Rayonier (NYSE:RYN) today reported third quarter net income of
$81 million, or 62 cents per share, compared to $105 million, or 84
cents per share, in the prior year period. The 2011 results
included a $16 million tax benefit from the reversal of a reserve
relating to the taxability of the 2009 alternative fuel mixture
credit (AFMC). Excluding this benefit, 2011 third quarter net
income was $89 million, or 71 cents per share.
Year-to-date 2012 net income totaled $203 million, or $1.58 per
share, compared to $220 million, or $1.75 per share, in 2011.
Excluding the tax benefit from the AFMC, net income for the first
three quarters of 2011 was $204 million, or $1.62 per share.
Cash provided by operating activities was $354 million for the
first nine months of 2012 compared to $326 million for the prior
year period. Year-to-date cash available for distribution (CAD)1
was $261 million versus $242 million in 2011. (See Schedule D for
more details.)
“We are pleased to report continued strong operating results
this quarter in line with our expectations. In Performance Fibers,
the cellulose specialties market remains strong, and in Forest
Resources, sales increased as we added volume from our recent
acquisitions,” said Paul G. Boynton, Chairman, President and
CEO.
Forest Resources
Third quarter sales of $60 million were $3 million above the
prior year period, while operating income of $11 million was
comparable. Year-to-date sales of $165 million increased $2 million
over prior year, while operating income of $27 million declined $7
million primarily due to lower prices in the Pacific Northwest and
New Zealand reflecting weaker Asian demand. Third quarter and
year-to-date sales improved over the prior year in the Gulf States
region due to higher volumes from the 2011 timberland
acquisitions.
Real Estate
Third quarter sales of $13 million were $19 million lower than
the prior year period and operating income of $8 million decreased
$20 million. Year-to-date sales of $37 million were $21 million
below 2011, and operating income of $21 million was $19 million
below the prior year. The third quarter and year-to-date periods of
2011 benefited from a 6,300 acre non-strategic sale at $3,995 per
acre and a $6 million property tax settlement covering several
prior years. The 2012 periods included improved margins on rural
land sales due to geographic mix.
Performance Fibers
Third quarter sales of $288 million were $33 million above the
prior year period, while operating income of $101 million improved
$27 million. Year-to-date sales of $794 million were $55 million
above the comparable 2011 period, while operating income of $266
million increased $44 million. The 2012 results reflected higher
cellulose specialties prices partially offset by a decline in
absorbent materials prices and higher production costs. Third
quarter 2012 also benefited from higher cellulose specialties
volumes due to timing of shipments.
Other Items
Wood Products operating income improved $2 million and $8
million for the three and nine months ended September 30, 2012,
respectively, compared to the prior year periods as prices and
volumes increased due to higher demand.
Corporate and other expenses were $3 million above third quarter
2011, which benefited from a favorable insurance settlement.
Year-to-date corporate and other expenses were $4 million above the
prior year due to higher stock-based compensation and pension
costs.
In the third quarter, the IRS released guidance stating that the
repayment of the AFMC in exchange for the Cellulosic Biofuel
Producer Credit (CBPC) does not require interest payments. As a
result, the Company reversed a $3 million interest accrual from
last quarter, lowering third quarter interest expense. The Company
also recorded another $3 million of AFMC for CBPC exchange benefit
in the third quarter.
Effective tax rates for the quarter and year-to-date were 23.4
percent and 21.9 percent compared to a 9.0 percent benefit and a
7.5 percent expense in 2011, respectively. The increase in tax
rates resulted largely from several non-routine benefits recorded
in 2011.
Outlook
“We are positioned for another strong year as our businesses
continue to execute well, creating strong operating cash flows”
said Boynton. “In Forest Resources, we will continue to capitalize
on local market opportunities in the Southeast. In Performance
Fibers, we anticipate another record year driven by strong
cellulose specialties markets and we remain on track to complete
our cellulose specialties expansion project by mid-2013.”
“Overall, we expect operating income to increase approximately
10 percent over 2011. However, due to the non-routine tax benefits
detailed above, we still expect full year earnings to be comparable
to 2011, excluding special items. We anticipate CAD to range from
$295 million to $310 million, substantially above our recently
increased dividend,” Boynton concluded.
Further Information
A conference call will be held on Thursday, October 25, 2012 at
2 p.m. EDT to discuss these results. Presentation 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 calling 1-800-RYN-7611.
1 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: Forest Resources, Real Estate and
Performance Fibers. The company owns, leases or manages 2.7 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, FL.
Its Performance Fibers business is one of the world's leading
producers of high-value specialty cellulose fibers, which are used
in products such as filters, pharmaceuticals and LCD screens.
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
continues to impact 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, particularly in our Performance
Fibers business; changes in global economic conditions and world
events, including political changes in particular regions or
countries; the uncertainties of potential impacts of
climate-related weather changes and legislative 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 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 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 INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED
INCOME
September 30, 2012
(unaudited)
(millions of dollars, except per share
information)
Three Months Ended Nine Months Ended September 30,
June 30, September 30, September 30, September
30, 2012 2012 2011 2012 2011
Sales $ 409.0 $ 371.9
$ 385.1 $ 1,136.7 $ 1,100.2 Costs and
expenses Cost of sales 278.7 262.6 266.2 794.5 786.5 Selling and
general expenses 15.8 16.2 15.8 51.7 48.2 Other operating expense
(income), net 1.3 (5.5 ) (5.2 ) (5.3 ) (9.5 )
Operating
income 113.2 98.6 108.3 295.8 275.0 Interest expense (8.3 )
(16.1 ) (12.4 ) (36.1 ) (38.3 ) Interest and other income, net 0.3
0.1 0.4 0.3 0.9
Income before
taxes 105.2 82.6 96.3 260.0 237.6 Income tax (expense) benefit
(24.6 ) (13.5 ) 8.6 (56.9 ) (17.8 )
Net income $ 80.6
$ 69.1 $ 104.9 $ 203.1 $ 219.8
Net Income per Common Share: Basic Net Income $ 0.66
$ 0.56 $ 0.86 $ 1.66 $ 1.81 Diluted Net
Income $ 0.62 $ 0.54 $ 0.84 $ 1.58 $
1.75 Pro forma Net Income (a) $ 0.62 $ 0.54 $
0.71 $ 1.58 $ 1.62
Dividends per
share $ 0.44 $ 0.40 $ 0.40 $ 1.24 $
1.12
Weighted Average Common Shares used
for determining Basic EPS 122,848,705 122,455,464
121,790,059 122,552,910 121,665,644 Diluted
EPS (b) 129,959,666 127,411,127 125,599,609
128,548,552 125,530,100
(a) For the three and nine months ended
September 30, 2011, pro forma net income excludes a gain of $0.13
per share from the reversal of a reserve related to the taxability
of the AFMC. Pro forma net income is a non-GAAP measure. See
Schedule D for a reconciliation to the nearest GAAP measure.
(b) The increase in the dilutive shares
for the three and nine months ended September 30, 2012, is
primarily due to the potential dilutive impact of the Senior
Exchangeable Notes due 2012 and 2015.
A
RAYONIER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AND STATEMENTS OF CASH FLOWS
September 30, 2012
(unaudited)
(millions of dollars)
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 2012 2011
Assets Cash and cash
equivalents $ 215.5 $ 78.6 Other current assets 309.7 265.8 Timber
and timberlands, net of depletion and amortization 1,489.9 1,503.7
Property, plant and equipment 1,803.5 1,619.2 Less - accumulated
depreciation (1,173.7 ) (1,157.6 ) Net property, plant and
equipment 629.8 461.6 Investment in New Zealand JV 70.2 69.2 Other
assets 198.8 190.4 $ 2,913.9 $ 2,569.3
Liabilities and Shareholders' Equity Current maturities of
long-term debt $ 41.3 $ 28.1 Other current liabilities 245.8 150.1
Long-term debt 967.8 819.2 Non-current liabilities for dispositions
and discontinued operations 75.5 80.9 Other non-current liabilities
165.5 167.9 Shareholders' equity 1,418.0 1,323.1 $
2,913.9 $ 2,569.3
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2012
2011
Cash provided by operating activities: Net income $
203.1 $ 219.8 Depreciation, depletion, amortization 102.5 101.8
Non-cash basis of real estate sold 3.0 3.1 Other items to reconcile
net income to cash provided by operating activities 11.5 0.4
Changes in working capital and other assets and liabilities 33.5
1.2 353.6 326.3
Cash used for
investing activities: Capital expenditures (112.0 ) (87.2 )
Purchase of timberlands (11.6 ) (94.2 ) Jesup mill cellulose
specialties expansion (gross purchases of $130.7 and $14.6, net of
purchases on account of $25.9 and $6.5) (104.8 ) (8.1 ) Change in
restricted cash (12.8 ) 8.3 Other 4.3 0.7 (236.9 )
(180.5 )
Cash provided by (used for) financing activities:
Changes in debt, net of issuance costs 152.7 (2.0 ) Dividends paid
(152.4 ) (136.6 ) Issuance of common shares 20.7 8.2 Repurchase of
common shares (7.8 ) (7.9 ) Excess tax benefits on stock-based
compensation 7.1 5.0 20.3 (133.3 )
Effect
of exchange rate changes on cash (0.1 ) 0.3
Cash and
cash equivalents: Change in cash and cash equivalents 136.9
12.8 Balance, beginning of year 78.6 349.5 Balance,
end of period $ 215.5 $ 362.3
B
RAYONIER INC. AND SUBSIDIARIES
BUSINESS SEGMENT SALES AND OPERATING
INCOME (LOSS)
September 30, 2012
(unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended September 30,
June 30, September 30, September 30, September
30, 2012 2012 2011 2012 2011
Sales Forest Resources $ 59.9 $
52.7 $ 57.3 $ 164.7 $ 162.5 Real Estate 13.0 11.7 32.2 37.4 57.9
Performance Fibers Cellulose specialties 247.2 220.2 207.5 679.5
593.8 Absorbent materials 41.0 34.3 48.0 114.1
145.6 Total Performance Fibers 288.2 254.5
255.5 793.6 739.4 Wood Products 22.8
23.8 16.5 65.9 50.2 Other Operations 26.3 29.3 25.9 76.7 94.9
Intersegment Eliminations (1.2 ) (0.1 ) (2.3 ) (1.6 ) (4.7 )
Total sales $ 409.0 $ 371.9 $ 385.1 $
1,136.7 $ 1,100.2
Operating
income/(loss) Forest Resources $ 11.2 $ 8.2 $ 10.8 $ 27.4 $
33.7 Real Estate 8.4 6.0 28.1 20.9 40.5 Performance Fibers 101.5
83.7 74.9 265.8 221.7 Wood Products 1.6 4.1 (0.7 ) 6.7 (1.3 ) Other
Operations (0.4 ) 1.1 1.1 (0.2 ) 1.0 Corporate and other (9.1 )
(4.5 ) (5.9 ) (24.8 ) (20.6 )
Operating income $ 113.2
$ 98.6 $ 108.3 $ 295.8 $ 275.0
C
RAYONIER INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP
MEASURES
September 30, 2012
(unaudited)
(millions of dollars, except per share
information)
CASH AVAILABLE FOR DISTRIBUTION (a): Nine
Months Ended September 30, September 30, 2012 2011 Cash provided by
operating activities $ 353.6 $ 326.3 Capital expenditures (b)
(112.0 ) (87.2 ) Change in committed cash 6.2 (0.1 ) Excess tax
benefits on stock-based compensation 7.1 5.0 Other 6.0 (2.3
)
Cash Available for Distribution $ 260.9 $ 241.7
(a) Cash Available for Distribution (CAD) is defined as cash
provided by operating activities adjusted for capital spending, 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 strategic acquisitions. CAD is
not necessarily indicative of the CAD that may be generated in
future periods.
(b) Capital expenditures exclude strategic capital. For the nine
months ended September 30, 2012, strategic capital totaled $130.7
million for the Jesup mill cellulose specialties expansion and
$11.6 million for timberland acquisitions. For the nine months
ended September 30, 2011, strategic capital totaled $94.2 million
for timberlands and $14.6 million for the Jesup mill cellulose
specialties expansion.
PRO FORMA OPERATING INCOME AND NET INCOME:
Three Months Ended September 30, 2011
Per Diluted
$
Share
Net Income $ 104.9 $ 0.84 Reversal of tax reserve related to
the taxability of the AFMC (16.0 ) (0.13 )
Pro forma Net
Income $ 88.9 $ 0.71 Nine Months
Ended September 30, 2011
Per Diluted
$
Share
Net Income $ 219.8 $ 1.75 Reversal of tax reserve related to
the taxability of the AFMC (16.0 ) (0.13 )
Pro forma Net
Income $ 203.8 $ 1.62
D
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