JACKSONVILLE, Fla.--(BUSINESS WIRE)--July 28, 2004--Rayonier (NYSE:RYN) today reported second quarter net income of $43.7 million, or 86 cents per share, compared to $75.5 million, or $1.49 per share, in first quarter 2004 and $31.7 million, or 74 cents per share, in second quarter 2003. First quarter 2004 results were $25.9 million, or 51 cents per share, excluding a net tax benefit of 98 cents per share relating to the company's January 1 conversion to a Real Estate Investment Trust (REIT).
Second quarter earnings were significantly above first quarter earnings (excluding the net tax benefit) in all three business segments -- Timber and Land, Performance Fibers, and Wood Products. Earnings were also above second quarter 2003 due to strong Performance Fibers and Wood Products results, offset somewhat by slightly lower Timber and Land earnings due to a large land sale last year. REIT conversion costs had no material impact on second quarter 2004 or 2003 results, but did affect first quarter 2004 by 7 cents per share.
Lee Nutter, Chairman, President and CEO said: "We had an excellent quarter as strong housing markets and the growing economy led to increased demand for all of our products. In addition, costs at our Performance Fibers segment continued to be significantly below the elevated levels experienced during most of 2003. Cash flow for the first half of 2004 was very strong. We ended the quarter with $66 million in cash and cash equivalents after paying $55 million in dividends during the first half of the year, and had an additional $30 million in restricted cash earmarked for the pending 83,000-acre Alabama timberland acquisition."
Cash provided by operating activities of $158 million in the first six months was $49 million above first half 2003. Cash Available for Distribution (CAD) for the same period was $121 million, $45 million above 2003. Cash flow was stronger primarily due to significantly improved operating earnings but also due to a $7 million income tax deferral on, and the monetization of, a land sales installment note. (Cash Available for Distribution is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.)
Sales of $337 million were $43 million above first quarter and $41 million above second quarter 2003.
Debt at quarter-end of $616 million was $3 million below both first quarter 2004 and year-end 2003. The debt-to-capital ratio declined to 44.1 percent from 44.6 percent and 46.5 percent at the end of first quarter 2004 and year-end 2003, respectively. The reduction from year-end 2003 was due to the positive impact on shareholders' equity of the aforementioned first quarter 2004 net tax benefit.
The company did not record in the second quarter 15 to 17 cents per share in tax benefits associated with like-kind exchange (LKE) transactions due to some uncertainty over the timing for closing the acquisition component of the transactions.
Timber and Land
Sales of $90 million and operating income of $55 million were $3 million and $9 million above first quarter, respectively. Compared to second quarter 2003, sales and operating income declined $2 million and $4 million, respectively. The improvement over first quarter was primarily due to higher land sales partially offset by lower U.S. timber sales volume. Compared to second quarter 2003, lower land sales were partly offset by stronger U.S. timber prices. Last year's results reflected an additional $16 million in operating income from major land sales.
Performance Fibers
Sales of $152 million were $20 million above first quarter primarily due to higher volumes and stronger absorbent materials prices. Operating income of $18 million improved $12 million over first quarter due to reduced manufacturing costs, increased volumes and higher absorbent material prices. Costs improved $9 million primarily due to lower hardwood, chemical and energy expenses and a $1.5 million reversal of a maintenance accrual. Compared to second quarter 2003, sales and operating income increased by $20 million and $16 million, respectively, primarily due to higher cellulose specialties prices, while operating income also benefited from lower manufacturing costs.
Wood Products
Sales of $45 million and operating income of $5 million were $7 million and $5 million above first quarter, and $13 million and $7 million above second quarter 2003, respectively, due to higher lumber prices and volume.
Other Operations
Sales of $50 million increased $13 million and $9 million from first quarter 2004 and second quarter 2003, respectively, while operating income of $2 million was unchanged from first quarter but $3 million above second quarter 2003. Operating income compared to first quarter reflected higher coal revenue offset by lower log and wood products trading margins, while the improvement over second quarter 2003 was due to increased coal revenue and higher trading margins.
Other Items
Corporate expenses of $9.7 million were $3.5 million below first quarter primarily due to lower REIT conversion costs partly offset by higher stock price-based incentive compensation expense. Compared to second quarter 2003, corporate expenses increased $1.8 million primarily due to higher stock price-based incentive compensation expense and legal costs.
Interest expense of $12.1 million was $1.0 million above first quarter primarily due to a greater number of interest-accruing days in the second quarter. Interest expense was essentially flat compared to second quarter 2003.
Through June 30, the annual effective tax rate, before discrete items, was 25.1 percent compared to 24.7 percent for the comparable period in 2003 (see Schedule I). While the tax benefits associated with the company's REIT structure continue to be significant, the effective tax rate was above the first quarter rate of 19.4 percent primarily due to a higher proportion of income generated in the company's taxable REIT subsidiaries and additional foreign taxes on intercompany debt caused by a 10 percent decline in the New Zealand dollar exchange rate. This exchange rate change also reduced the tax liability on un-repatriated foreign earnings which was recorded as a discrete second quarter item.
The company said it expects the current portion of cash taxes due for 2004 results to be 13 to 15 percent of pre-tax income, declining to 3 to 5 percent assuming completion of the LKE transactions. Also, the tax characteristics of the 2004 dividend are forecast to be 50 to 60 percent capital gains income and 40 to 50 percent return of capital.
Outlook
Third quarter 2004 earnings, excluding the impact of any like-kind exchange related tax benefits, are expected to be somewhat above pro forma third quarter 2003 (post E&P dividend), but below second quarter 2004 primarily due to reduced land sales and seasonally lower Northwest U.S. timber sales volumes. If the previously announced Alabama timberland acquisition closes in the third quarter, LKE-related tax benefits of approximately $11 million or 22 cents per share would be realized, with $10 million or 20 cents per share impacting third quarter results.
Nutter said: "First half 2004 markets improved in all of our product areas, especially for higher value cellulose specialties and absorbent materials products, and higher-and-better use properties. Although lumber prices are retreating somewhat, we continue to feel the positive impact of demand for housing and remodeling in our timber and wood products businesses. Cash flow for the year is expected to be very strong, enabling us to finance the anticipated $89 million timberland acquisition with internally generated funds and increase our 2004 dividend to $111 million."
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 the company's sales are outside the U.S. to customers in more than 50 countries.
Reported results are preliminary and not final until filing of the second quarter 2004 Form 10-Q with the Securities and Exchange Commission. Comments about anticipated demand, pricing, volumes, expenses, earnings, dividends, timberland acquisitions and taxes 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; fluctuations in demand for cellulose specialties, absorbent materials, timber, wood products or real estate; adverse weather conditions; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of land sale transactions; the Company's ability to satisfy complex rules in order to qualify as a REIT; the availability of tax deductions and the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, import and export controls or taxes, including changes in tax laws that could reduce the benefits associated with REIT status. 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 Thursday, July 29 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
JUNE 30, 2004 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Six Months Ended
--------------------------- -----------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
-------- --------- -------- -------- --------
Profitability
Sales $336.9 $293.7 $295.9 $630.6 $561.8
Operating income $70.3 $42.5 $54.0 $112.8 $73.2
Net income $43.7 $75.5 $31.7 $119.2 $39.9
Net income per diluted
common share $0.86 $1.49 $0.74 $2.35 $0.94
Proforma net income
per diluted common
share (a) (b) $0.86 $0.51 $0.65 $1.37 $0.82
Operating income as a
percent of sales 20.9% 14.5% 18.2% 17.9% 13.0%
ROE (annualized)
(a) (c) 17.4% 10.7% 6.2% 15.6% 6.5%
Six Months Ended June 30,
------------------------------------
2004 2003
--------- --------
Capital Resources and Liquidity
Cash provided by
operating activities $157.7 $108.8
Cash used for
investing activities $(66.0) $(32.7)
Cash used for
financing activities $(46.9) $(48.0)
Cash Available for
Distribution (CAD)
(d) $120.5 $75.3
Adjusted EBITDA (e) $202.0 $160.2
Repayment of debt, net $1.5 $31.5
Debt $615.7 $622.2
Debt / capital 44.1% 45.8%
(a) First quarter and six months ended June 30, 2004 exclude first
quarter reversal of deferred taxes not required after REIT
conversion of $77.9 million, or $1.53 per share and additional
taxes for repatriation of foreign earnings of ($28.2) million, or
($0.55) per share, for a net effect of $49.7 million, or $0.98 per
share. See reconciliation on Schedule G.
(b) 2003 per share data has been restated for the December 19, 2003
15.1% special dividend.
(c) Major land sales and REIT conversion costs are not annualized.
(d) Cash Available for Distribution (CAD) is defined as cash
provided by operating activities less both custodial and
discretionary capital spending and less the tax benefit on the
exercise of stock options. Cash Available for Distribution is a
non-GAAP measure of cash generated during a period that is
available for dividend distribution, repurchase of the Company's
common shares, debt reduction and for strategic acquisitions net
of associated financing. See reconciliation on Schedule G.
(e) Adjusted EBITDA is defined as earnings from continuing
operations before interest expense, income taxes, depreciation,
depletion, amortization and the non-cash cost basis of land sold.
Adjusted EBITDA is a non-GAAP measure of operating cash generating
capacity of the Company. See reconciliation on Schedule H.
- A -
RAYONIER
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
JUNE 30, 2004 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Six Months Ended
----------------------------------- -----------------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
----------- ----------- ----------- ----------- -----------
Sales $336.9 $293.7 $295.9 $630.6 $561.8
----------- ----------- ----------- ----------- -----------
Costs and expenses
Cost of
sales 252.0 234.4 231.3 486.4 469.6
Selling
and
general
expenses 14.7 18.1 13.0 32.8 23.0
Other
oper-
ating
expense
(income) (0.1) (1.3) (2.4) (1.4) (4.0)
----------- ----------- ----------- ----------- -----------
Operating
income 70.3 42.5 54.0 112.8 73.2
Interest
expense (12.1) (11.1) (12.4) (23.2) (24.8)
Interest
and misc-
ellaneous
income
(expense),
net 0.4 0.7 0.4 1.1 1.5
----------- ----------- ----------- ----------- -----------
Income
before
taxes 58.6 32.1 42.0 90.7 49.9
Income tax
(expense)
benefit
(a) (14.9) 43.4 (10.3) 28.5 (10.0)
----------- ----------- ----------- ----------- -----------
Net income
(a) $43.7 $75.5 $31.7 $119.2 $39.9
=========== =========== =========== =========== ===========
Net income
per Common
Share
Basic EPS $0.88 $1.53 $0.76 $2.41 $0.96
=========== =========== =========== =========== ===========
Diluted
EPS $0.86 $1.49 $0.74 $2.35 $0.94
=========== =========== =========== =========== ===========
Proforma net income
per Common Share
(b)(c)
Adjusted
basic EPS $0.88 $0.52 $0.66 $1.40 $0.83
=========== =========== =========== =========== ===========
Adjusted
diluted
EPS $0.86 $0.51 $0.65 $1.37 $0.82
=========== =========== =========== =========== ===========
Weighted average Common
Shares used for determining
Basic EPS 49,557,582 49,340,565 41,796,776 49,449,037 41,734,379
=========== =========== =========== =========== ===========
Diluted
EPS 50,891,616 50,776,436 42,516,508 50,833,270 42,344,871
=========== =========== =========== =========== ===========
(a) First quarter and six months ended June 30, 2004 includes
reversal of deferred taxes not required after REIT conversion of
$77.9 million and additional taxes for repatriation of foreign
earnings of ($28.2) million.
(b) First quarter and six months ended June 30, 2004 excludes
reversal of deferred taxes not required after REIT conversion of
$1.58 per basic share and $1.53 per diluted share and additional
taxes for repatriation of foreign earnings of ($0.57) per basic
share and ($0.55) per diluted share, for a net of $1.01 per basic
share and $0.98 per diluted share. See reconciliation on Schedule
G.
(c) For the three and six months ended June 30, 2003 per share data
has been restated for the December 19, 2003 15.1% special
dividend.
- B -
RAYONIER
BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
JUNE 30, 2004 (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
---------------------------- -----------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
--------- --------- -------- -------- --------
Sales
Timber and Land
Timber $49.3 $53.1 $38.5 $102.4 $82.1
Land 40.4 33.3 53.1 73.7 70.7
--------- --------- -------- -------- --------
Total Timber and
Land 89.7 86.4 91.6 176.1 152.8
--------- --------- -------- -------- --------
Performance Fibers
Cellulose
specialties 107.2 93.1 91.7 200.3 178.8
Absorbent materials 45.2 39.8 40.4 85.0 81.8
--------- --------- -------- -------- --------
Total Performance
Fibers 152.4 132.9 132.1 285.3 260.6
--------- --------- -------- -------- --------
Wood Products 44.8 37.5 31.4 82.3 61.4
Other Operations 50.3 36.9 41.2 87.2 87.7
Intersegment
eliminations (0.3) - (0.4) (0.3) (0.7)
--------- --------- -------- -------- --------
Total sales $336.9 $293.7 $295.9 $630.6 $561.8
========= ========= ======== ======== ========
Operating income (loss)
Timber and Land
Timber $20.1 $22.8 $11.6 $42.9 $28.3
Land 35.0 23.7 47.6 58.7 56.7
--------- --------- -------- -------- --------
Total Timber and
Land 55.1 46.5 59.2 101.6 85.0
Performance Fibers 18.4 6.1 2.7 24.5 1.5
Wood Products 5.2 0.7 (1.7) 5.9 (4.3)
Other Operations 1.9 2.3 (0.8) 4.2 (0.8)
Corporate (9.7) (13.2) (7.9) (22.9) (12.9)
Intersegment
eliminations and
other (Including
Corporate FX) (0.6) 0.1 2.5 (0.5) 4.7
--------- --------- -------- -------- --------
Total operating
income $70.3 $42.5 $54.0 $112.8 $73.2
========= ========= ======== ======== ========
- C -
RAYONIER
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
JUNE 30, 2004 (unaudited)
(millions of dollars)
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2004 2003
---------- -------------
Assets
Current assets $293.3 $244.6
Timber, timberlands and logging roads,
net of depletion and amortization 972.4 994.8
Property, plant and equipment 1,427.5 1,414.5
Less accumulated depreciation 952.6 912.3
---------- -------------
474.9 502.2
---------- -------------
Other assets 133.6 97.1
---------- -------------
$1,874.2 $1,838.7
========== =============
Liabilities and Shareholders' Equity
Current liabilities $162.7 $147.3
Deferred income taxes 79.6 121.8
Long-term debt 612.1 614.9
Non-current reserves for dispositions
and discontinued operations 134.1 140.2
Other non-current liabilities 104.2 103.4
Shareholders' Equity 781.5 711.1
---------- -------------
$1,874.2 $1,838.7
========== =============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
--------------------------
June 30, June 30,
2004 2003
---------- -------------
Cash provided by operating activities:
Net Income $119.2 $39.9
Depreciation, depletion, amortization
and non-cash cost basis of land sold 88.1 85.5
Other non-cash items included in
income (44.0)(a) 7.9
Changes in working capital and other
assets and liabilities (5.6) (24.5)
---------- -------------
157.7 108.8
---------- -------------
Cash used for investing activities:
Capital expenditures, net of sales
and retirements (35.5) (32.7)
Increase in restricted cash (30.5) -
---------- -------------
(66.0) (32.7)
---------- -------------
Cash used for financing activities:
Repayment of debt, net (1.5) (31.5)
Dividends paid (55.4) (21.5)
Shares issued 10.0 5.0
---------- -------------
(46.9) (48.0)
---------- -------------
Effect of exchange rate changes on cash (0.2) -
---------- -------------
Cash and cash equivalents:
Increase in cash and cash equivalents 44.6 28.1
Balance, beginning of year 21.4 18.9
---------- -------------
Balance, end of period $66.0 $47.0
========== =============
(a) Mainly reversal of deferred taxes not required after REIT
conversion of ($77.9) million and additional taxes for
repatriation of foreign earnings of $28.2 million.
- D -
RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA
JUNE 30, 2004 (unaudited)
(millions of dollars)
Three Months Ended Six Months Ended
---------------------------- -----------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
-------- ---------- -------- -------- --------
Geographical Data
(Non-U.S.)
Sales
New Zealand $24.3 $19.8 $22.0 $44.1 $40.5
Other 9.4 6.0 2.9 15.4 7.5
-------- ---------- -------- -------- --------
Total $33.7 $25.8 $24.9 $59.5 $48.0
======== ========== ======== ======== ========
Operating income
(loss)
New Zealand $0.2 $(1.0) $1.7 $(0.8) $3.2
Other (0.5) (0.5) (0.5) (1.0) (0.9)
-------- ---------- -------- -------- --------
Total $(0.3) $(1.5) $1.2 $(1.8) $2.3
======== ========== ======== ======== ========
Timber
Sales
Northwest U.S. $22.0 $24.2 $15.0 $46.2 $35.3
Southeast U.S. 20.6 23.5 18.3 44.1 37.7
New Zealand 6.7 5.4 5.2 12.1 9.1
-------- ---------- -------- -------- --------
Total $49.3 $53.1 $38.5 $102.4 $82.1
======== ========== ======== ======== ========
Operating income
Northwest U.S. $11.9 $13.9 $7.3 $25.8 $19.9
Southeast U.S. 6.2 8.3 3.9 14.5 8.1
New Zealand 2.0 0.6 0.4 2.6 0.3
-------- ---------- -------- -------- --------
Total $20.1 $22.8 $11.6 $42.9 $28.3
======== ========== ======== ======== ========
Adjusted EBITDA by
Segment
Timber and Land $73.6 $69.9 $77.6 $143.5 $126.1
Performance Fibers 39.1 24.5 22.3 63.6 39.8
Wood Products 9.2 4.1 1.3 13.3 1.7
Other Operations 2.4 2.3 (0.7) 4.7 (0.5)
Corporate and other (10.5) (12.6) (5.1) (23.1) (6.9)
-------- ---------- -------- -------- --------
Total $113.8 $88.2 $95.4 $202.0 $160.2
======== ========== ======== ======== ========
- E -
RAYONIER
SELECTED OPERATING INFORMATION
JUNE 30, 2004 (unaudited)
Three Months Ended Six Months Ended
----------------------------- -----------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
-------- ---------- -------- -------- --------
Timber and Land
Sales volume -
Timber
Northwest U.S.,
in millions of
board feet 81 88 67 169 144
Southeast U.S.,
in thousands of
short green
tons 1,140 1,249 1,144 2,389 2,338
New Zealand,
in thousands
of metric
tons 158 106 148 264 259
Timber sales
volume -
Intercompany
Southeast U.S.,
in thousands of
short green
tons 21 - 2 21 5
New Zealand,
in thousands
of metric
tons - - 26 - 45
Acres sold 4,796 (a) 17,050 12,415 21,846 (a) 32,123
Performance Fibers
Sales Volume
Cellulose
specialties,
in thousands of
metric tons 115 101 106 216 205
Absorbent
materials,
in thousands of
metric tons 75 68 69 143 147
Production as a
percent of
capacity 99.8% 97.9% 95.9% 98.9% 96.8%
Wood Products
Lumber sales
volume,
in millions of
board feet 91 83 73 174 144
Medium-density
fiberboard
sales volume,
in thousands of
cubic meters 40 39 41 79 82
(a) Excludes 5,487 acres associated with a Northeast Florida sale
($26 million) in which we had timber lease rights.
- F -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES
JUNE 30, 2004 (unaudited)
(millions of dollars, except per share information)
Six Months Ended
----------------------------
June 30, June 30,
2004 (a) 2003
-------------- -------------
Cash Available for Distribution (CAD)
Cash provided by operating activities $157.7 $108.8
Capital spending (b) (35.5) (32.7)
Tax benefit on exercise of
stock options (1.7) (0.8)
-------------- -------------
Cash Available for Distribution (CAD) $120.5 $75.3
============== =============
(a) Includes $30.5 million of restricted cash to be used for the
Alabama timberland purchase.
(b) Capital Spending is net of proceeds from retirements.
Three Months Ended Six Months Ended
------------------------------ -----------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
---------- ---------- -------- -------- --------
Net income per
Common Share
Basic EPS $0.88 $1.53 $0.76 $2.41 $0.96
========== ========== ======== ======== ========
Diluted EPS $0.86 $1.49 $0.74 $2.35 $0.94
========== ========== ======== ======== ========
Deferred taxes
not required
after REIT
conversion
Basic EPS - (1.58) - (1.58) -
========== ========== ======== ======== ========
Diluted EPS - (1.53) - (1.53) -
========== ========== ======== ======== ========
Additional
taxes for
repatriation
of foreign
earnings
Basic EPS - 0.57 - 0.57 -
========== ========== ======== ======== ========
Diluted EPS - 0.55 - 0.55 -
========== ========== ======== ======== ========
Impact of
December 19,
2003 15.1%
special
dividend
Basic EPS - - (0.10) - (0.13)
========== ========== ======== ======== ========
Diluted EPS - - (0.09) - (0.12)
========== ========== ======== ======== ========
Proforma net
income per Common
Share
Adjusted basic
EPS 0.88 0.52 0.66 1.40 0.83
========== ========== ======== ======== ========
Adjusted
diluted EPS 0.86 0.51 0.65 1.37 0.82
========== ========== ======== ======== ========
- G -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES (1)
JUNE 30, 2004 (unaudited)
(millions of dollars)
Timber Perfor- Other
and mance Wood Oper- Corporate
Land Fibers Products ations and other Total
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA
Three Months Ended
June 30, 2004
Cash provided
by operating
activities $80.0 $30.6 $8.0 $(0.7) $(42.2) $75.7
Income tax
expense - - - - 14.9 14.9
Interest
expense - - - - 12.1 12.1
Working
capital
increases
(decreases) (3.6) 8.3 1.2 3.3 4.3 13.5
Other balance
sheet
changes (2.8) 0.2 - (0.2) 0.4 (2.4)
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA $73.6 $39.1 $9.2 $2.4 $(10.5) $113.8
======= ======= ========= ====== ========== =======
March 31, 2004
Cash provided
by operating
activities $74.0 $15.7 $1.4 $6.6 $(15.7) $82.0
Income tax
benefit - - - - (43.4) (43.4)
Interest
expense - - - - 11.1 11.1
Working
capital
increases
(decreases) (7.8) 7.6 2.8 (3.8) (17.4)(a) (18.6)
Other balance
sheet
changes 3.7 1.2 (0.1) (0.5) 52.8 (b) 57.1
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA $69.9 $24.5 $4.1 $2.3 $(12.6) $88.2
======= ======= ========= ====== ========== =======
June 30, 2003
Cash provided
by operating
activities $80.4 $25.7 $0.4 $0.8 $(37.8) $69.5
Income tax
expense - - - - 10.3 10.3
Interest
expense - - - - 12.4 12.4
Working
capital
increases
(decreases) (1.3) (2.9) 1.6 (2.1) 21.5 (c) 16.8
Other balance
sheet
changes (1.5) (0.5) (0.7) 0.6 (11.5)(d) (13.6)
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA $77.6 $22.3 $1.3 $(0.7) $(5.1) $95.4
======= ======= ========= ====== ========== =======
Six Months Ended
June 30, 2004
Cash provided
by operating
activities $154.0 $46.3 $9.4 $5.9 $(57.9) $157.7
Income tax
benefit - - - - (28.5) (28.5)
Interest
expense - - - - 23.2 23.2
Working
capital
increases
(decreases) (11.4) 15.9 4.0 (0.5) (13.1)(a) (5.1)
Other balance
sheet
changes 0.9 1.4 (0.1) (0.7) 53.2 (b) 54.7
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA $143.5 $63.6 $13.3 $4.7 $(23.1) $202.0
======= ======= ========= ====== ========== =======
June 30, 2003
Cash provided
by operating
activities $129.8 $37.1 $(1.8) $6.2 $(62.5) $108.8
Income tax
expense - - - - 10.0 10.0
Interest
expense - - - - 24.8 24.8
Working
capital
increases
(decreases) (1.4) 2.9 3.6 (7.1) 25.0 (c) 23.0
Other balance
sheet
changes (2.3) (0.2) (0.1) 0.4 (4.2) (6.4)
------- ------- --------- ------ ---------- -------
Adjusted
EBITDA $126.1 $39.8 $1.7 $(0.5) $(6.9) $160.2
======= ======= ========= ====== ========== =======
(1) Unusual, non-trade intercompany items between the segments have
been eliminated.
(a) Mainly higher taxes and interest payable.
(b) Includes reversal of deferred taxes not required after REIT
conversion partly offset by additional taxes for repatriation of
foreign earnings.
(c) Mainly lower accrued taxes and interest payable.
(d) Mainly higher incentive compensation accrual.
- H -
RAYONIER
RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
JUNE 30, 2004 (unaudited)
(millions of dollars, except percentages)
Three Months Ended
------------------------------------------
June 30, March 31, June 30,
2004 2004 2003
-------------- ------------- -------------
$ % $ % $ %
------- ------ ------ ------ ------ ------
Income tax
provision at
the U.S.
statutory
rate $20.6 35.0 $11.2 35.0 $14.7 35.0
REIT income
not subject
to federal
tax (14.2) (24.2) (6.9) (21.5) - -
Lost deduction
on REIT
interest
expense and
overhead
expenses
associated
with
REIT
activities 6.5 11.3 1.8 5.7 - -
State and
local income
taxes, foreign
exchange rate
changes and
permanent
differences 3.6 6.1 0.2 0.2 (4.4) (10.4)
------- ------ ------ ------ ------ ------
Income tax
provision
before
discrete
items (a) $16.5 28.2 $6.3 19.4 $10.3 24.6
Exchange rate
changes on
tax on
undistributed
foreign
earnings (1.6) (2.8) - - - -
Tax benefit
from interim
partial
IRS audit
settlement - - - - - -
------- ------ ------ ------ ------ ------
Income tax
expense (a) $14.9 25.4 $6.3 19.4 $10.3 24.6
======= ====== ====== ====== ====== ======
Six Months Ended
----------------------------
June 30, June 30,
2004 2003
-------------- -------------
$ % $ %
------- ------ ------ ------
Income tax
provision at
the U.S.
statutory
rate $31.8 35.0 $17.5 35.0
REIT income
not subject
to federal
tax (21.1) (23.2) - -
Lost deduction
on REIT
interest
expense and
overhead
expenses
associated
with
REIT
activities 8.3 9.0 - -
State and
local income
taxes, foreign
exchange rate
changes and
permanent
differences 3.8 4.3 (5.2) (10.3)
------- ------ ------ ------
Income tax
provision
before
discrete
items (a) $22.8 25.1 $12.3 24.7
Exchange rate
changes on
tax on
undistributed
foreign
earnings (1.6) (1.8) - -
Tax benefit
from interim
partial
IRS audit
settlement - - (2.3) (4.7)
------- ------ ------ ------
Income tax
expense (a) $21.2 23.3 $10.0 20.0
======= ====== ====== ======
(a) First quarter and six months ended June 30, 2004 exclude first
quarter reversal of deferred taxes not required after REIT
conversion of ($77.9) million and additional taxes for
repatriation of foreign earnings of $28.2 million.
- I -
CONTACT:
Rayonier, Jacksonville
Media Contact:
Jay Fredericksen, 904-357-9106
or
Investor Contact:
Parag Bhansali, 904-357-9155
SOURCE: Rayonier
