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Rayonier Reports Fourth Quarter Results

Jan. 26, 2006 - Rayonier today reported fourth quarter 2009 net income of $98 million, or $1.21 per share. For the full year, net income totaled $313 million, or $3.91 per share.

These results include a special item for earnings related to the alternative fuel mixture credit (“AFMC”) of $64 million, or 79 cents per share, for the fourth quarter and $193 million, or $2.41 per share, for the full year. Excluding the AFMC, fourth quarter earnings were $33 million, or 42 cents per share, compared to $43 million, or 55 cents per share, in the prior year period. Earnings for full year 2009, excluding the AFMC, were $120 million, or $1.50 per share, compared to $149 million, or $1.87 per share, in 2008.

Cash provided by operating activities was $307 million for 2009 compared to $340 million in 2008. Cash available for distribution1 (CAD) was $230 million compared to $213 million in 2008. (See Schedule D for more details.)

"We performed well in 2009 despite the difficult economic conditions facing our timber and real estate operations. Strong earnings in Performance Fibers along with a solid balance sheet and conservative debt levels provided significant operating flexibility,” commented Lee M. Thomas, chairman, president and chief executive officer.

“In Timber, we deferred harvesting higher-value sawtimber until markets improve to preserve value for the future, while in Real Estate, we sold only those non-strategic properties where we could realize attractive returns. Overall, we generated strong cash flow in 2009, with cash available for distribution above 2008 levels, and well in excess of our $2.00 per share dividend.”

Timber

In the fourth quarter, sales of $34 million were $19 million below 2008, while operating income of $7 million declined $3 million. Full year sales of $159 million declined $40 million from 2008, while operating income of $7 million decreased $24 million.

In the Eastern region, sales and operating income decreased from the prior year periods due to weaker sawlog markets and a sales mix shift from sawtimber to lower-priced pulpwood. The impact on prices and volumes was partially offset by lower depletion and logging costs.

In the Western region, full year sales and operating income decreased from 2008 as weak demand and planned harvest reductions negatively impacted prices and volumes. In the fourth quarter, however, operating results improved from the prior year period as lower sales prices and volumes were offset by decreased logging and transportation costs.

In December of 2009, our New Zealand joint venture, Matariki Forestry Group (Matariki), signed an agreement to sell a 35 percent interest in the joint venture to a new investor. Consummation of this transaction is subject to approval from the New Zealand Overseas Investment Office, which is expected in the first quarter of 2010. Upon closing, Rayonier’s ownership interest in Matariki will decline from 40 percent to 26 percent. Rayonier will continue to manage the joint venture.

Real Estate

Sales of $11 million were $37 million below fourth quarter 2008, while operating income of $5 million declined $25 million. As expected, there were no significant non-strategic timberland sales in the fourth quarter of 2009 compared to 28,000 acres sold in the prior year period. However, rural acres sold were above the prior year period.

Full year sales of $101 million were $26 million below 2008, while operating income of $56 million decreased $24 million, driven by lower per acre prices primarily due to soft markets and sales mix. Non-strategic timberland prices remained solid although below their 2008 peak.

Performance Fibers

For the quarter, sales of $241 million were $16 million above the prior year period, while operating income of $59 million increased $27 million. The improvement is primarily due to lower production and transportation costs as well as higher cellulose specialties prices and volumes, somewhat offset by a decline in fluff prices.

For the year, sales of $839 million were $41 million above 2008, while operating income increased $35 million to $184 million. Higher cellulose specialties prices driven by strong customer demand were partially offset by a decline in absorbent materials prices and lower cellulose specialties volumes.

Other Items

Excluding the impact of the AFMC, Corporate and other expenses were $10 million for the quarter and $28 million for full year 2009. Fourth quarter expenses increased $3 million from the prior year period primarily due to higher stock-based and other incentive compensation expense. However, for the year, expenses declined $2 million.

Interest and other expenses for the fourth quarter were comparable to the prior year period, but were $2 million above the full year as higher average debt balances more than offset lower interest rates.

The fourth quarter effective tax rate before discrete items was 20.2 percent in 2009 and 14.0 percent in 2008. For the year, the effective tax rate before discrete items was 21.6 percent in 2009 and 15.0 percent in 2008. The increased rates in 2009 were due to proportionately higher earnings from the taxable REIT subsidiary (“TRS”).

Including discrete items, the effective tax rates for the quarter and year were 9.0 percent and 12.9 percent compared to 13.0 percent and 16.5 percent in 2008, respectively.

In 2009, $20 million of the AFMC was used to offset the TRS’ federal estimated income tax payments. An additional $15 million is expected to be applied against income tax liabilities during 2010; a cash refund for the remaining $180 million of the AFMC is anticipated to be received in 2010 after filing of the 2009 tax return.

Outlook

“We are encouraged by recent timber price improvement and continued strength in pulpwood demand. In Real Estate, we expect increased interest in rural, conservation and non-strategic properties. In Performance Fibers, we anticipate continued solid demand for cellulose specialties and absorbent materials,” said Thomas.

“Accordingly, we expect this year’s Timber and Real Estate results to exceed 2009 and Performance Fibers results to be comparable. Overall, we anticipate earnings and cash available for distribution to be above 2009 which, along with our strong balance sheet and significant liquidity, position us well for future growth opportunities,” Thomas concluded.

SOURCE: Rayonier




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