Rayonier (NYSE:RYN) today reported full year 2007 income from
continuing operations of $174.3 million, or $2.21 per share,
compared to $171.2 million, or $2.19 per share, in 2006. Excluding
special items1, earnings were $2.35 per share, or 18 percent, above
2006 earnings of $1.99 per share. In 2007, cash provided by
operating activities of $324 million was $17 million above 2006.
Cash available for distribution2 of $241 million was $63 million,
or 35 percent, above 2006. �Each of our three core businesses
contributed to strong 2007 performance, despite a challenging
environment in timber and real estate markets,� said Lee M. Thomas,
chairman, president and CEO. �In Timber, we lessened the effect of
a weak housing market by rebalancing our sales mix to meet heavy
demand in the pulpwood market. Continued interest in our rural
properties and the entitlements we received on 3,300 acres along
the I-95 corridor near Savannah, Georgia contributed to a
successful year in Real Estate. Our Performance Fibers business
capitalized on strong global markets to achieve record results. The
resulting cash flow enabled us to increase our dividend to an
annualized $2.00 per share, the fourth increase since our
conversion to a REIT in 2004." Fourth quarter income from
continuing operations was $34.4 million, or 44 cents per share,
compared to $50 million, or 64 cents per share, in 2006. Fourth
quarter 2007 included a special item expense of $0.8 million, or 1
cent per share, for the final assessment of losses sustained from
the second quarter wildfires in Florida and Georgia. Fourth quarter
2006 included a special item gain of $3.7 million, or 5 cents per
share, for a deferred tax adjustment. Excluding special items,
fourth quarter income from continuing operations was 45 cents per
share compared to 59 cents per share in 2006.3 Full year 2007 net
income was $174.3 million, or $2.21 per share, compared to $176.5
million, or $2.26 per share, in 2006. Net income in the fourth
quarter was $34.4 million, or 44 cents per share, compared to $55.3
million, or 71 cents per share, in fourth quarter 2006. Fourth
quarter 2006 included income from discontinued operations of $5.3
million, or 7 cents per share, reflecting a reduction in
environmental reserves. Timber For the fourth quarter and full
year, sales increased $2 million and $14 million from the prior
year periods, while operating income declined by $7 million and $19
million, respectively, due to increased sales of lower margin
pulpwood and reduced demand for sawlogs in a weak housing market.
Full year operating income also was negatively impacted by
approximately $10 million from lower prices realized on the sale of
fire damaged timber. Real Estate Compared to fourth quarter 2006,
sales and operating income decreased $25 million and $24 million,
respectively, due to the timing of transactions which occurred
earlier in 2007 than 2006. For the full year, sales and operating
income each improved $4 million primarily due to increased rural
land prices, driven by a third quarter sale of 3,100 acres in west
central Florida. Performance Fibers For the fourth quarter, sales
and operating income improved $3 million and $7 million,
respectively, from the prior year period as increased prices more
than offset lower volume primarily resulting from unplanned
downtime. Sales and operating income for the year increased $51
million and $61 million, respectively, largely due to higher prices
driven by favorable market dynamics and improved mix. Effective Tax
Rate The full year effective tax rate before discrete items was
13.5 percent compared to 16.3 percent in 2006. The comparable
fourth quarter effective tax rate was 8.0 percent compared to 20.7
percent in 2006.4 The lower rates were due to higher REIT income.
Including discrete items of $4 million, the fourth quarter
effective tax rate was a benefit of 4.0 percent. Outlook �Even with
the soft housing market negatively affecting timber prices and
volumes, we expect full year 2008 earnings to be only slightly
below 2007, and first quarter earnings to be comparable to first
quarter of 2007, due to the diversity and balance of our three core
businesses,� said Thomas. �We are well positioned to generate
favorable results despite a challenging economic environment. Cash
available for distribution is expected to remain strong, although
somewhat below 2007.� Thomas continued, �In Timber, as part of our
strategy to upgrade our portfolio, we will initiate sales of
non-strategic timberlands while pursuing acquisitions that meet our
investment criteria. We have the flexibility to adjust our sales
mix in difficult sawlog markets, preserving our higher-value timber
assets until markets improve. In Real Estate, we will continue to
pursue entitlements on development lands that drive long-term
shareholder value. We anticipate that interest in our rural
properties will continue to be high among buyers with industrial,
conservation or recreational land uses. We expect even better
results from our Performance Fibers business in 2008, and we will
increase capital investment to improve reliability and operational
excellence." Further Information A conference call will be held on
Thursday, January 24, at 2:00 p.m. EST to discuss these results.
Interested parties are invited to listen to the live Webcast by
logging on to www.rayonier.com and following the link. Investors
may also choose to access the �listen only� conference call by
dialing 913-981-5584. Supplemental materials will be available at
the website. A replay will be available on the site shortly after
the call, and it will be archived for one month. 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. 1 Earnings excluding special items is a non-GAAP
measure detailed and reconciled to GAAP in the attached exhibits.
The 2007 special item of $10.9 million is a charge to write down
fire damaged timber. In 2006, special item gains totaled $15.5
million. 2 Cash available for distribution (CAD) is a non-GAAP
measure defined and reconciled to GAAP in the attached exhibits. 3
See Schedule H for details. 4 See Schedule J for details. Rayonier
is a leading international forest products company with three core
businesses: Timber, Real Estate and Performance Fibers. The company
owns, leases or manages 2.6 million acres of timber and land in the
United States and New Zealand. 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. Certain statements in this document regarding anticipated
financial outcomes (including earnings guidance, if any), business
and market conditions, outlook and other similar statements
relating to Rayonier's future financial and operational
performance, 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 are identified by the use of words such
as "may," "will," "should," "expect," "estimate," "believe,"
"anticipate" and other similar language. Forward-looking statements
are not guarantees of future performance and undue reliance should
not be placed on these statements. The following important factors,
among others, could cause actual results to differ materially from
those expressed in forward-looking statements that may have been
made in this document: the cyclical and competitive nature of the
industries in which we operate; fluctuations in demand for, or
supply of, our forest products and real estate offerings; entry of
new competitors into our markets; changes in global economic
conditions and world events, including political changes in
particular regions or countries; changes in energy and raw material
prices, particularly for our performance fibers and wood products
businesses; unanticipated equipment maintenance and repair
requirements at our manufacturing facilities; the geographic
concentration of a significant portion of our timberland; our
ability to identify and complete timberland acquisitions; changes
in environmental laws and regulations, including laws regarding air
emissions and water discharges, remediation of contaminated sites,
timber harvesting, delineation of wetlands, and endangered species,
that may restrict or adversely impact our ability to conduct our
business, or increase the cost of doing so; adverse weather
conditions, natural disasters and other catastrophic events such as
hurricanes, wind storms and wildfires, which can adversely affect
our timberlands and the production, distribution and availability
of our products and raw materials such as wood, energy and
chemicals; interest rate and currency movements; the availability
of credit generally, including its impact on the cost and terms of
obtaining financing; our capacity to incur additional debt, and any
decision we may make to do so; changes in tariffs, taxes or
treaties relating to the import and export of our products or those
of our competitors; the ability to complete like-kind-exchanges of
timberlands and real estate; changes in key management and
personnel; our ability to continue to qualify as a REIT and to fund
distributions using cash generated through our taxable REIT
subsidiaries; and changes in tax laws that could reduce the
benefits associated with REIT status. In addition, specifically
with respect to our Real Estate business, the following important
factors, among others, could cause actual results to differ
materially from those expressed in forward-looking statements that
may have been made in this document: the cyclical nature of the
real estate business generally, including fluctuations in demand
for both entitled and unentitled property; the lengthy, uncertain
and costly process associated with the ownership, entitlement and
development of real estate, especially in Florida, which also may
be affected by changes in law, policy and political factors beyond
our control; the potential for legal challenges to entitlements and
permits in connection with our properties; unexpected delays in the
entry into or closing of real estate transactions; the existence of
competing developers and communities in the markets in which we own
property; the pace of development and the rate and timing of
absorption of existing entitled property in the markets in which we
own property; changes in the demographics affecting projected
population growth and migration to the Southeastern U.S.; changes
in environmental laws and regulations, including laws regarding
water withdrawal and management and delineation of wetlands, that
may restrict or adversely impact our ability to sell or develop
properties; the cost of the development of property generally,
including the cost of property taxes, labor and construction
materials; the timing of construction and availability of public
infrastructure; and the availability of financing for real estate
development and mortgage loans. Additional factors are described in
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 is required by law. RAYONIER FINANCIAL
HIGHLIGHTS DECEMBER 31, 2007 (unaudited) (millions of dollars,
except per share information) � � � � Three Months Ended � Year
Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, � 2007 � � 2007
� � 2006 � � 2007 � � 2006 � Profitability Sales $ 290.4 $ 334.2 $
328.5 $ 1,224.7 $ 1,229.8 Operating income $ 43.1 $ 92.7 $ 67.8 $
246.6 $ 229.7 Pro forma operating income (a) $ 43.9 $ 92.7 $ 67.8 $
257.5 $ 221.9 Income from continuing operations $ 34.4 $ 71.5 $
50.0 $ 174.3 $ 171.2 Discontinued operations $ - $ - $ 5.3 $ - $
5.3 Net income $ 34.4 $ 71.5 $ 55.3 $ 174.3 $ 176.5 Income per
diluted common share Continuing operations $ 0.44 $ 0.90 $ 0.64 $
2.21 $ 2.19 Net income $ 0.44 $ 0.90 $ 0.71 $ 2.21 $ 2.26 Pro forma
income from continuing operations (a) $ 0.45 $ 0.90 $ 0.59 $ 2.35 $
1.99 Pro forma operating income as a percent of sales (a) 15.1 %
27.7 % 20.6 % 21.0 % 18.0 % Adjusted ROE (a) N/M N/M N/M 19.4 %
17.2 % Average diluted shares outstanding (millions) 79.3 79.1 78.3
78.9 78.2 � Year EndedDecember 31, � 2007 � � 2006 � Capital
Resources and Liquidity Cash provided by operating activities $
324.0 $ 306.9 Cash used for investing activities $ (126.0 ) $
(385.2 ) Cash used for financing activities $ (57.8 ) $ (29.8 )
Adjusted EBITDA (b) (d) $ 418.5 $ 370.2 Cash Available for
Distribution (CAD) (c) (d) $ 240.8 $ 177.8 � � 12/31/07 � �
12/31/06 � Debt (1) $ 749.8 $ 659.0 Debt / capital 43.1 % 41.8 %
Cash $ 181.1 $ 40.2 � (a), (b), (c) and (d), see Schedule B. � N/M:
Not meaningful. � (1) In October, Rayonier TRS Holdings Inc. issued
$300 million of 3.75% Senior Exchangeable Notes due 2012. � - A -
RAYONIER FOOTNOTES FOR SCHEDULE A DECEMBER 31, 2007 (unaudited) � �
� (a) Pro forma operating income and income from continuing
operations, 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 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 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 DECEMBER 31, 2007 (unaudited)
(millions of dollars, except per share information) � � � � � Three
Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec.
31, � 2007 � � 2007 � � 2006 � � 2007 � � 2006 � Sales $ 290.4 � $
334.2 � $ 328.5 � $ 1,224.7 � $ 1,229.8 � Costs and expenses Cost
of sales (a) 231.9 227.3 249.6 922.1 952.6 Selling and general
expenses 18.1 16.9 18.4 67.0 63.5 Other operating income, net �
(2.7 ) � (2.7 ) � (7.3 ) � (11.0 ) � (8.2 ) Operating income before
gain on sale of New Zealand timber assets 43.1 92.7 67.8 246.6
221.9 Gain on sale of New Zealand timber assets � - � � - � � - � �
- � � 7.8 � Operating income (a) 43.1 92.7 67.8 246.6 229.7
Interest expense (14.1 ) (15.0 ) (13.8 ) (56.3 ) (48.9 ) Interest
and other income, net � 4.1 � � 1.4 � � 2.5 � � 7.7 � � 9.5 �
Income before taxes 33.1 79.1 56.5 198.0 190.3 Income tax benefit /
(expense) � 1.3 � � (7.6 ) � (6.5 ) � (23.7 ) � (19.1 ) Income from
continuing operations 34.4 71.5 50.0 174.3 171.2 Discontinued
operations � - � � - � � 5.3 � � - � � 5.3 � Net income $ 34.4 � $
71.5 � $ 55.3 � $ 174.3 � $ 176.5 � Income per Common Share: Basic
From continuing operations $ 0.45 � $ 0.92 � $ 0.65 � $ 2.25 � $
2.24 � Net income $ 0.45 � $ 0.92 � $ 0.72 � $ 2.25 � $ 2.31 �
Diluted From continuing operations $ 0.44 � $ 0.90 � $ 0.64 � $
2.21 � $ 2.19 � Net income $ 0.44 � $ 0.90 � $ 0.71 � $ 2.21 � $
2.26 � Pro forma income from continuing operations (b) $ 0.45 � $
0.90 � $ 0.59 � $ 2.35 � $ 1.99 � Weighted average Common Shares
used for determining � Basic EPS � 77,969,013 � � 77,760,290 � �
76,679,126 � � 77,571,684 � � 76,486,690 � Diluted EPS � 79,264,982
� � 79,059,474 � � 78,331,461 � � 78,920,284 � � 78,158,691 � � (a)
Cost of sales and operating income for the three months and year
ended December 31, 2007 include a $0.8 million and $10.9 million
charge, respectively, for timber destroyed by forest fires.
Excluding this amount, cost of sales and operating income for the
three months and year ended December 31, 2007, were $231.1 million
and $43.9 million, and $911.2 million and $257.5 million,
respectively. � (b) Non-GAAP measure, see Schedule H for a
reconciliation to the nearest GAAP measure. � - C - RAYONIER
BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS) DECEMBER 31,
2007 (unaudited) (millions of dollars) � � � � � � Three Months
Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31, �
2007 � � 2007 � � 2006 � � 2007 � � 2006 � Sales Timber $ 49.4 $
50.3 $ 47.2 $ 221.4 $ 207.0 Real Estate 10.2 55.9 34.9 116.3 112.0
Performance Fibers Cellulose specialties 143.3 137.6 146.1 539.4
499.4 Absorbent materials � 56.0 � � 51.2 � � 50.0 � � 182.9 � �
172.0 � Total Performance Fibers � 199.3 � � 188.8 � � 196.1 � �
722.3 � � 671.4 � Wood Products 20.3 24.3 21.3 88.1 111.4 Other
Operations 11.2 14.9 29.1 76.6 128.3 Intersegment eliminations � -
� � - � � (0.1 ) � - � � (0.3 ) Total sales $ 290.4 � $ 334.2 � $
328.5 � $ 1,224.7 � $ 1,229.8 � � Pro forma operating income/(loss)
(a) Timber $ 11.8 $ 12.0 $ 18.9 $ 71.1 $ 89.6 Real Estate 6.0 47.6
29.9 92.8 88.6 Performance Fibers 39.9 43.1 32.7 141.0 80.0 Wood
Products (2.9 ) (1.5 ) (4.1 ) (8.4 ) (2.8 ) Other Operations (1.3 )
0.4 1.2 (3.2 ) 1.3 Corporate and other � (9.6 ) � (8.9 ) � (10.8 )
� (35.8 ) � (34.8 ) Pro forma operating income (a) $ 43.9 � $ 92.7
� $ 67.8 � $ 257.5 � $ 221.9 � � (a) Timber segment operating
income excludes the $0.8 million and $10.9 million fire loss for
the three months and year ended December 31, 2007, respectively,
and the $7.8 million gain on sale of New Zealand timber assets for
the year ended December 31, 2006. Pro forma operating income is a
non-GAAP measure, see Schedule H for a reconciliation to the
nearest GAAP measure. � - D - RAYONIER CONDENSED CONSOLIDATED
BALANCE SHEETS AND STATEMENTS OF CASH FLOWS DECEMBER 31, 2007
(unaudited) (millions of dollars) � CONDENSED CONSOLIDATED BALANCE
SHEETS � December 31, � December 31, � 2007 � � 2006 � Assets
Current assets $ 396.2 $ 300.3 Timber, timberlands and logging
roads, net of depletion and amortization 1,117.2 1,127.5 Property,
plant and equipment 1,340.2 1,365.0 Less - accumulated depreciation
� (994.4 ) � (1,011.2 ) � 345.8 � � 353.8 � Investment in New
Zealand JV 62.8 61.2 Other assets � 164.5 � � 121.8 � $ 2,086.5 � $
1,964.6 � Liabilities and Shareholders' Equity Current liabilities
$ 218.5 $ 193.3 Long-term debt 694.3 655.4 Non-current liabilities
for dispositions and discontinued operations 103.6 111.8 Other
non-current liabilities 79.7 86.1 Shareholders' equity � 990.4 � �
918.0 � $ 2,086.5 � $ 1,964.6 � CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS Year Ended December 31, December 31, � 2007 � � 2006
� Cash provided by operating activities: Net Income $ 174.3 $ 176.5
Income from discontinued operations - (5.3 ) Depreciation,
depletion, amortization and non-cash basis of real estate sold
163.3 148.9 Non-cash charge for forest fire losses 10.4 - Other
non-cash items included in income 12.1 (13.2 ) Changes in working
capital and other assets and liabilities � (36.1 ) � - � � 324.0 �
� 306.9 � Cash used for investing activities: Capital expenditures
(97.0 ) (105.5 ) Purchase of timberlands, real estate and wood
chipping facilities (27.2 ) (298.9 ) Proceeds from sale of portion
of New Zealand timber assets - 21.8 (Increase) / decrease in
restricted cash (8.8 ) 1.3 Other � 7.0 � � (3.9 ) � (126.0 ) �
(385.2 ) Cash used for financing activities: Issuance of debt, net
of repayments and issuance costs 69.2 99.7 Dividends paid (150.6 )
(143.9 ) Issuance of common shares 18.9 10.8 Repurchase of common
shares (3.2 ) (0.5 ) Excess tax benefits from equity-based
compensation � 7.9 � � 4.1 � � (57.8 ) � (29.8 ) Effect of exchange
rate changes on cash � 0.7 � � 2.1 � Cash and cash equivalents:
Increase / (decrease) in cash and cash equivalents 140.9 (106.0 )
Balance, beginning of year � 40.2 � � 146.2 � Balance, end of year
$ 181.1 � $ 40.2 � � - E - RAYONIER SELECTED SUPPLEMENTAL FINANCIAL
DATA DECEMBER 31, 2007 (unaudited) (millions of dollars) � � � � �
Three Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31, Dec. 31,
Dec. 31, 2007 2007 2006 2007 2006 � Geographical Data (Non-U.S.)
Sales New Zealand $ 8.8 $ 10.1 $ 10.3 $ 42.9 $ 32.5 Other � 2.8 � �
2.5 � � 3.7 � � 9.7 � � 15.4 � Total $ 11.6 � $ 12.6 � $ 14.0 � $
52.6 � $ 47.9 � � Operating income (loss) New Zealand $ (1.0 ) $
0.8 $ 0.2 $ 1.7 $ (1.2 ) Other � 1.3 � � (0.6 ) � 1.0 � � (0.3 ) �
(0.2 ) Total $ 0.3 � $ 0.2 � $ 1.2 � $ 1.4 � $ (1.4 ) � Timber
Sales Western U.S. $ 20.1 $ 24.3 $ 21.9 $ 104.4 $ 108.6 Eastern
U.S. 25.7 23.2 22.2 104.5 87.9 New Zealand � 3.6 � � 2.8 � � 3.1 �
� 12.5 � � 10.5 � Total $ 49.4 � $ 50.3 � $ 47.2 � $ 221.4 � $
207.0 � � Pro forma operating income (loss) (a) Western U.S. $ 5.7
$ 9.9 $ 9.6 $ 49.5 $ 59.6 Eastern U.S. (a) 5.9 2.3 8.6 19.6 30.6
New Zealand (a) � 0.2 � � (0.2 ) � 0.7 � � 2.0 � � (0.6 ) Total $
11.8 � $ 12.0 � $ 18.9 � $ 71.1 � $ 89.6 � � Adjusted EBITDA by
Segment (b) Timber $ 30.6 $ 28.1 $ 33.4 $ 143.9 $ 142.8 Real Estate
7.7 53.1 32.0 106.2 102.9 Performance Fibers 58.5 59.7 53.2 209.4
152.8 Wood Products (1.5 ) - (2.6 ) (2.3 ) 4.1 Other Operations
(1.6 ) 0.3 1.4 (3.0 ) 2.0 Corporate and other � (9.4 ) � (8.9 ) �
(10.9 ) � (35.7 ) � (34.4 ) Total $ 84.3 � $ 132.3 � $ 106.5 � $
418.5 � $ 370.2 � � (a) Timber segment operating income excludes
the $0.8 million and $10.9 million fire loss for the three months
and year ended December 31, 2007, respectively, and the $7.8
million gain on sale of New Zealand timber assets for the year
ended December 31, 2006. Pro forma operating income is a non-GAAP
measure, see Schedule H for a reconciliation to the nearest GAAP
measure. � (b) Adjusted EBITDA is a non-GAAP measure, see Schedule
I for reconciliation to nearest GAAP measure. � - F - RAYONIER
SELECTED OPERATING INFORMATION DECEMBER 31, 2007 (unaudited) � � �
� � � Three Months Ended Year Ended Dec. 31, Sept. 30, Dec. 31,
Dec. 31, Dec. 31, 2007 2007 2006 2007 2006 Timber Sales Volume
Western U.S. in millions of board feet 47 56 51 254 274 Eastern
U.S. in thousands of short green tons 1,615 1,556 1,363 6,168 4,740
� Real Estate Acres sold Southeast U.S. Development 351 - 4,020
4,356 9,377 Southeast U.S. Rural 509 5,190 2,400 11,722 16,099
Northwest U.S. 351 � 386 � 713 � 1,095 � 775 � Total 1,211 5,576
7,133 17,173 26,251 � Performance Fibers Sales Volume Cellulose
specialties, in thousands of metric tons 123 119 137 467 474
Absorbent materials, in thousands of metric tons 75 72 76 259 272
Production as a percent of capacity 99.4 % 97.2 % 103.9 % 99.1 %
101.2 % � Lumber Sales volume, in millions of board feet 81 88 83
329 350 � - G - RAYONIER RECONCILIATION OF NON-GAAP MEASURES
DECEMBER 31, 2007 (unaudited) (millions of dollars, except per
share information) � CASH AVAILABLE FOR DISTRIBUTION: � � � Year
Ended December 31, December 31, 2007 � 2006 � Cash provided by
operating activities $ 324.0 $ 306.9 Capital spending (a) (97.0 )
(105.5 ) Decrease (increase) in committed cash 16.9 � (b) (19.1 )
Like-kind exchange tax benefits on third party real estate sales
(c) (3.9 ) (4.8 ) Other � 0.8 � � 0.3 � Cash Available for
Distribution $ 240.8 � $ 177.8 � � (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 OPERATING
INCOME, INCOME FROM CONTINUING OPERATIONS AND ADJUSTED RETURN ON
EQUITY: � Three Months Ended Dec. 31, � Sept. 30, Dec. 31, 2007
2007 2006 $ � � Per Diluted Share � $ � Per Diluted Share $ � Per
Diluted Share Operating Income $ 43.1 $ 92.7 $ 67.8 Forest fire
loss � 0.8 � � - � � - � Pro Forma Operating Income $ 43.9 � $ 92.7
� $ 67.8 � � Income from Continuing Operations $ 34.4 $ 0.44 $ 71.5
$ 0.90 $ 50.0 $ 0.64 Deferred tax adjustment - - - - (3.7 ) (0.05 )
Forest fire loss � 0.8 � � 0.01 � - � � - � � - � - � Pro Forma
Income from Continuing Operations $ 35.2 � $ 0.45 $ 71.5 � $ 0.90 �
$ 46.3 � $ 0.59 � � Year Ended December 31, December 31, 2007 2006
� $ Per Diluted Share $ Per Diluted Share � � � � � � Operating
Income $ 246.6 $ 229.7 Sale of New Zealand timber assets - (7.8 )
Forest fire loss � 10.9 � � - � Pro Forma Operating Income $ 257.5
� $ 221.9 � � Income from Continuing Operations $ 174.3 $ 2.21 $
171.2 $ 2.19 Sale of New Zealand timber assets - - (6.5 ) (0.08 )
Tax reserves and associated interest - - (5.3 ) (0.07 ) Deferred
tax adjustment - - (3.7 ) (0.05 ) Forest fire loss � 10.9 � � 0.14
� - � � - � Pro Forma Income from Continuing Operations $ 185.2 $
2.35 $ 155.7 $ 1.99 � Divided by: average equity $ 954.3 � $ 905.8
� Adjusted ROE � 19.4 % � 17.2 % � � � - H - RAYONIER
RECONCILIATION OF NON-GAAP MEASURES DECEMBER 31, 2007 (unaudited)
(millions of dollars) � � � � � � � � ADJUSTED EBITDA: � � � � �
Timber Real Estate Performance Fibers Wood Products Other
Operations Corporate and other Total � Three Months Ended December
31, 2007 Cash provided by operating activities $ 20.0 $ 6.5 $ 81.9
$ 0.3 $ (4.3 ) $ (44.1 ) $ 60.3 Income tax benefit - - - - - (1.3 )
(1.3 ) Interest, net - - - - - 10.2 10.2 Working capital and other
� 10.6 � � 1.2 � � (23.4 ) � (1.8 ) � 2.7 � � 25.8 � � 15.1 �
Adjusted EBITDA $ 30.6 � $ 7.7 � $ 58.5 � $ (1.5 ) $ (1.6 ) $ (9.4
) $ 84.3 � � September 30, 2007 Cash provided by operating
activities $ 30.2 $ 48.7 $ 57.5 $ 1.7 $ 3.7 $ (9.6 ) $ 132.2 Income
tax expense - - - - - 7.6 7.6 Interest, net - - - - - 13.4 13.4
Working capital and other � (2.1 ) � 4.4 � � 2.2 � � (1.7 ) � (3.4
) � (20.3 ) � (20.9 ) Adjusted EBITDA $ 28.1 � $ 53.1 � $ 59.7 � $
- � $ 0.3 � $ (8.9 ) $ 132.3 � � December 31, 2006 Cash provided by
operating activities $ 28.2 $ 37.4 $ 45.1 $ (2.2 ) $ 8.0 $ (31.9 )
$ 84.6 Income tax expense - - - - - 6.5 6.5 Interest, net - - - - -
11.1 11.1 Working capital and other � 5.2 � � (5.4 ) � 8.1 � � (0.4
) � (6.6 ) � 3.4 � � 4.3 � Adjusted EBITDA $ 33.4 � $ 32.0 � $ 53.2
� $ (2.6 ) $ 1.4 � $ (10.9 ) $ 106.5 � � Year Ended December 31,
2007 Cash provided by operating activities $ 136.7 $ 101.2 $ 228.2
$ (0.1 ) $ (9.1 ) $ (132.9 ) $ 324.0 Income tax expense - - - - -
23.7 23.7 Interest, net - - - - - 48.6 48.6 Working capital and
other � 7.2 � � 5.0 � � (18.8 ) � (2.2 ) � 6.1 � � 24.9 � � 22.2 �
Adjusted EBITDA $ 143.9 � $ 106.2 � $ 209.4 � $ (2.3 ) $ (3.0 ) $
(35.7 ) $ 418.5 � � December 31, 2006 Cash provided by operating
activities $ 149.8 $ 103.0 $ 127.3 $ 5.6 $ 13.6 $ (92.4 ) $ 306.9
Income tax expense - - - - - 19.1 19.1 Interest, net - - - - - 39.1
39.1 Working capital and other � (7.0 ) � (0.1 ) � 25.5 � � (1.5 )
� (11.6 ) � (0.2 ) � 5.1 � Adjusted EBITDA $ 142.8 � $ 102.9 � $
152.8 � $ 4.1 � $ 2.0 � $ (34.4 ) $ 370.2 � � � - I - RAYONIER
RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
DECEMBER 31, 2007 (unaudited) (millions of dollars, except
percentages) � Three Months Ended � Year Ended December 31, �
September 30, � December 31, December 31, � December 31, 2007 �
2007 � 2006 � 2007 � 2006 � � $ � � % � � $ � � % � � $ � � % � � $
� � % � � $ � � % � � Income tax provision at the U.S. statutory
rate $ (11.6 ) (35.0 ) $ (27.7 ) (35.0 ) $ (19.7 ) (35.0 ) $ (69.3
) (35.0 ) $ (66.5 ) (35.0 ) � REIT income not subject to federal
tax 11.5 34.8 23.9 30.2 12.5 22.2 55.1 27.8 46.3 24.4 � Lost
deduction on REIT interest expense and overhead expenses associated
with REIT activities � � � (3.0 ) (9.1 ) (3.8 ) (4.9 ) (4.0 ) (7.1
) (12.8 ) (6.5 ) (12.7 ) (6.7 ) � Foreign, state and local income
taxes, foreign exchange rate changes and permanent differences � �
� 0.4 � 1.3 � � (0.1 ) - � � (0.5 ) (0.8 ) � 0.3 � 0.2 � � 1.8 �
1.0 � � Income tax expense before discrete items $ (2.7 ) (8.0 ) $
(7.7 ) (9.7 ) $ (11.7 ) (20.7 ) $ (26.7 ) (13.5 ) $ (31.1 ) (16.3 )
� Return to accrual adjustment 0.1 0.3 2.0 2.5 - - 2.1 1.1 (0.3 )
(0.2 ) � Taxing authority settlements and FIN 48 adjustments 1.1
3.3 (5.5 ) (7.0 ) - - (4.4 ) (2.2 ) 5.3 2.8 � Change in valuation
allowance - - 3.6 4.6 - - 3.6 1.8 - - � Deferred tax adjustments/
other � 2.8 � 8.4 � � - � - � � 5.2 � 9.3 � � 1.7 � 0.8 � � 7.0 �
3.7 � � Income tax benefit/ (expense) $ 1.3 � 4.0 � $ (7.6 ) (9.6 )
$ (6.5 ) (11.4 ) $ (23.7 ) (12.0 ) $ (19.1 ) (10.0 ) � � - J -
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