JACKSONVILLE, Fla.--(BUSINESS WIRE)--Oct. 21, 2003--Rayonier (NYSE:RYN) today reported third quarter 2003 net income of $8.1 million, or 19 cents per share, compared to $31.7 million, or 74 cents per share, in second quarter 2003 and $15.6 million, or 37 cents per share, in third quarter 2002. Third quarter 2003 results included 8 cents per share for REIT conversion costs and second quarter 2003 results included 59 cents per share from the Matanzas Marsh land sale.
Lee Nutter, Chairman, President and CEO said: "While we experienced solid results from our land sales business, improved lumber markets and steady U.S. timber prices, third quarter results reflected expenses associated with our planned REIT conversion and an extremely challenging cost environment for our performance fibers business. Nonetheless, we again demonstrated Rayonier's strong cash generating capability through the business cycle, increasing cash by nearly $40 million to $86 million at quarter-end. In addition, we remain on schedule for our January 1, 2004, conversion to a REIT and the payment of a special dividend of undistributed earnings and profits this December."
Sales of $268 million were $28 million below second quarter primarily due to the Matanzas sale and lower Northwest timber volume. Compared to third quarter 2002, sales declined $26 million, principally due to lower trading activity, performance fibers volume and timber prices.
Cash provided by operating activities of $64 million and free cash flow of $26 million were $6 million and $18 million, respectively, below second quarter primarily due to lower operating income. Cash provided by operating activities and free cash flow were $10 million and $14 million, respectively, below third quarter 2002 also due to lower operating income. Adjusted EBITDA was $62 million, a decrease of $33 million and $20 million from second quarter 2003 and third quarter 2002, respectively, mainly due to lower operating results. (Adjusted EBITDA and free cash flow are non-GAAP measures defined in Exhibit A.)
Debt at quarter-end of $620 million was $2 million and $33 million below second quarter and year-end 2002, respectively. The continuing improvement in our debt-to-capital ratio to 44.9 percent reflected a decline of 0.9 and 3.0 percentage points from second quarter and year-end 2002, respectively.
Performance Fibers
Sales of $132 million were comparable to second quarter with higher cellulose specialties volume offset by lower absorbent materials volume. Operating income of $2 million was $1 million below the second quarter primarily due to record high weather-related hardwood chip costs and slightly weaker cellulose specialties prices, partly offset by increased cellulose specialties volume and absorbent materials prices. Compared to third quarter 2002, sales and operating income declined $7 and $10 million, respectively, due to lower volume and higher hardwood chip, chemical and maintenance costs, partially offset by increased prices in both cellulose specialties and absorbent materials.
Timber and Land
Sales of $59 million and operating income of $32 million were below the second quarter by $32 million and $27 million, respectively, mainly due to the Matanzas sale as well as seasonally lower third quarter Northwest timber volume. Compared to third quarter 2002, sales decreased $5 million and operating income declined $1 million due to lower Northwest timber volume and prices, partly offset by improved land sales margins.
Wood Products
Sales of $36 million were $4 million above second quarter and the operating loss of $1 million reflected an improvement of $1 million principally due to higher lumber prices and volumes. Compared to third quarter 2002, sales were higher and the operating loss improved by $3 million due to increased lumber prices and lower lumber manufacturing costs.
Other Operations
Sales of $42 million were in line with second quarter, while the operating loss of $0.2 million reflected an improvement of $0.7 million. Compared to third quarter 2002, sales declined $15 million due to lower trading activity while the operating loss improved $0.3 million.
Other Items
Corporate expenses of $11.0 million were $3.1 million and $7.7 million above prior quarter and third quarter 2002, respectively, primarily due to REIT conversion costs of $4.2 million. The variance to third quarter 2002 also reflected an increase of $2.4 million in stock price-based incentive compensation accruals.
Intersegment eliminations and other included $0.5 million in balance sheet-related foreign exchange gains, compared to a $2.8 million benefit in the second quarter and a $1.1 million loss in third quarter 2002. Interest expense of $12.1 million was comparable to second quarter and $2.4 million below third quarter 2002 primarily due to lower debt.
The effective tax rate of 22.2 percent compared to 24.6 percent for the second quarter and 29.1 percent in third quarter 2002. The lower rate compared to prior year was primarily due to increased foreign and other tax credits.
Outlook
Although demand continues to be strong for cellulose specialties and Northwest timber earnings are forecasted to improve from the seasonally low third quarter, fourth quarter net income is likely to be near break-even. Earnings are expected to be adversely impacted by REIT project expenses (approximately 5 cents per share), delays in realizing Northwest timber earnings (approximately 6 cents per share) as contract terms of sale are revised to take advantage of REIT status in first quarter 2004, and continued exceptionally high hardwood chip costs at performance fibers. For 2003, REIT conversion costs and timber contract-related earnings deferrals are anticipated to reduce income by approximately 20 cents per share.
"We are very pleased with market reaction to our REIT plans and believe the tax-efficient structure will provide additional opportunities for growth and further increases in shareholder value," Nutter said. "In early November we will announce the schedule and election process for the special dividend of earnings and profits to be paid in December."
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.
Reported results are preliminary and not final until filing of the third quarter Form 10-Q with the Securities and Exchange Commission. Comments about anticipated demand, sales, expenses and earnings, and the Company's expected REIT conversion, 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 or wood products; 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 timing of the Company's election to be taxed as a REIT and its ability to satisfy complex rules in order to qualify as a REIT; 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/A on file with the Securities and Exchange Commission.
See Exhibit A for definitions of the non-GAAP financial measures "Adjusted EBITDA" and "free cash flow," and Exhibits G and H for reconciliations of each to cash provided by operating activities.
A conference call will be held on Wednesday, October 22 at 4:15 p.m. EDT to discuss these results. Interested parties are invited to listen to the live webcast by logging on to 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 719-457-2649.
For more 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, 2003 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
--------------------------- -------------------
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
--------- ------- --------- -------- ---------
Profitability
Sales $267.6 $295.9 $293.1 $829.4 $831.1
Operating
income $21.7 $54.0 $35.5 $94.9 $102.9
Income from
continuing
operations $8.1 $31.7 $15.5 $48.0 $42.1
Discontinued
operations $- $- $0.1 $- $(0.8)
Net income
(after disc.
ops) $8.1 $31.7 $15.6 $48.0 $41.3
Diluted
earnings per
share:
Continuing
operations $0.19 $0.74 $0.37 $1.13 $0.99
Net income
(after
disc. ops) $0.19 $0.74 $0.37 $1.13 $0.97
Operating
income
as a percent
of sales 8.1% 18.2% 12.1% 11.4% 12.4%
ROE
(annualized)
(a) 0.6% 6.2% 6.6% 6.8% 7.1%
Capital Resources
and Liquidity
Cash provided
by operating
activities $64.0 $69.5 $73.5 $172.8 $204.0
Cash used for
investing
activities $(26.0) $(14.5) $(23.5) $(58.7) $(57.1)
Cash from (used
for) financing
activities $1.5 $(12.3) $(52.5) $(46.5) $(143.7)
Adjusted
EBITDA (b) $62.0 $95.4 $82.3 $222.2 $235.1
Free cash flow
(c) $26.4 $44.7 $40.8 $83.6 $117.2
Repayment of
debt, net $1.2 $5.7 $41.2 $32.7 $124.9
Debt $620.4 $622.2 $741.7 $620.4 $741.7
Debt / capital 44.9% 45.8% 50.2% 44.9% 50.2%
(a) From continuing operations; major land sales and REIT conversion
costs are not annualized.
(b) 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 G.
(c) Free cash flow is defined as cash provided by operating
activities less net custodial capital spending,
dividends at prior year level, required debt repayments and
the tax benefit on the exercise of stock options.
Free cash flow is a non-GAAP measure of cash generated during
a period that was available for discretionary capital
expenditures, increasing dividends above the prior
year level, repurchasing the Company's common shares and/or
reducing debt within the period. Free cash flow is not
necessarily indicative of the free cash flow that may be
generated in future periods. See reconciliation on Schedule H.
(1) Prior year earnings per share data have been restated to reflect
the June 12, 2003 three-for-two stock split.
- A -
RAYONIER
CONDENSED STATEMENTS OF CONSOLIDATED INCOME (2)
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars, except per share information)
Three Months Ended Nine Months Ended
-------------------------------------------------------
September June September September September
30, 2003 30, 2003 30, 2002 30, 2003 30, 2002
-------------------------------------------------------
Sales $267.6 $295.9 $293.1 $829.4 $831.1
-------------------------------------------------------
Costs and
expenses
Cost of
sales 231.8 231.3 247.8 701.4 697.4
Selling and
general
expenses 16.1 13.0 8.4 39.1 30.2
Other
operating
expense
(income) (2.0) (2.4) 1.4 (6.0) 0.6
-------------------------------------------------------
Operating
income 21.7 54.0 35.5 94.9 102.9
Interest
expense (12.1) (12.4) (14.5) (36.9) (45.3)
Interest and
miscellaneous
income
(expense),
net 0.8 0.4 0.9 2.3 1.2
-------------------------------------------------------
Income from
continuing
operations
before income
taxes 10.4 42.0 21.9 60.3 58.8
Income tax
(expense)
benefit (2.3) (10.3) (6.4) (12.3) (16.7)
-------------------------------------------------------
Income from
continuing
operations $8.1 $31.7 $15.5 $48.0 $42.1
Discontinued
operations,
net - - 0.1 - (0.8)
-------------------------------------------------------
Net income $8.1 $31.7 $15.6 $48.0 $41.3
=======================================================
Net income per
Common Share
Basic EPS
From
continuing
operations $0.19 $0.76 $0.37 $1.15 $1.01
=======================================================
Net income
(after
disc. ops) $0.19 $0.76 $0.37 $1.15 $0.99
=======================================================
Diluted EPS
From
continuing
operations $0.19 $0.74 $0.37 $1.13 $0.99
=======================================================
Net income
(after
disc. ops) $0.19 $0.74 $0.37 $1.13 $0.97
=======================================================
Weighted
average
Common
Shares used
for
determining
Basic EPS 42,133,413 41,796,776 41,630,142 41,867,879 41,504,580
=======================================================
Diluted EPS 42,963,352 42,516,508 42,301,929 42,557,905 42,304,847
=======================================================
(2)Prior year earnings per share and share data have been restated to
reflect the June 12, 2003 three-for-two stock split.
- B -
RAYONIER
BUSINESS SEGMENT SALES AND OPERATING INCOME
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
-----------------------------------------------
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
-----------------------------------------------
Sales
Performance Fibers
Cellulose specialties $94.3 $91.7 $97.4 $273.1 $274.6
Absorbent materials 37.6 40.4 41.7 119.4 117.9
-----------------------------------------------
Total Performance
Fibers 131.9 132.1 139.1 392.5 392.5
-----------------------------------------------
Timber and Land
Timber 32.5 38.5 35.8 114.6 123.5
Land 26.8 53.1 28.2 97.5 59.9
-----------------------------------------------
Total Timber and
Land 59.3 91.6 64.0 212.1 183.4
-----------------------------------------------
Wood Products 35.6 31.4 34.7 97.0 107.0
Other Operations 41.6 41.2 56.2 129.3 156.8
Intersegment
eliminations (0.8) (0.4) (0.9) (1.5) (8.6)
-----------------------------------------------
Total sales $267.6 $295.9 $293.1 $829.4 $831.1
===============================================
Operating income (loss)
Performance Fibers $1.5 $2.8 $11.1 $3.1 $28.9
Timber and Land
Timber 8.4 11.6 14.2 36.7 55.8
Land 23.7 47.6 18.5 80.4 37.9
-----------------------------------------------
Total Timber and
Land 32.1 59.2 32.7 117.1 93.7
Wood Products (1.2) (2.4) (4.4) (6.8) (5.7)
Other Operations (0.2) (0.9) (0.5) (1.1) (1.7)
Corporate (11.0) (7.9) (3.3) (23.9) (15.0)
Intersegment
eliminations and
other (Including
Corporate FX) 0.5 3.2 (0.1) 6.5 2.7
-----------------------------------------------
Total operating
income $21.7 $54.0 $35.5 $94.9 $102.9
===============================================
- C -
RAYONIER
CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars)
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 31,
2003 2002
-------------------
Assets
Current assets $300.6 $228.8
Timber, timberlands and logging roads,
net of depletion and amortization 999.1 1,023.2
Property, plant and equipment 1,416.4 1,387.4
Less accumulated depreciation 906.4 846.3
-------------------
510.0 541.1
-------------------
Other assets 90.2 94.1
-------------------
$1,899.9 $1,887.2
===================
Liabilities and Shareholders' Equity
Current liabilities $160.4 $171.8
Deferred income taxes 123.8 110.2
Long-term debt 616.8 649.6
Non-current reserves for dispositions and
discontinued operations 139.4 146.3
Other non-current liabilities 98.8 99.6
Shareholders' equity 760.7 709.7
-------------------
$1,899.9 $1,887.2
===================
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
-------------------
2003 2002
-------------------
Cash provided by operating activities:
Income from continuing operations $48.0 $42.1
Depreciation, depletion, amortization and non-
cash cost basis of land sold 125.1 131.0
Other non-cash items included in income 6.8 9.9
Changes in working capital and other assets and
liabilities (7.1) 21.0
-------------------
172.8 204.0
-------------------
Cash used for investing activities:
Capital expenditures, net of sales and
retirements (53.3) (57.1)
Purchase of assets previously leased (5.4) -
-------------------
(58.7) (57.1)
-------------------
Cash used for financing activities:
Repayment of debt, net (32.7) (124.9)
Dividends paid, shares issued, net (13.8) (18.8)
-------------------
(46.5) (143.7)
-------------------
Cash provided by discontinued operations - 24.0
-------------------
Effect of exchange rate changes on cash (0.1) -
-------------------
Cash and cash equivalents:
Increase in cash and cash equivalents 67.5 27.2
Balance, beginning of year 18.9 14.1
-------------------
Balance, end of period $86.4 $41.3
===================
- D -
RAYONIER
SELECTED SUPPLEMENTAL FINANCIAL DATA
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
----------------------------------------------
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
----------------------------------------------
Geographical Data (Non- U.S.)
Sales
New Zealand $23.0 $22.0 $20.2 $63.5 $57.5
Other 1.7 2.9 8.5 9.2 33.3
----------------------------------------------
Total $24.7 $24.9 $28.7 $72.7 $90.8
==============================================
Operating income
(loss)
New Zealand $0.6 $1.7 $2.0 $3.8 $3.9
Other (0.6) (0.5) 0.1 (1.5) (0.9)
----------------------------------------------
Total $- $1.2 $2.1 $2.3 $3.0
==============================================
Timber
Sales
Northwest U.S. $8.9 $15.0 $9.3 $44.2 $46.9
Southeast U.S. 18.3 18.3 20.2 56.0 64.3
New Zealand 5.3 5.2 6.3 14.4 12.3
----------------------------------------------
Total $32.5 $38.5 $35.8 $114.6 $123.5
==============================================
Operating income
(loss)
Northwest U.S. $1.6 $7.3 $4.5 $21.5 $32.3
Southeast U.S. 4.0 3.9 5.3 12.1 19.2
New Zealand 2.8 0.4 4.4 3.1 4.3
----------------------------------------------
Total $8.4 $11.6 $14.2 $36.7 $55.8
==============================================
Adjusted EBITDA by
Segment
Performance Fibers $21.9 $22.3 $29.7 $61.7 $85.4
Timber and Land 48.1 77.6 56.8 174.2 157.9
Wood Products 2.3 0.8 (1.1) 2.8 4.2
Other Operations (0.1) (0.7) 0.1 (0.6) (0.1)
Corporate and other (10.2) (4.6) (3.2) (15.9) (12.3)
----------------------------------------------
Total $62.0 $95.4 $82.3 $222.2 $235.1
==============================================
- E -
RAYONIER
SELECTED OPERATING INFORMATION
SEPTEMBER 30, 2003 (unaudited)
Three Months Ended Nine Months Ended
-----------------------------------------------
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
-----------------------------------------------
Performance Fibers
Sales Volume
Cellulose
specialties,
in thousands of
metric tons 109 106 114 314 319
Absorbent materials,
in thousands of
metric tons 62 69 74 209 208
Production as a percent
of capacity 97.6% 95.9% 98.3% 97.2% 98.2%
Timber and Land
Sales volume - Timber
Northwest U.S.,
in millions of
board feet 34 67 36 178 186
Southeast U.S.,
in thousands of
short green
tons 1,150 1,144 1,165 3,488 3,597
New Zealand,
in thousands of
metric tons 187 148 243 446 532
Timber sales volume -
Intercompany
Northwest U.S.,
in millions of
board feet - - 2 - 36
Southeast U.S.,
in thousands of
short green
tons 19 2 13 24 21
New Zealand,
in thousands of
metric tons 40 26 16 85 39
Acres sold 5,744 12,415 14,657 37,867 37,552
Wood Products
Lumber sales volume,
in millions of
board feet 78 73 87 222 252
Medium-density
fiberboard
sales volume,
in thousands of
cubic meters 49 41 40 131 117
- F -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES (3)
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars)
Performance Timber Wood Other Corporate
Fibers and Land Products Operations and other Total
---------------------------------------------------------
Adjusted EBITDA
Three Months Ended
September 30, 2003
Cash provided by
operating
activities $14.4 $63.7 $2.6 $(0.5) $(16.2) $64.0
Income tax
expense - - - - 2.3 2.3
Interest
expense - - - - 12.1 12.1
Working
capital
increases
(decreases) 7.9 (11.0) (0.2) 0.4 (14.8) (17.7)
Other balance
sheet changes (0.4) (4.6) (0.1) - 6.4 1.3
---------------------------------------------------------
Adjusted
EBITDA $21.9 $48.1 $2.3 $(0.1) $(10.2) $62.0
=========================================================
June 30, 2003
Cash provided by
operating
activities $25.7 $80.4 $(0.8) $0.8 $(36.6) $69.5
Income tax
expense - - - - 10.3 10.3
Interest
expense - - - - 12.4 12.4
Working
capital
increases
(decreases) (2.9) (0.7) 1.6 (2.1) 21.5 17.4
Other balance
sheet changes (0.5) (2.1) - 0.6 (12.2) (14.2)
-------------------------------------- -----------------
Adjusted
EBITDA $22.3 $77.6 $0.8 $(0.7) $(4.6) $95.4
====================================== =================
September 30, 2002
Cash provided by
operating
activities $39.7 $61.2 $0.2 $(2.2) $(25.4) $73.5
Income tax
expense - - - - 6.4 6.4
Interest
expense - - - - 14.5 14.5
Working capital
increases
(decreases) (9.5) (0.4) (1.1) 3.1 15.4 7.5
Other balance
sheet changes (0.5) (4.0) (0.2) (0.8) (14.1) (19.6)
---------------------------------------------------------
Adjusted
EBITDA $29.7 $56.8 $(1.1) $0.1 $(3.2) $82.3
=========================================================
Nine Months Ended
September 30, 2003
Cash provided by
operating
activities $51.5 $193.5 $(0.4) $5.7 $(77.5)$172.8
Income tax
expense - - - - 12.3 12.3
Interest
expense - - - - 36.9 36.9
Working
capital
increases
(decreases) 10.8 (12.4) 3.4 (6.7) 10.2 5.3
Other balance
sheet changes (0.6) (6.9) (0.2) 0.4 2.2 (5.1)
---------------------------------------------------------
Adjusted
EBITDA $61.7 $174.2 $2.8 $(0.6) $(15.9)$222.2
=========================================================
September 30, 2002
Cash provided by
operating
activities $91.4 $164.5 $(0.1) $6.3 $(58.1)$204.0
Income tax
expense - - - - 16.7 16.7
Interest
expense - - - - 45.3 45.3
Working capital
increases
(decreases) (14.9) (1.2) 4.9 (4.0) 8.5 (6.7)
Other balance
sheet changes 8.9 (5.4) (0.6) (2.4) (24.7) (24.2)
---------------------------------------------------------
Adjusted
EBITDA $85.4 $157.9 $4.2 $(0.1) $(12.3)$235.1
=========================================================
(3) Unusual, non-trade intercompany items between the segments have
been eliminated.
- G -
RAYONIER
RECONCILIATION OF NON-GAAP MEASURES
SEPTEMBER 30, 2003 (unaudited)
(millions of dollars)
Three Months Ended Nine Months Ended
----------------------------------------------
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
----------------------------------------------
Free cash flow
Cash provided by
operating activities $64.0 $69.5 $73.5 $172.8 $204.0
Custodial capital
spending, net (18.1) (13.2) (21.4) (47.3) (49.5)
Purchase of assets
previously leased (5.4) - - (5.4) -
Dividends at prior year
level (10.1) (10.1) (10.0) (30.2) (29.9)
Required debt
repayments (4) (1.2) (0.7) (1.2) (2.7) (4.9)
Tax benefit on exercise
of stock options (2.8) (0.8) (0.1) (3.6) (2.5)
----------------------------------------------
Free cash flow $26.4 $44.7 $40.8 $83.6 $117.2
==============================================
(4) The required repayments represent debt that matured and was paid
during the period. In addition to the required payments, the
Company made discretionary debt repayments as indicated below:
Discretionary debt
repayments $- $5.0 $40.0 $30.0 $120.0
==============================================
Custodial capital
spending, net
Capital expenditures,
net of sales and
retirements $20.6 $14.5 $23.5 $53.3 $57.1
Discretionary capital
expenditures (2.5) (1.3) (2.1) (6.0) (7.6)
----------------------------------------------
Custodial capital
spending, net (5) $18.1 $13.2 $21.4 $47.3 $49.5
==============================================
(5) Custodial Capital Spending, net, a non-GAAP measure, is defined
as capital expenditures, net of retirements, required to maintain
the Company's current earnings level over the cycle and to keep
facilities and equipment in safe and reliable condition as well
as in compliance with regulatory requirements.
- H -
CONTACT: Rayonier, Jacksonville
Media:
Jay Fredericksen, 904-357-9106
or
Investors:
Parag Bhansali, 904-357-9155
SOURCE: Rayonier
