Rayonier 2nd Quarter Earnings Rise on Demand, Pricing
July 25, 2006 (Press Releaase) - Rayonier today reported second quarter income
from continuing operations of $42.8 million, or 55 cents per share.
This compares to $23.3 million, or 30 cents per share, in the first
quarter and $41.6 million, or 54 cents per share, in second quarter
2005. Second quarter 2006 included a special item gain of $6.5
million, or 8 cents per share, on the sale of a portion of the
company's investment in a New Zealand timberland consortium. There
were no special items in the first quarter, while second quarter 2005
included a tax benefit of $7.2 million, or 10 cents per share,
resulting from an IRS audit settlement.
Net income equaled income from continuing operations for both the
second and first quarters of 2006. Net income for second quarter 2005
was $16.9 million, or 22 cents per share, which included a
discontinued operation loss of $24.7 million, or 32 cents per share,
almost entirely due to a write-down of the company's
Lee Nutter, Chairman, President and CEO, said: "Second quarter
results reflect the strength and balance of our three core businesses
as demand and prices remained strong, particularly for cellulose
specialties and U.S. timber."
Second quarter results, excluding special items, were above the
first quarter primarily due to increased volumes and prices for
Northwest timber and cellulose specialties. Compared to second quarter
2005, earnings were up due to higher prices and Northwest timber
volumes, partly offset by increased performance fibers manufacturing
costs and lower lumber prices.
Sales for the second quarter of $312 million were $35 million and
$22 million above first quarter 2006 and second quarter 2005,
Cash provided by operating activities of $133 million for the six
months ended June 30 was $10 million above the 2005 comparable period
primarily due to lower working capital requirements partly offset by
reduced earnings. For the same period, Cash Available for Distribution
(CAD) of $82 million was $14 million below 2005 principally due to
capital spending for a major energy cost reduction project partly
offset by increased cash provided by operating activities. (CAD is a
non-GAAP measure defined and reconciled to GAAP in the attached
Debt of $557 million and the debt-to-capital ratio of 38.6 percent
at quarter-end were comparable to year-end 2005. Cash at June 30 was
Sales of $61 million and operating income of $30 million were $7
million and $6 million above first quarter, respectively, primarily
due to higher Northwest volume and prices. Compared to second quarter
2005, both sales and operating income increased $7 million principally
due to higher prices and Northwest volume.
Sales of $18 million and operating income of $11 million were $5
million and $1 million above first quarter, respectively, due to a
significant increase in the number of rural acres sold. Compared to
second quarter 2005, sales were up $3 million while operating income
was essentially unchanged due to a higher proportion of rural versus
development acres sold.
Sales of $166 million and operating income of $16 million were $20
million and $5 million above first quarter, respectively. The results
reflect higher prices and volumes partly offset by increased costs.
Compared to second quarter 2005, sales increased $13 million mainly
due to higher cellulose specialties volume and prices. However,
operating income decreased $3 million as higher raw material and
energy costs more than offset increased sales.
The company recently announced that it has secured long term
contracts into 2011 with its key customers for nearly 80 percent of
its high-value cellulose specialties production, representing almost 2
million metric tons and more than $2 billion in revenue at current
Sales of $32 million were $1 million above first quarter while
operating income of $2 million decreased $1 million. The improvement
in sales was mostly due to higher volume partly offset by lower
prices. Operating income declined principally due to lower prices
partially offset by reduced manufacturing costs. Compared to second
quarter 2005, sales and operating income were both down $4 million
primarily due to lower prices.
Sales of $35 million were $3 million above first quarter while
essentially break even operating income improved by $1 million due to
stronger trading activity and coal royalties. Compared to second
quarter 2005, sales and operating income improved $4 million and $1
million, respectively, mainly due to stronger trading activity.
Corporate expenses of $7.1 million were $2.4 million below first
quarter and $1.2 million below second quarter 2005, primarily due to
lower stock-based incentive compensation.
Intersegment eliminations and other expense of $0.7 million was $1
million unfavorable to first quarter largely due to an increase in
disposition reserves, but comparable to second quarter 2005.
Interest expense of $11.9 million was comparable to first quarter
and $0.9 million below second quarter 2005 mainly due to lower debt.
Interest and other income of $1.8 million was comparable to first
quarter, but $0.8 million above second quarter 2005 primarily due to
higher interest income.
Excluding discrete items, the effective tax rate for the quarter
was 14.0 percent compared to 16.4 percent in the first quarter largely
due to foreign earnings taxed below the U.S. statutory rate. The
second quarter 2005 rate was 14.1 percent. Through June 30, the
effective tax rate, before discrete items, was 14.9 percent compared
to 15.7 percent for the comparable period last year mainly due to U.S.
taxes recorded on undistributed foreign earnings in 2005 (see Schedule
J for details).
The company said third quarter 2006 results are expected to be
above the second quarter (excluding special items), due to higher real
estate sales partly offset by seasonally lower Northwest timber
volume. Also, earnings are anticipated to be above third quarter 2005
primarily due to increased real estate sales and higher cellulose
specialties prices partly offset by lower lumber prices and higher
performance fibers manufacturing costs.
Nutter said: "As we previously indicated, the second half of the
year should be much stronger than the first due to increased real
estate revenues - particularly from transactions involving our
high-value development properties - and stronger performance fibers
operating income. As a result, we still expect full-year earnings to
be above 2005, excluding special items."
Rayonier is a leading international forest products company with
three core businesses: Timber, Real Estate and Performance Fibers. It
owns, leases or manages 2.5 million acres of timber and land in the
U.S., New Zealand and Australia. The company's holdings include
approximately 200,000 acres with residential and commercial
development potential along the fast-growing Interstate 95 corridor
between Savannah, Georgia, and Daytona Beach, Florida. Its Performance
Fibers business is the world's leading producer of high-value
specialty cellulose fibers. Approximately 40 percent of the company's
sales are outside the U.S. to customers in more than 50 countries.