
million was $1.5 million and $1.2 million below fourth quarter and
first quarter 2006, respectively, primarily due to lower interest
income. There was no impact from discontinued operations in first
quarter 2007 and 2006, however, fourth quarter 2006 included income
of $5.3 million due to a reduction in environmental reserves as a
result of the approval of a more cost-effective remediation plan at
a closed facility. The first quarter effective tax rate, before
discrete items, was 16.7 percent, compared to 16.4 percent in first
quarter 2006. Including discrete items, the effective tax rate
increased to 17.6 percent compared to 14.6 percent in first quarter
2006. (See Schedule J for details.) Outlook �Rayonier�s mix of core
businesses continues to provide us with strength and balance and we
look forward to another good year with earnings comparable to 2006,
excluding special items,� Thomas said. �Although the housing
slowdown continues to put pressure on our Timber and Real Estate
businesses, we expect the impact will be offset by the strength of
Performance Fibers. �However, we are closely monitoring the ongoing
wildfires in Southeast Georgia which have affected about 26,000
acres of our timberland and are not yet fully contained. Our
preliminary estimate of the impact on second quarter earnings is $5
to $7 million, or 6 to 9 cents per share. Once the area is fully
accessible, we will be able to more accurately assess the damage.�
Rayonier is a leading international forest products company with
three core businesses: Timber, Real Estate and Performance Fibers.
It owns, leases or manages 2.7 million acres of timber and land in
the U.S., New Zealand and Australia. The company�s holdings include
approximately 200,000 acres with residential and commercial
development potential along the fast-growing Interstate 95 corridor
between Savannah, Georgia, and Daytona Beach, Florida. Its
Performance Fibers business is the world�s leading producer of
high-value specialty cellulose fibers. Approximately 40 percent of
the company�s sales are outside the U.S. to customers in more than
50 countries. Rayonier is structured as a real estate investment
trust. Except for historical information, the statements made in
this press release are �forward-looking statements� made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and other federal securities laws. These
forward-looking statements, which include statements regarding
anticipated earnings, revenues, volumes, pricing, costs and other
statements relating to Rayonier�s financial and operational
performance, in some cases are identified by the use of words such
as �may,� �will,� �should,� �expect,� �estimate,� �believe,�
�anticipate� and other similar language. The following important
factors, among others, could cause actual results to differ
materially from those expressed in the forward-looking statements
contained in this release: changes in global market trends and
world events; interest rate and currency movements; changes in key
management personnel; fluctuations in demand for, or supply of,
cellulose specialty products, absorbent materials, timber, wood
products or real estate and entry of new competitors into these
markets; adverse weather conditions and natural disasters affecting
production, timber availability and sales, or distribution; changes
in production costs for wood products or performance fibers,
particularly for raw materials such as wood, energy and chemicals;
unexpected delays in the entry into or closing of real estate sale
transactions; changes in law, policy or political environment that
might condition, limit or restrict the development of real estate;
the ability of the company to identify and complete timberland and
higher-value real estate acquisitions; the company's ability to
continue to qualify as a REIT; the ability of the company to
complete like-kind exchanges of timberland; and implementation or
revision of governmental policies, laws and regulations affecting
the environment, endangered species, timber harvesting, import and
export controls or taxes, including changes in tax laws that could
reduce the benefits associated with REIT status. For additional
factors that could impact future results, please see the company's
most recent Form 10-K on file with the Securities and Exchange
Commission. Rayonier assumes no obligation to update these
statements except as may be required by law. A conference call will
be held on Tuesday, April 24, at 2:00 p.m. EDT to discuss these
results. Interested parties are invited to listen to the live
webcast by logging onto www.rayonier.com and following the link.
Supplemental materials will be available at the website. A replay
will be available on the site shortly after the call where it will
be archived for one month. Also, investors may access the �listen
only� conference call by dialing 913-981-5584. For further
information, visit the company�s web site at www.rayonier.com.
Complimentary copies of Rayonier press releases and other financial
documents are also available by mail or fax by calling
1-800-RYN-7611. RAYONIER FINANCIAL HIGHLIGHTS MARCH 31, 2007
(unaudited) (millions of dollars, except per share information) �
Three Months Ended March 31, Dec. 31, March 31, 2007� 2006� 2006�
Profitability Sales $ 299.7� $ 328.5� $ 277.2� Operating income $
55.2� $ 67.6� $ 37.2� Income from continuing operations $ 35.1� $
49.9� $ 23.2� Discontinued operations $ -� $ 5.3� $ -� Net income $
35.1� $ 55.2� $ 23.2� Income per diluted common share Continuing
operations $ 0.45� $ 0.64� $ 0.30� Net income $ 0.45� $ 0.71� $
0.30� Pro forma net income (a) (d) $ 0.45� $ 0.59� $ 0.30�
Operating income as a percent of sales 18.4% 20.6% 13.4% Adjusted
ROE (a) (d) 15.2% 20.1% 10.4% Average diluted shares outstanding
(millions) 78.5� 78.3� 78.0� � Three Months Ended March 31, 2007�
2006� Capital Resources and Liquidity Cash provided by operating
activities $ 52.4� $ 50.8� Cash used for investing activities $
(46.9) $ (40.4) Cash used for financing activities $ (17.0) $
(30.8) Adjusted EBITDA (b) (d) $ 97.5� $ 70.8� Cash Available for
Distribution (CAD) (c) (d) $ 60.8� $ 23.7� Borrowing/(repayment) of
debt, net $ 12.0� $ (0.8) � 03/31/07� 12/31/06� Debt $ 671.4� $
659.0� Debt / capital 42.0% 41.8% Cash $ 28.5� $ 40.2� � (a), (b),
(c) and (d), see Schedule B. � - A - RAYONIER FOOTNOTES FOR
SCHEDULE A MARCH 31, 2007 (unaudited) � � (a) Pro forma net income
and Adjusted ROE are non-GAAP measures. See Schedule H for
reconciliation to the nearest GAAP measure. � (b) Adjusted EBITDA
is defined as earnings from continuing operations before interest,
taxes, depreciation, depletion, amortization and the non-cash cost
basis of real estate sold. Adjusted EBITDA is a non-GAAP measure of
operating cash generating capacity of the Company. See
reconciliation on Schedule I. � (c) Cash Available for Distribution
(CAD) is defined as cash provided by operating activities less
capital spending, adjusted for equity based compensation amounts,
the tax benefits associated with certain strategic acquisitions,
the change in committed cash and other items which include the
proceeds from matured energy forward contracts and the change in
capital expenditures purchased on account. CAD is a non-GAAP
measure of cash generated during a period that is available for
dividend distribution, repurchase of the Company�s common shares,
debt reduction and for strategic acquisitions net of associated
financing. See reconciliation on Schedule H. � (d) Management
considers these measures to be important to estimate the enterprise
and shareholder values of the Company as a whole and of its core
segments, and for allocating capital resources. In addition,
analysts, investors and creditors use these measures when analyzing
the financial condition and cash generating ability of the Company.
� - B - RAYONIER CONDENSED STATEMENTS OF CONSOLIDATED INCOME MARCH
31, 2007 (unaudited) (millions of dollars, except per share
information) � Three Months Ended March 31, Dec. 31, March 31,
2007� 2006� 2006� � Sales $ 299.7� $ 328.5� $ 277.2� Costs and
expenses Cost of sales 231.7� 249.2� 224.2� Selling and general
expenses 15.8� 18.9� 16.2� Other operating income, net (3.0) (7.2)
(0.4) Operating income 55.2� 67.6� 37.2� Interest expense (13.6)
(13.8) (12.2) Interest and other income, net 1.0� 2.5� 2.2� Income
before taxes 42.6� 56.3� 27.2� Income tax expense (7.5) (6.4) (4.0)
Income from continuing operations $ 35.1� $ 49.9� $ 23.2�
Discontinued operations, net -� 5.3� -� Net income $ 35.1� $ 55.2�
$ 23.2� � Income per Common Share: Basic From continuing operations
$ 0.45� $ 0.65� $ 0.30� Net income $ 0.45� $ 0.72� $ 0.30� Diluted
From continuing operations $ 0.45� $ 0.64� $ 0.30� Net income $
0.45� $ 0.71� $ 0.30� � Pro forma net income (a) Adjusted diluted
EPS $ 0.45� $ 0.59� $ 0.30� � Weighted average Common Shares used
for determining Basic EPS 77,130,711� 76,679,126� 76,289,274�
Diluted EPS 78,528,221� 78,331,461� 78,006,773� � (a) Non-GAAP
measure, see Schedule H for a reconciliation to the nearest GAAP
measure. � � - C -� RAYONIER BUSINESS SEGMENT SALES AND OPERATING
INCOME (LOSS) MARCH 31, 2007 (unaudited) (millions of dollars) �
Three Months Ended March 31, Dec. 31, March 31, 2007� 2006� 2006�
Sales Timber $ 65.0� $ 47.2� $ 54.5� � Real Estate 21.0� 34.9�
13.1� � Performance Fibers Cellulose specialties 129.5� 146.1�
106.7� Absorbent materials 36.9� 50.0� 39.3� Total Performance
Fibers 166.4� 196.1� 146.0� � Wood Products 19.7� 21.3� 31.6� �
Other Operations 27.6� 29.1� 32.0� � Intersegment eliminations -�
(0.1) -� � Total sales $ 299.7� $ 328.5� $ 277.2� � Operating
income/(loss) Timber $ 26.3� $ 18.8� $ 23.9� � Real Estate 15.2�
29.9� 10.2� � Performance Fibers 27.1� 32.6� 10.2� � Wood Products
(3.3) (4.2) 2.6� � Other Operations (1.3) 1.3� (0.5) � Corporate
(9.1) (11.3) (9.5) � Intersegment eliminations and other 0.3� 0.5�
0.3� � Total operating income $ 55.2� $ 67.6� $ 37.2� � - D -
RAYONIER CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF
CASH FLOWS MARCH 31, 2007 (unaudited) (millions of dollars) �
CONDENSED CONSOLIDATED BALANCE SHEETS March 31, Dec. 31, 2007�
2006� Assets Current assets $ 291.6� $ 300.3� Timber, timberlands
and logging roads, net of depletion and amortization 1,112.8�
1,127.5� Property, plant and equipment 1,385.5� 1,365.0� Less -
accumulated depreciation (1,018.7) (1,011.2) 366.8� 353.8�
Investment in New Zealand JV 59.9� 61.2� Other assets 136.4� 121.8�
$ 1,967.5� $ 1,964.6� Liabilities and Shareholders' Equity Current
liabilities $ 172.8� $ 193.3� Long-term debt 670.9� 655.4�
Non-current liabilities for dispositions and discontinued
operations 110.0� 111.8� Other non-current liabilities 87.6� 86.1�
Shareholders' equity 926.2� 918.0� $ 1,967.5� $ 1,964.6� �
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
March 31, March 31, 2007� 2006� Cash provided by operating
activities: Net Income $ 35.1� $ 23.2� Depreciation, depletion,
amortization and non-cash basis of real estate sold 42.3� 33.2�
Other non-cash items included in income 4.9� 4.1� Changes in
working capital and other assets and liabilities (29.9) (9.7) 52.4�
50.8� Cash used for investing activities: Capital expenditures
(31.4) (36.5) Purchase of timberlands and wood chipping facilities
(8.7) (4.3) (Increase)/decrease in restricted cash (14.0) 0.1�
Other 7.2� 0.3� (46.9) (40.4) Cash used for financing activities:
Borrowing/(repayment) of debt, net 12.0� (0.8) Dividends paid
(36.3) (35.9) Issuance of common shares 5.1� 4.1� Excess tax
benefits from equity-based compensation 2.2� 1.8� (17.0) (30.8)
Effect of exchange rate changes on cash (0.2) 0.4� Cash and cash
equivalents: Decrease in cash and cash equivalents (11.7) (20.0)
Balance, beginning of year 40.2� 146.2� Balance, end of period $
28.5� $ 126.2� � - E - RAYONIER SELECTED SUPPLEMENTAL FINANCIAL
DATA MARCH 31, 2007 (unaudited) (millions of dollars) � Three
Months Ended March 31, Dec. 31, March 31, 2007� 2006� 2006� �
Geographical Data (Non-U.S.) Sales New Zealand $ 12.3� $ 10.2� $
5.5� Other 2.0� 3.7� 4.5� Total $ 14.3� $ 13.9� $ 10.0� � Operating
income (loss) New Zealand $ 0.8� $ 0.3� $ (1.1) Other (0.5) 1.0�
(0.4) Total $ 0.3� $ 1.3� $ (1.5) � Timber Sales Northwest U.S. $
30.7� $ 21.9� $ 27.2� Southern U.S. 31.1� 22.2� 25.0� New Zealand
3.2� 3.1� 2.3� Total $ 65.0� $ 47.2� $ 54.5� � Operating income
(loss) Northwest U.S. $ 18.0� $ 9.6� $ 16.0� Southern U.S. 7.8�
8.5� 8.9� New Zealand 0.5� 0.7� (1.0) Total $ 26.3� $ 18.8� $ 23.9�
� Adjusted EBITDA by Segment(a) Timber $ 48.0� $ 33.4� $ 38.8� Real
Estate 18.8� 32.0� 11.5� Performance Fibers 42.4� 53.2� 25.3� Wood
Products (1.7) (2.6) 4.3� Other Operations (1.3) 1.4� (0.2)
Corporate and other (8.7) (10.9) (8.9) Total $ 97.5� $ 106.5� $
70.8� � � (a) Adjusted EBITDA is a non-GAAP measure, see Schedule I
for reconciliation to nearest GAAP measure. � - F - RAYONIER
SELECTED OPERATING INFORMATION MARCH 31, 2007 (unaudited) � Three
Months Ended � � � March 31, 2007 Dec. 31, 2006 March 31, 2006
Timber Northwest U.S., in millions of board feet 79� 51� 75�
Southern U.S., in thousands of short green tons 1,643� 1,363�
1,247� � Real Estate Acres sold Development 123� 4,020� 744� Rural
5,867� 2,400� 2,660� Northwest U.S. 148� 713� -� Total 6,138�
7,133� 3,404� � Performance Fibers Sales Volume Cellulose
specialties, in thousands of metric tons 114� 137� 104� Absorbent
materials, in thousands of metric tons 55� 76� 65� Production as a
percent of capacity 95.1% 103.9% 98.9% � Lumber Sales volume, in
millions of board feet 73� 83� 84� � - G - RAYONIER RECONCILIATION
OF NON-GAAP MEASURES MARCH 31, 2007 (unaudited) (millions of
dollars, except per share information) � CASH AVAILABLE FOR
DISTRIBUTION: Three Months Ended March 31, March 31, 2007� 2006�
Cash provided by operating activities $ 52.4� $ 50.8� Capital
spending (a) (31.4) (36.5) Decrease in committed cash 27.8� (b)
5.9� Equity based compensation adjustments 5.8� 4.2� Like-kind
exchange tax benefits on third party real estate sales (c) (1.0)
(0.9) Other 7.2� 0.2� Cash Available for Distribution $ 60.8� $
23.7� � (a) Capital spending excludes strategic acquisitions and
dispositions. (b) Primarily 2006 interest paid in 2007 and
previously reflected as a reduction in 2006 CAD. (c) Represents
taxes that would have been paid if the Company had not completed
LKE transactions. � PRO FORMA NET INCOME AND ADJUSTED RETURN ON
EQUITY: � Three Months Ended March 31, December 31, March 31, 2007�
2006� 2006� PRO FORMA NET INCOME $ Per Diluted Share $ Per Diluted
Share $ Per Diluted Share � � � Net Income $ 35.1� $ 0.45� $ 55.2�
$ 0.71� $ 23.2� $ 0.30� � Discontinued Operations - Environmental
Reserves -� -� (5.3) (0.07) -� -� Deferred Tax Adjustment -� -�
(3.7) (0.05) -� -� Pro Forma Net Income $ 35.1� $ 0.45� $ 46.2� $
0.59� $ 23.2� $ 0.30� � � Annualized Pro Forma Net Income $ 140.4�
$ 184.8� $ 92.8� � � Divided by: Average Equity $ 922.1� $ 920.9� $
889.0� � � � � Adjusted ROE 15.2% 20.1% 10.4% � � � � - H - �
RAYONIER RECONCILIATION OF NON-GAAP MEASURES MARCH 31, 2007
(unaudited) (millions of dollars) � ADJUSTED EBITDA: � � � � �
Timber Real Estate Perfor-mance Fibers Wood Products Other
Oper-ations Cor-porate and other Total Three Months Ended March 31,
2007 Cash provided by operating activities $ 47.3� $ 19.0� $ 45.4�
$ (1.3) $ (7.3) $ (50.7) $ 52.4� Income tax expense -� -� -� -� -�
7.5� 7.5� Interest, net -� -� -� -� -� 12.6� 12.6� Working capital
increases (decreases) 2.4� (1.0) (2.8) (0.4) 6.0� 25.4� 29.6� Other
balance sheet changes (1.7) 0.8� (0.2) -� -� (3.5) (4.6) Adjusted
EBITDA $ 48.0� $ 18.8� $ 42.4� $ (1.7) $ (1.3) $ (8.7) $ 97.5� �
Dec. 31, 2006 Cash provided by operating activities from continuing
operations $ 28.2� $ 37.4� $ 45.1� $ (2.2) $ 8.0� $ (31.9) $ 84.6�
Income tax expense -� -� -� -� -� 6.4� 6.4� Interest, net -� -� -�
-� -� 11.1� 11.1� Working capital increases (decreases) 0.3� (1.4)
7.9� (0.4) (5.3) 0.7� 1.8� Other balance sheet changes 4.9� (4.0)
0.2� -� (1.3) 2.8� 2.6� Adjusted EBITDA $ 33.4� $ 32.0� $ 53.2� $
(2.6) $ 1.4� $ (10.9) $ 106.5� � March 31, 2006 Cash provided by
operating activities $ 43.8� $ 7.5� $ 29.6� $ 0.7� $ 0.5� $ (31.3)
$ 50.8� Income tax expense -� -� -� -� -� 4.0� 4.0� Interest, net
-� -� -� -� -� 10.0� 10.0� Working capital increases (decreases)
4.5� 4.7� (4.3) 3.6� (0.9) 2.8� 10.4� Other balance sheet changes
(9.5) (0.7) -� -� 0.2� 5.6� (4.4) Adjusted EBITDA $ 38.8� $ 11.5� $
25.3� $ 4.3� $ (0.2) $ (8.9) $ 70.8� � - I - RAYONIER
RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX MARCH
31, 2007 (unaudited) (millions of dollars, except percentages) �
Three Months Ended March 31, Dec. 31, March 31, 2007� 2006� 2006� $
% $ % $ % � Income tax provision at the U.S. statutory rate $
(14.9) (35.0) $ (19.6) (35.0) $ (9.6) (35.0) � REIT income not
subject to federal tax 10.7� 25.2� 12.5� 22.2� 8.0� 29.4� � Lost
deduction on REIT interest expense and overhead expenses associated
with REIT activities � � � (3.1) (7.2) (4.0) (7.1) (3.2) (11.8) �
Foreign, state and local income taxes, foreign exchange rate
changes and permanent differences � � 0.2� 0.3� (0.5) (0.8) 0.3�
1.0� � Income tax expense before discrete items $ (7.1) (16.7) $
(11.6) (20.7) $ (4.5) (16.4) � Built-in gain adjustments -� -� 1.5�
2.7� -� -� � Deferred tax adjustments -� -� 3.7� 6.6� -� -� � Other
(0.4) (0.9) -� -� 0.5� 1.8� � Income tax expense $ (7.5) (17.6) $
(6.4) (11.4) $ (4.0) (14.6) � - J - �
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