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2014 Separation Closing Pro Forma 8-K Shell
Table of Contents


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 27, 2014
RAYONIER INC.
COMMISSION FILE NUMBER 1-6780
Incorporated in the State of North Carolina
I.R.S. Employer Identification Number 13-2607329
225 Water Street, Suite 1400
Jacksonville, Florida 32202
(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))



Table of Contents


RAYONIER INC.
TABLE OF CONTENTS
 
 
  
 
  
PAGE
Item 2.01.
  
  
1

Item 9.01.
  
  
1

 
  
  
2

 
  
  
3




Table of Contents

ITEM 2.01.
Completion of Acquisition or Disposition of Assets.
On June 27, 2014, Rayonier Inc. ("Rayonier") completed the previously announced distribution of 100% of the outstanding common stock of Rayonier Advanced Materials Inc. ("SpinCo") to Rayonier’s shareholders (the “Distribution”). SpinCo was formed to hold Rayonier’s performance fibers business and, as a result of the Distribution, is now an independent public company whose common stock is listed and trading under the symbol “RYAM” on the New York Stock Exchange. The Distribution was made to Rayonier’s shareholders of record as of the close of business on June 18, 2014 (the “Record Date”), and such shareholders received one share of SpinCo common stock for every three Rayonier common shares held as of close of business on the Record Date.
ITEM 9.01.
Financial Statements and Exhibits.
(b)
Pro Forma Financial Information.
 

The unaudited pro forma condensed consolidated financial statements of Rayonier giving effect to the Distribution, and the related notes thereto, are attached hereto as Exhibit 99.1.
(d)
Exhibits.
Exhibit No.

 
Exhibit
99.1

  
Unaudited pro forma condensed consolidated financial information


1
Table of Contents

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/ H. EDWIN KIKER
 
 
H. Edwin Kiker
 
 
Senior Vice President and
 
 
Chief Financial Officer
July 3, 2014


2
Table of Contents

EXHIBIT INDEX
EXHIBIT NO.
 
DESCRIPTION
 
LOCATION
99.1
 
Unaudited pro forma condensed consolidated financial information
 
Furnished herewith.


3
Unaudited Pro Forma F/S for Separation 8-K
Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma condensed consolidated financial statements of Rayonier Inc. ("Rayonier") have been derived from Rayonier's historical consolidated financial statements and are being presented to give effect to the separation of Rayonier Advanced Materials Inc. ("Rayonier Advanced Materials") into an independent, publicly traded company as of March 31, 2014. The separation occurred on June 27, 2014. Effective with the filing of the Rayonier Form 10-Q for the period ending June 30, 2014, Rayonier Advanced Materials will be reported as a discontinued operation of Rayonier.

The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with Rayonier's historical financial statements and accompanying notes. The unaudited pro forma condensed consolidated balance sheet has been prepared as though the separation occurred on March 31, 2014 while the unaudited pro forma condensed consolidated income statements have been prepared as though the separation occurred on January 1, 2011. The pro forma adjustments are based on available information and assumptions management believes are factually supportable. For income statement purposes, the pro forma adjustments include only those deemed to be recurring in nature. The pro forma adjustments to reflect the separation of Rayonier Advanced Materials include:
•
 The distribution of Rayonier Advanced Materials common stock to Rayonier shareholders.
•
The transfer by Rayonier Advanced Materials of approximately $906 million to Rayonier prior to the distribution.
•
The transfer of assets and liabilities from Rayonier to Rayonier Advanced Materials, primarily related to postretirement benefit plans, certain property, plant and equipment, and environmental liabilities associated with prior disposed operations.
No adjustments have been made to Rayonier's operating costs after the separation of Rayonier Advanced Materials, the potentially dilutive impact of changes to stock-based compensation resulting from the Employee Matters Agreement executed in connection with the separation and the use of proceeds from the Rayonier Advanced Materials cash distribution as these items are not factually supportable at this time.
The unaudited pro forma condensed consolidated financial statements are for illustrative purposes only, and do not reflect what Rayonier's actual financial position and results of operations would have been had the separation occurred on the dates indicated and are not necessarily indicative of Rayonier's future financial position and results of operations.


1


RAYONIER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
For the Three Months Ended March 31, 2014
(Dollars in thousands, except per share amounts) 
 
 
Historical Rayonier Inc.
 
Less: Separation of Rayonier Advanced Materials
 
Pro Forma Adjustments
 
Pro Forma Rayonier Inc.
SALES
 
$
386,686

 
$
(243,499
)
 
$
—

 
$
143,187

Costs and Expenses
 
 
 
 
 
 
 
 
Cost of sales
 
302,650

 
(188,719
)
 
—

 
113,931

Selling and general expenses
 
15,491

 
(8,226
)
 
5,972

(a)
13,237

Other operating expense (income), net
 
3,537

 
(3,190
)
 
(534
)
(c)
(187
)
 
 
321,678

 
(200,135
)
 
5,438

 
126,981

OPERATING INCOME
 
65,008

 
(43,364
)
 
(5,438
)
 
16,206

Interest expense
 
(12,969
)
 
—

 
2,295

(d)
(10,674
)
Interest and miscellaneous (expense) income, net
 
(1,015
)
 
—

 
—

 
(1,015
)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
51,024

 
(43,364
)
 
(3,143
)
 
4,517

Income tax (expense) benefit
 
(7,732
)
 
12,417

 
1,147

(e)
5,832

INCOME FROM CONTINUING OPERATIONS
 
43,292

 
(30,947
)
 
(1,996
)
 
10,349

Less: Loss from continuing operations attributable to noncontrolling interests
 
(83
)
 
—

 
—

 
(83
)
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO RAYONIER INC.
 
$
43,375

 
$
(30,947
)
 
$
(1,996
)
 
$
10,432

EARNINGS PER COMMON SHARE
 
 
 
 
 
 
 
 
Pro Forma Income from Continuing Operations Attributable to Rayonier Inc. per Share of Common Stock:
 
 
 
 
 
 
Basic
 
$
0.34

 
 
 
 
 
$
0.08

Diluted
 
$
0.34

 
 
 
 
 
$
0.08

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
126,344,987

 
 
 
 
 
126,344,987

Diluted
 
128,424,493

 
 
 
 
 
128,424,493


See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements.


2


RAYONIER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
For the Year Ended December 31, 2013
(Dollars in thousands, except per share amounts) 
 
 
Historical Rayonier Inc.
 
Less: Separation of Rayonier Advanced Materials
 
Pro Forma Adjustments
 
Pro Forma Rayonier Inc.
SALES
 
$
1,707,822

 
$
(1,046,603
)
 
$
—

 
$
661,219

Costs and Expenses
 
 
 
 
 
 
 
 
Cost of sales
 
1,246,312

 
(714,038
)
 
—

 
532,274

Selling and general expenses
 
64,843

 
(35,778
)
 
26,369

(a)
55,434

Other operating (income) expense, net
 
(9,487
)
 
(8,163
)
 
(3,253
)
(b)
(20,903
)
 
 
1,301,668

 
(757,979
)
 
23,116

 
566,805

Equity in income of New Zealand joint venture
 
562

 
—

 
—

 
562

OPERATING INCOME BEFORE GAIN RELATED TO CONSOLIDATION OF NEW ZEALAND JOINT VENTURE
 
406,716

 
(288,624
)
 
(23,116
)
 
94,976

Gain related to consolidation of New Zealand joint venture
 
16,098

 
—

 
—

 
16,098

OPERATING INCOME
 
422,814

 
(288,624
)
 
(23,116
)
 
111,074

Interest expense
 
(43,760
)
 
—

 
8,964

(d)
(34,796
)
Interest and miscellaneous income (expense), net
 
2,372

 
(292
)
 
—

 
2,080

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
381,426

 
(288,916
)
 
(14,152
)
 
78,358

Income tax (expense) benefit
 
(49,661
)
 
69,148

 
5,165

(e)
24,652

INCOME FROM CONTINUING OPERATIONS
 
331,765

 
(219,768
)
 
(8,987
)
 
103,010

Less: Income from continuing operations attributable to noncontrolling interests
 
1,902

 
—

 
—

 
1,902

INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO RAYONIER INC.
 
$
329,863

 
$
(219,768
)
 
$
(8,987
)
 
$
101,108

EARNINGS PER COMMON SHARE
 
 
 
 
 
 
 
 
Pro Forma Income from Continuing Operations Attributable to Rayonier Inc. per Share of Common Stock:
 
 
 
 
 
 
Basic
 
$
2.63

 
 
 
 
 
$
0.80

Diluted
 
$
2.54

 
 
 
 
 
$
0.78

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
125,717,311

 
 
 
 
 
125,717,311

Diluted
 
130,105,101

 
 
 
 
 
130,105,101


See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements.


3


RAYONIER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
For the Year Ended December 31, 2012
(Dollars in thousands, except per share amounts) 
 
 
Historical Rayonier Inc.
 
Less: Separation of Rayonier Advanced Materials
 
Pro Forma Adjustments
 
Pro Forma Rayonier Inc.
SALES
 
$
1,483,490

 
$
(1,095,376
)
 
$
—

 
$
388,114

Costs and Expenses
 
 
 
 
 
 
 
 
Cost of sales
 
1,030,692

 
(715,707
)
 
—

 
314,985

Selling and general expenses
 
66,957

 
(35,684
)
 
27,360

(a)
58,633

Other operating (income) expense, net
 
(14,169
)
 
(2,003
)
 
(797
)
(b)
(16,969
)
 
 
1,083,480

 
(753,394
)
 
26,563

 
356,649

Equity in income of New Zealand joint venture
 
550

 
—

 
—

 
550

OPERATING INCOME
 
400,560

 
(341,982
)
 
(26,563
)
 
32,015

Interest expense
 
(44,981
)
 
—

 
9,333

(d)
(35,648
)
Interest and miscellaneous income (expense), net
 
606

 
(507
)
 
—

 
99

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
356,185

 
(342,489
)
 
(17,230
)
 
(3,534
)
Income tax (expense) benefit
 
(84,743
)
 
100,393

 
6,289

(e)
21,939

INCOME FROM CONTINUING OPERATIONS
 
$
271,442

 
$
(242,096
)
 
$
(10,941
)
 
$
18,405

EARNINGS PER COMMON SHARE
 
 
 
 
 
 
 
 
Pro Forma Income from Continuing Operations Attributable to Rayonier Inc. per Share of Common Stock:
 
 
 
 
 
 
Basic
 
$
2.21

 
 
 
 
 
$
0.15

Diluted
 
$
2.11

 
 
 
 
 
$
0.14

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
122,711,802

 
 
 
 
 
122,711,802

Diluted
 
128,702,423

 
 
 
 
 
128,702,423


See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements.


4


RAYONIER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF INCOME FROM CONTINUING OPERATIONS
For the Year Ended December 31, 2011
(Dollars in thousands, except per share amounts) 
 
 
Historical Rayonier Inc.
 
Less: Separation of Rayonier Advanced Materials
 
Pro Forma Adjustments
 
Pro Forma Rayonier Inc.
SALES
 
$
1,420,960

 
$
(1,021,416
)
 
$
—

 
$
399,544

Costs and Expenses
 
 
 
 
 
 
 
 
Cost of sales
 
1,006,297

 
(697,918
)
 
—

 
308,379

Selling and general expenses
 
65,251

 
(33,110
)
 
25,146

(a)
57,287

Other operating (income) expense, net
 
(3,794
)
 
(7,434
)
 
(6,873
)
(b)
(18,101
)
 
 
1,067,754

 
(738,462
)
 
18,273

 
347,565

Equity in income of New Zealand joint venture
 
4,088

 
—

 
—

 
4,088

OPERATING INCOME
 
357,294

 
(282,954
)
 
(18,273
)
 
56,067

Interest expense
 
(50,775
)
 
—

 
5,799

(d)
(44,976
)
Interest and miscellaneous income (expense), net
 
843

 
(98
)
 
—

 
745

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
 
307,362

 
(283,052
)
 
(12,474
)
 
11,836

Income tax (expense) benefit
 
(30,688
)
 
69,234

 
4,553

(e)
43,099

INCOME FROM CONTINUING OPERATIONS
 
$
276,674

 
$
(213,818
)
 
$
(7,921
)
 
$
54,935

EARNINGS PER COMMON SHARE
 
 
 
 
 
 
 
 
Pro Forma Income from Continuing Operations Attributable to Rayonier Inc. per Share of Common Stock:
 
 
 
 
 
 
Basic
 
$
2.28

 
 
 
 
 
$
0.45

Diluted
 
$
2.21

 
 
 
 
 
$
0.44

Weighted Average Shares Outstanding:
 
 
 
 
 
 
 
 
Basic
 
121,662,985

 
 
 
 
 
121,662,985

Diluted
 
125,394,291

 
 
 
 
 
125,394,291


See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements.



5


RAYONIER INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEETS
As of March 31, 2014
(Dollars in thousands)
 
Historical Rayonier Inc.
 
Less: Separation of Rayonier Advanced Materials
 
Pro Forma Adjustments
 
Pro Forma Rayonier Inc.
ASSETS
CURRENT ASSETS
 
 
 
 
 
 
 
Cash and cash equivalents
$
156,071

 
$
—

 
$
831,527

(f)
$
987,598

Restricted cash
—

 
—

 
75,000

(f)
75,000

Accounts receivable, less allowance for doubtful accounts of $630
111,697

 
(80,108
)
 
(896
)
(g)
30,693

Inventory
 
 
 
 
 
 
—

Finished goods
124,075

 
(108,128
)
 
—

 
15,947

Work in progress
2,533

 
(2,533
)
 
—

 
—

Raw materials
12,943

 
(12,649
)
 
—

 
294

Manufacturing and maintenance supplies
2,377

 
(2,377
)
 
—

 
—

Total inventory
141,928

 
(125,687
)
 
—

 
16,241

Deferred tax assets
31,580

 
(15,902
)
 
9,943

(h)(i)
25,621

Prepaid and other current assets
54,557

 
(25,809
)
 
(4,466
)
(g)
24,282

Total current assets
495,833

 
(247,506
)
 
911,108

 
1,159,435

TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
2,069,518

 
—

 
—

 
2,069,518

PROPERTY, PLANT AND EQUIPMENT
 
 
 
 
 
 
—

Land
20,620

 
(13,939
)
 
—

 
6,681

Buildings
188,913

 
(174,113
)
 
(5,791
)
(g)
9,009

Machinery and equipment
1,756,924

 
(1,753,571
)
 
—

 
3,353

Construction in progress
32,560

 
(32,289
)
 
—

 
271

Total property, plant and equipment, gross
1,999,017

 
(1,973,912
)
 
(5,791
)
 
19,314

Less — accumulated depreciation
(1,137,048
)
 
1,126,153

 
2,932

(g)
(7,963
)
Total property, plant and equipment, net
861,969

 
(847,759
)
 
(2,859
)
 
11,351

OTHER ASSETS
217,458

 
(27,205
)
 
(72,631
)
(g)(i)(j)
117,622

TOTAL ASSETS
$
3,644,778

 
$
(1,122,470
)
 
$
835,618

 
$
3,357,926

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
 
 
 
 
 
 
 
Accounts payable
$
86,282

 
$
(62,655
)
 
$
(111
)
(g)
$
23,516

Current maturities of long-term debt
114,319

 
—

 
—

 
114,319

Accrued taxes
11,374

 
(1,682
)
 
(75
)
(g)
9,617

Accrued payroll and benefits
19,261

 
(9,777
)
 
(6,010
)
(g)
3,474

Accrued interest
13,857

 
—

 
—

 
13,857

Accrued customer incentives
10,082

 
(10,082
)
 
—

 
—

Other current liabilities
35,870

 
(1,662
)
 
(8,848
)
(g)(l)
25,360

Current liabilities for dispositions and discontinued operations
6,446

 
—

 
(6,446
)
(i)
—

Total current liabilities
297,491

 
(85,858
)
 
(21,490
)
 
190,143

LONG-TERM DEBT
1,393,887

 
—

 
—

 
1,393,887

NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS
67,456

 
—

 
(67,456
)
(i)
—

PENSION AND OTHER POSTRETIREMENT BENEFITS
95,098

 
(21,441
)
 
(59,005
)
(j)
14,652

OTHER NON-CURRENT LIABILITIES
31,254

 
(46,953
)
 
19,190

(g)(i)
3,491

COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
 
Common Shares, 480,000,000 shares authorized, 126,451,505 and 126,257,870 shares issued and outstanding
694,236

 
—

 
—

 
694,236

Retained earnings
996,573

 
(1,007,087
)
 
951,740

(k)
941,226

Accumulated other comprehensive loss
(30,037
)
 
38,869

 
12,639

(j)
21,471

TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY
1,660,772

 
(968,218
)
 
964,379

 
1,656,933

Noncontrolling interest
98,820

 
—

 
—

 
98,820

TOTAL SHAREHOLDERS’ EQUITY
1,759,592

 
(968,218
)
 
964,379

 
1,755,753

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
$
3,644,778

 
$
(1,122,470
)
 
$
835,618

 
$
3,357,926

See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements.

6
RAYONIER INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands unless otherwise stated)


(a)
These pro forma adjustments represent the reversal of general corporate overhead costs previously allocated to Rayonier Advanced Materials which are not permitted to be allocated to discontinued operations under generally accepted accounting principles.
(b)
This pro forma item eliminates adjustments to the estimates of environmental remediation liabilities relating to prior disposed operations that were transfered to Rayonier Advanced Materials upon separation.
(c)
This pro forma adjustment represents the elimination of transaction costs to be allocated from Rayonier to discontinued operations. These costs were incurred by Rayonier related to the separation of the Performance Fibers business and are primarily legal, accounting and information system costs.
(d)
These pro forma adjustments reflect the Rayonier pretax interest expense allocated to discontinued operations as allowed by generally accepted accounting principles.
(e)
These pro forma tax adjustments represent the tax effect of the pro forma adjustments described above using a blended federal, state and non-U.S. statutory tax rate of 36.5 percent, which is not indicative of the anticipated effective tax rate of Rayonier subsequent to the separation. The income tax benefit for pro forma Rayonier Inc. is the result of eliminating the Rayonier Advanced Materials income tax expense which was calculated on a stand-alone basis. As the Rayonier Advanced Materials stand alone income tax expense is greater than historical Rayonier tax expense, the tax benefit represents the benefits from losses from Rayonier's taxable operations and interest and general administrative expenses not allocated to Rayonier Advanced Materials.
(f)
Immediately prior to the separation, Rayonier Advanced Materials and subsidiaries distributed approximately $906 million in cash to Rayonier stemming from $550 million in Senior Notes issued by Rayonier A.M. Products (a wholly owned subsidiary of Rayonier Advanced Materials) on May 22, 2014, $281 million in term loans and $75 million from a revolving credit facility Rayonier Advanced Materials entered into prior to separation. Under the terms of an Internal Revenue Service ruling, $75 million of these funds is restricted to pay dividends or repurchase common stock within eighteen months following its distribution. The remaining $831 million of proceeds will be used by Rayonier to repay debt and support future working capital needs.
(g)
These pro forma adjustments represent Rayonier assets and liabilities that were transferred to Rayonier Advanced Materials as defined in the separation agreement, primarily consisting of prepaid insurance, leasehold improvements (and related depreciation), accrued benefits, workman's compensation and deferred compensation liabilities.
(h)
This pro forma adjustment represents the Cellulosic Biofuel Producer Credit (“CBPC”) tax credit carryforward of $12 million which will remain with Rayonier and will be available to be utilized in the income tax returns of Rayonier TRS Holdings Inc., a wholly-owned subsidiary of Rayonier, through 2016.
(i)
These pro forma adjustments represent all of Rayonier's environmental assets and liabilities relating to prior disposed operations that were transfered to Rayonier Advanced Materials upon separation. The assets consist mainly of $11 million of land, land improvements, and docks located at Rayonier’s disposed operations sites, primarily Port Angeles, Washington, Augusta, Georgia and Spartanburg, South Carolina and $28 million of related deferred tax assets ($3 million in Deferred Tax Assets and $25 million in Other Assets).
(j)
These pro forma adjustments represent the funded status of Rayonier sponsored pension and other post retirement benefit plans pertaining to Rayonier Advanced Materials employees, who were transferred to newly formed Rayonier Advanced Materials sponsored plans. In addition, accumulated other comprehensive losses and deferred tax assets ($36 million in Other Assets netted with $22 million in Other Non-Current Liabilities) associated with the Rayonier Advanced Materials benefit plans were also transfered.
(k)
This pro forma adjustment represents the net impact of all Balance Sheet pro forma adjustments (as outlined above) on Rayonier’s equity.
(l)
This pro forma adjustment represents an accrual of $4.7 million in transaction costs incurred by Rayonier related to the separation of the Performance Fibers business.


7