Rayonier Reports Third Quarter 2005 Results

Business Wire,  Oct 24, 2005  

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JACKSONVILLE, Fla. -- Rayonier (NYSE:RYN) today reported third quarter income from continuing operations of $74.9 million, or 96 cents per share. This compares to $41.6 million, or 54 cents per share, in second quarter 2005 and $25.1 million, or 33 cents per share, in third quarter 2004. Net income for the quarter was $75.0 million, or 96 cents per share. All earnings-per-share data reflect the three-for-two stock split completed October 17, 2005.

Third quarter 2005 results included the following special items:

--An income tax benefit of $25.8 million, or 33 cents per share, associated with the repatriation of foreign earnings.

--Tax and related interest benefits of $8.1 million, or 10 cents per share, from the favorable resolution of tax audits for prior years.

--A gain of $5.2 million, or 7 cents per share, from an arbitration award related to the sharing of insurance proceeds by the company's former parent.

Second quarter 2005 special items included a tax benefit of $7.2 million, or 9 cents per share, related to an IRS audit settlement.

Also, both third and second quarter 2005 results included tax benefits from like-kind exchange (LKE) transactions of approximately $1 million compared to $10 million, or 13 cents per share, in third quarter 2004.

Lee Nutter, Chairman, President and CEO, said: "With strong demand and pricing across all product lines, income from continuing operations was above both the second quarter and last year's third quarter, despite higher raw material and energy costs. Cash flow, including proceeds from the sale of our medium-density-fiberboard business, remained strong, enabling us to reduce debt by 14 percent from the end of the prior quarter."

Excluding the special items, third quarter income from continuing operations was above second quarter primarily due to higher real estate sales, somewhat offset by a normal seasonal decline in Northwest timber sales. On the same basis, compared to third quarter 2004, earnings improved primarily due to increased real estate sales and Northwest timber prices, partially offset by reduced LKE tax benefits.

Cash provided by operating activities for the nine months ended September 30 of $206 million was $26 million below the comparable period in 2004 due to working capital increases. However, Cash Available for Distribution (CAD) of $159 million was $11 million above last year. (CAD is a non-GAAP measure defined and reconciled to GAAP measures in the attached exhibits.)

Sales for the third quarter of $300 million were $9 million and $32 million above second quarter 2005 and third quarter 2004, respectively.

Debt at quarter-end of $590 million was $69 million below year end 2004 primarily due to strong cash flow and proceeds of $40 million from the sale of the medium-density-fiberboard business. Debt less cash of $480 million declined $94 million from year end. The debt-to-capital ratio of 42.2 percent strengthened from 45.3 percent at year end. Cash at September 30, 2005, was $110 million.

Timber

Sales of $46 million and operating income of $16 million were $9 million and $7 million below second quarter, respectively, primarily due to the normal seasonal decline in Northwest volume and higher costs. Compared to third quarter 2004, sales and operating income improved $6 million and $4 million, respectively, mainly due to higher Northwest prices partially offset by lower volume and increased costs.

Real Estate

Sales of $28 million and operating income of $22 million were $13 million and $11 million above second quarter, respectively, and $20 million and $17 million higher than third quarter 2004, respectively, due to increased sales of development and rural properties and higher per acre prices for development properties.

Performance Fibers

Sales of $159 million were $6 million and $16 million above second quarter 2005 and third quarter 2004, respectively, primarily due to higher prices for absorbent materials and cellulose specialty products and increased volumes of cellulose specialty products. However, operating income of $16 million decreased $3 million and $1 million compared to second quarter 2005 and third quarter 2004, respectively, due to higher wood, chemical, and energy costs.

Wood Products

Sales of $36 million and operating income of $5 million were each $1 million below the second quarter. Sales improved $2 million from third quarter 2004 while operating income was essentially unchanged as higher prices were offset by increased manufacturing costs.

Other Operations

Sales of $32 million and essentially breakeven operating results were both $1 million above second quarter. Sales declined $14 million from third quarter 2004 due to weaker trading activity while operating income was unchanged.

Other Items

Corporate expenses of $10.2 million were $1.9 million and $2.2 million above second quarter 2005 and third quarter 2004, respectively, largely due to higher stock price-based incentive compensation.

Intersegment eliminations and other of $2.2 million was $2.6 million and $2 million favorable to second quarter 2005 and third quarter 2004, respectively, primarily due to proceeds from an insurance settlement.