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Rayonier Reports First Quarter 2003 Earnings

April 22, 2003

JACKSONVILLE, Fla., Apr 22, 2003 (BUSINESS WIRE) -- Rayonier (NYSE:RYN) today reported first quarter net income of $6.1 million, or 22 cents per share, compared to $12.9 million, or 46 cents per share, in fourth quarter 2002 and $9.4 million, or 33 cents per share, in first quarter 2002.

Lee Nutter, Chairman, President and CEO said: "Although first quarter results were negatively impacted by unusually high energy and hardwood costs in our Performance Fibers business, we are seeing a significant increase in demand for our cellulose specialty products and improving prices for absorbent materials as worldwide inventories tighten. While timber markets remain soft, our land sales program continues to generate strong results."

First quarter income was below fourth quarter primarily due to the impact of limited hardwood fiber availability that constrained production and sales of high value cellulose specialties, higher energy costs and lower absorbent materials prices. These variances were partially offset by lower interest expense and the absence of fourth quarter's $2.7 million increase in disposition reserves. Results were below first quarter 2002 largely due to higher performance fibers' hardwood and energy costs and lower Southeast U.S. timber and lumber prices, somewhat offset by reduced interest expense.

Sales of $266 million were $20 million below fourth quarter primarily due to unfavorable performance fibers' sales mix, lower absorbent materials prices and reduced trading activity partially offset by higher cellulose specialties prices. Sales were comparable to first quarter 2002.

Cash provided by operating activities decreased to $39 million from $49 million in the fourth quarter and $62 million in first quarter 2002, primarily due to higher working capital requirements, a $9.4 million pension fund contribution and lower operating earnings. These items also caused free cash flow to decline to $13 million compared to $23 million in the fourth quarter and $36 million in first quarter 2002. EBITDA was $65 million, a decrease of $12 million and $9 million from fourth and first quarter 2002, respectively, mainly due to lower operating results. (EBITDA and free cash flow are non-GAAP measures defined in Exhibit A.)

Debt at quarter-end of $628 million was $26 million and $202 million below year-end 2002 and first quarter 2002, respectively. The debt-to-capital ratio of 47.0 percent reflects a decline of 0.9 and 6.5 percentage points from year-end 2002 and first quarter 2002, respectively.

Performance Fibers

Sales of $129 million were $5.1 million below fourth quarter primarily due to lower cellulose specialties volume and absorbent materials prices, partially offset by higher cellulose specialties prices. Cellulose specialties volume declined from a seasonally strong fourth quarter due to weather related limited hardwood supply and an extended maintenance shutdown at the Fernandina Mill. Lower sales, coupled with higher manufacturing costs, resulted in an operating loss of $1.2 million compared to fourth quarter operating income of $6.7 million. Compared to first quarter 2002, sales were essentially unchanged while operating income decreased $8 million, primarily due to increased hardwood and energy costs, and lower cellulose specialties volume and absorbent materials prices, partially offset by higher cellulose specialties prices.

Timber and Land

Sales of $61 million and operating income of $26 million were $2.4 million and $4.2 million below fourth quarter, respectively. Sales declined mainly due to reduced U.S. timber prices and seasonally lower New Zealand volume, partially offset by higher Northwest U.S. volume and New Zealand timber prices. Operating income declined primarily due to a seasonal reduction in hunting lease income. Compared to first quarter 2002, sales were unchanged, reflecting lower land sales and Southeast U.S. timber prices, essentially offset by increased U.S. timber volume and New Zealand timber prices. Operating income compared to first quarter 2002 declined $3.5 million, mainly due to lower U.S. timber prices and unfavorable balance sheet foreign exchange translation, partially offset by higher U.S. timber volume and New Zealand timber prices.

Wood Products

Sales of $30 million and an operating loss of $3.2 million were comparable to fourth quarter levels. Higher lumber prices were offset by increased manufacturing costs at MDF mainly due to the appreciation of the New Zealand dollar. Compared to first quarter 2002, sales declined $4 million while the operating loss increased $2.4 million. Sales declined primarily due to lower lumber prices while operating income was also impacted by the higher MDF manufacturing costs.

Other Operations

Wood products' trading revenue of $47 million declined $13 million compared to fourth quarter while operating results improved $1.3 million to break-even, mainly due to improved margins. Compared to first quarter 2002, sales were essentially unchanged while operating results improved $1.6 million due to favorable margins.

Other Items

Corporate expenses of $5 million were $1.8 million below fourth quarter primarily due to a re-audit of 2001 and 2000 financial statements and a fourth quarter contribution to the Rayonier Foundation. Corporate expenses were $1.4 million below first quarter 2002 primarily due to lower incentive compensation expenses.

Intersegment eliminations and other income of $2.8 million was $2 million below fourth quarter largely due to reduced intercompany trading activity and the unfavorable impact of balance sheet foreign exchange translation. A favorable variance compared to first quarter 2002 of $2.4 million was primarily due to positive balance sheet foreign exchange translation and intersegment eliminations.

Interest expense of $12 million was $4.7 million and $3.1 million below fourth quarter and first quarter 2002, respectively. The favorable variance compared to fourth quarter was due to year-end tax deficiency interest charges and lower debt, while the variance compared to first quarter 2002 was due to reduced debt.

Interest and miscellaneous income of $1.1 million was slightly higher than both fourth and first quarter 2002 primarily due to $0.8 million of interest income relating to a pre-1994 tax audit settlement.

An income tax provision of $1.8 million compared unfavorably to a benefit of $1.8 million in the fourth quarter resulting from $4 million in tax benefits associated with a 10 percent appreciation in the New Zealand dollar and previously recognized foreign losses. The effective tax rate of 22.3% was lower than the first quarter 2002 rate of 28.4% mainly due to favorable tax audit negotiations.

Outlook

"Second quarter results are expected to be significantly better than first quarter primarily due to the April 14 closing of the previously announced $40 million (80 cents per share) Matanzas Marsh land sale," Nutter said. "But we also expect stronger results from Performance Fibers as product mix, volume and absorbent materials prices improve."

Rayonier has more than 2 million acres of timber and land in the U.S. and New Zealand and is the world's premier supplier of high performance specialty cellulose fibers. Approximately 40 percent of Rayonier's sales are outside the U.S. to customers in more than 50 countries.

Comments about anticipated demand, expenses and earnings are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends and world events; interest rate and currency movements; changes in capital markets and the resulting impact on returns on the company's pension plan assets and on certain stock-based incentive plans; fluctuations in demand for cellulose specialties, absorbent materials, timber, and wood products; adverse weather conditions; changes in production costs for wood products and performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of land sale transactions; and implementation or revision of governmental policies and regulations affecting the environment, import and export controls and taxes. For additional factors that could impact future results, please see the company's most recent Form 10-K on file with the Securities and Exchange Commission.

A conference call will be held on Tuesday, April 22 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto http://www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will be available on the site shortly after the call where it will be archived for one month. Also, investors may access the "listen only" conference call by dialing 913-981-5584.

For further information, visit the company's web site at http://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.

                              RAYONIER
                        FINANCIAL  HIGHLIGHTS (i)
                      MARCH 31, 2003  (unaudited)

          (millions of dollars, except per share information)


                                                 Three Months Ended
                                              ------------------------
                                               March  December  March
                                                 31,      31,     31,
                                                2003     2002    2002
                                              ------- -------- -------
 Profitability
   Sales                                      $265.9   $286.3  $268.7
   Operating income                            $19.2    $27.3   $27.7
   Income from continuing operations            $6.1    $12.8    $9.0
   Discontinued operations                        $-     $0.1    $0.4
   Net income (after disc. ops)                 $6.1    $12.9    $9.4
   Diluted earnings per share:
      Continuing operations                    $0.22    $0.46   $0.32
      Net income (after disc. ops)             $0.22    $0.46   $0.33
   Operating income
     as a percent of sales                       7.2%     9.5%   10.3%
   ROE (annualized) (a)                          2.4%     6.5%    3.3%

 Capital Resources and Liquidity
   Cash provided by operating activities       $39.4    $48.9   $61.7
   EBITDA (b)                                  $64.8    $76.5   $73.9
   Free cash flow (c)                          $13.4    $22.9   $35.6
   Repayment of debt, net                      $25.8    $88.3   $35.8
   Debt                                       $627.5   $653.1  $829.1
   Net debt (d)                               $627.5   $639.1  $808.6
   Net debt / capital                           47.0%    47.4%   52.9%


 (a) From continuing operations; major land sales are not annualized.

 (b) EBITDA is defined as earnings from continuing operations before
     interest expense, income taxes, depreciation, depletion,
     amortization and the non-cash cost of land sales. EBITDA is a
     non-GAAP measure of gross cash generating capacity of the
     company.

 (c) Free Cash Flow is defined as cash provided by operating
     activities of continuing operations less net custodial
     capital spending, dividends at prior year level and the tax
     benefit on the exercise of stock options.  Free cash
     flow is a non-GAAP measure of discretionary cash available to
     shareholders or to grow earnings.

 (d) Net debt is defined as debt less cash invested and intended for
     debt reduction of $0, $14.0 and $20.5, at 3/31/03, 12/31/02, and
     3/31/02, respectively.  Net debt is a non-GAAP measure of
     anticipated debt levels.


 (i) Prior period amounts were reclassified to reflect the New Zealand
     East Coast operations as discontinued operations.

                                  -A-


                               RAYONIER
          CONDENSED STATEMENTS  OF  CONSOLIDATED  INCOME (i)
                      MARCH 31, 2003  (unaudited)

          (millions of dollars, except per share information)


                                             Three Months Ended
                                     ---------------------------------
                                          March    December     March
                                            31,        31,        31,
                                           2003       2002       2002
                                     ---------------------------------

 Sales                                   $265.9     $286.3     $268.7
                                     ---------------------------------
 Costs and expenses
  Cost of sales                           238.3      251.0      229.0
  Selling and general expenses             10.0       12.2       11.4
  Other operating expense (income)         (1.6)      (6.9)       0.6
  Provision for dispositions                  -        2.7          -
                                     ---------------------------------
 Operating income                          19.2       27.3       27.7

 Interest expense                         (12.4)     (17.1)     (15.5)
 Interest and miscellaneous
    income (expense), net                   1.1        0.8        0.4
                                     ---------------------------------
 Income from continuing operations
    before income taxes                     7.9       11.0       12.6
 Income tax (expense) benefit              (1.8)       1.8       (3.6)
                                     ---------------------------------
 Income from continuing operations         $6.1      $12.8       $9.0
 Discontinued operations, net                 -        0.1        0.4
                                     ---------------------------------
 Net income                                $6.1      $12.9       $9.4
                                     =================================

 Net income per Common Share
   Basic EPS
    From continuing operations            $0.22      $0.46      $0.33
                                     =================================
    Net income (after disc. ops)          $0.22      $0.47      $0.34
                                     =================================
   Diluted EPS
    From continuing operations            $0.22      $0.46      $0.32
                                     =================================
    Net income (after disc. ops)          $0.22      $0.46      $0.33
                                     =================================

 Weighted average Common
 Shares used for determining
   Basic EPS                         27,780,859 27,717,458 27,526,125
                                     =================================
   Diluted EPS                       28,135,659 28,076,363 28,085,833
                                     =================================

 (i) Prior period amounts were reclassified to reflect the New
     Zealand East Coast operations as discontinued operations.

                                  -B-


                               RAYONIER
          BUSINESS  SEGMENT  SALES  AND  OPERATING  INCOME (i)
                      MARCH 31, 2003  (unaudited)

                         (millions of dollars)


                                                  Three Months Ended
                                               -----------------------
                                                March  December March
                                                  31,     31,     31,
                                                 2003     2002   2002
                                               -----------------------
Sales
 Performance Fibers
  Cellulose specialties                         $87.1   $100.3  $90.6
  Absorbent materials                            41.4     33.3   38.7
                                               -----------------------
    Total Performance Fibers                    128.5    133.6  129.3
                                               -----------------------

 Timber and Land
  Timber                                         45.8     48.3   42.3
  Land                                           15.4     15.3   19.1
                                               -----------------------
    Total Timber and Land                        61.2     63.6   61.4
                                               -----------------------

 Wood Products                                   30.0     30.6   34.0

 Other Operations                                46.5     59.3   47.6

 Intersegment eliminations                       (0.3)    (0.8)  (3.6)
                                               -----------------------

    Total sales                                $265.9   $286.3 $268.7
                                               =======================

 Operating income  (loss)
  Performance Fibers                            $(1.2)    $6.7   $6.8

  Timber and Land
   Timber                                        17.0     20.6   20.7
   Land                                           8.8      9.4    8.6
                                               -----------------------
      Total Timber and Land                      25.8     30.0   29.3

 Wood Products                                   (3.2)    (3.4)  (0.8)

 Other Operations                                   -     (1.3)  (1.6)

 Provision for dispositions                         -     (2.7)     -

 Corporate                                       (5.0)    (6.8)  (6.4)

 Intersegment eliminations and other
    (Including Corporate FX)                      2.8      4.8    0.4
                                               -----------------------

      Total operating income                    $19.2    $27.3  $27.7
                                               =======================



 (i) Prior period amounts were reclassified to reflect the New Zealand
     East Coast operations as discontinued operations.

                                  -C-


                               RAYONIER
CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS OF CASH FLOWS (i)
                      MARCH 31, 2003  (unaudited)
                         (millions of dollars)


 CONDENSED CONSOLIDATED BALANCE SHEET
                                                      March   December
                                                        31,      31,
                                                        2003     2002
                                                    ------------------
 Assets
 Current assets                                       $215.5   $228.8
 Timber, timberlands and logging roads,
    net of depletion and amortization                1,009.1  1,023.2
 Property, plant and equipment                       1,394.8  1,387.4
 Less accumulated depreciation                         865.8    846.3
                                                    ------------------
                                                       529.0    541.1
                                                    ------------------
 Other assets                                           93.3     94.1
                                                    ------------------
                                                    $1,846.9 $1,887.2
                                                    ==================
 Liabilities and Shareholders' Equity
 Current liabilities                                  $163.3   $171.8
 Deferred income taxes                                 121.3    110.2
 Long-term debt                                        618.9    649.6
 Non-current reserves for dispositions and
  discontinued operations                              146.0    146.3
 Other non-current liabilities                          90.8     99.6
 Shareholders' equity                                  706.6    709.7
                                                    ------------------
                                                    $1,846.9 $1,887.2
                                                    ==================

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                       Three Months
                                                      Ended March 31,
                                                    ------------------
                                                        2003     2002
                                                    ------------------
 Cash provided by operating activities:
    Income from continuing operations                   $6.1     $9.0
    Depreciation, depletion, amortization and non-
     cash cost of land sales                            44.5     45.9
    Other non-cash items included in income              1.3      0.3
    Changes in working capital and other assets and
     liabilities                                       (12.5)     6.5
                                                    ------------------
                                                        39.4     61.7
                                                    ------------------
 Cash used for investing activities:
                                                    ------------------
    Capital expenditures, net of sales and
     retirements                                       (18.2)   (16.0)
                                                    ------------------

 Cash used for financing activities:
    Repayment of debt, net                             (25.8)   (35.8)
    Dividends paid, shares issued, net                  (9.9)    (1.5)
                                                    ------------------
                                                       (35.7)   (37.3)
                                                    ------------------
 Cash provided by discontinued operations                  -      0.5
                                                    ------------------
 Cash and cash equivalents:
    (Decrease) increase in cash and cash equivalents   (14.5)     8.9
    Balance, beginning of year                          18.9     14.1
                                                    ------------------
    Balance, end of period                              $4.4    $23.0
                                                    ==================



(i) Prior period amounts were reclassified to reflect the New Zealand
    East Coast operations as discontinued operations.

                                  -D-


                               RAYONIER
              SELECTED  SUPPLEMENTAL FINANCIAL DATA (i)
                      MARCH 31, 2003  (unaudited)

                         (millions of dollars)


                                                Three Months Ended
                                              ---------------------
                                               March December  March
                                                31,     31,     31,
                                               2003     2002   2002
                                              ----------------------

 Geographical Data (Non-U.S.)
   Sales
    New Zealand                               $18.5    $29.2   $19.8
    Other                                       4.6      7.9    13.3
                                              ----------------------
       Total                                  $23.1    $37.1   $33.1
                                              ======================

   Operating income  (loss)
    New Zealand                                $1.5     $5.4   $(0.6)
    Other                                      (0.4)     1.1    (1.4)
                                              ----------------------
       Total                                   $1.1     $6.5   $(2.0)
                                              ======================

 Timber
   Sales
    Northwest U.S.                            $20.3    $17.8   $17.3
    Southeast U.S.                             21.6     21.6    22.7
    New Zealand                                 3.9      8.9     2.3
                                              ----------------------
       Total                                  $45.8    $48.3   $42.3
                                              ======================

 Operating income  (loss)
    Northwest U.S.                            $12.6    $12.1   $12.9
    Southeast U.S.                              4.5      7.6     7.8
    New Zealand                                (0.1)     0.9       -
                                              ----------------------
       Total                                  $17.0    $20.6   $20.7
                                              ======================

 EBITDA
    Performance Fibers                        $17.5    $28.7   $25.1
    Timber and Land                            48.5     51.7    53.6
    Wood Products                              (0.3)       -     2.3
    Other Operations                            0.2      0.2    (1.1)
    Corporate and other                        (1.1)    (4.1)   (6.0)
                                              ----------------------
      Total                                   $64.8    $76.5   $73.9
                                              ======================



(i) Prior period amounts were reclassified to reflect the New Zealand
    East Coast operations as discontinued operations.


                                  -E-

                               RAYONIER
                SELECTED  OPERATING  INFORMATION (i)
                     MARCH 31, 2003  (unaudited)


                                                  Three Months Ended
                                               -----------------------
                                                March  December March
                                                  31,     31,     31,
                                                 2003     2002   2002
                                               -----------------------
 Performance Fibers
 Sales Volume
    Cellulose specialties,
       in thousands of metric tons                 99      116    104
    Absorbent materials,
       in thousands of metric tons                 78       60     70
Production as a percent of capacity              97.7%    99.9%  96.3%

 Timber and Land
 Sales volume - Timber
    Northwest U.S.,
       in millions of board feet                   77       66     70
    Southeast U.S.,
       in thousands of short green tons         1,366    1,284  1,241
    New Zealand,
       in thousands of metric tons                111      273    121

 Timber sales volume -
 Intercompany
    Northwest U.S.,
       in millions of board feet                    -        2     15
    Southeast U.S.,
       in thousands of short green tons             3       16      5
    New Zealand,
       in thousands of metric tons                 19       21     13

 Acres sold                                    19,708    6,704 18,900

 Wood Products
 Lumber sales volume,
    in millions of board feet                      71       73     79
 Medium-density fiberboard
    sales volume,
    in thousands of cubic meters                   41       46     36



 (i) Prior period amounts were reclassified to reflect the New Zealand
     East Coast operations as discontinued operations.

                                  -F-


                               RAYONIER
               RECONCILIATION OF NON-GAAP MEASURES (i)
                      MARCH 31, 2003  (unaudited)

                         (millions of dollars)

                                               Three Months Ended
                                            -----------------------
                                             March  December  March
                                               31,     31,      31,
                                              2003     2002    2002
                                            -----------------------

 EBITDA
   Cash provided by operating
    activities of continuing
    operations                               $39.4    $48.9   $61.7
   Income tax expense (benefit)                1.8     (1.8)    3.6
   Interest expense                           12.4     17.1    15.5
   Working capital increases
    (decreases)                                4.0      4.1    (3.0)
   Other balance sheet
    changes                                    7.2      8.2    (3.9)
                                            ------------------------
   EBITDA                                    $64.8    $76.5   $73.9
                                            ========================


 Free cash flow
   Cash provided by operating
    activities of continuing
    operations                               $39.4    $48.9   $61.7
   Custodial capital spending, net           (16.0)   (16.0)  (14.9)
   Dividends at prior year level             (10.0)   (10.0)   (9.9)
   Tax benefit on exercise of
    stock options                                -        -    (1.3)
                                            ------------------------
   Free cash flow                            $13.4    $22.9   $35.6
                                            ========================


 Net Debt
   Debt                                     $627.5   $653.1  $829.1
   Cash intended to pay down debt                -    (14.0)  (20.5)
                                            ------------------------
   Net Debt                                 $627.5   $639.1  $808.6
                                            ========================



 (i) Prior period amounts were reclassified to reflect the New Zealand
     East Coast operations as discontinued operations.

Rayonier, Jacksonville
Media:
Jay Fredericksen, 904/357-9106
or
Investors:
Parag Bhansali, 904/357-9155

Contact

Mark McHugh

Senior Vice President and Chief Financial Officer

Phone: (904) 357-9100

investorrelations@rayonier.com

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