Rayonier (NYSE:RYN) today reported first quarter net income of
$40.6 million, or 51 cents per share, compared to $35.1 million, or
45 cents per share, in first quarter 2007. �Despite a weak timber
market, first quarter results were quite good,� said Lee M. Thomas,
Chairman, President and CEO. �Softness in timber prices and lower
volumes from our planned reductions in sawlog harvests were offset
by strong demand in Performance Fibers and demand for higher and
better use rural properties and non-strategic timberlands. We also
executed on our strategy to grow and upgrade our timberland
portfolio, as evidenced by our recent acquisitions of more than
110,000 acres in Washington and New York." Cash provided by
operating activities of $100 million was $48 million above the
prior year period due to lower working capital requirements and
higher operating earnings. Cash available for distribution1 of $61
million was comparable to first quarter 2007. (See Schedule H for
more details.) Timber In first quarter 2008, sales and operating
income were $47 million and $12 million, $18 million and $14
million below the prior year period, respectively, due to the weak
housing market�s impact on sawlog pricing and the Company�s planned
reductions in sawlog volume. Based on current conditions, the
Company expects to continue to limit its sawtimber harvest for the
balance of the year preserving higher-value timber until markets
improve. Real Estate Sales and operating income were $29 million
and $22 million, $8 million and $7 million above first quarter
2007, respectively, due to increased rural property prices and
volumes and non-strategic timberland sales. The first quarter
improvement in volume was partially attributable to the
acceleration of transactions originally expected to close in second
quarter 2008. Performance Fibers Sales and operating income were
$175 million and $37 million, an improvement of $9 million and $10
million from the prior year period, respectively. Increased prices
and lower depreciation expense more than offset higher raw
materials costs as well as the maintenance costs and lower volume
resulting primarily from unplanned downtime early in the quarter.
Other Items Corporate expenses were $7 million, down $2 million
from the prior year period primarily due to lower stock-based and
other incentive compensation expenses. Interest expense of $11
million was $2 million below first quarter 2007 primarily due to
lower interest rates resulting from the fourth quarter 2007 debt
refinancing. The first quarter effective tax rate before discrete
items increased to 20.5 percent compared to 16.7 percent in 2007
due to proportionately higher earnings from the Company�s taxable
REIT subsidiary.2 Including discrete items, the first quarter
effective tax rate was 20.2 percent. Outlook �Given the outlook for
the timber and real estate markets, we expect that second quarter
and full year 2008 earnings will be below prior year periods.
However, we anticipate that the softness in those markets will be
somewhat offset by the continued strength in Performance Fibers,�
said Thomas. �In Real Estate, we anticipate continued interest in
rural properties and non-strategic timberlands although sales will
be more heavily weighted to the second half of the year. Cash
available for distribution is expected to remain strong, although
below 2007.� Further Information A conference call will be held on
Tuesday, April 22, at 2:00 p.m. ET 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 Cash available for distribution (CAD) is a
non-GAAP measure defined and reconciled to GAAP in the attached
exhibits. 2 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. More at www.rayonier.com. 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 MARCH 31, 2008 (unaudited) (millions of dollars, except
per share information) � � � � � Three Months Ended March 31,
December 31, March 31, � 2008 � � 2007 � � 2007 � Profitability
Sales $ 284.2 $ 290.4 $ 299.7 Operating income $ 60.5 $ 43.1 $ 55.2
Pro forma operating income (a) $ 60.5 $ 43.9 $ 55.2 Net income $
40.6 $ 34.4 $ 35.1 Income per diluted common share Net income $
0.51 $ 0.44 $ 0.45 Pro forma net income (a) $ 0.51 $ 0.45 $ 0.45
Pro forma operating income as a percent of sales (a) 21.3 % 15.1 %
18.4 % Average diluted shares (millions) 79.2 79.3 78.5 � Three
Months Ended March 31, � 2008 � � 2007 � Capital Resources and
Liquidity Cash provided by operating activities $ 100.2 $ 52.4 Cash
used for investing activities $ (38.2 ) $ (46.9 ) Cash used for
financing activities $ (96.1 ) $ (17.0 ) Adjusted EBITDA (b) (d) $
96.5 $ 97.5 Cash Available for Distribution (CAD) (c) (d) $ 61.4 $
60.8 � � 03/31/08 � � 12/31/07 � Debt $ 694.8 $ 749.8 Debt /
capital 41.3 % 43.3 % Cash $ 146.9 $ 181.1 � (a), (b), (c) and (d),
see Schedule B. � � � - A - RAYONIER FOOTNOTES FOR SCHEDULE A MARCH
31, 2008 (unaudited) � � � (a) Pro forma operating income and net
income 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 MARCH 31, 2008 (unaudited) (millions of
dollars, except per share information) � � � � Three Months Ended
March 31, December 31, March 31, � 2008 � � 2007 � � 2007 � Sales $
284.2 � $ 290.4 � $ 299.7 � Costs and expenses Cost of sales (a)
211.0 231.9 231.7 Selling and general expenses 14.9 18.1 15.8 Other
operating income, net � (2.2 ) � (2.7 ) � (3.0 ) Operating income
(a) 60.5 43.1 55.2 Interest expense (11.2 ) (14.1 ) (13.6 )
Interest and other income, net � 1.5 � � 4.1 � � 1.0 � Income
before taxes 50.8 33.1 42.6 Income tax (expense) / benefit � (10.2
) � 1.3 � � (7.5 ) Net income $ 40.6 � $ 34.4 � $ 35.1 � Income per
Common Share: Basic Net income $ 0.52 � $ 0.45 � $ 0.45 � Diluted
Net income $ 0.51 � $ 0.44 � $ 0.45 � Pro forma net income (b) $
0.51 � $ 0.45 � $ 0.45 � Weighted average Common Shares used for
determining Basic EPS � 78,254,220 � � 77,969,013 � � 77,130,711 �
Diluted EPS � 79,212,287 � � 79,264,982 � � 78,528,221 � � � (a)
Cost of sales and operating income for the three months December
31, 2007 include a $0.8 million charge, for timber destroyed by
forest fires. Excluding this amount, cost of sales and operating
income were $231.1 million and $43.9 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) MARCH 31, 2008 (unaudited) (millions of
dollars) � � � Three Months Ended March 31, December 31, March 31,
2008 2007 2007 Sales Timber $ 47.2 $ 49.4 $ 65.0 Real Estate 29.4
10.2 21.0 Performance Fibers Cellulose specialties 132.7 143.3
129.5 Absorbent materials � 42.2 � � 56.0 � � 36.9 � Total
Performance Fibers � 174.9 � � 199.3 � � 166.4 � Wood Products 18.9
20.3 19.7 Other Operations � 13.8 � � 11.2 � � 27.6 � � Total sales
$ 284.2 � $ 290.4 � $ 299.7 � � Pro forma operating
income/(loss)(a) Timber $ 12.0 $ 11.8 $ 26.3 Real Estate 21.8 6.0
15.2 Performance Fibers 37.1 39.9 27.1 Wood Products (2.5 ) (2.9 )
(3.3 ) Other Operations (0.6 ) (1.3 ) (1.3 ) Corporate and other �
(7.3 ) � (9.6 ) � (8.8 ) Pro forma operating income (a) $ 60.5 � $
43.9 � $ 55.2 � � (a) Timber segment pro forma operating income
excludes the $0.8 million fire loss for the three months ended
December 31, 2007. 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 MARCH 31, 2008 (unaudited) (millions
of dollars) � CONDENSED CONSOLIDATED BALANCE SHEETS � � � March 31,
� December 31, � 2008 � � 2007 � Assets Current assets $ 351.1 $
396.2 Timber and timberlands, net of depletion and amortization
1,122.3 1,117.2 Property, plant and equipment 1,361.5 1,340.2 Less
- accumulated depreciation � (1,006.8 ) � (994.4 ) � 354.7 � �
345.8 � Investment in New Zealand JV 68.8 62.8 Other assets � 151.8
� � 157.0 � $ 2,048.7 � $ 2,079.0 � Liabilities and Shareholders'
Equity Current liabilities $ 180.8 $ 218.4 Long-term debt 694.3
694.3 Non-current liabilities for dispositions and discontinued
operations 102.4 103.6 Other non-current liabilities 81.6 81.6
Shareholders' equity � 989.6 � � 981.1 � $ 2,048.7 � $ 2,079.0 �
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
March 31, March 31, � 2008 � � 2007 � Cash provided by operating
activities: Net Income $ 40.6 $ 35.1 Depreciation, depletion,
amortization and non-cash basis of real estate sold 36.1 42.3 Other
non-cash items included in income 8.0 4.9 Changes in working
capital and other assets and liabilities � 15.5 � � (29.9 ) � 100.2
� � 52.4 � Cash used for investing activities: Capital expenditures
(31.8 ) (31.4 ) Purchase of timberlands and wood chipping
facilities (19.6 ) (8.7 ) Decrease / (increase) in restricted cash
10.0 (14.0 ) Other � 3.2 � � 7.2 � � (38.2 ) � (46.9 ) Cash used
for financing activities: (Repayment) / borrowing of debt, net
(55.0 ) 12.0 Dividends paid (39.1 ) (36.3 ) Issuance of common
shares 0.6 5.1 Repurchase of common shares (3.5 ) - Excess tax
benefits from equity-based compensation � 0.9 � � 2.2 � � (96.1 ) �
(17.0 ) Effect of exchange rate changes on cash � (0.1 ) � (0.2 )
Cash and cash equivalents: Decrease in cash and cash equivalents
(34.2 ) (11.7 ) Balance, beginning of year � 181.1 � � 40.2 �
Balance, end of period $ 146.9 � $ 28.5 � � � - E - RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA MARCH 31, 2008 (unaudited)
(millions of dollars) � � � Three Months Ended March 31, December
31, March 31, 2008 2007 2007 � Timber Sales Western U.S. $ 20.6 $
20.1 $ 30.7 Eastern U.S. 24.1 25.7 31.1 New Zealand � 2.5 � � 3.6 �
� 3.2 � Total $ 47.2 � $ 49.4 � $ 65.0 � � Pro forma operating
income (a) Western U.S. $ 8.5 $ 5.7 $ 18.0 Eastern U.S. (a) 2.5 5.9
7.8 New Zealand � 1.0 � � 0.2 � � 0.5 � Total $ 12.0 � $ 11.8 � $
26.3 � � Adjusted EBITDA by Segment (b) Timber $ 30.1 $ 30.6 $ 48.0
Real Estate 27.0 7.7 18.8 Performance Fibers 48.2 58.5 42.4 Wood
Products (1.1 ) (1.5 ) (1.7 ) Other Operations (0.6 ) (1.6 ) (1.3 )
Corporate and other � (7.1 ) � (9.4 ) � (8.7 ) Total $ 96.5 � $
84.3 � $ 97.5 � � (a) Timber segment pro forma operating income
excludes the $0.8 million fire loss for the three months ended
December 31, 2007. 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 MARCH 31, 2008 (unaudited) � � �
Three Months Ended March 31, December 31, March 31, 2008 2007 2007
Timber Sales Volume Western U.S. in millions of board feet 59 47 79
Eastern U.S. in thousands of short green tons 1,312 1,615 1,643 �
Real Estate Acres sold HBU Development 47 351 123 HBU Rural 6,488
861 6,014 Non-Strategic Timberlands 4,073 � - � - � Total 10,608
1,212 6,137 � Performance Fibers Sales Volume Cellulose
specialties, in thousands of metric tons 107 123 114 Absorbent
materials, in thousands of metric tons 56 75 55 Production as a
percent of capacity 94.7 % 99.4 % 95.1 % � Lumber Sales volume, in
millions of board feet 74 81 73 � � - G - RAYONIER RECONCILIATION
OF NON-GAAP MEASURES MARCH 31, 2008 (unaudited) (millions of
dollars, except per share information) � CASH AVAILABLE FOR
DISTRIBUTION: � Three Months Ended March 31, March 31, 2008 � 2007
� Cash provided by operating activities $ 100.2 $ 52.4 Capital
spending (a) (31.8 ) (31.4 ) (Increase) / decrease in committed
cash (8.0 ) 27.8 (b) Equity based compensation adjustments - 5.8
Like-kind exchange tax benefits on real estate sales (c) (2.9 )
(1.0 ) Other � 3.9 � � 7.2 � Cash Available for Distribution $ 61.4
� $ 60.8 � � (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 AND NET INCOME: � � �
Three Months Ended March 31, � December 31, � March 31, 2008 2007
2007 � � � � � � � $ Per DilutedShare � $ Per DilutedShare � $ Per
DilutedShare Operating Income $ 60.5 $ 43.1 $ 55.2 Forest fire loss
� - � 0.8 � - Pro Forma Operating Income $ 60.5 $ 43.9 $ 55.2 � Net
Income $ 40.6 $ 0.51 $ 34.4 $ 0.44 $ 35.1 $ 0.45 Forest fire loss �
- � - � 0.8 � 0.01 � - � - Pro Forma Net Income $ 40.6 $ 0.51 $
35.2 $ 0.45 $ 35.1 $ 0.45 � � - H - RAYONIER RECONCILIATION OF
NON-GAAP MEASURES MARCH 31, 2008 (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, 2008 Cash provided by operating
activities $ 26.5 $ 26.2 $ 58.3 $ (4.0 ) $ 2.2 $ (9.0 ) $ 100.2
Income tax expense - - - - - 10.2 10.2 Interest, net - - - - - 9.7
9.7 Working capital and other � 3.6 � 0.8 � � (10.1 ) � 2.9 � �
(2.8 ) � (18.0 ) � (23.6 ) Adjusted EBITDA $ 30.1 $ 27.0 � $ 48.2 �
$ (1.1 ) $ (0.6 ) $ (7.1 ) $ 96.5 � 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 � 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 and other � 0.7 �
(0.2 ) � (3.0 ) � (0.4 ) � 6.0 � � 21.9 � � 25.0 � Adjusted EBITDA
$ 48.0 $ 18.8 � $ 42.4 � $ (1.7 ) $ (1.3 ) $ (8.7 ) $ 97.5 � � � -
I - RAYONIER RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED
INCOME TAX MARCH 31, 2008 (unaudited) (millions of dollars, except
percentages) � � � Three Months Ended March 31, � December 31, �
March 31, 2008 2007 2007 � $ � � % � � $ � � % � � $ � � % � �
Income tax provision at the U.S. statutory rate $ (17.8 ) (35.0 ) $
(11.6 ) (35.0 ) $ (14.9 ) (35.0 ) � REIT income not subject to
federal tax 9.1 17.9 11.5 34.8 10.7 25.2 � Lost deduction on REIT
interest expense and overhead expenses associated with REIT
activities � � � (1.4 ) (2.8 ) (3.0 ) (9.1 ) (3.1 ) (7.2 ) Foreign,
state and local income taxes, foreign exchange rate changes and
permanent differences � � � (0.3 ) (0.6 ) � 0.4 � 1.3 � � 0.2 � 0.3
� � Income tax expense before discrete items $ (10.4 ) (20.5 ) $
(2.7 ) (8.0 ) $ (7.1 ) (16.7 ) � Return to accrual adjustment - -
0.1 0.3 - - � Taxing authority settlements and FIN 48 adjustments
(0.1 ) (0.3 ) 1.1 3.3 - - � Deferred tax adjustments / other � 0.3
� 0.6 � � 2.8 � 8.4 � � (0.4 ) (0.9 ) � Income tax (expense) /
benefit $ (10.2 ) (20.2 ) $ 1.3 � 4.0 � $ (7.5 ) (17.6 ) � � - J -
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