UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED)
June 11, 2014
RAYONIER INC.
COMMISSION FILE NUMBER 1-6780
Incorporated in the State of North Carolina
I.R.S. Employer Identification Number 13-2607329
1301 Riverplace Boulevard, Jacksonville, Florida 32207
(Principal Executive Office)
Telephone Number: (904) 357-9100
Check the appropriate box below if the form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
RAYONIER INC.
TABLE OF CONTENTS
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Item 7.01. | 1 | ||||
Item 9.01. | 1 | ||||
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3 | |||||
ITEM 7.01. | Regulation FD Disclosure |
Beginning on June 11, 2014, and at certain other times thereafter, Rayonier Inc. (“Rayonier”) and Rayonier Advanced Materials Inc. (“Rayonier Advanced Materials”) intend to use or otherwise provide the presentation materials attached to this Current Report on Form 8-K as Exhibit 99.1 and Exhibit 99.2, respectively, which exhibits are incorporated herein by reference, in connection with webcasts, presentations or other communications with various investors or securities market professionals.
The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 and Exhibit 99.2, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any registration statement or other document filed under the U.S. Securities Exchange Act of 1933, as amended, or the Exchange Act, except as otherwise expressly dated in such filing.
Certain statements in the presentations attached to this Current Report on Form 8-K as Exhibit 99.1 and Exhibit 99.2 and incorporated herein by reference regarding anticipated financial, legal or other outcomes including business and market conditions, outlook and other similar statements relating to Rayonier's and Rayonier Advanced Materials’ future events, developments or financial or operational performance or results, are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward looking statements are identified by the use of words such as "may," "will," "should," "expect," "estimate," "believe," "intend,” "anticipate" and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements.
Although Rayonier believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: uncertainties as to the timing of the spin-off of Rayonier Advanced Materials and whether it will be completed, the possibility that various closing conditions for the spin-off may not be satisfied or waived, the expected tax treatment of the spin-off, the impact of the spin-off on the businesses of Rayonier and Rayonier Advanced Materials, the ability of both companies to meet debt service requirements, the availability and terms of financing and expectations of credit rating. Other important factors are described in Rayonier’s most recent Form 10-K and 10-Q reports on file with the Securities and Exchange Commission and in Rayonier Advanced Materials’ Registration Statement on Form 10 that could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document. Neither Rayonier nor Rayonier Advanced Materials assumes any obligation to update these statements except as required by law.
ITEM 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
The following is filed as an Exhibit to this Report.
Exhibit No. | Exhibit Description | ||
99.1 | Presentation, dated June 11, 2014. | ||
99.2 | Presentation, dated June 11, 2014. | ||
1
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of l934, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
RAYONIER INC. (Registrant) | ||
BY: | /s/ MICHAEL R. HERMAN | |
Michael R. Herman | ||
Senior Vice President and | ||
General Counsel | ||
June 11, 2014
2
EXHIBIT INDEX
EXHIBIT NO. | DESCRIPTION | LOCATION | ||
99.1 | Presentation, dated June 11, 2014. | Furnished herewith. | ||
99.2 | Presentation, dated June 11, 2014. | Furnished herewith. | ||
3
Investor Presentation June 2014
Safe Harbor Statement 2 Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to Rayonier’s future events, developments or financial or operational performance or results, are “forward- looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend, “ “anticipate” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward- looking. While management believes that these forward-looking statements are reasonable when made, forward- looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. The following important factors, among others, could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document: the cyclical and competitive nature of the industries in which we operate; fluctuations in demand for, or supply of, our forest products and real estate offerings; entry of new competitors into our markets; changes in global economic conditions and world events, including political changes in particular regions or countries; fluctuations in demand for our products in Asia, and especially China; the uncertainties of potential impacts of climate-related initiatives; changes in energy and raw material prices, particularly for our Performance Fibers business; impacts of the rising cost of fuel, including the cost and availability of transportation for our products, both domestically and internationally, and the cost and availability of third party logging and trucking services; unanticipated equipment maintenance and repair requirements at our manufacturing facilities; the geographic concentration of a significant portion of our timberland; our ability to identify, finance and complete timberland acquisitions; changes in environmental laws and regulations, including laws regarding air emissions and water discharges, remediation of contaminated sites, timber harvesting, delineation of wetlands, and endangered species, that may restrict or adversely impact our ability to conduct our business, or increase the cost of doing so; adverse weather conditions, natural disasters and other catastrophic events such as hurricanes, wind storms and wildfires, which can adversely affect our timberlands and the production, distribution and availability of our products and raw materials such as wood, energy and chemicals; interest rate and currency movements; our capacity to incur additional debt, and any decision we may make to do so; changes in tariffs, taxes or treaties relating to the import and export of our products or those of our competitors; the ability to complete like-kind exchanges of property; changes in key management and personnel; our ability to meet all necessary legal requirements to continue to qualify as a real estate investment trust (“REIT”) and to fund distributions using cash generated through our taxable REIT subsidiaries, and changes in tax laws that could adversely affect tax treatment of our specific businesses or reduce the benefits associated with REIT status. In addition, specifically with respect to our Real Estate business, the following important factors, among others, could cause actual results to differ materially from those expressed in forward-looking statements that may have been made in this document: the cyclical nature of the real estate business generally, including fluctuations in demand for both entitled and unentitled property; a delayed or weak recovery in the housing market; the lengthy, uncertain and costly process associated with the ownership, entitlement and development of real estate, especially in Florida, which also may be affected by changes in law, policy and political factors beyond our control; the potential for legal challenges to entitlements and permits in connection with our properties; unexpected delays in the entry into or closing of real estate transactions; the existence of competing developers and communities in the markets in which we own property; the pace of development and the rate and timing of absorption of existing entitled property in the markets in which we own property; changes in the demographics affecting projected population growth and migration to the Southeastern U.S.; changes in environmental laws and regulations, including laws regarding water withdrawal and management and delineation of wetlands, that may restrict or adversely impact our ability to sell or develop properties; the cost of the development of property generally, including the cost of property taxes, labor and construction materials; the timing of construction and availability of public infrastructure; and the availability of financing for real estate development and mortgage loans. In addition, specifically with respect to the separation of Rayonier Advanced Materials from Rayonier, the following important factors, among others, could cause actual results to differ materially from those expressed in forward-looking statements that may have been made in this document: uncertainties as to the timing of the separation and whether it will be completed, the possibility that various closing conditions for the separation may not be satisfied or waived, the expected tax treatment of the separation, the impact of the separation on the businesses of Rayonier and Rayonier Advanced Materials, the ability of both companies to meet debt service requirements, the availability and terms of additional financing required by Rayonier Advanced Materials, and expectations of credit rating. Additional factors are described in Rayonier’s most recent Form 10-K and 10-Q, Rayonier Advanced Materials, Form 10, and other reports of Rayonier and Rayonier Advanced Materials on file with the Securities and Exchange Commission. Forward-looking statements are only as of the date they are made, and Rayonier assumes no obligation to update these statements except as is required by law.
Table of Contents The Separation 5 Business Overview 9 Forest Resources 15 Real Estate 27 Value Proposition 37 Financial Review 40 Appendix 44 3
The Separation
Strategic Rationale for the Separation 5 Separation will create two independent, industry-leading public companies Different Markets, Drivers and Value Creation Strategies More Efficient Allocation of Capital Distinct Investment Identities Enhanced Strategic and Management Focus Positions each best-in-class entity to continue to grow and deliver unique value creation strategies Rayonier – Improving housing market and economy, and strong export markets fuel growth Advanced Materials – Complete the ramp-up of high-value specialty product sales volumes Concentration of each company’s financial resources solely on its operations Capital structure allows each company financial flexibility Each company can allocate capital in a more efficient manner best suited to its distinct priorities and strategies Enables management of both companies to focus on unique opportunities for long- term growth and profitability Improves alignment of management and employee incentives with profitability and growth objectives Two unique investment theses: Leading pure-play timberland REITs with best-in-class assets, premium land portfolio and attractive dividend High-value, pure-play specialty cellulose producer with leading margins and significant free cash flow generation
6 Completion of technically demanding CSE • Additional 190K tons of cellulose specialties capacity • High quality of cellulose specialties produced on converted line; achieved ahead of schedule • Excellent progress in qualifying new production with customers Acquired additional interest in New Zealand JV Sold non-core assets • Wood Products business • New York timberlands Cellulose Specialties Expansion (CSE) project construction Acquired $540M of high-quality timberlands Obtained land-use entitlements on 39K acres of coastal FL/GA Higher and Better Use (HBU) properties Additional cellulose specialties (CS) sales volume as CSE ramp-up begins Strengthening housing market with positive impact on timber demand and prices Growing interest in development HBU properties Separate Performance Fibers business from Rayonier CSE ramp-up continues through 2018 when CS capacity is fully placed in the market Improvement of housing market to trend level of ~1.5 million starts per year • Higher sawlog prices • Improved mix • Additional US harvest volume (approx.15%) from recent acquisitions • EBITDA growth in Forest Resources business Improving housing market and economy increase demand for development HBU Expectations beyond 2014201420132011 - 2012 Optimal timing for the separation Optimal timing as both companies have strong growth prospects in years ahead
Two Companies with Strong Financial Profiles 7 Sales Revenue by segment Segment EBITDA* (% Margin) CapEx Net debt $1.7B $0.7B $1.0B Forest Resources 22% Perf. Fibers 61% Real Estate 9% Trading & Other 8% $641M (38%) $159M ~$1.5B Forest Resources 57% Real Estate 22% Trading & Other 21% Cellulose specialties ~ 89% $255M (38%) $386M (37%) $63M $96M ~$0.5B (expected) ~$.95B Rayonier prior to separation Rayonier post separation Rayonier Advanced Materials Commodity grades ~ 11% Expected credit rating BBB/Baa2 BB+/Ba2 Sales volume: 76% CS / 24% commodity grade * Non-GAAP measure (see Appendix for definition and reconciliation) ** Assumes normalized corporate expenses of $20M for Rayonier and $25M for Rayonier Advanced Materials 2 0 1 3 Revenue by segment Net debt/ LTM EBITDA ~1.7x** ~ 3.0x** P r o f o r m a a t s p i n
• An international real estate investment trust (REIT) committed to creating value through excellence in our core businesses: – Forest resources – Real estate • A responsible steward of the land, managing every acre towards its highest and best use to achieve optimal value Business Overview
Rayonier: Best-in-class land resources REIT 9 • Third-largest timber REIT with 2.6 million acres of high-quality timberland • Advantageous REIT structure • Geographic diversity - U.S. Southeast and Gulf states, Pacific Northwest, New Zealand • $700 million invested in high-quality timberlands since early 2011 • Incremental 1 million tons of harvest volume in Gulf Region beginning in 2016 from recent acquisitions as young timber reaches maturity • Profitably grow timberland base through disciplined acquisition process • Best-in-class genetic selection of seedlings yields long-term volume growth • Excellent HBU platform with approximately 200,000 acres along the Florida + Georgia Coastal Corridor • Over 39,000 acres with land-use entitlements well positioned for higher sales values per acre as economy strengthens • Consistent rural HBU sales • Conservative leverage • Favorable financing facilities/commitments • Flexibility to invest in strategic priorities Leading pure- play land resources company Growing timberland base Attractive Real Estate Strong Capital Structure
Highly productive, geographically diversified land resources 10 Florida/Georgia Coastal Corridor Washington - 377,000 acres, access to strong export markets ~ 800,000 acres, sawlog and pulpwood ~ 1.1 million acres, sawlog and pulpwood; Florida + Georgia Coastal Corridor HBU 313,000 acres, manage and own 65% of joint venture; strong export markets 377 148 93 22 130 92 322 658 428 ~200K acres 313 Total Rayonier = 2,583,000 acres(1) (1) Acres owned or managed as of March 31, 2014
Premium portfolio generates strong cash flow 11 Timberlands diversified across significant number of micro markets End-market optionality in all geographic regions EBITDA growth driven by several factors • Increased prices and improved sawlog/pulpwood mix from housing improvement • Increased U.S. harvest due to $560 million of acquisitions since early 2011 − Incremental 1M tons beginning in 2016 • Increased yield from advanced silviculture practices Well-positioned, high-quality HBU along Florida + Georgia coastal corridor 2010 2011 2012 2013 LTM 3/31/14 Segment EBITDA(1) ($ in millions) 169 161 257 167 253(2) (1) EBITDA is a non-GAAP measure defined and reconciled in the Appendix (2) 2013 included $3 from the consolidation of the NZ JV Note: Excludes log trading activities Forest Resources Real Estate
Rayonier leadership, post-separation 12 Richard D. Kincaid*, Chairman John A. Blumberg Governor John Ellis (Jeb) Bush* Dod A. Fraser Scott R. Jones Senator Blanche L. Lincoln V. Larkin Martin* David L. Nunes, CEO David W. Oskin* Dave Nunes – Chief Executive Officer Lynn Wilson – EVP, Forest Resources Chris Corr – SVP, Real Estate Ed Kiker – SVP & Chief Financial Officer Board of DirectorsManagement * Current Rayonier Board members
Strategy leverages best-in-class assets Forest Resources: • Optimize highly productive timberlands with proven disciplined approach, leveraging micro- market supply/demand dynamics • Grow core timberland ownership over time • Increase timber yields through advanced silvicultural practices and industry-leading seedling genetics • Pursue other value-added opportunities, including minerals and recreational leases Real Estate: • Identify land with higher value potential using proprietary classification system • Realize rural HBU value through conservation and recreational sales • Create catalysts for value appreciation • Sell directly, or through ventures, entitled and other coastal corridor development land for industrial, commercial and residential uses Provide an attractive, growing dividend in a tax-effective REIT structure • Fund from core, recurring cash flows 13
Forest Resources
EBITDA growth drivers for Forest Resources 15 Improving housing market driving increasing U.S. lumber production and sawlog pricing North American supply dynamics also drive higher sawlog demand in U.S. South Strong Asian export demand Mountain pine beetle impact reduces British Columbia log and lumber production long term Increasing biomass/wood pellet demand Completed acquisitions increase pine harvest volume by 1 million tons beginning in 2016 Investment in intensive forest management increases volume and sawlog grades Favorable local dynamics in many of Rayonier’s Southeastern timberland markets Improved Southeast sawlog vs. pulpwood harvest mix Acquire timberlands that meet rigorous operating and financial criteria Demand / Price Volume Mix Timberland Acquisitions
Sawlog Markets Pulp Markets Lumber Paper and packaging Plywood Absorbant materials Biomass End-market optionality provides reliable cash flow Improving housing outlook drives return to historical sawlog/pulpwood mix of 50/50 Pacific Northwest and New Zealand timberlands located near ports to supply both domestic and export markets Pulpwood volumeGrade volume U.S. South Pacific Northwest and New Zealand 16
Demand expected to drive sawlog prices higher 17 $/ton Housing starts millions Historic U.S. housing starts Bank of America/Merrill Lynch Pine sawlog stumpage price (TMS) Rayonier pine sawlog stumpage price forecast 0 10 20 30 40 50 60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0.0 0.5 1.0 1.5 2.0 2.5 Pine sawlog prices and U.S. housing starts A $10/ton sawlog price lift would increase EBITDA $20 million
18 0 50 100 150 200 250 300 350 1985 1990 1995 2000 2005 2010 2015 2020 2025 Urban households Housing stocks, units MM Shortage of 35 – 45 M China’s urban housing demand outstrips supply Housing consumes 80% of softwood logs and lumber Urban housing shortage estimated to be 35–45M units in 2012 Urban households projected to grow 5M per year for 20+ years Ensuring availability and affordability of adequate housing is a top policy priority • Official statistics show that China is on track with its goal to start 36 million affordable housing units by the end of the five-year plan (2015) Estimated stock of urban housing and urban population Source: GaveKal Dragonomics Urban growth fueling demand for logs
19 21.1 10.3 13.4 8.5 13.23.4 6.2 2.4 3.1 2.0 2.7 0 5 10 15 20 25 30 35 40 45 2007 2012 2017 Other Australia Canada USA NZ Russia 0 10 20 30 40 50 60 70 80 2012 2017 Demand Domestic Supply Imports (Gap) m i l l i o n s o f M 3 Source: RISI m i l l i o n s o f M 3 China softwood log deficit expected to grow U.S. and New Zealand log exports to China expected to increase China relying on imports to meet demand US, New Zealand and Canada log exports growing as Russia’s share diminishes China Softwood Log Imports
Structural decline in Canadian supply 20 British Columbia (BC) timber and lumber supply projected to decline significantly due to mountain pine beetle epidemic • Over 43 million acres dead or dying timberland • Estimated 53% of merchantable pine volume in BC has been killed • Expect ~58% of merchantable pine volume in interior BC will be dead by 2023 • Estimated shelf life of 8 to 10 years • 60-year impact on future harvest levels Eastern Canada harvest reductions of 10% to 20% implemented Combined projected impact of 7% to 15% reduction in North American lumber supply depending on lumber price level Source: BC Ministry of Forests and Range, Statistics Canada and Forest Economic Advisors Benefits U.S. timberlands as Canadian capacity shifts to US South
U.S. sawmill capacity increasing due to higher lumber demand and reduced Canadian supply 21 2005 U.S. lumber production 43.2 New Capacity Investments US South -> 2.2 BBF US West -> 0.9 BBF 25.9 10.3 3.9 0.9 2.2 Dismantled5.1 l u m b e r p r o d u c t i o n B B F Source: FEA, Rayonier research Production Rate Production RateProduction Rate New Capacity Investments 2012 Prduction Rate Increased rduction Rate Restarts New Cap city Investments 2018 Production Rate
22 Through a rotation, harvest volume should increase 20%, 33 tons/acre, with revenue increase of $675/acre at 2014 prices Site Management 0% 10% 20% 30% 40% 50% 60% 70% 2008-2009 2010-2011 2012-2013 2014-2015 Genetics Industry leader in control mass pollination plantings Future Southeast plantings will be approximately 70% Loblolly Percentage of Loblolly Seedlings from Control Mass Pollination Site Index 68 Pulpwood = 42% Grade* = 58% Site Index 73 Pulpwood = 30% Grade* = 70% • Stand establishment • Fertilization • Competition control Southern Pine Advanced silvicultural practices increase harvest yield * Sawlogs and Chip N’ Saw
Local market supply / demand dynamics determine price Logs typically travel less than 100 miles Supply / demand conditions vary widely across the region Sawlog price increases expected to exceed 30% in key markets over next 7 to 10 years *Source: USDA FIA; Rayonier research **Most current FIA cycle data by state (vintage years vary by state) Favorable supply/demand dynamics in many Rayonier timberland micro-markets 23
3 * Represents timberland owned, leased or managed by Rayonier and real estate properties ** Includes acquisition of 237K acres by the New Zealand JV, which Rayonier manages and (as of April 2013) holds a 65% ownership interest *** Includes termination of management agreement in Australia in 2007 and expiration of leases in 2010 **** 2012 acquisitions exclude 15,000 acres previously reported under a lease agreement ***** Reflects sale of 128K acres in New York Acquire timberlands that meet strategic and financial criteria Optimize timberland portfolio • Monetize non-strategic timberlands • Maximize value through intensive silvicultural practices Advance HBU initiatives Generate non-timber revenue from minerals and recreational leases Disciplined approach to portfolio value optimization Strategy to steadily grow and upgrade timberland holdings, increase harvests and enhance HBU inventory 24 *****
Hawke’s Bay Bay of Plenty 313K acres of plantations • 5 Regions, 67 Forests • 131K acres fee land • Remainder crown license In 2013 Rayonier acquired additional interest in Matariki JV for $140M, increasing ownership from 26% to 65% Revenue of ~US$300 million (incl. log trading) expected in 2014 Harvest 2.0 million m3/year 85% Pine; 8% Douglas Fir • 38% export • 62% domestic Well-established export and log trading business Log trading expertise capitalizes on Asian market demand Northland Canterbury Southland Forest locations Office locations Export ports Southern North Island New Zealand joint venture 25Positioned to capitalize on long-term net wood fiber deficit in Asia Pacific
Real Estate
27 Optimize our portfolio with a disciplined land classification system that manages every acre toward its ultimate highest and best use (HBU) Monetize non-strategic timberlands at best possible value Collaborate with conservation organizations to identify lands with ecological, historical, or habitat significance; 145,000+ acres conserved Proactive land enhancement and product development strategies to market rural residential and recreation land sales Lead initiatives to bring to market land with residential and commercial development potential; execute sales, ventures, and strategic partnerships when the market is ready Generated $131 million in revenue and $54 million in EBITDA* for the 12 months ended March 31, 2014 on sales of 172K acres (includes sale of ~128K acres of NY timberlands for $57 million) Real Estate strategy * EBITDA is a non-GAAP measure defined and reconciled in the Appendix All strategies to create value start with land classification
Our approach: market recreation/residential properties 28 Land Characteristics Evaluation Market Assessment Conceptual Program Conceptual Site Planning Site Specific Planning Land Use Entitlements Regulatory Permitting Enabling Infrastructure Land Enhancement & Amenities Marketing & Sales Site Development Services
Rural land products create value 29 Land classified as rural has intrinsic attributes that position the property to generate a premium over its value for timber production and non-timber income Attributes Rural Residential Rural Recreation Conservation Frontage on a maintained road or access convenient for everyday use Natural features such as lakes, rivers, streams, swamps, marshes, topography and more Diversity of forest types, aesthetic landscape, plants, trees, habitat and more Proximity to population centers and amenities Supports subdivision
Rural land products 30 Location Escambia, AL Irwin, GA Marion, FL Polk, TX Classification Non-strategic Rural rec Core timberland Conservation Rural rec Rural res Parcel size 3,220 4,486 2,493 41 Intended use Investment Ag conversion Hunting Residence Timber 42% non- plantable Merch pine reserved Partial harvest by RYN Natural pine & hardwood Minerals Reserved by Rayonier Reserved by Rayonier Sold to buyer Royalty reservation Price per acre $1,275 $1,375 $2,825 $5,300 Rural land products are variable and can differ by market Marketing and product creation attract customers and achieve premiums over timberland Recent examples:
Significant HBU acres in Florida + Georgia Coastal Corridor 31 2 0 0 M I L E S +/- 200,000 acres; largest landowner in the region Approximately 40 miles of water frontage Approximately 250 miles of road and highway frontage Land holdings at five interchanges on I-95 and two planned future interchanges Land use entitlements in hand for more than 26,400 residential units and 39 million square feet of commercial uses Key rail served sites, mega-site certified for industrial uses Proximity and connection to international airports and seaports 25 planning areas across the corridor = Rayonier landholdings
The Southeast is poised to grow 32 Populous region (60 million) and is developing as the country’s second industrial hub, after the Great Lakes Since 2000, population growth has been more than 2X the Northeast, a trend projected to continue in the next decade Low cost of living makes the Southeast an appealing primary, secondary, and retirement home destination Cost of living advantage 13.3M households added since 2000, 50% in the South
Our approach: position development HBU for sales/ventures 33 Land Classification Land Management Regional Market Assessment Conceptual Program & Strategy Project Market Assessment Program Development Land Use Entitlements Conceptual Master Planning Marketing Sales Ventures Project Specific Planning Enabling Infrastructure Regulatory Permitting Civic Infrastructure
Multiple approaches to HBU development 34 Undeveloped/ Unentitled Undeveloped/ Entitled Horizontal Development/ Entitled Vertical Development Lower HigherTime/Risk Higher Lower Value Sales Ventures
35 Project Belfast Commerce Centre St. Johns North East Nassau Market Street Location Bryan Co, GA St. Johns Co, FL Nassau Co, FL Market Characteristics Port of Savannah's growth driving industrial sector Strong market driving 50% of new home sales of Jacksonville MSA Emerging market Market Segment Industrial Residential Mixed use Rayonier Approach Horizontal development / entitled Undeveloped / entitled To be determined Status Infrastructure development and marketing underway, 45 acres sold 1,900 acres under contract, 90 acres remaining Site planning underway Disciplined approach with focus on risk/reward Limited capital allocated to development projects
Value Proposition
Competitive dividend funded by core, recurring cash flow 37 (1) EBITDA reflects normalized corporate expenses of ~$20 million, which excludes spin-related expenses. EBITDA is a non-cash measure defined and reconciled in the Appendix. Attractive, sustainable and growing dividend is a strategic priority Expected EBITDA(1) growth in coming years allows dividend increases Dividends based on recurring cash flows from timberland operations and core real estate sales • Proceeds from sales of non-strategic timberlands generally re- invested in the business Initial quarterly dividend of $.30/share, or $1.20/share annualized Special dividend of $0.50/share planned for 3Q 2014 • Funded from a portion of proceeds from Rayonier Advanced Materials in connection with spin-off
Shareholder value creation from attractive dividend, growing cash flow and land appreciation 38 Premium portfolio generates significant and reliable cash flow • Outlook for increased EBITDA from volume increases and housing market recovery Attractive asset class with track record of steady appreciation • Real estate strategies positioning HBU for higher value uses Strategic capital focused on disciplined asset growth Attractive, growing dividend Strong balance sheet, low debt levels and significant liquidity Tax-efficient REIT structure
Financial Review
Historical RYN superior performance (includes Performance Fibers business) 40 214 267 364 401 410 363 0 100 200 300 400 500 2009 2010 2011 2012 2013 LTM $ millions 367 406 547 601 565 497 0 100 200 300 400 500 600 700 2009 2010 2011 2012 2013 LTM $ millions 1.05 1.48 2.11 2.11 2.42 1.99 0.00 0.50 1.00 1.50 2.00 2.50 3.00 2009 2010 2011 2012 2013 LTM $ 1.33 1.36 1.52 1.68 1.86 0.98 0.60 0.50 0.00 0.50 1.00 1.50 2.00 2009 2010 2011 2012 2013 Pro Forma 2014 $ Pro forma Operating Income * Pro forma EBITDA * Pro forma Earnings Per Share * Dividend Per Share * Pro forma results are non-GAAP measures defined and reconciled in the Appendix. In the first quarter 2013, the Wood Products segment was sold. Results have been restated for all periods to exclude Wood Products. Special dividend Regular post-spin dividend Regular pre-spin dividend
2014 Financial Guidance ($ millions) 41 2013 Sales 669 5 - 8% Operating Income (1) Forest Resources 81 30 - 35% Real Estate 56 Comparable EBITDA (1)(2) Forest Resources 180 15 - 20% Real Estate 73 Comparable CapEx 63 DD&A 116 65 - 70 115 - 120 2014 Guidance (1) Excludes corporate expenses. After the separation, normalized corporate expenses are expected to be $20M for Rayonier. (2) EBITDA is a non-GAAP measure defined and reconciled in the Appendix. Note: 2014 guidance percentage ranges exclude the impact of the 2013 sale of New York timberlands (sales $57 million, operating income $3 million)
Longer-term Outlook 42 Forest Resources • Volume − Completed timberland acquisitions add harvest volume as age profile matures − Advanced silviculture practices − Sustained strong demand in China for logs from Pacific Northwest and New Zealand • Mix – Improved Southeast sawlog vs. pulpwood harvest mix • Price − Asian demand − Housing recovery − British Columbia mountain pine beetle impact Real Estate • Continued solid demand for rural HBU properties • Sustained US South household growth − Residential developer interest improving as existing lots are absorbed − Well-positioned properties with industrial and commercial sites
Appendix
Gulf States and Atlantic Regions 1.9 million acres in eight states Diverse management regimes and species mix increase harvest flexibility • Slash pine 43% • Loblolly pine 53% • Hardwood 4% Adjusted harvest mix to meet strong pulpwood demand Typical Current • Pulp/OSB 50% 67% • Sawmills 50% 33% Non-timber income • $20 million for the 12 months ended March 31, 2014 44
Northern Region 377K acres in coastal Washington • Hemlock 51% • Douglas-fir 36% • Valuable minor species 13% Proximity to five ports Harvest mix • Domestic pulpwood 15% • Domestic sawlogs 55% • Export (China and Korea) 30% Value-added income • $3 million for the 12 months ended March 31, 2014 45
46 Current MPB epidemic expected to kill 58% of BC Lodgepole Pine Annual allowable cut projected to decline 20-25% to 50–60 mm³ Harvest levels will decline after damaged timber salvaged Significant investment by Canadian lumber producers in the Southeast in 2013 Mountain Pine Beetle (MPB) epidemic will reduce BC log and lumber production Lower Canadian harvests in BC and the Eastern provinces reduce North American lumber supply by 7 to 15%, the equivalent of 400,000 housing starts
Biomass market 47 Wood pellet demand increase driven by European energy policy Key recent start-ups • German Pellets Texas, LLC (TX) • Westervelt Renewable Energy (AL) • American Renewables LLC (FL) Key recent announcements - Green Circle (MS) Rayonier holdings of 1.9 million acres in the US South are strategically located to benefit from increased demand for wood fiber Source: Forest Economic Advisors Quarterly Wood Biomass Forecasting Services, August 2012 Source: Forisk Consulting Note: Expected demand represents a subset of announced projects. CHP is combined heat and power, or cogeneration.
REIT Technical / Other Considerations 48 Key REIT Definitions / Parameters REIT Taxable Income – REITs are required to distribute 90% of their taxable income (excluding capital gains and certain other income) in order to maintain REIT status; any amount not distributed by the REIT is taxed at corporate rates 75% Income Test – At least 75% of REIT gross income must be derived from real property sources (including the sale of timber) • No more than 25% of gross income can be derived from other sources, including dividends from a TRS and/or any other dividends and interest 75% Asset Test – At the close of each quarter, at least 75% of the value of the REIT’s gross assets must be comprised of real estate assets (including timberlands), cash items and government securities 25% Asset / Securities Limitation – At the close of each quarter, no more than 25% of the REIT’s gross assets can be securities; no more than 5% of the REIT’s assets can be securities of a single issuer (other than a TRS); and the REIT can own no more than a 10% interest of a single issuer (other than a TRS) TRS Limitation – The fair market value of the securities of a TRS owned by a REIT cannot exceed 25% of the fair market value of the REIT’s gross assets
Definitions of Non-GAAP Measures 49 EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. Pro forma EBITDA is defined as EBITDA (as defined above) excluding discontinued operations, income related to the AFMC, increases in disposition reserves, separation costs and gains related to the sale or consolidation of the New Zealand joint venture. Pro forma EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. Pro forma Operating Income is defined as operating income excluding discontinued operations, income related to the AFMC, increases in disposition reserves, separation costs and gains related to the sale or consolidation of the New Zealand joint venture. Pro forma EPS is defined as diluted earnings per share attributable to Rayonier Inc. excluding discontinued operations, income related to the AFMC or CBPC, increases in disposition reserves, separation costs and gains related the sale or consolidation of the New Zealand joint venture.
Reconciliation of Non-GAAP Measures 50 ($ in millions) Forest Resources Real Estate Performance Fibers Other Corporate & Eliminations Total 2009 Operating income $7 $56 $184 ($3) $175 $419 Depreciation, depletion and amortization 70 24 58 – 6 158 Loss from discontinued operations (1) – – – – (9) (9) EBITDA $77 $80 $242 ($3) $172 $568 Loss from discontinued operations (1) – – – – 9 9 Depreciation, depletion, and amortization, discontinued operations – – – – (5) (5) Income related to the AFMC – – – – (205) (205) Pro forma EBITDA $77 $80 $242 ($3) ($29) $367 2010 Operating income $33 $53 $214 $1 ($22) $279 Depreciation, depletion and amortization 59 22 58 – 4 143 Income from discontinued operations (1) – – – – 3 3 EBITDA $92 $75 $272 $1 ($15) $425 Income from discontinued operations (1) – – – – (3) (3) Depreciation, depletion, and amortization, discontinued operations – – – – (4) (4) Gain on sale of a portion of NZ JV interest – – – – (12) (12) Pro forma EBITDA $92 $75 $272 $1 ($34) $406 (1) In first quarter 2013, the Wood Products segment was sold. As a result, operating income has been restated to reflect the Wood Products operations as discontinued.
Reconciliation of Non-GAAP Measures (cont’d.) 51 ($ in millions) Forest Resources Real Estate Performance Fibers Other Corporate & Eliminations Total 2011 Operating income $47 $47 $298 $1 ($36) $357 Depreciation, depletion and amortization 63 12 56 – 5 136 Loss from discontinued operations (1) – – – – (1) (1) EBITDA $110 $59 $354 $1 ($32) $492 Loss from discontinued operations (1) – – – – 1 1 Depreciation, depletion, and amortization, discontinued operations – – – – (3) (3) Income related to the AFMC – – – – 7 7 Pro forma EBITDA $110 $59 $354 $1 ($27) $497 2012 Operating income $46 $32 $359 $– ($36) $401 Depreciation, depletion and amortization 75 8 61 – 4 148 Income from discontinued operations (1) – – – – 11 11 EBITDA $121 $40 $420 $– ($21) $560 Income from discontinued operations (1) – – – – (11) (11) Depreciation, depletion, and amortization, discontinued operations – – – – (2) (2) Pro forma EBITDA $121 $40 $420 $– $(34) $547 (1) In first quarter 2013, the Wood Products segment was sold. As a result, operating income has been restated to reflect the Wood Products operations as discontinued.
Reconciliation of Non-GAAP Measures (cont’d.) 52 ($ in millions) Forest Resources Real Estate Performance Fibers Other Corporate & Eliminations Total 2013 Operating income $81 $56 $311 $2 ($27) $423 Depreciation, depletion and amortization 99 17 75 – 1 192 Loss from discontinued operations (1) – – – – 63 63 EBITDA $180 $73 $386 $2 $37 $678 Gain related to consolidation of New Zealand JV – – – – (16) (16) Income from discontinued operations (1) – – – – (63) (63) Separation Costs – – – – 3 3 Depreciation, depletion, and amortization, discontinued operations – – – – (1) (1) Pro forma EBITDA $180 $73 $386 $2 ($40) $601 Last Twelve Months March 31, 2014 Operating income $96 $40 $268 $2 ($33) $373 Depreciation, depletion and amortization 107 14 81 – – 202 Income from discontinued operations (1) – – – – (4) (4) EBITDA $203 $54 $349 $2 ($37) $571 Gain related to consolidation of New Zealand JV – – – – (16) (16) Income from discontinued operations (1) – – – – 6 6 Income from discontinued operations (1) – – – – 4 4 Depreciation, depletion, and amortization, discontinued operations – – – – – – Pro forma EBITDA $203 $54 $349 $2 ($43) $565 (1) In first quarter 2013, the Wood Products segment was sold. As a result, operating income has been restated to reflect the Wood Products operations as discontinued.
Reconciliation of Non-GAAP Measures (cont’d.) 53 LTM 2013 2012 2011 2010 2009 Operating Income (1) 373$ 423$ 401$ 357$ 279$ 419$ Gain related to consolidation of New Zealand JV (16) (16) - - - - Gain on sale of portion of New Zealand JV interest - - - - (12) - Separation costs 6 3 - - - - Increase in disposition reserve - - - 7 - - AFMC - - - - - (205) Pro forma Operating Income 363$ 410$ 401$ 364$ 267$ 214$ $ EPS $ EPS $ EPS $ EPS $ EPS $ EPS Net Income Attributable to Rayonier 268$ 2.07$ 372$ 2.86$ 279$ 2.17$ 276$ 2.20$ 218$ 1.79$ 313$ 2.60$ Gain related to consolidation of New Zealand JV (16) (0.13) (16) (0.13) - - - - - - - - Gain on sale of portion of New Zealand JV interest - - - - - - - - (12) (0.09) - - Discontinued operations 3 0.02 (42) (0.32) (7) (0.06) 1 0.01 (2) (0.02) 6 0.05 Increase in disposition reserve - - - - - - 4 0.03 - - - - Separation costs 5 0.03 2 0.01 - - - - - - - - Reversal of reserve related to the taxability of the AFMC - - - - - - (16) (0.13) - - - - CBPC - - - - - - - - (24) (0.20) - - AFMC, net of $16M tax reserve - - - - - - - - - - (193) (1.60) Pro forma Net Income 260$ 1.99$ 316$ 2.42$ 272$ 2.11$ 265$ 2.11$ 180$ 1.48$ 126$ 1.05$ 2010 2009LTM 2013 2012 2011 ($ in millions, except per share data) (1) In first quarter 2013, the Wood Products segment was sold. As a result, operating income has been restated to reflect the Wood Products operations as discontinued.
Safe Harbor Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to future events, developments or financial or operational performance or results of Rayonier Advanced Materials Inc. (“RYAM”), are "forward-looking statements" made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as "may," "will," "should," "expect," "estimate," "believe," "intend," "project," "anticipate" and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. The following important factors, among others, could cause actual results or events to differ materially from those expressed in forward-looking statements that may have been made in this document: competitive pressures in the markets in which RYAM operates; risks associated with customer concentration, raw material and energy prices; risks associated with international operations; changes in global economic conditions; the Chinese dumping duties imposed on commodity viscose; litigation with the Altahama Riverkeeper; the effect of current and future environmental laws and regulations; potential impact of future tobacco-related restrictions; potential for additional pension contributions; labor relations; the effect of weather and other natural conditions; transportation cost and availability; the failure to attract and retain key personnel; the failure to develop new ideas and protect RYAM’s intellectual property; uncertainties related to the availability of additional financing to RYAM in the future and the terms of such financing; risks associated with product liability claims; the inability to make or effectively integrate future acquisitions; RYAM’s inability to engage in certain corporate transactions following its separation from Rayonier Inc. (“Rayonier”); any failure to realize expected benefits from such separation; risks associated with RYAM’s debt obligations following such separation; and uncertainties relating to general economic, political, business, industry, regulatory and market conditions. In addition, specifically with respect to the separation of RYAM from Rayonier, the following important factors, among others, could cause actual results to differ materially from those expressed in forward-looking statements that may have been made in this document: uncertainties as to the timing of the separation and whether it will be completed, the possibility that various closing conditions for the separation may not be satisfied or waived, the expected tax treatment of the separation, the impact of the separation on the businesses of Rayonier and RYAM, the ability of both companies to meet debt service requirements, the availability and terms of additional financing required by RYAM, and expectations of credit rating. Additional factors are described in Rayonier’s most recent Form 10-K and 10-Q, RYAM’s Form 10, and other reports of Rayonier and RYAM on file with the Securities and Exchange Commission. Neither RYAM nor Rayonier assumes any obligation to update these statements except as is required by law. 2
Table of Contents The Separation 4 Business Overview 8 Strategy 21 Financial Review 25 Value Proposition 31 Appendix 33 3
The Separation 4
Strategic Rationale for the Separation Separation will create two independent, industry-leading public companies Different Markets, Drivers and Value Creation Strategies More Efficient Allocation of Capital Distinct Investment Identities Enhanced Strategic and Management Focus Positions each best-in-class entity to continue to grow and deliver unique value creation strategies Rayonier – Improving housing market and economy, and strong export markets fuel growth Advanced Materials – Complete the ramp-up of high-value specialty product sales volumes Concentration of each company’s financial resources solely on its operations Capital structure allows each company financial flexibility Each company can allocate capital in a more efficient manner best suited to its distinct priorities and strategies Enables management of both companies to focus on unique opportunities for long- term growth and profitability Improves alignment of management and employee incentives with profitability and growth objectives Two unique investment theses: Leading pure-play timberland REITs with best-in-class assets, premium land portfolio and attractive dividend High-value, pure-play specialty cellulose producer with leading margins and significant free cash flow generation 5
Optimal Timing for the Separation Optimal timing as both companies have strong growth prospects in years ahead Expectations beyond 2014 2014 2013 2011 - 2012 6 Completion of technically demanding CSE • Additional 190K tons of cellulose specialties capacity • High quality of cellulose specialties produced on converted line; achieved ahead of schedule • Excellent progress in qualifying new production with customers Acquired additional interest in New Zealand JV Sold non-core assets • Wood Products business • New York timberlands Cellulose Specialties Expansion (CSE) project construction Acquired $540M of high-quality timberlands Obtained land-use entitlements on 39K acres of coastal FL/GA HBU properties Additional cellulose specialties (CS) sales volume as CSE ramp-up begins Strengthening housing market with positive impact on timber demand and prices Growing interest in development HBU properties Separate Performance Fibers business from Rayonier CSE ramp-up continues through 2018 when CS capacity is fully placed in the market Improvement of housing market to trend level of ~1.5 million starts per year • Higher sawlog prices • Improved mix • Additional US harvest volume (approx.15%) from recent acquisitions • EBITDA growth in Forest Resources business Improving housing market and economy increase demand for development HBU
Sales Revenue by segment Segment EBITDA* (% Margin) CapEx Net debt $1.7B $0.7B $1.0B Forest Resources 22% Perf. Fibers 61% Real Estate 9% Trading & Other 8% $641M (38%) $159M ~$1.4B Forest Resources 57% Real Estate 22% Trading & Other 21% Cellulose specialties ~ 89% $255M (38%) $386M (37%) $63M $96M ~$0.5B (expected) ~$1.0B Rayonier prior to separation Rayonier post separation Rayonier Advanced Materials Commodity grades ~ 11% Expected credit rating Strong BBB/Baa2 BB+/Ba2 Sales volume: 76% CS / 24% commodity grade 2 0 1 3 Revenue by segment Net debt/ LTM EBITDA ~1.7X** ~ 3.0X** P ro f o rm a a t s p in Two Companies with Strong Financial Profiles * Non-GAAP measure (see Appendix for definition and reconciliation) ** Assumes corporate expense for Rayonier of $20M and Rayonier Advanced Materials, $25M 7
Business Overview 8
A Leader in Specialty Chemicals Global leader across cellulose specialties (“CS”) product portfolio • Greater than 2x sales volume versus competition: #1 in acetate / strong position in ethers and high-strength viscose/specialty • High purity product for technically demanding end uses • Extensive R&D capability, process knowledge and customer support • Customized products with demanding, lengthy customer qualification processes Intermediate specialty chemical producer primarily serving global chemical companies • Long-term customer relationships • Consistent and secure supply of RYAM cellulose specialties is critical to customers Operate two flexible, advanced manufacturing facilities in Southeast US • Facilities in Jesup, GA (520K tons) and Fernandina Beach, FL (155K tons) • Recent CSE expansion continues industry leadership Industry leading margins and cash flows • Over $1 billion revenue business • Attractive ~ 30% EBITDA* margins • Cash Flow From Operations in excess of $255 million annually over the past three years 9 * Represents Management Adjusted EBITDA, a non-GAAP measure, see Appendix for definition and reconciliation
Cellulose Specialties is a High-Value Product Dissolving Pulp Commodity Viscose Fluff 5.3 MMT Commodity Market Pulp 52 MMT Cellulose Specialties 4.4 MMT Total: 1.6 MMT Total: 63 MMT Cellulose Specialties segment Market pulp industry (1) Increasing Specialization * Includes some lower purity, less demanding grades Acetate ~ 710,000 MT Ethers ~ 503,000 MT* High Strength Viscose and Specialty High Value ~ 355,000 MT (1) Represents chemical (Kraft and Sulfite) pulp market 10
Production Focus on High End Cellulose Specialties Cellulose Specialties: 486,000 MTs Advanced Materials: 643,000 MTs Cellulose Specialties 76% Commodity Products 24% Acetate 81% High value ethers 6% Other Cellulose Specialties 13% 2013 Production Volumes 11
Participate in Diverse, Growing End-Markets Illustrative End Products 12 High Value Ethers High Strength Viscose Other Cellulose Specialties Specialty High Value Acetate
End Use Breakdown Estimated Segment Size ~ 503,000 MT (pulp) 4 – 6% growth p.a. End Use Breakdown Estimated Segment Size ~ 355,000 MT (pulp) 2 – 3% growth p.a. End Use Breakdown Estimated Segment Size ~ 710,000 MT (pulp) 1 – 2% growth p.a. Textiles 4% Acetate High Value Ethers (3) Other Cellulose Specialties Source: Hawkins Wright, PCI Fibres, Markets and Markets, and company estimates (1) Data from 2012 (2) Segment sizes include approximately 130,000 to 160,000 MT of Cotton Linter Pulps (3) Segment size includes 100,000 MT of microcrystalline cellulose Coatings, Plastics & Film 7% Cigarette Filters 82% LCD Film 7% Construction, Coatings & Paints 11% Pharmaceutical 29% Industrial 35% Food Products 25% Engine Filter 16% Tire Cord 15% Casings 21% Explosives, Inks & Lacquers 48% Global Leader Across Cellulose Specialties Global Cellulose Specialties End Use Breakdown (1)(2) 13 Global Market Demand Growing 3%, 45K-50K MT/Year Estimated Rayonier AM Position Number 1 Estimated Rayonier AM Position Top 4 Top 2 Estimated Rayonier AM Position
Rayonier Advanced Materials: The Cellulose Specialties Standard Bearer Source: Public information and privately commissioned studies 14 Estimated 2013 Sales Announced Additional Capacity/ Potential Additional Volume • Rayonier AM - 190K MT • Buckeye – 42K MT • Sateri – upper limit undetermined
Technical Leadership in Cellulose Specialties Process Knowledge Process Flexibility Juvenile, exterior fiber, center fiber, region hardness Caustic (high ph) Ammonia (low ph) Process sequence, bleach sequence: Cl2, Cl02, peroxide, concentrations, temperature, wash type/sequence, cold caustic extraction C u st omi ze d f o r ea ch c u st om er a p p lic at io n Filter Plastic LCD/Film Tire Cord Casings Acetate Ethers/MCC Specialty High Value High Strength Viscose Customer Markets Finishing Pulping Hardwood Softwood Kraft Sulfite Bleaching Food Pharmaceuticals The “Rayonier Advanced Material Recipe” 15
Turning Wood into a High-End Specialty Polymer Black Liquor Organics - Energy Inorganics - Recovery Extractives 1 - 5% Water Cellulose 43 - 45% Hemicellulose 27 - 30% 17 tons CS or 20 tons Viscose or 25 tons Fluff Inorganics /Organics Waste Treatment Lignin 20 - 28% Bleaching Process 100 Green tons wood Input Output Cooking Process Purit y 16 A Natural Plastic
Purity is Critical to Customers Potential for molecular buildup of impurities Cigarette Filter Spinerette Acetate Filament Hair Spinerette Hole (smaller than a human hair) Acetate Tow (Filter) Manufacturing Process 17
Low Cost, Flexible Manufacturing Facilities Jesup, GA Kraft mill Three production lines 520,000 MT of capacity Ability to be dedicated CS producer; produces acetate, ethers and high- strength viscose Purchases 1.8 million tons of hardwood chips and 1.4 million tons of softwood chips annually Produces greater than 90 percent of energy required by mill Fernandina Beach, FL Sulfite mill One production line 155,000 MT of capacity Dedicated CS producer; acetate, ethers and high-strength viscose Purchases 900,000 tons of softwood chips annually Produces 100 percent of energy required by mill and sells excess power into the grid Combined, these facilities produce more than 25 different grades of cellulose specialties 18
World Class, Customer Focused R&D Effort Strong technical partnerships with our customers and their customers • Customer-driven research • Experienced scientists and engineers with leading expertise in cellulose chemistry • Comprehensive understanding of our customers' processes - Majority of relationships span several decades • Superior analytical capability and end-use testing capability • Trust in our confidentiality Ability to customize each product grade to meet the exacting requirements of a specific end use Pilot plant lines that simulate Jesup and Fernandina mill pulping and bleaching processes 19
Leadership 20 Management Board of Directors * Current Rayonier Board members Paul G. Boynton* - Chairman C. David Brown, II* - Lead Director De Lyle W. Bloomquist Mark E. Gaumond* James F. Kirsch Lisa Palumbo James H. Miller* Thomas I. Morgan* Ronald Townsend* Paul G. Boynton – Chairman, President & CEO Jack Kriesel - SVP, Performance Fibers Benson Woo – SVP, Chief Financial Officer Frank Ruperto - SVP, Corporate Development & Strategy Beth Johnson – VP, Investor Relations & Planning
Strategy 21
Rayonier Advanced Materials Strategy Strengthen global leadership position in cellulose specialties • Currently possess 2x the capacity and sales of next largest competitor • Differentiate through purity, consistency and technical expertise Enhance strong relationships with key customer base • Focus on meeting customer demand needs • Deliver products customized precisely for demanding chemical applications Drive growth and diversification • Expand reach into adjacent markets • Diversify portfolio through value-enhancing acquisitions Focus on operational excellence to improve cost position • Identify and drive cost savings opportunities • Increase production efficiencies to enhance supply reliability 22
M a rgi n Technical Expertise Required Purity (alpha) 85 Fluff Viscose CS 98 Rayonier Advanced Materials CS Strategy Focused on Highest End of the Value Chain High Low Low High 23
* Does not include sales of off-grade product Absorbent Materials Cellulose Specialties without cost surcharge Product Mix $/MT CSE completion June 2013 Cellulose Specialties Command Premium Price $385 million to convert commodity capacity to CS in Jesup completed June 2013 • Customer-driven project to support their growth • 260,000 MT absorbent materials converted to 190,000 MT CS Strategically attractive to Advanced Materials • Strengthens our industry leadership • Enables future CS growth Transition to CS as customer and market growth allows • Incremental 190,000 tons of CS production expected to increase EBITDA** by $150M based upon 2013 sales prices and costs, when fully sold (2018 target) CSE Expansion Focused on Strategic Growth 24 ** Non-GAAP measure (see Appendix for definition)
Financial Review 25
Q1 Financial Highlights Short term pricing softness due to transitional markets fueled by capacity additions, mostly from RYAM CSE Revenue Drivers • Pricing down 3% relative to the first quarter of 2013 or 6% relative to 2013 year end • New CS capacity outpacing consistently growing demand in short term • Planned extended maintenance for shutdown at the Jesup mill for boilers moved forward from 2015 had negative effects on shipments and volumes Cost Drivers • Wet weather affecting wood costs • Cold weather affecting fuel costs ($ in millions, except volumes) Q1 2014 Q1 2013 CS price ($ per MT) $1,823 $1,874 CS sales volume (000s of MT) 113 132 Cellulose Specialties 206 247 Absorbent Materials 10 37 Commodity Viscose & Other 27 1 Total Sales $243 $285 % Growth (15%) NA Performance Fibers Segment EBITDA * $70 $107 % Margin 29% 37% Management Adjusted EBITDA * $64 $101 % Margin 26% 35% 26 * Non-GAAP measure (see Appendix for definition and reconciliation)
($ in Millions) Financial Performance Highlights Note: Management Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP figures. See Appendix for reconciliations * Includes adjustment for $25M overhead * LTM volume lower due to timing of extended shutdown in Q1’14 * 27 *
Attractive Capital Structure with Low-Cost, Long-Term Debt (1) 1 month LIBOR plus 1.08% (2) $250 million capacity (undrawn at closing) (3) Net of 67 bps of patronage (4) Non-GAAP measure (see Appendix for definition and reconciliations) Corporate Ratings of BB+ and Ba2 Interest Cumulative Debt Rate(1) Amount Leverage Term Revolving Credit Facility(2) 1.65% $ -- 0.0x 5 years Term Loan A 1.65% 110 0.3x 5 years Farm Credit Term Loan 1.23% 290 1.2x 7 years Senior Notes 5.5% 550 2.9x 10 years Total Debt $ 950 2.9x Q1 LTM Management Adj. EBITDA(4) $ 324 Total Debt/EBITDA 2.9 28 ($ in millions) (3)
Key Financial Metrics 29 Year Ended December 31, ($ in millions) 2011 2012 2013 Tons sold (000s of MT) Cellulose specialties 504 503 486 Commodity viscose / absorbent materials 227 214 157 Sales Cellulose specialties $824 $935 $930 Commodity viscose / absorbent materials / other 197 160 117 Gross margin $323 $379 $333 Gross margin percentage 32% 35% 32% Operating income $283 $342 $289 Operating income margin 28% 31% 28% Management adjusted EBITDA * $329 $395 $361 Management adjusted EBITDA margin 32% 36% 35% Capital expenditures $97 $105 $96 Adjusted free cash flow * 140 188 143 * Non-GAAP measure (see Appendix for definition and reconciliation)
2014 Financial Guidance (2) Excludes corporate expenses. After the separation, normalized corporate expenses are expected to be $25M for Rayonier Advanced Materials. 2013 2014 Guidance Sales 1,042 Comparable CS Volumes (000s of MT) (1) 486 ~ 30 Operating Income (2) 311 ↓ ~ 25% Segment EBITDA (2)(3) 386 ↓ ~ 15% CapEx (4) 96 75 - 80 DD&A 75 85 - 90 Dividends (5) $.07 / Qtr, or $.28 / annualized RYN Performance Fibers Segment 30 ($ in millions) (3) Non-GAAP measure (see Appendix for definition and reconciliations) (4) Additional capital spending in 2015 and 2016 for industrial boiler air emissions compliance (5) Each Rayonier shareholder will receive one share of Rayonier Advanced Materials common stock for every three common shares of Rayonier. ↑ (1) If targeted volumes are not realized, 2014 sales, operating income and EBITDA will be below guidance. Currently, incremental cellulose specialties volume is not under contract.
Value Proposition 31
Attractive Shareholder Value Proposition Best-in-class margins and cash flows with material upside as new capacity is absorbed and operational efficiency improves Completed investment in cellulose specialties expansion provides runway for significant future growth Attractive cash flows allow for rapid de-leveraging and increased financial flexibility World-class assets and strong financial position provide ability to pursue new growth opportunities Modest dividend with focus to enhance long-term ability to prudently return capital 32
Appendix 33
Global Consumption Growing 1% – 1.5% Per Year B illi o n s o f Ci ga re tt es Cigarette Volume by Region The Asia Pacific region (including China) contains seven of the world’s largest markets and six of the fastest-growing 5,630 6,184 5,811 34 Source: Euromonitor 2013
CS Market / Pricing Largely Independent of Commodity Viscose Pricing Source: PCI Fibres, CCF Group and Rayonier Advanced Materials $/MT Note: CS prices were higher in Q2 2011, Q2 2012 and Q3 2012 due to sales mix. 35
Definitions of Non-GAAP Measures EBITDA is defined as earnings before interest, taxes, depreciation, depletion and amortization. EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. Segment EBITDA is defined as EBITDA (as defined above) before allocated corporate overhead and one time transaction and legal costs. Segment EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. Management Adjusted EBITDA is defined as Segment EBITDA (as defined above) less estimated stand alone costs. Management Adjusted EBITDA is a non-GAAP measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. Adjusted Free Cash Flow is defined as cash provided by operating activities adjusted for capital expenditures excluding strategic capital and tax benefits related to exchange the AFMC for the CBPC. 36
Reconciliation of Non-GAAP Measures Three Months Ended Last Twelve Months Ended Year Ended December 31, March 31, 2014 March 31, 2013 March 31, 2014 2013 2012 2011 Operating income $43 $87 $245 $289 $342 $283 Depreciation, depletion and amortization 21 15 80 74 60 56 EBITDA 64 102 325 363 402 339 Corporate overhead allocation 3 5 15 17 18 15 Legal / Transaction costs 3 - 9 6 - - Segment EBITDA 70 107 349 386 420 354 Estimated stand alone costs (6) (6) (25) (25) (25) (25) Management Adjusted EBITDA $64 $101 $324 $361 $395 $329 Cash flow from operations $55 $30 $283 $258 $305 $258 Capital Expenditures (22) (21) (97) (96) (105) (97) Tax benefit due to AFMC / CBPC - (19) - (19) (12) (21) Adjusted Free Cash Flow $33 $(10) $186 $143 $188 $140 37