Rayonier Reports Lower First Quarter Income
April 25, 2006 (Press Release) - Rayonier today reported first quarter net
income of $23.3 million, or 30 cents per share. This compares to $56.4
million, or 73 cents per share, in fourth quarter 2005 and $34.4
million, or 45 cents per share, in first quarter 2005. There were no
special items in the quarter, however, fourth quarter 2005 included a
gain of $30.5 million, or 39 cents per share, on the sale of New
Zealand timber assets to a consortium including Rayonier, while first
quarter 2005 included a tax benefit of $9.5 million, or 12 cents per
share, resulting from an IRS audit settlement.
Lee Nutter, Chairman, President and CEO, said: "We had a good
quarter, in line with our expectations, with continued strong demand
and prices for U.S. timber and cellulose specialties. Also, our real
estate subsidiary, TerraPointe, continued to experience very strong
interest in its Southeast coastal corridor properties. As expected,
real estate operating income was below the comparable periods due, in
part, to our strategy of moving up the real estate value chain and
away from traditional bulk land sales, and also the timing of
First quarter net income was below fourth quarter, excluding the
special item, primarily due to lower real estate sales, a higher tax
rate and the impact of expensing stock options. These were partly
offset by improved performance fibers results. On the same basis,
earnings were also below first quarter 2005 primarily due to reduced
real estate sales and higher performance fibers costs.
Sales for the first quarter of $277 million were $39 million below
the fourth quarter but $2 million above first quarter 2005.
Cash provided by operating activities of $51 million was $25
million below first quarter 2005 primarily due to lower operating
earnings and higher working capital. Cash Available for Distribution
(CAD) of $24 million was $39 million below first quarter 2005
primarily due to reduced earnings and increased capital spending. (CAD
is a non-GAAP measure defined and reconciled to GAAP in the attached
Debt of $558 million and the debt-to-capital ratio of 38.9 percent
at quarter-end were comparable to year-end 2005. Cash at March 31,
2006, was $126 million.
Sales of $54 million were $1 million below fourth quarter 2005
while operating income of $24 million was essentially unchanged, as
lower Northwest prices were offset by higher volumes in that region as
well as increased Southeast prices. Compared to first quarter 2005,
sales improved $3 million primarily due to higher Southeast prices
while operating income was unchanged as the improved prices were
offset by lower New Zealand earnings and increased costs in the
Sales of $13 million and operating income of $10 million were $7
million and $6 million below fourth quarter 2005, respectively,
primarily due to pricing for development properties that, while very
strong, was below the exceptionally high prices received in the
previous quarter. Sales volume and pricing for rural properties
increased from the fourth quarter. Compared to first quarter 2005,
sales and operating income decreased $11 million and $5 million,
respectively, mainly due to fewer development and rural acres sold,
partly offset by higher per acre prices for both development and rural
Sales of $146 million were $27 million below fourth quarter,
however, operating income of $10 million increased $4 million as
higher cellulose specialties prices more than offset lower volume and
absorbent materials prices. Compared to first quarter 2005, sales
increased $3 million largely due to cellulose specialties prices
partly offset by reduced volume and absorbent materials prices.
Operating income, however, decreased $2 million mainly due to higher
raw material and energy costs.
Sales of $32 million were $3 million below fourth quarter 2005
primarily due to lower volume while operating income of $3 million was
essentially unchanged. Compared to first quarter 2005, sales improved
$1 million while operating income declined $1 million due to increased
manufacturing costs partially offset by higher volume and prices.
Sales of $32 million and essentially break even operating results
were $2 million and $1 million below fourth quarter 2005,
respectively, primarily due to lower coal royalties. Compared to first
quarter 2005, sales improved $6 million while operating income
declined $1 million mainly due to lower trading margins.
Corporate expenses of $9.5 million were $0.9 million below fourth
quarter 2005 as lower incentive compensation accruals were partially
offset by $2.1 million of stock option expense. Compared to first
quarter 2005, corporate expenses were $1.9 million higher, principally
due to the impact of expensing stock options.
Intersegment eliminations and other income of $0.3 million was
$3.2 million favorable to fourth quarter 2005, primarily due to a $3
million increase in disposition reserves in 2005, and comparable to
last year's first quarter.
Interest expense of $12 million was in line with both fourth and
first quarters of 2005.
Interest and other income of $2.2 million was $2 million below
fourth quarter 2005 but $1.8 million above first quarter 2005. The
unfavorable variance to the fourth quarter was primarily due to a gain
on the sale of a manufacturing asset in that quarter, while the
favorable variance to the first quarter was mainly due to higher
Excluding discrete items, the effective tax rate for the quarter
was 16.4 percent compared to 17.2 percent in first quarter 2005.
Including discrete items, the first quarter 2005 effective tax rate
was substantially lower due to the favorable IRS audit settlement in
that period (see Schedule J for details).
The company said second quarter 2006 net income is expected to be
somewhat above the first quarter with improved cellulose specialties
volume and product mix as well as higher Northwest timber prices,
partly offset by increased performance fibers manufacturing costs.
However, earnings are expected to be somewhat below second quarter
2005, excluding special items, primarily due to higher performance
fibers manufacturing costs partly offset by improved prices for
cellulose specialties and Southeast timber.
Nutter said: "With strong demand and pricing for cellulose
specialties, U.S. timber and Southeast real estate, we continue to
believe that full-year earnings will be somewhat above 2005, excluding
special items. The second half of the year should be much stronger
than the first, particularly due to increased real estate
Rayonier owns, leases or manages 2.5 million acres of timberland
in the U.S., New Zealand and Australia. Its real estate subsidiary,
TerraPointe LLC, is focused on maximizing the value of its
higher-and-better use properties, particularly in the fast growing
counties along Interstate 95 between Savannah, Georgia, and Daytona
Beach, Florida, where the company owns approximately 200,000 acres.
Rayonier is also the world's leading producer of high performance
cellulose specialty products. Approximately 40 percent of Rayonier's
sales are outside the U.S. to customers in more than 50 countries.