Rayonier reports Q4 2013 net income attributable to shareholders of US$79.7M, up from US$75.6M a year earlier, on sales up 26% to US$520.2M; CEO highlights acquisition of New Zealand timberland JV in 2013, Jesup mill cellulose specialties expansion

Wendy Lisney

JACKSONVILLE, Florida , January 27, 2014 (press release) – Rayonier (RYN) today reported fourth quarter 2013 net income attributable to shareholders of $80 million, or 62 cents per share, compared to $76 million, or 59 cents per share, in the prior year period.

Full year 2013 net income attributable to shareholders was $372 million, or $2.86 per share, compared to $279 million, or $2.17 per share, in the prior year period. Pro forma net income ¹ was $314 million, or $2.41 per share, compared to $272 million, or $2.11 per share, in 2012.

Cash provided by operating activities was $545 million for full year 2013 compared to $446 million for the prior year period. Full year cash available for distribution (CAD)2 was $334 million versus $304 million for the prior year period.

The following table summarizes the current quarter and comparable prior period results:


	Three Months Ended
(millions of dollars, except earnings per share (EPS))	December 31, 2013				December 31, 2012
	$		EPS		$			EPS
Net income attributable to Rayonier	$	80	$	0.62	$	76		$	0.59
Discontinued operations	2		0.02		(2		)	(0.02		)
Pro forma net income	$	82	$	0.64	$	74		$	0.57

The following table summarizes the 2013 full year and comparable prior period results:


	Twelve Months Ended
(millions of dollars, except earnings per share (EPS))	December 31, 2013						December 31, 2012
	$			EPS			$			EPS
Net income attributable to Rayonier	$	372		$	2.86		$	279		$	2.17
Gain related to consolidation of New Zealand JV	(16		)	(0.13		)	—			—
Discontinued operations	(42		)	(0.32		)	(7		)	(0.06		)
Pro forma net income	$	314		$	2.41		$	272		$	2.11

“We are pleased with our outstanding performance in 2013, resulting in a 14 percent increase in pro forma EPS to $2.41 and strong operating cash flows. These results were achieved during a year in which we accomplished key strategic initiatives including completing our Jesup mill cellulose specialties expansion and increasing our ownership to acquire a majority interest in our New Zealand timberland joint venture,” said Paul G. Boynton, Chairman, President and CEO.

Forest Resources

Fourth quarter sales of $105 million were $39 million above the prior year period, while operating income of $24 million improved $5 million. Full year sales of $382 million increased $152 million from 2012, while operating income of $81 million rose $35 million above prior year results. Fourth quarter and full year 2013 periods included $47 million and $146 million, respectively, of sales and $1 million and $8 million, respectively, of operating income from the consolidation of the New Zealand joint venture (JV).

Full year results for the Atlantic and Gulf regions were above prior year due to higher prices from improved pulpwood and sawlog demand and limited supply due to sustained rainfalls throughout the year. The Gulf region also benefited from increased volumes from our December 2012 Texas acquisition and higher non-timber income. In the Pacific Northwest, operating results reflected higher prices driven largely by stronger export demand, partially offset by higher logging costs.

Real Estate

Fourth quarter sales of $97 million were $78 million above 2012, and operating income of $25 million was $14 million above the prior year period. Full year sales of $149 million were $92 million above 2012, and operating income of $56 million was $24 million above the prior year. The fourth quarter and full year increases were primarily due to higher non-strategic volumes, including a 21,000 acre sale in the Southeast. Also in the fourth quarter, the Company sold its New York timberlands (128,000 acres).

Performance Fibers

Fourth quarter and full year sales of $281 million and $1 billion were $19 million and $51 million, respectively, below the prior year periods. Lower cellulose specialties sales volumes due to the timing of customer orders and the impact of the cellulose specialties expansion (CSE) project more than offset higher cellulose specialties prices. Fourth quarter and full year operating income of $78 million and $311 million decreased $16 million and $48 million, respectively, due to higher production costs related to the CSE project, higher wood prices related to wet weather and the lower volumes.

Other Items

Excluding the gain related to the consolidation of the New Zealand JV, fourth quarter and full year corporate and other operating expenses of $14 million and $41 million, were $3 million and $5 million, respectively, above the prior year periods, primarily due to higher legal and corporate development costs.

Fourth quarter interest and other expenses were $4 million above the prior year period primarily due to lower capitalized interest related to the CSE project. Full year interest and other expenses were $3 million below the prior year period primarily due to lower borrowing rates.

The fourth quarter effective tax rate before discrete items was 19.4 percent compared to 25.6 percent in the prior year period. The full year effective tax rate before discrete items was 21.1 percent compared to 26.3 percent in the prior year period. The fourth quarter and full year decline in the effective tax rates was primarily due to proportionately higher earnings from REIT operations in 2013 and a benefit associated with the internal transfer of timberland properties.

Including discrete items, the fourth quarter effective tax rate was 18.3 percent versus 29.3 percent in the prior year period. On a full year basis, the effective tax rate was 13.0 percent compared to 23.8 percent in 2012, as the 2013 tax credit exchange (AFMC for CBPC) was higher than the 2012 credit.

Outlook

“Today, we also announced that we intend to separate the Performance Fibers business from the Forest Resources and Real Estate businesses,” added Boynton. “Over the past few years, we have completed a number of strategic steps to position these businesses to operate as two industry-leading public companies with significant growth opportunities. The separation will provide investors with two strong companies, distinct businesses and focused investment identities. With an improving housing market and economy, and expanded capacity in Performance Fibers, we are excited about the prospects for these two businesses in the years ahead.”

Further Information

A conference call will be held on Monday January 27, 2014 at 10 a.m. EST to discuss these results. Presentation materials and access to the live webcast will be available at www.rayonier.com. Investors may also choose to access the conference call by dialing (888) 989-7543, password: Rayonier. A replay of this webcast will be available on the Company's website shortly after the call. Complimentary copies of Rayonier press releases and other financial documents are also available by calling 1-800-RYN-7611.

1 Pro forma net income is a non-GAAP measure which is defined and reconciled to GAAP in the attached exhibits.

2 CAD is a non-GAAP measure defined and reconciled to GAAP in the attached exhibits.

About Rayonier

Rayonier is a leading international forest products company with three core businesses: Forest Resources, Real Estate and Performance Fibers. The company owns, leases or manages 2.6 million acres of timber and land in the United States and New Zealand. The company's holdings include approximately 200,000 acres with residential and commercial development potential along the Interstate 95 corridor between Savannah, GA and Daytona Beach, FL. Its Performance Fibers business is one of the world's leading producers of high-value specialty cellulose fibers, which are used in products such as filters, pharmaceuticals and LCD screens. Approximately 50 percent of the company's sales are outside the U.S. to customers in approximately 20 countries. Rayonier is structured as a real estate investment trust. More information is available at www.rayonier.com.

Industry Intelligence Editor's note: In an omitted table, the company reported sales of US$520.2 million in the three months ended Dec. 31 2013 and $412.7 million in the three months ended Dec. 31, 2012.