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FIRSTENERGY 72 HOUR DEADLINE ALERT: Former Louisiana Attorney General and Kahn Swick & Foti, LLC Remind Investors With Losses in Excess of $100,000 of Deadline in Class Action Lawsuit Against FirstEnergy Corp. – FE

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Kahn Swick & Foti, LLC (“KSF”) and KSF partner, the former Attorney General of Louisiana, Charles C. Foti, Jr., remind investors that they have only until September 28, 2020 to file lead plaintiff applications in a securities class action lawsuit against FirstEnergy Corp. (NYSE: FE), if they purchased the Companys shares between February 21, 2017 and July 21, 2020, inclusive (the Class Period). This action is pending in the United States District Court for the Southern District of Ohio.

What You May Do

If you purchased shares of FirstEnergy and would like to discuss your legal rights and how this case might affect you and your right to recover for your economic loss, you may, without obligation or cost to you, contact KSF Managing Partner Lewis Kahn toll-free at 1-877-515-1850 or via email ([email protected]), or visit https://www.ksfcounsel.com/cases/nyse-fe/ to learn more. If you wish to serve as a lead plaintiff in this class action by overseeing lead counsel with the goal of obtaining a fair and just resolution, you must request this position by application to the Court by September 28, 2020.

About the Lawsuit

FirstEnergy and certain of its executives are charged with failing to disclose material information during the Class Period, violating federal securities laws.

On July 21, 2020, federal law enforcement officials announced the arrest of Ohio House Speaker Larry Householder and others in connection with a $60 million racketeering and bribery scheme designed to ensure the passage of legislation that included a billion-dollar bailout of two failing nuclear power plants owned by the Companys former subsidiary and operated by the Company. Further, the Company disclosed the same day that it had received subpoenas in connection with the investigation, which is ongoing.

On this news, the price of FirstEnergys shares plummeted.

The case is Owens v. FirstEnergy Corp., No. 20-cv-3785.

About Kahn Swick & Foti, LLC

KSF, whose partners include former Louisiana Attorney General Charles C. Foti, Jr., is one of the nations premier boutique securities litigation law firms. KSF serves a variety of clients “ including public institutional investors, hedge funds, money managers and retail investors “ in seeking to recover investment losses due to corporate fraud and malfeasance by publicly traded companies. KSF has offices in New York, California and Louisiana.

To learn more about KSF, you may visit www.ksfcounsel.com.

Kahn Swick & Foti, LLC

Lewis Kahn, Managing Partner

[email protected]

1-877-515-1850

News

Rayonier Reports Third Quarter 2020 Results

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Rayonier Inc. (NYSE:RYN) today reported third quarter net loss attributable to Rayonier of ($0.8) million, or ($0.01) per share, on revenues of $198.9 million. This compares to net loss attributable to Rayonier of ($0.4) million, or $0.00 per share, on revenues of $156.4 million in the prior year quarter. The third quarter results included costs related to the merger with Pope Resources1 of $0.4 million and timber write-offs resulting from casualty events2 attributable to Rayonier of $7.9 million. Excluding these items, pro forma net income (loss)3 was $7.5 million, or $0.06 per share, versus ($0.4) million, or $0.00 per share, in the prior year period.

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

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

(millions of dollars, except earnings per share (EPS))

September 30, 2020

 

September 30, 2019

 

 

 

$

 

EPS

 

$

 

EPS

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

$198.9

 

 

 

 

$156.4

 

 

 

 

 

Sales attributable to noncontrolling interest in Timber Funds

(7.7

)

 

Pro forma revenues3

$191.2

 

 

 

 

$156.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Rayonier

($0.8

)

 

($0.01

)

 

($0.4

)

 

 

 

 

Costs related to the merger with Pope Resources1

0.4

 

 

 

 

 

 

 

 

 

Timber write-offs resulting from casualty events2 attributable to Rayonier

7.9

 

 

0.07

 

 

 

 

 

 

 

Pro forma net income (loss)3

$7.5

 

 

$0.06

 

 

($0.4

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Third quarter operating income was $1.8 million versus $11.0 million in the prior year period. The current quarter operating income included costs related to the merger with Pope Resources1 of $0.4 million and timber write-offs resulting from casualty events2 of $15.2 million (of which $7.9 million was attributable to Rayonier). Excluding these items and adjusting for the operating loss attributable to noncontrolling interest in Timber Funds, current quarter pro forma operating income3 was $20.3 million. Third quarter Adjusted EBITDA3 was $67.2 million versus $43.2 million in the prior year period.

The following table summarizes operating income (loss), pro forma operating income (loss)3 and Adjusted EBITDA3 for the current quarter and comparable prior year period:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

Operating Income (Loss)

 

Pro forma Operating Income (Loss)3

 

Adjusted EBITDA3

(millions of dollars)

2020

 

2019

 

2020

 

2019

 

2020

2019

Southern Timber

$5.1

 

 

$9.5

 

 

$11.1

 

 

$9.5

 

 

$26.1

 

 

$22.5

 

Pacific Northwest Timber

(1.8

)

 

(3.6

)

 

(1.8

)

 

(3.6

)

 

9.1

 

 

2.7

 

New Zealand Timber

10.7

 

 

10.1

 

 

10.7

 

 

10.1

 

 

18.1

 

 

17.7

 

Timber Funds

(12.4

)

 

 

 

(0.3

)

 

 

 

0.2

 

 

 

Real Estate

9.5

 

 

0.4

 

 

9.5

 

 

0.4

 

 

22.2

 

 

5.4

 

Trading

(0.6

)

 

 

 

(0.6

)

 

 

 

(0.6

)

 

 

Corporate and other

(8.7

)

 

(5.4

)

 

(8.3

)

 

(5.4

)

 

(7.9

)

 

(5.1

)

Total

$1.8

 

 

$11.0

 

 

$20.3

 

 

$11.0

 

 

$67.2

 

 

$43.2

 

 

 

 

 

 

 

 

 

 

 

 

 

Year-to-date cash provided by operating activities was $138.0 million versus $164.2 million in the prior year period. Cash available for distribution (CAD)3 of $124.2 million increased $8.6 million versus the prior year period primarily due to higher Adjusted EBITDA3 ($10.1 million), lower cash taxes paid ($0.7 million) and lower capital expenditures ($2.2 million), partially offset by higher cash interest paid ($4.4 million).

We delivered strong operating results across our segments in the third quarter despite ongoing challenges associated with the COVID-19 pandemic, said David Nunes, President and CEO. Both our U.S. and New Zealand timber operations remained fully-operational throughout the third quarter as we continued to follow enhanced safety protocols to protect our employees, contractors and customers. During the quarter, we also contended with several casualty events, including a hurricane that impacted properties in our Southern Timber segment and wildfires that impacted properties in our Timber Funds segment. Fortunately, no Rayonier employees were injured during these events. While our third quarter results were negatively impacted by inventory write-downs due to damage sustained to standing timber on these properties, Im pleased that our team was able to quickly mobilize, assess the damage to our lands and execute a plan to maximize salvage opportunities. Overall, Ive been very encouraged by the resiliency of our business as well as the dedication of our employees as weve navigated these various operational challenges.

Notably, each of our operating segments registered an increase in Adjusted EBITDA versus the prior year quarter, continued Nunes. Southern Timber Adjusted EBITDA improved 16% relative to the prior year quarter, as strong demand for sawlogs amid surging lumber prices resulted in a 16% increase in harvest volumes and an 8% increase in sawtimber stumpage prices. In Pacific Northwest Timber, Adjusted EBITDA more than tripled versus the prior year quarter, as an additional 55,000 tons of harvest volume resulting from the acquisition of Pope Resources was augmented by an 18% increase in weighted-average log prices. New Zealand Timber Adjusted EBITDA improved 2% relative to the prior year quarter, as lower log prices were offset by a 3% increase in harvest volumes and higher carbon credit sales. Real Estate also delivered another strong quarter as Adjusted EBITDA rose significantly versus the prior year quarter driven primarily by strong rural sales demand.

Hurricane & Wildfire Update

During the third quarter, properties within our Southern Timber and Timber Funds segments were impacted by hurricane and wildfire events, respectively. In our Southern Timber segment, Hurricane Laura made landfall in Louisiana on August 27th as a Category 4 hurricane with 150mph sustained winds, impacting nearly 8,000 acres of our timberland properties in the state. Initial damage assessments indicated that approximately 4,900 acres of pine plantations and 2,900 acres of natural stands sustained severe damage. Of the approximately 4,900 acres of pine plantations, we anticipate being able to salvage approximately 1,000 acres, weather permitting, based on existing mill quotas and the condition of the damaged timber. We do not expect to be able to salvage any of the natural stands. As a result of the hurricane, we wrote off timber basis in the amount of $6.0 million during the third quarter.

In our Timber Funds segment, the Beachie Creek fire in Oregon spread through approximately 9,000 acres of land owned by ORM Timber Fund II, which Rayonier manages and in which Rayonier holds a 20% economic interest, and the Slater fire in Oregon spread through approximately 1,000 acres of land owned by ORM Timber Fund IV, which Rayonier manages and in which Rayonier holds a 15% economic interest. Based on the severity of the damage sustained to these properties, as well as the widespread impact on other timberland owners throughout the Pacific Northwest, we estimate that approximately 60% of the damaged merchantable timber will be salvageable. As a result of the wildfires, we wrote off timber basis of approximately $9.2 million (including $8.8 million in ORM Timber Fund II and $0.4 million in ORM Timber Fund IV) during the third quarter, of which approximately $7.3 million was attributable to the non-controlling interest in the Timber Funds and $1.9 million was attributable to Rayonier.

Due to the nature of these casualty events and the infrequency with which they materially impact our results, we have included these charges as a pro forma item in our third quarter results.

Southern Timber

Third quarter sales of $47.7 million increased $6.4 million, or 15%, versus the prior year period primarily due to higher volumes, partially offset by lower pipeline easement revenue. Harvest volumes increased 16% to 1.48 million tons versus 1.28 million tons in the prior year period due to strong demand for sawtimber and pulpwood products. Average pine sawtimber stumpage prices increased 8% to $25.02 per ton versus $23.16 per ton in the prior year period, primarily due to improved demand for domestic and export grade timber coupled with favorable geographic mix. Average pine pulpwood stumpage prices were flat at $15.50 per ton versus $15.53 per ton in the prior year period. Overall, weighted-average stumpage prices (including hardwood) increased 5% to $18.88 per ton versus $18.05 per ton in the prior year period, primarily driven by higher sawtimber prices coupled with an 8% increase in sawtimber mix. Operating income of $5.1 million decreased $4.4 million versus the prior year period due to the write-off of timber basis as a result of Hurricane Laura ($6.0 million) and lower non-timber income ($2.9 million), partially offset by higher volumes ($1.6 million), higher net stumpage prices ($1.2 million), lower lease and other expenses ($1.6 million) and lower depletion rates ($0.1 million).

Third quarter Adjusted EBITDA3 of $26.1 million was $3.6 million above the prior year period.

Pacific Northwest Timber

Third quarter sales of $28.9 million increased $10.1 million, or 54%, versus the prior year period. Harvest volumes increased 33% to 346,000 tons versus 261,000 tons in the prior year period primarily due to improved sawtimber demand coupled with 55,000 tons of incremental volume from the acquired Pope Resources timberlands. Average delivered sawtimber prices increased 19% to $93.34 per ton versus $78.26 per ton in the prior year period, primarily due to improved domestic lumber markets coupled with a higher percentage of Douglas-fir sawtimber. Average delivered pulpwood prices decreased 15% to $32.12 per ton versus $37.87 per ton in the prior year period, as the deterioration of pulpwood export markets and higher lumber mill residuals resulted in excess domestic supply. Operating loss of $1.8 million improved $1.7 million versus the prior year period due to higher net stumpage prices ($5.0 million) and higher non-timber income ($0.8 million), partially offset by higher depletion rates ($2.6 million) and higher overhead and road maintenance costs ($1.4 million).

Third quarter Adjusted EBITDA3 of $9.1 million was $6.4 million above the prior year period.

New Zealand Timber

Third quarter sales of $62.8 million increased $0.8 million, or 1%, versus the prior year period. Harvest volumes increased 3% to 776,000 tons versus 754,000 tons in the prior year period. Average delivered prices for export sawtimber decreased 1% to $94.42 per ton versus $95.51 per ton in the prior year period, while average delivered prices for domestic sawtimber decreased 7% to $70.24 per ton versus $75.29 per ton in the prior year period. The slight decrease in export sawtimber prices was driven primarily by a buildup of China log inventories and continued competition from lower-cost European log and lumber imports into China. The decrease in domestic sawtimber prices (in U.S. dollar terms) was partially offset by the slight rise in the NZ$/US$ exchange rate (US$0.661 per NZ$1.00 versus US$0.655 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 8% versus the prior year period, generally lagging the prior negative trend in the export market. Operating income of $10.7 million increased $0.6 million versus the prior year period as a result of higher volumes ($0.4 million), higher carbon credit sales ($0.9 million) and lower depletion rates ($0.5 million), partially offset by lower net stumpage prices ($1.0 million) and unfavorable foreign exchange impacts ($0.2 million).

Third quarter Adjusted EBITDA3 of $18.1 million was $0.4 million above the prior year period.

Timber Funds

The Timber Funds segment generated third quarter sales of $9.9 million on harvest volumes of 110,000 tons, and operating loss of $12.4 million. Third quarter operating loss included timber write-offs of $9.2 million resulting from two fires in Oregon.2 Adjusting for the portion of the Timber Funds segment attributable to noncontrolling interests and fee revenue to Rayonier, and excluding timber write-offs resulting from the Oregon fires, pro forma sales3 and pro forma operating loss3 were $2.2 million and ($0.3) million, respectively.

Third quarter Adjusted EBITDA3 was $0.2 million.

Real Estate

Third quarter sales of $28.8 million increased $19.6 million versus the prior year period while operating income of $9.5 million increased $9.0 million versus the prior year period due to a higher number of acres sold (10,562 acres sold versus 1,345 acres sold in the prior year period), partially offset by a decrease in weighted-average prices ($2,332 per acre versus $6,513 per acre in the prior year period).

Improved Development sales of $1.3 million included $1.0 million of sales in the Wildlight development project north of Jacksonville, Florida consisting of 15 residential lots ($65,000 per lot or $377,000 per acre) in addition to a $0.3 million sale of development property in Kitsap County, Washington ($247,000 per acre). This compares to prior year period sales of $4.5 million, which consisted of 21.7 acres of commercial property ($207,000 per acre) in the Wildlight development project.

There were no Unimproved Development sales in the third quarter or the prior year period.

Rural sales of $23.2 million consisted of 10,482 acres at an average price of $2,218 per acre. This compares to prior year period sales of $4.2 million, which consisted of 1,291 acres at an average price of $3,262 per acre.

Timberland and Non-Strategic sales in the current quarter and the prior year quarter were negligible.

During the quarter, we began reporting Conservation Easement sales as a new sales category within the Real Estate segment. Since Conservation Easement sales involve the sale of certain land use rights rather than an outright sale of the land, these sales are not reflected in our average price per acre metrics for the Real Estate segment. Conservation Easement sales during the quarter were $3.1 million and covered 2,150 acres in Kitsap and Mason Counties, Washington ($1,450 per acre). There were no Conservation Easement sales in the prior year period.

Third quarter Adjusted EBITDA3 of $22.2 million was $16.8 million above the prior year period.

Trading

Third quarter sales of $22.2 million decreased $3.0 million versus the prior year period due to lower volumes and prices. Sales volumes decreased 7% to 252,000 tons versus 270,000 tons in the prior year period. The Trading segment generated operating loss of $0.6 million versus breakeven results in the prior year period, due to lower trading margins resulting from lower volumes and prices as well as higher shipping expenses.

Other Items

Third quarter corporate and other operating expenses of $8.7 million increased $3.3 million versus the prior year period, primarily due to higher employee benefit costs ($1.8 million), legal expenses ($0.7 million), costs related to the Pope Resources merger ($0.4 million) and other overheads ($0.4 million). The increase in employee benefit costs was primarily driven by an increase in the annual bonus accrual due to an improved outlook for the year as well as additional headcount from the Pope Resources merger.

Third quarter interest expense of $10.4 million increased $2.4 million versus the prior year period due to higher outstanding debt following the closing of the Pope Resources merger.

Third quarter income tax expense of $0.7 million decreased $1.5 million versus the prior year period. The New Zealand subsidiary is the primary driver of income tax expense.

ATM Equity Offering Program

In September, we established an at-the-market (ATM) equity offering program under which we may sell common shares, from time to time, having an aggregate sales price of up to $300 million. There were no shares issued under the ATM program during the three months ended September 30, 2020, and all $300 million authorized under the program remained available for issuance.

Outlook

Based on our year-to-date results and expectations for the fourth quarter, we anticipate that full-year Adjusted EBITDA will be modestly above the high end of our prior guidance while pro forma EPS will be around the high end of our prior guidance, stated Nunes. In our Southern Timber segment, we expect full-year Adjusted EBITDA toward the higher end of our prior guidance based on continued strong sawtimber demand and pricing, partially offset by lower-priced salvage volume and market impacts from Hurricane Laura. In our Pacific Northwest Timber segment, we expect full-year Adjusted EBITDA well above our prior guidance based on continued strong log demand and pricing. In our New Zealand Timber segment, we expect full-year Adjusted EBITDA near the high end of our prior guidance as our operations continue to normalize following the COVID-19 disruptions earlier this year, with modest improvements anticipated in both export and domestic pricing. In our Real Estate segment, we expect full-year Adjusted EBITDA near the high end of our prior guidance, as we continue to see strong demand and a favorable transaction pipeline across our sales categories. Overall, we remain very encouraged by the stability of our business and the strength of our end markets despite the ongoing uncertainty associated with the COVID-19 pandemic.

Conference Call

A conference call and live audio webcast will be held on Thursday, October 29, 2020 at 10:00 AM EDT to discuss these results.

Access to the live audio webcast will be available at www.rayonier.com. A replay of the webcast will be archived on the Companys website and available shortly after the call.

Investors may listen to the conference call by dialing 800-857-5752 (domestic) or 312-470-7110 (international), passcode: Rayonier. A replay of the conference call will be available one hour following the call until Saturday, November 28, 2020 by dialing 800-835-5808 (domestic) or 203-369-3353 (international), passcode: 3360.

Complimentary copies of Rayonier press releases and other financial documents are also available by calling (904) 357-9100.

1Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

2Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events which cannot be salvaged.

3Pro forma net income (loss), Pro forma revenues (sales), Pro forma operating income (loss), Adjusted EBITDA and CAD are non-GAAP measures defined and reconciled to GAAP in the attached exhibits.

About Rayonier

Rayonier is a leading timberland real estate investment trust with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. As of September 30, 2020, Rayonier owned or leased under long-term agreements approximately 2.7 million acres of timberlands located in the U.S. South (1.75 million acres), U.S. Pacific Northwest (507,000 acres) and New Zealand (416,000 acres). The Company also acts as the managing member in a private equity timber fund business with three funds comprising approximately 141,000 acres. On a look-through basis, the Companys ownership in the timber fund business equates to approximately 17,000 acres. More information is available at www.rayonier.com.

_______________________________________________________________________

Forward-Looking Statements – Certain statements in this press release regarding anticipated financial outcomes including Rayoniers earnings guidance, if any, business and market conditions, outlook, expected dividend rate, Rayoniers business strategies, including the recent acquisition of Pope Resources, expected harvest schedules, timberland acquisitions and dispositions, the anticipated benefits of Rayoniers business strategies, and other similar statements relating to Rayoniers future events, developments or financial or operational performance or results, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as may, will, should, expect, estimate, believe, intend, project, anticipate and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements.

The following important factors, among others, could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document: the cyclical and competitive nature of the industries in which we operate; fluctuations in demand for, or supply of, our forest products and real estate offerings, including any downturn in the housing market; entry of new competitors into our markets; changes in global economic conditions and world events; business disruptions arising from public health crises and outbreaks of communicable diseases, including the current outbreak of the virus known as the novel coronavirus; fluctuations in demand for our products in Asia, and especially China; the uncertainties of potential impacts of climate-related initiatives; the cost and availability of third party logging and trucking services; the geographic concentration of a significant portion of our timberland; our ability to identify, finance and complete timberland acquisitions; changes in environmental laws and regulations regarding timber harvesting, delineation of wetlands, endangered species and development of real estate generally, that may restrict or adversely impact our ability to conduct our business, or increase the cost of doing so; adverse weather conditions, natural disasters and other catastrophic events such as hurricanes, wind storms and wildfires; the lengthy, uncertain and costly process associated with the ownership, entitlement and development of real estate, especially in Florida and Washington, including changes in law, policy and political factors beyond our control; the availability of financing for real estate development and mortgage loans; changes in tariffs, taxes or treaties relating to the import and export of our products or those of our competitors; changes in key management and personnel; and our ability to meet all necessary legal requirements to continue to qualify as a real estate investment trust (REIT) and changes in tax laws that could adversely affect beneficial tax treatment.

For additional factors that could impact future results, please see Item 1A – Risk Factors in the Companys most recent Annual Report on Form 10-K and similar discussion included in other reports that we subsequently file with the Securities and Exchange Commission (the SEC). Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any further disclosures we make on related subjects in our subsequent reports filed with the SEC.

Non-GAAP Financial Measures “ To supplement Rayoniers financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), Rayonier uses certain non-GAAP measures, including cash available for distribution, pro forma sales, pro forma operating income (loss), pro forma net (loss) income, and Adjusted EBITDA, which are defined and further explained in this communication. Reconciliation of such measures to the nearest GAAP measures can also be found in this communication. Rayoniers definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

 

RAYONIER INC. AND SUBSIDIARIES

CONDENSED STATEMENTS OF CONSOLIDATED INCOME

September 30, 2020 (unaudited)

(millions of dollars, except per share information)

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

2020

 

2020

 

2019

 

2020

 

2019

 

SALES

$198.9

 

 

$195.6

 

 

$156.4

 

 

$653.6

 

 

$532.8

 

Costs and Expenses

 

 

 

 

 

 

 

 

 

Cost of sales

(180.9

)

 

(154.9

)

 

(134.5

)

 

(545.3

)

 

(418.2

)

Selling and general expenses

(14.5

)

 

(12.5

)

 

(10.1

)

 

(37.1

)

 

(30.9

)

Other operating expense, net

(1.7

)

 

(16.5

)

 

(0.8

)

 

(19.2

)

 

(2.8

)

OPERATING INCOME

1.8

 

 

11.7

 

 

11.0

 

 

52.0

 

 

80.9

 

Interest expense

(10.4

)

 

(9.8

)

 

(8.0

)

 

(28.4

)

 

(23.6

)

Interest and other miscellaneous (expense) income, net

(0.2

)

 

1.5

 

 

0.8

 

 

1.2

 

 

3.1

 

(LOSS) INCOME BEFORE INCOME TAXES

(8.8

)

 

3.4

 

 

3.8

 

 

24.8

 

 

60.4

 

Income tax expense

(0.7

)

 

(2.9

)

 

(2.3

)

 

(7.4

)

 

(10.2

)

NET (LOSS) INCOME

(9.5

)

 

0.5

 

 

1.5

 

 

17.4

 

 

50.2

 

Less: Net loss (income) attributable to noncontrolling interests in the Operating Partnership

 

 

(0.2

)

 

 

 

(0.2

)

 

 

Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates

8.7

 

 

1.4

 

 

(1.9

)

 

9.6

 

 

(7.1

)

NET (LOSS) INCOME ATTRIBUTABLE TO RAYONIER INC.

($0.8

)

 

$1.7

 

 

($0.4

)

 

$26.8

 

 

$43.1

 

(LOSS) EARNINGS PER COMMON SHARE

 

 

 

 

 

 

 

 

 

Basic (loss) earnings per share attributable to Rayonier Inc.

($0.01

)

 

$0.01

 

 

 

 

$0.20

 

 

$0.33

 

Diluted (loss) earnings per share attributable to Rayonier Inc.

($0.01

)

 

$0.01

 

 

 

 

$0.20

 

 

$0.33

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income (loss) per share (a)

$0.06

 

 

$0.11

 

 

 

 

$0.17

 

$0.33

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares used for determining

 

 

 

 

 

 

 

 

 

Basic EPS

136,351,271

 

 

133,318,209

 

 

129,325,181

 

 

132,948,124

 

 

129,293,562

 

Diluted EPS (b)

136,351,271

 

 

135,957,026

 

 

129,325,181

 

 

135,460,456

 

 

129,652,462

 

(a)

Pro forma net income (loss) per share is a non-GAAP measure. See Schedule F for definition and reconciliation to the nearest GAAP measure.

(b)

Diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding combined with the incremental weighted average number of shares that would have been outstanding assuming all potentially dilutive securities (including redeemable operating partnership units) were converted into shares of common stock at the earliest date possible. As of September 30, 2020, there were 136,518,006 common shares and 4,445,153 redeemable operating partnership units outstanding.

A

 

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2020 (unaudited)

(millions of dollars)

 

 

 

 

September 30,

 

December 31,

 

 

2020

 

2019

 

Assets

 

 

 

 

Cash and cash equivalents (excluding Timber Funds)

 

$75.2

 

 

$68.7

 

Cash and cash equivalents (Timber Funds)

 

3.0

 

 

 

Assets held for sale

 

9.7

 

 

 

Other current assets

 

80.9

 

 

57.3

 

Timber and timberlands, net of depletion and amortization

 

3,284.7

 

 

2,482.0

 

Higher and better use timberlands and real estate development investments

 

108.3

 

 

81.8

 

Property, plant and equipment

 

39.9

 

 

31.9

 

Less – accumulated depreciation

 

(11.1

)

 

(9.6

)

Net property, plant and equipment

 

28.8

 

 

22.3

 

Restricted cash

 

0.5

 

 

1.2

 

Right-of-use assets

 

100.3

 

 

99.9

 

Other assets

 

35.6

 

 

47.8

 

 

 

$3,727.0

 

 

$2,861.0

 

Liabilities, Noncontrolling Interests in the Operating Partnership and Shareholders Equity

 

 

 

 

Current maturities of long-term debt (excluding Timber Funds)

 

 

 

82.0

 

Other current liabilities

 

92.1

 

 

69.2

 

Long-term debt (excluding Timber Funds)

 

1,318.2

 

 

973.1

 

Long-term debt (Timber Funds)

 

60.4

 

 

 

Long-term lease liability

 

91.1

 

 

90.5

 

Other non-current liabilities

 

196.6

 

 

108.6

 

Noncontrolling interests in the Operating Partnership

 

117.5

 

 

 

Total Rayonier Inc. shareholders equity

 

1,429.2

 

 

1,440.0

 

Noncontrolling interests in consolidated affiliates

 

421.9

 

 

97.6

 

Total shareholders equity

 

1,851.1

 

 

1,537.6

 

 

 

$3,727.0

 

 

$2,861.0

 

 

B

 

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY

September 30, 2020 (unaudited)

(millions of dollars, except share information)

 

Common Shares

 

Retained Earnings

 

Accumulated Other Comprehensive (Loss) Income

 

Noncontrolling Interests in consolidated affiliates

 

Shareholders Equity

 

Shares

 

Amount

 

 

Balance, January 1, 2020

129,331,069

 

 

$888.2

 

 

$583.0

 

 

($31.2

)

 

$97.6

 

 

$1,537.6

 

Net income

 

 

 

 

25.9

 

 

 

 

0.5

 

 

26.4

 

Dividends ($0.27 per share)

 

 

 

 

(34.8

)

 

 

 

 

 

(34.8

)

Issuance of shares under incentive stock plans

2,407

 

 

0.1

 

 

 

 

 

 

 

 

0.1

 

Stock-based compensation

 

 

1.5

 

 

 

 

 

 

 

 

1.5

 

Repurchase of common shares made under repurchase program

(152,223

)

 

 

 

(3.2

)

 

 

 

 

 

(3.2

)

Other (a)

(14

)

 

 

 

 

 

(116.1

)

 

(11.8

)

 

(127.9

)

Balance, March 31, 2020

129,181,239

 

 

$889.8

 

 

$570.9

 

 

($147.3

)

 

$86.3

 

 

$1,399.7

 

Issuance of shares in merger with Pope Resources

7,181,071

 

 

172.4

 

 

 

 

 

 

 

 

172.4

 

Net income (loss)

 

 

 

 

1.9

 

 

 

 

(1.4

)

 

0.5

 

Net income attributable to noncontrolling interest in the Operating Partnership

 

 

 

 

(0.2

)

 

 

 

 

 

(0.2

)

Dividends ($0.27 per share)

 

 

 

 

(37.0

)

 

 

 

 

 

(37.0

)

Issuance of shares under incentive stock plans

215,970

 

 

0.2

 

 

 

 

 

 

 

 

0.2

 

Stock-based compensation

 

 

2.7

 

 

 

 

 

 

 

 

2.7

 

Acquisition of noncontrolling interests in consolidated affiliates

 

 

 

 

 

 

 

 

372.3

 

 

372.3

 

Adjustment of noncontrolling interest in the Operating Partnership

 

 

 

 

(3.9

)

 

 

 

 

 

(3.9

)

Other (a)

(66,168

)

 

(1.6

)

 

 

 

9.4

 

 

(0.5

)

 

7.3

 

Balance, June 30, 2020

136,512,112

 

 

$1,063.5

 

 

$531.7

 

 

($137.9

)

 

$456.7

 

 

$1,914.0

 

Net loss

 

 

 

 

(0.8

)

 

 

 

(8.7

)

 

(9.5

)

Dividends ($0.27 per share)

 

 

 

 

(37.3

)

 

 

 

 

 

(37.3

)

Issuance of shares under incentive stock plans

6,079

 

 

0.2

 

 

 

 

 

 

 

 

0.2

 

Stock-based compensation

 

 

2.0

 

 

 

 

 

 

 

 

2.0

 

Measurement period adjustment of noncontrolling interests in consolidated affiliates

 

 

 

 

 

 

 

 

(0.7

)

 

(0.7

)

Adjustment of noncontrolling interest in the Operating Partnership

 

 

 

 

(8.0

)

 

 

 

 

 

(8.0

)

Other (a)

(185

)

 

(0.5

)

 

 

 

16.3

 

 

(25.4

)

 

(9.6

)

Balance, September 30, 2020

136,518,006

 

 

$1,065.2

 

 

$485.6

 

 

($121.6

)

 

$421.9

 

 

$1,851.1

 

 

C

 

 

Common Shares

 

Retained Earnings

 

Accumulated Other Comprehensive (Loss) Income

 

Noncontrolling Interests in consolidated affiliates

 

Shareholders Equity

 

Shares

 

Amount

 

 

Balance, January 1, 2019

129,488,675

 

 

$884.3

 

 

$672.4

 

 

$0.2

 

 

$97.7

 

 

$1,654.6

 

Net income

 

 

 

 

24.8

 

 

 

 

3.0

 

 

27.8

 

Dividends ($0.27 per share)

 

 

 

 

(35.1

)

 

 

 

 

 

(35.1

)

Issuance of shares under incentive stock plans

26,031

 

 

0.6

 

 

 

 

 

 

 

 

0.6

 

Stock-based compensation

 

 

1.4

 

 

 

 

 

 

 

 

1.4

 

Other (a)

(1,140

)

 

 

 

 

 

(6.0

)

 

(2.1

)

 

(8.1

)

Balance, March 31, 2019

129,513,566

 

 

$886.3

 

 

$662.1

 

 

($5.8

)

 

$98.6

 

 

$1,641.2

 

Net income

 

 

 

 

18.8

 

 

 

 

2.1

 

 

20.9

 

Dividends ($0.27 per share)

 

 

 

 

(35.1

)

 

 

 

 

 

(35.1

)

Issuance of shares under incentive stock plans

250,344

 

 

0.2

 

 

 

 

 

 

 

 

0.2

 

Stock-based compensation

 

 

2.3

 

 

 

 

 

 

 

 

2.3

 

Other (a)

(134,194

)

 

(4.2

)

 

 

 

(23.7

)

 

(1.3

)

 

(29.2

)

Balance, June 30, 2019

129,629,716

 

 

$884.6

 

 

$645.8

 

 

($29.5

)

 

$99.4

 

 

$1,600.3

 

Net (loss) income

 

 

 

 

(0.4

)

 

 

 

1.9

 

 

1.5

 

Dividends ($0.27 per share)

 

 

 

 

(34.9

)

 

 

 

 

 

(34.9

)

Issuance of shares under incentive stock plans

2,423

 

 

0.1

 

 

 

 

 

 

 

 

0.1

 

Stock-based compensation

 

 

1.5

 

 

 

 

 

 

 

 

1.5

 

Repurchase of common shares made under repurchase program

(320,016

)

 

 

 

(8.4

)

 

 

 

 

 

(8.4

)

Other (a)

(230

)

 

 

 

 

 

(33.7

)

 

(10.8

)

 

(44.5

)

Balance, September 30, 2019

129,311,893

 

 

$886.2

 

 

$602.1

 

 

($63.2

)

 

$90.5

 

 

$1,515.6

 

(a)

Primarily includes shares purchased from employees in non-open market transactions to pay withholding taxes associated with the vesting of shares granted under the Companys Incentive Stock Plan, amortization of pension and postretirement plan liabilities, foreign currency translation adjustments, mark-to-market adjustments of qualifying cash flow hedges, and distributions to noncontrolling interests in consolidated affiliates. The three months ended September 30, 2020 also include the redemption of 1,000 common units in the Operating Partnership for an equal number of Rayonier Inc. common shares, common stock offering costs associated with the At-the-market (ATM) offering program, as well as changes related to the recapitalization of the New Zealand JV.

C

 

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30, 2020 (unaudited)

(millions of dollars)

 

 

Nine Months Ended September 30,

 

2020

 

2019

 

Cash provided by operating activities:

 

 

 

Net income

$17.4

 

 

$50.2

 

Depreciation, depletion and amortization

119.5

 

 

91.9

 

Non-cash cost of land and improved development

20.7

 

 

10.0

 

Timber-write offs due to casualty events

15.2

 

 

 

Gain on large dispositions of timberlands

(28.7

)

 

 

Other items to reconcile net income to cash provided by operating activities

10.1

 

 

13.2

 

Changes in working capital and other assets and liabilities

(16.2

)

 

(1.1

)

 

138.0

 

 

164.2

 

Cash used for investing activities:

 

 

 

Capital expenditures

(44.7

)

 

(45.3

)

Real estate development investments

(5.4

)

 

(3.3

)

Purchase of timberlands

(24.4

)

 

(81.9

)

Net proceeds from large dispositions of timberlands

115.7

 

 

 

Net cash consideration for merger with Pope Resources

(231.1

)

 

 

Other

5.1

 

 

(2.3

)

 

(184.8

)

 

(132.8

)

Cash provided by (used for) financing activities:

 

 

 

Net increase in debt

188.0

 

 

 

Dividends paid

(109.1

)

 

(106.1

)

Distributions to noncontrolling interests in the Operating Partnership

(2.4

)

 

 

Proceeds from the issuance of common shares under incentive stock plan

0.2

 

 

0.8

 

Repurchase of common shares made under repurchase program

(3.2

)

 

(8.4

)

Noncontrolling interests in consolidated affiliates redemption of shares

(5.1

)

 

 

Distributions to noncontrolling interest in consolidated affiliates

(8.2

)

 

(7.3

)

Other

(4.5

)

 

(4.2

)

 

55.7

 

 

(125.2

)

Effect of exchange rate changes on cash and restricted cash

(0.3

)

 

(2.8

)

Cash, cash equivalents and restricted cash:

 

 

 

Change in cash, cash equivalents and restricted cash

8.6

 

 

(96.6

)

Balance, beginning of year

70.0

 

 

156.5

 

Balance, end of period

$78.6

 

 

$59.9

 

D

 

RAYONIER INC. AND SUBSIDIARIES

BUSINESS SEGMENT SALES, PRO FORMA SALES, OPERATING INCOME,

PRO FORMA OPERATING INCOME AND ADJUSTED EBITDA

September 30, 2020 (unaudited)

(millions of dollars)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

2020

 

2020

 

2019

 

2020

 

2019

 

Sales

 

 

 

 

 

 

 

 

 

Southern Timber

$47.7

 

 

$46.8

 

 

$41.3

 

 

$147.4

 

 

$148.3

 

Pacific Northwest Timber

28.9

 

 

26.2

 

 

18.8

 

 

86.1

 

 

57.9

 

New Zealand Timber

62.8

 

 

41.8

 

 

62.0

 

 

142.1

 

 

181.3

 

Timber Funds

9.9

 

 

7.5

 

 

 

 

17.4

 

 

 

Real Estate

28.8

 

 

50.0

 

 

9.2

 

 

197.4

 

 

52.7

 

Trading

22.2

 

 

24.3

 

 

25.2

 

 

65.5

 

 

92.7

 

Intersegment Eliminations

(1.4

)

 

(1.0

)

 

(0.1

)

 

(2.3

)

 

(0.1

)

Sales

$198.9

 

 

$195.6

 

 

$156.4

 

 

$653.6

 

 

$532.8

 

 

 

 

 

 

 

 

 

 

 

Pro forma sales (a)

 

 

 

 

 

 

 

 

 

Southern Timber

$47.7

 

 

$46.8

 

 

$41.3

 

 

$147.4

 

$148.3

 

Pacific Northwest Timber

28.9

 

 

26.2

 

 

18.8

 

 

86.1

 

57.9

 

New Zealand Timber

62.8

 

 

41.8

 

 

62.0

 

 

142.1

 

181.3

 

Timber Funds

2.2

 

 

1.7

 

 

 

 

3.9

 

 

 

Real Estate

28.8

 

 

50.0

 

 

9.2

 

 

81.4

 

52.7

 

Trading

22.2

 

 

24.3

 

 

25.2

 

 

65.5

 

92.7

 

Intersegment Eliminations

(1.4

)

 

(1.0

)

 

(0.1

)

 

(2.3

)

 

(0.1

)

Pro forma sales

$191.2

 

 

$189.8

 

 

$156.4

 

 

$524.1

 

$532.8

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

 

 

Southern Timber

$5.1

 

 

$11.2

 

 

$9.5

 

 

$31.4

 

 

$45.8

 

Pacific Northwest Timber

(1.8

)

 

(6.7

)

 

(3.6

)

 

(9.5

)

 

(11.1

)

New Zealand Timber

10.7

 

 

5.0

 

 

10.1

 

 

21.1

 

 

38.6

 

Timber Funds

(12.4

)

 

(1.9

)

 

 

 

(14.3

)

 

 

Real Estate

9.5

 

 

24.8

 

 

0.4

 

 

61.1

 

 

25.9

 

Trading

(0.6

)

 

0.1

 

 

 

 

(0.5

)

 

0.3

 

Corporate and Other

(8.7

)

 

(20.9

)

 

(5.4

)

 

(37.3

)

 

(18.6

)

Operating income

$1.8

 

 

$11.7

 

 

$11.0

 

 

$52.0

 

 

$80.9

 

 

 

 

 

 

 

 

 

 

 

Pro forma operating income (loss) (a)

 

 

 

 

 

 

 

 

 

Southern Timber

$11.1

 

 

$11.2

 

 

$9.5

 

 

$37.4

 

 

$45.8

 

Pacific Northwest Timber

(1.8

)

 

(6.7

)

 

(3.6

)

 

(9.5

)

 

(11.1

)

New Zealand Timber

10.7

 

 

5.0

 

 

10.1

 

 

21.1

 

 

38.6

 

Timber Funds

(0.3

)

 

0.1

 

 

 

 

(0.1

)

 

 

Real Estate

9.5

 

 

24.8

 

 

0.4

 

 

32.4

 

 

25.9

 

Trading

(0.6

)

 

0.1

 

 

 

 

(0.5

)

 

0.3

 

Corporate and Other

(8.3

)

 

(7.4

)

 

(5.4

)

 

(20.9

)

 

(18.6

)

Pro forma operating income

$20.3

 

 

$27.2

 

 

$11.0

 

 

$59.9

 

 

$80.9

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (a)

 

 

 

 

 

 

 

 

 

Southern Timber

$26.1

 

 

$26.4

 

 

$22.5

 

 

$85.8

 

 

$91.4

 

Pacific Northwest Timber

9.1

 

 

3.9

 

 

2.7

 

 

22.8

 

 

8.0

 

New Zealand Timber

18.1

 

 

9.9

 

 

17.7

 

 

38.2

 

 

59.7

 

Timber Funds

0.2

 

 

0.7

 

 

 

 

0.8

 

 

 

Real Estate

22.2

 

 

44.6

 

 

5.4

 

 

65.7

 

 

41.1

 

Trading

(0.6

)

 

0.1

 

 

 

 

(0.5

)

 

0.3

 

Corporate and Other

(7.9

)

 

(7.0

)

 

(5.1

)

 

(19.9

)

 

(17.7

)

Adjusted EBITDA

$67.2

 

 

$78.6

 

 

$43.2

 

 

$192.9

 

 

$182.8

 

(a)

Pro forma sales, Pro forma operating income (loss) and Adjusted EBITDA are non-GAAP measures. See Schedule F for definitions and reconciliations

E

 

RAYONIER INC. AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP MEASURES

September 30, 2020 (unaudited)

(millions of dollars, except per share information)

LIQUIDITY MEASURES:

 

 

 

 

Nine Months Ended

 

September 30,

 

September 30,

 

2020

 

2019

 

Cash Provided by Operating Activities

$138.0

 

 

$164.2

 

Working capital and other balance sheet changes

14.6

 

 

(3.3

)

Costs related to the merger with Pope Resources (a)

16.4

 

 

 

Cash Available for Distribution attributable to NCI in Timber Funds

(0.1

)

 

 

Capital expenditures (b)

(44.7

)

 

(45.3

)

Cash Available for Distribution (c)

$124.2

 

 

$115.6

 

 

 

 

 

Net Income

$17.4

 

 

$50.2

 

Operating loss attributable to NCI in Timber Funds

12.3

 

 

 

Interest, net attributable to NCI in Timber Funds

0.3

 

 

 

Income tax expense attributable to NCI in Timber Funds

0.2

 

 

 

Net Income (Excluding NCI in Timber Funds)

$30.2

 

 

$50.2

 

Interest, net and miscellaneous income attributable to Rayonier

27.9

 

 

21.2

 

Income tax expense attributable to Rayonier

7.3

 

 

10.2

 

Depreciation, depletion and amortization attributable to Rayonier

112.2

 

 

91.9

 

Non-cash cost of land and improved development

20.7

 

 

10.0

 

Timber write-offs resulting from casualty events attributable to Rayonier (d)

7.9

 

 

 

Non-operating income

(1.0

)

 

(0.8

)

Costs related to the merger with Pope Resources (a)

16.4

 

 

 

Large Dispositions (e)

(28.7

)

 

 

Adjusted EBITDA (f)

$192.9

 

 

$182.8

 

Cash interest paid attributable to Rayonier (g)

(25.0

)

 

(20.6

)

Cash taxes paid attributable to Rayonier

(0.6

)

 

(1.4

)

Capital expenditures attributable to Rayonier (b)

(43.1

)

 

(45.3

)

Cash Available for Distribution (c)

$124.2

 

 

$115.6

 

 

 

 

 

Cash Available for Distribution (c)

$124.2

 

 

$115.6

 

Real estate development investments

(5.4

)

 

(3.3

)

Cash Available for Distribution after real estate development investments

$118.8

 

 

$112.3

 

F

 

PRO FORMA SALES (h):

Three Months Ended

 

Southern Timber

 

Pacific Northwest Timber

 

New Zealand Timber

 

Timber Funds

 

Real Estate

 

Trading

 

Intersegment Eliminations

 

Total

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$47.7

 

 

$28.9

 

 

$62.8

 

 

$9.9

 

 

$28.8

 

 

$22.2

 

 

($1.4

)

 

$198.9

 

Sales attributable to noncontrolling interest in Timber Funds

 

 

 

 

 

 

 

(7.7

)

 

 

 

 

 

 

 

(7.7

)

Pro forma sales

 

$47.7

 

 

$28.9

 

 

$62.8

 

 

$2.2

 

 

$28.8

 

 

$22.2

 

 

($1.4

)

 

$191.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$46.8

 

 

$26.2

 

 

$41.8

 

 

$7.5

 

 

$50.0

 

 

$24.3

 

 

($1.0)

 

 

$195.6

 

Sales attributable to noncontrolling interest in Timber Funds

 

 

 

 

 

 

 

(5.8

)

 

 

 

 

 

 

 

(5.8

)

Pro forma sales

 

$46.8

 

 

$26.2

 

 

$41.8

 

 

$1.7

 

 

$50.0

 

 

$24.3

 

 

($1.0

)

 

$189.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$41.3

 

 

$18.8

 

 

$62.0

 

 

 

 

$9.2

 

 

$25.2

 

 

($0.1

)

 

$156.4

 

Pro forma sales

 

$41.3

 

 

$18.8

 

 

$62.0

 

 

 

 

$9.2

 

 

$25.2

 

 

($0.1

)

 

$156.4

 

 

PRO FORMA SALES (h):

Nine Months Ended

Southern Timber

 

Pacific Northwest Timber

 

New Zealand Timber

 

Timber Funds

 

Real Estate

 

Trading

 

Intersegment Eliminations

 

Total

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

$147.4

 

$86.1

 

$142.1

 

$17.4

 

 

$197.4

 

 

$65.5

 

($2.3

)

 

$653.6

 

Sales attributable to noncontrolling interest in Timber Funds

 

 

 

(13.5

)

 

 

 

 

 

 

(13.5

)

Large Dispositions (e)

 

 

 

 

 

(116.0

)

 

 

 

 

(116.0

)

Pro forma sales

$147.4

 

$86.1

 

$142.1

 

$3.9

 

 

$81.4

 

 

$65.5

 

($2.3

)

 

$524.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales

$148.3

 

$57.9

 

$181.3

 

 

 

$52.7

 

 

$92.7

 

($0.1

)

 

$532.8

 

Pro forma sales

$148.3

 

$57.9

 

$181.3

 

 

 

$52.7

 

 

$92.7

 

($0.1

)

 

$532.8

 

 

PRO FORMA NET INCOME (LOSS) (i):

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30, 2020

 

June 30, 2020

 

September 30, 2019

 

September 30, 2020

 

September 30, 2019

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

 

$

 

Per Diluted Share

 

Net (Loss) Income Attributable to Rayonier Inc.

($0.8

)

 

($0.01

)

 

$1.7

 

$0.01

 

($0.4

)

 

 

$26.8

 

 

$0.20

 

 

$43.1

 

$0.33

Costs related to the merger with Pope Resources (a)

0.4

 

 

 

 

13.5

 

0.10

 

 

 

 

16.4

 

 

0.12

 

 

 

Timber write-offs resulting from casualty events attributable to Rayonier (d)

7.9

 

 

0.07

 

 

 

 

 

 

 

7.9

 

 

0.06

 

 

 

Large Dispositions (e)

 

 

 

 

 

 

 

 

 

(28.7

)

 

(0.21

)

 

 

Pro Forma net income (loss)

$7.5

 

 

$0.06

 

 

$15.2

 

$0.11

 

($0.4

)

 

 

$22.4

 

 

$0.17

 

$43.1

 

$0.33

 

F

 

PRO FORMA OPERATING INCOME (LOSS) AND ADJUSTED EBITDA (f) (j):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

Southern Timber

 

Pacific Northwest Timber

 

New Zealand Timber

 

Timber Funds

 

Real Estate

 

Trading

 

Corporate and Other

 

Total

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$5.1

 

($1.8

)

 

$10.7

 

($12.4

)

 

$9.5

 

($0.6

)

 

($8.7

)

 

$1.8

Operating loss attributable to NCI in Timber Funds

 

 

 

 

10.3

 

 

 

 

 

 

 

10.3

Timber write-offs resulting from casualty events attributable to Rayonier (d)

6.0

 

 

 

 

1.8

 

 

 

 

 

 

 

7.9

Costs related to the merger with Pope Resources (a)

 

 

 

 

 

 

 

 

 

0.4

 

 

0.4

Pro forma operating income (loss)

$11.1

 

($1.8

)

 

$10.7

 

($0.3

)

 

$9.5

 

($0.6

)

 

($8.3

)

 

$20.3

Depreciation, depletion and amortization

15.0

 

10.9

 

 

7.3

 

0.5

 

 

5.5

 

 

 

0.4

 

 

39.6

Non-cash cost of land and improved development

 

 

 

 

 

 

7.3

 

 

 

 

 

7.3

Adjusted EBITDA

$26.1

 

$9.1

 

 

$18.1

 

$0.2

 

 

$22.2

 

($0.6

)

 

($7.9

)

 

$67.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$11.2

 

($6.7

)

 

$5.0

 

($1.9

)

 

$24.8

 

$0.1

 

 

($20.9

)

 

$11.7

Operating loss attributable to NCI in Timber Funds

 

 

 

 

2.0

 

 

 

 

 

 

 

2.0

Costs related to merger with Pope Resources (a)

 

 

 

 

 

 

 

 

 

13.5

 

 

13.5

Pro forma operating income (loss)

$11.2

 

($6.7

)

 

$5.0

 

$0.1

 

 

$24.8

 

$0.1

 

 

($7.4

)

 

$27.2

Depreciation, depletion and amortization

15.2

 

10.6

 

 

4.9

 

0.5

 

 

6.7

 

 

 

0.3

 

 

38.3

Non-cash cost of land and improved development

 

 

 

 

 

 

13.0

 

 

 

 

 

13.0

Adjusted EBITDA

$26.4

 

$3.9

 

 

$9.9

 

$0.7

 

 

$44.6

 

$0.1

 

 

($7.0

)

 

$78.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$9.5

 

($3.6

)

 

$10.1

 

 

 

$0.4

 

 

 

($5.4

)

 

$11.0

Depreciation, depletion and amortization

13.0

 

6.3

 

 

7.6

 

 

 

0.7

 

 

 

0.3

 

 

27.8

Non-cash cost of land and improved development

 

 

 

 

 

 

4.3

 

 

 

 

 

4.3

Adjusted EBITDA

$22.5

 

$2.7

 

 

$17.7

 

 

 

$5.4

 

 

 

($5.1

)

 

$43.2

PRO FORMA OPERATING INCOME (LOSS) AND ADJUSTED EBITDA (f) (j):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

Southern Timber

 

Pacific Northwest Timber

 

New Zealand Timber

 

Timber Funds

 

Real Estate

 

Trading

 

Corporate and Other

 

Total

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$31.4

 

($9.5

)

 

$21.1

 

($14.3

)

 

$61.1

 

 

($0.5

)

 

($37.3

)

 

$52.0

 

Operating loss attributable to NCI in Timber Funds

 

 

 

 

12.3

 

 

 

 

 

 

 

 

12.3

 

Timber write-offs resulting from casualty events attributable to Rayonier (d)

6.0

 

 

 

 

1.8

 

 

 

 

 

 

 

 

7.9

 

Costs related to the merger with Pope Resources (a)

 

 

 

 

 

 

 

 

 

 

16.4

 

 

16.4

 

Large Dispositions (e)

 

 

 

 

 

 

(28.7

)

 

 

 

 

 

(28.7

)

Pro forma operating income (loss)

$37.4

 

($9.5

)

 

$21.1

 

($0.1

)

 

$32.4

 

 

($0.5

)

 

($20.9

)

 

$59.9

 

Depreciation, depletion and amortization

48.4

 

32.2

 

 

17.1

 

1.0

 

 

12.6

 

 

 

 

1.0

 

 

112.2

 

Non-cash cost of land and improved development

 

 

 

 

 

 

20.7

 

 

 

 

 

 

20.7

 

Adjusted EBITDA

$85.8

 

$22.8

 

 

$38.2

 

$0.8

 

 

$65.7

 

 

($0.5

)

 

($19.9

)

 

$192.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

$45.8

 

($11.1

)

 

$38.6

 

 

 

$25.9

 

 

$0.3

 

 

($18.6

)

 

$80.9

 

Depreciation, depletion and amortization

45.6

 

19.2

 

 

21.1

 

 

 

5.2

 

 

 

 

0.9

 

 

91.9

 

Non-cash cost of land and improved development

 

 

 

 

 

 

10.0

 

 

 

 

 

 

10.0

 

Adjusted EBITDA

$91.4

 

$8.0

 

 

$59.7

 

 

 

$41.1

 

 

$0.3

 

 

($17.7

)

 

$182.8

 

(a)

Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

(b)

Capital expenditures during the nine months ended September 30, 2020 exclude timberland acquisitions. Excluding the Pope Resources acquisition, timberland acquisitions were $24.4 million and $81.9 million, respectively, during the nine months ended September 30, 2020 and September 30, 2019.

(c)

Cash Available for Distribution (CAD) is defined as cash provided by operating activities adjusted for capital spending (excluding timberland acquisitions and real estate development investments), CAD attributable to noncontrolling interest in Timber Funds and working capital and other balance sheet changes. CAD is a non-GAAP measure of cash generated during a period that is available for common stock dividends, distributions to noncontrolling interest in the Operating Partnership, distributions to the New Zealand minority shareholder, repurchase of the Companys common shares, debt reduction, timberland acquisitions and real estate development investments. CAD is not necessarily indicative of the CAD that may be generated in future periods.

(d)

Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events which cannot be salvaged.

(e)

Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In March 2020, the Company completed a disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximately $116.0 million and $28.7 million, respectively.

(f)

Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, depletion, amortization, the non-cash cost of land and improved development, non-operating income and expense, operating loss attributable to noncontrolling interest in Timber Funds, costs related to the merger with Pope Resources, timber write-offs resulting from casualty events and Large Dispositions. Adjusted EBITDA is a non-GAAP measure that management uses to make strategic decisions about the business and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis attributable to Rayonier.

(g)

Cash interest paid is presented net of patronage refunds received of $4.6 million and $4.0 million, respectively, excluding patronage refunds attributable to noncontrolling interest in Timber Funds during the nine months ended September 30, 2020 and September 30, 2019.

(h)

Pro forma revenue (sales) is defined as revenue (sales) adjusted for Large Dispositions and sales attributable to the noncontrolling interest in Timber Funds. Rayonier believes that this non-GAAP financial measure provides investors with useful information to evaluate core business operations because it excludes specific items that are not indicative of ongoing operating results attributable to Rayonier.

(i)

Pro forma net income (loss) is defined as net (loss) income attributable to Rayonier Inc. adjusted for costs related to the merger with Pope Resources, timber write-offs resulting from casualty events and Large Dispositions. Rayonier believes that this non-GAAP financial measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results attributable to Rayonier.

(j)

Pro forma operating income (loss) is defined as operating income (loss) adjusted for operating loss attributable to noncontrolling interest in Timber Funds, costs related to the merger with Pope Resources, timber write-offs resulting from casualty events and Large Dispositions. Rayonier believes that this non-GAAP financial measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results attributable to Rayonier.

F

Investors/Media

Mark McHugh

904-357-9100

[email protected]

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News

Kimco Realty Declares Dividends on Class L and Class M Preferred Stock

gbafNews28

Kimco Realty Corp. (NYSE: KIM), one of North Americas largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets, today announced that its Board of Directors declared a quarterly dividend with respect to shares of the companys 5.125% Class L and 5.25% Class M cumulative redeemable preferred stock. All dividends on the shares of preferred stock will be paid on January 15, 2021, to shareholders of record on January 4, 2021.

About Kimco

Kimco Realty Corp. (NYSE:KIM) is a real estate investment trust (REIT) headquartered in Jericho, N.Y. that is one of North Americas largest publicly traded owners and operators of open-air, grocery-anchored shopping centers and mixed-use assets. As of June 30, 2020, the company owned interests in 400 U.S. shopping centers and mixed-use assets comprising 70 million square feet of gross leasable space primarily concentrated in the top major metropolitan markets. Publicly traded on the NYSE since 1991, and included in the S&P 500 Index, the company has specialized in shopping center acquisitions, development and management for more than 60 years. For further information, please visit www.kimcorealty.com, the companys blog at blog.kimcorealty.com,, or follow Kimco on Twitter at www.twitter.com/kimcorealty.

The company announces material information to its investors using the companys investor relations website (investors.kimcorealty.com), SEC filings, press releases, public conference calls, and webcasts. The company also uses social media to communicate with its investors and the public, and the information the company posts on social media may be deemed material information. Therefore, the company encourages investors, the media, and others interested in the company to review the information that it posts on the companys blog (blog.kimcorealty.com) and social media channels, including Facebook (www.facebook.com/KimcoRealty), Twitter (www.twitter.com/kimcorealty), YouTube (www.youtube.com/kimcorealty) and LinkedIn (www.linkedin.com/company/kimco-realty-corporation). The list of social media channels that the company uses may be updated on its investor relations website from time to time.

Safe Harbor Statement

The statements in this news release state the companys and managements intentions, beliefs, expectations or projections of the future and are forward-looking statements. It is important to note that the companys actual results could differ materially from those projected in such forward-looking statements. Factors which may cause actual results to differ materially from current expectations include, but are not limited to, (i) general adverse economic and local real estate conditions, (ii) the inability of major tenants to continue paying their rent obligations due to bankruptcy, insolvency or a general downturn in their business, (iii) financing risks, such as the inability to obtain equity, debt or other sources of financing or refinancing on favorable terms to the company, (iv) the companys ability to raise capital by selling its assets, (v) changes in governmental laws and regulations and managements ability to estimate the impact of such changes, (vi) the level and volatility of interest rates and managements ability to estimate the impact thereof, (vii) pandemics or other health crises, such as coronavirus disease 2019 (COVID-19), (viii) the availability of suitable acquisition, disposition, development and redevelopment opportunities, and risks related to acquisitions not performing in accordance with our expectations, (ix) valuation and risks related to the companys joint venture and preferred equity investments, (x) valuation of marketable securities and other investments, (xi) increases in operating costs, (xii) changes in the dividend policy for the companys common and preferred stock and the companys ability to pay dividends at current levels, (xiii) the reduction in the companys income in the event of multiple lease terminations by tenants or a failure by multiple tenants to occupy their premises in a shopping center, (xiv) impairment charges and (xv) unanticipated changes in the companys intention or ability to prepay certain debt prior to maturity and/or hold certain securities until maturity. Additional information concerning factors that could cause actual results to differ materially from those forward- looking statements is contained from time to time in the companys Securities and Exchange Commission (SEC) filings. Copies of each filing may be obtained from the company or the SEC.

The company refers you to the documents filed by the company from time to time with the SEC, specifically the section titled Risk Factors in the companys Annual Report on Form 10-K for the year ended December 31, 2019, as may be updated or supplemented in the companys Quarterly Reports on Form 10-Q and the companys other filings with the SEC, which discuss these and other factors that could adversely affect the companys results. The company disclaims any intention or obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise.

David F. Bujnicki

Senior Vice President, Investor Relations and Strategy

Kimco Realty Corporation

1-866-831-4297

[email protected]

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News

Western Digital Reports Fiscal First Quarter 2021 Financial Results

gbafNews28

Western Digital Corp. (Nasdaq: WDC) today reported fiscal first quarter 2021 financial results.

I am pleased with our results, as we continued to focus our execution on the massive market opportunity for data storage technology that stems from the ongoing expansion of cloud infrastructure connected to intelligent endpoints and powered by high performance networks, said David Goeckeler, Western Digital CEO. While we are still managing through macro uncertainty, during the quarter we benefitted from strength particularly in the retail sector, driven by favorable macro and market dynamics, as well as the brand recognition of our products. Our diversified storage portfolio strategy implemented through our recently announced organizational structure will enable us to accelerate growth, improve our focus, and drive sustainable, long-term shareholder value.

Q1 2021 Financial Highlights

 

 

GAAP

 

Non-GAAP

 

 

 

 

 

 

 

 

 

 

 

Q1 2021

Q1 2020

vs. Q1 2020

 

Q1 2021

Q1 2020

vs. Q1 2020

Revenue ($M)

 

$3,922

$4,040

down 3%

 

$3,922

$4,040

down 3%

Gross Margin

 

23.0%

18.8%

up 4.2 ppt

 

26.3%

24.8%

up 1.5 ppt

Operating Expenses ($M)

 

$834

$887

down 6%

 

$708

$767

down 8%

Operating Income (Loss) ($M)

 

$70

($129)

*

 

$323

$235

up 37%

Net Income (Loss) ($M)

 

($60)

($276)

*

 

$196

$101

up 94%

Earnings Per Share

 

($0.20)

($0.93)

*

 

$0.65

$0.34

up 91%

 

*not a meaningful figure

Note: The company’s fiscal first quarter of 2021 was a 13-week fiscal quarter, compared to a 14-week fiscal quarter a year ago.

Key End Market Summary

Revenue ($M)

 

Q1 2021

Q1 2020

vs. Q1 2020

Client Devices

 

$1,946

$1,616

up 20%

Data Center Devices & Solutions

 

$1,129

$1,532

down 26%

Client Solutions

 

$847

$892

down 5%

Total Revenue

 

$3,922

$4,040

down 3%

 

Note: The company’s fiscal first quarter of 2021 was a 13-week fiscal quarter, compared to a 14-week fiscal quarter a year ago.

In the fiscal first quarter of 2021, Western Digitals revenue decreased 3% year-over-year to $3.9 billion. The decrease is largely attributable to the uncertainty associated with the global economic contraction and geopolitical headwinds, which resulted in shifts in customer buying patterns impacting Data Center Devices & Solutions and Client Solutions.

In Client Devices, Western Digitals industry leading client SSD solutions for notebook and desktops benefitted from the acceleration of work from home and remote learning trends. Gaming experienced significant growth as upcoming game consoles transition from hard drive-based storage solutions to flash, powering a more real-time, immersive gaming experience. In addition, mobile revenue more than doubled, driven by recent 5G phone launches and a broadening of end customers within China.

In Data Center Devices & Solutions, both Capacity Enterprise hard drive and Enterprise SSD (eSSD) demand were negatively impacted by shifts in customer ordering patterns. Important product transitions in hard drive and flash-based storage solutions also impacted demand trends as customers are still ramping up on these newer products.

In Client Solutions, Western Digital continued to recover as many brick and mortar customers reopened from COVID-19-related lock downs during the period. In addition, demand related to work from home and distance learning benefitted both hard drive and flash-based solutions.

Business Outlook for Fiscal Second Quarter of 2021

 

Three Months Ending

January 1, 2021

 

GAAP(1)

 

Non-GAAP(1)

Revenue ($B)

$3.75 – $3.95

 

$3.75 – $3.95

Gross margin

21% – 23%

 

24% – 26%

Operating expenses ($M)

$790 – $810

 

$680 – $700

Interest and other expense, net ($M)

$80 – $85

 

$70 – $75

Tax rate

N/A

 

21% – 25% (2)

Diluted earnings per share

N/A

 

$0.40 – $0.60

Diluted shares outstanding (in millions)

~ 306

 

~ 306

_______________

(1) Non-GAAP gross margin guidance excludes amortization of acquired intangible assets and stock-based compensation expense, totaling approximately $110 million to $130 million. The companys non-GAAP operating expenses guidance excludes amortization of acquired intangible assets; stock-based compensation expense; and employee termination, asset impairment and other charges, totaling approximately $100 million to $120 million. The company’s non-GAAP interest and other expense guidance excludes approximately $10 million of convertible debt activity. In the aggregate, non-GAAP diluted earnings per share guidance excludes these items totaling $220 million to $260 million. The timing and amount of these charges excluded from non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, net and non-GAAP diluted earnings per share cannot be further allocated or quantified with certainty. Additionally, the timing and amount of additional charges the company excludes from its non-GAAP tax rate and non-GAAP diluted earnings per share are dependent on the timing and determination of certain actions and cannot be reasonably predicted. Accordingly, full reconciliations of non-GAAP gross margin, non-GAAP operating expenses, non-GAAP interest and other expense, non-GAAP tax rate and non-GAAP diluted earnings per share to the most directly comparable GAAP financial measures (gross margin, operating expenses, interest and other expense, tax rate and diluted earnings per share, respectively) are not available without unreasonable effort.

(2) The non-GAAP tax rates provided are based on a percentage of non-GAAP pre-tax income.

Investor Communications

The investment community conference call to discuss these results and the companys business outlook for the fiscal second quarter of 2021 will be broadcast live online today at 1:30 p.m. Pacific/4:30 p.m. Eastern. The live and archived conference call/webcast and the earnings presentation can be accessed online at investor.wdc.com.

About Western Digital

Western Digital, a leader in data infrastructure, creates environments for data to thrive. The company is driving the innovation needed to help customers capture, preserve, access, analyze, and transform an ever-increasing diversity of data. Everywhere data lives, from advanced data centers to mobile sensors to personal devices, the company’s industry-leading solutions deliver the possibilities of data. Western Digital data-centric solutions are comprised of the Western Digital, G-Technology„¢, SanDisk and WD brands. Financial and investor information is available on the company’s Investor Relations website at investor.wdc.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements concerning the companys preliminary financial results for its fiscal first quarter ended October 2, 2020; the companys business outlook for the fiscal second quarter of 2021; expectations regarding the impact of COVID-19; demand trends and market conditions; expansion of the cloud infrastructure; benefits of the company’s organizational structure; the company’s brand recognition and product portfolio; and expected future financial performance. These forward-looking statements are based on managements current expectations and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. The preliminary financial results for the companys fiscal first quarter ended October 2, 2020 included in this press release represent the most current information available to management. The companys actual results when disclosed in its Form 10-Q may differ from these preliminary results as a result of the completion of the companys financial closing procedures; final adjustments; completion of the review by the companys independent registered accounting firm; and other developments that may arise between now and the disclosure of the final results. Other risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the forward-looking statements include: future responses to and effects of the COVID-19 pandemic; volatility in global economic conditions; impact of business and market conditions; impact of competitive products and pricing; our development and introduction of products based on new technologies and expansion into new data storage markets; risks associated with cost saving initiatives, restructurings, acquisitions, divestitures, mergers, joint ventures and our strategic relationships; difficulties or delays in manufacturing or other supply chain disruptions; hiring and retention of key employees; our high level of debt and other financial obligations; changes to our relationships with key customers; disruptions in operations from cyberattacks or other system security risks; actions by competitors; risks associated with compliance with changing legal and regulatory requirements and the outcome of legal proceedings; and other risks and uncertainties listed in the companys filings with the Securities and Exchange Commission (the SEC), including the companys Form 10-K filed with the SEC on August 28, 2020, to which your attention is directed. You should not place undue reliance on these forward-looking statements, which speak only as of the date hereof, and the company undertakes no obligation to update these forward-looking statements to reflect new information or events.

Western Digital, the Western Digital logo, G-Technology, SanDisk and WD are registered trademarks or trademarks of Western Digital Corporation or its affiliates in the US and/or other countries.

WESTERN DIGITAL CORPORATION

PRELIMINARY CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions; unaudited; on a US GAAP basis)

 

 

October 2,

2020

 

July 3,

2020

 

 

 

 

ASSETS

Current assets:

 

 

 

Cash and cash equivalents

$

2,995

 

$

3,048

Accounts receivable, net

 

2,097

 

 

2,379

Inventories

 

3,355

 

 

3,070

Other current assets

 

558

 

 

551

Total current assets

 

9,005

 

 

9,048

Property, plant and equipment, net

 

2,897

 

 

2,854

Notes receivable and investments in Flash Ventures

 

1,746

 

 

1,875

Goodwill

 

10,069

 

 

10,067

Other intangible assets, net

 

758

 

 

941

Other non-current assets

 

927

 

 

877

Total assets

$

25,402

 

$

25,662

 

 

 

 

LIABILITIES AND SHAREHOLDERS EQUITY

Current liabilities:

 

 

 

Accounts payable

$

1,949

 

$

1,945

Accounts payable to related parties

 

404

 

 

407

Accrued expenses

 

1,293

 

 

1,296

Accrued compensation

 

497

 

 

472

Current portion of long-term debt

 

286

 

 

286

Total current liabilities

 

4,429

 

 

4,406

Long-term debt

 

9,086

 

 

9,289

Other liabilities

 

2,311

 

 

2,416

Total liabilities

 

15,826

 

 

16,111

Total shareholders equity

 

9,576

 

 

9,551

Total liabilities and shareholders equity

$

25,402

 

$

25,662

WESTERN DIGITAL CORPORATION

PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share amounts; unaudited; on a US GAAP basis)

 

 

Three Months Ended

 

October 2,

2020

 

October 4,

2019

Revenue, net

$

3,922

 

 

$

4,040

 

Cost of revenue

 

3,018

 

 

 

3,282

 

Gross profit

 

904

 

 

 

758

 

Operating expenses:

 

 

 

Research and development

 

555

 

 

 

574

 

Selling, general and administrative

 

256

 

 

 

305

 

Employee termination, asset impairment and other charges

 

23

 

 

 

8

 

Total operating expenses

 

834

 

 

 

887

 

Operating income (loss)

 

70

 

 

 

(129

)

Interest and other expense, net

 

(73

)

 

 

(108

)

Loss before taxes

 

(3

)

 

 

(237

)

Income tax expense

 

57

 

 

 

39

 

Net loss

$

(60

)

 

$

(276

)

 

 

 

 

Loss per common share

 

 

 

Basic

$

(0.20

)

 

$

(0.93

)

Diluted

$

(0.20

)

 

$

(0.93

)

 

 

 

 

Weighted average shares outstanding:

 

 

 

Basic

 

303

 

 

 

296

 

Diluted

 

303

 

 

 

296

 

WESTERN DIGITAL CORPORATION

PRELIMINARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions; unaudited; on a US GAAP basis)

 

 

Three Months Ended

 

October 2,

2020

 

October 4,

2019

Operating Activities

 

 

 

Net loss

$

(60

)

 

$

(276

)

Adjustments to reconcile net loss to net cash provided by operations:

 

 

 

Depreciation and amortization

 

374

 

 

 

406

 

Stock-based compensation

 

76

 

 

 

77

 

Deferred income taxes

 

11

 

 

 

(27

)

Loss on disposal of assets

 

1

 

 

 

2

 

Write-off of issuance costs and amortization of debt discounts

 

10

 

 

 

10

 

Other non-cash operating activities, net

 

(6

)

 

 

(21

)

Changes in:

 

 

 

Accounts receivable, net

 

282

 

 

 

(243

)

Inventories

 

(285

)

 

 

(5

)

Accounts payable

 

99

 

 

 

155

 

Accounts payable to related parties

 

(3

)

 

 

176

 

Accrued expenses

 

(23

)

 

 

100

 

Accrued compensation

 

26

 

 

 

75

 

Other assets and liabilities, net

 

(139

)

 

 

(176

)

Net cash provided by operating activities

 

363

 

 

 

253

 

Investing Activities

 

 

 

Purchases of property, plant and equipment, net

 

(330

)

 

 

(145

)

Acquisitions, net of cash acquired

 

 

 

 

(22

)

Activity related to Flash Ventures, net

 

163

 

 

 

186

 

Strategic Investments and Other, net

 

1

 

 

 

15

 

Net cash provided by (used in) investing activities

 

(166

)

 

 

34

 

Financing Activities

 

 

 

Employee stock plans, net

 

(40

)

 

 

(26

)

Dividends paid to shareholders

 

 

 

 

(147

)

Repayment of debt

 

(213

)

 

 

(319

)

Net cash used in financing activities

 

(253

)

 

 

(492

)

Effect of exchange rate changes on cash

 

3

 

 

 

(2

)

Net decrease in cash and cash equivalents

 

(53

)

 

 

(207

)

Cash and cash equivalents, beginning of period

 

3,048

 

 

 

3,455

 

Cash and cash equivalents, end of period

$

2,995

 

 

$

3,248

 

WESTERN DIGITAL CORPORATION

PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in millions; unaudited)

 

 

Three Months Ended

 

October 2,

2020

 

October 4,

2019

GAAP cost of revenue

$

3,018

 

 

$

3,282

 

Amortization of acquired intangible assets

 

(145

)

 

 

(164

)

Stock-based compensation expense

 

(12

)

 

 

(12

)

Charges related to a power outage incident and related recovery

 

30

 

 

 

(68

)

Non-GAAP cost of revenue

$

2,891

 

 

$

3,038

 

 

 

 

 

GAAP gross profit

$

904

 

 

$

758

 

Amortization of acquired intangible assets

 

145

 

 

 

164

 

Stock-based compensation expense

 

12

 

 

 

12

 

Charges related to a power outage incident and related recovery

 

(30

)

 

 

68

 

Non-GAAP gross profit

$

1,031

 

 

$

1,002

 

 

 

 

 

GAAP operating expenses

$

834

 

 

$

887

 

Amortization of acquired intangible assets

 

(39

)

 

 

(41

)

Stock-based compensation expense

 

(64

)

 

 

(65

)

Employee termination, asset impairment and other charges

 

(23

)

 

 

(8

)

Charges related to acquisitions and dispositions

 

 

 

 

(5

)

Charges related to cost saving initiatives

 

 

 

 

(1

)

Non-GAAP operating expenses

$

708

 

 

$

767

 

 

 

 

 

GAAP operating income (loss)

$

70

 

 

$

(129

)

Cost of revenue adjustments

 

127

 

 

 

244

 

Operating expense adjustments

 

126

 

 

 

120

 

Non-GAAP operating income

$

323

 

 

$

235

 

 

 

 

 

GAAP interest and other expense, net

$

(73

)

 

$

(108

)

Convertible debt activity

 

7

 

 

 

7

 

Other

 

(2

)

 

 

2

 

Non-GAAP interest and other expense, net

$

(68

)

 

$

(99

)

 

 

 

 

GAAP income tax expense

$

57

 

 

$

39

 

Income tax adjustments

 

2

 

 

 

(4

)

Non-GAAP income tax expense

$

59

 

 

$

35

 

WESTERN DIGITAL CORPORATION

PRELIMINARY RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts; unaudited)

 

 

Three Months Ended

 

October 2,

2020

 

October 4,

2019

GAAP net loss

$

(60

)

 

$

(276

)

Amortization of acquired intangible assets

 

184

 

 

 

205

 

Stock-based compensation expense

 

76

 

 

 

77

 

Employee termination, asset impairment and other charges

 

23

 

 

 

8

 

Charges related to acquisitions and dispositions

 

 

 

 

5

 

Charges related to cost saving initiatives

 

 

 

 

1

 

Charges related to a power outage incident and related recovery

 

(30

)

 

 

68

 

Convertible debt activity

 

7

 

 

 

7

 

Other

 

(2

)

 

 

2

 

Income tax adjustments

 

(2

)

 

 

4

 

Non-GAAP net income

$

196

 

 

$

101

 

 

 

 

 

Diluted income (loss) per common share

 

 

 

GAAP

$

(0.20

)

 

$

(0.93

)

Non-GAAP

$

0.65

 

 

$

0.34

 

 

 

 

 

Diluted weighted average shares outstanding:

 

 

 

GAAP

 

303

 

 

 

296

 

Non-GAAP

 

303

 

 

 

300

 

 

 

 

 

Cash flows

 

 

 

Cash flow provided by operating activities

$

363

 

 

$

253

 

Purchase of property, plant and equipment, net

 

(330

)

 

 

(145

)

Activity related to flash ventures, net

 

163

 

 

 

186

 

Free cash flow

$

196

 

 

$

294

 

To supplement the condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), the table above sets forth non-GAAP cost of revenue; non-GAAP gross profit; non-GAAP operating expenses; non-GAAP operating income; non-GAAP interest and other expense, net; non-GAAP income tax expense; non-GAAP net income; non-GAAP diluted income per common share and free cash flow (Non-GAAP measures). These Non-GAAP measures are not in accordance with, or an alternative for, measures prepared in accordance with GAAP and may be different from Non-GAAP measures used by other companies. The company believes the presentation of these Non-GAAP measures, when shown in conjunction with the corresponding GAAP measures, provides useful information to investors for measuring the companys earnings performance and comparing it against prior periods. Specifically, the company believes these Non-GAAP measures provide useful information to both management and investors as they exclude certain expenses, gains and losses that the company believes are not indicative of its core operating results or because they are consistent with the financial models and estimates published by many analysts who follow the company and its peers. As discussed further below, these Non-GAAP measures exclude the amortization of acquired intangible assets, stock-based compensation expense, employee termination, asset impairment and other charges, charges related to acquisitions and dispositions, charges related to cost saving initiatives, charges related to a power outage incident and related recovery, convertible debt activity, other adjustments, and income tax adjustments, and the company believes these measures along with the related reconciliations to the GAAP measures provide additional detail and comparability for assessing the company’s results. These Non-GAAP measures are some of the primary indicators management uses for assessing the company’s performance and planning and forecasting future periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

As described above, the company excludes the following items from its Non-GAAP measures:

Amortization of acquired intangible assets. The company incurs expenses from the amortization of acquired intangible assets over their economic lives. Such charges are significantly impacted by the timing and magnitude of the company’s acquisitions and any related impairment charges.

Stock-based compensation expense. Because of the variety of equity awards used by companies, the varying methodologies for determining stock-based compensation expense, the subjective assumptions involved in those determinations, and the volatility in valuations that can be driven by market conditions outside the company’s control, the company believes excluding stock-based compensation expense enhances the ability of management and investors to understand and assess the underlying performance of its business over time and compare it against the company’s peers, a majority of whom also exclude stock-based compensation expense from their non-GAAP results.

Employee termination, asset impairment and other charges. From time-to-time, in order to realign the company’s operations with anticipated market demand or to achieve cost synergies from the integration of acquisitions, the company may terminate employees and/or restructure its operations. From time-to-time, the company may also incur charges from the impairment of intangible assets and other long-lived assets. These charges (including any reversals of charges recorded in prior periods) are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.

Charges related to acquisitions and dispositions. In connection with the company’s business combinations or dispositions, the company incurs expenses which it would not have otherwise incurred as part of its business operations. These expenses include third-party professional service and legal fees, third-party integration services, severance costs, non-cash adjustments to the fair value of acquired inventory, contract termination costs, and retention bonuses. The company may also experience other accounting impacts in connection with these transactions. These charges and impacts are related to acquisitions and dispositions, are inconsistent in amount and frequency, and the company believes they are not indicative of the underlying performance of its business.

Charges related to cost saving initiatives. In connection with the transformation of the company’s business, the company incurred charges related to cost saving initiatives which do not qualify for special accounting treatment as exit or disposal activities. These charges, which the company believes are not indicative of the underlying performance of its business, primarily relate to costs associated with rationalizing the company’s channel partners or vendors, transforming the company’s information systems infrastructure, integrating the company’s product roadmap, and accelerated depreciation of assets.

Charges related to a power outage incident and related recovery. In June 2019, an unexpected power outage incident occurred at the flash-based memory manufacturing facilities operated through the company’s joint venture with Kioxia Corporation in Yokkaichi, Japan. The power outage incident resulted in costs associated with the repair of damaged tools and the write-off of damaged inventory and unabsorbed manufacturing overhead costs which are expensed as incurred. In September 2020, the company received a partial recovery of these losses from insurance carriers. These charges and recoveries are inconsistent in amount and frequency, and the company believes these charges or recoveries are not part of the ongoing production operation of its business.

Convertible debt activity. The company excludes non-cash economic interest expense associated with its convertible notes. These charges do not reflect the company’s operating results, and the company believes they are not indicative of the underlying performance of its business.

Other adjustments. From time-to-time, the company incurs charges or gains that the company believes are not a part of the ongoing operation of its business. The resulting expense or benefit is inconsistent in amount and frequency.

Income tax adjustments. Income tax adjustments include the difference between income taxes based on a forecasted annual non-GAAP tax rate and a forecasted annual GAAP tax rate as a result of the timing of certain non-GAAP pre-tax adjustments. The income tax adjustments also include adjustments to estimates related to the current status of the rules and regulations governing the transition to the Tax Cuts and Jobs Act. These adjustments are excluded because they are infrequent and the company believes that they are not indicative of the underlying performance of its business.

Additionally, free cash flow is defined as cash flows provided by operating activities less purchases of property, plant and equipment, net of proceeds from sales of property, plant and equipment, and the activity related to Flash Ventures, net. The company considers free cash flow generated in any period to be a useful indicator of cash that is available for strategic opportunities including, among others, investing in the company’s business, making strategic acquisitions, repaying debt and strengthening the balance sheet.

Investor Contact:

Western Digital Corp.

T. Peter Andrew

949.672.9655

[email protected]

[email protected]

Media Contact:

Sard Verbinnen & Co

John Christiansen

David Isaacs

Leah Polito

[email protected]

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