1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ........... TO ............
COMMISSION FILE NUMBER 1-6780
RAYONIER INC.
Incorporated in the State of North Carolina
I.R.S. Employer Identification Number 13-2607329
1177 Summer Street, Stamford, Connecticut 06905-5529
(Principal Executive Office)
Telephone Number: (203) 348-7000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days.
YES /X/ NO / /.
As of November 10, 1994, there were outstanding 29,574,807 Common
Shares of the Registrant.
-----------------
2
RAYONIER INC.
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Consolidated Income for the
Three Months and Nine Months
Ended September 30, 1994 and 1993 1
Consolidated Balance Sheets as of September 30, 1994
and December 31, 1993 2
Statements of Consolidated Cash Flows for the
Nine Months Ended September 30, 1994 and 1993 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 4-6
Item 3. Selected Operating Data 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 8
Exhibit Index 9
i
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements reflect, in the opinion of
Rayonier Inc. (the Company), all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of
operations, the financial position, and the cash flows for the periods
presented. Certain reclassifications have been made to the prior year's
financial statements to conform to current year presentation. For a full
description of accounting policies, see notes to financial statements in the
1993 annual report on Form 10-K.
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE INFORMATION)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
SALES $ 286,006 $ 226,445 $ 794,503 $ 699,340
----------- ----------- ----------- -----------
Costs and expenses
Cost of sales 239,672 196,045 649,026 570,881
Selling and general expenses 7,667 7,095 21,920 20,796
Other operating income, net (1,408) (940) (2,921) (1,981)
----------- ----------- ----------- -----------
Total costs and expenses 245,931 202,200 668,025 589,696
----------- ----------- ----------- -----------
OPERATING INCOME 40,075 24,245 126,478 109,644
Interest expense (8,290) (5,941) (22,881) (17,163)
Interest and miscellaneous income, net 418 309 1,702 904
Minority interest (7,490) (2,777) (24,861) (15,013)
----------- ----------- ----------- -----------
Income before income taxes 24,713 15,836 80,438 78,372
Income taxes (8,308) (8,103) (28,200) (29,029)
----------- ----------- ----------- -----------
NET INCOME $ 16,405 $ 7,733 $ 52,238 $ 49,343
=========== =========== =========== ===========
NET INCOME PER COMMON SHARE $0.55 $0.26 $1.76 $1.67
===== ===== ===== =====
Weighted average Common Shares
outstanding 29,757,506 29,565,392 29,686,693 29,565,392
=========== =========== =========== ===========
1
4
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
September 30, December 31,
1994 1993
------------ -------------
CURRENT ASSETS
Cash and short-term investments $ 9,510 $ 5,989
Accounts receivable, less allowance for
doubtful accounts of $4,511 and $4,268 124,696 82,696
Inventories
Finished goods 45,901 46,516
Work in process 17,856 16,235
Raw materials 36,758 44,057
Manufacturing and maintenance supplies 29,661 26,751
---------- ----------
Total inventories 130,176 133,559
Deferred income taxes 8,094 10,498
Prepaid timber stumpage 59,903 55,770
Other current assets 13,066 10,752
---------- ----------
Total current assets 345,445 299,264
OTHER ASSETS 28,273 24,025
TIMBER STUMPAGE 23,183 12,480
TIMBER, TIMBERLANDS AND LOGGING ROADS,
NET OF DEPLETION AND AMORTIZATION 477,233 470,077
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment 1,183,406 1,149,447
Less - accumulated depreciation 524,041 480,518
---------- ----------
Net property plant and equipment 659,365 668,929
---------- ----------
TOTAL ASSETS $1,533,499 $1,474,775
========== ==========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 81,196 $ 67,783
Bank loans and current maturities of long-term debt 32,626 182,003
Accrued taxes 1,609 2,480
Accrued payroll and benefits 22,894 18,525
Other current liabilities 39,202 39,776
Current reserves for dispositions and discontinued
operations 23,390 27,280
---------- ----------
Total current liabilities 200,917 337,847
DEFERRED INCOME TAXES 138,894 126,176
LONG-TERM DEBT 482,937 316,138
NONCURRENT RESERVES FOR DISPOSITIONS AND
DISCONTINUED OPERATIONS (Net of discontinued
operations' assets of $12,860 and $12,986) 28,880 35,920
OTHER NONCURRENT LIABILITIES 17,687 15,741
MINORITY INTEREST 21,536 36,649
COMMON SHAREHOLDERS' EQUITY
Common Shares, 60 million shares authorized,
29,569,807 and 29,565,392 shares issued and outstanding 157,498 157,426
Retained earnings 485,150 448,878
---------- ----------
Total common shareholders' equity 642,648 606,304
---------- ----------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $1,533,499 $1,474,775
========== ==========
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5
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
(UNAUDITED)
(THOUSANDS OF DOLLARS)
1994 1993
---------- ----------
OPERATING ACTIVITIES
Net income $ 52,238 $ 49,343
Non-cash items included in income:
Depreciation, depletion and amortization 69,610 57,162
Deferred portion of provision for income taxes 11,893 11,251
Increase (decrease) in other noncurrent liabilities 1,946 (250)
Change in accounts receivable, inventories
and accounts payable (25,204) (21,325)
Increase in prepaid timber stumpage (4,133) (16,154)
(Decrease) increase in accrued taxes (871) 12,167
Change in reserves for dispositions and discontinued operations (2,252) 1,000
Other changes in working capital 1,481 (3,866)
-------- --------
Cash from operating activities 104,708 89,328
======== ========
INVESTING ACTIVITIES
Capital expenditures net of sales and retirements
of $300 and $382 (67,202) (49,295)
Expenditures for dispositions and discontinued operations, net
of tax benefits of $3,229 and $8,405 (5,449) (14,183)
Change in other assets and long-term timber stumpage (14,951) (3,864)
-------- --------
Cash used for investing activities (87,602) (67,342)
======== ========
FINANCING ACTIVITIES
Issuance of debt 285,403 31,635
Repayments of debt (267,981) (26,925)
Dividends (15,966) (30,196)
Issuance of common shares 72 -
Decrease in minority interest (15,113) (2,444)
-------- --------
Cash used for financing activities (13,585) (27,930)
======== ========
CASH AND SHORT-TERM INVESTMENTS
Increase (decrease) during the period 3,521 (5,944)
Balance at beginning of period 5,989 10,731
-------- --------
Balance at end of period $ 9,510 $ 4,787
======== ========
Supplemental disclosures of cash flow information
Cash paid (received) during the period for:
Interest $ 19,958 $ 15,713
======== ========
Income taxes, net of refunds $ 18,815 $ (3,448)
======== ========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The amounts and relative contributions to sales and operating income
attributable to each of Rayonier's business segments for the three and nine
months ended September 30, 1994 and 1993 were as follows (thousands of
dollars):
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------- --------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
SALES
- -----
TIMBER AND WOOD PRODUCTS:
Log Trading and Merchandising $100,348 $ 89,359 $261,057 $264,599
Timberlands Management and Stumpage
(Standing Timber) 40,038 16,359 130,324 79,696
Wood Products 19,380 10,691 59,763 30,987
-------- -------- -------- --------
Total Before Intrasegment Eliminations 159,766 116,409 451,144 375,282
Intrasegment Eliminations (3,511) (1,651) (13,341) (8,917)
-------- -------- -------- --------
TOTAL TIMBER AND WOOD PRODUCTS 156,255 114,758 437,803 366,365
SPECIALTY PULP PRODUCTS:
Chemical Cellulose 81,398 68,327 226,519 202,904
Fluff and Specialty Paper Pulps 50,671 45,334 134,237 138,484
-------- -------- -------- --------
TOTAL SPECIALTY PULP PRODUCTS 132,069 113,661 360,756 341,388
Intersegment Eliminations (2,318) (1,974) (4,056) (8,413)
-------- -------- -------- --------
TOTAL SALES $286,006 $226,445 $794,503 $699,340
======== ======== ======== ========
OPERATING INCOME
- ----------------
Timber and Wood Products $ 39,213 $ 26,133 $130,640 $116,021
Specialty Pulp Products 3,383 1,113 2,915 2,494
Corporate and Other (3,153) (1,930) (7,805) (5,794)
Intersegment Eliminations 632 (71) 728 (2,077)
-------- -------- -------- --------
Total Before Dispositions 40,075 25,245 126,478 110,644
Dispositions - (1,000) - (1,000)
-------- -------- -------- --------
TOTAL OPERATING INCOME $ 40,075 $ 24,245 $126,478 $109,644
======== ======== ======== ========
RESULTS OF OPERATIONS
SALES AND OPERATING INCOME
Sales of $286 million for the third quarter of 1994 were $60 million or 26
percent higher than the third quarter of 1993 due to stronger sales volumes in
both of the Company's business segments. Operating income for the quarter of
$40 million was $16 million or 65 percent higher than last year's level. Sales
for the nine months ended September 30, 1994 of $795 million, were $95 million
or 14 percent higher than the prior year. Operating income of $126 million
increased $17 million or 15 percent over the prior year.
4
7
Timber and Wood Products
Timber and Wood Products' sales in the third quarter were $156 million, up $41
million or 36 percent from the same period of 1993. Operating income for the
quarter of $39 million was up $13 million from the prior year. Most of the
year-over-year improvement was due to a return to normal volumes compared to
unusually low timber (stumpage) harvest activity in the third quarter of 1993.
Log Trading and Merchandising, which includes the company's New Zealand log
sales, experienced higher volumes and prices in U.S. and N.Z. domestic markets,
which offset lower prices in other international log markets. Wood Products
experienced increased lumber volumes and higher prices offset by higher wood
costs.
Sales for the nine month period were $438 million, up $71 million from 1993's
comparable period, with operating income of $131 million up $15 million from
1993. Results for the nine months reflected increased timber sales volumes
(which were unusually high in the first quarter of 1994 and unusually low in
the third quarter of 1993) and increased timber prices in the Company's
Northwest U.S. and Southeast U.S. timberland management regions, partially
offset by reduced income from log trading.
Specialty Pulp Products
Specialty Pulp Products' third quarter sales were $132 million, up $18 million
from last year's third quarter. Operating income for the segment was $3
million, an increase of $2 million over 1993. The gains in sales and operating
income resulted from improved sales volume and higher fluff and specialty paper
pulp prices.
For the nine month period ended September 30, 1994, Specialty Pulp Products
sales were $361 million, up $19 million from 1993, with stronger shipments
offsetting lower pulp prices. The year-over-year decline in pulp prices
reflected the continuation into 1994 of the downward trend in prices caused by
excess capacity in the pulp industry and weakness in domestic and international
markets. However, during the second and third quarters of 1994, the Company
experienced a significant increase in demand for pulp products which allowed
the Company to increase prices for its fluff and specialty paper pulps. The
Company expects that fluff and specialty paper pulp prices will continue to
increase during the fourth quarter of 1994. Chemical cellulose pulp prices
stabilized in the second quarter of 1994 and the Company expects that these
prices, which traditionally lag increases in commodity pulp grades by up to a
year, will begin to increase early in 1995.
Intersegment
Nine month intersegment sales of $4 million in 1994 were less than the
comparable 1993 amount due to lower stumpage sales from the Timber and Wood
Products segment to the Specialty Pulp Products segment.
OTHER ITEMS
Interest expense of $23 million for the first nine months of 1994 increased $6
million over 1993 primarily as a result of additional debt utilized by the
Company to finance a $90 million special dividend to the Company's former
parent ITT Corporation (ITT) in December 1993, to settle intercompany accounts
with ITT and to fund an increase in working capital.
Minority interest in the earnings of Rayonier's subsidiary, Rayonier
Timberlands, L.P. (RTLP), increased $10 million to $25 million in the first
nine months of 1994 due to significantly higher partnership earnings resulting
from increased stumpage volume and prices in the Company's Northwest U.S. and
Southeast U.S. timberland management regions. The minority participation in
the earnings of RTLP will change from approximately 25 percent to approximately
1 percent effective January 1, 2001.
NET INCOME
Net income for the third quarter was $16 million or $0.55 per common share, up
$9 million or $0.29 per common share from 1993's level. Net income for the
nine months ended September 30, 1994 was $52 million or $1.76 per common share,
up $3 million or $0.09 per common share from 1993's net income.
5
8
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $105 million in the first nine months
of 1994 versus $89 million in 1993. Cash from operating activities together
with an increase in debt of $17 million financed capital expenditures of $67
million, timber purchases of $15 million, common dividends of $16 million, a
special distribution of $20 million to the minority unitholders of RTLP and $5
million (after tax benefits) of environmental remediation and other costs
relating to discontinued operations and units held for disposition. The
Company's September 30, 1994 debt/capital ratio of 45 percent is the same as
the December 31, 1993 level.
EBITDA (defined as earnings before provision for dispositions, interest
expense, income taxes and depreciation, depletion and amortization) for the
first nine months of 1994 of $173 million increased $19 million over the
comparable period of 1993. Free cash flow (EBITDA less capital expenditures)
was $106 million compared to $104 million in 1993.
In April 1994, the Company closed on revolving credit agreements with a group
of banks which provide the Company with unsecured credit facilities totaling
$300 million. The Company subsequently borrowed $85 million under these credit
facilities to retire short-term debt. The Company also issued $100 million of
commercial paper in the second quarter of 1994 under a newly implemented
commercial paper program backed by the revolving credit facilities. As a
result of the refinancing described above, the Company's net working capital
position improved from negative net working capital of $39 million at December
31, 1993 to positive net working capital of $145 million at September 30, 1994.
As of September 30, 1994 the Company has $115 million of available borrowings
under its revolving credit facilities. In addition, through currently
effective shelf registration statements filed with the Securities and Exchange
Commission, the Company may offer up to $174 million of new public debt
securities. The Company believes that internally generated funds combined with
available external financing will enable Rayonier to fund capital expenditures,
working capital and other liquidity needs for the foreseeable future.
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ITEM 3. SELECTED OPERATING DATA
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1994 1993 1994 1993
---- ---- ---- ----
TIMBER AND WOOD PRODUCTS
Log Sales Volume
North America - millions of board feet 94 70 219 218
New Zealand - thousands of cubic meters 405 348 1,232 984
Other - millions of board feet 2 - 7 -
Timber Harvest Volume
Northwest U.S. - millions of board feet 39 19 143 101
Southeast U.S. - thousands of short green tons 726 324 1,679 1,422
New Zealand - thousands of cubic meters 277 244 844 626
Lumber Sold - millions of board feet 50 31 147 89
Intercompany Sales
Northwest U.S. Timber Stumpage
- millions of board feet 8 3 22 19
Southeast U.S. Timber Stumpage
- thousands of short green tons 27 23 73 247
SPECIALTY PULP PRODUCTS
Pulp Sales Volume
Chemical Cellulose
- thousands of metric tons 116 87 320 266
Fluff and Specialty Paper Pulps
- thousands of metric tons 93 89 269 259
Production as a Percentage of Capacity 100% 83% 94% 86%
SELECTED SUPPLEMENTAL INFORMATION (thousands of dollars)
New Zealand - Sales $24,945 $27,303 $75,793 $68,717
======= ======= ======= =======
New Zealand - Operating Income $ 2,751 $ 9,337 $ 9,928 $23,864
======= ======= ======= =======
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Rayonier's Form 10-Q for the second quarter of 1994 described the
intervention by Rayonier's wholly-owned subsidiary Southern Wood
Piedmont Company (SWP) in an action filed by the U.S. Environmental
Protection Agency in 1990 in the U.S. District Court for the Western
District of Louisiana against Marine Shale Processors, Inc. (MSP).
The 10-Q referred to a pending trial on the issue of whether SWP
should be fined for sending hazardous waste to MSP's facility on the
grounds that it did not have a hazardous waste storage permit even
though SWP had been furnished with copies of correspondence from the
Louisiana state agency to MSP indicating that MSP had the authority to
store SWP's waste. This trial has now been held, and on August 30,
1994, the Court, citing SWP's "good faith effort to comply" with
applicable legal requirements, entered an order setting a nominal
civil penalty of $25,000 against SWP, which fine SWP has paid.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index.
(b) Rayonier Inc. did not file a report on Form 8-K during the
quarter covered by this report.
SIGNATURE
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
RAYONIER INC. (Registrant)
---------------------------
BY KENNETH P. JANETTE
------------------
Kenneth P. Janette
Vice President and Corporate Controller
November 14, 1994 (Chief Accounting Officer)
8
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
---------- ----------- --------
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
4 Instruments defining the rights of security Not required to be filed. The
holders, including indentures Registrant hereby agrees to file
with the Commission a copy of
any instrument defining the
rights of holders of the
Registrant's long-term debt
upon request of the Commission.
10 Material contracts None
11 Statement re computation of per share earnings Not required
12 Statement re computation of ratios Filed herewith
15 Letter re unaudited interim financial information None
18 Letter re change in accounting principles None
19 Report furnished to security holders None
22 Published report regarding matters None
submitted to vote of security holders
23 Consents of experts and counsel None
24 Power of attorney None
27 Financial data schedule Filed herewith
99 Additional exhibits None
9
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EXHIBIT 12
RAYONIER INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(THOUSANDS OF DOLLARS)
Nine Months
Ended September 30,
-------------------------
1994 1993
---- ----
Earnings:
Net Income $ 52,238 $ 49,343
Add (Deduct):
Income Taxes 28,200 29,029
Minority Interest 24,861 15,013
Amortization of Capitalized Interest 1,059 1,154
-------- --------
106,358 94,539
Adjustments to Earnings for Fixed Charges:
Interest and Other Financial Charges 22,881 17,163
Interest Factor Attributable to Rentals 1,320 1,403
-------- --------
24,201 18,566
-------- --------
EARNINGS AS ADJUSTED $130,559 $113,105
======== ========
Fixed Charges:
Fixed Charges above $ 24,201 $ 18,566
Capitalized Interest 33 -
-------- --------
TOTAL FIXED CHARGES $ 24,234 $ 18,566
======== ========
RATIO OF EARNINGS AS ADJUSTED TO
TOTAL FIXED CHARGES 5.39 6.09
==== ====
10
5
1,000
9-MOS
DEC-31-1994
JAN-01-1994
SEP-30-1994
9,510
0
129,207
4,511
130,176
345,445
1,183,406
524,041
1,533,499
200,917
482,937
157,948
0
0
485,150
1,533,499
794,503
794,503
649,026
649,026
42,158
0
22,881
80,438
28,200
52,238
0
0
0
52,238
1.76
1.76
