Rayonier (NYSE:RYN) today reported second quarter net income of
$108 million, or $1.35 per share. Year-to-date net income was $134
million, or $1.68 per share.
In April 2009, Rayonier became eligible for a tax credit equal
to 50 cents per gallon of biomass-based fuels (“black liquor”)
burned as an alternative fuel mixture used at its Performance
Fibers mills. Second quarter net income includes $79 million, or 99
cents per share, for alternative fuel mixture credit (“AFMC”)
related to black liquor burned from January 19, 2009 through the
end of the second quarter. Excluding the AFMC, second quarter
earnings were $28 million, or 36 cents per share, compared to $37
million, or 46 cents per share, in the prior year period. Earnings
for the six months ended June 30, 2009 were $54 million, or 68
cents per share, compared to $76 million, or 96 cents per share, in
the first six months of 2008.
Cash provided by operating activities of $127 million for the
first six months of 2009 was $28 million below the prior year. Cash
available for distribution1 of $95 million was $2 million below the
first half of 2008. (See Schedule D for more details.)
Lee M. Thomas, Chairman, President and CEO said, "In the second
quarter, we continued to benefit from our business mix and
generated good cash flow, despite the difficult economy. Continued
interest in our non-strategic timberlands and solid Performance
Fibers results helped offset the impact of the weak housing market
on our timber segment.”
Timber
Second quarter 2009 sales of $44 million decreased $12 million
from the prior year period, while operating income of $0.4 million
decreased $9 million. Year-to-date sales of $78 million declined
$24 million from prior year, while operating income decreased $23
million to an operating loss of $2 million.
In the Eastern region, sales and operating income increased from
the prior year periods reflecting higher volumes and lower costs
due to sales mix, as well as increased non-timber income. However,
these items were largely offset by a sales shift from sawtimber to
lower-price pulpwood.
In the Western region, sales and operating income declined from
the prior year periods as weak demand and planned harvest
reductions continued to negatively impact prices and volumes.
Average prices declined 17 percent and 20 percent for the quarter
and year-to-date periods, respectively, while volumes declined 45
percent for both periods. Also impacting 2009 was higher depletion
expense partially offset by lower production and overhead
costs.
The Company expects to operate at reduced sawtimber harvest
levels until markets improve.
As a result of stressed capital markets and weak global economic
conditions, Rayonier and its joint venture partners discontinued
the sale process of their New Zealand holdings. Accordingly, the
New Zealand results are no longer classified as discontinued
operations.
Real Estate
Sales of $41 million were $18 million above second quarter 2008,
while operating income of $24 million increased $10 million. For
the six month period, sales of $68 million were $15 million above
the prior year period, while operating income of $39 million
increased by $2 million. Higher non-strategic timberland volumes
were partially offset by the timing of rural property sales and
lower per acre prices due to sales mix.
Performance Fibers
For the quarter, sales and operating income of $177 million and
$35 million declined $10 million and $2 million from the prior
year, respectively. For the six months, sales and operating income
of $381 million and $76 million increased $19 million and $2
million from 2008, respectively. The results reflect higher
cellulose specialties prices, increased input costs and declines in
fluff prices and cellulose specialties volumes. As anticipated,
cellulose specialties volumes declined in the second quarter from
prior year, as customers undertook inventory destocking initiatives
and delayed orders to the second half of the year.
Other Items
Excluding the impact of the AFMC, Corporate and other expenses
were $9 million and $15 million for the quarter and six months
ended June 2009. Second quarter expenses increased $2 million from
the prior year as general corporate spending reductions were offset
by lower log trading margins and foreign exchange losses. For the
six months, expenses were comparable to 2008.
Interest and other expenses were consistent for the quarter but
$1 million higher for the six months compared to 2008 primarily due
to higher average net debt balances, partially offset by lower
interest rates.
Second quarter effective tax rates before discrete items were
21.5 percent and 11.1 percent in 2009 and 2008, respectively. For
the six months, the effective tax rates were 20.2 percent and 16.0
percent in 2009 and 2008, respectively. The increased rates in 2009
were due to proportionately higher earnings from the taxable REIT
subsidiary (“TRS”).
Including discrete items, the effective tax rates for the
quarter and year-to-date were 11.9 percent and 12.6 percent
compared to 11.1 percent and 15.8 percent in 2008,
respectively.
In the second quarter of 2009, $8 million of the AFMC was used
to offset the TRS’ federal estimated income tax payments. While an
additional $10 million is expected to be applied against income tax
payments in the second half of the year, the majority of the cash
for the AFMC is anticipated to be received in 2010 after the filing
of the 2009 tax return.
Outlook
“Our unique business mix, strong balance sheet, and conservative
debt levels provide significant operating flexibility. We expect to
generate strong cash flows in 2009 well above our $2.00 per share
dividend and are increasing our full year guidance for CAD to be
comparable to 2008. Also, we anticipate EBITDA to be only 5 percent
to 10 percent below 2008 compared to previous guidance of 10
percent to 15 percent lower and EPS (excluding AFMC) to be 15
percent to 20 percent below 2008, versus previous guidance of 20
percent to 25 percent lower,” said Thomas.
“We are encouraged by the gradual improvement recently seen in
housing starts and the continued export demand for our Western and
New Zealand timber, however, we will continue to reduce sawtimber
harvest levels until demand and pricing improve. In Real Estate, we
expect continued interest in our rural HBU and non-strategic
timberlands. And in Performance Fibers, earnings are expected to
remain strong and above 2008 levels.”
Further Information
A conference call will be held on Thursday, July 30, 2009 at
2:00 p.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 conference call by dialing
(888) 790-3052, password: Rayonier. Financial Presentation
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) is a non-GAAP measure
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 2.5 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
approximately 40 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 economic downturn, which is
impacting many areas of our economy, including the housing market,
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, or the alternative fuel
mixture credit discussed in this document.
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 current downturn in the housing market,
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 CONDENSED STATEMENTS OF CONSOLIDATED INCOME
June 30, 2009 (unaudited) (millions of dollars, except per
share information) Three Months Ended
Six Months Ended June 30, March 31, June 30, June 30,
June 30, 2009 2009 2008
2009 2008
Sales $ 278.7
$ 279.4 $ 304.9 $ 558.1 $ 589.1
Costs and expenses Cost of sales 216.7 224.3 237.0 441.0 448.0
Selling and general expenses 14.3 14.7 16.9 29.0 31.8 Other
operating income, net (a) (86.5 ) (2.8 ) (2.6
) (89.3 ) (4.8 )
Operating income (a) 134.2
43.2 53.6 177.4 114.1 Interest expense (12.2 ) (12.6 ) (13.1 )
(24.8 ) (25.6 ) Interest and other income, net 0.2
0.1 0.6 0.3 2.1
Income before taxes 122.2 30.7 41.1 152.9 90.6 Income
tax expense (14.5 ) (4.7 ) (4.5 ) (19.2
) (14.3 )
Net income $ 107.7 $ 26.0 $
36.6 $ 133.7 $ 76.3
Income per Common
Share: Basic Net income $ 1.37 $ 0.33 $ 0.47
$ 1.70 $ 0.97 Diluted Net income $ 1.35
$ 0.33 $ 0.46 $ 1.68 $ 0.96 Pro
forma net income (b) $ 0.36 $ 0.33 $ 0.46 $
0.68 $ 0.96
Weighted average Common Shares
used for determining Basic EPS 78,913,563
78,806,973 78,377,396 78,860,562
78,315,808 Diluted EPS 79,789,075
79,272,477 79,397,487 79,537,197
79,310,701 (a) Includes $85.9 million
for the alternative fuel mixture credit during the three and six
months ended June 30, 2009. (b) Pro forma net income excludes
earnings for the alternative fuel mixture credit of $0.99 per share
and $1.00 per share for the three and six months ended June 30,
2009, respectively. Pro forma net income is a non-GAAP measure, see
Schedule D for a reconciliation to the nearest GAAP measure.
RAYONIER CONDENSED CONSOLIDATED BALANCE SHEETS AND
STATEMENTS OF CASH FLOWS June 30, 2009 (unaudited)
(millions of dollars)
CONDENSED CONSOLIDATED
BALANCE SHEETS June 30, December 31, 2009
2008
Assets Current assets $ 313.2 $
277.1 Tax receivable 85.1 1.9 Timber and timberlands, net of
depletion and amortization 1,209.2 1,255.0 Property, plant and
equipment 1,411.5 1,393.5 Less - accumulated depreciation
(1,057.0 ) (1,042.8 ) Net property, plant and equipment
354.5 350.7 Other assets 202.1 197.1 $
2,164.1 $ 2,081.8
Liabilities and Shareholders'
Equity Current liabilities $ 161.1 $ 159.6 Long-term debt 749.5
746.6 Non-current liabilities for dispositions and discontinued
operations 93.0 96.4 Other non-current liabilities 146.1 140.3
Shareholders' equity 1,014.4 938.9 $
2,164.1 $ 2,081.8
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30,
2009 2008
Cash provided by operating
activities: Net Income $ 133.7 $ 76.3 Depreciation, depletion,
amortization and non-cash basis of real estate sold 91.9 76.5 Other
non-cash items included in income 11.9 16.5 Changes in working
capital and other assets and liabilities (110.3 ) (a)
(14.4 ) 127.2 154.9
Cash used for
investing activities: Capital expenditures (50.1 ) (59.9 )
Purchase of timberlands - (229.4 ) Change in restricted cash (1.1 )
6.6 Other (2.2 ) (1.5 ) (53.4 ) (284.2
)
Cash used for financing activities: Repayment, net of
borrowings and issuance costs - 45.0 Dividends paid (78.9 ) (78.3 )
Issuance of common shares 3.7 4.3 Repurchase of common shares (1.4
) (3.7 ) Excess tax benefits from equity-based compensation
0.9 2.0 (75.7 ) (30.7 )
Effect of exchange rate changes on cash 0.1
(0.1 )
Cash and cash equivalents: Decrease in cash
and cash equivalents (1.8 ) (160.1 ) Balance, beginning of year
61.7 181.1 Balance, end of period $
59.9 $ 21.0 (a) Includes $79.3 million
of working capital increases for the alternative fuel mixture
credit.
RAYONIER BUSINESS SEGMENT SALES AND OPERATING INCOME
(LOSS) June 30, 2009 (unaudited) (millions of dollars)
Three Months Ended Six Months Ended June 30,
March 31, June 30, June 30, June 30,
2009 2009 2008 2009
2008
Sales Timber $ 43.6 $ 34.9 $ 55.3
$ 78.5 $ 102.5 Real Estate 41.4 26.6 23.4 68.0 52.8 Performance
Fibers Cellulose specialties 134.7 156.7 147.0 291.4 279.7
Absorbent materials 42.4 46.9
40.1 89.3 82.3 Total Performance
Fibers 177.1 203.6 187.1
380.7 362.0 Wood Products 12.5 11.8
24.5 24.3 43.4 Other Operations 9.0 5.7 14.6 14.7 28.4 Intersegment
Eliminations (4.9 ) (3.2 ) -
(8.1 ) -
Total sales $ 278.7 $ 279.4 $ 304.9 $
558.1 $ 589.1
Pro forma operating
income/(loss) (a) Timber $ 0.4 $ (2.3 ) $ 9.5 $ (1.9 ) $ 21.5
Real Estate 24.2 14.4 14.6 38.6 36.4 Performance Fibers 34.7 40.8
36.7 75.5 73.8 Wood Products (2.5 ) (3.6 ) (0.3 ) (6.1 ) (2.9 )
Corporate and other (8.5 ) (6.1 ) (6.9 )
(14.6 ) (14.7 )
Pro forma operating income (a)
$ 48.3 $ 43.2 $ 53.6 $ 91.5 $ 114.1
(a) Corporate and other excludes $85.9 million
of operating income related to the alternative fuel mixture credit
for the three and six months ended June 30, 2009. Pro forma
operating income is a non-GAAP measure, see Schedule D for a
reconciliation to the nearest GAAP measure.
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES June 30, 2009
(unaudited) (millions of dollars, except per share information)
CASH AVAILABLE FOR DISTRIBUTION (a):
Six Months Ended June 30, June 30,
2009 2008 Cash provided by operating
activities $ 127.2 $ 154.9 Capital expenditures (b) (50.1 ) (59.9 )
Change in committed cash 20.5 4.9 Like-kind exchange tax benefits
on real estate sales (c) - (5.7 ) Other (2.1 ) 2.8
Cash Available for Distribution $ 95.5 $ 97.0
(a)
Cash Available for Distribution
(CAD) is defined as cash provided by operating activities adjusted
for capital spending, the tax benefits associated with certain
strategic acquisitions, the change in committed cash, and other
items which include cash provided by discontinued operations,
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.
(b) Capital spending excludes strategic acquisitions. (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 June 30, March 31, June 30,
2009 2009 2008
$
Per Diluted Share
$
Per Diluted
Share
$
Per Diluted
Share
Operating Income $ 134.2 $ 43.2 $ 53.6 Alternative Fuel
Mixture Credit (85.9 ) - -
Pro Forma
Operating Income $ 48.3 $ 43.2 $ 53.6
Net Income $ 107.7 $ 1.35 $ 26.0 $ 0.33 $ 36.6 $ 0.46
Alternative Fuel Mixture Credit (79.3 ) (0.99 )
- - - -
Pro Forma Net
Income $ 28.4 $ 0.36 $ 26.0 $ 0.33 $ 36.6
$ 0.46 Six Months Ended June 30, June
30, 2009 2008
$
Per Diluted
Share
$
Per Diluted
Share
Operating Income $ 177.4 $ 114.1 Alternative Fuel Mixture
Credit (85.9 ) -
Pro Forma Operating
Income $ 91.5 $ 114.1
Net Income $ 133.7 $ 1.68 $ 76.3 $ 0.96 Alternative
Fuel Mixture Credit (79.3 ) (1.00 ) -
-
Pro Forma Net Income $ 54.4 $ 0.68 $
76.3 $ 0.96
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