Rayonier (NYSE:RYN) today reported fourth quarter 2009 net
income of $98 million, or $1.21 per share. For the full year, net
income totaled $313 million, or $3.91 per share.
These results include a special item for earnings related to the
alternative fuel mixture credit (“AFMC”) of $64 million, or 79
cents per share, for the fourth quarter and $193 million, or $2.41
per share, for the full year. Excluding the AFMC, fourth quarter
earnings were $33 million, or 42 cents per share, compared to $43
million, or 55 cents per share, in the prior year period. Earnings
for full year 2009, excluding the AFMC, were $120 million, or $1.50
per share, compared to $149 million, or $1.87 per share, in
2008.
Cash provided by operating activities was $307 million for 2009
compared to $340 million in 2008. Cash available for distribution1
(CAD) was $230 million compared to $213 million in 2008. (See
Schedule D for more details.)
"We performed well in 2009 despite the difficult economic
conditions facing our timber and real estate operations. Strong
earnings in Performance Fibers along with a solid balance sheet and
conservative debt levels provided significant operating
flexibility,” commented Lee M. Thomas, chairman, president and
chief executive officer.
“In Timber, we deferred harvesting higher-value sawtimber until
markets improve to preserve value for the future, while in Real
Estate, we sold only those non-strategic properties where we could
realize attractive returns. Overall, we generated strong cash flow
in 2009, with cash available for distribution above 2008 levels,
and well in excess of our $2.00 per share dividend.”
Timber
In the fourth quarter, sales of $34 million were $19 million
below 2008, while operating income of $7 million declined $3
million. Full year sales of $159 million declined $40 million from
2008, while operating income of $7 million decreased $24
million.
In the Eastern region, sales and operating income decreased from
the prior year periods due to weaker sawlog markets and a sales mix
shift from sawtimber to lower-priced pulpwood. The impact on prices
and volumes was partially offset by lower depletion and logging
costs.
In the Western region, full year sales and operating income
decreased from 2008 as weak demand and planned harvest reductions
negatively impacted prices and volumes. In the fourth quarter,
however, operating results improved from the prior year period as
lower sales prices and volumes were offset by decreased logging and
transportation costs.
In December of 2009, our New Zealand joint venture, Matariki
Forestry Group (Matariki), signed an agreement to sell a 35 percent
interest in the joint venture to a new investor. Consummation of
this transaction is subject to approval from the New Zealand
Overseas Investment Office, which is expected in the first quarter
of 2010. Upon closing, Rayonier’s ownership interest in Matariki
will decline from 40 percent to 26 percent. Rayonier will continue
to manage the joint venture.
Real Estate
Sales of $11 million were $37 million below fourth quarter 2008,
while operating income of $5 million declined $25 million. As
expected, there were no significant non-strategic timberland sales
in the fourth quarter of 2009 compared to 28,000 acres sold in the
prior year period. However, rural acres sold were above the prior
year period.
Full year sales of $101 million were $26 million below 2008,
while operating income of $56 million decreased $24 million, driven
by lower per acre prices primarily due to soft markets and sales
mix. Non-strategic timberland prices remained solid although below
their 2008 peak.
Performance Fibers
For the quarter, sales of $241 million were $16 million above
the prior year period, while operating income of $59 million
increased $27 million. The improvement is primarily due to lower
production and transportation costs as well as higher cellulose
specialties prices and volumes, somewhat offset by a decline in
fluff prices.
For the year, sales of $839 million were $41 million above 2008,
while operating income increased $35 million to $184 million.
Higher cellulose specialties prices driven by strong customer
demand were partially offset by a decline in absorbent materials
prices and lower cellulose specialties volumes.
Other Items
Excluding the impact of the AFMC, Corporate and other expenses
were $10 million for the quarter and $28 million for full year
2009. Fourth quarter expenses increased $3 million from the prior
year period primarily due to higher stock-based and other incentive
compensation expense. However, for the year, expenses declined $2
million.
Interest and other expenses for the fourth quarter were
comparable to the prior year period, but were $2 million above the
full year as higher average debt balances more than offset lower
interest rates.
The fourth quarter effective tax rate before discrete items was
20.2 percent in 2009 and 14.0 percent in 2008. For the year, the
effective tax rate before discrete items was 21.6 percent in 2009
and 15.0 percent in 2008. 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 were 9.0 percent and 12.9 percent compared to 13.0
percent and 16.5 percent in 2008, respectively.
In 2009, $20 million of the AFMC was used to offset the TRS’
federal estimated income tax payments. An additional $15 million is
expected to be applied against income tax liabilities during 2010;
a cash refund for the remaining $180 million of the AFMC is
anticipated to be received in 2010 after filing of the 2009 tax
return.
Outlook
“We are encouraged by recent timber price improvement and
continued strength in pulpwood demand. In Real Estate, we expect
increased interest in rural, conservation and non-strategic
properties. In Performance Fibers, we anticipate continued solid
demand for cellulose specialties and absorbent materials,” said
Thomas.
“Accordingly, we expect this year’s Timber and Real Estate
results to exceed 2009 and Performance Fibers results to be
comparable. Overall, we anticipate earnings and cash available for
distribution to be above 2009 which, along with our strong balance
sheet and significant liquidity, position us well for future growth
opportunities,” Thomas concluded.
Further Information
A conference call will be held on Tuesday, Jan. 26, 2010 at 2
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 conference call by dialing
(888) 790-3052, password: Rayonier. Financial presentation
materials are available at the Web site. A replay will be available
on the site shortly after the call.
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.
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 45 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 and 10-Q reports 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 December 31,
2009 (unaudited) (millions of dollars, except per share
information) Three Months Ended
Year Ended December 31, September 30, December 31, December 31,
December 31, 2009 2009 2008
2009 2008
Sales $ 309.8
$ 300.6 $ 364.5 $ 1,168.6 $ 1,271.0
Costs and expenses Cost of sales 241.9 231.8 291.1 914.8
991.9 Selling and general expenses 17.7 16.0 16.5 62.6 64.5 Other
operating income, net (a) (70.7 ) (58.3 ) (6.5
) (218.3 ) (11.8 )
Operating income (a) 120.9
111.1 63.4 409.5 226.4 Interest expense (14.8 ) (12.8 ) (13.3 )
(52.5 ) (50.7 ) Interest and other income, net 1.2
0.3 (0.2 ) 1.8 2.3
Income before taxes 107.3 98.6 49.9 358.8 178.0 Income tax
expense (9.6 ) (17.5 ) (6.5 ) (46.3 )
(29.4 )
Net income $ 97.7 $ 81.1 $ 43.4
$ 312.5 $ 148.6
Income per Common
Share: Basic Net income $ 1.23 $ 1.03
$ 0.55 $ 3.95 $ 1.89 Diluted Net income
$ 1.21 $ 1.01 $ 0.55 $ 3.91 $ 1.87
Pro forma net income (b) $ 0.42 $ 0.40
$ 0.55 $ 1.50 $ 1.87
Weighted average
Common Shares used for determining Basic EPS
79,337,212 79,145,323 78,690,532
79,052,479 78,476,635 Diluted
EPS 80,450,741 80,107,115
79,406,271 80,020,300 79,429,233
(a) Includes $63.5 million and $55.8 million for the
alternative fuel mixture credit for the three months ended December
31, 2009 and September 30, 2009, respectively, and $205.2 million
for the year ended December 31, 2009. (b) Pro forma net income
excludes earnings for the alternative fuel mixture credit of $0.79
per share and $0.61 per share for the three months ended December
31, 2009 and September 30, 2009, respectively, and $2.41 per share
for the year ended December 31, 2009. Pro forma net income is a
non-GAAP measure, see Schedule D for a reconciliation to the
nearest GAAP measure.
-A-
RAYONIER CONDENSED CONSOLIDATED BALANCE SHEETS AND
STATEMENTS OF CASH FLOWS December 31, 2009 (unaudited)
(millions of dollars)
CONDENSED
CONSOLIDATED BALANCE SHEETS December 31, December 31, 2009 2008
Assets Cash and cash equivalents $ 75.0 $ 61.7 AFMC
receivable, net 192.4 - Other current assets 242.3 217.3 Timber and
timberlands, net of depletion and amortization 1,188.6 1,255.0
Property, plant and equipment 1,427.1 1,393.6 Less - accumulated
depreciation (1,082.2) (1,042.8) Net property, plant and equipment
344.9 350.8 Investment in New Zealand JV 51.0 43.0 Other assets
159.7 154.1 $ 2,253.9 $ 2,081.9
Liabilities and Shareholders'
Equity Current liabilities $ 175.4 $ 159.6 Long-term debt 695.0
746.6 Non-current liabilities for dispositions and discontinued
operations 87.9 96.4 Other non-current liabilities 150.3 140.4
Shareholders' equity 1,145.3 938.9 $ 2,253.9 $ 2,081.9
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS Year Ended December 31, 2009 2008
Cash provided by
operating activities: Net income $ 312.5 $ 148.6 Depreciation,
depletion, amortization 158.4 168.2 Non-cash basis of real estate
sold 7.6 11.1 Other non-cash items included in income 24.5 33.4
Changes in working capital and other assets and liabilities (195.7)
(a)
(21.1) 307.3 340.2
Cash used for investing activities:
Capital expenditures (91.7) (104.8) Purchase of timberlands and
real estate - (234.0) Change in restricted cash 1.4 8.5 Other (2.4)
(0.1) (92.7) (330.4)
Cash used for financing activities:
(Repayments)/Borrowings of debt, net and issuance costs (44.8) 21.1
Dividends paid (158.2) (157.0) Issuance of common shares 11.1 8.3
Repurchase of common shares (1.4) (3.9) Excess tax benefits from
equity-based compensation 2.7 3.2 Purchase of exchangeable note
hedge (23.5) - Proceeds from issuance of warrant 12.5 - (201.6)
(128.3)
Effect of exchange rate changes on cash 0.3 (0.9)
Cash and cash equivalents: Change in cash and cash
equivalents 13.3 (119.4) Balance, beginning of year 61.7 181.1
Balance, end of year $ 75.0 $ 61.7
(a) Includes $193.2 million of
working capital increases for the alternative fuel mixture
credit.
-B-
RAYONIER BUSINESS SEGMENT SALES
AND OPERATING INCOME (LOSS) December 31, 2009
(unaudited) (millions of dollars)
Three Months Ended Year Ended December 31,
September 30, December 31, December 31, December 31, 2009
2009 2008 2009 2008
Sales Timber
$ 34.2 $ 46.5 $ 53.7 $ 159.2 $ 199.1 Real Estate 11.0 21.9 48.0
101.0 126.8 Performance Fibers Cellulose specialties 193.9 173.1
163.0 658.4 599.5 Absorbent materials 47.3
43.7 62.5 180.4 198.1
Total Performance Fibers 241.2 216.8
225.5 838.8 797.6
Wood Products 13.0 13.3 19.0 50.6 86.4 Other Operations 15.1 8.5
18.6 38.2 61.4 Intersegment Eliminations (4.7 ) (6.4
) (0.3 ) (19.2 ) (0.3 )
Total sales
$ 309.8 $ 300.6 $ 364.5 $ 1,168.6 $
1,271.0
Pro forma operating income/(loss) (a)
Timber $ 7.3 $ 1.0 $ 10.7 $ 6.5 $ 30.8 Real Estate 4.7 12.8 29.9
56.1 80.3 Performance Fibers 58.6 49.5 31.8 183.6 148.6 Wood
Products (2.8 ) (2.0 ) (3.8 ) (10.9 ) (6.4 ) Other Operations (0.4
) (1.3 ) 2.0 (3.1 ) 3.0 Corporate and other (10.0 )
(4.7 ) (7.2 ) (27.9 ) (29.9 )
Pro forma
operating income (a) $ 57.4 $ 55.3 $ 63.4
$ 204.3 $ 226.4
(a)
Corporate and other excludes $63.5
and $55.8 million of operating income related to the alternative
fuel mixture credit for the three months ended December 31, 2009
and September 30, 2009, respectively, and $205.2 million for the
year ended December 31, 2009. Pro forma operating income is a
non-GAAP measure, see Schedule D for a reconciliation to the
nearest GAAP measure.
- C -
RAYONIER RECONCILIATION OF NON-GAAP
MEASURES December 31, 2009 (unaudited) (millions of
dollars, except per share information)
CASH AVAILABLE FOR
DISTRIBUTION (a): Year Ended
December 31, December 31, 2009 2008
Cash provided by operating activities $ 307.3 $ 340.2 Capital
expenditures (b) (91.7 ) (104.8 ) Change in committed cash 17.0
(10.0 ) Like-kind exchange tax benefits on real estate sales (c) -
(12.1 ) Other (2.4 ) (0.1 )
Cash Available for
Distribution $ 230.2 $ 213.2 (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 December 31, September 30, December 31, 2009 2009 2008
$
Per DilutedShare
$
Per DilutedShare
$
Per DilutedShare
Operating Income $ 120.9 $ 111.1 $ 63.4 Alternative Fuel
Mixture Credit (63.5) (55.8) -
Pro Forma Operating Income $
57.4 $ 55.3 $ 63.4
Net Income $ 97.7 $ 1.21 $ 81.1 $
1.01 $ 43.4 $ 0.55 Alternative Fuel Mixture Credit (64.3) (0.79)
(49.1) (0.61) - -
Pro Forma Net Income $ 33.4 $ 0.42 $ 32.0
$ 0.40 $ 43.4 $ 0.55 Year Ended
December 31, December 31, 2009 2008 $
Per DilutedShare
$
Per DilutedShare
Operating Income $ 409.5 $ 226.4 Alternative Fuel Mixture
Credit (205.2) -
Pro Forma Operating Income $ 204.3 $ 226.4
Net Income $ 312.5 $ 3.91 $ 148.6 $ 1.87 Alternative
Fuel Mixture Credit (192.8) (2.41) - -
Pro Forma Net Income
$ 119.7 $ 1.50 $ 148.6 $ 1.87 -D-
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