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Rayonier Reports Second Quarter 2005 Results.



JACKSONVILLE Jacksonville.

1 City (1990 pop. 29,101), Pulaski co., central Ark., inc. 1941. The city has varied industries, including printing and publishing and the manufacture of electronic equipment, ordnance, and plastic and metal products.
, Fla. -- Rayonier Rayonier NYSE: RYN is the seventh largest private owner of timberland in the United States. It also owns land in New Zealand.

Headquartered in Jacksonville, Florida, Rayonier was founded in 1926 as the Rainier Pulp and Paper Company.
 (NYSE NYSE

See: New York Stock Exchange
:RYN RYN Reply with Yes or No
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) today reported second quarter income from continuing operations continuing operations

Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the
 of $41.6 million, or 81 cents per share Cents per share

The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned.
. This compares to $34.8 million, or 68 cents per share, in first quarter 2005 and $44.8 million, or 88 cents per share, in second quarter 2004. Net income of $16.9 million, or 33 cents per share, included a write-down Write-Down

Reducing the book value of an asset because it is overvalued compared to the market value.

Notes:
This is usually reflected in the company's income statement as an expense, thereby reducing net income.
 of $24.1 million, or 47 cents per share, and an operating loss operating loss

The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income.
 of $0.6 million, or 1 cent per share, related to the planned sale of the medium-density-fiberboard (MDF (1) (Main Distribution Frame) A wiring rack that connects outside lines with internal lines. It is used to connect public or private lines coming into the building to internal networks. ) business, now classified as a discontinued operation discontinued operation

A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations.
 for financial reporting purposes. Second quarter 2005 results also included a tax benefit of $7.2 million, or 14 cents per share, while first quarter 2005 results included a tax benefit of $9.5 million, or 19 cents per share, due to IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws.  audit settlements. Second quarter 2004 results included $15 million, or 29 cents per share, in earnings from a major real estate sale.

Lee Nutter, Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board.  said: "Income from continuing operations for the second quarter, even before the positive effect of the tax audit settlement, was above first quarter as pricing and demand remained strong across all of our businesses. Cash flow also continues to be strong increasing quarter-end cash and cash equivalents to $136 million."

Second quarter income from continuing operations was above first quarter earnings, excluding the tax benefits in both quarters, mainly due to improved results from performance fibers and lumber lumber, term for timber that has been cut into boards for use as a building material. The major steps in producing lumber involve logging (the felling and preparation of timber for shipment to sawmills), sawing the logs into boards, grading the boards according to , somewhat offset by lower real estate sales. On the same basis, compared to second quarter 2004, earnings declined primarily due to lower real estate sales, partially offset by higher Northwest For names and places containing the slightly longer word 'northwestern' (or variants), see .

Northwest or north west is the ordinal direction halfway between north and west on a compass. It is the opposite of southeast.
 U.S. timber timber: see lumber; wood.  results.

Cash provided by operating activities for the six months ended June June: see month.  30 of $123 million was $35 million below the comparable period in 2004 and Cash Available for Distribution (CAD CAD: see computer-aided design.


(Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software.
) of $94 million was $28 million below last year. (CAD is a non-GAAP measure defined and reconciled rec·on·cile  
v. rec·on·ciled, rec·on·cil·ing, rec·on·ciles

v.tr.
1. To reestablish a close relationship between.

2. To settle or resolve.

3.
 to GAAP GAAP

See: Generally Accepted Accounting Principles


GAAP

See generally accepted accounting principles (GAAP).
 in the attached exhibits.) Cash flow, while lower mainly as a result of higher working capital requirements Capital requirements

Financing required for the operation of a business, composed of long-term and working capital plus fixed assets.
 and lower real estate sales, remained robust due to continued strength in our operations.

Sales for the second quarter of $290 million were $15 million above first quarter but $36 million below second quarter 2004.

Debt at quarter-end of $687 million was $28 million above year-end year-end also year·end
n.
The end of a year.

adj.
Occurring or done at the end of the year: a year-end audit.

Noun 1.
 2004 due to inter-company transactions, however, debt less cash was $550 million, a $24 million decrease from year end. The debt-to-capital ratio of 46.3 percent compared to 45.3 percent at the end of 2004.

Timber and Real Estate

Timber sales of $55 million were $3 million higher while operating income Operating Income

The profit realized from a business' own operations.

Notes:
This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit.
 of $23 million was $1 million lower than first quarter, primarily due to higher costs. Compared to second quarter 2004, sales and operating income improved $5 million and $3 million, respectively, primarily due to increased Northwest U.S. timber prices.

Real estate sales of $15 million and operating income of $11 million were $9 million and $5 million below first quarter, respectively, and $26 million and $24 million lower than second quarter 2004, respectively, due to a large transaction in each of the prior periods.

Performance Fibers

Sales of $153 million were $10 million above first quarter, primarily due to improved prices and volumes. Operating income of $19 million increased $6 million compared to first quarter, mainly due to higher prices and lower costs (wood, maintenance and energy). Compared to second quarter 2004, sales and operating income were essentially unchanged. While higher prices positively impacted operating income, they were offset by lower volume and higher raw material costs.

Wood Products

Sales and operating income of $36 million and $6 million were $6 million and $2 million, respectively, above first quarter mainly due to improved lumber prices and volumes. Compared to second quarter 2004, sales improved $2 million while operating income was essentially the same, as higher prices offset increased manufacturing costs. (MDF is no longer included under Wood Products as it is now treated as a discontinued operation for financial reporting purposes.)

Other Operations

Sales of $32 million were $5 million above first quarter while operating income was essentially breakeven breakeven

1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations
 in both periods as higher trading volumes Trading volume

The number of shares transacted every day. As there is a seller for every buyer, one can think of the trading volume as half of the number of shares transacted. That is, if A sells 100 shares to B, the volume is 100 shares.
 were offset by lower margins. Compared to second quarter 2004, sales and operating income declined $19 million and $2 million, respectively, due to weaker trading activity and lower coal royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced.  income.

Other Items

Corporate expenses of $8.3 million were $0.7 million above first quarter, mainly due to higher stock price-based incentive compensation, but $1.4 million below second quarter 2004, largely due to lower incentive compensation expense.

The year-to-date Year-to-date (YTD)

The period beginning at the start of the calendar year up to the current date.
 effective tax rate, before discrete A component or device that is separate and distinct and treated as a singular unit.  items, was 15.7 percent compared to 24.5 percent for the same period in 2004 and 17.5 percent in the first quarter due to a higher percentage of non-taxable non-taxable adjnicht steuerpflichtig

non-taxable adj non-taxable income → reddito non imponibile 
 REIT REIT

See: Real Estate Investment Trust


REIT

See real estate investment trust (REIT).
 income and lower taxes on foreign operations (see Schedule J for details).

The overall second quarter 2005 income tax benefit of $4.5 million included two discrete items: the previously noted $7.2 million tax benefit and a $2.5 million benefit for the currency impact on the tax liability for unrepatriated foreign earnings.

Outlook

The company indicated third quarter 2005 income from continuing operations is expected to be comparable to second quarter, excluding the aforementioned a·fore·men·tioned  
adj.
Mentioned previously.

n.
The one or ones mentioned previously.


aforementioned
Adjective

mentioned before

Adj. 1.
 tax benefit of 14 cents per share, due to a significant increase in real estate earnings partly offset by lower results in performance fibers due to higher costs, and reduced foreign exchange related tax benefits. Earnings are expected to well exceed third quarter 2004 primarily due to stronger U.S. timber prices and real estate results.

Nutter said: "We are very pleased with year-to-date results and are well positioned for the second half of 2005. Demand remains strong across all businesses, particularly for higher value real estate holdings and cellulose cellulose, chief constituent of the cell walls of plants. Chemically, it is a carbohydrate that is a high molecular weight polysaccharide. Raw cotton is composed of 91% pure cellulose; other important natural sources are flax, hemp, jute, straw, and wood.  specialty A contract under seal.

A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt.
 products. We anticipate that most of the second quarter's improvement over previous expectations will continue into the third and fourth quarters and that full year 2005 income from continuing operations, excluding special items, will compare quite favorably fa·vor·a·ble  
adj.
1. Advantageous; helpful: favorable winds.

2. Encouraging; propitious: a favorable diagnosis.

3.
 to 2004."

Rayonier has 2.2 million acres of prime timberland and real estate in the U.S. and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. . The company recently formed a real estate subsidiary, TerraPointe LLC (Logical Link Control) See "LANs" under data link protocol.

LLC - Logical Link Control
, to maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows.  the value of its extensive higher-and-better use properties, particularly in the fast growing counties along Interstate in·ter·state  
adj.
Involving, existing between, or connecting two or more states.

n.
One of a system of highways extending between the major cities of the 48 contiguous United States.

Noun 1.
 95 between Savannah, Georgia Savannah is a city located in (and the county seat of) Chatham County, Georgia (USA). The city's population was 128,500 in 2005, according to the most recent U.S. Census estimate. Savannah was the first colonial and state capital of Georgia. , and Daytona Beach, Florida “Daytona” redirects here. For other uses, see Daytona (disambiguation).

Daytona Beach is a city in Volusia County, Florida, USA. According to 2006 U.S. Census Bureau estimates, the city has a population of 64,421.
, where Rayonier owns approximately ap·prox·i·mate  
adj.
1. Almost exact or correct: the approximate time of the accident.

2.
 200,000 acres. Rayonier is also the world's leading producer of high performance specialty cellulose fibers. Approximately 40 percent of the company's sales are outside the U.S. to customers in more than 50 countries.

Reported results are preliminary and not final until filing of the second quarter 2005 Form 10-Q Form 10-Q

See 10-Q.
 with the Securities and Exchange Commission and, therefore, remain subject to subsequent event adjustments. Comments about anticipated demand, pricing, earnings, tax planning Tax planning

Devising strategies throughout the year in order to minimize tax liability, for example, by choosing a tax filing status that is most beneficial to the taxpayer.
 opportunities and rates, and real estate sales and development opportunities are forward-looking for·ward-look·ing
adj.
Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan.

Adj. 1.
 and are made pursuant to the safe harbor Safe Harbor

1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.

2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive.
 provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and  of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements forward-looking statement

A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections.
: changes in global market trends and world events; interest rate and currency movements; fluctuations in demand for or supply of cellulose specialties, absorbent absorbent /ab·sor·bent/ (-sor´bent)
1. able to take in, or suck up and incorporate.

2. a tissue structure involved in absorption.

3. a substance that absorbs or promotes absorption.
 materials, timber, wood products or real estate and entry of new competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t.  into these markets; adverse weather conditions affecting production, timber availability and sales, or distribution; changes in production costs for wood products or performance fibers, particularly for raw materials such as wood, energy and chemicals; unexpected delays in the closing of real estate sale transactions; changes in law or policy that might limit or restrict In the C programming language, the data pointed to by a pointer declared with the restrict qualifier may not be pointed to by any other pointer. This allows for more effective optimization.  the development of real estate; the ability of the company to identify and complete timberland and higher-value real estate acquisitions; the company's ability to satisfy complex rules in order to qualify as a REIT; the availability of tax deductions Tax deduction

An expense that a taxpayer is allowed to deduct from taxable income.


tax deduction

See deduction.
 and the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision (programming) revision - A release of a piece of software which is not a major release or a bugfix, but only introduces small changes or new features.  of governmental policies and regulations affecting the environment, endangered species endangered species, any plant or animal species whose ability to survive and reproduce has been jeopardized by human activities. In 1999 the U.S. government, in accordance with the U.S. , import and export controls or taxes, including changes in tax laws that could reduce the benefits associated with REIT status. For additional factors that could impact future results, please see the company's most recent Form 10-K Form 10-K

A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information.


Form 10-K

See 10-K.
 on file with the Securities and Exchange Commission.

A conference call will be held on Tuesday Tuesday: see week. , July July: see month.  26 at 4:15 p.m. EDT EDT
abbr.
Eastern Daylight Time


EDT Eastern Daylight Time

EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York

EDT 
 to discuss these results. Interested parties are invited to listen to the live webcast by logging onto http://www.rayonier.com and following the link. Supplemental materials will be available at the website. A replay will be available on the site shortly after the call where it will be archived for one month. Also, investors may access the "listen only" conference call by dialing 913-981-5584.

For further information, visit the company's web site at http://www.rayonier.com. Complimentary copies of Rayonier press releases and other financial documents are also available by mail or fax by calling 1-800-RYN-7611.
RAYONIER
                         FINANCIAL HIGHLIGHTS
                       JUNE 30, 2005 (unaudited)

          (millions of dollars, except per share information)

                           Three Months Ended        Six Months Ended
                    ------------------------------  ------------------
                     June 30,  March 31,  June 30,  June 30,  June 30,
                       2005      2005       2004      2005     2004
                    --------- ----------- --------  --------- --------
 Profitability
  Sales                $290.3      $275.0    $326.6   $565.3  $610.4
  Operating income      $48.9       $47.3     $71.2    $96.2  $114.3
  Income from
   continuing
   operations           $41.6       $34.8     $44.8    $76.4  $121.0
  Discontinued
   operations          $(24.7)      $(0.4)    $(1.0)  $(25.1)  $(1.7)
  Net income            $16.9       $34.4     $43.8    $51.3  $119.3
  Income per diluted
   common share
     Continuing
      operations        $0.81       $0.68     $0.88    $1.49   $2.38
     Net income         $0.33       $0.67     $0.86    $1.00   $2.35
     Pro forma
      income from
      continuing
      operations (a)    $0.67       $0.49     $0.88    $1.16   $1.40
  Operating income
   as a percent of
   sales                 16.8%       17.2%     21.8%    17.0%   18.7%
   ROE (annualized)
   (a) (b)               19.2%        9.6%     17.3%    15.0%   15.5%


                                 Six Months Ended June 30,
                                 -------------------------
                                    2005       2004
                                   ------     ------
 Capital Resources
  and Liquidity
 Continuing Operations:
  Cash provided by
   operating
   activities                      $122.9    $157.7
  Cash used for
   investing
   activities                      $(45.7)   $(65.3)
  Cash used for
   financing
   activities                      $(25.8)   $(46.9)
  Adjusted EBITDA
   (c) (e)                         $175.7    $199.8
  Cash Available for
   Distribution
   (CAD) (d) (e)                    $93.6    $121.2
  Issuance
   (repayment) of
   debt, net                        $28.4     $(1.5)
  Debt                             $686.8    $615.7
  Debt / capital                     46.3%     44.1%

(a), (b), (c), (d) and (e), see Schedule C.

                                 - A -

RAYONIER
              CONDENSED STATEMENTS OF CONSOLIDATED INCOME
                       JUNE 30, 2005 (unaudited)

          (millions of dollars, except per share information)

                       Three Months Ended          Six Months Ended
               -------------------------------   ---------------------
                 June 30,   March 31,  June 30,   June 30,   June 30,
                  2005        2005      2004        2005       2004
               --------------------------------  ---------------------

 Sales             $290.3     $275.0     $326.6     $565.3     $610.4
               ----------  ----------  --------  ---------  ----------
 Costs and
  expenses
    Cost of
     sales          227.0      217.4      241.0      444.4      464.5
    Selling and
     general
     expenses        15.3       14.5       14.4       29.8       32.2
    Other
     operating
     income,
     net             (0.9)      (4.2)         -       (5.1)      (0.6)
               ----------  ----------  --------  ---------  ----------
 Operating
  income             48.9       47.3       71.2       96.2      114.3

 Interest
  expense           (12.8)     (12.3)     (12.0)     (25.1)     (23.1)
 Interest and
  miscellaneous
  income
  (expense), net      1.0        0.5        0.4        1.5        1.1
               ----------  ----------  --------  ---------  ----------
 Income before
  taxes              37.1       35.5       59.6       72.6       92.3
 Income tax
  benefit
  (expense) (a)       4.5       (0.7)     (14.8)       3.8       28.7
               ----------  ----------  --------  ---------  ----------
 Income from
  continuing
  operations        $41.6      $34.8      $44.8      $76.4     $121.0
 Discontinued
  operations,
  net               (24.7)     $(0.4)      (1.0)     (25.1)      (1.7)
               ----------  ----------  --------  ---------  ----------
 Net income (a)     $16.9      $34.4      $43.8      $51.3     $119.3
               ========== ========== ========== ========== ===========

 Income per
  Common Share:
  Basic
    From
     continuing
     operations     $0.83      $0.70      $0.90      $1.52      $2.45
               ========== ========== ========== ========== ===========
    Net income      $0.34      $0.69      $0.88      $1.02      $2.41
               ========== ========== ========== ========== ===========
  Diluted
    From
     continuing
     operations     $0.81      $0.68      $0.88      $1.49      $2.38
               ========== ========== ========== ========== ===========
    Net income      $0.33      $0.67      $0.86      $1.00      $2.35
               ========== ========== ========== ========== ===========

 Pro forma
  income from
  continuing
  operations (b)
    Adjusted
     basic EPS      $0.69      $0.51      $0.90      $1.19      $1.44
               ========== ========== ========== ========== ===========
    Adjusted
     diluted
     EPS            $0.67      $0.49      $0.88      $1.16      $1.40
               ========== ========== ========== ========== ===========

 Weighted
  average
  Common
  Shares used
  for
  determining
   Basic EPS   50,217,948 50,119,923 49,557,582 50,169,207 49,449,037
               ========== ========== ========== ========== ===========
   Diluted EPS 51,608,073 51,430,445 50,891,616 51,519,064 50,833,270
               ========== ========== ========== ========== ===========

(a) and (b), see Schedule C.

                                 - B -

RAYONIER
                    FOOTNOTES FOR SCHEDULES A AND B
                       JUNE 30, 2005 (unaudited)

          (millions of dollars, except per share information)

Schedule A

(a) Three months ended June 30, 2005 and March 31, 2005 excludes
tax benefits for prior years' IRS audit settlements of $7.2 million,
or $0.14 per share and $9.5 million, or $0.19 per share, respectively,
for a six month ended June 30, 2005 total of $16.7 million, or $0.33
per share. Six months ended June 30, 2004 excludes reversal of
deferred taxes not required after REIT conversion of $77.9 million, or
$1.53 per share and additional taxes for repatriation of foreign
earnings of ($28.2) million, or ($0.55) per share, for a net effect of
$49.7 million, or $0.98 per share. See reconciliation on Schedule H.

(b) Based on year-to-date percent; major land sales and REIT
conversion costs are not annualized.

(c) Adjusted EBITDA is defined as earnings from continuing operations
before interest, taxes, depreciation, depletion, amortization and the
non-cash cost basis of real estate sold. Adjusted EBITDA is a non-GAAP
measure of operating cash generating capacity of the Company. See
reconciliation on Schedule H.

(d) Cash Available for Distribution (CAD) is defined as cash provided
by operating activities less capital spending, the tax benefit on the
exercise of stock options, tax benefits associated with certain
strategic acquisitions and the change in committed cash. CAD is a
non-GAAP measure of cash generated during a period that is available
for dividend distribution, repurchase of the Company's common shares,
debt reduction and for strategic acquisitions net of associated
financing. See reconciliation on Schedule H.

(e) Management considers these measures to be important to estimate
the enterprise and shareholder values of the Company as a whole and of
its core segments, and for allocating capital resources.

Schedule B

(a) Three months ended June 30, 2005 and March 31, 2005 includes tax
benefits for prior years' IRS audit settlements of $7.2 million and
$9.5 million, respectively, for a six month ended June 30, 2005 total
of $16.7 million. Six months ended June 30, 2004 includes reversal of
deferred taxes not required after REIT conversion of $77.9 million and
additional taxes for repatriation of foreign earnings of ($28.2)
million for a net effect of $49.7 million. See reconciliation on
Schedule H.

(b) Three months ended June 30, 2005 and March 31, 2005 excludes
tax benefits for prior years' IRS audit settlements of $0.14 per share
and $0.19 per share, respectively, for a six month ended June 30, 2005
total of $0.33 per share. Six months ended June 30, 2004 excludes
reversal of deferred taxes not required after REIT conversion of $1.53
per share and additional taxes for repatriation of foreign earnings of
($0.55) per share, for a net effect of $0.98 per share. See
reconciliation on Schedule H.

                                 - C -

RAYONIER
          BUSINESS SEGMENT SALES AND OPERATING INCOME (LOSS)
                       JUNE 30, 2005 (unaudited)

                         (millions of dollars)

                            Three Months Ended        Six Months Ended
                        ---------------------------  -----------------
                        June 30,  March 31, June 30, June 30, June 30,
                          2005      2005      2004     2005     2004
                        --------- --------  -------  -------  --------
Sales
 Timber and Real Estate
  Timber                     $54.5   $51.9   $49.3   $106.4  $102.4
  Real Estate                 14.7    23.6    40.4     38.3    73.7
                          --------- ------- -------  ------- -------
       Total Timber and
        Real Estate           69.2    75.5    89.7    144.7   176.1
                          --------- ------- -------  ------- -------

 Performance Fibers
  Cellulose specialties      108.0   101.1   107.2    209.1   200.3
  Absorbent materials         45.2    41.9    45.2     87.1    85.0
                          --------- ------- -------  ------- -------
       Total Performance
        Fibers               153.2   143.0   152.4    296.2   285.3
                          --------- ------- -------  ------- -------

 Wood Products                36.4    30.5    34.5     66.9    62.1

 Other Operations             31.5    26.3    50.3     57.8    87.2

 Intersegment
  eliminations                   -    (0.3)   (0.3)    (0.3)   (0.3)
                          --------- ------- -------  ------- -------

       Total sales          $290.3  $275.0  $326.6   $565.3  $610.4
                          ========= ======= =======  ======= =======

Operating income  (loss)
 Timber and Real Estate
  Timber                     $23.1   $23.7   $20.1    $46.8   $42.9
  Real Estate                 10.7    15.3    35.0     26.0    58.7
                          --------- ------- -------  ------- -------
       Total Timber and
        Real Estate           33.8    39.0    55.1     72.8   101.6

 Performance Fibers           18.5    12.4    18.4     30.9    24.5

 Wood Products                 5.7     3.3     6.1      9.0     7.3

 Other Operations             (0.4)    0.2     2.0     (0.2)    4.3

 Corporate                    (8.3)   (7.6)   (9.7)   (15.9)  (22.9)

 Intersegment
  eliminations and other
  (Including Corporate FX)    (0.4)      -    (0.6)    (0.4)   (0.5)
                          --------- ------- -------  ------- -------

       Total operating
        income               $48.9   $47.3   $71.3    $96.2  $114.3
                          ========= ======= =======  ======= =======

                                 - D -

RAYONIER
  CONDENSED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
                       JUNE 30, 2005 (unaudited)
                         (millions of dollars)

 CONDENSED CONSOLIDATED BALANCE SHEETS
                                               June 30,  December 31,
                                                 2005       2004
                                              ---------  -----------
  Assets
  Current assets                                $406.0      $369.4
  Timber, timberlands and logging roads,
     net of depletion and amortization         1,040.4     1,053.5
  Property, plant and equipment                1,350.4     1,333.3
  Less - accumulated depreciation               (971.1)     (936.2)
                                              --------- -----------
                                                 379.3       397.1
                                              --------- -----------
  Other assets                                   112.9       113.9
                                              --------- -----------
                                              $1,938.6    $1,933.9
                                              ========= ===========
  Liabilities and Shareholders' Equity
  Current liabilities                           $249.2      $246.7
  Deferred income taxes                           38.8        46.5
  Long-term debt                                 623.2       610.3
  Non-current reserves for dispositions and
   discontinued operations                       128.5       133.9
  Other non-current liabilities                  101.6       100.1
  Shareholders' equity                           797.3       796.4
                                              --------- -----------
                                              $1,938.6    $1,933.9
                                              ========= ===========

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                Six Months Ended
                                               -------------------
                                               June 30,   June 30,
                                                 2005       2004
                                               --------  ---------
  Cash provided by operating activities of
   continuing operations:
     Income from continuing operations           $76.4      $121.0
     Depreciation, depletion, amortization and
      non-cash cost basis of real estate sold     78.0        84.5
     Other non-cash items included in income     (12.6)      (44.6)(a)
     Changes in working capital and other
      assets and liabilities                     (18.9)       (3.2)
                                              --------- -----------
                                                 122.9       157.7
                                              --------- -----------
  Cash used for investing activities of
   continuing operations:
     Capital expenditures, net of sales and
      retirements                                (43.7)      (34.8)
     Increase in restricted cash                  (2.0)      (30.5)
                                              --------- -----------
                                                 (45.7)      (65.3)
                                              --------- -----------
  Cash used for financing activities:
     Issuance (repayment) of debt, net            28.4        (1.5)
     Dividends paid                              (62.2)      (55.4)
     Issuance of common shares                     8.0        10.0
                                              --------- -----------
                                                 (25.8)      (46.9)
                                              --------- -----------
  Effect of exchange rate changes on cash          0.1        (0.2)
                                              --------- -----------
  Cash provided by discontinued operations         0.7        (0.7)
                                              --------- -----------
  Cash and cash equivalents:
     Increase in cash and cash equivalents        52.2        44.6
     Balance, beginning of year                   84.1        21.4
                                              --------- -----------
     Balance, end of period                     $136.3       $66.0
                                              ========= ===========

(a) Mainly reversal of deferred taxes not required after REIT
conversion of ($77.9) million and additional taxes for repatriation of
foreign earnings of $28.2 million, for a net effect of ($49.7)
million.

                                 - E -
RAYONIER
                 SELECTED SUPPLEMENTAL FINANCIAL DATA
                             JUNE 30, 2005
                              (unaudited)

                         (millions of dollars)

                             Three Months Ended       Six Months Ended
                         --------------------------- -----------------
                         June 30, March 31, June 30, June 30, June 30,
                           2005     2005     2004      2005     2004
                         -------- --------- -------- -------- --------

 Geographical Data
  (Non-U.S.)
   Sales
    New Zealand            $14.1      $8.9    $14.1    $23.0    $24.0
    Other                    2.8       2.7      9.4      5.5     15.4
                         -------- --------- -------- -------- --------
     Total                 $16.9     $11.6    $23.5    $28.5    $39.4
                         ======== ========= ======== ======== ========

   Operating income (loss)
    New Zealand             $0.8      $0.7     $1.4     $1.5     $1.8
    Other                   (0.5)     (0.1)    (0.5)    (0.6)    (1.0)
                         -------- --------- -------- -------- --------
     Total                  $0.3      $0.6     $0.9     $0.9     $0.8
                         ======== ========= ======== ======== ========

 Timber
   Sales
    Northwest U.S.         $26.0     $26.3    $22.0    $52.3    $46.2
    Southeast U.S.          21.6      20.9     20.6     42.5     44.1
    New Zealand              6.9       4.7      6.7     11.6     12.1
                         -------- --------- -------- -------- --------
     Total                 $54.5     $51.9    $49.3   $106.4   $102.4
                         ======== ========= ======== ======== ========

   Operating income
    Northwest U.S.         $16.0     $16.4    $11.9    $32.4    $25.8
    Southeast U.S.           5.8       6.4      6.2     12.2     14.5
    New Zealand              1.3       0.9      2.0      2.2      2.6
                         -------- --------- -------- -------- --------
     Total                 $23.1     $23.7    $20.1    $46.8    $42.9
                         ======== ========= ======== ======== ========

 Adjusted EBITDA by
  Segment
   Timber and Real Estate  $51.7     $60.9    $73.6   $112.6   $143.5
   Performance Fibers       37.2      28.4     39.1     65.6     63.6
   Wood Products             7.5       5.0      8.1     12.5     11.1
   Other Operations          0.1       0.3      2.4      0.4      4.7
   Corporate and other      (8.3)     (7.1)   (10.5)   (15.4)   (23.1)
                         -------- --------- -------- -------- --------
     Total                 $88.2     $87.5   $112.7   $175.7   $199.8
                         ======== ========= ======== ======== ========
                                 - F -

RAYONIER
                    SELECTED OPERATING INFORMATION
                             JUNE 30, 2005
                              (unaudited)

                            Three Months Ended        Six Months Ended
                       ----------------------------  -----------------
                       June 30,  March 31, June 30,  June 30, June 30,
                         2005      2005      2004      2005     2004
                       --------- --------- --------  -------- --------
 Timber and Real
  Estate
   Sales volume -
    Timber
    Northwest U.S.,
     in millions of
     board feet              69        76       81       145      169
    Southeast U.S.,
     in thousands of
     short green tons     1,206     1,221    1,140     2,427    2,389
    New Zealand,
     in thousands of
     metric tons            143        94      158       237      264

   Timber sales volume -
   Intercompany
    Southeast U.S.,
     in thousands of
     short green tons         2        21       21        23       21
    New Zealand,
     in thousands of
     metric tons              1         1        -         2        -

   Acres sold             6,185    10,748   10,831(a) 16,934 27,881(a)

 Performance Fibers
   Sales Volume
    Cellulose
     specialties,
     in thousands of
     metric tons            113       107      115       220      216
    Absorbent
     materials,
     in thousands of
     metric tons             69        67       75       136      143
  Production as a
   percent of capacity    102.8%     98.0%    99.8%    102.6%    98.9%

 Lumber
   Sales volume,
    in millions of
    board feet               90        83       91       173      174


(a) Includes 5,487 acres associated with a Northeast Florida sale
($26 million) in which we had timber lease rights.

                                 - G -
RAYONIER
                  RECONCILIATION OF NON-GAAP MEASURES
                       JUNE 30, 2005 (unaudited)

          (millions of dollars, except per share information)

                                    Six Months Ended
                                  --------------------
                                   June 30,  June 30,
                                     2005      2004
                                  --------- ----------
 Cash Available for Distribution
 Cash provided by operating
  activities                        $122.9   $157.7
 Capital spending (a)                (43.7)   (34.8)
 Change in committed cash              5.5        -
 LKE tax benefits                     (0.9)       -
 Release of restricted cash (b)       12.0        -
 Tax benefit on exercise of
    stock options                     (2.2)    (1.7)
                                  --------- --------
 Cash Available for Distribution     $93.6   $121.2
                                  ========= =========

(a) Capital Spending is net of sales and retirements and excludes
strategic acquisitions.
(b) Released July 19, 2005.

                            Three Months Ended       Six Months Ended
                        ---------------------------- -----------------
                        June 30,  March 31, June 30, June 30, June 30,
                          2005      2005      2004     2005     2004
                        --------- --------- -------- -------- --------
 Income from continuing
  operations per Common
   Share
    Basic EPS              $0.83     $0.70    $0.90    $1.52    $2.45
                        ========= ========= ======== ======== ========
    Diluted EPS            $0.81     $0.68    $0.88    $1.49    $2.38
                        ========= ========= ======== ======== ========

    Deferred taxes not
     required after
      REIT conversion
    Basic EPS                  -         -        -        -    (1.58)
                        ========= ========= ======== ======== ========
    Diluted EPS                -         -        -        -    (1.53)
                        ========= ========= ======== ======== ========

    Additional taxes
     for repatriation
     of foreign
     earnings
    Basic EPS                  -         -        -        -     0.57
                        ========= ========= ======== ======== ========
    Diluted EPS                -         -        -        -     0.55
                        ========= ========= ======== ======== ========

    Tax benefit from
     prior years'
     IRS audit
     settlement
    Basic EPS              (0.14)    (0.19)       -    (0.33)       -
                        ========= ========= ======== ======== ========
    Diluted EPS            (0.14)    (0.19)       -    (0.33)       -
                        ========= ========= ======== ======== ========

 Pro forma income from
  continuing operations
  per Common Share
   Adjusted basic EPS      $0.69     $0.51    $0.90    $1.19    $1.44
                        ========= ========= ======== ======== ========
   Adjusted diluted EPS    $0.67     $0.49    $0.88    $1.16    $1.40
                        ========= ========= ======== ======== ========

                                 - H -

RAYONIER
                  RECONCILIATION OF NON-GAAP MEASURES
                       JUNE 30, 2005 (unaudited) (a)

                         (millions of dollars)

                     Timber
                     and     Perfor-  Wood   Other
                     Real    mance    Prod-  Opera-  Corporate
                     Estate  Fibers   ucts   tions   and other   Total
                    -------- -------  ------ ------- ---------- ------
 Adjusted EBITDA

 Three Months Ended
 June 30, 2005
  Cash provided by
   operating
   activities          $37.6  $28.8   $6.9   $2.5   $(28.3)    $47.5
  Income tax benefit       -      -      -      -     (4.5)     (4.5)
  Interest expense         -      -      -      -     12.8      12.8
  Working capital
   increases
   (decreases)           9.4    8.3    0.7   (2.0)     4.6      21.0
  Other balance sheet
   changes               4.7    0.1   (0.1)  (0.4)     7.1      11.4
                      ------- ------ ------ ------  -------   -------
  Adjusted EBITDA      $51.7  $37.2   $7.5   $0.1    $(8.3)    $88.2
                      ======= ====== ====== ======  =======   =======

 March 31, 2005
  Cash provided by
   operating
   activities          $72.4  $25.8   $1.6  $(3.7)  $(20.7)    $75.4
  Income tax expense       -      -      -      -      0.7       0.7
  Interest expense         -      -      -      -     12.3      12.3
  Working capital
   increases
   (decreases)          (8.5)   2.7    3.4    2.1     (0.6)     (0.9)
  Other balance sheet
   changes              (3.0)  (0.1)     -    1.9      1.2         -
                      ------- ------ ------ ------  -------   -------
  Adjusted EBITDA      $60.9  $28.4   $5.0   $0.3    $(7.1)    $87.5
                      ======= ====== ====== ======  =======   =======

 June 30, 2004
  Cash provided by
   operating
   activities          $80.0  $30.6   $7.6  $(0.6)  $(43.1)    $74.5
  Income tax expense       -      -      -      -     14.8      14.8
  Interest expense         -      -      -      -     12.0      12.0
  Working capital
   increases
   (decreases)          (3.6)   8.3    0.5    3.2      7.4      15.8
  Other balance sheet
   changes              (2.8)   0.2      -   (0.2)    (1.6)     (4.4)
                      ------- ------ ------ ------  -------   -------
  Adjusted EBITDA      $73.6  $39.1   $8.1   $2.4   $(10.5)   $112.7
                      ======= ====== ====== ======  =======   =======

 Six Months Ended
 June 30, 2005
  Cash provided by
   operating
   activities         $110.0  $54.6   $8.5  $(1.2)  $(49.0)   $122.9
  Income tax benefit       -      -      -      -     (3.8)     (3.8)
  Interest expense         -      -      -      -     25.1      25.1
  Working capital
   increases
   (decreases)           0.9   11.0    4.1    0.1      4.0      20.1
  Other balance sheet
   changes               1.7      -   (0.1)   1.5      8.3      11.4
                      ------- ------ ------ ------  -------   -------
  Adjusted EBITDA     $112.6  $65.6  $12.5   $0.4   $(15.4)   $175.7
                      ======= ====== ====== ======  =======   =======

 June 30, 2004
  Cash provided by
   operating
   activities         $154.0  $46.3   $8.8   $6.0   $(57.4)   $157.7
  Income tax benefit       -      -      -      -    (28.7)    (28.7)
  Interest expense         -      -      -      -     23.1      23.1
  Working capital
   increases
   (decreases)         (11.4)  15.9    2.3   (0.6)   (14.0)     (7.8)
  Other balance sheet
   changes               0.9    1.4      -   (0.7)    53.9(b)   55.5
                      ------- ------ ------ ------  -------   -------
  Adjusted EBITDA     $143.5  $63.6  $11.1   $4.7   $(23.1)   $199.8
                      ======= ====== ====== ======  =======   =======

(a) Unusual, non-trade intercompany items between the segments have
been eliminated.

(b) Includes reversal of deferred taxes not required after REIT
conversion partly offset by additional taxes for repatriation of
foreign earnings.

                                - I -
RAYONIER
     RECONCILIATION OF STATUTORY INCOME TAX TO REPORTED INCOME TAX
                       JUNE 30, 2005 (unaudited)

               (millions of dollars, except percentages)

                                        Three Months Ended
                          --------------------------------------------
                             June 30,       March 31,      June 30,
                               2005           2005           2004
                          -------------- -------------- --------------
                             $      %       $      %       $      %
                          ------- ------ ------- ------ ------- ------

Income tax provision at
 the U.S. statutory rate  $(13.0) (35.0) $(12.4) (35.0) $(20.9) (35.0)

REIT income not subject
 to federal tax              9.9   26.7     8.4   23.7    14.2   23.8

Lost deduction on REIT
 interest expense and
 overhead expenses
 associated with REIT
 activities                 (2.6)  (7.0)   (2.7)  (7.6)   (6.5) (10.9)

State and local income
 taxes, foreign exchange
 rate changes and
 permanent differences       0.5    1.2     0.5    1.4    (3.2)  (5.4)
                         ------- ------ ------- ------ ------- ------

Income tax (expense)
 benefit before discrete
 items (a)                 $(5.2) (14.1)  $(6.2) (17.5) $(16.4) (27.5)

Exchange rate changes
 on tax on undistributed
 foreign earnings            2.5    6.7    (1.1)  (3.1)    1.6    2.7

Non-realizability of
 New Zealand tax credits
 on U.S. withholding
 tax for prior years'
 intercompany note
 interest                      -      -    (2.9)  (8.2)      -      -

Tax benefit from prior
 years' IRS audit
 settlements                 7.2   19.4     9.5   26.8       -      -
                         ------- ------ ------- ------ ------- ------

Income tax benefit
 (expense)(a)               $4.5   12.0   $(0.7)  (2.0) $(14.8) (24.8)
                         ======= ====== ======= ====== ======= ======

(a) Six months ended June 30, 2004 excludes reversal of deferred
taxes not required after REIT conversion of $77.9 million and
additional taxes for repatriation of foreign earnings of ($28.2)
million, for a net effect of $49.7 million.


                                                Six Months Ended
                                         -----------------------------
                                            June 30,       June 30,
                                              2005           2004
                                         -------------- --------------
                                            $      %       $      %
                                         ------- ------ ------- ------

Income tax provision at
 the U.S. statutory rate                 $(25.4) (35.0) $(32.3) (35.0)

REIT income not subject
 to federal tax                            18.3   25.2    21.1   22.9

Lost deduction on REIT
 interest expense and
 overhead expenses
 associated with REIT
 activities                                (5.3)  (7.3)   (8.3)  (9.0)

State and local income
 taxes, foreign exchange
 rate changes and
 permanent differences                      1.0    1.4    (3.1)  (3.4)
                                         ------- ------ ------- ------

Income tax (expense)
 benefit before discrete
 items (a)                               $(11.4) (15.7) $(22.6) (24.5)

Exchange rate changes
 on tax on undistributed
 foreign earnings                           1.4    1.9     1.6    1.7

Non-realizability of
 New Zealand tax credits
 on U.S. withholding
 tax for prior years'
 intercompany note
 interest                                  (2.9)  (4.0)      -      -

Tax benefit from prior
 years' IRS audit
 settlements                               16.7   23.1       -      -
                                        ------- ------ ------- ------

Income tax
 benefit (expense)(a)                      $3.8    5.3  $(21.0) (22.8)
                                        ======= ====== ======= ======

(a) Six months ended June 30, 2004 excludes reversal of deferred
taxes not required after REIT conversion of $77.9 million and
additional taxes for repatriation of foreign earnings of ($28.2)
million, for a net effect of $49.7 million.

                                 - J -

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