Rayonier Posts Second Quarter Profit on Strong Markets
July 29, 2010 - Rayonier today reported second quarter net income of $39 million, or 48 cents per share, a 33 percent increase over second quarter 2009 net income of $28 million, or 36 cents per share, which excludes a special item.1 Including the special item,1 second quarter 2009 net income was $108 million, or $1.35 per share.
For the first six months, net income totaled $96 million, or $1.18 per share, compared to $134 million, or $1.68 per share, in 2009. Excluding special items,1,2 year-to-date net income rose to $84 million, or $1.04 per share, from $54 million, or 68 cents per share, in 2009.
Cash provided by operating activities of $356 million for the first six months of 2010 was $229 million above the prior year. Cash available for distribution3 of $303 million was $207 million above the first half of 2009. In April, the company received a cash refund from the Internal Revenue Service of $189 million for the alternative fuel mixture credit (AFMC).
“We are pleased with our second quarter results, which reflect continued improvement in many of our markets,” said Lee M. Thomas, chairman, president and CEO. “In Timber, we took advantage of good export markets for sawtimber in the West and continued demand for pulpwood in the East. In Performance Fibers, we successfully executed our planned Jesup and Fernandina maintenance shutdowns, returning to full production ahead of expectations.”
Second quarter sales of $49 million were $5 million above 2009, while operating income of $9 million increased $8 million. Year-to-date sales of $96 million increased $18 million from prior year, while operating income of $17 million was $19 million above the prior year.
In the Eastern region, second quarter operating income improved from the 2009 period as higher sales prices more than offset lower volumes. This year we returned to more normal thinning levels.
Year-to-date sales and operating income in the Eastern region increased from the prior year period as significantly higher prices more than offset lower volumes. Operating income also benefited from lower costs due to geographic sales mix and improved production and transportation costs.
In the Western region, sales and operating income improved from prior year periods primarily due to higher prices driven largely by stronger export demand. Year-to-date results also reflect lower production and transportation costs as well as higher sales volumes.
Second quarter sales of $13 million were $29 million lower than last year and operating income of $4 million was $20 million below 2009. Year-to-date, sales and operating income of $46 million and $22 million were $22 million and $17 million below 2009, respectively. A reduction in non-strategic timberland sales primarily drove the decrease in sales and operating income in the second quarter and first half of 2010. The 2010 periods also reflect lower rural prices due to geographic mix.
For the quarter, sales of $202 million were $25 million above the prior year period, while operating income of $45 million increased $10 million. For the six months, sales of $402 million were $21 million above 2009, while operating income of $90 million increased $14 million. Cellulose specialties sales improved in both 2010 periods as increased volume reflecting strong demand more than offset a decline in prices from the prior year periods, which benefited from a cost-based surcharge. While absorbent materials prices improved, sales declined in both periods mainly due to lower volumes.
Operating income improved in both 2010 periods reflecting increased cellulose specialties sales volumes, higher absorbent materials prices and lower chemical costs, offset in part by higher wood costs.
Excluding special items,1,2 corporate and other expenses were $6 million for the quarter and $13 million for the six months ended June 2010, comparable to prior year periods. Interest and other expenses were also comparable to both prior year periods.
Second quarter effective tax rates before discrete items were 19.1 percent in 2010 and 21.5 percent in 2009. For the six months, the effective tax rate was 17.6 percent, down from 20.2 percent in 2009. The decreased rates in 2010 were due to proportionately higher earnings from the REIT.
Including discrete items, the effective tax rates for the quarter and year-to-date were 13.4 percent and 12.4 percent compared to 11.9 percent and 12.6 percent in 2009, respectively.
“With solid performance in the first half, we are well positioned for strong full year results. In Timber, by acting quickly to pull forward stumpage volume, we effectively locked in higher prices. In Real Estate, we are expecting an increase in rural and conservation sales in the second half while reducing our sales of non-strategic timberland. With strategic investments in our mills lowering costs and enabling us to meet increasing demand for our cellulose specialties and absorbent materials products, we are on track for another strong year in Performance Fibers,” said Thomas.
“As a result we are again increasing our 2010 guidance. We now expect earnings of $2.05 to $2.20 per share for 2010, excluding special items, and CAD of $360 million to $380 million.4”
1 Net income for the three and six months ended June 30, 2009 includes $79 million, or 99 cents per share and $79 million, or $1.00 per share, respectively, relating to the alternative fuel mixture credit.
2 Net income for the six months ended June 30, 2010 includes a first quarter gain of $12 million, or 14 cents per share, from the sale of a portion of the Company’s interest in its New Zealand joint venture.
3 Cash available for distribution (CAD) is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.
4 Projected full year CAD reflects AFMC proceeds as well as an increase in capital expenditures and pension contributions from 2009.