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Text: They are also referenced on Page 2 of our financial supplement.
With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO.
First, I'll make some high-level comments before turning it back over to Mark McHugh, Senior Vice President and Chief Financial Officer to review our consolidated financial results.
Then I'll ask Doug Long, our Senior Vice President of Forest Resources, to comment on our U.S. and New Zealand timber results.
And following the review of our timber segments, Mark will discuss our real estate results as well as our outlook for the balance of 2021.
We are pleased to report that the encouraging momentum we experienced across all our businesses to start 2021 continued into the second quarter.
Specifically, we generated adjusted EBITDA of $95 million and pro forma earnings per share of $0.22 per share.
Adjusted EBITDA exceeded the prior-year quarter by 21%, as favorable results in each of our timber segments more than offset lower adjusted EBITDA in the real estate segment.
As we reflect on the second quarter, the operating environment was markedly improved as compared to the prior year period.
We're pleased with how our team continues to capitalize on strong domestic lumber markets improving, real estate market trends and export market opportunities.
As Mark will discuss in greater detail based on our solid first half results and our expectations for the balance of the year, we are modestly raising our 2021 adjusted EBITDA guidance.
Drilling down to our different operating segments, our Southern Timber segment generated adjusted EBITDA of $31 million for the quarter, which was 16% above the prior year second quarter.
Net stumpage prices increased 14% which more than offset a 4% reduction in harvest volumes as weather conditions impacted productions across the South.
In our Pacific Northwest Timber segment, we achieved adjusted EBITDA of $14 million, an improvement of $10 million versus the prior year quarter.
This sharp increase in adjusted EBITDA was driven by a 30% increase in delivered saw timber prices stemming from favorable domestic lumber markets and increased log export demand as well as higher volumes following the merger with Pope Resources.
In our New Zealand Timber segment.
Second quarter adjusted EBITDA nearly triple to $28 million.
The year-over-year increase in adjusted EBITDA was due to both significantly higher harvest volumes as the second quarter of 2020 was severely impacted by COVID 19 related headwinds and weighted average log prices and increased 51% as a result of robust export and domestic log demand.
In our Real Estate segment, we generated adjusted EBITDA of $29 million, down from $45 million in an exceptionally strong period last year.
The decline versus the prior year quarter was driven by a 61% reduction in acres sold, partially offset by significantly higher per acre prices.
Importantly, our real estate team closed significant transactions in both our Wildlight and Belfast Commerce Park development projects during the quarter.
Switching gears from second quarter results, I'd like to provide an update on the Timber Fund business that we acquired last year through our merger with Pope Resources.
Two weeks ago we announced that we had sold the rights to manage to -- of the Timber Funds, as well as our co-investment stake in both of these funds.
The aggregate purchase price was $35.9 million and the transaction will be reflected in our third quarter financial results.
As we had previously communicated the private equity timber funds business was not a long-term strategic fit for Rayonier.
We believe this transaction reflects a favorable outcome for our shareholders.
As it allows us to simplify our operations and allocate capital to other strategic priorities.
Following this transaction, we continue to manage, as well as own 20% co-investment stake in one Timber Fund comprising 31,000 acres in the Pacific Northwest.
Since this fund is at the end of its investment term it was not included in the sale transaction rather we have commenced a process to liquidate the assets from this fund, which if successful will complete our exit from the fund business.
Let's start on Page 5 with our financial highlights.
Sales for the quarter totaled $291 million, while operating income was $84 million and net income attributable to Rayonier was $57 million or $0.41 per share.
On a pro forma basis, net income was $31 million or $0.22 per share.
Pro forma adjustments for the quarter were primarily associated with a large disposition in the Pacific Northwest, as well as a series of debt actions that I will discuss momentarily.
As Dave touched on second quarter adjusted EBITDA of $95 million was above the prior year period as higher results across all of our timber segments more than offset a lower contribution from our Real Estate segment.
On the bottom of Page 5, we provide an overview of our capital resources and liquidity at quarter-end as well as a comparison to year-end, our cash available for distribution or CAD for the first half of the year was $111 million versus $80 million in the prior-year period, primarily due to higher adjusted EBITDA, partially offset by higher cash taxes, interest expense and capital expenditures.
A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement.
Consistent with our nimble approach to capital allocation, we raised $81 million through our at-the-market equity offering program during the second quarter an average price of $36.79 per share.
As previously discussed, we view the ATM program as a cost-effective tool to opportunistically raise capital strengthen our balance sheet and match fund bolt-on acquisitions.
We are also active in the debt market during the quarter taking steps to address our 2022 bond maturity, improve our debt maturity profile and lower our weighted average borrowing cost.
Specifically in May, we issued $450 million or 2.75% senior notes due 2031.
Additionally while currently remains undrawn.
We executed a credit agreement for a delayed-draw term loan for up to $200 million, which if utilized would mature in 2029.
We also obtained an amendment to lower the interest rate on the term loan we have maturing in 2026 and amended the terms of the debt we assumed in the Pope acquisition to make this debt, unsecured.
Furthermore, we also lowered the pricing of our revolving credit facility as well as extended its maturity by year to April 2026.
A portion of the proceeds from the May debt offering were used to completely repay a $250 million term loan that was due in 2025.
Additionally, given our strong cash position, following the large disposition completed during the quarter we prepaid $100 million of the term loan that matures in 2026 reducing the outstanding balance to $200 million.
In conjunction with these actions, we recorded a $2.2 million loss associated with the termination of an interest rate swap as well as cost of $1.1 million related to debt extinguishments and modifications.
Collectively, these items translated the $0.02 per share, a pro forma adjustments in the quarter.
Looking ahead, we believe the actions taken during the quarter help to facilitate an optimal capital structure and leave us with ample liquidity to fund the repayment of our 2022 bond maturity early next year.
Pro forma for the repayment of our 2022 bond maturity, we expect that our weighted average cost of debt will drop below 3% and our weighted average maturity will extend to roughly seven years.
Moreover, almost all of our term debt has been swapped to fixed, which gives us strong visibility on our forecasted interest expense.
Lastly, by tapping into the bond markets at an advantageous time we preserved additional debt capacity within the farm credit system providing us with increased future financing flexibility.
In sum, we closed the quarter with $310 million of cash and $1.4 billion of debt, both of which exclude cash and debt attributable to the Timber Funds segment which is non-recourse to Rayonier.
Our net debt of $1.1 billion represented 17% of our enterprise value based on our closing stock price at the end of the second quarter.
Let's start on Page 9 with our Southern Timber segment.
Adjusted EBITDA in the second quarter of $31 million was $4 million above the prior year quarter.
The year-over-year improvement was largely attributable to higher net stumpage pricing albeit partially offset by lower harvest volumes.
The 4% decline in volume during the second quarter was largely due to wet weather resulting in lost production days.
This modest decline in volume though was more than offset by higher prices.
Specifically, average sawlog stumpage pricing was roughly $28 per ton, a 10% increase compared to the prior year quarter.
Improved pricing strong demand from sawmills as well as improved export log demand in certain markets.
Pulpwood pricing climbed 14% from the prior year quarter, reflecting robust customer demand, coupled with tighter supply due to wet weather conditions.
A favorable mix shift toward our Coastal Atlantic markets also contributed to the strong year-over-year comparison.
Overall weighted average pine stumpage prices increased 14% versus the prior year quarter due to higher sawtimber and pulpwood prices as well as a more favorable mix of sawtimber.
We are encouraged by the pricing gains registered during the quarter.
Which underscore the importance of local timber market dynamics across the USL and the construction of our portfolio across those markets.
Moving to our Pacific Northwest Timber segment on Page 10.
Adjusted EBITDA of $14 million was $10 million above the prior year quarter.
The year-over-year increase was largely attributable to significantly improved pricing due to strong domestic lumber markets and the incremental pension created by healthcare export demand.
Second quarter harvest volume was 4% above the prior year quarter due to additional volume from last year's merger with Pope Resources.
At $98 per ton, our average delivered sawlog price during the second quarter was up 30% from the prior year quarter.
Strong pricing was sustained throughout the quarter.
Even as lumber prices preceded from the record levels set in May.
In part due to the pricing support created by stronger export market demand meanwhile pulpwood pricing fell 21% in the second quarter relative to prior year quarter.
As sawmill residuals remain plentiful and that increased lumber production.
As it relates to the export market in Pacific Northwest improved demand we discussed on our last call has continued into recent months.
The constricted flow of European Spruce salvage logs, the ban on Australian log exports to China and an improvement in Japanese demand have all contributed to a favorable environment for log exports from the region.
And we have seen more inventories in China rise in recent weeks.
We believe these forces continues for healthy demand for log exports Pacific Northwest.
We've continued strong demand for domestic sawmills as well as the attention created by the flow of Pacific Northwest marks in the export market will translate into a relatively stable pricing environment in the second half of the year.
While we are closely monitoring the correction in lumber prices, we believe the underlying log demand remains healthy.
In particular, demand for green logs remained robust given the supply disruptions caused by wildfires, and other regions.
On that note, I'd also like to offer a few comments regarding the risk wildfires across parts of the Western United States.
Thus far, none of our properties have been seriously threatened by the fires that have impacted the region in 2021.
As a reminder, none of our fee timber properties were impacted by last year's fires, either on the roughly 10,000 acres of timber fund properties sustained fired image.
While there continues to be upward pressure on higher cost in the areas that have been directly impacted by fires over the past year, our operations have not been materially impacted from the salvage efforts conducted by others.
Page 11 shows results and key operating metrics for our New Zealand Timber segment.
Adjusted EBITDA in the second quarter of $28 million was nearly triple the $10 million that we reported in the prior year quarter.
The increase in adjusted EBITDA was driven by a much stronger pricing and then more normalized level of harvest activity versus the prior year period constrained by COVID 19 disruptions.
Increased volumes and pricing were partially offset by reduced carbon credit sales.
We continue to defer credit sales during the quarter as we expect that the value of these credits this poised for further price appreciation.
Turning to pricing, average delivered prices for export sawtimber jumped 50% in the second quarter from the prior year period to $148 per tonne, reflecting improved China demand the ban on a strain log exports in China and the reduced flow of European Spruce salvage logs into China.
As we've previously noted, prior to the ban Australia was applying approximately 10% of the total volume imported by China.
Furthermore shipments of European Spruce salvage logs in the China may constrained by higher transportation costs and the lack of container availability.
These constraints on the flow of logs into China.
When coupled with the healthy demand translated an exceptionally strong export pricing in New Zealand.
Underscoring the favorable pricing environment A grade log export prices to China surpassed previous record highs during the second quarter.
As reaching record levels, though there has been a pullback in pricing in recent weeks as demand for Radiata logs has softened in response to higher log inventories in China.
Shifting to the New Zealand domestic market average delivered sawlog prices increased 27% in the prior year period to $85 per ton.
The increase in US dollar pricing was driven primarily by foreign exchange rates and New Zealand domestic pricing improved by more modest 9% in the second quarter versus the prior year quarter.
Average domestic pulpwood pricing declined 35% as compared to the prior year quarter.
In sum, while we expect lower pricing over the balance of the year, our New Zealand operations continue to generate strong net stumpage realizations.
We believe we are well positioned to continue to capture market share from Australia and Europe and the export market as well as benefit from strong domestic demand.
I'll now briefly discuss the results from our Timber Funds segment.
Highlight on Page 12 Timber Funds segment generated consolidated EBITDA of $8 million in the second quarter on harvest volume of 185,000 tons.
Adjusted EBITDA, which reflects the look through contribution from the Timber Funds was $1 million.
As discussed earlier, we are in the process of extinguish Timber Funds business expect contribution from this segment will be negligible moving forward.
Lastly, in our Trading segment we reported $400,000 of adjusted EBITDA in the second quarter.
As a reminder, our trading activities typically generate low margins in our primarily designed to provide additional economies of scale for fee timber export business.
As detailed on Page 13, our Real Estate segment delivered strong results in the second quarter, second quarter real estate sales totaled $75 million on roughly 17,000 acres sold, which included a large disposition in Washington consisting of roughly 8500 acres.
Excluding this transaction, second quarter sales totaled $39 million on roughly 8,000 acres sold at an average price of $4900 per acre.
Adjusted EBITDA for the quarter was $29 million.
Sales in the Improved Development category totaled a record high $19 million in the second quarter as we closed significant transactions within both our Wildlight and Belfast Commerce Park development projects.
In our Wildlight development project north of Jacksonville, Florida sales included a $9.1 million sale of 130 acres to a national homebuilder for the first phase of an active adult community.
Due to post closing obligations roughly $5 million of revenue from this transaction was deferred and will be recognized in future periods.
The addition of an active adult community is a significant milestone for the Wildlight project as it adds a complementary market segment, which we believe will help to catalyze additional downstream demand.
In addition, we closed on 36 residential lots in our Wildlight project for $2.3 million or $65 per lot.
Meanwhile, in our Belfast Commerce Park development project south of Savannah, Georgia, we sold 153 acre parcel to a national developer of industrial properties for $7.9 million or $51,000 per acre.
Overall, we are pleased with the demand for entitled infrastructure served land that is translating into additional momentum across our development projects.
We remain encouraged by the pipeline of opportunities in Wildlight, Richmond Hill and the West Puget Sound area of Washington.
In the rural category sales totaled roughly 7700 acres at an average price of just over $2600 per acre, a nearly 100-acre sale in Georgia to the Conservation Fund comprise the bulk of our second quarter activity.
More broadly, demand for rural land remains healthy as the space privacy and recreational opportunities offered by these properties continue to attract buyers.
We are well positioned to capitalize on these demand trends moving forward and remain focused on achieving price realizations well above timberland values.
We also closed on a conservation easement sale covering 18 acres in Washington for $4 million in the second quarter.
The property covered by this easement was in the Town of Port Gamble, which was acquired as part of the merger with Pope Resources.
Lastly, if we closed on a large disposition in Western Washington during the quarter for $6 million roughly $100 per acre.
This roughly 8500-acre property was a relatively less strategic holding for us in the region and was sold through a competitive bid process.
Now moving on to our outlook for the year.
Based on our solid first half results and our expectations for the balance of the year, we are raising our full-year adjusted EBITDA guidance to range of $300 million to $320 million, which reflects a 3% increase at the midpoint from our original guidance.
In our Southern Timber segment, we now expect full year harvest volumes of $5.9 million to $6.1 million tons as production has been constrained by regional weather conditions and trucking availability.
We expect that weighted average pricing will remain above prior year levels, driven by continued strong demand from domestic pulp and lumber mills, as well as improving export demand in select US South markets.
However, we are seeing higher trucking costs which could limit the upside and net stumpage realizations over the balance of the year, we are taking measures to mitigate the upward pressure on these costs by optimizing whole distances on our deliberate log sales and targeting stumpage sales to customers with great advantages.
Overall, we expect full-year adjusted EBITDA of $118 to $122 million and our Southern Timber segment a modest increase from prior guidance.
In our Pacific Northwest Timber segment we are maintaining our full year volume guidance of $1.7 million to $1.8 million tons, along with our full-year adjusted EBITDA guidance of $50 million to $55 million.
We expect pricing in the region, we remain relatively stable as long demand across both the domestic and export markets remains favorable.
In our New Zealand Timber segment, we are maintaining our full year volume guidance of $2.6 million to $2.8 million tons.
Given the robust start to 2021, we now expect full-year adjusted EBITDA of $78 million to $82 million.
That said, we expect relatively lower export pricing over the second half of the year as log inventories in China have increased significantly in recent weeks.
Further, we anticipate that shipping and demurrage costs will remain elevated.
In our Real Estate segment, we now expect full-year adjusted EBITDA of $78 million to $86 million.
We expect a strong second half of the year in this segment given the healthy demand for residential and commercial properties within our real estate development projects, as well as continued strength in rural land sales activity.
Overall, we're very pleased with the quarter and optimistic about our outlook for the balance of the year.
As I reflect on the last 18 months.
I'm very proud of how our team has successfully navigated pandemic related disruptions and integrated Pope Resources, while also continuing to execute on several other strategic priorities.
To this end, in the second quarter, we continue to improve our portfolio through both addition and subtraction.
We opportunistically recycled capital out of a non-strategic timberland holding in Washington State while also closing on a total of $22 million of bolt-on acquisitions.
These portfolio moves have helped us improve our positioning in the strongest softwood log markets in the US and New Zealand, which should help us grow both cash flows and value per share over time.
Subsequent to quarter end, we also closed on the sale of two Timber Funds, an important step toward exiting a private equity fund business that is not a strategic fit for Rayonier.
Meanwhile, the benefits of the strategic investments we've made on the real estate front, are being increasingly realized as quarterly improved development real estate sales reached a record high in the second quarter.
Furthermore, we took steps to optimize our cost of capital and better position our balance sheet for long-term growth by accessing both the debt and equity markets during the quarter.
In addition to achieving important operational and financial goals, we also continue to embrace the increased interest from stakeholders in our environmental social and governance practices.
As previously discussed, we believe our mission of providing industry-leading returns while serving as a responsible steward of the lands is well aligned with key ESG principles that we're looking to advance.
Building on the inaugural carbon report we published earlier this year, we are planning to release a comprehensive sustainability report in the coming weeks, which will further enhance our ESG disclosures.
Overall I continue to be impressed by the dedication and focus of our employees as they work together to better position Rayonier for long-term success.

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q2 pro forma earnings per share $0.22.
q2 earnings per share $0.41.
anticipate full-year net income attributable to rayonier of $98 to $106 million, earnings per share of $0.69 to $0.75.
anticipate full-year pro forma earnings per share of $0.51 to $0.57, and adjusted ebitda of $300 to $320 million.

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