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 SEPTEMBER 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 November 1, 2000, there were outstanding 27,098,590 common shares of the Registrant.

2 RAYONIER INC. FORM 10-Q SEPTEMBER 30, 2000 TABLE OF CONTENTS PAGE PART I. FINANCIAL INFORMATION Item l. Financial Statements Statements of Consolidated Income for the Three Months and Nine Months Ended September 30, 2000 and 1999 1 Consolidated Balance Sheets as of September 30, 2000 and December 3l, 1999 2 Statements of Consolidated Cash Flows for the Nine Months Ended September 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 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 Nine Months Ended September 30, September 30, ------------- ------------- 2000 1999 2000 1999 --------- --------- --------- --------- SALES .................................. $ 251,058 $ 255,453 $ 823,765 $ 739,872 --------- --------- --------- --------- Costs and expenses Cost of sales ....................... 209,444 217,950 661,506 621,829 Selling and general expenses ........ 6,845 6,771 26,197 26,021 Other operating expense (income), net 1,204 (1,381) 3,725 (3,286) --------- --------- --------- --------- 217,493 223,340 691,428 644,564 --------- --------- --------- --------- OPERATING INCOME ....................... 33,565 32,113 132,337 95,308 Interest expense ....................... (20,586) (7,306) (64,988) (22,693) Miscellaneous (expense) income, net .... (2,378) 114 (3,001) 595 Gains from sale of assets .............. -- -- 23,147 -- --------- --------- --------- --------- Income before income taxes ............. 10,601 24,921 87,495 73,210 Income tax benefit (expense) ........... 1,504 (7,787) (22,486) (23,869) --------- --------- --------- --------- NET INCOME ............................. $ 12,105 $ 17,134 $ 65,009 $ 49,341 ========= ========= ========= ========= EARNINGS PER COMMON SHARE Basic ............................ $ 0.45 $ 0.62 $ 2.38 $ 1.78 ========= ========= ========= ========= Diluted .......................... $ 0.44 $ 0.61 $ 2.34 $ 1.75 ========= ========= ========= ========= 1

4 RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS) ASSETS September 30, December 31, 2000 1999 --------- --------- CURRENT ASSETS Cash and short-term investments $ 4,627 $ 12,265 Accounts receivable, less allowance for doubtful accounts of $4,773 and $4,859 104,942 103,535 Inventories Finished goods 53,489 52,984 Work in process 11,019 12,478 Raw materials 12,805 17,947 Manufacturing and maintenance supplies 24,185 21,670 ---------- ---------- Total inventories 101,498 105,079 Timber purchase agreements 32,841 30,477 Other current assets 12,035 11,107 Deferred income taxes 4,437 9,143 ---------- ---------- Total current assets 260,380 271,606 ---------- ---------- OTHER ASSETS 62,158 77,094 TIMBER PURCHASE AGREEMENTS 9,770 7,816 TIMBER, FORESTLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 1,208,112 1,247,547 PROPERTY, PLANT AND EQUIPMENT, NET Land, buildings, machinery and equipment 1,352,898 1,333,789 Less accumulated depreciation 713,112 657,625 ---------- ---------- 639,786 676,164 ---------- ---------- TOTAL ASSETS $2,180,206 $2,280,227 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 66,006 $ 74,035 Bank loans and current maturities 2,216 3,248 Accrued taxes 17,478 15,148 Accrued payroll and benefits 26,064 22,405 Accrued interest 25,296 11,160 Other current liabilities 39,218 48,895 Current reserves for dispositions and discontinued operations 19,411 18,980 ---------- ---------- Total current liabilities 195,689 193,871 DEFERRED INCOME TAXES 128,923 123,458 LONG-TERM DEBT 1,007,070 1,132,930 NON-CURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS 142,193 149,551 OTHER NON-CURRENT LIABILITIES 33,581 27,517 SHAREHOLDERS' EQUITY Common shares, 60,000,000 shares authorized, 27,030,040 and 27,407,094 shares issued and outstanding 44,807 60,518 Retained earnings 627,943 592,382 ---------- ---------- 672,750 652,900 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,180,206 $2,280,227 ========== ========== 2

5 RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS) Nine Months Ended September 30, ------------- 2000 1999 --------- --------- OPERATING ACTIVITIES Net income $ 65,009 $ 49,341 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization 116,804 77,313 Deferred income taxes 7,634 7,772 Gains from sale of assets (23,147) -- Non-cash cost of land sales 3,621 4,017 Increase (decrease) in other non-current liabilities 6,064 (411) Change in accounts receivable, inventories and accounts payable (9,476) (5,796) (Increase) decrease in current timber purchase agreements (2,364) 4,641 (Increase) decrease in other current assets (928) 1,936 Increase in accrued liabilities 10,448 8,480 --------- --------- CASH PROVIDED BY OPERATING ACTIVITIES 173,665 147,293 --------- --------- INVESTING ACTIVITIES Capital expenditures (63,111) (63,802) Sales, retirements and reclassifications of property, plant and equipment, net (4,136) (442) Expenditures for dispositions and discontinued operations, net of tax benefits of $2,537 and $4,234 (4,390) (6,905) Proceeds from sale of assets, net of cash costs 49,403 -- Change in timber purchase agreements and other assets 12,982 10,078 --------- --------- CASH USED FOR INVESTING ACTIVITIES (9,252) (61,071) --------- --------- FINANCING ACTIVITIES Issuance of debt 70,901 116,879 Repayments of debt (197,793) (167,775) Dividends paid (29,394) (25,852) Repurchase of common shares (17,624) (16,438) Issuance of common shares 1,859 3,995 --------- --------- CASH USED FOR FINANCING ACTIVITIES (172,051) (89,191) --------- --------- CASH AND SHORT-TERM INVESTMENTS Decrease in cash and short-term investments (7,638) (2,969) Balance at beginning of period 12,265 6,635 --------- --------- Balance at end of period $ 4,627 $ 3,666 ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 50,852 $ 18,188 ========= ========= Income taxes $ 13,621 $ 12,094 ========= ========= 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 nine months ended September 30, 2000 and 1999. Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $ 12,105 $ 17,134 $ 65,009 $ 49,341 =========== =========== =========== =========== Shares used for determining basic earnings per common share 27,134,430 27,698,598 27,282,984 27,763,251 Dilutive effect of Stock options 140,264 270,402 177,394 269,705 Contingent shares 360,000 240,000 360,000 240,000 ----------- ----------- ----------- ----------- Shares used for determining diluted earnings per common share 27,634,694 28,209,000 27,820,378 28,272,956 =========== =========== =========== =========== Basic earnings per common share $ 0.45 $ 0.62 $ 2.38 $ 1.78 =========== =========== =========== =========== Diluted earnings per common share $ 0.44 $ 0.61 $ 2.34 $ 1.75 =========== =========== =========== =========== 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. INCOME TAXES During the third quarter of 2000, the Company reduced its 2000 income tax provision by $2.6 million upon resolution of outstanding tax issues. 4. 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 Company renamed its Specialty Pulp Products segment, the Performance Fibers group, as detailed in its press release dated November 9, 2000. This change will be reflected in future filings. The amounts and relative contributions to sales and operating income attributable to each of Rayonier's reportable business units for the three months and nine months ended September 30, 2000 and 1999 were as follows (thousands of dollars): Three Months Ended Nine Months Ended September 30, September 30, ------------- ------------- 2000 1999 2000 1999 --------- --------- --------- --------- SALES Timber and Wood Products Forest Resources and Trading $ 94,293 $ 111,255 $ 335,608 $ 330,399 Wood Products 22,940 31,995 86,239 89,409 --------- --------- --------- --------- Total Timber and Wood Products 117,233 143,250 421,847 419,808 --------- --------- --------- --------- Specialty Pulp Products Chemical Cellulose 71,380 67,072 220,232 199,857 Fluff and Specialty Paper Pulps 62,445 45,442 181,878 120,767 --------- --------- --------- --------- Total Specialty Pulp Products 133,825 112,514 402,110 320,624 --------- --------- --------- --------- Intersegment Eliminations -- (311) (192) (560) --------- --------- --------- --------- Total Sales $ 251,058 $ 255,453 $ 823,765 $ 739,872 ========= ========= ========= ========= OPERATING INCOME (LOSS) Timber and Wood Products Forest Resources and Trading $ 19,947 $ 20,517 $ 94,461 $ 78,926 Wood Products (7,117) 1,745 (11,250) 2,808 --------- --------- --------- --------- Total Timber and Wood Products 12,830 22,262 83,211 81,734 Specialty Pulp Products 22,853 10,394 61,362 22,416 Corporate and Other (2,118) (543) (12,236) (8,842) --------- --------- --------- --------- Total Operating Income $ 33,565 $ 32,113 $ 132,337 $ 95,308 ========= ========= ========= ========= RESULTS OF OPERATIONS SALES AND OPERATING INCOME (LOSS) Sales for the third quarter of 2000 were $251.1 million, $4.4 million below prior year, primarily due to lower log and wood products trading activity and weakness in lumber markets, partially offset by stronger Specialty Pulp Products markets and additional Southeast timber volume related to the 1999 acquisition. Sales for the nine months ended September 30, 2000 of $823.8 million were $83.9 million higher than the prior year, due to increases in the Specialty Pulp Products segment, primarily the result of higher volume and prices, as well as increases in the Timber and Wood Products segment, primarily the result of increased timber harvesting in both the Southeast U.S. and the Northwest U.S., and higher Southeast U.S. land sales partially offset by weakness in lumber markets. 5

8 Operating income for the third quarter of 2000 of $33.6 million was $1.5 million above prior year, and operating income for the nine months ended September 30, 2000 of $132.3 million was $37.0 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 third quarter compared to the prior year due primarily to lower lumber pricing and a lower harvest in the Northwest U.S. partially due to an unusually strong first quarter 2000 harvest. However, for the nine months ended September 30, 2000, increased timber volume, primarily from the unusually strong Northwest U.S. harvest during first quarter 2000, more than offset the impact of lower lumber prices. TIMBER AND WOOD PRODUCTS Timber and Wood Products sales for the third quarter of 2000 were $117.2 million, $26.0 million below prior year, although sales for the nine months ended September 30, 2000 at $421.8 million were $2.0 million above prior year. Operating income for the third quarter of 2000 of $12.8 million was $9.4 million below prior year. Operating income for the nine months ended September 30, 2000, however, at $83.2 million was $1.5 million above prior year. FOREST RESOURCES AND TRADING Forest Resources and Trading sales for the third quarter of 2000 were $94.3 million, $17.0 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, lower Northwest U.S. and Southeast U.S. timber prices and lower log trading activity. For the nine months ended September 30, 2000, sales were $335.6 million, $5.2 million above prior year. The sales improvement was the result of increased volumes in the Southeast U.S. resulting from the Smurfit forestlands acquisition, and unusually strong first quarter 2000 Northwest U.S. timber volumes. These improvements in sales were partially offset by lower timber prices in the Southeast U.S. Operating income for the third quarter of 2000 was $19.9 million, $0.6 million below prior year, as increased timber volume and prices in the Southeast U.S. and New Zealand were more than offset by lower timber volume and prices in the Northwest U.S and lower timber prices in the Southeast U.S. For the nine months ended September 30, 2000, operating income was $94.5 million, $15.5 million above prior year. The increase was primarily a result of the unusually strong Northwest U.S. timber sales activity in first quarter 2000, and higher Southeast U.S. land sales. WOOD PRODUCTS Wood Products sales for the third quarter of 2000 were $22.9 million, $9.1 million below prior year, and sales for the nine months ended September 30, 2000 of $86.2 million were $3.2 million below prior year. Operating losses of $7.1 million and $11.3 million for the third quarter of 2000 and nine months ended September 30, 2000, respectively, were $8.9 million and $14.1 million below prior year results, respectively. 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 third quarter of 2000 were $133.8 million, $21.3 million above prior year, due to stronger fluff pulp pricing and higher pulp volumes, partially offset by lower chemical cellulose prices. For the nine months ended September 30, 2000, sales were $402.1 million, $81.5 million above prior year. Operating income of $22.9 million and $61.4 million for the third quarter of 2000 and nine months ended September 30, 2000, respectively, were $12.5 million and $38.9 million above prior year. Third quarter 2000 fluff and specialty paper pulp prices were 28.7 percent higher than prior year, while overall volumes for chemical cellulose, and fluff and specialty paper pulps were 7.9 percent higher. For the nine months ended September 30, 2000, fluff and specialty paper pulp prices were 26 percent higher, while chemical cellulose and fluff and specialty paper pulp volumes increased 16.1 percent. CORPORATE AND OTHER Corporate and other costs for the third quarter of 2000 were $2.1 million, $1.6 million above prior year, due to increased incentive compensation costs. Additionally, corporate and other expenses for the nine months ended September 30, 2000 of $12.2 million were $3.4 million above prior year, principally as a result of costs associated with the headquarters relocation from Stamford, CT to Jacksonville, FL. 6

9 INTEREST EXPENSE Interest expense of $20.6 million and $65.0 million for the third quarter of 2000 and the nine months ended September 30, 2000, respectively, were $13.3 million and $42.3 million above prior year, reflecting higher debt levels associated with the Smurfit forestland acquisition and slightly higher interest rates. MISCELLANEOUS (EXPENSE) INCOME, NET Miscellaneous (expense) income for the third quarter of 2000 was $(2.4) million compared to $0.1 million in the prior year, and $(3.0) million for the nine months ended September 30, 2000 compared to $0.6 million for the nine months ended September 30, 1999. The increased expense for both the third quarter of 2000 and the nine months ended September 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 TAXES During the third quarter of 2000, the Company reduced its 2000 income tax provision by $2.6 million upon resolution of outstanding tax issues, which resulted in an income tax benefit of $1.5 million for the quarter. The effective tax rate for the nine months ended September 30, 2000 was 25.7 percent. The effective tax rates for the corresponding periods in the prior year were 31.2 percent and 32.6 percent. The Company's effective tax rate continues 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 third quarter of 2000 was $12.1 million, or $0.44 per diluted common share, compared to $17.1 million, or $0.61 per diluted common share, for the third quarter of 1999. Net income for the nine months ended September 30, 2000 was $65.0 million, or $2.34 per diluted common share, compared to $49.3 million, or $1.75 per diluted common share, for the nine months ended September 30, 1999. Net income for the nine months ended September 30, 2000 included $14.4 million, or $0.51 per diluted common share, reflecting gains from the sale of non-strategic forestland. In its press release dated October 23, 2000, the Company said specialty pulp markets and pricing remain firm, wood products markets continue to languish. However, seasonal increases in timber volumes should result in fourth quarter earnings that are higher than the third quarter but lower than fourth quarter 1999. LIQUIDITY AND CAPITAL RESOURCES Cash flow provided by operating activities of $173.7 million for the nine months ended September 30, 2000 increased $26.4 million from 1999, primarily as a result of improvements in net income. Cash flow used for investing activities for the nine months ended September 30, 2000 was $9.3 million, decreased $51.7 million from 1999, primarily the result of capital expenditures being mostly offset by monetizing certain non-strategic forestlands. 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 nine months ended September 30, 2000 was $77.0 million and $249.8 million, respectively, $16.6 million and $72.5 million higher than the prior year. During the nine months ended September 30, 2000, cash from operating activities and the proceeds from the sale of non-strategic assets were used to finance capital expenditures of $63.1 million, pay dividends of $29.4 million, repurchase common shares for $17.6 million, and reduce debt by $126.9 million. The Company repurchased 204,500 of its shares during the third quarter of 2000 at an average cost of $40.41 for a total of $8.3 million, and 433,000 shares during the nine months ended September 30, 2000 at an average cost of $40.70 for a total of $17.6 million. These activities completed a one million share repurchase program authorized in October 1998. During the third quarter of 1999 and the nine months ended September 30, 1999, the Company repurchased 249,000 and 373,300 shares, at average costs 7

10 of $43.53 and $44.03 per share for $10.8 million and $16.4 million, respectively. On October 20, 2000 the Company's Board of Directors authorized another share repurchase program of up to one million shares. At September 30, 2000, debt was $1,009.3 million and the debt-to-capital ratio was 60.0 percent, compared to debt of $1,136.2 million and a debt-to-capital ratio of 63.5 percent at December 31, 1999. Excluding U.S. timberland external debt, corporate debt was $286.8 million, a reduction of $132.4 million from December 31, 1999 and $152.2 million from September 30, 1999. The Company has unsecured credit facilities totaling $300 million, which were used as support for $35 million of outstanding commercial paper. As of September 30, 2000, Rayonier (excluding U.S. timberland revolving credit facilities) had $265 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. As of September 30, 2000 and December 31, 1999, RTOC's outstanding external debt was $722.5 million and $717.0 million, respectively. RTOC had $40 million of available borrowings under its revolving credit facilities as of September 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 volumes and earnings and other future activities 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 Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ---- ---- ---- ---- TIMBER AND WOOD PRODUCTS Log trading sales volume North America, in millions of board feet 42 57 166 132 New Zealand, in thousands of cubic meters 348 306 897 897 Other, in thousands of cubic meters 41 157 246 429 Timber sales volume Northwest U.S., in millions of board feet 26 33 180 165 Southeast U.S., in thousands of short green tons 1,237 664 3,373 1,795 New Zealand, in thousands of cubic meters 370 324 912 915 Lumber sales volume, in millions of board feet 51 65 186 189 Medium-density fiberboard sales volume, in thousands of cubic meters 37 33 113 91 Intercompany timber sales volume Northwest U.S., in millions of board feet 6 3 45 21 Southeast U.S., in thousands of short green tons 4 15 27 26 New Zealand, in thousands of cubic meters 177 159 440 428 SPECIALTY PULP PRODUCTS Pulp sales volume Chemical cellulose, in thousands of metric tons 87 80 265 235 Fluff and specialty paper pulp, in thousands of metric tons 91 85 276 231 Production as a percent of capacity 103.4% 95.4% 102.9% 94.7% 9

12 SELECTED SUPPLEMENTAL FINANCIAL DATA (thousands of dollars, except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 --------- --------- --------- --------- GEOGRAPHICAL DATA (NON-U.S.) Sales New Zealand $ 25,388 $ 20,678 $ 68,241 $ 60,483 Other 5,689 9,662 29,686 30,745 --------- --------- --------- --------- Total $ 31,077 $ 30,340 $ 97,927 $ 91,228 ========= ========= ========= ========= Operating income (loss) New Zealand $ (378) $ (2,462) $ (1,842) $ (5,165) Other (495) (352) (228) (620) --------- --------- --------- --------- Total $ (873) $ (2,814) $ (2,070) $ (5,785) ========= ========= ========= ========= FOREST RESOURCES Sales Northwest U.S. $ 8,430 $ 11,488 $ 64,429 $ 59,070 Southeast U.S. 29,476 19,701 83,968 51,397 New Zealand 7,341 6,035 17,510 18,827 --------- --------- --------- --------- Total $ 45,247 $ 37,224 $ 165,907 $ 129,294 ========= ========= ========= ========= Operating income Northwest U.S. $ 5,205 $ 6,576 $ 52,243 $ 43,846 Southeast U.S. 12,777 14,597 37,564 37,592 New Zealand 2,948 1,277 5,730 4,742 --------- --------- --------- --------- Total $ 20,930 $ 22,450 $ 95,537 $ 86,180 ========= ========= ========= ========= EBITDA per share Northwest U.S. $ 0.23 $ 0.27 $ 2.00 $ 1.66 Southeast U.S. 0.94 0.62 2.65 1.63 New Zealand 0.23 0.17 0.54 0.52 --------- --------- --------- --------- Total $ 1.40 $ 1.06 $ 5.19 $ 3.81 ========= ========= ========= ========= 10

13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index. (b) Rayonier Inc. filed a current report on Form 8-K dated October 6, 2000, which included a press release dated September 22, 2000. 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) November 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) Nine Months Ended September 30, 2000 1999 -------- -------- Earnings: Net Income $ 65,009 $ 49,341 Add: Income Taxes 22,487 23,869 Amortization of Capitalized Interest 1,731 1,748 -------- -------- Additions to Net Income 24,218 25,617 -------- -------- Adjustments to Earnings for Fixed Charges: Interest and Other Financial Charges 64,988 22,693 Interest Factor Attributable to Rentals 1,026 1,313 -------- -------- Adjustments for Fixed Charges 66,014 24,006 -------- -------- EARNINGS AS ADJUSTED $155,241 $ 98,964 ======== ======== Fixed Charges: Fixed Charges above $ 66,014 $ 24,006 Capitalized Interest -- 314 -------- -------- TOTAL FIXED CHARGES $ 66,014 $ 24,320 ======== ======== RATIO OF EARNINGS AS ADJUSTED TO TOTAL FIXED CHARGES 2.35 4.07 ======== ======== 13

5 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 4,627 0 109,715 4,773 101,498 260,380 1,352,898 713,112 2,180,206 195,689 1,007,070 0 0 44,807 627,943 2,180,206 823,765 823,765 661,506 661,506 29,922 0 64,988 87,495 22,486 65,009 0 0 0 65,009 2.38 2.34