Earnings from continuing operations were lower compared with second quarter primarily due to a seasonal decline in Northwest U.S. timber sales volume and weaker lumber prices, partially offset by higher land sales. Results were stronger than third quarter 2001 primarily due to increased land sales and reduced performance fibers manufacturing costs and interest expense, partially offset by lower lumber and performance fibers prices.
Sales of $293 million were $24 million above second quarter and $29 million above third quarter 2001, primarily due to higher land sales.
Lee Nutter, Chairman, President and CEO said: "Despite a very challenging economic environment, we posted solid results due to steady demand in performance fibers and a significant contribution from our ongoing land sales program. Our cash flow remained strong enabling us to further reduce debt."
EBITDA (defined in Exhibit A) was $81 million, or $2.89 per share, compared with $78 million, or $2.74 per share, in the second quarter and $61 million, or $2.20 per share, in third quarter 2001. Free cash flow (defined in Exhibit A) was $39 million compared with $28 million in the second quarter and $23 million in third quarter 2001. Debt at quarter-end was $729 million. Net debt (debt less cash invested) was $694 million, $44 million lower than second quarter and $140 million below third quarter 2001. The net debt-to-capital ratio of 48.5 percent reflects a decline of 1.7 and 5.6 percentage points from second quarter 2002 and third quarter 2001, respectively.
Performance Fibers
Sales of $139 million were $15 million above second quarter primarily due to
higher volumes while operating income of $11 million was essentially unchanged.
The favorable impact of higher sales volumes was offset by slightly lower
prices. Compared with third quarter 2001, sales increased by $2 million while
operating income rose $6 million due to reduced manufacturing costs which were
partially offset by lower prices.
Timber and Land
Sales of $64 million were $6 million above the second quarter and operating
income of $33 million improved $1 million primarily due to higher land sales and
the favorable impact of balance sheet related foreign exchange translation,
partially offset by seasonally lower Northwest U.S. timber sales volume.
Compared with third quarter 2001, sales and operating income increased by $18
million and $11 million, respectively, primarily due to higher land sales.
Wood Products and Trading
Sales of $91 million were essentially unchanged from the second quarter.
However, substantially lower lumber prices resulted in an operating loss of $5
million compared to break-even results in the prior quarter. Compared with third
quarter 2001, sales improved $8 million while operating income declined $3
million as higher trading activity was more than offset by lower lumber prices.
Other Items
Corporate and Other expense of $3.3 million was $0.5 million and $0.4 million
above second quarter 2002 and third quarter 2001, respectively, primarily due to
the unfavorable impact of balance sheet related foreign exchange translation.
Due to lower debt, interest expense of $14 million was $1 million and $2 million below second quarter 2002 and third quarter 2001, respectively.
The effective tax rate of 29.1 percent was slightly higher than the second quarter and significantly above third quarter 2001 which was unusually low primarily due to the positive catch-up effect of re-estimating the annual effective tax rate at that time.
Pension Liabilities
The severe decline in U.S. equity markets has reduced the value of the company's
pension plan assets and lower interest rates have increased the net present
value of accumulated benefit obligations. As a result, assuming plan asset
values and interest rates remain at September 30, 2002 levels, the company would
be required at year-end to record a non-cash, after-tax, charge to Shareholders'
Equity of approximately $30 to $35 million. Under such circumstances, and taking
into account expected changes in key pension assumptions, pension expense for
2003 would increase by approximately $3 to $4 million from 2002 levels.
Outlook
"While we expect continued strong demand for our market leading cellulose
specialty products and Southeast U.S. development properties, fourth quarter
earnings are expected to be lower than third quarter primarily due to the timing
of land sales and higher chemical, fuel and other manufacturing costs in our
performance fibers business," Nutter said.
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 about 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; 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 or collection of proceeds from installment sales; 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, October 22 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging onto 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 (1)
SEPTEMBER 30, 2002 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
------------------------- -----------------
Sept. June Sept. Sept. Sept.
30, 30, 30, 30, 30,
2002 2002 2001 2002 2001
-------- ------- -------- -------- --------
Profitability
Sales $293.1 $269.3 $263.9 $831.1 $869.9
Operating income $35.3 $39.5 $21.8 $102.2 $123.7
Income from
continuing
operations $15.6 $17.5 $6.0 $42.1 $49.6
Discontinued
operations $0.1 $(1.3) $- $(0.8) $0.1
Net income (after
disc. ops) $15.7 $16.2 $6.0 $41.3 $49.7
Diluted earnings per
share:
Continuing
operations $0.55 $0.62 $0.22 $1.49 $1.79
Net income (after
disc. ops) $0.56 $0.57 $0.22 $1.46 $1.80
Operating income
as a percent of
sales 12.0% 14.7% 8.3% 12.3% 14.2%
ROE (annualized) (a) 6.6% 8.2% 3.5% 7.1% 8.5%
Capital Resources and
Liquidity
EBITDA (b) $81.3 $77.8 $61.3 $232.0 $268.4
Free cash flow (c) $38.6 $27.9 $23.2 $92.5 $121.9
Decrease in
borrowings $40.4 $47.2 $24.4 $122.6 $118.2
Debt $728.8 $768.4 $854.8 $728.8 $854.8
Net debt (d) $693.7 $737.6 $833.8 $693.7 $833.8
Net debt / capital 48.5% 50.2% 54.1% 48.5% 54.1%
(a) From continuing operations; major land sales are not
annualized.
(b) EBITDA is defined as earnings from continuing operations
before significant non-recurring items, provision for dispositions,
interest expense, income taxes, depreciation, depletion, amortization
and the non-cash cost of land sales.
(c) Free cash flow is defined as EBITDA plus or minus significant
non-recurring items, changes in working capital and long-term assets
and liabilities (excluding the non-cash costs of land sales), less
income taxes, interest expense, custodial capital spending and
prior-year dividend levels.
(d) Net debt is defined as debt less cash invested of $35.1, $30.8
and $21.0, at 9/30/02, 6/30/02, and 9/30/01, respectively.
(1) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
- A -
RAYONIER
STATEMENTS OF CONSOLIDATED INCOME (2)
SEPTEMBER 30, 2002 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
---------------------------------- -------------------
Sept. 30, June 30, Sept.30, Sept.30, Sept. 30,
---------- ----------- ----------- --------- ---------
2002 2002 2001 2002 2001
---------- ----------- ----------- --------- ---------
Sales $293.1 $269.3 $263.9 $831.1 $869.9
---------- ----------- ----------- --------- ---------
Costs and expenses
Cost of
sales 248.0 220.9 235.0 698.1 722.4
Selling and
general
expenses 8.4 10.3 7.4 30.2 24.6
Other
operating
expense
(income) 1.4 (1.4) (0.3) 0.6 (0.8)
---------- ----------- ----------- ----------- -------
Operating income 35.3 39.5 21.8 102.2 123.7
Interest
expense (14.3) (15.1) (16.5) (44.6) (52.9)
Interest and
miscellaneous
income (expense),
net 0.9 - 1.0 1.2 1.2
---------- ----------- ----------- ----------- -------
Income from
continuing
operations
before income
taxes 21.9 24.4 6.3 58.8 72.0
Income tax
expense (6.3) (6.9) (0.3) (16.7) (22.4)
---------- ----------- ----------- ----------- -------
Income from
continuing
operations $15.6 $17.5 $6.0 $42.1 $49.6
Discontinued
operations,
net 0.1 (1.3) - (0.8) 0.1
---------- ----------- ----------- ----------- -------
Net income
(after disc.
ops) $15.7 $16.2 $6.0 $41.3 $49.7
========== =========== =========== =========== =======
Net income per
Common Share
Basic EPS
From
continuing
operations $0.55 $0.64 $0.22 $1.52 $1.83
========== =========== =========== =========== =======
Net income
(after
disc. ops) $0.56 $0.59 $0.22 $1.49 $1.83
========== =========== =========== =========== =======
Diluted EPS
From
continuing
operations $0.55 $0.62 $0.22 $1.49 $1.79
========== =========== =========== =========== =======
Net income
(after
disc. ops) $0.56 $0.57 $0.22 $1.46 $1.80
========== =========== =========== =========== =======
Weighted
average Common
Shares used for
determining
Basic EPS 27,753,428 27,728,798 27,266,368 27,669,720 27,186,767
========== ========== ========== ========== ==========
Diluted EPS 28,201,286 28,324,784 27,690,303 28,203,231 27,599,697
========== ========== ========== ========== ==========
(2) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
- B -
RAYONIER
BUSINESS SEGMENT SALES AND OPERATING INCOME (3)
SEPTEMBER 30, 2002 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
----------------------------- --------------------
September June September September September
30, 30, 30, 30, 30,
2002 2002 2001 2002 2001
-------- ------- -------- ---------- ----------
Sales
Performance
Fibers
Cellulose
specialties $97.4 $86.6 $96.1 $274.6 $282.0
Absorbent
materials 41.7 37.5 40.6 117.9 139.5
-------- ------- -------- ---------- ----------
Total
Performance
Fibers 139.1 124.1 136.7 392.5 421.5
-------- ------- -------- ---------- ----------
Timber and Land
Timber 35.8 45.4 38.9 123.5 146.9
Land 28.3 12.6 7.5 60.0 70.9
-------- ------- -------- ---------- ----------
Total Timber
and Land 64.1 58.0 46.4 183.5 217.8
-------- ------- -------- ---------- ----------
Wood Products
and Trading 90.8 91.3 82.6 263.7 241.8
Intersegment
eliminations (0.9) (4.1) (1.8) (8.6) (11.2)
-------- ------- -------- ---------- ----------
Total sales $293.1 $269.3 $263.9 $831.1 $869.9
======== ======= ======== ========== ==========
Operating income
(loss)
Performance
Fibers $10.8 $10.7 $4.6 $28.1 $32.5
Timber and Land
Timber 14.2 20.9 16.1 55.8 72.8
Land 18.6 10.7 5.6 37.9 40.8
-------- ------- -------- ---------- ----------
Total Timber
and Land 32.8 31.6 21.7 93.7 113.6
Wood Products
and Trading (5.0) - (1.6) (7.4) (8.6)
Corporate and
other (3.3) (2.8) (2.9) (12.2) (13.8)
-------- ------- -------- ---------- ----------
Total
operating
income $35.3 $39.5 $21.8 $102.2 $123.7
======== ======= ======== ========== ==========
(3)Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
- C -
RAYONIER
FUNDS FLOW SUMMARY (4)
SEPTEMBER 30, 2002 (unaudited)
(millions of dollars)
Nine Months Ended
-------------------
September September
30, 30,
2002 2001
--------- ---------
Income from continuing operations $42.1 $49.6
Depreciation, depletion and amortization 120.4 134.8
Non-cash cost of land sales 8.2 8.7
--------- ---------
Subtotal 170.7 193.1
Capital expenditures (57.4) (56.7)
Working capital changes 9.8 13.0
Cash balance increase (27.2) (15.8)
Dividends (29.9) (29.4)
Proceeds from stock options exercised 14.2 6.9
Share repurchases (3.1) (2.0)
All other 21.3 6.6
--------- ---------
Subtotal 98.4 115.7
Cash provided by discontinued operations 24.2 2.5
--------- ---------
Decrease in borrowings $122.6 $118.2
========= =========
(4) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
- D -
RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA (5)
SEPTEMBER 30, 2002 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
-------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2002 2002 2001 2002 2001
--------- ------ --------- --------- ---------
Geographical Data
(Non-U.S.)
Sales
New
Zealand $20.2 $17.5 $17.5 $57.5 $50.9
Other 8.5 11.5 5.0 33.3 30.2
--------- ------ --------- --------- ---------
Total $28.7 $29.0 $22.5 $90.8 $81.1
========= ====== ========= ========= =========
Operating
income (loss)
New
Zealand $2.0 $2.5 $1.3 $3.9 $1.4
Other 0.1 0.4 (0.8) (0.9) (1.6)
--------- ------ --------- --------- ---------
Total $2.1 $2.9 $0.5 $3.0 $(0.2)
========= ====== ========= ========= =========
Timber and Land
Sales
Northwest
U.S. $9.7 $21.3 $11.3 $48.3 $49.5
Southeast
U.S. 48.1 33.0 28.4 116.7 152.3
New
Zealand 6.3 3.7 6.7 18.5 16.0
--------- ------ --------- --------- ---------
Total $64.1 $58.0 $46.4 $183.5 $217.8
========= ====== ========= ========= =========
Operating
income (loss)
Northwest
U.S. $4.8 $15.6 $6.7 $33.2 $35.5
Southeast
U.S. 23.7 16.0 12.4 56.9 72.3
New
Zealand 4.3 - 2.6 3.6 5.8
--------- ------ --------- --------- ---------
Total $32.8 $31.6 $21.7 $93.7 $113.6
========= ====== ========= ========= =========
EBITDA per Share
Performance
Fibers $1.02 $1.04 $0.82 $2.92 $3.22
Timber and
Land 2.02 1.67 1.38 5.60 6.94
Wood
Products
and Trading (0.03) 0.14 0.08 0.15 0.08
Corporate
and other (0.12) (0.11) (0.08) (0.44) (0.52)
--------- ------ --------- --------- ---------
Total $2.89 $2.74 $2.20 $8.23 $9.72
========= ====== ========= ========= =========
(5) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
- E -
RAYONIER
SELECTED OPERATING INFORMATION (6)
SEPTEMBER 30, 2002 (unaudited)
Three Months Ended Nine Months Ended
-------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2002 2002 2001 2002 2001
--------- ------ -------- --------- ---------
Performance Fibers
Sales Volume
Cellulose specialties,
in thousands of
metric tons 114 101 110 319 323
Absorbent materials,
in thousands of
metric tons 75 66 69 211 216
Production as a percent
of capacity 98.3% 99.5% 88.2% 98.2% 96.4%
Timber and Land
Sales volume - Timber
Northwest U.S., in
millions of board feet 36 80 48 186 185
Southeast U.S., in
thousands of short
green tons 1,165 1,191 1,184 3,597 4,370
New Zealand,in
thousands of metric
tons (7) 243 168 213 532 551
Timber sales volume -
Intercompany
Northwest U.S., in
millions of board feet 2 19 9 36 44
Southeast U.S., in
thousands of short
green tons 13 3 2 21 32
New Zealand, in
thousands of metric
tons (7) 16 10 9 39 34
Acres sold 14,657 3,995 2,678 37,552 60,951
Wood Products and Trading
Lumber sales volume, in
millions of board feet 87 86 79 252 199
Medium-density fiberboard
sales volume,in thousands
of cubic meters 40 41 37 117 113
Log trading sales volume
North America, in
millions of board feet 32 32 42 91 128
New Zealand, in
thousands of metric tons 91 85 55 251 217
Other, in thousands
of cubic meters 46 86 31 250 263
(6) Prior period amounts were reclassified to reflect the New
Zealand East Coast operations as discontinued operations.
(7) 2001 volume restated from cubic meters to metric tons
- F -
CONTACT: Rayonier, Jacksonville
Media Contact:
Jay Fredericksen, 904/357-9106
or
Investor Contact:
Parag Bhansali, 904/357-9155
