Rayonier (NYSE:RYN) today reported first quarter net income
attributable to Rayonier of $43 million, or 34 cents per share,
compared to $148 million, or $1.13 per share, in the prior
year period.
The 2014 first quarter results included $3 million in costs, net
of tax, related to the planned separation of the Performance Fibers
business from the Forest Resources and Real Estate businesses.
Excluding this item, 2014 first quarter pro forma net income1 was
$46 million, or 36 cents per share. For the comparable 2013
period, pro forma net income was $103 million, or
79 cents per share, excluding income from discontinued
operations of $45 million, or 34 cents per share, from
the sale of the Wood Products business.
The following table summarizes the current quarter and
comparable prior period results:
Three Months Ended (millions of dollars, except
earnings per share (EPS))
March 31, 2014 March 31,
2013 $ EPS $ EPS Net
income attributable to Rayonier $ 43 $ 0.34 $ 148 $ 1.13 Separation
costs, net 3 0.02 — — Discontinued operations, net — —
(45 ) (0.34 ) Pro forma net income $ 46 $ 0.36
$ 103 $ 0.79
Cash provided by operating activities was $99 million compared
to $90 million in the first quarter 2013. Cash available for
distribution (CAD)2 was $72 million versus $67 million in 2013.
“While first quarter results were affected by the timing of
cellulose specialties sales volumes and real estate closings, we
are pleased with Forest Resources' strong results and the
significant progress made on key strategic initiatives,” said Paul
G. Boynton, Chairman, President and CEO.
“In Forest Resources, we took advantage of strong export markets
in the Pacific Northwest and New Zealand and realized higher timber
prices in the South. In Performance Fibers, we successfully
qualified production from the converted line with major cellulose
specialties customers. We have also made considerable progress
toward the separation of this business which remains on target for
mid-year,” added Boynton.
Forest Resources
Sales of $105 million and operating income of $28 million
increased $48 million and $14 million, respectively, from the prior
year period. In the Atlantic and Gulf regions, timber prices
increased due to improved sawlog demand and weather-related supply
limitations. In the Northern region, strong China demand drove
prices and volumes higher. Our New Zealand joint venture (JV) also
benefited from the higher China demand.
Real Estate
Sales of $6 million and operating income of $1 million decreased
$19 million and $16 million, respectively, from the prior year
period primarily due to lower non-strategic volumes, as planned,
the timing of closings and lower traffic due to inclement weather.
The first quarter of 2013 included a 5,400 acre non-strategic sale
in our Northern region at $3,673 per acre. Also, in 2014, slightly
higher rural HBU prices and volumes were partially offset by lower
development HBU prices and volumes.
Performance Fibers
Sales of $242 million and operating income of $49 million
decreased $42 million and $43 million, respectively, from the
prior year period. Cellulose specialties sales volumes declined as
the planned extended annual outage for the Jesup mill and
production issues during the first quarter 2014 reduced customer
shipments. Operating results were also negatively impacted by
previously announced lower cellulose specialties prices, higher
wood and energy costs due to weather conditions, and increased
manufacturing costs due to the shift away from absorbent materials
and into cellulose specialties and commodity viscose.
Other Items
Corporate and other operating expenses of $9 million, excluding
separation costs of $3 million, were $3 million above the
prior year period which benefited from a $2 million foreign
currency gain.
Interest and other expenses of $14 million were $6 million above
the prior year period primarily due to lower capitalized interest
related to the CSE project and higher debt levels associated with
the consolidation of our New Zealand JV.
The first quarter effective tax rate from continuing operations
before discrete items was 17.9 percent compared to 23.4
percent in 2013. The lower tax rate was due to proportionately
higher earnings from REIT operations in 2014. Including discrete
items, the first quarter effective tax rate from continuing
operations was 15.2 percent versus 4.1 percent in the
first quarter of 2013, which benefited from a $19 million tax
credit from the exchange of the alternative fuel mixture credit for
the cellulosic biofuel producer credit.
Separation
The Company is on track to complete the separation of its
Performance Fibers business, which will be named Rayonier Advanced
Materials, by mid-2014. It anticipates that it will receive a
private letter ruling from the Internal Revenue Service confirming
the tax-free nature of the separation. Additionally, the Company is
progressing well in the registration process with the Securities
and Exchange Commission. Estimates for normalized annual corporate
expenses for Rayonier and Rayonier Advanced Materials are $20
million and $25 million, respectively.
Outlook
“With improving demand, Forest Resources had an excellent first
quarter and we expect strong full-year results well above the prior
year. In Real Estate, we expect 2014 results will be comparable to
2013. In Performance Fibers, with the higher costs experienced in
the first quarter, we anticipate full-year results will be at the
low end of our earlier estimated range,” noted Boynton.
“We are pleased with our progress toward separation of the
Performance Fibers business, and are excited about the prospects
for these two separate businesses. We are confident that the
separation will create two industry-leading public companies with
significant long-term growth opportunities,” concluded Boynton.
Further Information
A conference call will be held on Tuesday, April 29, 2014 at 10
a.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) 989-7543, 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 Pro forma net income is a non-GAAP measure which is defined
and reconciled to GAAP in the attached exhibits.
2 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 2.6 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 50 percent of the company's sales are outside the
U.S. to customers in approximately 20 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 events, developments or financial or
operational performance or results, 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," "intend," "project," "anticipate" and other
similar language. However, the absence of these or similar words or
expressions does not mean that a statement is not forward-looking.
While management believes that these forward-looking statements are
reasonable when made, forward-looking statements are not guarantees
of future performance or events and undue reliance should not be
placed on these statements.
Forward-looking statements are only as of the date they are
made, and the Company undertakes no duty to update its forward-
looking statements except as required by law. You are advised,
however, to review any further disclosures we make on related
subjects in our subsequent Forms 10-Q, 10-K, 8-K and other reports
to the SEC.
The following important factors, among others, could cause
actual results or events to differ materially from those expressed
in forward-looking statements that may have been made in this
document: 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; risks associated with customer concentration and
potential impact of future tobacco-related restrictions in our
Performance Fibers business; changes in global economic conditions
and world events, including political changes in particular regions
or countries; fluctuations in demand for our products in Asia, and
especially China; the uncertainties of potential impacts of
climate-related initiatives; changes in energy and raw material
prices, particularly for our Performance Fibers business; 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; current litigation with the Altamaha
Riverkeeper relating to the Jesup mill's permitted wastewater
discharge (which has been disclosed in our public filings); 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 (such as the
recent Chinese anti-dumping investigation of dissolving pulp, which
has been disclosed in our public filings); changes in key
management and personnel; our ability to meet all necessary legal
requirements to continue to qualify as a real estate investment
trust (“REIT”) and to fund distributions using cash generated
through our taxable REIT subsidiaries, and changes in tax laws that
could adversely affect tax treatment of our specific businesses or
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; a delayed or weak recovery 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.
In addition, specifically with respect to the separation of
Rayonier Advanced Materials Inc. from Rayonier Inc., 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: uncertainties
as to the timing of the separation and whether it will be
completed, the possibility that various closing conditions for the
separation may not be satisfied or waived, the expected tax
treatment of the separation, the impact of the separation on the
businesses of Rayonier Inc. and Rayonier Advanced Materials Inc.,
the ability of both companies to meet debt service requirements,
the availability and terms of additional financing required by
Rayonier Advanced Materials Inc., and expectations of credit
rating.
Additional factors are described in the company's most recent
Form 10-K and 10-Q and other 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 March 31, 2014 (unaudited)
(millions of dollars, except per share information)
Three Months Ended March 31, December 31,
March 31, 2014 2013 2013
SALES $ 386.7 $ 520.2
$ 393.7 Costs and Expenses Cost of sales 302.7 395.4 266.0
Selling and general expenses 15.5 16.5 16.1 Other operating expense
(income), net 3.5 (4.9 ) (3.8 )
OPERATING INCOME 65.0
113.2 115.4 Interest expense (13.0 ) (13.0 ) (7.7 ) Interest and
miscellaneous (expense) income, net (1.0 ) 0.5 —
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 51.0
100.7 107.7 Income tax expense (7.7 ) (18.5 ) (4.4 )
INCOME FROM
CONTINUING OPERATIONS 43.3 82.2 103.3 Income (loss) from
discontinued operations, net — (2.4 ) 44.4
NET
INCOME 43.3 79.8 147.7 Less: Net (loss) income attributable to
noncontrolling interest (0.1 ) 0.1 —
NET INCOME
ATTRIBUTABLE TO RAYONIER INC. $ 43.4 $ 79.7 $
147.7
EARNINGS PER COMMON SHARE BASIC EARNINGS PER
SHARE ATTRIBUTABLE TO RAYONIER INC. Continuing Operations $
0.34 $ 0.65 $ 0.83 Discontinued Operations — (0.02 ) 0.36
Net Income $ 0.34 $ 0.63 $ 1.19
DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO RAYONIER INC.
Continuing Operations $ 0.34 $ 0.64 $ 0.79 Discontinued Operations
— (0.02 ) 0.34 Net Income $ 0.34 $ 0.62
$ 1.13 Pro forma Net Income (a) $ 0.36 $ 0.65
$ 0.79
Weighted Average Common
Shares used for determining Basic EPS 126,344,987
126,216,451 124,479,865 Diluted EPS 128,424,493
128,949,778 130,436,888
(a) Pro forma Net Income per share is a
non-GAAP measure. See Schedule E for a reconciliation to the
nearest GAAP measure.
A
RAYONIER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
BALANCE SHEETS March 31, 2014 (unaudited) (millions
of dollars) March 31, December 31, 2014
2013
Assets Cash and cash equivalents $ 156.1 $ 199.6 Other
current assets 339.7 319.5 Timber and timberlands, net of depletion
and amortization 2,069.5 2,049.4 Property, plant and equipment
1,999.0 1,981.1 Less - accumulated depreciation (1,137.0 ) (1,120.3
) Net property, plant and equipment 862.0 860.8 Other assets 217.5
256.2 $ 3,644.8 $ 3,685.5
Liabilities and Shareholders' Equity Current maturities of
long-term debt $ 114.3 $ 112.5 Other current liabilities 183.2
163.6 Long-term debt 1,393.9 1,461.7 Non-current liabilities for
dispositions and discontinued operations 67.5 69.5 Other
non-current liabilities 126.3 122.9 Total Rayonier Inc.
shareholders’ equity 1,660.8 1,661.2 Noncontrolling interest 98.8
94.1 Total shareholders' equity 1,759.6
1,755.3 $ 3,644.8 $ 3,685.5
B
RAYONIER INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS March 31, 2014 (unaudited)
(millions of dollars) Three
Months Ended March 31, 2014 2013
Cash provided by
operating activities: Net income $ 43.3 $ 147.7 Depreciation,
depletion and amortization 46.8 36.0 Non-cash cost of real estate
sold 1.0 0.6 Tax benefit of AFMC for CBPC exchange — (18.8 ) Gain
on sale of discontinued operations, net — (42.7 ) Other items to
reconcile net income to cash provided by operating activities 11.4
4.9 Changes in working capital and other assets and liabilities
(3.2 ) 32.3 Tax payment to IRS to exchange AFMC for CBPC —
(70.3 ) 99.3 89.7
Cash (used for) provided by
investing activities: Capital expenditures (36.8 ) (32.7 )
Purchase of timberlands (10.6 ) (1.6 )
Jesup mill cellulose specialties expansion
(gross purchases of $0 and $57.7, net of purchases on
account of $0 and $21.0)
— (36.7 ) Proceeds from disposition of Wood Products business —
83.7 Change in restricted cash 45.3 10.0 Other 1.6 1.8
(0.5 ) 24.5
Cash used for financing
activities: Decrease in debt, net of issuance costs (78.2 )
(70.0 ) Dividends paid (62.5 ) (57.7 ) Proceeds from the issuance
of common shares 2.0 4.1 Excess tax (deficiencies) benefits on
stock-based compensation (1.2 ) 6.2 Repurchase of common shares
(1.8 ) (11.3 ) Other (0.7 ) — (142.4 ) (128.7 )
Effect of
exchange rate changes on cash 0.1 (0.1 )
Cash and
cash equivalents: Change in cash and cash equivalents (43.5 )
(14.6 ) Balance, beginning of year 199.6 280.6
Balance, end of period $ 156.1 $ 266.0
C
RAYONIER INC. AND SUBSIDIARIES BUSINESS SEGMENT SALES AND
OPERATING INCOME March 31, 2014 (unaudited) (millions
of dollars) Three Months Ended March 31, December
31, March 31, 2014 2013 2013
Sales Forest Resources $
104.7 $ 104.6 $ 57.1 Real Estate (a) 5.5 97.2 24.3 Performance
Fibers Cellulose specialties 206.5 249.9 246.9 Viscose/other 25.1
24.2 — Absorbent materials 10.2 6.5 37.3 Total
Performance Fibers 241.8 280.6 284.2 Other
Operations 37.4 40.4 28.2 Intersegment Eliminations (2.7 ) (2.6 )
(0.1 )
Total sales $ 386.7 $ 520.2 $ 393.7
Pro forma operating income (b) Forest
Resources $ 27.5 $ 23.8 $ 13.3 Real Estate 0.7 25.4 16.8
Performance Fibers 49.0 77.6 91.7 Other Operations 0.2 0.5 0.2
Corporate and other (b) (9.1 ) (12.5 ) (6.6 )
Pro forma
operating income (b) $ 68.3 $ 114.8 $ 115.4
(a) The three months ended December 31,
2013 include $57.3 million from the sale of our New York
timberlands.
(b) The three months ended March 31,
2014 and December 31, 2013 exclude $3.3 million and $1.6 million,
respectively, of transaction costs related to the planned
separation of the Performance Fibers business from our Forest
Resources and Real Estate businesses. Pro forma operating income is
a non-GAAP measure. See Schedule E for reconciliation.
D
RAYONIER INC. AND SUBSIDIARIES RECONCILIATION OF NON-GAAP
MEASURES March 31, 2014 (unaudited) (millions of
dollars except per share information) CASH AVAILABLE
FOR DISTRIBUTION (a): Three Months Ended March
31, March 31, 2014 2013 Cash provided by operating activities $
99.3 $ 89.7 Capital expenditures (b) (36.8 ) (32.7 ) Change in
committed cash 4.7 0.5 Excess tax (deficiencies) benefits on
stock-based compensation (1.2 ) 6.2 Other 5.6 3.0
Cash Available for Distribution $ 71.6 $ 66.7
(a) Cash Available for Distribution (CAD)
is defined as cash provided by operating activities adjusted for
capital spending, strategic divestitures, the change in committed
cash, and other items which include cash provided by discontinued
operations, 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 three months ended March 31, 2014, strategic
capital totaled $10.6 million for timberland acquisitions. For the
three months ended March 31, 2013, strategic capital totaled
$57.7 million for the Jesup mill cellulose specialties expansion
and $1.6 million for timberland acquisitions.
PRO FORMA OPERATING INCOME AND NET INCOME:
Three Months Ended March
31, 2014 December 31, 2013 March 31, 2013 $
Per
Diluted
Share
$
Per
Diluted
Share
$
Per
Diluted
Share
Operating income $ 65.0 $ 113.2 $ 115.4 Separation costs 3.3
1.6 —
Pro forma operating income $ 68.3
$ 114.8 $ 115.4
Net income
attributable to Rayonier Inc. $ 43.4 $ 0.34 $ 79.7 $ 0.62 $
147.7 $ 1.13 Separation costs, net 2.7 0.02 1.3 0.01 — —
Discontinued operations, net — — 2.4 0.02
(44.4 ) (0.34 )
Pro forma net income $ 46.1 $
0.36 $ 83.4 $ 0.65 $ 103.3 $ 0.79
E
RayonierInvestors:Ed Kiker, 904-357-9186orMedia:Russell
Schweiss, 904-357-9158
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