Rayonier Posts Higher 1st Quarter Income
April 22, 2008 - Rayonier today reported first quarter net income of $40.6 million, or 51 cents per share, compared to $35.1 million, or 45 cents per share, in first quarter 2007.
“Despite a weak timber market, first quarter results were quite good,” said Lee M. Thomas, Chairman, President and CEO. “Softness in timber prices and lower volumes from our planned reductions in sawlog harvests were offset by strong demand in Performance Fibers and demand for higher and better use rural properties and non-strategic timberlands. We also executed on our strategy to grow and upgrade our timberland portfolio, as evidenced by our recent acquisitions of more than 110,000 acres in Washington and New York."
Cash provided by operating activities of $100 million was $48 million above the prior year period due to lower working capital requirements and higher operating earnings. Cash available for distribution1 of $61 million was comparable to first quarter 2007.
In first quarter 2008, sales and operating income were $47 million and $12 million, $18 million and $14 million below the prior year period, respectively, due to the weak housing market’s impact on sawlog pricing and the Company’s planned reductions in sawlog volume. Based on current conditions, the Company expects to continue to limit its sawtimber harvest for the balance of the year preserving higher-value timber until markets improve.
Sales and operating income were $29 million and $22 million, $8 million and $7 million above first quarter 2007, respectively, due to increased rural property prices and volumes and non-strategic timberland sales. The first quarter improvement in volume was partially attributable to the acceleration of transactions originally expected to close in second quarter 2008.
Sales and operating income were $175 million and $37 million, an improvement of $9 million and $10 million from the prior year period, respectively. Increased prices and lower depreciation expense more than offset higher raw materials costs as well as the maintenance costs and lower volume resulting primarily from unplanned downtime early in the quarter.
Corporate expenses were $7 million, down $2 million from the prior year period primarily due to lower stock-based and other incentive compensation expenses.
Interest expense of $11 million was $2 million below first quarter 2007 primarily due to lower interest rates resulting from the fourth quarter 2007 debt refinancing.
The first quarter effective tax rate before discrete items increased to 20.5 percent compared to 16.7 percent in 2007 due to proportionately higher earnings from the Company’s taxable REIT subsidiary.2 Including discrete items, the first quarter effective tax rate was 20.2 percent.
“Given the outlook for the timber and real estate markets, we expect that second quarter and full year 2008 earnings will be below prior year periods. However, we anticipate that the softness in those markets will be somewhat offset by the continued strength in Performance Fibers,” said Thomas. “In Real Estate, we anticipate continued interest in rural properties and non-strategic timberlands although sales will be more heavily weighted to the second half of the year. Cash available for distribution is expected to remain strong, although below 2007.”
NOTE: 1 Cash available for distribution (CAD) is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.