Rayonier (NYSE:RYN) today reported fourth quarter net income of
$59 million, or 72 cents per share, compared to $98 million, or
$1.21 per share, in the prior year period. Full year net income was
$218 million, or $2.68 per share, compared to $313 million, or
$3.91 per share, in 2009.
Excluding the special items shown below, fourth quarter pro
forma net income of $35 million, or 43 cents per share, was
comparable to the prior year’s pro forma net income of $33 million,
or 42 cents per share. Full year pro forma results of $182 million,
or $2.24 per share, increased from $120 million, or $1.50 per
share, in 2009.
(millions of dollars, except earnings per share (EPS))
Fourth Qtr. 2010 Fourth Qtr. 2009 $ EPS
$ EPS Net Income $ 59 $ 0.72 $ 98 $ 1.21 Less:
Cellulosic Biofuel Producer Credit1 (24 ) (0.29 ) - - Alternative
Fuel Mixture Credit2 - - (65 )
(0.79 ) Pro Forma Net Income $ 35 0.43
$ 33 0.42 Full Year 2010 Full Year 2009
$ EPS $ EPS Net Income $ 218 $ 2.68 $
313 $ 3.91 Less: Cellulosic Biofuel Producer Credit1 (24 ) (0.30 )
- - Gain on sale of a portion of NZ JV3 (12 ) (0.14 ) - -
Alternative Fuel Mixture Credit2 - -
(193 ) (2.41 ) Pro Forma Net Income $ 182
2.24 $ 120 1.50
Cash provided by operating activities was $495 million for 2010
compared to $307 million in 2009. Cash available for distribution4
(CAD) was $384 million compared to $233 million in 2009. (See
Schedule D for more details.)
“We executed well in 2010, increasing our pro forma EPS from
$1.50 to $2.24 per share, a 49 percent increase,” said Lee M.
Thomas, Chairman and CEO. “In Timber, we aligned our harvest to
take advantage of stronger export and stumpage markets while
holding off volume in less attractive markets, allowing our
inventory value to build. In Performance Fibers, we had another
record year driven by strong demand for our high purity cellulose
specialties products and improved pricing for absorbent
materials.”
“Our decision to increase the December dividend by 8 percent to
$0.54 per share reflects our strong operating cash flow and
confidence in the future. This was our fifth dividend increase in
seven years,” Thomas concluded.
Timber
Fourth quarter sales of $34 million were $1 million below the
prior year period, while operating income was $7 million for both
periods. Full year sales of $177 million increased $18 million from
prior year, while operating income of $33 million was $26 million
above 2009 results.
In the Eastern region, fourth quarter and full year sales
declined from the prior year periods as higher prices were more
than offset by lower volumes as thinnings returned to more
normalized levels. Fourth quarter operating income was consistent
with the prior year period, while full year operating income
improved from 2009 reflecting higher margins.
In the Western region, fourth quarter and full year sales and
operating income improved from prior year periods primarily due to
higher prices driven largely by stronger export demand. The price
improvement was somewhat offset by a decline in volumes and
increased logging costs.
Real Estate
Fourth quarter sales of $5 million were $6 million below last
year and operating income of $1 million was $4 million lower than
2009 reflecting lower rural sales volumes due to timing.
Full year sales and operating income of $96 million and $53
million were $5 million and $3 million below the prior year
results, respectively, primarily due to a decline in rural prices
reflecting a change in geographic mix. A decline in non-strategic
timberland acres sold was mostly offset by an increase in average
price per acre due to location and site characteristics.
Performance Fibers
Fourth quarter sales of $233 million were $8 million below 2009,
while operating income of $62 million was $4 million above the
prior year period. Price increases in cellulose specialties and
absorbent materials were more than offset by lower volumes due to
the timing of customer orders, and absorbent materials production
issues. The improvement in operating income reflects a favorable
shift in cellulose specialties sales mix offset in part by an
increase in wood, chemical and transportation costs.
Full year sales of $881 million were $42 million above 2009,
while operating income of $214 million increased $31 million.
Cellulose specialties sales improved due to increased volume and
price. Absorbent materials sales also increased as higher prices
more than offset lower volumes. Full year costs were higher in 2010
mainly due to an increase in wood, chemical and transportation
costs.
Other Items
Excluding special items, 2, 3 corporate and other expenses were
$12 million for the quarter and $33 million for full year 2010,
compared to $10 million and $28 million for the prior year periods,
respectively. The 2010 periods include a $3 million accrual for
increased future environmental costs associated with closed
facilities. Full year 2010 also reflects an increase in incentive
compensation accruals. Interest and other expenses declined $1
million for both the quarter and year compared to the prior year
periods primarily due to lower average net debt balances and
interest rates. Fourth quarter 2009 also included a $1 million
favorable IRS interest claim.
The fourth quarter effective tax rate was a benefit of 33.7
percent compared to an expense of 9.0 percent in 2009, while the
full year rate declined to 6.5 percent from 12.9 percent. The
significant decline in 2010 reflects the benefit of the $24 million
cellulosic biofuel producer credit.1
Excluding special items, fourth quarter effective tax rates were
21.3 percent in 2010 and 23.9 percent in 2009. For the year, the
effective tax rate was 17.6 percent, down from 22.1 percent in
2009. The lower rates in 2010 were due to proportionately higher
earnings from the REIT.
Outlook
“We are encouraged by the improvement in our key markets,” said
Thomas. “For 2011, we expect Timber results to improve somewhat,
reflecting continued export demand for sawlogs from our Washington
property and strong pulpwood demand in the Southeast. We anticipate
greater buyer interest in our rural and conservation properties,
although substantially lower non-strategic land sales will likely
reduce the total contribution from Real Estate. In Performance
Fibers, strong demand for cellulose specialties is driving
significant price increases and our expectation of another record
year, as we continue to run at full capacity to meet our customers’
needs.”
“Overall, we anticipate EPS of $2.50 to $2.70 per share, an
increase of 10 to 20 percent above 2010 pro forma amounts. We
expect CAD to range between $260 million and $280 million, well
above our dividend level. With strong operating cash flows, low
leverage and ample liquidity, we will continue to grow our
businesses and effectively allocate our strategic capital,” Thomas
concluded.
Further Information
A conference call will be held on Tuesday, January 25, 2011 at 2
p.m. EST to discuss these results. Supplemental materials and
access to the live webcast will be available at www.rayonier.com. Investors may also choose to
access the conference call by dialing (888) 790-3052, password:
Rayonier. A replay of this webcast will be available on the
company’s website shortly after the call.
Complimentary copies of Rayonier press releases and other
financial documents are also available by mail or fax by calling
1-800-RYN-7611.
1 In 2010, the Internal Revenue Service (IRS) issued a
memorandum which concluded that black liquor burned during calendar
year 2009 qualifies for the cellulosic biofuel producer credit. As
a result, Rayonier recognized a $24 million tax benefit in the
fourth quarter of 2010, a $0.29 and $0.30 increase to earnings per
share for the quarter and year, respectively.
2 For 2009, Rayonier was eligible for a tax credit equal to 50
cents per gallon of black liquor burned as an alternative fuel
mixture at its Performance Fibers mills. Operating income for the
fourth quarter and full year of 2009 included $63 million and $205
million, respectively, relating to the alternative fuel mixture
credit.
3 Net income for full year 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.
4 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 2.4 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.
RAYONIER CONDENSED STATEMENTS OF CONSOLIDATED INCOME
December 31, 2010 (unaudited) (millions of dollars, except
per share information)
Three Months Ended Year Ended December 31, September 30, December
31, December 31, December 31, 2010 2010 2009
2010 2009
Sales $ 315.3 $ 377.5
$ 309.8 $ 1,315.2 $ 1,168.6 Costs and expenses
Cost of sales 245.1 269.2 241.9 990.1 914.8 Selling and general
expenses 17.8 17.1 17.7 67.1 62.6 Other operating income, net (a)
(4.3 ) (0.9 ) (70.7 ) (24.0 )
(218.3 )
Operating income (a) 56.7 92.1 120.9 282.0 409.5
Interest expense (12.8 ) (12.9 ) (14.8 ) (50.5 ) (52.5 ) Interest
and other income, net 0.4 0.3
1.2 1.3 1.8
Income before
taxes 44.3 79.5 107.3 232.8 358.8 Income tax benefit (expense)
(b) 14.9 (16.6 ) (9.6 ) (15.2 )
(46.3 )
Net income $ 59.2 $ 62.9 $ 97.7
$ 217.6 $ 312.5
Income per Common
Share: Basic Net income $ 0.73 $ 0.78 $ 1.23
$ 2.71 $ 3.95 Diluted Net income $ 0.72
$ 0.77 $ 1.21 $ 2.68 $ 3.91 Pro
forma net income (c) $ 0.43 $ 0.77 $ 0.42 $
2.24 $ 1.50
Weighted average Common Shares
used for determining Basic EPS 80,522,519
80,262,781 79,337,212 80,160,183
79,052,479 Diluted EPS 81,787,560
81,470,749 80,450,741 81,245,574
80,020,300 (a) The year ended December
31, 2010 includes 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 months and year ended December 31, 2009, include a
benefit of $63.5 million and $205.2 million, respectively, for the
alternative fuel mixture credit (AFMC). (b) Includes $24.3 million
for the cellulosic biofuel producer credit (CBPC) for the three
months and year ended December 31, 2010. (c) For the three months
ended December 31, 2010, pro forma net income excludes a gain of
$0.29 per share for the CBPC. For the year ended December 31, 2010,
pro forma net income excludes $0.30 per share for the CBPC and
$0.14 per share from the sale of a portion of the New Zealand joint
venture interest. For the three months and year ended December 31,
2009, pro forma net income excludes earnings for the AFMC of $0.79
per share and $2.41 per share, respectively. 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, 2010 (unaudited)
(millions of dollars)
CONDENSED
CONSOLIDATED BALANCE SHEETS December 31, December 31, 2010
2009
Assets Cash and cash equivalents $
349.5 $ 75.0 AFMC receivable, net - 192.4 Other current assets
259.7 242.3 Timber and timberlands, net of depletion and
amortization 1,137.9 1,188.6 Property, plant and equipment 1,506.7
1,427.1 Less - accumulated depreciation (1,121.4 )
(1,082.2 ) Net property, plant and equipment 385.3 344.9 Investment
in New Zealand JV 68.5 51.0 Other assets 164.4
158.7 $ 2,365.3 $ 2,252.9
Liabilities and
Shareholders' Equity Current liabilities $ 245.7 $ 175.1
Long-term debt 675.1 695.0 Non-current liabilities for dispositions
and discontinued operations 81.7 87.9 Other non-current liabilities
110.8 148.7 Shareholders' equity 1,252.0
1,146.2 $ 2,365.3 $ 2,252.9
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Year
Ended December 31, 2010 2009
Cash
provided by operating activities: Net income $ 217.6 $ 312.5
Depreciation, depletion, amortization 143.4 158.4 Non-cash basis of
real estate sold 6.7 7.6 Other items to reconcile net income to
cash provided by operating activities 32.7 24.5 Changes in working
capital and other assets and liabilities (a) 95.0
(195.7 ) 495.4 307.3
Cash
used for investing activities: Capital expenditures (138.4 )
(91.7 ) Purchase of timberlands (5.4 ) - Change in restricted cash
(8.2 ) 1.4 Other 9.3 (2.4 ) (142.7 )
(92.7 )
Cash used for financing activities:
Borrowings of debt, net of repayments and issuance costs 59.8 (44.8
) Dividends paid (163.7 ) (158.2 ) Issuance of common shares 26.3
11.1 Repurchase of common shares (6.0 ) (1.4 ) Excess tax benefits
from equity-based compensation 5.4 2.7 Purchase of exchangeable
note hedge - (23.5 ) Proceeds from issuance of warrant -
12.5 (78.2 ) (201.6 )
Effect
of exchange rate changes on cash - 0.3
Cash and cash equivalents: Change in cash and cash
equivalents 274.5 13.3 Balance, beginning of year 75.0
61.7 Balance, end of year $ 349.5 $
75.0
(a)
Includes $189.1 million of working capital
decreases and $193.2 million of working capital increases for the
AFMC for December 31, 2010 and December 31, 2009, respectively.
B
RAYONIER BUSINESS SEGMENT SALES AND OPERATING INCOME
(LOSS) December 31, 2010 (unaudited) (millions of
dollars) Three Months
Ended Year Ended December 31, September 30, December 31, December
31, December 31, 2010 2010 2009 2010
2009
Sales Timber $ 33.7 $ 47.3 $ 34.2 $ 177.1 $
159.2 Real Estate 5.2 45.2 11.0 96.1 101.0 Performance Fibers
Cellulose specialties 179.0 186.7 193.9 685.6 658.4 Absorbent
materials 54.0 59.6 47.3
195.4 180.4 Total Performance Fibers
233.0 246.3 241.2
881.0 838.8 Wood Products 15.6 14.7 13.0 67.8
50.6 Other Operations 29.2 25.4 15.1 102.0 38.2 Intersegment
Eliminations (1.4 ) (1.4 ) (4.7 ) (8.8
) (19.2 )
Total sales $ 315.3 $ 377.5 $ 309.8 $
1,315.2 $ 1,168.6
Pro forma operating
income/(loss) (a) Timber $ 6.9 $ 9.2 $ 7.3 $ 32.9 $ 6.5 Real
Estate 1.1 30.8 4.7 53.4 56.1 Performance Fibers 62.3 62.3 58.6
214.4 183.6 Wood Products (1.8 ) (1.4 ) (2.8 ) 1.2 (10.9 ) Other
Operations 0.3 (0.8 ) (0.4 ) 0.8 (3.1 ) Corporate and other (a)
(12.1 ) (8.0 ) (10.0 ) (33.1 )
(27.9 )
Pro forma operating income (a) $ 56.7 $ 92.1
$ 57.4 $ 269.6 $ 204.3
(a) For the year ended December 31, 2010, 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.
Additionally, for the three months and year ended December 31,
2009, Corporate and other excludes $63.5 million and $205.2
million, respectively, of operating income related to the AFMC. Pro
forma operating income is a non-GAAP measure. See Schedule D for a
reconciliation.
C
RAYONIER RECONCILIATION OF NON-GAAP MEASURES
December 31, 2010 (unaudited) (millions of dollars, except
per share information)
CASH AVAILABLE FOR DISTRIBUTION (a):
Year Ended December 31,
December 31, 2010 2009 Cash provided by
operating activities $ 495.4 $ 307.3 Capital expenditures (b)
(138.4 ) (91.7 ) Change in committed cash 12.2 17.0 Excess tax
benefits on stock-based compensation 5.4 2.7 Other 9.4
(2.4 )
Cash Available for Distribution $ 384.0
$ 232.9 (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. CAD is not
necessarily indicative of the CAD that may be generated in future
periods.
(b) Capital spending excludes strategic acquisitions.
PRO FORMA OPERATING INCOME AND NET INCOME: Three Months
Ended December 31, 2010 September 30, 2010 December 31, 2009
$
Per DilutedShare
$
Per DilutedShare
$
Per DilutedShare
Operating Income $ 56.7 $ 92.1 $ 120.9 Alternative Fuel
Mixture Credit - - (63.5 )
Pro Forma Operating Income $ 56.7 $ 92.1 $
57.4
Net Income $ 59.2 $ 0.72 $ 62.9 $ 0.77 $
97.7 $ 1.21 Alternative Fuel Mixture Credit - - - - (64.3 ) (0.79 )
Cellulosic Biofuel Producer Credit (24.3 ) (0.29 )
- - - -
Pro Forma Net Income $ 34.9 $ 0.43 $ 62.9
$ 0.77 $ 33.4 $ 0.42
Year Ended December 31, 2010 December 31, 2009
$
Per DilutedShare
$
Per DilutedShare
Operating Income $ 282.0 $ 409.5 Gain on sale of a portion
of New Zealand JV interest (12.4 ) - Alternative Fuel Mixture
Credit - (205.2 )
Pro Forma Operating
Income $ 269.6 $ 204.3
Net Income $
217.6 $ 2.68 $ 312.5 $ 3.91 Gain on sale of a portion of New
Zealand JV interest (11.5 ) (0.14 ) - - Cellulosic Biofuel Producer
Credit (24.3 ) (0.30 ) - - Alternative Fuel Mixture Credit -
- (192.8 ) (2.41 )
Pro Forma
Net Income $ 181.8 $ 2.24 $ 119.7 $ 1.50
D
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