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Rayonier Reports Second Quarter 2005 Results.

JACKSONVILLE, Fla. -- Rayonier (NYSE:RYN) today reported second quarter income from continuing operations of $41.6 million, or 81 cents per share. 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 of $24.1 million, or 47 cents per share, and an operating loss of $0.6 million, or 1 cent per share, related to the planned sale of the medium-density-fiberboard (MDF) business, now classified as a discontinued operation 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 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 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, 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 U.S. timber results.

Cash provided by operating activities for the six months ended June 30 of $123 million was $35 million below the comparable period in 2004 and Cash Available for Distribution (CAD) of $94 million was $28 million below last year. (CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.) Cash flow, while lower mainly as a result of higher working capital requirements 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 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 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 in both periods as higher trading volumes 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 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 effective tax rate, before discrete 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 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 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 specialty 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 to 2004."

Rayonier has 2.2 million acres of prime timberland and real estate in the U.S. and New Zealand. The company recently formed a real estate subsidiary, TerraPointe LLC, to maximize the value of its extensive higher-and-better use properties, particularly in the fast growing counties along Interstate 95 between Savannah, Georgia, and Daytona Beach, Florida, where Rayonier owns approximately 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 with the Securities and Exchange Commission and, therefore, remain subject to subsequent event adjustments. Comments about anticipated demand, pricing, earnings, tax planning opportunities and rates, and real estate sales and development opportunities are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends and world events; interest rate and currency movements; fluctuations in demand for or supply of cellulose specialties, absorbent materials, timber, wood products or real estate and entry of new competitors 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 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 and the ability of the company to complete tax-efficient exchanges of real estate; and implementation or revision of governmental policies and regulations affecting the environment, endangered species, 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 on file with the Securities and Exchange Commission.

A conference call will be held on Tuesday, July 26 at 4:15 p.m. 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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