SEC Filing | Rayonier Inc.

View:

Download DOC

Download PDF

Download XLS

Download XBRL

Document

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019



☐	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.

(Exact name of registrant as specified in its charter)

Incorporated in the State of North Carolina

I.R.S. Employer Identification No. 13-2607329

1 RAYONIER WAY

WILDLIGHT, FL 32097

(Principal Executive Office)

Telephone Number: (904) 357-9100

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:



Title of each class	Trading Symbol	Exchange
COMMON SHARES, NO PAR VALUE	RYN	New York Stock Exchange

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐	Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of August 2, 2019, there were outstanding 129,630,052 Common Shares of the registrant.

Table of Contents

TABLE OF CONTENTS



Item		Page
	PART I - FINANCIAL INFORMATION
1.	Financial Statements (unaudited)	1
	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018	1
	Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	2
	Consolidated Statements of Changes in Shareholders’ Equity for the Three and Six Months ended June 30, 2019 and 2018	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	5
	Notes to Consolidated Financial Statements	6
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
3.	Quantitative and Qualitative Disclosures about Market Risk	56
4.	Controls and Procedures	57
	PART II - OTHER INFORMATION
1.	Legal Proceedings	58
2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
6.	Exhibits	59
	Signature	60

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share amounts)



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
SALES (NOTE 2)		$184,800			$245,906			$376,346			$449,101
Costs and Expenses
Cost of sales	(140,454		)	(184,418		)	(283,705		)	(322,906		)
Selling and general expenses	(10,984		)	(11,502		)	(20,794		)	(20,504		)
Other operating (expense) income, net (Note 16)	(1,969		)	1,659			(1,934		)	3,029
	(153,407		)	(194,261		)	(306,433		)	(340,381		)
OPERATING INCOME	31,393			51,645			69,913			108,720
Interest expense	(7,922		)	(8,102		)	(15,632		)	(16,155		)
Interest and other miscellaneous income, net	1,057			2,905			2,390			3,525
INCOME BEFORE INCOME TAXES	24,528			46,448			56,671			96,090
Income tax expense (Note 9)	(3,608		)	(7,110		)	(7,958		)	(14,047		)
NET INCOME	20,920			39,338			48,713			82,043
Less: Net income attributable to noncontrolling interest	(2,168		)	(3,080		)	(5,167		)	(5,246		)
NET INCOME ATTRIBUTABLE TO RAYONIER INC.	18,752			36,258			43,546			76,797
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of income tax expense of $0, $0, $0 and $0	(5,604		)	(29,760		)	429			(20,072		)
Cash flow hedges, net of income tax (benefit) expense of ($91), ($2,008), $244 and ($1,640)	(19,519		)	529			(30,205		)	17,143
Amortization of pension and postretirement plans, net of income tax expense of $0, $0, $0 and $0	112			178			224			338
Total other comprehensive (loss) income	(25,011		)	(29,053		)	(29,552		)	(2,591		)
COMPREHENSIVE (LOSS) INCOME	(4,091		)	10,285			19,161			79,452
Less: Comprehensive (income) loss attributable to noncontrolling interest	(815		)	5,011			(5,366		)	528
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RAYONIER INC.		($4,906	)		$15,296			$13,795			$79,980
EARNINGS PER COMMON SHARE (NOTE 12)
Basic earnings per share attributable to Rayonier Inc.		$0.14			$0.28			$0.34			$0.60
Diluted earnings per share attributable to Rayonier Inc.		$0.14			$0.28			$0.34			$0.59

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)



	June 30, 2019			December 31, 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$130,956			$148,374
Accounts receivable, less allowance for doubtful accounts of $8 and $8	44,931			26,151
Inventory (Note 17)	23,597			15,703
Prepaid expenses	20,581			17,016
Other current assets	690			609
Total current assets	220,755			207,853
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION	2,392,389			2,401,327
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS (NOTE 7)	77,072			85,609
PROPERTY, PLANT AND EQUIPMENT
Land	4,131			4,131
Buildings	22,432			22,503
Machinery and equipment	3,681			3,534
Construction in progress	589			567
Total property, plant and equipment, gross	30,833			30,735
Less — accumulated depreciation	(8,789		)	(7,984		)
Total property, plant and equipment, net	22,044			22,751
RESTRICTED CASH (NOTE 18)	3,754			8,080
RIGHT-OF-USE ASSETS (NOTE 3)	104,016			—
OTHER ASSETS	41,021			55,046
TOTAL ASSETS		$2,861,051			$2,780,666
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable		$24,944			$18,019
Accrued taxes	5,935			3,178
Accrued payroll and benefits	5,451			10,416
Accrued interest	4,931			5,007
Deferred revenue	19,798			10,447
Other current liabilities	25,026			16,474
Total current liabilities	86,085			63,541
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS (NOTE 6)	972,848			972,567
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 15)	29,383			29,800
LONG-TERM LEASE LIABILITY (NOTE 3)	93,749			—
OTHER NON-CURRENT LIABILITIES	78,688			60,208
COMMITMENTS AND CONTINGENCIES (NOTES 8 and 10)
SHAREHOLDERS’ EQUITY
Common Shares, 480,000,000 shares authorized,129,629,716 and 129,488,675 shares issued and outstanding	884,618			884,263
Retained earnings	645,743			672,371
Accumulated other comprehensive (loss) income (Note 19)	(29,511		)	239
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY	1,500,850			1,556,873
Noncontrolling interest	99,448			97,677
TOTAL SHAREHOLDERS’ EQUITY	1,600,298			1,654,550
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$2,861,051			$2,780,666

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except share data)



	Common Shares					Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non-controlling Interest			Shareholders’ Equity
	Shares		Amount			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non-controlling Interest			Shareholders’ Equity
Balance, January 1, 2019	129,488,675			$884,263			$672,371			$239			$97,677			$1,654,550
Net income	—		—			24,794			—			2,999			27,793
Dividends ($0.27 per share)	—		—			(35,049		)	—			—			(35,049		)
Issuance of shares under incentive stock plans	26,031		597			—			—			—			597
Stock-based compensation	—		1,477			—			—			—			1,477
Repurchase of common shares	(1,140	)	(33		)	—			—			—			(33		)
Amortization of pension and postretirement plan liabilities	—		—			—			112			—			112
Foreign currency translation adjustment	—		—			—			4,680			1,353			6,033
Cash flow hedges	—		—			—			(10,884		)	198			(10,686		)
Distribution to minority shareholder	—		—			—			—			(3,594		)	(3,594		)
Balance, March 31, 2019	129,513,566			$886,304			$662,116			($5,853	)		$98,633			$1,641,200
Net income	—		—			18,752			—			2,168			20,920
Dividends ($0.27 per share)	—		—			(35,125		)	—			—			(35,125		)
Issuance of shares under incentive stock plans	250,344		177			—			—			—			177
Stock-based compensation	—		2,344			—			—			—			2,344
Repurchase of common shares	(134,194	)	(4,207		)	—			—			—			(4,207		)
Amortization of pension and postretirement plan liabilities	—		—			—			112			—			112
Foreign currency translation adjustment	—		—			—			(4,305		)	(1,299		)	(5,604		)
Cash flow hedges	—		—			—			(19,465		)	(54		)	(19,519		)
Balance, June 30, 2019	129,629,716			$884,618			$645,743			($29,511	)		$99,448			$1,600,298

Table of Contents



	Common Shares					Retained Earnings			Accumulated Other Comprehensive Income			Non-controlling Interest			Shareholders’ Equity
	Shares		Amount			Retained Earnings			Accumulated Other Comprehensive Income			Non-controlling Interest			Shareholders’ Equity
Balance, January 1, 2018	128,970,776			$872,228			$707,378			$13,417			$99,917			$1,692,940
Net income	—		—			40,539			—			2,167			42,706
Dividends ($0.25 per share)	—		—			(32,634		)	—			—			(32,634		)
Issuance of shares under incentive stock plans	204,336		5,455			—			—			—			5,455
Stock-based compensation	—		1,262			—			—			—			1,262
Repurchase of common shares	(811	)	(18		)	—			—			—			(18		)
Amortization of pension and postretirement plan liabilities	—		—			—			159			—			159
Foreign currency translation adjustment	—		—			—			7,606			2,082			9,688
Cash flow hedges	—		—			—			16,381			234			16,615
Balance, March 31, 2018	129,174,301			$878,927			$715,283			$37,563			$104,400			$1,736,173
Net income	—		—			36,258			—			3,080			39,338
Dividends ($0.27 per share)	—		—			(35,213		)	—			—			(35,213		)
Issuance of shares under incentive stock plans	357,139		2,369			—			—			—			2,369
Stock-based compensation	—		2,212			—			—			—			2,212
Repurchase of common shares	(80,172	)	(2,948		)	—			—			—			(2,948		)
Amortization of pension and postretirement plan liabilities	—		—			—			178			—			178
Foreign currency translation adjustment	—		—			—			(22,857		)	(6,903		)	(29,760		)
Cash flow hedges	—		—			—			1,717			(1,189		)	529
Balance, June 30, 2018	129,451,268			$880,560			$716,328			$16,601			$99,388			$1,712,877

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



	Six Months Ended June 30,
	2019			2018
OPERATING ACTIVITIES
Net income		$48,713			$82,043
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization	64,093			80,920
Non-cash cost of land and improved development	5,647			14,936
Stock-based incentive compensation expense	3,821			3,474
Deferred income taxes	7,257			13,653
Amortization of losses from pension and postretirement plans	224			338
Other	987			(5,466		)
Changes in operating assets and liabilities:
Receivables	(21,031		)	(26,203		)
Inventories	(994		)	1,014
Accounts payable	5,558			4,448
Income tax receivable/payable	—			(84		)
All other operating activities	2,679			12,510
CASH PROVIDED BY OPERATING ACTIVITIES	116,954			181,583
INVESTING ACTIVITIES
Capital expenditures	(29,505		)	(25,920		)
Real estate development investments	(999		)	(4,501		)
Purchase of timberlands	(26,396		)	(31,234		)
Other	(3,888		)	113
CASH USED FOR INVESTING ACTIVITIES	(60,788		)	(61,542		)
FINANCING ACTIVITIES
Issuance of debt	—			1,014
Repayment of debt	—			(54,389		)
Dividends paid	(71,107		)	(67,053		)
Proceeds from the issuance of common shares under incentive stock plan	774			7,824
Repurchase of common shares	(4,241		)	(2,966		)
Distribution to minority shareholder	(3,594		)	—
Other	133			—
CASH USED FOR FINANCING ACTIVITIES	(78,035		)	(115,570		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	125			(578		)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash	(21,744		)	3,893
Balance, beginning of year	156,454			172,356
Balance, end of period		$134,710			$176,249
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest (a)		$14,377			$14,858
Income taxes	705			302
Non-cash investing activity:
Capital assets purchased on account	3,407			6,646


(a)	Interest paid is presented net of patronage payments received of $4.0 million and $3.8 million for the six months ended June 30, 2019 and June 30, 2018, respectively. For additional information on patronage payments, see Note 5 — Debt in the 2018 Form 10-K.

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)


1.	BASIS OF PRESENTATION

The unaudited 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 (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet information was derived from audited financial statements not included herein. In the opinion of management, these financial statements and notes reflect any adjustments (all of which are normal recurring 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, 2018, as filed with the SEC (the “2018 Form 10-K”).

SUMMARY OF UPDATES TO SIGNIFICANT ACCOUNTING POLICIES

For information on updated significant accounting policies due to the adoption of ASC 842, see Note 3 — Leases. For a full description of our other significant accounting policies, see Note 1 — Basis of Presentation in the 2018 Form 10-K.

RECENTLY ADOPTED STANDARDS

ASU 2016-02 (ASC 842)

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), on January 1, 2019 and elected to apply the standard as of that day. As such, the Consolidated Balance Sheet as of June 30, 2019 includes right-of-use assets and lease liabilities related to the rights and obligations created by the Company’s long-term leases. Prior periods have not been restated.

The Company applied the following practical expedients in the transition to the new standard as allowed under ASC 842-10-65-1:



Practical Expedient		Description
Reassessment of expired or existing contracts		The Company elected not to reassess, at the application date, whether any expired or existing contracts contained leases, the lease classification for any expired or existing leases, and the accounting for initial direct costs for any existing leases.
Use of hindsight		The Company elected to use hindsight in determining the lease term (that is, when considering options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of right-to-use assets.
Reassessment of existing or expired land easements		The Company elected not to evaluate existing or expired land easements that were not previously accounted for as leases under ASC 840, as allowed under the transition practical expedient. Going forward, new or modified land easements will be evaluated under ASU No. 2016-02.

See Note 3 — Leases for additional qualitative and quantitative disclosures required under ASU No. 2016-02.

OTHER RECENTLY ADOPTED STANDARDS

The Company adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities in the first quarter ended March 31, 2019 with no material impact on the consolidated financial statements.

The Company adopted ASU No 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting in the first quarter ended March 31, 2019 with no impact on the consolidated financial statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

NEW ACCOUNTING STANDARDS

During the six months ended June 30, 2019, the Financial Accounting Standards Board (“FASB”) has not issued any Accounting Standard Updates which are expected to have a material retrospective or future effect on the consolidated financial statements.

SUBSEQUENT EVENTS

The Company has evaluated events occurring from June 30, 2019 to the date of issuance of these Consolidated Financial Statements for potential recognition or disclosure in the consolidated financial statements. No events were identified that warranted recognition or disclosure.

2. REVENUE

PERFORMANCE OBLIGATIONS

The Company recognizes revenues when control of promised goods or services (“performance obligations”) is transferred to customers, in an amount that reflects the consideration expected in exchange for those goods or services (“transaction price”). The Company generally satisfies performance obligations within a year of entering into a contract and therefore has applied the disclosure exemption found under ASC 606-10-50-14. Unsatisfied performance obligations as of June 30, 2019 are primarily due to advances on stumpage contracts and unearned license revenue. These performance obligations are expected to be satisfied within the next twelve months. The Company generally collects payment within a year of satisfying performance obligations and therefore has elected not to adjust revenues for a financing component.

CONTRACT BALANCES

The timing of revenue recognition, invoicing and cash collections results in accounts receivable and deferred revenue (contract liabilities) on the Consolidated Balance Sheets. Accounts receivable are recorded when the Company has an unconditional right to consideration for completed performance under the contract. Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.

The following table summarizes revenue recognized during the three and six months ended June 30, 2019 and 2018 that was included in the contract liability balance at the beginning of each year:

Three Months Ended June 30,