SEC Filing | Rayonier Inc.

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 JUNE 30, 2000 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 l3-2607329 50 North Laura Street, Jacksonville, FL 32202 (Principal Executive Office) Telephone Number: (904) 357-9100 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) As of July 31, 2000, there were outstanding 27,207,040 Common Shares of the Registrant.

2 RAYONIER INC. FORM 10-Q JUNE 30, 2000 TABLE OF CONTENTS PAGE ---- PART I. FINANCIAL INFORMATION Item l. Financial Statements Statements of Consolidated Income for the Three Months and Six Months Ended June 30, 2000 and 1999 1 Consolidated Balance Sheets as of June 30, 2000 and December 3l, 1999 2 Statements of Consolidated Cash Flows for the Six Months Ended June 30, 2000 and 1999 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 3. Selected Operating Data 9 Selected Supplemental Financial Data 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 Signature 11 Exhibit Index 12 i

3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The following unaudited financial statements reflect, in the opinion of Rayonier Inc. and subsidiaries (Rayonier or 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. For a full description of accounting policies, please refer to the Notes to Consolidated Financial Statements in the l999 Annual Report on Form l0-K. RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ------------ ------------ ------------ ------------ SALES $ 283,552 $ 258,023 $ 572,707 $ 484,419 ------------ ------------ ------------ ------------ Costs and expenses Cost of sales 225,922 215,198 452,062 403,879 Selling and general expenses 9,416 9,785 19,352 19,250 Other operating expense (income), net 948 (711) 2,521 (1,905) ------------ ------------ ------------ ------------ 236,286 224,272 473,935 421,224 ------------ ------------ ------------ ------------ OPERATING INCOME 47,266 33,751 98,772 63,195 Interest expense (21,612) (7,683) (44,402) (15,387) Miscellaneous (expense) income, net (790) (233) (623) 481 Gains from sale of assets - - 23,147 - ------------ ------------ ------------ ------------ Income before income taxes 24,864 25,835 76,894 48,289 Income tax expense (7,433) (8,758) (23,990) (16,082) ------------ ------------ ------------ ------------ NET INCOME $ 17,431 $ 17,077 $ 52,904 $ 32,207 ============ ============ ============ ============ EARNINGS PER COMMON SHARE Basic $ 0.64 $ 0.62 $ 1.93 $ 1.16 ============ ============ ============ ============ Diluted $ 0.63 $ 0.60 $ 1.90 $ 1.14 ============ ============ ============ ============ 1

4 RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS) ASSETS June 30, December 31, 2000 1999 ------------- -------------- CURRENT ASSETS Cash and short-term investments $ 14,416 $ 12,265 Accounts receivable, less allowance for doubtful accounts of $4,831 and $4,859 112,957 103,535 Inventories Finished goods 49,786 52,984 Work in process 9,832 12,478 Raw materials 12,064 17,947 Manufacturing and maintenance supplies 21,688 21,670 ------------- -------------- Total inventories 93,370 105,079 Timber purchase agreements 36,987 30,477 Other current assets 13,416 11,107 Deferred income taxes 8,073 9,143 ------------- -------------- Total current assets 279,219 271,606 ------------- -------------- OTHER ASSETS 65,746 77,094 TIMBER PURCHASE AGREEMENTS 10,363 7,816 TIMBER, FORESTLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 1,217,666 1,247,547 PROPERTY, PLANT AND EQUIPMENT, NET Land, buildings, machinery and equipment 1,351,427 1,333,789 Less accumulated depreciation 695,595 657,625 ------------- -------------- 655,832 676,164 ------------- -------------- TOTAL ASSETS $ 2,228,826 $ 2,280,227 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 74,213 $ 74,035 Bank loans and current maturities 2,734 3,248 Accrued taxes 26,133 15,148 Accrued payroll and benefits 22,803 22,405 Accrued interest 11,989 11,160 Other current liabilities 38,114 48,895 Current reserves for dispositions and discontinued operations 19,573 18,980 ------------- -------------- Total current liabilities 195,559 193,871 DEFERRED INCOME TAXES 129,029 123,458 LONG-TERM DEBT 1,050,245 1,132,930 NON-CURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS 144,038 149,551 OTHER NON-CURRENT LIABILITIES 31,430 27,517 SHAREHOLDERS' EQUITY Common shares, 60,000,000 shares authorized, 27,231,040 and 27,407,094 shares issued and outstanding 52,928 60,518 Retained earnings 625,597 592,382 ------------- -------------- 678,525 652,900 ------------- -------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,228,826 $ 2,280,227 ============= ============= 2

5 RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS) Six Months Ended June 30, ------------------------------- 2000 1999 --------- --------- OPERATING ACTIVITIES Net income $ 52,904 $ 32,207 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization 73,388 50,124 Deferred income taxes 4,839 5,663 Gains from sale of assets (23,147) - Non-cash cost of land sales 1,215 2,878 Increase in other non-current liabilities 3,913 1,584 Change in accounts receivable, inventories and accounts payable 1,250 5,730 Increase in current timber purchase agreements (6,510) (2,138) Increase in other current assets (2,309) (348) Increase in accrued liabilities 1,431 7,866 --------- --------- CASH PROVIDED BY OPERATING ACTIVITIES 106,974 103,566 --------- --------- INVESTING ACTIVITIES Capital expenditures (47,420) (43,453) Sales, retirements and reclassifications of property, plant and equipment, net (2,011) (311) Expenditures for dispositions and discontinued operations, net of tax benefits of $1,802 and $2,773 (3,118) (4,798) Proceeds from sale of assets, net of cash costs 49,403 - Change in timber purchase agreements and other assets 8,801 1,500 --------- --------- CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 5,655 (47,062) --------- --------- FINANCING ACTIVITIES Issuance of debt 55,549 99,861 Repayments of debt (138,748) (137,436) Dividends paid (19,652) (17,244) Repurchase of common shares (9,350) (5,600) Issuance of common shares 1,723 2,997 --------- --------- CASH USED FOR FINANCING ACTIVITIES (110,478) (57,422) --------- --------- CASH AND SHORT-TERM INVESTMENTS Increase (decrease) in cash and short-term investments 2,151 (918) Balance at beginning of period 12,265 6,635 --------- --------- Balance at end of period $ 14,416 $ 5,717 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 43,574 $ 14,132 ========= ========= Income taxes $ 11,208 $ 4,622 ========= ========= 3

6 RAYONIER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1. EARNINGS PER COMMON SHARE The following table provides details of the calculation of basic and diluted earnings per common share in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," for the three months and six months ended June 30, 2000 and 1999. Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- Net income $ 17,431 $ 17,077 $ 52,904 $ 32,207 =========== =========== =========== =========== Shares used for determining basic earnings per common share 27,324,476 27,785,931 27,357,419 27,796,186 Dilutive effect of Stock options 192,293 307,947 193,325 269,111 Contingent shares 360,000 240,000 360,000 240,000 ----------- ----------- ----------- ----------- Shares used for determining diluted earnings per common share 27,876,769 28,333,878 27,910,744 28,305,297 =========== =========== =========== =========== Basic earnings per common share $ 0.64 $ 0.62 $ 1.93 $ 1.16 =========== =========== =========== =========== Diluted earnings per common share $ 0.63 $ 0.60 $ 1.90 $ 1.14 =========== =========== =========== =========== 2. GAINS FROM SALE OF ASSETS From time to time, Rayonier opportunistically sells non-strategic assets to monetize portions of its asset base. In March 2000, Rayonier sold approximately 57,000 acres of Southeastern U.S. forestland to various third parties for $49.6 million, resulting in a pre-tax gain of $23.1 million ($14.4 million after tax, or $0.51 per diluted common share). The proceeds of these sales were used to reduce debt. 3. RECLASSIFICATIONS Certain reclassifications of the prior year amounts have been made to conform with the current year presentation. 4

7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEGMENT INFORMATION Rayonier operates in two major business segments, Timber and Wood Products and Specialty Pulp Products. The Timber and Wood Products segment includes two reportable business units, Forest Resources and Trading and Wood Products. Chemical Cellulose and Fluff and Specialty Paper Pulps are product lines within the Specialty Pulp Products segment. The amounts and relative contributions to sales and operating income attributable to each of Rayonier's reportable business units for the three months and six months ended June 30, 2000 and 1999 were as follows (thousands of dollars): Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ SALES Timber and Wood Products Forest Resources and Trading $ 116,746 $ 119,102 $ 241,315 $ 219,144 Wood Products 31,660 32,786 63,299 57,414 ------------ ------------ ------------ ------------ Total Timber and Wood Products 148,406 151,888 304,614 276,558 ------------ ------------ ------------ ------------ Specialty Pulp Products Chemical Cellulose 74,073 69,945 148,852 132,785 Fluff and Specialty Paper Pulps 61,070 36,296 119,433 75,325 ------------ ------------ ------------ ------------ Total Specialty Pulp Products 135,143 106,241 268,285 208,110 ------------ ------------ ------------ ------------ Intersegment Eliminations 3 (106) (192) (249) ------------ ------------ ------------ ------------ Total Sales $ 283,552 $ 258,023 $ 572,707 $ 484,419 ============ ============ ============ ============ OPERATING INCOME (LOSS) Timber and Wood Products Forest Resources and Trading $ 32,849 $ 29,892 $ 74,514 $ 58,409 Wood Products (2,736) 1,964 (4,133) 1,063 ------------ ------------ ------------ ------------ Total Timber and Wood Products 30,113 31,856 70,381 59,472 Specialty Pulp Products 21,008 6,156 38,509 12,022 Corporate and Other (3,855) (4,261) (10,118) (8,299) ------------ ------------ ------------ ------------ Total Operating Income $ 47,266 $ 33,751 $ 98,772 $ 63,195 ============ ============ ============ ============ RESULTS OF OPERATIONS SALES AND OPERATING INCOME (LOSS) Sales for the second quarter of 2000 were $284 million, $26 million above prior year, primarily due to higher U.S. Southeast timber harvest volumes and stronger Specialty Pulp Products markets. Sales for the six months ended June 30, 2000 of $573 million were $89 million higher than the prior year, due to increases in the Specialty Pulp Products segment, primarily the result of higher prices and volumes, as well as increases in the Timber and Wood Products segment, primarily the result of increased log trading activity and timber harvesting in both the Southeast and the Northwest U.S. regions. Operating income for the second quarter of 2000 of $47 million was $14 million above prior year, and operating income for the six months ended June 30, 2000 of $99 million was $36 million above prior year. Specialty Pulp Products operating results for both periods increased due to higher volumes, higher prices and lower costs. Timber and Wood Products results declined in the second quarter compared to the prior year due primarily to lower lumber pricing. However, the unusually strong Northwest U.S. harvest during the first quarter resulted in greater operating income for the six months ended June 30, 2000 when compared to the prior year. 5

8 TIMBER AND WOOD PRODUCTS Timber and Wood Products sales for the second quarter of 2000 were $148 million, $4 million below prior year, although sales for the six months ended June 30, 2000 were $28 million above prior year, at $305 million. Operating income for the second quarter of 2000 of $30 million was $2 million below prior year. However, operating income for the six months ended June 30, 2000 was $11 million above prior year, at $70 million. FOREST RESOURCES AND TRADING Forest Resources and Trading sales for the second quarter of 2000 were $117 million, $2 million below prior year. Higher Southeast U.S. timber volumes were more than offset by lower Northwest U.S. timber volumes, which had been unusually strong in first quarter 2000. For the six months ended June 30, 2000, sales were $241 million, $22 million above prior year. The sales improvement was the result of unusually strong first quarter 2000 Northwest U.S. timber volumes and higher prices, increased volumes in the Southeast U.S. resulting from the Smurfit forestlands acquisition, and higher log trading activity in U.S. markets. These improvements in sales were partially offset by lower timber prices in the Southeast U.S. Operating income for the second quarter of 2000 was $33 million, $3 million above prior year, and $75 million for the six months ended June 30, 2000, $16 million above prior year. The increases were primarily a result of the strong Northwest U.S. timber sales activity in first quarter of 2000. Second quarter 2000 results were also adversely affected by $0.8 million in additional foreign exchange translation losses compared to the prior year and by $0.4 million due to the write off of fire-damaged, pre-merchantable timber. WOOD PRODUCTS Wood Products sales for the second quarter of 2000 were $32 million, $1 million below prior year, although for the six months ended June 30, 2000 sales were $63 million, $6 million above prior year. Operating losses of $3 million and $4 million for the second quarter of 2000 and six months ended June 30, 2000, respectively, were both $5 million below prior year results. The lower operating income is attributable to lower lumber pricing and higher logs costs, partially offset by continued operating and price improvements at the New Zealand medium-density-fiberboard (MDF) plant. SPECIALTY PULP PRODUCTS Sales of Specialty Pulp Products for the second quarter of 2000 were $135 million, $29 million above prior year, due to stronger fluff pulp pricing and higher pulp volumes, and for the six months ended June 30, 2000, sales were $268 million, $60 million above prior year. Operating income of $21 million and $39 million for the second quarter of 2000 and six months ended June 30, 2000, respectively, were $15 million and $27 million above prior year. Second quarter 2000 fluff and specialty paper pulp prices were 28 percent higher than prior year, while overall volumes for chemical cellulose, and fluff and specialty paper pulps were 20 percent higher. For the six months ended June 30, 2000, fluff and specialty paper pulp prices were 25 percent higher, while chemical cellulose and fluff and specialty paper pulp volumes increased 21 percent. CORPORATE AND OTHER Corporate and other costs for the second quarter of 2000 were $3.9 million, $0.4 million below prior year, due to lower general administrative costs. However, corporate and other expenses for the six months ended June 30, 2000 of $10.1 million were $1.8 million above prior year, principally as a result of costs associated with the headquarters relocation from Stamford, CT to Jacksonville, FL, partially offset by lower general administrative costs. The relocation is essentially complete, on schedule and under budget. INTEREST EXPENSE Interest expense of $22 million and $44 million for the second quarter of 2000 and the six months ended June 30, 2000, respectively, were $14 million and $29 million above prior year, reflecting higher debt levels associated with the Smurfit forestland acquisition and slightly higher interest rates. 6

9 MISCELLANEOUS (EXPENSE) INCOME, NET Miscellaneous (expense) income for the second quarter of 2000 was $(0.8) million compared to $(0.2) million in the prior year, and $(0.6) million for the six months ended June 30, 2000 compared to $0.5 million for the six months ended June 30, 1999. The increased expense for both the second quarter of 2000 and the six months ended June 30, 2000 reflect losses on the mark-to-market of foreign exchange forward contracts. GAINS FROM SALES OF ASSETS In March 2000, Rayonier sold approximately 57,000 acres of non-strategic Southeast U.S. forestland to various third parties for $49.6 million, resulting in a pre-tax gain of $23.1 million ($14.4 million after tax, or $0.51 per diluted common share). The proceeds of these sales were used to reduce debt. INCOME TAX EXPENSE The effective tax rate was 29.9 percent for the second quarter of 2000 and 31.2 percent for the six months ended June 30, 2000, compared to 33.9 percent and 33.3 percent for the corresponding periods in the prior year. The lower tax rates in 2000 reflect the impact of increased foreign sales corporation tax benefits. The effective tax rates continue to be below U.S. statutory rates, resulting from the lower tax rates in effect for foreign subsidiaries and various tax credits. NET INCOME Net income for the second quarter of 2000 was $17.4 million, or $0.63 per diluted common share, compared to $17.1 million, or $0.60 per diluted common share, for the second quarter of 1999. Net income for the six months ended June 30, 2000 was $52.9 million, or $1.90 per diluted common share, compared to $32 million, or $1.14 per diluted common share, for the six months ended June 30, 1999. Net income for the six months ended June 30, 2000 included $14.4 million, or $0.51 per diluted common share, reflecting gains from the sale of non-strategic forestland. Specialty pulp markets are continuing to strengthen reflecting a tight supply and demand balance, while New Zealand timber and MDF conditions are stable to improving. As a result, full year 2000 net income is expected to be better than in 1999, despite the timberland acquisition financing costs. However, results for the third quarter of 2000 are expected to be somewhat lower than both the second quarter of 2000 and the third quarter of 1999. In the third quarter, improving pulp markets are expected to only partially offset the combined effect of a lower U.S. Northwest harvest due to the seasonal slowdown in Northwest timber harvests and the unusually strong harvest that took place in the first quarter of 2000. LIQUIDITY AND CAPITAL RESOURCES Cash flow provided by operating activities of $107 million for the six months ended June 30, 2000 increased $3 million from 1999, primarily as a result of improvements in net income, partially offset by working capital requirements. Cash flow provided by investing activities for the six months ended June 30, 2000 was $6 million, primarily the result of monetizing certain non-strategic forestlands and reduced timber purchase agreements. EBITDA (defined as earnings from continuing operations before significant non-recurring items, provision for dispositions, interest expense, income taxes, depreciation, depletion and amortization and the non-cash cost of land sales) for the three months and six months ended June 30, 2000 was $83 million and $173 million, respectively, $26 million and $56 million higher, respectively, than the prior year. Cash from operating activities were used to finance capital expenditures of $47 million, dividends of $20 million and the repurchase of common shares for $9 million. The Company repurchased 142,900 of its shares during the second quarter of 2000 at an average cost of $40.64 for a total of $6 million, and 228,500 shares during the six months ended June 30, 2000 at an average cost of $40.92 for a total of $9 million. During the second quarter of 1999 and the six months ended June 30, 1999, the Company repurchased 86,900 and 124,300 shares, at average costs of $46.92 and $45.05 per share for $4 million and $6 million, respectively. At June 30, 2000, debt was $1,053 million and the debt-to-capital ratio was 60.8 percent, compared to debt of $1,136 million and a debt-to-capital ratio of 63.5 percent at December 31, 1999. Excluding U.S. timberland external debt, corporate debt was $323 million, a reduction of $96 million from December 31, 1999 and $129 million from June 30, 1999. The Company has unsecured credit facilities totaling $300 million, which were used as support for $45 million of outstanding commercial paper. As of June 30, 2000, Rayonier (excluding U.S. timberland revolving credit facilities) had $255 million available under its revolving credit facilities. In connection with the financing of the Smurfit forestland acquisition, Rayonier Timberlands Operating Company, L.P. (RTOC), a wholly-owned limited partnership, issued notes totaling $485 million, and entered into an agreement with a group of banks that provided RTOC with an unsecured term loan of $200 million and revolving credit facilities totaling $75 million, which expire in 2004. 7

10 As of June 30, 2000 and December 31, 1999, RTOC's outstanding external debt was $730 million and $717 million, respectively. RTOC had $30 million of available borrowings under its revolving credit facilities as of June 30, 2000. In addition, the Company has on file with the Securities and Exchange Commission shelf registration statements to offer $150 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, share repurchases, working capital and other liquidity needs for the foreseeable future. SAFE HARBOR Comments about market trends, anticipated earnings and future activities in 2000 and beyond, are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Changes in the following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in global market trends; interest rate and currency movements; fluctuations in demand for specialty chemical cellulose and fluff pulps, export and domestic logs, and wood products; the impact of such market factors on the Company's timber sales in the U.S. and New Zealand; adverse weather conditions; production costs for wood products and for specialty pulps, particularly for raw materials such as wood and chemicals; and governmental policies and regulations affecting the environment, import and export controls, and taxes. 8

11 ITEM 3. SELECTED OPERATING DATA Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- TIMBER AND WOOD PRODUCTS Log trading sales volume North America, in millions of board feet 62 45 124 75 New Zealand, in thousands of cubic meters 305 319 549 591 Other, in thousands of cubic meters 86 162 205 272 Timber sales volume Northwest U.S., in millions of board feet 64 67 154 132 Southeast U.S., in thousands of short green tons 1,137 598 2,136 1,131 New Zealand, in thousands of cubic meters 289 321 542 591 Lumber sales volume, in millions of board feet 70 68 135 124 Medium-density fiberboard sales volume, in thousands of cubic meters 39 31 76 58 Intercompany timber sales volume Northwest U.S., in millions of board feet 19 8 39 18 Southeast U.S., in thousands of short green tons 11 4 23 11 New Zealand, in thousands of cubic meters 154 148 263 269 SPECIALTY PULP PRODUCTS Pulp sales volume Chemical cellulose, in thousands of metric tons 89 81 178 155 Fluff and specialty paper pulp, in thousands of metric tons 91 69 185 146 Production as a percent of capacity 101.1% 87.0% 102.6% 94.0% 9

12 SELECTED SUPPLEMENTAL FINANCIAL DATA (thousands of dollars, except per share data) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 --------- --------- --------- ---------- GEOGRAPHICAL DATA (NON-U.S.) Sales New Zealand $ 23,559 $ 21,521 $ 42,853 $ 39,805 Other 12,859 11,101 23,997 21,083 --------- --------- --------- ---------- Total $ 36,418 $ 32,622 $ 66,850 $ 60,888 ========= ========= ========= ========== Operating income (loss) New Zealand $ (355) $ (1,068) $ (1,464) $ (2,703) Other 307 38 267 (268) --------- --------- --------- ---------- Total $ (48) $ (1,030) $ (1,197) $ (2,971) ========= ========= ========= ========== FOREST RESOURCES Sales Northwest U.S. $ 21,701 $ 23,716 $ 55,999 $ 47,582 Southeast U.S. 27,150 14,754 54,492 31,696 New Zealand 5,611 7,430 10,169 12,792 --------- --------- --------- ---------- Total $ 54,462 $ 45,900 $ 120,660 $ 92,070 ========= ========= ========= ========== Operating income Northwest U.S. $ 17,409 $ 18,704 $ 47,038 $ 37,270 Southeast U.S. 11,902 10,532 24,787 22,995 New Zealand 1,660 2,467 2,782 3,465 --------- --------- --------- ---------- Total $ 30,971 $ 31,703 $ 74,607 $ 63,730 ========= ========= ========= ========== EBITDA per share Northwest U.S. $ 0.66 $ 0.70 $ 1.77 $ 1.39 Southeast U.S. 0.85 0.47 1.71 1.01 New Zealand 0.17 0.21 0.31 0.35 --------- --------- --------- ---------- Total $ 1.68 $ 1.38 $ 3.79 $ 2.75 ========= ========= ========= ========== 10

13 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on May 18, 2000. At that meeting, three directors were elected as follows (there were no broker non-votes with respect to the election of directors): Votes For Votes Withheld --------- -------------- Director of Class III, Term Expires in 2003: Rand V. Araskog 23,724,109 109,208 W. Lee Nutter 23,747,958 85,359 Nicholas L. Trivisonno 23,748,335 84,982 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 /s/ GEORGE C. KAY George C. Kay Vice President and Corporate Controller (Chief Accounting Officer) August 10, 2000 11

14 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- 2 Plan of acquisition, reorganization, None arrangement, liquidation or succession 3.1 Amended and restated articles of incorporation No amendments 3.2 By-laws No amendments 4 Instruments defining the rights of security holders, Not required to be filed. The 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 to be filed 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 12

1 EXHIBIT 12 RAYONIER INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED) (THOUSANDS OF DOLLARS) Six Months Ended June 30, -------- 2000 1999 ---------- ---------- Earnings: Net Income $ 52,904 $ 32,207 Add: Income Taxes 23,990 16,082 Amortization of Capitalized Interest 1,154 1,184 ---------- ---------- Additions to Net Income 25,144 17,266 ---------- ---------- Adjustments to Earnings for Fixed Charges: Interest and Other Financial Charges 44,402 15,387 Interest Factor Attributable to Rentals 685 875 ---------- ---------- Adjustments for Fixed Charges 45,087 16,262 ---------- ---------- EARNINGS AS ADJUSTED $ 123,135 $ 65,735 ========== ========== Fixed Charges: Fixed Charges above $ 45,087 $ 16,262 Capitalized Interest - 150 ---------- ---------- TOTAL FIXED CHARGES $ 45,087 $ 16,412 ========== ========== RATIO OF EARNINGS AS ADJUSTED TO TOTAL FIXED CHARGES 2.73 4.01 ========== ========== 13

5 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 14,416 0 117,788 4,831 93,370 279,219 1,351,427 695,595 2,228,826 195,559 1,050,245 0 0 52,928 625,597 2,228,826 572,707 572,707 452,062 452,062 21,873 0 44,402 76,894 23,990 52,904 0 0 0 52,904 1.93 1.90