Rayonier (NYSE:RYN) today reported third quarter income from
continuing operations of $40 million, or 50 cents per share,
compared to $70 million, or 89 cents per share, in third quarter
2007. Year-to-date income from continuing operations was $118
million, or $1.48 per share, compared to $138 million, or $1.75 per
share, in the first nine months of 2007. Year-to-date 2007 included
a special item charge of $10 million, or 13 cents per share, for
timber damaged by forest fires. Third quarter net income was $30
million, or 37 cents per share compared to $71 million, or 90 cents
per share, in 2007. Year-to-date net income was $108 million, or
$1.36 per share compared to $140 million, or $1.77 per share, in
2007. For the three and nine months ended September 30, 2008, net
income included a discontinued operations loss of $10 million, or
13 cents per share, primarily due to one-time tax charges related
to the planned sale of our New Zealand holdings. For the comparable
2007 periods, income from discontinued operations was $1 million
and $2 million, respectively. Lee M. Thomas, Chairman, President
and CEO said, �Given the challenging economic conditions, we
continued to perform well and generated strong cash flows. We are
still experiencing high demand for our Performance Fibers products
and non-strategic timberlands which has partially mitigated the
softness in our timber business resulting from the weak housing
market.� Cash provided by operating activities was $248 million for
the nine months ended September 30, 2008 compared to $264 million
in 2007. Year-to-date cash available for distribution1 was $159
million compared to $210 million in 2007. (See Schedule H for more
details.) Timber Sales of $41 million declined $7 million from
third quarter 2007, while operating income decreased $13 million to
a $0.6 million operating loss. Year-to-date 2008 sales of $138
million were $25 million below the comparable prior year period,
while operating income of $20 million decreased $36 million,
excluding a loss of $10.1 million, or 13 cents per share, for
timber damaged by forest fires in 2007. In the Western region,
sawtimber prices declined due to the weak housing market and
oversupply of salvaged timber from a December 2007 storm.
Additionally, costs increased from the prior year period primarily
due to $3 million of higher depletion expense this quarter
resulting from last quarter�s timberland acquisition in the
Northwest. In the Eastern region, sales volumes shifted from
sawtimber to pulpwood in response to the weak housing market and
strong pulpwood demand. The shift in sales mix resulted in lower
margins as pulpwood prices are below sawtimber prices but depletion
cost per ton is comparable. Despite lower operating earnings, the
Timber segment generated $18 million and $79 million of EBITDA1 for
the three and nine months ended September 30, 2008, respectively.
Based on current conditions, the Company expects to continue its
planned reduction in sawtimber harvest for the balance of the year,
thereby preserving higher-value timber until markets improve. Real
Estate Sales of $26 million were $30 million below third quarter
2007, while operating income of $14 million declined $34 million.
For the nine month period, sales and operating income were $79
million and $50 million, declining $27 million and $36 million from
2007, respectively. The 2008 results reflect a mix shift within the
segment. Third quarter 2008 included $17 million of non-strategic
timberland sales while third quarter 2007 reflected a $47 million
sale of 3,100 acres to an industrial buyer. Performance Fibers
Sales of $210 million were $21 million above third quarter 2007,
while operating income of $43 million was comparable. For the nine
month period, sales of $572 million were $49 million above the
prior year period, while operating income of $117 million was $16
million above 2007. For the quarter, increased prices and improved
cellulose specialty volumes offset lower absorbent material volumes
and higher chemical, wood, energy and maintenance costs. The
increased prices included a cost-related surcharge for cellulose
specialty shipments effective September 1, 2008. Year-to-date,
increased prices and lower depreciation expense more than offset
cost increases. Other Items For the three and nine months ended
September 30, 2008, corporate expenses were $7 million and $23
million, down $2 million and $4 million from the prior year
periods, respectively, primarily due to lower incentive
compensation expense. Interest expense of $10 million was $4
million below third quarter 2007 while year-to-date interest
expense of $33 million was $9 million below the prior year period.
These declines reflect lower interest rates which more than offset
higher average debt balances due to strategic timberland
acquisitions. In addition, interest expense benefited from a
favorable IRS settlement in third quarter 2008. The effective tax
rate from continuing operations before discrete items was 15.6
percent and 16.0 percent for the three and nine months ended
September 30, 2008 compared to 10.1 percent and 14.4 percent for
the prior year periods. The increased rates were due to
proportionately higher earnings from the Company�s taxable REIT
subsidiary. Including discrete items, third quarter income tax was
a benefit of $1 million, reflecting a $4 million favorable IRS
settlement and other positive discrete adjustments. (See Schedule J
for further details.) Outlook �Our strong balance sheet and diverse
mix of businesses enable us to continue generating strong cash flow
during these uncertain economic times,� said Thomas. �With low debt
levels and no near-term maturities, we have significant operating
flexibility. Additionally, our Performance Fibers business has
long-term contracts extending into 2011 covering nearly all of our
high-value cellulose specialties production.� �Given the continued
weak outlook for sawtimber, we expect full year 2008 earnings to be
below the prior year period. In Performance Fibers, results are
expected to improve with strong demand for our cellulose specialty
products more than offsetting escalating raw material, energy and
transportation costs," said Thomas. �In Real Estate, we anticipate
continued interest for our non-strategic timberlands. Overall, cash
available for distribution in 2008 is anticipated to be well above
dividend requirements.� Further Information A conference call will
be held on Wednesday, October 22, 2008 at 11:00 a.m. EDT 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 888-215-6825. Supplemental materials are available
at the website. A replay will be available on the site shortly
after the call. For further information, visit the company�s
website 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) and EBITDA are non-GAAP measures defined and reconciled to
GAAP in the attached exhibits. 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 one of
the world�s leading producers 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 information is
available 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 effect of the current financial crisis,
which is impacting many areas of our economy, including the
availability and cost of credit, pricing of raw materials and
energy and demand for our products and real estate; 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; impacts of the rising cost of
fuel, including the cost and availability of transportation for our
products, both domestically and internationally, and the cost and
availability of third party logging and trucking services;
unanticipated equipment maintenance and repair requirements at our
manufacturing facilities; the geographic concentration of a
significant portion of our timberland; our ability to identify,
finance 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; 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 property; 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 SEPTEMBER 30, 2008 (unaudited) (millions of dollars,
except per share information) � � � � Three Months Ended Nine
Months Ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2008
2008 2007 2008 2007 Profitability Sales $ 308.1 $ 295.0 $ 324.1 $
878.2 $ 890.0 Operating income $ 49.0 $ 53.7 $ 91.7 $ 162.3 $ 201.6
Pro forma operating income (a) $ 49.0 $ 53.7 $ 91.7 $ 162.3 $ 211.7
Income from continuing operations $ 39.7 $ 38.2 $ 70.3 $ 117.5 $
138.2 (Loss) / income from discontinued operations $ (9.9 ) $ (0.8
) $ 1.2 $ (9.8 ) $ 1.6 Net income $ 29.8 $ 37.4 $ 71.5 $ 107.7 $
139.8 Income per diluted common share Continuing operations $ 0.50
$ 0.48 $ 0.89 $ 1.48 $ 1.75 Pro forma income from continuing
operations (a) $ 0.50 $ 0.48 $ 0.89 $ 1.48 $ 1.88 Net income $ 0.37
$ 0.47 $ 0.90 $ 1.36 $ 1.77 Pro forma operating income as a percent
of sales (a) 15.9 % 18.2 % 28.3 % 18.5 % 23.8 % Average diluted
shares (millions) 79.6 79.4 79.1 79.4 78.8 � Nine Months
EndedSeptember 30, � 2008 � � 2007 � Capital Resources and
Liquidity Cash provided by operating activities $ 248.2 $ 263.7
Cash used for investing activities $ (308.2 ) $ (83.5 ) Cash used
for financing activities $ (65.3 ) $ (128.9 ) Adjusted EBITDA (b)
(d) $ 282.9 $ 334.2 Cash Available for Distribution (CAD) (c) (d) $
159.4 $ 210.2 � 09/30/08 12/31/07 Debt $ 794.3 $ 749.8 Debt /
capital 44.2 % 43.3 % Cash $ 55.0 $ 181.1 � (a), (b), (c) and (d),
see Schedule B. � - A - RAYONIER FOOTNOTES FOR SCHEDULE A SEPTEMBER
30, 2008 (unaudited) � (a) Pro forma operating income and income
from operations are non-GAAP measures. See Schedule H for
reconciliation to the nearest GAAP measure. (b) Adjusted EBITDA is
defined as earnings before interest, taxes, depreciation,
depletion, amortization and the non-cash cost basis of real estate
sold. Adjusted EBITDA is a non-GAAP measure of the 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, less cash provided by
discontinued operations 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
SEPTEMBER 30, 2008 (unaudited) (millions of dollars, except per
share information) � � � � � � � Three Months Ended Nine Months
Ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2008 2008
2007 2008 2007 Sales $ 308.1 $ 295.0 $ 324.1 $ 878.2 $ 890.0 Costs
and expenses Cost of sales (a) 243.6 227.4 217.3 673.3 646.1
Selling and general expenses 16.1 16.8 16.8 47.7 48.6 Other
operating income, net (0.6) (2.9) (1.7) (5.1) (6.3) Operating
income (a) 49.0 53.7 91.7 162.3 201.6 Interest expense (10.5)
(11.7) (15.0) (33.4) (42.2) Interest and other income, net 0.3 0.6
1.3 2.2 3.2 Income before taxes 38.8 42.6 78.0 131.1 162.6 Income
tax expense 0.9 (4.4) (7.7) (13.6) (24.4) Income from continuing
operations 39.7 38.2 70.3 117.5 138.2 (Loss) / income from
discontinued operations, net (9.9) (0.8) 1.2 (9.8) 1.6 Net income $
29.8 $ 37.4 $ 71.5 $ 107.7 $ 139.8 Income per Common Share: Basic
Continuing operations $ 0.51 $ 0.49 $ 0.90 $ 1.50 $ 1.78 Net income
$ 0.38 $ 0.48 $ 0.92 $ 1.37 $ 1.80 Diluted Continuing operations $
0.50 $ 0.48 $ 0.89 $ 1.48 $ 1.75 Net income $ 0.37 $ 0.47 $ 0.90 $
1.36 $ 1.77 � Pro forma income from continuing operations (b) $
0.50 $ 0.48 $ 0.89 $ 1.48 $ 1.88 Weighted average Common Shares
used for determining Basic EPS 78,580,895 78,377,396 77,760,290
78,404,815 77,454,510 Diluted EPS 79,571,363 79,397,487 79,059,474
79,389,285 78,794,204 � (a) Cost of sales and operating income for
the nine months ended September 30, 2007 include a $10.1 million
charge, for timber destroyed by forest fires. Cost of sales and
operating income for the nine months ended September 30, 2007,
excluding the fire losses were $636.0 million and $211.7 million,
respectively. � (b) Non-GAAP measure, see Schedule H for a
reconciliation to the nearest GAAP measure. � - C - RAYONIER
BUSINESS SEGMENT SALES, OPERATING INCOME (LOSS), AND ADJUSTED
EBITDA SEPTEMBER 30, 2008 (unaudited) (millions of dollars) � �
Three Months Ended � Nine Months Ended Sept. 30, � June 30, � Sept.
30, Sept. 30, � Sept. 30, 2008 2008 2007 2008 2007 Sales Timber $
40.5 $ 52.8 $ 47.4 $ 137.9 $ 163.1 Real Estate 26.0 23.4 56.0 78.8
106.1 Performance Fibers Cellulose specialties 156.8 147.0 137.6
436.5 396.1 Absorbent materials � 53.3 � � 40.1 � � 51.2 � � 135.6
� � 126.9 � Total Performance Fibers � 210.1 � � 187.1 � � 188.8 �
� 572.1 � � 523.0 � Wood Products 24.1 24.5 24.3 67.5 67.8 Other
Operations � 7.4 � � 7.2 � � 7.6 � � 21.9 � � 30.0 � � Total sales
$ 308.1 � $ 295.0 � $ 324.1 � $ 878.2 � $ 890.0 � � Pro forma
operating income/(loss) (a) Timber $ (0.6 ) $ 10.1 $ 11.9 $ 20.4 $
56.7 Real Estate 14.0 14.6 47.7 50.4 86.8 Performance Fibers 43.0
36.7 43.1 116.8 101.2 Wood Products 0.3 (0.3 ) (1.5 ) (2.6 ) (5.5 )
Other Operations (0.3 ) 0.5 (0.6 ) (0.1 ) (1.1 ) Corporate and
other � (7.4 ) � (7.9 ) � (8.9 ) � (22.6 ) � (26.4 ) Pro forma
operating income (a) $ 49.0 � $ 53.7 � $ 91.7 � $ 162.3 � $ 211.7 �
� � Adjusted EBITDA by Segment (b) Timber $ 18.3 $ 30.9 $ 28.1 $
79.4 $ 113.3 Real Estate 22.2 19.3 53.1 68.5 98.5 Performance
Fibers 57.1 49.6 59.7 154.9 150.9 Wood Products 1.5 1.0 - 1.4 (0.8
) Other Operations 0.4 1.1 0.3 1.0 (1.4 ) Corporate and other �
(7.3 ) � (7.9 ) � (8.9 ) � (22.3 ) � (26.3 ) Total $ 92.2 � $ 94.0
� $ 132.3 � $ 282.9 � $ 334.2 � � (a) Timber segment pro forma
operating income excludes the $10.1 million fire loss for the nine
months ended September 30, 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. � - D -
RAYONIER CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF
CASH FLOWS SEPTEMBER 30, 2008 (unaudited) (millions of dollars) �
CONDENSED CONSOLIDATED BALANCE SHEETS � � � Sept. 30, Dec. 31, �
2008 � � 2007 � Assets Current assets $ 361.5 $ 396.2 Timber and
timberlands, net of depletion and amortization 1,273.3 1,117.2
Property, plant and equipment 1,379.9 1,340.2 Less - accumulated
depreciation � (1,027.6 ) � (994.4 ) � 352.3 � � 345.8 � Investment
in New Zealand JV - 62.8 Other assets � 153.9 � � 157.0 � $ 2,141.0
� $ 2,079.0 � Liabilities and Shareholders' Equity Current
liabilities $ 218.8 $ 218.4 Long-term debt 770.3 694.3 Non-current
liabilities for dispositions and discontinued operations 96.6 103.6
Other non-current liabilities 53.4 81.6 Shareholders' equity �
1,001.9 � � 981.1 � $ 2,141.0 � $ 2,079.0 � CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS Nine Months Ended Sept. 30, Sept. 30, �
2008 � � 2007 � Cash provided by operating activities: Net Income $
107.7 $ 139.8 Depreciation, depletion, amortization and non-cash
basis of real estate sold 119.7 122.7 Non-cash charge for forest
fire losses - 9.6 Other non-cash items included in income 23.2 4.0
Changes in working capital and other assets and liabilities � (2.4
) � (12.4 ) � 248.2 � � 263.7 � Cash used for investing activities:
Capital expenditures (74.9 ) (67.4 ) Purchase of timberlands and
wood chipping facilities (229.5 ) (12.4 ) Decrease / (increase) in
restricted cash 4.6 (0.4 ) Other � (8.4 ) � (3.3 ) � (308.2 ) �
(83.5 ) Cash used for financing activities: Borrowings, net of
repayments 44.4 (38.6 ) Dividends paid (117.6 ) (111.6 ) Issuance
of common shares 8.2 15.0 Repurchase of common shares (3.7 ) -
Excess tax benefits from equity-based compensation � 3.4 � � 6.3 �
� (65.3 ) � (128.9 ) Effect of exchange rate changes on cash � (0.8
) � 0.6 � Cash and cash equivalents: (Decrease) / increase in cash
and cash equivalents (126.1 ) 51.9 Balance, beginning of year �
181.1 � � 40.2 � Balance, end of period $ 55.0 � $ 92.1 � � - E -
RAYONIER SELECTED SUPPLEMENTAL FINANCIAL DATA SEPTEMBER 30, 2008
(unaudited) (millions of dollars) � � � � � � Debt Maturity
Schedule at October 1, 2008 (a) � � � � � � � � � � � � � � � � �
Instrument & Rates Total � 2009 � 2010 2011 2012 � 2013 2014
There-after Installment Notes $ 327.6 $ 122.0 (b) $ - $ 93.1 $ - $
- $ 112.5 $ - (8.39%-8.64%) Senior Exchangeable Notes 300.0 - - -
300.0 - - - (3.75%) Revolving Credit Facility (c) 100.0 - - 100.0 -
- - - (L + 40) � Tax Exempt Debt � Nassau County (d) 23.1 - - -
23.1 - - � (3.75% & 6.20%) 5.3 0.6 0.7 0.7 0.7 0.8 0.9 0.9
Wayne County (d) � 15.0 � - � - - - � - - � 15.0 (4.28%) $ 771.0 $
122.6 $ 0.7 $193.8 $323.8 $ 0.8 $ 113.4 $ 15.9 � � � � � � (a) $23
million of debt was paid on October 1, 2008. (b) Due December 31,
2009. (c) $250 million total; $144 million available. (d) Rate set
weekly (as of October 14, 2008). � � - F - RAYONIER SELECTED
SUPPLEMENTAL FINANCIAL DATA AND OPERATING INFORMATION SEPTEMBER 30,
2008 (unaudited) � � � � � Three Months Ended Nine Months Ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2008 2008 2007
2008 2007 Timber Sales Western U.S. $ 16.6 $ 24.1 $ 24.2 $ 61.3 $
84.3 Eastern U.S. � 23.9 � � 28.7 � � 23.2 � � 76.6 � $ 78.8 �
Total $ 40.5 � $ 52.8 � $ 47.4 � $ 137.9 � $ 163.1 � � Pro forma
operating (loss) / income (a) Western U.S. (b) $ (2.0 ) $ 7.3 $
10.3 $ 13.9 $ 44.0 Eastern U.S. (a) 1.5 3.0 2.3 7.1 13.9 Other
Timber � (0.1 ) � (0.2 ) � (0.7 ) � (0.6 ) � (1.2 ) Total $ (0.6 )
$ 10.1 � $ 11.9 � $ 20.4 � $ 56.7 � � (a) Timber segment pro forma
operating income excludes the $10.1 million fire loss for the nine
months ended September 30, 2007. Pro forma operating income is a
non-GAAP measure, see Schedule H for a reconciliation to the
nearest GAAP measure. � (b) The three and nine months ended
September 30, 2008 include $3.2 million of additional timber
depletion expense resulting from a second quarter 2008 timberland
acquisition in the Northwest. � � Three Months Ended Nine Months
Ended Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30, 2008 2008
2007 2008 2007 Timber Sales Volume Western U.S. in millions of
board feet 48 77 56 184 207 Eastern U.S. in thousands of short
green tons 1,508 1,864 1,555 4,684 4,552 � Real Estate Acres sold
HBU Development 294 - - 341 4,005 HBU Rural 2,849 5,444 5,576
14,781 11,957 Non-Strategic Timberlands � 10,917 � � 6,227 � � - �
� 21,217 � � - � Total 14,060 11,671 5,576 36,339 15,962 �
Performance Fibers Sales Volume Cellulose specialties, in thousands
of metric tons 124 118 119 349 344 Absorbent materials, in
thousands of metric tons 67 51 72 174 183 Production as a percent
of capacity 102.1 % 100.0 % 97.2 % 99.0 % 98.1 % � Lumber Sales
volume, in millions of board feet 84 87 88 245 248 � -G- RAYONIER
RECONCILIATION OF NON-GAAP MEASURES SEPTEMBER 30, 2008 (unaudited)
(millions of dollars, except per share information) � � � CASH
AVAILABLE FOR DISTRIBUTION: � Nine Months Ended Sept. 30, Sept. 30,
2008 2007 Cash provided by operating activities $ 248.2 $ 263.7
Capital expenditures (a) (74.9) (67.4) Decrease in committed cash
3.5 26.3 (b) Like-kind exchange tax benefits on real estate sales
(c) (9.0) (3.6) Cash from discontinued operations (4.3) (6.5) Other
(4.1) (2.3) Cash Available for Distribution $ 159.4 $ 210.2 � (a)
Capital spending excludes strategic acquisitions. (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 INCOME FROM CONTINUING OPERATIONS: � Nine Months Ended
Sept. 30, Sept. 30, 2008 2007 $ Per DilutedShare $ Per DilutedShare
Operating Income $ 162.3 $ 201.6 Forest fire loss - 10.1 Pro Forma
Operating Income $ 162.3 $ 211.7 � Income from Continuing
Operations $ 117.5 $ 1.48 $ 138.2 $ 1.75 Forest fire loss - - 10.1
0.13 Pro Forma Income from Continuing Operations $ 117.5 $ 1.48 $
148.3 $ 1.88 � - H - RAYONIER RECONCILIATION OF NON-GAAP MEASURES
SEPTEMBER 30, 2008 (unaudited) (millions of dollars) � � � � � � �
ADJUSTED EBITDA: � � � � Timber Real Estate Performance Fibers Wood
Products Other Operations Corporate and other Total Three Months
Ended September 30, 2008 Cash provided by operating activities $
25.2 $ 24.4 $ 47.3 $ (0.3) $ 8.4 $ (11.6) $ 93.4 Income tax expense
- - - - - 9.1 9.1 Interest, net - - - - - 10.2 10.2 Working capital
and other (6.9) (2.2) 9.8 1.8 (8.0) (15.0) (20.5) Adjusted EBITDA $
18.3 $ 22.2 $ 57.1 $ 1.5 $ 0.4 $ (7.3) $ 92.2 � June 30, 2008 Cash
provided by operating activities $ 39.9 $ 20.5 $ 21.6 $ 1.7 $ (2.9)
$ (26.1) $ 54.7 Income tax expense - - - - - 5.1 5.1 Interest, net
- - - - - 11.0 11.0 Working capital and other (9.0) (1.2) 28.0
(0.7) 4.0 2.1 23.2 Adjusted EBITDA $ 30.9 $ 19.3 $ 49.6 $ 1.0 $ 1.1
$ (7.9) $ 94.0 � 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 �
Nine Months Ended September 30, 2008 Cash provided by operating
activities $ 91.6 $ 71.1 $ 127.2 $ (2.6) $ 7.7 $ (46.8) $ 248.2
Income tax expense - - - - - 24.4 24.4 Interest, net - - - - - 31.1
31.1 Working capital and other (12.2) (2.6) 27.7 4.0 (6.7) (31.0)
(20.8) Adjusted EBITDA $ 79.4 $ 68.5 $ 154.9 $ 1.4 $ 1.0 $ (22.3) $
282.9 � September 30, 2007 Cash provided by operating activities $
116.7 $ 94.7 $ 146.3 $ (0.4) $ (4.8) $ (88.8) $ 263.7 Income tax
expense - - - - - 25.1 25.1 Interest, net - - - - - 38.4 38.4
Working capital and other (3.4) 3.8 4.6 (0.4) 3.4 (1.0) 7.0
Adjusted EBITDA $ 113.3 $ 98.5 $ 150.9 $ (0.8) $ (1.4) $ (26.3) $
334.2 � - I - RAYONIER RECONCILIATION OF STATUTORY INCOME TAX TO
REPORTED INCOME TAX SEPTEMBER 30, 2008 (unaudited) (millions of
dollars, except percentages) � � � � � � � � � Continuing
Operations Three Months Ended Nine Months Ended Sept. 30, June 30,
Sept. 30, Sept. 30, Sept. 30, 2008 � 2008 � 2007 � 2008 � 2007 � �
$ � % � � $ � % � � $ � % � � $ � % � � $ � % � � Income tax
provision at the U.S. statutory rate $ (13.6 ) (35.0 ) $ (14.9 )
(35.0 ) $ (27.3 ) (35.0 ) $ (45.9 ) (35.0 ) $ (56.9 ) (35.0 ) �
REIT income not subject to federal tax 8.1 20.9 11.9 28.0 23.9 30.6
28.0 21.3 43.5 26.8 � Lost deduction on REIT interest expense and
overhead expenses associated with REIT activities (0.8 ) (2.1 )
(1.4 ) (3.3 ) (3.8 ) (4.9 ) (2.8 ) (2.1 ) (9.8 ) (6.0 ) � Foreign,
state and local income taxes, foreign exchange rate changes and
permanent differences � 0.2 � 0.6 � � (0.1 ) (0.2 ) � (0.7 ) (0.8 )
� (0.2 ) (0.2 ) � (0.1 ) (0.2 ) � Income tax expense before
discrete items $ (6.1 ) (15.6 ) $ (4.5 ) (10.5 ) $ (7.9 ) (10.1 ) $
(20.9 ) (16.0 ) $ (23.3 ) (14.4 ) � Taxing authority settlements
and FIN 48 adjustments 3.8 9.7 - - (5.5 ) (7.1 ) 3.6 2.8 (5.8 )
(3.5 ) � Return to accrual adjustment / other � 3.2 � 8.2 � � 0.1 �
0.2 � � 5.7 � 7.3 � � 3.6 � 2.8 � � 4.7 � 2.9 � � Income tax
benefit / (expense) $ 0.9 � 2.3 � $ (4.4 ) (10.3 ) $ (7.7 ) (9.9 )
$ (13.7 ) (10.4 ) $ (24.4 ) (15.0 ) � � Discontinued Operations
Three Months Ended Nine Months Ended Sept. 30, 2008 Sept. 30, 2008
� $ � % � � $ � % � � Income tax provision from discontinued
operations at U.S. statutory rate $ (0.0 ) (35.0 ) $ (0.4 ) (35.0 )
� NOL valuation allowance (a) (5.8 ) n/m (5.8 ) n/m � Reversal of
APB 23 election (a) (4.4 ) n/m (4.4 ) n/m � Other � 0.2 � n/m � �
(0.2 ) n/m � � Income tax provision from discontinued operations $
(10.0 ) n/m � $ (10.8 ) n/m � � � (a) The Company's decision to
offer its New Zealand operations for sale in the third quarter of
2008 resulted in (1) the establishment of a $5.8 million valuation
allowance on a New Zealand net operating loss carryforward, and (2)
the reversal of the Company's Accounting Principles Board Opinion
23 election and recognition of a $4.4 million liability for U.S.
taxes on unremitted earnings. � n/m = not meaningful � - J -
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