JACKSONVILLE-- Rayonier today reported fourth quarter net income of $59 million, or 72 cents per share, compared to $98 million, or $1.21 per share, in the prior year period. Full year net income was $218 million, or $2.68 per share, compared to $313 million, or $3.91 per share, in 2009.

Excluding the special items shown below, fourth quarter pro forma net income of $35 million, or 43 cents per share, was comparable to the prior year's pro forma net income of $33 million, or 42 cents per share. Full year pro forma results of $182 million, or $2.24 per share, increased from $120 million, or $1.50 per share, in 2009.

Cash provided by operating activities was $495 million for 2010 compared to $307 million in 2009. Cash available for distribution4 (CAD) was $384 million compared to $233 million in 2009. (See Schedule D for more details.)

"We executed well in 2010, increasing our pro forma EPS from $1.50 to $2.24 per share, a 49 percent increase," said Lee M. Thomas, Chairman and CEO. "In Timber, we aligned our harvest to take advantage of stronger export and stumpage markets while holding off volume in less attractive markets, allowing our inventory value to build. In Performance Fibers, we had another record year driven by strong demand for our high purity cellulose specialties products and improved pricing for absorbent materials."

"Our decision to increase the December dividend by 8 percent to $0.54 per share reflects our strong operating cash flow and confidence in the future. This was our fifth dividend increase in seven years," Thomas concluded.

Timber

Fourth quarter sales of $34 million were $1 million below the prior year period, while operating income was $7 million for both periods. Full year sales of $177 million increased $18 million from prior year, while operating income of $33 million was $26 million above 2009 results.

In the Eastern region, fourth quarter and full year sales declined from the prior year periods as higher prices were more than offset by lower volumes as thinnings returned to more normalized levels. Fourth quarter operating income was consistent with the prior year period, while full year operating income improved from 2009 reflecting higher margins.

In the Western region, fourth quarter and full year sales and operating income improved from prior year periods primarily due to higher prices driven largely by stronger export demand. The price improvement was somewhat offset by a decline in volumes and increased logging costs.

Real Estate

Fourth quarter sales of $5 million were $6 million below last year and operating income of $1 million was $4 million lower than 2009 reflecting lower rural sales volumes due to timing.

Full year sales and operating income of $96 million and $53 million were $5 million and $3 million below the prior year results, respectively, primarily due to a decline in rural prices reflecting a change in geographic mix. A decline in non-strategic timberland acres sold was mostly offset by an increase in average price per acre due to location and site characteristics.

Performance Fibers

Fourth quarter sales of $233 million were $8 million below 2009, while operating income of $62 million was $4 million above the prior year period. Price increases in cellulose specialties and absorbent materials were more than offset by lower volumes due to the timing of customer orders, and absorbent materials production issues. The improvement in operating income reflects a favorable shift in cellulose specialties sales mix offset in part by an increase in wood, chemical and transportation costs.

Full year sales of $881 million were $42 million above 2009, while operating income of $214 million increased $31 million. Cellulose specialties sales improved due to increased volume and price. Absorbent materials sales also increased as higher prices more than offset lower volumes. Full year costs were higher in 2010 mainly due to an increase in wood, chemical and transportation costs.

Other Items

Excluding special items, 2, 3 corporate and other expenses were $12 million for the quarter and $33 million for full year 2010, compared to $10 million and $28 million for the prior year periods, respectively. The 2010 periods include a $3 million accrual for increased future environmental costs associated with closed facilities. Full year 2010 also reflects an increase in incentive compensation accruals. Interest and other expenses declined $1 million for both the quarter and year compared to the prior year periods primarily due to lower average net debt balances and interest rates. Fourth quarter 2009 also included a $1 million favorable IRS interest claim.

The fourth quarter effective tax rate was a benefit of 33.7 percent compared to an expense of 9.0 percent in 2009, while the full year rate declined to 6.5 percent from 12.9 percent. The significant decline in 2010 reflects the benefit of the $24 million cellulosic biofuel producer credit.1

Excluding special items, fourth quarter effective tax rates were 21.3 percent in 2010 and 23.9 percent in 2009. For the year, the effective tax rate was 17.6 percent, down from 22.1 percent in 2009. The lower rates in 2010 were due to proportionately higher earnings from the REIT.

Outlook

"We are encouraged by the improvement in our key markets," said Thomas. "For 2011, we expect Timber results to improve somewhat, reflecting continued export demand for sawlogs from our Washington property and strong pulpwood demand in the Southeast. We anticipate greater buyer interest in our rural and conservation properties, although substantially lower non-strategic land sales will likely reduce the total contribution from Real Estate. In Performance Fibers, strong demand for cellulose specialties is driving significant price increases and our expectation of another record year, as we continue to run at full capacity to meet our customers' needs."

"Overall, we anticipate EPS of $2.50 to $2.70 per share, an increase of 10 to 20 percent above 2010 pro forma amounts. We expect CAD to range between $260 million and $280 million, well above our dividend level. With strong operating cash flows, low leverage and ample liquidity, we will continue to grow our businesses and effectively allocate our strategic capital," Thomas concluded.

SOURCE: Rayonier

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