Rayonier (NYSE:RYN) today reported third quarter net income of
$63 million, or 77 cents per share, compared to $81 million, or
$1.01 per share, in the prior year period. Third quarter 2009
results included a $49 million, or 61 cents per share, benefit from
the alternative fuel mixture credit (AFMC). Excluding this 2009
special item, year-over-year net income increased $31 million, or
37 cents per share, over the prior year period.
Year-to-date 2010 net income totaled $158 million, or $1.95 per
share, compared to $215 million, or $2.69 per share, in 2009.
Excluding special items,1, 2 year-to-date net income rose to $147
million, or $1.81 per share, from $86 million, or $1.08 per share,
in 2009.
Cash provided by operating activities of $473 million for the
first nine months of 2010 was $259 million above the prior year
period, while cash available for distribution3 of $400 million was
$235 million above year-to-date 2009. (See Schedule D for more
details.) In April, the company received a cash refund from the
Internal Revenue Service of $189 million for the AFMC.
“We are pleased to report strong third quarter results today,
following our announcement last week of an eight percent dividend
increase,” said Lee M. Thomas, chairman and CEO.
“These results reflect increased contributions from each of our
core businesses. In timber, we continued to benefit from our action
to lock-in higher stumpage prices early in the year. In real
estate, we had higher year-over-year rural and non-strategic
timberland sales, including a significant conservation sale. And in
performance fibers, we capitalized on continued strong demand for
both cellulose specialties and absorbent materials products.”
Timber
Sales of $47 million were $1 million above the 2009 third
quarter, while operating income of $9 million increased $8 million.
Year-to-date sales of $143 million increased $18 million from prior
year, while operating income of $26 million was $27 million above
2009 results for the same period.
In the Eastern region, third quarter and year-to-date operating
income improved from the 2009 periods as higher sales prices more
than offset lower volumes as we returned to more normal thinning
levels. Operating income also benefited from lower costs due to
geographic sales mix and reduced production and transportation
costs.
In the Western region, sales and operating income improved from
prior year periods primarily due to higher prices driven largely by
stronger export demand.
Real Estate
Sales of $45 million were $23 million higher than last year’s
third quarter and operating income of $31 million was $18 million
above 2009 primarily due to higher sales volumes. Rural and
non-strategic timberland sales increased by 2,000 acres and 10,000
acres from the prior year period, respectively. Prices for our
non-strategic timberland properties declined in third quarter 2010
from the prior year mainly due to the mix of properties sold,
although the impact was partially offset by the lower basis of the
properties.
Year-to-date, sales and operating income of $91 million and $52
million were each $1 million above the prior year period. While
rural acres sold increased from the 2009 third quarter, rural
prices decreased primarily due to a change in geographic mix.
Non-strategic timberland acres sold declined from the prior year
while prices increased reflecting location and site
characteristics.
Performance Fibers
Sales of $246 million were $29 million above the prior year
period, while operating income of $62 million increased $13
million. Year-to-date sales of $648 million were $50 million above
2009, while operating income of $152 million increased $27 million.
Cellulose specialties sales improved in both 2010 periods primarily
due to increased volume. Prices were slightly higher for the
quarter, but continued to be down for the year compared to the
prior year period, which benefited from a cost-based surcharge.
Absorbent materials sales also improved in both 2010 periods as
increased prices more than offset lower volumes.
Operating income improved in both 2010 periods reflecting
increased cellulose specialties sales volumes and higher absorbent
materials prices. The quarter was negatively impacted by increased
wood, chemical and transportation costs, while year-to-date costs
were slightly favorable primarily due to a decline in chemical
costs.
Other Items
Excluding special items,1, 2 corporate and other expenses were
$8 million for the quarter and $21 million for the nine months
ended September 30, 2010, compared to $5 million and $18 million
for the prior year periods. The three months ended September 30,
2009 benefited from a $3 million favorable insurance settlement,
while the nine months ended September 30, 2010 primarily reflects
higher incentive compensation accruals. Interest and other expenses
were comparable to both prior year periods.
Third quarter effective tax rates before discrete items were
19.2 percent in 2010 and 25.2 percent in 2009. For the nine months,
the effective tax rate was 18.3 percent, down from 22.1 percent in
2009. The decreased rates in 2010 were due to proportionately
higher earnings from the REIT.
Including discrete items, the effective tax rates for the
quarter and year-to-date were 20.9 percent and 16.0 percent
compared to 17.8 percent and 14.6 percent in 2009,
respectively.
Two recent tax developments, the cellulosic biofuel producer
credit (CBPC) and the Small Business Jobs Act, are expected to
benefit the Company in future periods.
In October 2010 the Internal Revenue Service (IRS) released
clarification that both the alternative fuel mixture credit and the
cellulosic biofuel producer credit can be claimed in the same year
for different volumes of black liquor. The Company has applied for
the cellulosic biofuel producer registration. If IRS approval is
received, the CBPC would increase fourth quarter 2010 net income by
approximately $23 million, or $0.28 per share.
In September 2010 the Small Business Jobs Act was enacted, which
has a provision that eliminates the built-in gains tax for Rayonier
in 2011. The built-in gains tax was approximately $9 million in
2009 and is expected to be approximately $6 million in 2010.
Outlook
“Our actions to create value are driving strong cash flows and
operating results in 2010,” said Thomas. “We expect to be at the
upper end of our guidance for earnings of $2.05 to $2.20 per share
for 2010, excluding special items, and CAD of $360 million to $380
million.” 4
“Our decision to increase our dividend to $0.54 per share,
effective for the fourth quarter distribution, reflects the
priority we place on dividends as a key driver of shareholder
return. We believe our commitment to providing an attractive
dividend yield and investing strategic capital to grow our business
will continue to create superior value over time for our
shareholders.”
Further Information
A conference call will be held on Tuesday, October 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 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 Net income for the three and nine months ended September 30,
2009 included $49 million, or 61 cents per share, and $128 million,
or $1.61 per share, respectively, relating to the AFMC.
2 Net income for the nine months ended September 30, 2010
included a first quarter gain of $12 million, or 14 cents per
share, from the sale of a portion of the Company’s interest in its
New Zealand joint venture.
3 Cash available for distribution (CAD) is a non-GAAP measure
defined and reconciled to GAAP in the attached exhibits.
4 Projected full year CAD reflects AFMC proceeds as well as an
increase in capital expenditures and pension contributions from
2009.
Rayonier is a leading international forest products company with
three core businesses: Timber, Real Estate and Performance Fibers.
The company owns, leases or manages 2.4 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 Interstate 95 corridor between
Savannah, Ga., and Daytona Beach, Fla. 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, 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; the uncertainties of potential impacts of
climate-related initiatives; 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; changes in tax
laws that could reduce the benefits associated with REIT status;
and potential legal challenges that could reduce the benefits
associated with the alternative fuel mixture credit and the
cellulosic biofuel producer 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.
1301 Riverplace Blvd., Jacksonville, FL 32207 904-357-9100
RAYONIER CONDENSED STATEMENTS OF CONSOLIDATED INCOME
September 30, 2010 (unaudited) (millions of dollars, except
per share information) Three Months Ended
Nine Months Ended September 30, June 30,
September 30, September 30, September 30, 2010
2010 2009 2010
2009
Sales $ 377.5 $ 312.2 $ 300.6
$ 999.9 $ 858.7 Costs and expenses Cost of
sales 269.2 242.9 231.8 745.0 672.8 Selling and general expenses
17.1 15.1 16.0 49.3 45.0 Other operating income, net (a)
(0.9 ) (2.1 ) (58.3 ) (19.7 ) (147.7 )
Operating income (a) 92.1 56.3 111.1 225.3 288.6 Interest
expense (12.9 ) (12.2 ) (12.8 ) (37.7 ) (37.6 ) Interest and other
income, net 0.3 0.4 0.3
0.9 0.5
Income before taxes 79.5
44.5 98.6 188.5 251.5 Income tax expense (16.6 ) (6.0
) (17.5 ) (30.1 ) (36.7 )
Net income $
62.9 $ 38.5 $ 81.1 $ 158.4 $ 214.8
Income per Common Share: Basic Net income $ 0.78
$ 0.48 $ 1.03 $ 1.98 $ 2.72
Diluted Net income $ 0.77 $ 0.48 $ 1.01 $ 1.95
$ 2.69 Pro forma net income (b) $ 0.77
$ 0.48 $ 0.40 $ 1.81 $ 1.08
Weighted
average Common Shares used for determining Basic EPS
80,262,781 80,104,004 79,145,323
80,038,032 78,956,526 Diluted
EPS 81,470,749 81,092,703
80,107,115 81,184,845 79,746,034
(a) The nine months ended September 30, 2010 include a gain
of $12.4 million from the sale of a portion of the Company's
interest in its New Zealand joint venture. The three and nine
months ended September 30, 2009, include a benefit of $55.8 million
and $141.8 million, respectively, for the alternative fuel mixture
credit. (b) Pro forma net income excludes a gain of $0.14 per share
from the sale of a portion of the New Zealand joint venture
interest for the nine months ended September 30, 2010. Pro forma
net income excludes earnings for the alternative fuel mixture
credit of $0.61 per share and $1.61 per share for the three and
nine months ended September 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
September 30, 2010 (unaudited) (millions of dollars)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2010 2009
Assets Cash and cash equivalents $ 405.7 $ 75.0 AFMC
receivable, net - 192.4 Other current assets 255.9 242.3 Timber and
timberlands, net of depletion and amortization 1,130.7 1,188.6
Property, plant and equipment 1,481.0 1,427.1 Less - accumulated
depreciation (1,109.7 ) (1,082.2 ) Net property,
plant and equipment 371.3 344.9 Investment in New Zealand JV 65.3
51.0 Other assets 163.2 158.7 $ 2,392.1
$ 2,252.9
Liabilities and Shareholders' Equity
Current liabilities $ 175.1 $ 175.1 Long-term debt 766.1 695.0
Non-current liabilities for dispositions and discontinued
operations 80.5 87.9 Other non-current liabilities 147.8 148.7
Shareholders' equity 1,222.6 1,146.2 $
2,392.1 $ 2,252.9
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended
September 30, 2010 2009
Cash
provided by operating activities: Net income $ 158.4 $ 214.8
Depreciation, depletion, amortization 115.7 126.8 Non-cash basis of
real estate sold 6.5 6.3 Other items to reconcile net income to
cash provided by operating activities 20.5 17.8 Changes in working
capital and other assets and liabilities (a) 172.1
(151.4 ) 473.2 214.3
Cash
used for investing activities: Capital expenditures (95.6 )
(65.1 ) Change in restricted cash (13.2 ) 1.2 Other 6.2
(7.7 ) (102.6 ) (71.6 )
Cash used
for financing activities: Borrowings of debt, net of repayments
and issuance costs 59.8 67.8 Dividends paid (120.2 ) (118.5 )
Issuance of common shares 21.5 9.2 Repurchase of common shares (6.0
) (1.4 ) Excess tax benefits from equity-based compensation 5.1 2.3
Purchase of exchangeable note hedge - (23.5 ) Proceeds from
issuance of warrant - 12.5 (39.8
) (51.6 )
Effect of exchange rate changes on cash
(0.1 ) 0.3
Cash and cash equivalents:
Change in cash and cash equivalents 330.7 91.4
Balance, beginning of year
75.0 61.7 Balance, end of period $
405.7 $ 153.1
(a) Includes $189.1 million of working
capital decreases and $128.3 million of working capital increases
for the alternative fuel mixture credit for September 30, 2010 and
September 30, 2009, respectively.
RAYONIER BUSINESS SEGMENT SALES AND OPERATING INCOME
(LOSS) September 30, 2010 (unaudited) (millions of
dollars) Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
September 30, 2010 2010
2009 2010 2009
Sales
Timber $ 47.3 $ 48.9 $ 46.5 $ 143.4 $ 125.0 Real Estate 45.2 12.7
21.9 90.9 89.9 Performance Fibers Cellulose specialties 186.7 162.6
173.1 506.6 464.5 Absorbent materials 59.6
39.3 43.7 141.4 133.1
Total Performance Fibers 246.3 201.9
216.8 648.0 597.6
Wood Products 14.7 21.6 13.3 52.1 37.5 Other Operations 25.4 30.3
8.5 72.8 23.2 Intersegment Eliminations (1.4 ) (3.2 )
(6.4 ) (7.3 ) (14.5 )
Total sales $ 377.5 $ 312.2 $ 300.6 $
999.9 $ 858.7
Pro forma operating
income/(loss) (a) Timber $ 9.2 $ 8.7 $ 1.0 $ 26.0 $ (0.9 ) Real
Estate 30.8 4.1 12.8 52.3 51.4 Performance Fibers 62.3 45.0 49.5
152.2 125.1 Wood Products (1.4 ) 4.3 (2.0 ) 2.9 (8.1 ) Other
Operations (0.8 ) 0.7 (1.3 ) 0.5 (2.6 ) Corporate and other (a)
(8.0 ) (6.5 ) (4.7 ) (21.0 )
(18.1 )
Pro forma operating income (a) $ 92.1 $ 56.3
$ 55.3 $ 212.9 $ 146.8
(a)Corporate and other excludes a gain of $12.4 million from
the sale of a portion of the Company's interest in its New Zealand
joint venture for the nine months ended September 30, 2010.
Additionally, Corporate and other excludes $55.8 million and $141.8
million of operating income related to the alternative fuel mixture
credit for the three and nine months ended September 30, 2009,
respectively. Pro forma operating income is a non-GAAP measure. See
Schedule D for a reconciliation.
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES September 30, 2010
(unaudited) (millions of dollars, except per share information)
CASH AVAILABLE FOR DISTRIBUTION (a):
Nine Months Ended September 30, September 30,
2010 2009 Cash provided by operating
activities $ 473.2 $ 214.3 Capital expenditures (b) (95.6 ) (65.1 )
Change in committed cash 11.6 21.8 Other 11.2
(5.4 )
Cash Available for Distribution $ 400.4 $
165.6 (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, excess tax benefits
on stock based compensation 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.
PRO
FORMA OPERATING INCOME AND NET INCOME: Three Months Ended
September 30, June 30, September 30, 2010 2010 2009
Per Diluted
Share
Per Diluted
Share
Per Diluted
Share
$ $ $
Operating
Income $ 92.1 $ 56.3 $ 111.1 Alternative Fuel Mixture Credit
- - (55.8 )
Pro Forma
Operating Income $ 92.1 $ 56.3 $ 55.3
Net Income $ 62.9 $ 0.77 $ 38.5 $ 0.48 $ 81.1 $ 1.01
Alternative Fuel Mixture Credit - -
- - (49.1 ) (0.61 )
Pro Forma Net Income $ 62.9 $ 0.77 $ 38.5
$ 0.48 $ 32.0 $ 0.40
Nine Months Ended September 30, September 30, 2010
2009
Per Diluted
Share
Per Diluted
Share
$ $
Operating Income $ 225.3 $288.6 Gain on
sale of a portion of New Zealand JV interest (12.4 ) - Alternative
Fuel Mixture Credit - (141.8)
Pro Forma
Operating Income $ 212.9 $ 146.8
Net
Income $ 158.4 $ 1.95 $ 214.8 $ 2.69 Gain on sale of a portion
of New Zealand JV interest (11.5 ) (0.14 ) - - Alternative Fuel
Mixture Credit - - (128.5)
(1.61 )
Pro Forma Net Income $ 146.9 $ 1.81
$ 86.3 $ 1.08
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