Rayonier fourth quarter income dips slightly
Jan. 23, 2007 - Rayonier today reported fourth quarter income from
continuing operations of $50.0 million, or 64 cents per share. This
compares to $55.0 million, or 70 cents per share, in the third quarter
and $56.4 million, or 73 cents per share, in fourth quarter 2005.
Full-year 2006 income from continuing operations was $171.1 million,
or $2.19 per share, compared to $207.8 million, or $2.68 per share, in
Fourth quarter 2006 included a special item gain of $3.7 million,
or 5 cents per share, for a deferred tax adjustment. Third quarter
included special item gains of $5.3 million, or 7 cents per share, and
fourth quarter 2005 included special item gains of $30.1 million, or
39 cents per share. In 2006 special items totaled $15.5 million, or 20
cents per share, compared to $85.9 million, or $1.11 per share, in
2005. (See Schedule H for details.)
Lee Nutter, Chairman, President and CEO, said: "We had another
very successful year with strong and improved results in each of our
three core businesses.
"In Timber, we increased the geographic
footprint of our holdings with the purchase of 228,000 acres in six
states and are now the 5th largest private timberland owner in the
U.S. Also, we monetized 20 percent of our equity interest in a 354,000
acre Rayonier-managed New Zealand joint venture and, with a 40 percent
interest, we remain the largest investor.
"In Performance Fibers, we
continued to see very strong demand for our high-value cellulose
specialties and secured long-term contracts for 80 percent of that
production into 2011 with the world's largest manufacturers of
acetate-based products and other key customers.
"In Real Estate,
despite a softening in residential markets, operating income for the
year was 39 percent higher than 2005 due to continued interest in our
extensive and diverse development and rural properties. Also, as part
of our strategy to move up the real estate value chain we entered into
our first 'participation' agreements with two premier developers."
Net income in the fourth quarter was $55.3 million, or 71 cents
per share, compared to $55.0 million, or 70 cents per share, in third
quarter 2006, and $56.4 million, or 73 cents per share, in fourth
quarter 2005. Fourth quarter 2006 included income from discontinued
operations of $5.3 million, or 7 cents per share, reflecting a
reduction in environmental reserves. Full-year 2006 net income was
$176.4 million, or $2.26 per share, compared to $182.8 million, or
$2.36 per share, in 2005.
Excluding special items, fourth quarter income from continuing
operations was below third quarter primarily due to lower Real Estate
sales partly offset by improved Performance Fibers results. On the
same basis, earnings improved compared to fourth quarter 2005
primarily due to stronger Performance Fibers results and increased
Real Estate sales partly offset by lower Northwest timber volume and
Southeast timber prices.
Sales for the fourth quarter increased to $329 million from $312
million in the third quarter and $316 million in fourth quarter 2005.
Sales for the year of $1.2 billion were 4 percent higher than in 2005.
Cash provided by operating activities for 2006 of $307 million was
$53 million above 2005 due to higher operating earnings and lower
working capital requirements. Cash Available for Distribution (CAD) of
$178 million for 2006 was $9 million above 2005 mainly due to higher
operating earnings. (CAD is a non-GAAP measure defined and reconciled
to GAAP in the attached exhibits.)
Debt at year-end of $659 million was $101 million above year-end
2005 largely due to timberland acquisitions. The debt-to-capital ratio
was 42.1 percent compared to 38.7 percent at prior year-end. Cash was
$40 million compared to $146 million at year-end 2005.
Sales of $47 million and operating income of $19 million were $3
million and $2 million above third quarter, respectively, primarily
due to higher Southeast volume and hunting lease income partly offset
by lower Southeast prices and Northwest volume. Compared to fourth
quarter 2005, sales and operating income decreased $9 million and $5
million, respectively, mainly due to lower Northwest volume and
Sales of $35 million and operating income of $30 million were $12
million and $8 million below third quarter, respectively, primarily
due to fewer development acres sold, partially offset by an increase
in the price and number of rural acres sold. Compared to fourth
quarter 2005, sales and operating income increased $15 million and $14
million, respectively, mainly due to an increase in development and
rural acres sold and improved rural prices.
Sales and operating income of $196 million and $33 million,
respectively, were $33 million and $12 million above third quarter
primarily due to increased volume. Operating income also benefited
from lower manufacturing costs, including a favorable property tax
settlement which resulted in the reversal of $4.9 million in accruals
from prior years. Compared to fourth quarter 2005, sales and operating
income improved $23 million and $26 million, respectively, largely due
to higher cellulose specialties prices and volume, while operating
income also benefited from the property tax settlement and lower
Sales of $21 million were $5 million below third quarter due to a
decline in volume and prices, while an operating loss of $4 million
was unfavorable to third quarter by $1 million due to reduced prices
partly offset by lower manufacturing costs. Compared to fourth quarter
2005, sales and operating income declined $13 million and $7 million,
respectively, also due to weaker prices partially offset by lower
Sales of $29 million were $3 million below third quarter and $4
million lower than fourth quarter 2005, however, operating income of
$1 million was up from essentially break even results in both
comparative periods primarily due to settlement of a coal royalty
Corporate expenses of $11.3 million were $4.2 million above third
quarter mainly due to higher stock-price based incentive compensation
and business development expenses. Compared to fourth quarter 2005,
expenses increased $0.9 million largely due to higher incentive
Intersegment eliminations and other of $0.5 million income was
comparable to third quarter and $3.4 million favorable to fourth
quarter 2005 primarily due to an increase in disposition reserves in
Interest expense of $13.8 million was $2.8 million above third
quarter due to a litigation-related accrual and higher debt. Compared
to fourth quarter 2005, interest expense increased $1.8 million mainly
due to the legal matter.
Interest and other income of $2.5 million was $0.5 million below
third quarter. Compared to fourth quarter 2005, it was $1.7 lower
largely due to a gain on sale of a manufacturing asset in that
Income from discontinued operations was $5.3 million in fourth
quarter 2006 due to a more cost-effective remediation plan at a closed
facility resulting in a reduction in environmental reserves.
The full-year and fourth quarter 2006 effective tax rates, before
discrete items, were 16.3 and 20.7 percent, respectively, compared to
14.2 and 14.9 percent in the 2005 comparable periods. The increase was
primarily due to lower tax benefits from foreign operations, partly
offset by higher REIT income. The 2005 rates included a $6.5 million
tax benefit from the sale of New Zealand timber assets. Including
discrete items, the full year and fourth quarter 2006 rates were 10.0
and 11.4 percent, respectively. (See Schedule J for details.)
"Our focus this year is on integrating the 2006 timberland
acquisitions into our operations, continuing to move up the value
chain in real estate through additional 'participation' agreements and
on high-return cost improvement projects at our Performance Fibers
mills," Nutter said.
"Our mix of core businesses gives Rayonier strength and balance.
As a result, excluding special items, we expect another good year with
earnings generally in line with 2006. While the housing slowdown will
put pressure on timber and real estate markets in the near term, the
impact should be mostly offset by the strength of our Performance
Fibers business. First quarter results are expected to be slightly
below first quarter 2006 primarily due to lower timber earnings.