Rayonier Is Chopped Down Again After Earnings

| About: Rayonier Inc. (RYN)


Revenues increased from last year but earnings have dropped.

Interest and tax expenses are what brought earnings to its knees.

I'm going to be looking to close my position on the stock after next quarter's earnings report.

The last time I wrote about Rayonier Inc. (NYSE:RYN) I stated:

"With these results the stock is on the trading block after the stock split." Since that article was published the stock is down 25.06% (to be fair the majority of the drop is due to the spinoff of Rayonier Advanced Materials Inc (NYSE:RYAM) while the S&P 500 (NYSEARCA:SPY) is up 2.49% in the same timeframe. Rayonier is compared to real estate investment trusts and is an international forest products company primarily engaged in activities associated with timberland management, the sale and entitlement of real estate, and the production and sale of specialty cellulose fibers and fluff pulp.

The company reported earnings before the market opened on July 29, 2014, and on the surface the results were in-line with the company reporting earnings of $0.08 per share (in-line with estimates) on revenue of $163.1 million (in-line with estimates). The stock dropped 3.67% after it reported earnings and what I'd like to do at this time is delve into the weeds and pick out some highlights from different portions of the report.

Segment Revenue

Segment Revenue (millions of dollars)






Forest Resources






Real Estate






Other Operations






Inter-segment eliminations












At first glance the segment revenue section of the earnings report doesn't seem all too bad with a 5% increase in revenue. So let's delve into the weeds to figure out the details.

The Real Estate portion of the business which accounts for 21% of revenues increased significantly, to the tune of 154% from the prior year. The increases to this portion of the business were due in large part to the sale of a 19,500 acre timberland parcel in Florida. The parcel was not really strategic to the company so we shouldn't be missing it as investors.

Other operations, which account for about 18% of revenues, earned less this quarter than the prior year by 11%. This is due in large part to the gain with respect to the consolidation of the New Zealand joint venture last year.

Income Statement

Income Statement (millions of dollars)












Cost of Sales






Selling and general expenses






Other operating expense, net






Gain related to consolidation of New Zealand JV






Operating Income






Interest expense






Interest and miscellaneous income, net






Income from continuing operations before taxes






Income tax expense






Income from continuing operations






Income from discontinued operations, net






Net income






Less net income attributable to non-controlling interest






Non-GAAP discontinued operations, net






Non-GAAP gain related to consolidation of New Zealand JV






Non-GAAP separation costs, net






Net income attributable to Rayonier






Avg. Diluted Shares






Earnings per diluted share






With a slight increase in revenues I'd like to examine the income statement now to see if it affected the bottom line much. Immediately I see a 188% increase from last to the other operating expenses line item. After subtracting out all operating expenses shareholders received a 22% increase to operating income. Next we see interest expenses increase by 37% and miscellaneous income decrease 263% which made income before taxes drop 17% from last year; this has now started the snowball effect of lower earnings from last year. Taxes however decreased from last year, but brought income from continuing operations down to its knees with an 85% drop. Income from discontinued operations decreased 75% bringing total net income down 79%. After taking into consideration non-GAAP items and a 3% increase to diluted shares we see that earnings per share dropped 56% from last year.

Balance Sheet

Balance Sheet (millions of dollars)




Cash and cash equivalents




Restricted Cash




Other current assets




Timber and timberlands, net of depletion and amortization




Property, plant and equipment




Less-accumulated depreciation




Net property, plant and equipment




Other assets




Total Assets




Current maturities of long-term debt




Other current liabilities




Long-term debt




Non-current liabilities for dispositions and discontinued operations




Other non-current liabilities




Total Liabilities




Looking at the asset side of the equation on the balance sheet we immediately see a 42% increase from last quarter to the cash and equivalents line item thanks in part to the sale of the timberland parcel in Florida I talked about earlier. The rest of the balance sheet on the asset and liability portions of the equation only looks really bad with all the decreases because of the spinoff effect.


Finally that the company has spunoff the advanced materials part of the business it acts as a pure play timberland REIT. The company has some pretty good properties and expects to increase cash flow in order to increase dividends in the future. But in order to do this, the company is counting on a slowly increasing housing starts number. I don't know that this phenomenon will come to fruition as the housing industry is starting to stall right now, and interest rates haven't even gone up yet. The company anticipates better results for the remainder of 2014 from the timberlands in The South but expects higher log inventories in China to affect The Pacific Northwest pricing. Hence, the company is guiding down revenues for next quarter in the Forest Resources segment, but revenues are expected to stay above 2013 numbers. The company continues to believe that Real Estate segment revenues will be on par with 2013.

The company saw earnings decrease by 56% from last year thanks in part to large increase in interest and tax expenses while the share price was down 23.17% between earnings calls. The results of this earnings report were mediocre to me (earning an C grade from me), but other investors seem to think it was worse as the stock dropped 3.67% after reporting while the S&P500 decreased in value by 0.45% while the share count actually increased slightly from the prior year. I'm not too enthusiastic about his earnings report and will be looking for opportunities to close my position maybe after I see another earnings report from the company.

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: The author is long RYN, RYAM, SPY. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.