Rayonier reports Q1 net income of US$43M compared with US$148M a year earlier on sales down 1.8% to US$386.7M; results include US$3M in costs relating to planned separation of performance fibers business from forest resources and real estate businesses

JACKSONVILLE, Florida , April 29, 2014 (press release) – Rayonier (NYSE:RYN) today reported first quarter net income attributable to Rayonier of $43 million, or 34 cents per share, compared to $148 million, or $1.13 per share, in the prior year period.

The 2014 first quarter results included $3 million in costs, net of tax, related to the planned separation of the Performance Fibers business from the Forest Resources and Real Estate businesses. Excluding this item, 2014 first quarter pro forma net income1 was $46 million, or 36 cents per share. For the comparable 2013 period, pro forma net income was $103 million, or 79 cents per share, excluding income from discontinued operations of $45 million, or 34 cents per share, from the sale of the Wood Products business.

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


    Three Months Ended
(millions of dollars, except earnings per share (EPS))   March 31, 2014   March 31, 2013
    $   EPS   $   EPS
Net income attributable to Rayonier   $ 43     $ 0.34     $ 148     $ 1.13  
Separation costs, net   3     0.02          
Discontinued operations, net           (45 )   (0.34 )
Pro forma net income   $ 46     $ 0.36     $ 103     $ 0.79  
Cash provided by operating activities was $99 million compared to $90 million in the first quarter 2013. Cash available for distribution (CAD)2 was $72 million versus $67 million in 2013.

“While first quarter results were affected by the timing of cellulose specialties sales volumes and real estate closings, we are pleased with Forest Resources' strong results and the significant progress made on key strategic initiatives,” said Paul G. Boynton, Chairman, President and CEO.

“In Forest Resources, we took advantage of strong export markets in the Pacific Northwest and New Zealand and realized higher timber prices in the South. In Performance Fibers, we successfully qualified production from the converted line with major cellulose specialties customers. We have also made considerable progress toward the separation of this business which remains on target for mid-year,” added Boynton.

Forest Resources

Sales of $105 million and operating income of $28 million increased $48 million and $14 million, respectively, from the prior year period. In the Atlantic and Gulf regions, timber prices increased due to improved sawlog demand and weather-related supply limitations. In the Northern region, strong China demand drove prices and volumes higher. Our New Zealand joint venture (JV) also benefited from the higher China demand.

Real Estate

Sales of $6 million and operating income of $1 million decreased $19 million and $16 million, respectively, from the prior year period primarily due to lower non-strategic volumes, as planned, the timing of closings and lower traffic due to inclement weather. The first quarter of 2013 included a 5,400 acre non-strategic sale in our Northern region at $3,673 per acre. Also, in 2014, slightly higher rural HBU prices and volumes were partially offset by lower development HBU prices and volumes.

Performance Fibers

Sales of $242 million and operating income of $49 million decreased $42 million and $43 million, respectively, from the prior year period. Cellulose specialties sales volumes declined as the planned extended annual outage for the Jesup mill and production issues during the first quarter 2014 reduced customer shipments. Operating results were also negatively impacted by previously announced lower cellulose specialties prices, higher wood and energy costs due to weather conditions, and increased manufacturing costs due to the shift away from absorbent materials and into cellulose specialties and commodity viscose.

Other Items

Corporate and other operating expenses of $9 million, excluding separation costs of $3 million, were $3 million above the prior year period which benefited from a $2 million foreign currency gain.

Interest and other expenses of $14 million were $6 million above the prior year period primarily due to lower capitalized interest related to the CSE project and higher debt levels associated with the consolidation of our New Zealand JV.

The first quarter effective tax rate from continuing operations before discrete items was 17.9 percent compared to 23.4 percent in 2013. The lower tax rate was due to proportionately higher earnings from REIT operations in 2014. Including discrete items, the first quarter effective tax rate from continuing operations was 15.2 percent versus 4.1 percent in the first quarter of 2013, which benefited from a $19 million tax credit from the exchange of the alternative fuel mixture credit for the cellulosic biofuel producer credit.


The Company is on track to complete the separation of its Performance Fibers business, which will be named Rayonier Advanced Materials, by mid-2014. It anticipates that it will receive a private letter ruling from the Internal Revenue Service confirming the tax-free nature of the separation. Additionally, the Company is progressing well in the registration process with the Securities and Exchange Commission. Estimates for normalized annual corporate expenses for Rayonier and Rayonier Advanced Materials are $20 million and $25 million, respectively.


“With improving demand, Forest Resources had an excellent first quarter and we expect strong full-year results well above the prior year. In Real Estate, we expect 2014 results will be comparable to 2013. In Performance Fibers, with the higher costs experienced in the first quarter, we anticipate full-year results will be at the low end of our earlier estimated range,” noted Boynton.

“We are pleased with our progress toward separation of the Performance Fibers business, and are excited about the prospects for these two separate businesses. We are confident that the separation will create two industry-leading public companies with significant long-term growth opportunities,” concluded Boynton.

Further Information

A conference call will be held on Tuesday, April 29, 2014 at 10 a.m. EDT 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.

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$386.7 million in the three months ended March 31, 2014, and $393.7 million in the three months ended March 31, 2013.

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