Performance Fibers

Second quarter sales of $255 million were $22 million above the prior year period, while operating income of $84 million was $13 million higher. Year-to-date sales of $505 million were $21 million above 2011, while operating income of $164 million increased $17 million. Stronger cellulose specialties prices more than offset increased production costs and a decline in absorbent materials prices due to soft markets.

Other Items

In Wood Products, operating income improved $5 million and $6 million for the three and six months ended June 30, 2012, compared to the prior year periods, respectively, due to increased prices.

Corporate and other expenses for second quarter 2012 were $2 million below the prior year period primarily due to a favorable insurance settlement. Year-to-date corporate and other expenses were $1 million above the prior year.

Included in the second quarter 2012 and 2011 results were net benefits of $6 million and $4 million, respectively, relating to the exchange of the alternative fuel mixture credit (AFMC) for the cellulosic biofuel producer credit (CBPC) associated with the production and use of black liquor in 2009. In order to complete the AFMC/CBPC exchange, Rayonier is required to pay the IRS interest related to funds received for the AFMC in 2010. The $6 million net benefit in the 2012 results is recorded separately as a tax benefit of $9 million and interest expense of $3 million. There was minimal interest expense in the 2011 periods related to the exchange.

Effective tax rates for the quarter and year-to-date were 16.4 percent and 20.8 percent compared to 15.4 percent and 18.7 percent in 2011, respectively, due to expected proportionately higher earnings from our taxable REIT subsidiaries in 2012.


“As we enter the second-half of 2012, we are well positioned for another strong year and are pleased to be able to increase the dividend by 10 percent, our eighth increase in the past ten years,” added Boynton. “In Forest Resources, we will continue to capitalize on local market opportunities in the Southeast, and will increase harvest volumes in the Northwest as Asian markets improve. In Performance Fibers, we anticipate another record year driven by strong cellulose specialties markets. Also, we remain on track to complete our cellulose specialties expansion project by mid-2013.”

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