Rayonier 2011 10Q 3Q2011
Table of Contents



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, 2011
OR
o
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 No. 13-2607329
1301 RIVERPLACE BOULEVARD
JACKSONVILLE, FL 32207
(Principal Executive Office)
Telephone Number: (904) 357-9100

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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x        NO  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES x       NO  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer  x
  
Accelerated filer  o
Non-accelerated filer  o
  
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o        NO  x

As of October 19, 2011, there were outstanding 121,829,444 Common Shares of the registrant.















Table of Contents





Table of Contents

TABLE OF CONTENTS
 
Item
 
  
Page
 
 
PART I - FINANCIAL INFORMATION
 
1.
 
 
 
 
 
 
 
 
 
2.
 
3.
 
4.
 
 
 
PART II - OTHER INFORMATION
 
6.
 
 
 
 

i


Table of Contents

PART I.        FINANCIAL INFORMATION

Item 1.         Financial Statements

RAYONIER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
SALES
$
385,091

 
$
377,515

 
$
1,100,218

 
$
999,925

 
 
 
 
 
 
 
 
Costs and Expenses
 
 
 
 
 
 
 
Cost of sales
266,184

 
269,203

 
786,467

 
744,996

Selling and general expenses
15,762

 
17,125

 
48,187

 
49,264

Other operating income, net
(4,171
)
 
(792
)
 
(5,580
)
 
(6,620
)
 
277,775

 
285,536

 
829,074

 
787,640

Equity in income of New Zealand joint venture
994

 
103

 
3,817

 
634

 
 
 
 
 
 
 
 
OPERATING INCOME BEFORE GAIN ON SALE OF A PORTION
 
 
 
 
 
 
 
OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE
108,310

 
92,082

 
274,961

 
212,919

 
 
 
 
 
 
 
 
Gain on sale of a portion of the interest in the New Zealand joint venture (Note 5)

 

 

 
12,367

 
 
 
 
 
 
 
 
OPERATING INCOME
108,310

 
92,082

 
274,961

 
225,286

 
 
 
 
 
 
 
 
Interest expense
(12,356
)
 
(12,943
)
 
(38,300
)
 
(37,680
)
Interest and miscellaneous income, net
331

 
345

 
935

 
943

 
 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
96,285

 
79,484

 
237,596

 
188,549

Income tax benefit (expense)
8,624

 
(16,580
)
 
(17,822
)
 
(30,134
)
 
 
 
 
 
 
 
 
NET INCOME
104,909

 
62,904

 
219,774

 
158,415

 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Foreign currency translation adjustment
3,584

 
3,198

 
11,314

 
(64
)
Joint venture cash flow hedges
(630
)
 
(104
)
 
(498
)
 
922

Amortization of pension and postretirement benefit costs, net of income
 
 
 
 
 
 
 
tax expense (benefit) of $1,017 and $661, and $2,871 and ($1,705)
2,261

 
1,210

 
6,449

 
5,849

 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME
$
110,124

 
$
67,208

 
$
237,039

 
$
165,122

 
 
 
 
 
 
 
 
EARNINGS PER COMMON SHARE (NOTE 2)
 
 
 
 
 
 
 
Basic earnings per share
$
0.86

 
$
0.52

 
$
1.81

 
$
1.32

 
 
 
 
 
 
 
 
Diluted earnings per share
$
0.84

 
$
0.51

 
$
1.75

 
$
1.30

 
 
 
 
 
 
 
 
Dividends per share
$
0.40

 
$
0.33

 
$
1.12

 
$
1.00

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


See Notes to Condensed Consolidated Financial Statements.

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
 
September 30, 2011
 
December 31, 2010
ASSETS
CURRENT ASSETS
 
 
 
Cash and cash equivalents
$
362,285

 
$
349,463

Accounts receivable, less allowance for doubtful accounts of $388 and $387
106,937

 
82,640

Inventory
 
 
 
Finished goods
87,301

 
84,013

Work in progress
8,353

 
6,041

Raw materials
16,170

 
17,517

Manufacturing and maintenance supplies
2,290

 
2,464

Total inventory
114,114

 
110,035

Income tax receivable
1,624

 
21,734

Prepaid and other current assets
63,458

 
45,314

Total Current Assets
648,418

 
609,186

 
 
 
 
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
1,192,356

 
1,137,931

 
 
 
 
PROPERTY, PLANT AND EQUIPMENT
 
 
 
Land
26,345

 
24,776

Buildings
131,406

 
129,913

Machinery and equipment
1,343,931

 
1,318,055

Construction in progress
63,405

 
33,920

Total property, plant and equipment, gross
1,565,087

 
1,506,664

Less—accumulated depreciation
(1,144,479
)
 
(1,121,360
)
      Total property, plant and equipment, net
420,608

 
385,304

 
 
 
 
INVESTMENT IN JOINT VENTURE (NOTE 5)
80,281

 
68,483

 
 
 
 
OTHER ASSETS
153,058

 
162,749

 
 
 
 
TOTAL ASSETS
$
2,494,721

 
$
2,363,653

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
 
 
 
Accounts payable
$
68,495

 
$
57,985

Current maturities of long-term debt
116,167

 
93,057

Accrued taxes
22,894

 
10,337

Accrued payroll and benefits
24,719

 
25,466

Accrued interest
11,942

 
6,206

Accrued customer incentives
9,265

 
9,759

Other current liabilities
35,637

 
30,638

Current liabilities for dispositions and discontinued operations (Note 10)
11,090

 
11,500

TOTAL CURRENT LIABILITIES
300,209

 
244,948

 
 
 
 
LONG-TERM DEBT
658,464

 
675,103

 
 
 
 
NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED
 
 
 
OPERATIONS (Note 10)
75,213

 
81,660

 
 
 
 
PENSION AND OTHER POSTRETIREMENT BENEFITS (Note 12)
65,512

 
66,335

 
 
 
 
OTHER NON-CURRENT LIABILITIES
27,292

 
44,025

 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 9 and 11)

 

 
 
 
 
SHAREHOLDERS’ EQUITY
 
 
 
Common Shares, 240,000,000 shares authorized, 121,827,626 and
 
 
 
121,023,140 shares issued and outstanding
619,965

 
602,882

Retained earnings
799,159

 
717,058

Accumulated other comprehensive loss
(51,093
)
 
(68,358
)
TOTAL SHAREHOLDERS' EQUITY
1,368,031

 
1,251,582

 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
2,494,721

 
$
2,363,653

See Notes to Condensed Consolidated Financial Statements.

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

 
Nine Months Ended September 30,
 
2011
 
2010
OPERATING ACTIVITIES
 
 
 
Net income
$
219,774

 
$
158,415

Adjustments to reconcile net income to cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
101,758

 
115,687

Non-cash cost of real estate sold
3,108

 
6,531

Stock-based incentive compensation expense
11,793

 
11,610

Gain on sale of a portion of interest in the New Zealand joint venture

 
(11,545
)
Amortization of convertible debt discount
6,471

 
6,103

Deferred income taxes
(5,967
)
 
14,871

Excess tax benefits on stock-based compensation
(4,951
)
 
(5,071
)
Other
9,094

 
4,571

Changes in operating assets and liabilities:
 
 
 
Receivables
(24,071
)
 
(10,756
)
Inventories
(8,435
)
 
(3,481
)
Accounts payable
6,346

 
(8,993
)
Income tax receivable
20,110

 
190,997

Other current assets
(11,244
)
 
(6,032
)
Accrued liabilities
26,990

 
16,476

Other assets
1,168

 
629

Other non-current liabilities
(18,759
)
 
(321
)
Expenditures for dispositions and discontinued operations
(6,915
)
 
(6,484
)
CASH PROVIDED BY OPERATING ACTIVITIES
326,270

 
473,207

 
 
 
 
INVESTING ACTIVITIES
 
 
 
Capital expenditures
(87,156
)
 
(95,614
)
Purchase of timberlands
(94,162
)
 

Jesup mill cellulose specialties expansion
(14,567
)
 

Change in restricted cash
8,323

 
(13,209
)
Other
7,021

 
6,211

CASH USED FOR INVESTING ACTIVITIES
(180,541
)
 
(102,612
)
 
 
 
 
FINANCING ACTIVITIES
 
 
 
Issuance of debt
180,000

 
157,000

Repayment of debt
(180,000
)
 
(96,650
)
Dividends paid
(136,563
)
 
(120,156
)
Proceeds from the issuance of common shares
8,248

 
21,532

Excess tax benefits on stock-based compensation
4,951

 
5,071

Debt issuance costs
(2,027
)
 
(537
)
Repurchase of common shares
(7,909
)
 
(6,028
)
CASH USED FOR FINANCING ACTIVITIES
(133,300
)
 
(39,768
)
 
 
 
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH
393

 
(126
)
 
 
 
 
CASH AND CASH EQUIVALENTS
 
 
 
Change in cash and cash equivalents
12,822

 
330,701

Balance, beginning of year
349,463

 
74,964

Balance, end of period
$
362,285

 
$
405,665

 
 
 
 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
 
 
 
Cash paid during the period:
 
 
 
Interest
$
23,706

 
$
24,499

Income taxes
$
4,992

 
$
4,538

Non-cash investing activity:
 
 
 
Capital assets purchased on account
$
16,504

 
$
9,800



See Notes to Condensed Consolidated Financial Statements.

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)


1.
BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The unaudited condensed consolidated financial statements and notes thereto of Rayonier Inc. and its subsidiaries ("Rayonier" or "the Company") have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, certain information in the financial statements of the Company's Annual Report on Form 10-K has been condensed. In the opinion of management, these financial statements and notes reflect all adjustments necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the financial statements and supplementary data included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC.
Subsequent Events
The Company evaluated events and transactions that occurred after the balance sheet date but before financial statements were issued, and no subsequent events were identified that warranted disclosure.
New or Recently Adopted Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income. This standard eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. An entity can elect to present items of net income and other comprehensive income in one continuous statement - referred to as the statement of comprehensive income - or in two separate, but consecutive, statements. Each component of net income and each component of other comprehensive income, together with totals for comprehensive income and its two parts - net income and other comprehensive income, would need to be displayed under either alternative. The statements would need to be presented with equal prominence as the other primary financial statements. The standard is effective for Rayonier's first quarter 2012 filing. Since Rayonier reports a condensed consolidated statement of income and comprehensive income as its first financial statement each quarter, this new guidance will have no effect.
2.
EARNINGS PER COMMON SHARE
On July 22, 2011, the Board of Directors authorized a three-for-two stock split in the form of a stock dividend. The additional shares were distributed on August 24, 2011 to shareholders of record on August 10, 2011. The impact of the stock split is reflected for all periods presented in the following table which provides details of the calculations of basic and diluted earnings per common share:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Net income
$
104,909

 
$
62,904

 
$
219,774

 
$
158,415

 
 
 
 
 
 
 
 
Shares used for determining basic earnings per common share
121,790,059

 
120,394,172

 
121,665,644

 
120,057,048

Dilutive effect of:
 
 
 
 
 
 
 
Stock options
689,643

 
579,611

 
716,095

 
575,294

Performance and restricted shares
1,179,047

 
1,232,342

 
1,121,909

 
1,144,926

Assumed conversion of Senior Exchangeable Notes (a)
1,823,600

 

 
1,883,270

 

Assumed conversion of warrants
117,260

 

 
143,182

 

Shares used for determining diluted earnings per common share
125,599,609

 
122,206,125

 
125,530,100

 
121,777,268

 
 
 
 
 
 
 
 
Basic earnings per common share
$
0.86

 
$
0.52

 
$
1.81

 
$
1.32

 
 
 
 
 
 
 
 
Diluted earnings per common share
$
0.84

 
$
0.51

 
$
1.75

 
$
1.30



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Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2011
 
2010
 
2011
 
2010
Anti-dilutive shares excluded from the computations of
 
 
 
 
 
 
 
diluted earnings per share:
 
 
 
 
 
 
 
Stock options, performance and restricted shares
142,135

 
179,119

 
198,594

 
769,699

Assumed conversion of exchangeable note hedges (a)
1,823,600

 

 
1,883,270

 

Total
1,965,735

 
179,119

 
2,081,864

 
769,699


(a) Upon maturity of the Senior Exchangeable Notes (the "Notes"), Rayonier will not issue additional shares for the Notes due to the offsetting exchangeable note hedges (the "hedges"). However, accounting guidance under Accounting Standards Codification 260, Earnings Per Share requires the assumed conversion of the Notes to be included in dilutive shares, while the assumed conversion of the hedges are excluded since they are anti-dilutive. For additional information on the potential dilutive impact of the Senior Exchangeable Notes, warrants and exchangeable note hedges, see Note 11 - Debt in the 2010 Annual Report on Form 10-K.

3.
INCOME TAXES
Rayonier is a real estate investment trust ("REIT"). In general, only the taxable REIT subsidiaries, whose businesses include the Company's non-REIT qualified activities, are subject to corporate income taxes. However, the Company is subject to U.S. federal corporate income tax on built-in gains (the excess of fair market value over tax basis for property held upon REIT election at January 1, 2004) on taxable sales of such property during calendar years 2004 through 2013 (for 2011 the tax rate is zero). Accordingly, the provision for corporate income taxes relates principally to current and deferred taxes on taxable REIT subsidiaries' income and certain property sales.
Unrecognized Tax Benefits
During the third quarter of 2011, the Company received a final examination report from the U.S. Internal Revenue Service ("IRS") regarding its Rayonier TRS Holdings Inc. ("TRS") 2009 tax return. As a result, Rayonier reversed the uncertain tax liability recorded in 2009 relating to the taxability of the alternative fuel mixture credit ("AFMC") and recognized a $16 million tax benefit in the third quarter of 2011.
Cellulosic Biofuel Producer Credit
The IRS allowed two credits for taxpayers that produced and used an alternative fuel in the operation of their business through December 31, 2009. In the second quarter of 2011, management approved an exchange of alternative fuel (black liquor) gallons previously claimed under the AFMC for the cellulosic biofuel producer credit ("CBPC"). The net tax benefits from the exchange for the three and nine months ended September 30, 2011 were $2.0 million and $6.1 million, respectively.
For additional information, see Note 3 - Alternative Fuel Mixture Credit ("AFMC") and Cellulosic Biofuel Producer Credit ("CBPC") and Note 8 - Income Taxes in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.
Effective Tax Rate
The Company's effective tax rate is below the 35 percent U.S. statutory tax rate primarily due to tax benefits associated with being a REIT. The effective tax rate for the quarter was a 9.0 percent benefit compared to a 20.9 percent expense in the prior year period. Year-to-date, the 2011 effective tax rate was a 7.5 percent expense compared to a 16.0 percent expense in 2010. The 2011 periods benefited from the reversal of the reserve related to the taxability of the AFMC, the exchange for the CBPC and a $9.3 million benefit associated with the structuring of a transfer of higher and better use properties to a taxable REIT subsidiary from the REIT.

4.
RESTRICTED DEPOSITS
In order to qualify for like-kind exchange ("LKE") treatment, the proceeds from real estate sales must be deposited with a third-party intermediary. These proceeds are accounted for as restricted cash until a suitable replacement property is acquired. In the event that the LKE purchases are not completed, the proceeds are returned to the Company after 180 days and reclassified as available cash. As of September 30, 2011 and December 31, 2010, the Company had $0 and $8.3 million, respectively, of proceeds from real estate sales classified as restricted cash in Other Assets, which were deposited with an LKE intermediary.


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Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

5.
JOINT VENTURE INVESTMENT
The Company holds a 26 percent interest in Matariki Forestry Group ("Matariki"), a joint venture ("JV") that owns or leases approximately 0.3 million acres of New Zealand timberlands. In addition to the investment, Rayonier New Zealand Limited, a wholly-owned subsidiary of Rayonier Inc., serves as the manager of the JV forests and operates a log trading business.
In February 2010, the JV sold a 35 percent interest to a new investor for NZ$167 million. Matariki issued new shares to the investor and used all the proceeds to pay down a portion of its outstanding NZ$367 million debt. Upon closing, Rayonier's ownership interest in Matariki declined from 40 percent to 26 percent. As a result of this transaction, results for the nine months ended September 30, 2010 include a gain of $11.5 million, net of $0.9 million in tax, or $0.09 per diluted share.

6.
SHAREHOLDERS’ EQUITY
 An analysis of shareholders’ equity for the nine months ended September 30, 2011 and the year ended December 31, 2010 is shown below (share amounts not in thousands):
 
Common Shares
 
Retained
Earnings
 
Accumulated Other Comprehensive Loss
 
Shareholders’
Equity
 
Shares (a)
 
Amount
 
Balance, December 31, 2009
119,312,961

 
$
561,962

 
$
663,986

 
$
(79,742
)
 
$
1,146,206

Net income

 

 
217,586

 

 
217,586

Dividends ($1.36 per share)

 

 
(164,514
)
 

 
(164,514
)
Issuance of shares under incentive stock plans
1,914,341

 
26,314

 

 

 
26,314

Stock-based compensation

 
15,223

 

 

 
15,223

Excess tax benefit on stock-based compensation

 
5,411

 

 

 
5,411

Repurchase of common shares
(204,162
)
 
(6,028
)
 

 

 
(6,028
)
Net gain from pension and postretirement plans

 

 

 
6,385

 
6,385

Foreign currency translation adjustment

 

 

 
4,162

 
4,162

Joint venture cash flow hedges

 

 

 
837

 
837

Balance, December 31, 2010
121,023,140

 
$
602,882

 
$
717,058

 
$
(68,358
)
 
$
1,251,582

Net income

 

 
219,774

 

 
219,774

Dividends ($1.12 per share)

 

 
(137,673
)
 

 
(137,673
)
Issuance of shares under incentive stock plans
1,013,180

 
8,248

 

 

 
8,248

Stock-based compensation

 
11,793

 

 

 
11,793

Excess tax benefit on stock-based compensation

 
4,951

 

 

 
4,951

Repurchase of common shares
(208,694
)
 
(7,909
)
 

 

 
(7,909
)
Amortization of pension and postretirement plans

 

 

 
6,449

 
6,449

Foreign currency translation adjustment

 

 

 
11,314

 
11,314

Joint venture cash flow hedges

 

 

 
(498
)
 
(498
)
Balance, September 30, 2011
121,827,626

 
$
619,965

 
$
799,159

 
$
(51,093
)
 
$
1,368,031

 (a) The impact of the August 2011 three-for-two stock split is reflected for all periods presented. See Note 2 - Earnings Per Common Share for additional information.

7.
SEGMENT AND GEOGRAPHICAL INFORMATION
Effective first quarter 2011, the Company renamed its Timber segment, Forest Resources. All prior period amounts previously reported under the Timber segment are now reported under the Forest Resources segment.
Rayonier operates in four reportable business segments: Forest Resources, Real Estate, Performance Fibers, and Wood Products. Forest Resources sales include all activities that relate to the harvesting of timber. Real Estate sales include all property sales, including those designated for higher and better use ("HBU"). The assets of the Real Estate segment include HBU property held by the Company’s real estate subsidiary, TerraPointe LLC. The Performance Fibers segment includes two major product lines, cellulose specialties and absorbent materials. The Wood Products segment is comprised of lumber operations. The Company’s remaining operations include harvesting and selling timber acquired from third parties (log trading). These operations are reported in "Other Operations." Sales between operating segments are made based on fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. The Company evaluates financial performance based on the operating income of the segments.

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Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

Operating income (loss) as presented in the Condensed Consolidated Statements of Income and Comprehensive Income is equal to segment income (loss). Certain income (loss) items in the Condensed Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include gains (losses) from certain asset dispositions, interest income (expense), miscellaneous income (expense) and income tax (expense) benefit, are not considered by management to be part of segment operations.
Total assets, sales, operating income (loss) and depreciation, depletion and amortization by segment including Corporate were as follows:
 
September 30,
 
December 31,
ASSETS
2011
 
2010
Forest Resources
$
1,342,022

 
$
1,259,925

Real Estate
82,313

 
85,525

Performance Fibers
617,649

 
550,875

Wood Products
20,292

 
19,544

Other Operations
22,980

 
25,583

Corporate and other
409,465

 
422,201

Total
$
2,494,721

 
$
2,363,653

 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
SALES
2011
 
2010
 
2011
 
2010
Forest Resources
$
57,265

 
$
47,343

 
$
162,482

 
$
143,368

Real Estate
32,177

 
45,162

 
57,945

 
90,891

Performance Fibers
255,457

 
246,314

 
739,426

 
648,032

Wood Products
16,492

 
14,652

 
50,239

 
52,157

Other Operations
25,950

 
25,449

 
94,869

 
72,803

Intersegment Eliminations (a)
(2,250
)
 
(1,405
)
 
(4,743
)
 
(7,326
)
Total
$
385,091

 
$
377,515

 
$
1,100,218

 
$
999,925

(a)
Intersegment eliminations primarily reflect sales from our Forest Resources segment to our Performance Fibers segment.
  
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
OPERATING INCOME (LOSS)
2011
 
2010
 
2011
 
2010
Forest Resources
$
10,792

 
$
9,151

 
$
33,681

 
$
26,023

Real Estate
28,077

 
30,788

 
40,458

 
52,325

Performance Fibers
74,897

 
62,311

 
221,709

 
152,158

Wood Products
(740
)
 
(1,368
)
 
(1,274
)
 
2,943

Other Operations
1,122

 
(798
)
 
955

 
538

Corporate and other (b)
(5,838
)
 
(8,002
)
 
(20,568
)
 
(8,701
)
Total
$
108,310

 
$
92,082

 
$
274,961

 
$
225,286

(b)
Nine months ended September 30, 2010 include a $12.4 million gain from the sale of a portion of the Company's interest in its New Zealand JV. See Note 5 — Joint Venture Investment for additional information.

7


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RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
DEPRECIATION, DEPLETION AND AMORTIZATION
2011
 
2010
 
2011
 
2010
Forest Resources
$
16,614

 
$
14,813

 
$
47,866

 
$
48,819

Real Estate
5,677

 
9,284

 
10,598

 
21,286

Performance Fibers
15,592

 
13,922

 
40,089

 
41,929

Wood Products
689

 
936

 
2,344

 
3,080

Corporate and other
323

 
210

 
861

 
573

Total
$
38,895

 
$
39,165

 
$
101,758

 
$
115,687


8.
FAIR VALUE MEASUREMENTS
Fair Value of Financial Instruments
The following table presents the carrying amount and estimated fair values of financial instruments held by the Company at September 30, 2011 and December 31, 2010, using market information and what the Company believes to be appropriate valuation methodologies under generally accepted accounting principles:
 
 
September 30, 2011
 
December 31, 2010
Asset (liability)
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Cash and cash equivalents
$
362,285

 
$
362,285

 
$
349,463

 
$
349,463

Short-term debt
 
(116,167
)
 
(117,074
)
 
(93,057
)
 
(98,042
)
Long-term debt
 
(658,464
)
 
(692,754
)
 
(675,103
)
 
(783,080
)
Rayonier uses the following methods and assumptions in estimating the fair value of its financial instruments:
Cash and cash equivalents — The carrying amount is equal to fair market value.
Debt — The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities.
Variable Interest Entity
Rayonier holds a variable interest in a bankruptcy-remote, limited liability subsidiary ("special-purpose entity") which was created in 2004 when Rayonier monetized a $25.0 million installment note and letter of credit received in connection with a timberland sale. The Company contributed the note and a letter of credit to the special-purpose entity and using the installment note and letter of credit as collateral, the special-purpose entity issued $22.6 million of 15-year Senior Secured Notes and remitted cash of $22.6 million to the Company. There are no restrictions that relate to the transferred financial assets. Rayonier maintains a $2.6 million interest in the entity and receives immaterial cash payments equal to the excess of interest received on the installment note over the interest paid on the Senior Secured Notes. The Company's interest is recorded at fair value and is included in "Other Assets" in the Condensed Consolidated Balance Sheets. In addition, the Company calculated and recorded a de minimus guarantee liability to reflect its obligation of up to $2.6 million under a make-whole agreement pursuant to which it guaranteed certain obligations of the entity. This guarantee obligation is also collateralized by the letter of credit. The Company's interest in the entity, together with the make-whole agreement, represents the maximum exposure to loss as a result of the Company's involvement with the special-purpose entity. Upon maturity of the Senior Secured Notes in 2019 and termination of the special-purpose entity, Rayonier will receive the remaining $2.6 million of cash. The Company determined, based upon an analysis under the variable interest entity guidance, that it does not have the power to direct activities that most significantly impact the entity's economic success. Therefore, Rayonier is not the primary beneficiary and is not required to consolidate the entity.

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RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

Assets measured at fair value on a recurring basis are summarized below:
 
Asset
 
Carrying Value at
September 30, 2011
 
Level 2
 
Carrying Value at
December 31, 2010
 
Level 2
Investment in special-purpose entity
 
$
2,879

 
$
2,879

 
$
2,879

 
$
2,879

 
 
 
 
 
 
 
 
 
The fair value of the investment in the special-purpose entity is determined by summing the discounted value of future principal and interest payments that Rayonier will receive from the special-purpose entity. The interest rate of a similar instrument is used to determine the discounted value of the payments.

9.
GUARANTEES
 The Company provides financial guarantees as required by creditors, insurance programs, and state and foreign governmental agencies. As of September 30, 2011, the following financial guarantees were outstanding:
Financial Commitments
 
Maximum Potential
Payment
 
Carrying Amount
of Liability
Standby letters of credit (a)
$
43,807

 
$
38,110

Guarantees (b)
 
2,555

 
43

Surety bonds (c)
 
12,447

 
1,536

Total financial commitments
$
58,809

 
$
39,689

(a)
Approximately $39 million of the standby letters of credit serve as credit support for industrial revenue bonds. The remaining letters of credit support various insurance related agreements, primarily workers’ compensation and pollution liability policy requirements. These letters of credit will expire at various dates during 2011 and 2012 and will be renewed as required.
(b)
In conjunction with a timberland sale and note monetization in the first quarter of 2004, the Company issued a make-whole agreement pursuant to which it guaranteed $2.6 million of obligations of a special-purpose entity that was established to complete the monetization. At September 30, 2011, the Company has a de minimus liability to reflect the fair market value of its obligation to perform under the make-whole agreement.
(c)
Rayonier issues surety bonds primarily to secure timber harvesting obligations in the State of Washington and to provide collateral for the Company’s workers’ compensation self-insurance program in that state. These surety bonds expire at various dates during 2011, 2012 and 2014 and are expected to be renewed as required.

10.
LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS
An analysis of the liabilities for dispositions and discontinued operations follows:
 
 
September 30,
 
December 31,
 
 
2011
 
2010
 
Balance, beginning of period
$
93,160

 
$
98,591

 
Expenditures charged to liabilities
(6,915
)
 
(8,632
)
 
Increase to liabilities
58

 
3,201

 
Balance, end of period
86,303

 
93,160

 
Less: Current portion
(11,090
)
 
(11,500
)
 
Non-current portion
$
75,213

 
$
81,660

 
 
The Company is exposed to the risk of reasonably possible additional losses in excess of the established liabilities. As of September 30, 2011, this amount could range up to $40 million, allocable over several of the applicable sites, and arises from uncertainty over the availability, feasibility or effectiveness of certain remediation technologies, additional or different contamination that may be discovered, development of new or more effective environmental remediation technologies and the

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RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

exercise of discretion in interpretation of applicable law and regulations by governmental agencies.
Subject to the factors described in Note 14 - Liabilities for Dispositions and Discontinued Operations in the 2010 Annual Report on Form 10-K, the Company believes established liabilities are sufficient for costs expected to be incurred over the next 20 years with respect to its dispositions and discontinued operations. Remedial actions for these sites vary, but include, among others, on-site (and in certain cases off-site) removal or treatment of contaminated soils and sediments, recovery and treatment/remediation of groundwater, and source remediation and/or control.

11.
CONTINGENCIES
Rayonier is engaged in various legal actions, including certain environmental proceedings. The Company has been named as a defendant in various other lawsuits and claims arising in the normal course of business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, it has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance and general liability. These other lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flow.
For additional information, see Note 14 — Liabilities for Dispositions and Discontinued Operations in the 2010 Annual Report on Form 10-K.

12.
EMPLOYEE BENEFIT PLANS
The Company has four qualified non-contributory defined benefit pension plans covering a majority of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. Effective March 2011, all of these plans were closed to new participants. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.
The net pension and postretirement benefit costs that have been recognized during the stated periods are shown in the following table:
 
Pension
Postretirement
 
Three Months Ended September 30,
 
Three Months Ended September 30,
 
 
2011
 
2010
 
2011
 
2010
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
Service cost
$
1,695

 
$
1,549

 
$
99

 
$
148

 
Interest cost
4,522

 
4,435

 
257

 
258

 
Expected return on plan assets
(6,455
)
 
(5,412
)
 

 

 
Amortization of prior service cost
340

 
414

 
49

 
21

 
Amortization of plan amendment

 

 

 
(637
)
 
Amortization of losses
2,593

 
1,614

 
296

 
459

 
Net periodic benefit cost
$
2,695

 
$
2,600

 
$
701

 
$
249

 

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RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
Pension
Postretirement
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2011
 
2010
 
2011
 
2010
 
Components of Net Periodic Benefit Cost
 
 
 
 
 
 
 
 
Service cost
$
5,086

 
$
4,647

 
$
463

 
$
440

 
Interest cost
13,566

 
13,305

 
729

 
772

 
Expected return on plan assets
(19,366
)
 
(16,238
)
 

 

 
Amortization of prior service cost
1,020

 
1,243

 
93

 
65

 
Amortization of plan amendment

 

 

 
(5,421
)
 
Amortization of losses
7,779

 
4,842

 
428

 
3,415

 
Net periodic benefit cost
$
8,085

 
$
7,799

 
$
1,713

 
$
(729
)
 
The Company made no discretionary contributions to the pension plans during the nine months ended September 30, 2011. The Company has no mandatory pension contributions for 2011 and does not expect to make any discretionary contributions.

13.
DEBT
In April 2011, the Company entered into a five year $300 million unsecured revolving credit facility, replacing the previous $250 million facility which was scheduled to expire in August 2011. The new facility has a borrowing rate of LIBOR plus 105 basis points plus a facility fee of 20 basis points and expires in April 2016. In August 2011, the Company increased the revolving credit facility to $450 million from $300 million. At September 30, 2011, the Company had $370 million of available borrowings under this facility.
In March 2011, TRS, a wholly-owned subsidiary of Rayonier, repaid a $75 million term note due in 2015. There were no other significant changes to the Company's outstanding debt as reported in Note 11 - Debt of the Company's 2010 Annual Report on 10-K.

14.
ACCUMULATED OTHER COMPREHENSIVE LOSS
 
Accumulated Other Comprehensive Loss was comprised of the following:
 
 
September 30, 2011
 
December 31, 2010
Foreign currency translation adjustments (a)
$
42,245

 
$
30,931

Joint venture cash flow hedges
(1,966
)
 
(1,468
)
Unrecognized components of employee benefit plans, net of tax
(91,372
)
 
(97,821
)
Total
$
(51,093
)
 
$
(68,358
)
(a) During the nine months ended September 30, 2011, the increase in net foreign currency translation adjustments was due to the strengthening of the New Zealand dollar against the U.S. dollar.

15.
CONSOLIDATING FINANCIAL STATEMENTS
 
In October 2007, TRS issued $300 million of 3.75% Senior Exchangeable Notes due 2012, and in August 2009 TRS issued $172.5 million of 4.50% Senior Exchangeable Notes due 2015. The notes for both transactions are non-callable and are guaranteed by Rayonier Inc. as the Parent Guarantor and Rayonier Operating Company LLC ("ROC") as the Subsidiary Guarantor. In connection with these exchangeable notes, the Company provides the following condensed consolidating financial information in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in wholly-owned subsidiaries, which are eliminated upon consolidation, and the allocation of certain expenses of Rayonier Inc. incurred for the benefit of its subsidiaries.

11


Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

Reclassifications
In fourth quarter 2010, the Company determined that certain amounts had been incorrectly allocated between the entities presented. See Note 21 - Consolidating Financial Statements in the Company's 2010 Annual Report on Form 10-K for additional information. This resulted in (1) an understatement of interest expense of $5.3 million and $15.6 million for the three and nine months ended September 30, 2010, respectively, for TRS (Issuer) and an overstatement for the same amount for TRS non-guarantor subsidiaries, and (2) the overstatement of income (loss) related to the New Zealand joint venture totaling $(0.04) million and $4.65 million for the three and nine months ended September 30, 2010, respectively, at ROC (Subsidiary Guarantor) and an understatement for the same amount for Other non-guarantor subsidiaries.  Consequently, Subsidiary Guarantor and Issuer equity in income from subsidiaries, Issuer and non-guarantor subsidiaries interest and miscellaneous income (expense), net and Issuer and Non-guarantor subsidiaries income tax expense, as previously reported, were also impacted by these misallocations in lesser amounts. The information below gives effect to the correction of these matters. The aforementioned items do not impact the Company’s Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Income and Comprehensive Income or Condensed Consolidated Statement of Cash Flows for the quarter ended September 30, 2010. Management believes the effects of these corrections are not material to the Company’s previously issued condensed consolidating financial statements.

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RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)


 
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Three Months Ended September 30, 2011
 
Rayonier Inc.
(Parent
Guarantor)
 
ROC (Subsidiary Guarantor)
 
Rayonier TRS
Holdings Inc.
(Issuer)
 
Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-
guarantors)
 
All Other
Subsidiaries
(Non-
guarantors)
 
Consolidating
Adjustments
 
Total
Consolidated
SALES
$

 
$

 
$

 
$
342,937

 
$
61,463

 
$
(19,309
)
 
$
385,091

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales

 

 

 
254,969

 
32,376

 
(21,161
)
 
266,184

Selling and general expenses

 
2,566

 

 
12,584

 
612

 

 
15,762

Other operating expense  (income), net

 
45

 

 
(2,606
)
 
(1,610
)
 

 
(4,171
)
 

 
2,611

 

 
264,947

 
31,378

 
(21,161
)
 
277,775

Equity in income of New Zealand joint venture

 

 

 
200

 
794

 

 
994

OPERATING (LOSS) INCOME

 
(2,611
)
 

 
78,190

 
30,879

 
1,852

 
108,310

Interest expense

 
(440
)
 
(12,139
)
 
328

 
(105
)
 

 
(12,356
)
Interest and miscellaneous income (expense), net

 
1,332

 
(1,121
)
 
(5,053
)
 
5,173

 

 
331

Equity in income from subsidiaries
104,909

 
106,350

 
76,971

 

 

 
(288,230
)
 

INCOME BEFORE INCOME TAXES
104,909

 
104,631

 
63,711

 
73,465

 
35,947

 
(286,378
)
 
96,285

Income tax benefit

 
278

 
4,840

 
3,506

 

 

 
8,624

NET INCOME
$
104,909

 
$
104,909

 
$
68,551

 
$
76,971

 
$
35,947

 
$
(286,378
)
 
$
104,909

 

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Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Three Months Ended September 30, 2010
 
Rayonier Inc.
(Parent
Guarantor)
 
ROC (Subsidiary Guarantor)
 
Rayonier TRS
Holdings Inc.
(Issuer)
 
Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-
guarantors)
 
All Other
Subsidiaries
(Non-
guarantors)
 
Consolidating
Adjustments
 
Total
Consolidated
SALES
$

 
$

 
$

 
$
349,311

 
$
69,040

 
$
(40,836
)
 
$
377,515

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales

 

 

 
280,715

 
33,900

 
(45,412
)
 
269,203

Selling and general expenses

 
2,735

 

 
13,613

 
777

 

 
17,125

Other operating expense (income), net

 
54

 

 
679

 
(1,525
)
 

 
(792
)
 

 
2,789

 

 
295,007

 
33,152

 
(45,412
)
 
285,536

Equity in income (loss) of New Zealand joint venture

 

 

 
147

 
(44
)
 

 
103

OPERATING (LOSS) INCOME

 
(2,789
)
 

 
54,451

 
35,844

 
4,576

 
92,082

Interest expense

 
(80
)
 
(12,682
)
 
(153
)
 
(28
)
 

 
(12,943
)
Interest and miscellaneous income (expense), net

 
1,335

 
(987
)
 
(5,178
)
 
5,175

 

 
345

Equity in income from subsidiaries
62,904

 
66,680

 
29,793

 

 

 
(159,377
)
 

INCOME BEFORE INCOME TAXES
62,904

 
65,146

 
16,124

 
49,120

 
40,991

 
(154,801
)
 
79,484

Income tax (expense) benefit

 
(2,242
)
 
4,989

 
(19,327
)
 

 

 
(16,580
)
NET INCOME
$
62,904

 
$
62,904

 
$
21,113

 
$
29,793

 
$
40,991

 
$
(154,801
)
 
$
62,904



14


Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2011
 
Rayonier Inc.
(Parent
Guarantor)
 
ROC (Subsidiary Guarantor)
 
Rayonier TRS
Holdings Inc.
(Issuer)
 
Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-
guarantors)
 
All Other
Subsidiaries
(Non-
guarantors)
 
Consolidating
Adjustments
 
Total
Consolidated
SALES
$

 
$

 
$

 
$
1,002,015

 
$
147,884

 
$
(49,681
)
 
$
1,100,218

Costs and Expenses

 

 

 

 

 
 
 
 
Cost of sales

 

 

 
750,375

 
90,630

 
(54,538
)
 
786,467

Selling and general expenses

 
7,497

 

 
38,639

 
2,051

 

 
48,187

Other operating expense  (income), net

 
130

 

 
(406
)
 
(5,304
)
 

 
(5,580
)
 

 
7,627

 

 
788,608

 
87,377

 
(54,538
)
 
829,074

Equity in income of New Zealand joint venture

 

 

 
561

 
3,256

 

 
3,817

OPERATING (LOSS) INCOME

 
(7,627
)
 

 
213,968

 
63,763

 
4,857

 
274,961

Interest expense

 
(831
)
 
(37,350
)
 
73

 
(192
)
 

 
(38,300
)
Interest and miscellaneous income (expense), net

 
3,972

 
(3,313
)
 
(15,069
)
 
15,345

 

 
935

Equity in income from subsidiaries
219,774

 
224,142

 
166,190

 

 

 
(610,106
)
 

INCOME BEFORE INCOME TAXES
219,774

 
219,656

 
125,527

 
198,972

 
78,916

 
(605,249
)
 
237,596

Income tax benefit (expense)

 
118

 
14,842

 
(32,782
)
 

 

 
(17,822
)
NET INCOME
$
219,774

 
$
219,774

 
$
140,369

 
$
166,190

 
$
78,916

 
$
(605,249
)
 
$
219,774



15


Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Nine Months Ended September 30, 2010
 
Rayonier Inc.
(Parent
Guarantor)
 
ROC (Subsidiary Guarantor)
 
Rayonier TRS
Holdings Inc.
(Issuer)
 
Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-
guarantors)
 
All Other
Subsidiaries
(Non-
guarantors)
 
Consolidating
Adjustments
 
Total
Consolidated
SALES
$

 
$

 
$

 
$
928,643

 
$
203,909

 
$
(132,627
)
 
$
999,925

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales

 

 

 
754,937

 
99,782

 
(109,723
)
 
744,996

Selling and general expenses

 
7,591

 

 
39,343

 
2,330

 

 
49,264

Other operating expense (income), net

 
73

 

 
(955
)
 
(5,738
)
 

 
(6,620
)
 

 
7,664

 

 
793,325

 
96,374

 
(109,723
)
 
787,640

Equity in income of New Zealand joint venture

 

 

 
652

 
(18
)
 

 
634

OPERATING (LOSS) INCOME BEFORE GAIN ON SALE OF A PORTION OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE

 
(7,664
)
 

 
135,970

 
107,517

 
(22,904
)
 
212,919

Gain on sale of a portion of the interest in the New Zealand joint venture

 

 

 
7,697

 
4,670

 

 
12,367

OPERATING (LOSS) INCOME

 
(7,664
)
 

 
143,667

 
112,187

 
(22,904
)
 
225,286

Interest expense

 
70

 
(37,643
)
 

 
(107
)
 

 
(37,680
)
Interest and miscellaneous income (expense), net

 
11,595

 
(3,276
)
 
(21,835
)
 
14,459

 

 
943

Equity in income from subsidiaries
158,415

 
158,198

 
80,547

 

 

 
(397,160
)
 

INCOME BEFORE INCOME TAXES
158,415

 
162,199

 
39,628

 
121,832

 
126,539

 
(420,064
)
 
188,549

Income tax (expense) benefit

 
(3,784
)
 
14,935

 
(41,285
)
 

 

 
(30,134
)
NET INCOME
$
158,415

 
$
158,415

 
$
54,563

 
$
80,547

 
$
126,539

 
$
(420,064
)
 
$
158,415



 



16


Table of Contents
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)

 
CONDENSED CONSOLIDATING BALANCE SHEETS
As of September 30, 2011
 
Rayonier Inc.
(Parent
Guarantor)
 
ROC (Subsidiary Guarantor)
 
Rayonier TRS
Holdings Inc.
(Issuer)
 
Subsidiaries of
Rayonier TRS
Holdings
Inc. (Non-
guarantors)
 
All Other
Subsidiaries
(Non-
guarantors)
 
Consolidating
Adjustments
 
Total
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$

 
$
42,375

 
$
276,435

 
$
10,274

 
$
33,201

 
$

 
$
362,285

Accounts receivable, less allowance for doubtful accounts

 

 

 
105,707

 
1,230

 

 
106,937

Inventory

 
76

 

 
128,716