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- 2013 - January - 28th -

Rayonier still sees higher earnings in ‘transition’ year

by Mark Basch, Contributing Writer

Rayonier Inc. says 2013 will be a year of transition, but the Jacksonville-based forest products company still expects to grow earnings this year.

"With an improving housing market, growing Asian demand for logs from our Washington timberlands and our New Zealand joint venture and continued strong demand for our cellulose specialty products, we see ongoing operating momentum in each of our businesses that we anticipate will drive another good year in 2013," CEO Paul Boynton said in Rayonier's quarterly conference call with analysts last week.

Rayonier operates three business segments: timberland, real estate and performance fibers. The performance fibers division, in which it manufactures specialty cellulose products, is by far the biggest segment, accounting for about two-thirds of its $1.57 billion in revenue last year.

Boynton said the company is on schedule to complete a two-year "cellulose specialties expansion (CSE) project," at its mill in Jesup, Ga. Rayonier also last week announced an agreement to sell its wood products business for $80 million to International Forest Products Ltd.

The wood products division, consisting of three lumber mills in Georgia, produced about $10 million in operating income last year, a fraction of Rayonier's total operating income of more than $400 million.

"This will be a transition year for our manufacturing businesses as we complete the CSE project and finalize the sale of our wood products business. These actions are key elements of our strategy to exit commodity markets and focus on growth in the specialty chemicals sector led by our high-purity cellulose specialties products," Boynton said.

While it goes through the transition, Rayonier expects 2013 earnings to be "slightly above" its 2012 full-year earnings of $2.17 a share, Chief Financial Officer Hans Vanden Noort said in the conference call.

Rayonier raised its quarterly dividend by 10 percent to 44 cents a share in the third quarter last year, and Boynton said the company expects to continue giving money back to shareholders.

"We are committed to increasing our dividend over time funded by operating cash flows. With the strength of our businesses and strong conservative balance sheet, we will continue to target initiatives to create value and increase cash generation in the years ahead," he said.

Investors were happy with Rayonier's fourth-quarter report.

Earnings rose 25 percent to $75.6 million, or 59 cents a share, a penny above the average forecast of analysts surveyed by Thomson Financial.

Rayonier's stock rose as much as $1.61 to a record high of $56.78 Thursday after the earnings report.

Dick's Wings hires former Hooters CEO

Jacksonville-based American Restaurant Concepts Inc., operator of the Dick's Wings and Grill chain, last week hired a former CEO of Hooters of America as its chief operating officer.

Industry veteran Rick Akam has served in executive roles for several restaurant chains, most recently as chief operating officer of Twin Peaks Restaurants, a chain that is considered a competitor to Hooters. Akam ran Hooters from 1995 through 2003.

Akam's role with American Restaurant Concepts is to "direct operational improvements, growth strategies and provide seasoned expertise in brand development strategies" for the 16-unit Dick's chain, according to a company news release.

"By offering unmatched quality and variety, I believe the Dick's Wings restaurant franchise is a unique brand that can expand well beyond its current markets," Akam said in the release.

CEO Mike Rosenberger said in the release that he will now "concentrate my energies on identifying new markets, developing new franchisees and growing the footprint" of the chain.

FIS lifted to investment grade

Standard & Poor's Ratings Services raised its corporate credit rating on Fidelity National Information Services Inc. from BB-plus to BBB-minus.

That extra "B" may not seem like much, but it's significant.

A company with a "double-B" rating is considered speculative. A "triple-B" is considered investment grade. So that was a big step up for Fidelity, which calls itself FIS.

"The rating incorporates our assumption that FIS will maintain a satisfactory business risk profile, reflecting an increasingly global market position, strong operating margins, and contractual relationships that generate a significant base of recurring revenues," S&P said in a news release.

Robert W. Baird analyst David Koning said in a research note that the investment grade rating will lower the interest payments on about $2 billion in FIS debt.

FIS' stock rose as much as 71 cents to a 52-week high of $37.77 on Tuesday, the first trading day after the S&P upgrade.

"We are pleased that S&P recognizes the significant progress FIS has made in strengthening our balance sheet and achieving our stated goals to grow the business organically, expand margins and drive earnings growth, while maintaining a disciplined capital allocation policy," FIS Chief Executive Frank Martire said in a news release.

Parkway Properties stock on the rise

Two days after Orlando-based Parkway Properties Inc. announced a $130 million agreement to buy the Deerwood North and Deerwood South office parks in Jacksonville, Cantor Fitzgerald analyst David Toti downgraded Parkway from "hold" to "sell."

Does that mean he sees this as a bad deal? No, quite the contrary.

Toti supports Parkway's recent acquisition strategy and lowered his rating only because of a recent run-up in Parkway's stock price.

Parkway has announced more than $500 million in acquisitions since the end of the third quarter, Toti said in his report.

"We like the results, as management has better positioned the aggregate portfolio," Toti said.

"Parkway continues to take significant strides in improving both the portfolio and balance sheet," he said.

The stock has risen from about $10 six months ago to about $16 recently, a run that Toti thinks is "overdone." Since he doesn't expect Parkway to produce further shareholder returns equal to other real estate investment trusts, he downgraded the stock to "sell."

Parkway is buying eight buildings in the two Southside Jacksonville office parks from Flagler Development Co., increasing its presence in the market.

Parkway currently owns two buildings near the Southbank – the Stein Mart building and Riverplace South – and also owns a 30 percent interest in 245 Riverside, which was originally known as the St. Joe building before The St. Joe Co. moved its headquarters to the Florida Panhandle.

Parkway also provides management services for a number of Jacksonville office buildings, including the signature Wells Fargo Center in Downtown Jacksonville.

Parkway owns all or part of 43 buildings in nine states.

Vistakon sales up in 2012

Johnson & Johnson last week reported that 2012 sales at its Jacksonville-based contact lens subsidiary, Vistakon, rose 2.7 percent, falling just short of $3 billion at $2.996 billion.

The results were negatively impacted by foreign exchange rates. Excluding currency impacts, Vistakon, which gets about two-thirds of its sales outside of the U.S., increased sales by 4.3 percent.

In the New Jersey-based company's annual business review last week, Johnson & Johnson said its medical devices and diagnostics division, which includes Vistakon, will be a particular focus for growth this year. The company said it is continuing to invest in research and hopes to expand the division's growth in overseas markets.

Coach plunges on disappointing quarter

Coach Inc. has been a fascinating stock to watch over the past year. The handbag and fashion accessories company, which has a major distribution center in Jacksonville, has gone through several sharp spikes and drops as Wall Street reacts (and overreacts) to every number it reports.

The latest came Wednesday when Coach reported higher sales and earnings for the second quarter ended Dec. 29, but lower than analysts' forecasts.

Sales rose 4 percent to $1.5 billion, but the average analysts' forecast was $1.6 billion, according to Thomson Financial. Earnings rose by 5 cents a share to $1.23, but the average analysts' forecast was $1.28.

Coach's stock plunged by $9.93 to $50.75 on Wednesday after the report. That just continued the up-and-down trend over the past year in which the stock reached a high of $79.70 last spring and a low of $48.24 in the summer.

Robert W. Baird analyst Erika Maschmeyer isn't overly concerned about the latest earnings miss, maintaining an "outperform" rating on the stock.

"While we do not foresee an immediate catalyst, we view the current level as appealing in view of Coach's growth prospects and strong free cash flow," Maschmeyer said in a research note.

"We are positive on Coach's evolution into a broader lifestyle brand and increasingly meaningful contributions from men's and international," she said.

Fortegra cutting 40 jobs

Fortegra Financial Corp. said in a Securities and Exchange Commission filing that it is eliminating about 40 employee and contract positions as part of a plan to streamline operations.

The Jacksonville-based insurance services company did not say in the filing where the jobs were located, and Fortegra's investor relations department did not respond to voice mail and email messages last week.

The SEC filing said the job cuts are part of a plan to consolidate the fulfillment, claims administration and information technology functions for its insurance-related products.

Regency updates investors via social media

Regency Centers Corp. last week said in an unusual SEC filing that its 2012 operating results "were in line with some of its most successful historical results."

What was unusual about the filing is that Regency said the information was "disclosed on a social media platform on Friday, Jan. 18."

Public companies are required to file SEC reports when they have financial information that is considered material — that is, information that would be considered pertinent to investors. This is the first time I've seen a company say they've disclosed material information via social media before disseminating it through other means.

Does this mean we now have to friend Regency and all the other public companies on Facebook to keep up with their latest information?

Anyway, the SEC filing said the Jacksonville-based shopping center operator ended 2012 with occupancy at 94.5 percent in its same-property portfolio, the highest level since 2008.

Regency also said same-property net operating growth was 4 percent, excluding termination fees.

Hopefully, anything disclosed on social media will continue to be also disclosed through SEC filings, so we won't miss anything.

mbasch@baileypub.com

(904) 356-2466

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