Rayonier ends 2013 with 'manageable' net debt of $1.4 billion, new debt to fund spin-off in 2014

By Lisa Kerner

Charlotte, N.C., Jan. 27 - Rayonier Inc. had a strong fourth quarter, according to senior vice president and chief financial officer Hans Vanden Noort during the company's earnings call on Monday.

"We closed the year with $200 million of cash. Our debt balance was $1.6 billion. On a net debt basis we finished at a very manageable $1.4 billion," said Vanden Noort.

These figures compare to cash of $281 million and a debt balance of $1.3 billion a year ago.

Also on Monday, Rayonier announced plans to separate its Performance Fibers business from its Forest Resources and Real Estate businesses. The tax-free spin-off of the Performance Fibers business, slated for completion in mid-2014, will result in two independent, publicly traded companies.

"We expect Performance Fibers to raise about a billion dollars of debt, the proceeds of which will be distributed to Rayonier," Vanden Noort said.

"We expect about 40% will consist of bank debt with the remaining amount coming from longer-term bonds."

This will enable Performance Fibers to use its initial cash flows to efficiently reduce debt, according to the CFO.

Rayonier will be left with net debt of about $300 million and increased cash flows to be used for dividend growth, timberland acquisitions or stock buybacks.

Once the transaction is completed, Rayonier expects to maintain its investment-grade credit rating, while Performance Fibers is targeting a mid-BB grade rating.

The separation was determined to be the "best strategic path for our shareholders," and "now is the optimal time for this separation, "said chairman, president and chief executive officer Paul Boynton on the call.

Boynton also commented on Rayonier's performance in 2013. The company generated "strong cash flow well above our dividend, increasing pro forma operating income over last year's pro forma amount and increasing pro forma earnings by 14% per share."

"We also increased our quarterly dividend by 11% to $0.49 per share or $1.96 per year." Boynton added.

Financial highlights

Rayonier today reported fourth-quarter 2013 net income attributable to shareholders of $80 million, or $0.62 per share, compared to $76 million, or $0.59 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 2012.

Cash provided by operating activities was $545 million for the full year compared to $446 million for 2012.

Full-year cash available for distribution was $334 million versus $304 million a year ago.

Forest Resources' fourth-quarter sales were up $39 million for the prior-year period at $105 million. Operating income for the period was up $5 million at $24 million.

Full-year sales for the segment were $382 million, up $152 million, while operating income was up $35 million at $81 million.

The Real Estate business reported increased sales for the quarter of $97 million and full-year sales of $149 million. Operating income was up at $25 million for the quarter and $56 million for the year.

Performance Fibers' fourth-quarter and full-year sales were down at $281 million and $1 billion, respectively. The business segment's operating income also declined, to $78 million for the quarter and $311 million for the full year.

Rayonier is a Jacksonville, Fla.-based forest products company.

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