JACKSONVILLE--(BUSINESS WIRE)--Jan. 21, 2003--Rayonier (NYSE:RYN) today reported fourth quarter net income of $12.9 million, or 46 cents per share, compared to $15.7 million, or 56 cents per share, in third quarter 2002 and $7.9 million, or 28 cents per share, in fourth quarter 2001. Net income for full year 2002 was $54.2 million, or $1.92 per share, compared to $57.6 million, or $2.09 per share, in 2001.
Lee Nutter, Chairman, President and CEO said: "Despite difficult economic conditions, once again we had a solid year due to continued strong demand for our cellulose specialty products and contributions from the sale of higher value lands. In addition, our strong cash flow throughout the year enabled us to reduce debt by 25 percent, further strengthening our balance sheet."
Fourth quarter 2002 income from continuing operations was $12.8 million, or 46 cents per share, compared to $15.6 million, or 55 cents per share, in third quarter 2002 and $7.3 million, or 25 cents per share, in fourth quarter 2001. Income from continuing operations for full year 2002 was $54.9 million, or $1.95 per share, compared to $56.9 million, or $2.06 per share, in 2001. Fourth quarter results were below third quarter largely due to lower land sales, higher performance fibers' manufacturing costs, an increase in disposition reserves and higher interest costs, partially offset by increased U.S. timber volume and favorable tax benefits. Results were above fourth quarter 2001 primarily due to performance fibers' lower manufacturing costs and increased sales volumes, higher Northwest U.S. timber prices and favorable tax benefits, partially offset by lower land sales.
Fourth quarter 2002 included several items of note: a $2.7 million increase ($1.7 million after tax) in disposition reserves related to closed facilities in the Northwest U.S.; tax deficiency interest of $3.5 million ($2.3 million after tax) for 1996-1999 tax audits; and approximately $5 million in earnings mainly due to tax benefits related to the appreciation of the New Zealand dollar. The net impact of these items on income from continuing operations was a favorable $1 million, or 4 cents per share.
Sales of $286 million were $7 million below third quarter but $32 million above fourth quarter 2001. The decrease from third quarter was primarily due to lower absorbent materials volume and land sales, partially offset by higher timber volume. The year over year improvement was primarily due to higher cellulose specialties volume and increased Southeast U.S. timber volumes and land sales. Sales in 2002 were $1.1 billion, essentially in line with 2001.
Cash flow provided by operating activities for the year was $250 million compared to $228 million in 2001. Debt at year-end was $641 million, resulting in a debt-to-capital ratio of 47.5 percent.
EBITDA in 2002 was $308 million compared to $330 million in 2001. Free cash flow for the year was $142 million compared to $126 million in 2001. Net debt at year-end was $627 million, $67 million lower than third quarter and $215 million below year-end 2001. The net debt-to-capital ratio of 46.9 percent reflects a decline of 1.6 and 7.4 percentage points from third quarter 2002 and year-end 2001, respectively. (Each of these non-GAAP measures is defined in Exhibit A.)
Performance Fibers
Sales of $134 million were $6 million below third quarter primarily due to lower absorbent materials volume, partly offset by higher cellulose specialties prices. Operating income of $7 million was $4 million below third quarter principally due to higher raw material and maintenance costs, partially offset by higher cellulose specialties prices. Compared to fourth quarter 2001, sales and operating income increased $8 million and $4 million, respectively. Sales improved due to higher cellulose specialties volume while operating income improved due to reduced wood and chemical costs and higher cellulose specialties volume.
Timber and Land
Sales of $64 million were comparable to third quarter while operating income of $30 million was down $3 million primarily due to lower land sales and a $4 million unfavorable impact of balance sheet foreign exchange translation, partially offset by higher timber volumes. Compared to fourth quarter 2001, sales increased $9 million while operating income decreased $2 million. Sales improved mainly due to stronger Southeast U.S. timber volume and higher land sales. Operating income, however, declined largely due to a $2.3 million unfavorable impact of balance sheet foreign exchange translation.
Wood Products and Trading
Sales of $90 million and an operating loss of $5 million were comparable to third quarter levels. A $1 million favorable impact of balance sheet foreign exchange translation in this segment was offset by lower lumber prices. Compared to fourth quarter 2001, sales improved $15 million while the operating loss was unchanged, as higher MDF prices were offset by lower lumber prices.
Other Items
Corporate and other expense of $2.1 million was $1.2 million below third quarter and $3.1 million below fourth quarter 2001. Expenses were lower compared to third quarter primarily due to a $4.8 million favorable impact of balance sheet foreign exchange translation, partially offset by higher incentive compensation costs. The improvement from fourth quarter 2001 was primarily the result of a $3.4 million favorable impact of balance sheet foreign exchange translation.
Interest expense of $17 million was $3 million above third quarter and $1 million above fourth quarter 2001 primarily due to the $3.5 million tax deficiency interest as a result of recent IRS settlement proposals relating to outstanding tax audit issues. Interest expense on outstanding debt was below both prior periods.
A tax benefit for the quarter of $1.8 million resulted principally from approximately $3 million in benefits from a 10 percent appreciation of the New Zealand dollar vs. the U.S. dollar and the realization of $1 million of previously unrecognized foreign tax benefits. Previous foreign exchange related tax effects included a $1 million expense in third quarter 2002 and a benefit of $2 million in fourth quarter 2001. The unusually low effective annual tax rate of 21.3 percent compared to an estimated annual effective tax rate of 28.4 percent at the end of September 2002, and 29.4 percent for full year 2001.
Pension Liabilities
As anticipated in Rayonier's third quarter 2002 earnings release, due to the severe decline in U.S. equity markets and lower interest rates, the company recorded a year-end, non-cash, after-tax charge of $32 million to Shareholders' Equity for additional pension liabilities. The company continues to expect pension expense for 2003 to increase by approximately $4 million over the $3.4 million recorded in 2002.
Additional Items
Rayonier is undergoing a re-audit of fiscal years 2000 and 2001 as required by generally accepted auditing standards when a company has discontinued operations and its prior years' auditors have ceased operations. The company does not anticipate any material changes to prior years' financial statements due to the re-audits, which are expected to be completed shortly.
Outlook
"We expect a slow start to the year with first quarter earnings well below first quarter 2002 due to the timing both of land sales and performance fibers' shipments, weaker timber markets and increased raw material and energy costs," Nutter said. "However, continued strong demand for our high value cellulose specialty products and anticipated land sales should provide a solid earnings base for the year."
Rayonier is the world's premier supplier of high performance specialty cellulose fibers and has 2.2 million acres of timberland in the U.S. and New Zealand. Approximately 45 percent of Rayonier's sales are outside the U.S. to customers in 60 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; 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 Wednesday, January 22 at 4:15 p.m. EST 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 also be available on the site shortly after the call. 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)
DECEMBER 31, 2002 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Year Ended
--------------------------- -------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
-------- --------- -------- --------- ---------
Profitability
Sales $286.3 $293.1 $253.9 $1,117.4 $1,123.8
Operating income
before provision
for dispositions $29.7 $35.3 $24.2 $131.9 $147.9
Provision for
dispositions $(2.7) $- $- $(2.7) $-
Operating income $27.0 $35.3 $24.2 $129.2 $147.9
Income from
continuing
operations $12.8 $15.6 $7.3 $54.9 $56.9
Discontinued
operations $0.1 $0.1 $0.6 $(0.7) $0.7
Net income (after
disc. ops) $12.9 $15.7 $7.9 $54.2 $57.6
Diluted earnings
per share:
Continuing
operations $0.46 $0.55 $0.25 $1.95 $2.06
Net income
(after disc.
ops) $0.46 $0.56 $0.28 $1.92 $2.09
Operating income
as a percent of
sales 9.4% 12.0% 9.5% 11.6% 13.2%
ROE (annualized)(a) 6.5% 6.6% 2.0% 7.7% 8.2%
Capital Resources and Liquidity
Cash provided by
operating activities
of continuing
operations $48.1 $72.8 $15.3 $249.8 $227.9
EBITDA (b) $75.5 $81.3 $61.8 $307.5 $330.2
Free cash flow (c) $22.1 $41.2 $(11.4) $141.8 $126.3
Repayment of debt,
net $87.6 $40.4 $5.0 $210.2 $123.2
Debt $641.1 $728.8 $849.8 $641.1 $849.8
Net debt (d) $627.1 $693.7 $842.5 $627.1 $842.5
Net debt / capital 46.9% 48.5% 54.3% 46.9% 54.3%
(a) From continuing operations; major land sales are not
annualized.
(b) EBITDA is defined as earnings from continuing operations
before significant non-recurring items, 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 $14.0, $35.1 and $7.3, at 12/31/02,
9/30/02, and 12/31/01, 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
STATEMENTS OF CONSOLIDATED INCOME (i)
DECEMBER 31, 2002 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Year Ended
----------------------------------- ----------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
----------- ----------- ----------- ----------- ----------
Sales $286.3 $293.1 $253.9 $1,117.4 $1,123.8
----------- ----------- ----------- ----------- ----------
Costs and
expenses
Cost of
sales 251.3 248.0 221.1 949.4 943.5
Selling
and
general
expenses 12.2 8.4 11.7 42.4 36.3
Other
operating
expense
(income) (6.9) 1.4 (3.1) (6.3) (3.9)
----------- ----------- ----------- ----------- ----------
Operating income
before dispo-
sitions 29.7 35.3 24.2 131.9 147.9
Provision
for dispo-
sitions 2.7 - - 2.7 -
----------- ----------- ----------- ----------- ----------
Operating
income 27.0 35.3 24.2 129.2 147.9
Interest
expense (16.8) (14.3) (16.2) (61.4) (69.1)
Interest
and misc-
ellaneous
income
(expense),
net 0.8 0.9 0.7 2.0 1.9
----------- ----------- ----------- ----------- ----------
Income from
continuing
operations
before income
taxes 11.0 21.9 8.7 69.8 80.7
Income tax
benefit
(expense) 1.8 (6.3) (1.4) (14.9) (23.8)
----------- ----------- ----------- ----------- ----------
Income from
continuing
operations $12.8 $15.6 $7.3 $54.9 $56.9
Discontinued
operations,
net 0.1 0.1 0.6 (0.7) 0.7
----------- ----------- ----------- ----------- ----------
Net income
(after
disc. ops) $12.9 $15.7 $7.9 $54.2 $57.6
=========== =========== =========== =========== ==========
Net income
per Common
Share
Basic EPS
From conti-
nuing oper-
ations $0.46 $0.55 $0.26 $1.98 $2.09
=========== =========== =========== =========== ==========
Net income
(after disc.
ops) $0.47 $0.56 $0.29 $1.96 $2.12
=========== =========== =========== =========== ==========
Diluted EPS
From conti-
nuing oper-
ations $0.46 $0.55 $0.25 $1.95 $2.06
=========== =========== =========== =========== ==========
Net
income
(after
disc.
ops) $0.46 $0.56 $0.28 $1.92 $2.09
=========== =========== =========== =========== ==========
Weighted average Common
Shares used for determining
Basic EPS 27,717,458 27,753,428 27,282,588 27,681,785 27,210,802
=========== =========== =========== =========== ==========
Diluted EPS 28,076,363 28,201,286 27,669,616 28,157,576 27,601,898
=========== =========== =========== =========== ==========
(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)
DECEMBER 31, 2002 (unaudited)
(millions of dollars)
Three Months Ended Year Ended
------------------------------ -------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
--------- ---------- --------- --------- ---------
Sales
Performance Fibers
Cellulose
specialties $100.3 $97.4 $86.6 $374.9 $368.6
Absorbent
materials 33.3 41.7 38.9 151.2 178.4
--------- ---------- --------- --------- ---------
Total Performance
Fibers 133.6 139.1 125.5 526.1 547.0
--------- ---------- --------- --------- ---------
Timber and Land
Timber 48.3 35.8 41.7 171.8 188.6
Land 15.3 28.3 13.0 75.3 83.9
--------- ---------- --------- --------- ---------
Total Timber
and Land 63.6 64.1 54.7 247.1 272.5
--------- ---------- --------- --------- ---------
Wood Products
and Trading 89.9 90.8 74.8 353.6 316.6
Intersegment
eliminations (0.8) (0.9) (1.1) (9.4) (12.3)
--------- ---------- --------- --------- ---------
Total sales $286.3 $293.1 $253.9 $1,117.4 $1,123.8
========= ========== ========= ========= =========
Operating income (loss)
Performance
Fibers $6.5 $10.8 $2.6 $34.6 $35.1
Timber and Land
Timber 20.6 14.2 20.9 76.4 93.7
Land 9.4 18.6 10.8 47.3 51.6
--------- ---------- --------- --------- ---------
Total Timber
and Land 30.0 32.8 31.7 123.7 145.3
Wood Products
and Trading (4.7) (5.0) (4.9) (12.1) (13.5)
Corporate and
other (2.1) (3.3) (5.2) (14.3) (19.0)
--------- ---------- --------- --------- ---------
Operating income
before dispo-
sitions 29.7 35.3 24.2 131.9 147.9
Provision for
dispositions (2.7) - - (2.7) -
--------- ---------- --------- --------- ---------
Total
operating
income $27.0 $35.3 $24.2 $129.2 $147.9
========= ========== ========= ========= =========
(i) Prior period amounts were reclassified to reflect the New Zealand
East Coast operations as discontinued operations.
-C-
RAYONIER
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (i)
DECEMBER 31, 2002 (unaudited)
(millions of dollars)
Year Ended
-------------------
December December
31, 31,
2002 2001
--------- ---------
Continuing operations
Income from continuing operations $54.9 $56.9
Non-cash items included in income 184.1 192.2
Changes in working capital and other assets and
liabilities 10.8 (21.2)
--------- ---------
Cash provided by operating activities 249.8 227.9
--------- ---------
Capital expenditures, net of sales and
retirements (76.6) (74.3)
--------- ---------
Repayment of debt, net (210.2) (123.2)
Dividends paid, share repurchases, shares issued (28.7) (31.9)
--------- ---------
Cash used for financing activities (238.9) (155.1)
--------- ---------
Cash provided by discontinued operations 70.5 5.8
--------- ---------
Cash and equivalents
Increase in cash and cash equivalents 4.8 4.3
Balance, beginning of year 14.1 9.8
--------- ---------
Balance, end of year $18.9 $14.1
========= =========
(i) Prior period amounts were reclassified to reflect the New Zealand
East Coast operations as discontinued operations.
-D-
RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA (i)
DECEMBER 31, 2002 (unaudited)
(millions of dollars)
Three Months Ended Year Ended
------------------------------ -------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
--------- ---------- --------- --------- ---------
Geographical Data (Non-U.S.)
Sales
New Zealand $29.2 $20.2 $21.0 $86.7 $71.9
Other 7.9 8.5 9.7 41.2 39.9
--------- ---------- --------- --------- ---------
Total $37.1 $28.7 $30.7 $127.9 $111.8
========= ========== ========= ========= =========
Operating income (loss)
New Zealand $5.4 $2.0 $1.8 $9.3 $3.2
Other 1.1 0.1 1.3 0.2 (0.3)
--------- ---------- --------- --------- ---------
Total $6.5 $2.1 $3.1 $9.5 $2.9
========= ========== ========= ========= =========
Timber and Land
Sales
Northwest U.S. $21.2 $9.7 $18.5 $69.5 $68.0
Southeast U.S. 31.9 48.1 28.2 148.6 180.5
New Zealand 10.5 6.3 8.0 29.0 24.0
--------- ---------- --------- --------- ---------
Total $63.6 $64.1 $54.7 $247.1 $272.5
========= ========== ========= ========= =========
Operating income (loss)
Northwest U.S. $14.5 $4.8 $13.0 $47.7 $48.5
Southeast U.S. 14.0 23.7 17.0 70.9 89.3
New Zealand 1.5 4.3 1.7 5.1 7.5
--------- ---------- --------- --------- ---------
Total $30.0 $32.8 $31.7 $123.7 $145.3
========= ========== ========= ========= =========
EBITDA
Performance Fibers $27.7 $28.7 $22.5 $110.0 $111.5
Timber and Land 51.7 56.8 45.3 209.6 236.8
Wood Products and
Trading 0.3 (0.9) (1.2) 4.4 1.1
Corporate and other (4.2) (3.3) (4.8) (16.5) (19.2)
--------- ---------- --------- --------- ---------
Total $75.5 $81.3 $61.8 $307.5 $330.2
========= ========== ========= ========= =========
(i) Prior period amounts were reclassified to reflect the New Zealand
East Coast operations as discontinued operations.
-E-
RAYONIER
SELECTED OPERATING INFORMATION (i)
DECEMBER 31, 2002 (unaudited)
Three Months Ended Year Ended
------------------------------ -------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
--------- ---------- --------- --------- ---------
Performance Fibers
Sales Volume
Cellulose specialties,
in thousands of
metric tons 116 114 100 435 423
Absorbent materials,
in thousands of
metric tons 60 75 68 271 284
Production as a
percent of
capacity 99.9% 98.3% 95.9% 98.6% 97.1%
Timber and Land
Sales volume - Timber
Northwest U.S.,
in millions of
board feet 66 36 66 252 251
Southeast U.S.,
in thousands
of short
green tons 1,284 1,165 1,025 4,881 5,395
New Zealand,
in thousands
of metric
tons (ii) 273 243 242 805 793
Timber sales volume -
Intercompany
Northwest U.S.,
in millions of
board feet 2 2 4 38 48
Southeast U.S.,
in thousands of
short green tons 16 13 11 37 43
New Zealand,
in thousands of
metric tons (ii) 21 16 12 60 46
Acres sold 6,704 14,657 6,466 44,256 67,417
Wood Products and Trading
Lumber sales volume,
in millions of
board feet 73 87 80 325 279
Medium-density
fiberboard
sales volume,
in thousands of
cubic meters 46 40 48 163 161
Log trading sales
volume
North America,
in millions of
board feet 32 32 23 123 151
New Zealand,
in thousands of
metric tons 147 91 55 398 272
Other,
in thousands of
cubic meters 48 46 68 298 331
(i) Prior period amounts were reclassified to reflect the New Zealand
East Coast operations as discontinued operations.
(ii)2001 volume restated from cubic meters to metric tons
-F-
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES (i)
DECEMBER 31, 2002 (unaudited)
(millions of dollars)
Three Months Ended Year Ended
----------------------------- -------------------
December September December December December
31, 30, 31, 31, 31,
2002 2002 2001 2002 2001
--------- --------- --------- --------- ---------
EBITDA
Cash provided by
operating activities
of continuing
operations $48.1 $72.8 $15.3 $249.8 $227.9
Income tax
(benefit) expense (1.8) 6.3 1.4 14.9 23.8
Interest expense 16.8 14.3 16.2 61.4 69.1
Balance sheet changes 12.4 (12.1) 28.9 (18.6) 9.4
--------- --------- --------- --------- --------
EBITDA $75.5 $81.3 $61.8 $307.5 $330.2
========= ========= ========= ========= ========
Free Cash Flow
Cash provided by
operating activities
of continuing
operations $48.1 $72.8 $15.3 $249.8 $227.9
Custodial capital
spending, net (16.0) (21.5) (15.4) (65.6) (60.9)
Dividends at prior
year level (10.0) (10.0) (9.8) (39.9) (39.2)
Tax benefit on
exercise of
stock options - (0.1) (1.5) (2.5) (1.5)
--------- --------- --------- --------- --------
Free Cash Flow $22.1 $41.2 $(11.4) $141.8 $126.3
========= ========= ========= ========= ========
Net Debt
Debt $641.1 $728.8 $849.8 $641.1 $849.8
Cash intended to
pay-down debt (14.0) (35.1) (7.3) (14.0) (7.3)
--------- --------- --------- --------- --------
Net Debt $627.1 $693.7 $842.5 $627.1 $842.5
========= ========= ========= ========= ========
(i) Prior period amounts were reclassified to reflect the New Zealand
East Coast operations as discontinued operations.
-G-
CONTACT:
Rayonier Inc., Jacksonville
Media Contact:
Jay Fredericksen, 904/357-9106
or
Investor Contact:
Parag Bhansali, 904/357-9155
