SEC Filing | Rayonier Inc.

View:

ryn-20210630

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, 2021


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


			For the transition period from to

RAYONIER INC.

(Exact name of registrant as specified in its charter)

North Carolina

1-6780

13-2607329

(State or other Jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification Number)

Rayonier, L.P.

(Exact name of registrant as specified in its charter)

Delaware

333-237246

91-1313292

(State or other Jurisdiction of incorporation or organization)

(Commission File Number)

(I.R.S. Employer Identification Number)

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, of Rayonier Inc.	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.

Rayonier Inc. Yes ☒ No ☐ Rayonier, L.P. 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).

Rayonier Inc. Yes ☒ No ☐ Rayonier, L.P. 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.

Rayonier Inc.

Large Accelerated Filer

☒

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Rayonier, L.P.

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.

Rayonier Inc. ☐ Rayonier, L.P. ☐

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

Rayonier Inc. Yes ☐ No ☒ Rayonier, L.P. Yes ☐ No ☒

As of July 30, 2021, Rayonier Inc. had 141,325,002 Common Shares outstanding. As of July 30, 2021, Rayonier, L.P. had 4,267,327 Units outstanding.

Table of Contents

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the quarterly period ended June 30, 2021 of Rayonier Inc., a North Carolina corporation, and Rayonier, L.P., a Delaware limited partnership. Unless stated otherwise or the context otherwise requires, references to “Rayonier” or “the Company” mean Rayonier Inc. and references to the “Operating Partnership” mean Rayonier, L.P. References to “we,” “us,” and “our” mean collectively Rayonier Inc., the Operating Partnership and entities/subsidiaries owned or controlled by Rayonier Inc. and/or the Operating Partnership.

Rayonier Inc. has elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 2004. The Company is structured as an umbrella partnership REIT (“UPREIT”) under which substantially all of its business is conducted through the Operating Partnership. Rayonier Inc. is the sole general partner of the Operating Partnership. On May 8, 2020, Rayonier, L.P. acquired Pope Resources, a Delaware Limited Partnership (“Pope Resources”) and issued approximately 4.45 million operating partnership units (“OP Units” or “Redeemable Operating Partnership Units”) of Rayonier, L.P. as partial merger consideration. These OP Units are generally considered to be economic equivalents to Rayonier common shares and receive distributions equal to the dividends paid on Rayonier common shares. See Note 2 - Merger with Pope Resources for additional information pertaining to the merger.

As of June 30, 2021, the Company owned a 97.1% interest in the Operating Partnership, with the remaining 2.9% interest owned by limited partners of the Operating Partnership. As the sole general partner of the Operating Partnership, Rayonier Inc. has exclusive control of the day-to-day management of the Operating Partnership.

Rayonier Inc. and the Operating Partnership are operated as one business. The management of the Operating Partnership consists of the same members as the management of Rayonier Inc. As general partner with control of the Operating Partnership, Rayonier Inc. consolidates Rayonier, L.P. for financial reporting purposes, and has no material assets or liabilities other than its investment in the Operating Partnership.

We believe combining the quarterly reports of Rayonier Inc. and Rayonier, L.P. into this single report results in the following benefits:

•Strengthens investors’ understanding of Rayonier Inc. and the Operating Partnership by enabling them to view the business as a single operating unit in the same manner as management views and operates the business;

•Creates efficiencies for investors by reducing duplicative disclosures and providing a single comprehensive document; and

•Generates time and cost savings associated with the preparation of the reports when compared to preparing separate reports for each entity.

There are a few important differences between Rayonier Inc. and the Operating Partnership in the context of how Rayonier Inc. operates as a consolidated company. The Company itself does not conduct business, other than through acting as the general partner of the Operating Partnership and issuing equity or equity-related instruments from time to time. The Operating Partnership holds, directly or indirectly, substantially all of the Company’s assets. Likewise, all debt is incurred by the Operating Partnership or entities/subsidiaries owned or controlled by the Operating Partnership. The Operating Partnership conducts substantially all of the Company’s business and is structured as a partnership with no publicly traded equity.

To help investors understand the significant differences between the Company and the Operating Partnership, this report includes:

•Separate Consolidated Financial Statements for Rayonier Inc. and Rayonier, L.P.;

•A combined set of Notes to the Consolidated Financial Statements with separate discussions of per share and per unit information, noncontrolling interests and shareholders’ equity and partners’ capital, as applicable;

•A combined Management’s Discussion and Analysis of Financial Condition and Results of Operations which includes specific information related to each reporting entity;

Table of Contents

•A separate Part 1, Item 4. Controls and Procedures related to each reporting entity;

•A separate Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds section related to each reporting entity; and

•Separate Exhibit 31 and 32 certifications for each reporting entity within Part II, Item 6.

Table of Contents

TABLE OF CONTENTS


Item		Page
	PART I - FINANCIAL INFORMATION
1.	Financial Statements (unaudited)	1
	Rayonier Inc.:
	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020	1
	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	2
	Consolidated Statements of Changes in Shareholders’ Equity for the Quarters and Six Months Ended June 30, 2021 and 2020	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	5
	Rayonier, L.P.:
	Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020	6
	Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	7
	Consolidated Statements of Changes in Capital for the Quarters and Six Months Ended June 30, 2021 and 2020	8
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	10
	Notes to Consolidated Financial Statements	11
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	47
3.	Quantitative and Qualitative Disclosures about Market Risk	74
4.	Controls and Procedures	76
	PART II - OTHER INFORMATION
1.	Legal Proceedings	77
2.	Unregistered Sales of Equity Securities and Use of Proceeds	78
6.	Exhibits	79
	Signatures	80

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,
	2021	2020	2021	2020
SALES (NOTE 4)	$291,431	$195,630	$482,878	$454,760
Costs and Expenses
Cost of sales	(194,250)	(154,891)	(345,628)	(364,390)
Selling and general expenses	(14,693)	(12,570)	(28,725)	(22,538)
Other operating income (expense), net (Note 18)	1,956	(16,483)	4,404	(17,594)
	(206,987)	(183,944)	(369,949)	(404,522)
OPERATING INCOME	84,444	11,686	112,929	50,238
Interest expense	(13,000)	(9,820)	(23,027)	(18,036)
Interest and other miscellaneous (expense) income, net	(1,144)	1,579	(1,148)	1,370
INCOME BEFORE INCOME TAXES	70,300	3,445	88,754	33,572
Income tax expense (Note 20)	(6,880)	(2,990)	(10,302)	(6,696)
NET INCOME	63,420	455	78,452	26,876
Less: Net income attributable to noncontrolling interests in the Operating Partnership	(1,753)	(219)	(2,094)	(219)
Less: Net (income) loss attributable to noncontrolling interests in consolidated affiliates	(4,461)	1,499	(8,304)	931
NET INCOME ATTRIBUTABLE TO RAYONIER INC.	57,206	1,735	68,054	27,588
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of income tax effect of $0, $0, $0, and $0	1,239	23,258	(13,048)	(20,765)
Cash flow hedges, net of income tax effect of $315, $1,741, $1,374 and $116	(10,019)	(7,276)	50,982	(90,751)
Amortization of pension and postretirement plans, net of income tax expense of $0, $0, $0 and $0	294	217	587	434
Total other comprehensive (loss) income	(8,486)	16,199	38,521	(111,082)
COMPREHENSIVE INCOME (LOSS)	54,934	16,654	116,973	(84,206)
Less: Comprehensive income attributable to noncontrolling interests in the Operating Partnership	(1,499)	(676)	(3,371)	(676)
Less: Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates	(4,490)	(4,917)	(5,070)	5,743
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER INC.	$48,945	$11,061	$108,532	($79,139)
EARNINGS PER COMMON SHARE (NOTE 8)
Basic earnings per share attributable to Rayonier Inc.	$0.41	$0.01	$0.49	$0.21
Diluted earnings per share attributable to Rayonier Inc.	$0.41	$0.01	$0.49	$0.21

See Notes to Consolidated Financial Statements.

Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)


	June 30, 2021	December 31, 2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents, excluding Timber Funds	$309,839	$80,454
Cash and cash equivalents, Timber Funds	4,469	4,053
Total cash and cash equivalents	314,308	84,507
Accounts receivable, less allowance for doubtful accounts of $70 and $25	51,819	49,082

Inventory (Note 17)	29,789	10,594

Prepaid expenses	20,040	16,168
Assets held for sale (Note 23)	111,282	3,449
Other current assets	3,716	6,765
Total current assets	530,954	170,565
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION	3,135,519	3,262,126
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS (NOTE 16)	103,564	108,518
PROPERTY, PLANT AND EQUIPMENT
Land	6,569	6,548
Buildings	31,047	31,024
Machinery and equipment	4,396	4,615
Construction in progress	521	452
Total property, plant and equipment, gross	42,533	42,639
Less — accumulated depreciation	(13,449)	(12,238)
Total property, plant and equipment, net	29,084	30,401
RESTRICTED CASH (NOTE 22)	702	2,975
RIGHT-OF-USE ASSETS	109,221	108,992
OTHER ASSETS	50,225	45,156
TOTAL ASSETS	$3,959,269	$3,728,733
LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$29,226	$24,790

Current maturities of long-term debt, net, excluding Timber Funds (Note 9)	199,830	—

Accrued taxes	14,564	7,347

Accrued payroll and benefits	8,878	12,327
Accrued interest	7,081	6,325
Deferred revenue	23,259	11,112
Other current liabilities	27,355	29,234
Total current liabilities	310,193	91,135
LONG-TERM DEBT, NET, EXCLUDING TIMBER FUNDS (NOTE 9)	1,192,888	1,300,336
LONG-TERM DEBT, NET, TIMBER FUNDS (NOTE 9)	59,755	60,179
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 19)	22,568	23,344
LONG-TERM LEASE LIABILITY	100,860	100,251
OTHER NON-CURRENT LIABILITIES	122,017	160,722
COMMITMENTS AND CONTINGENCIES (NOTES 12 and 13)
NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP (NOTE 6)	153,505	130,121
SHAREHOLDERS’ EQUITY
Common Shares, 480,000,000 shares authorized,141,319,907 and 137,678,822 shares issued and outstanding	1,231,224	1,101,675
Retained earnings	411,531	446,267
Accumulated other comprehensive loss (Note 21)	(33,407)	(73,885)
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY	1,609,348	1,474,057
Noncontrolling interests in consolidated affiliates (Note 6)	388,135	388,588
TOTAL SHAREHOLDERS’ EQUITY	1,997,483	1,862,645
TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY	$3,959,269	$3,728,733

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	Noncontrolling Interests in Consolidated Affiliates	Shareholders’ Equity
	Shares	Amount
Balance, January 1, 2021	137,678,822	$1,101,675	$446,267	($73,885)	$388,588	$1,862,645
Net income	—	—	11,189	—	3,843	15,032
Net income attributable to noncontrolling interests in the Operating Partnership	—	—	(341)	—	—	(341)
Dividends ($0.27 per share) (a)	—	—	(37,532)	—	—	(37,532)
Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $197	1,107,814	36,708	—	—	—	36,708
Issuance of shares under incentive stock plans	39,140	1,166	—	—	—	1,166
Stock-based compensation	—	2,156	—	—	—	2,156
Repurchase of common shares	(5,020)	(155)	—	—	—	(155)
Measurement period adjustment of noncontrolling interests in consolidated affiliates	—	—	—	—	655	655
Adjustment of noncontrolling interests in the Operating Partnership	—	—	(11,867)	—	—	(11,867)
Conversion of units into common shares	150,134	4,715	—	—	—	4,715
Amortization of pension and postretirement plan liabilities	—	—	—	294	—	294
Foreign currency translation adjustment	—	—	—	(11,652)	(2,636)	(14,288)
Cash flow hedges	—	—	—	61,628	(627)	61,001
Allocation of other comprehensive income to noncontrolling interests in the Operating Partnership	—	—	—	(1,531)	—	(1,531)
Distributions to noncontrolling interests in consolidated affiliates	—	—	—	—	(8,737)	(8,737)
Balance, March 31, 2021	138,970,890	$1,146,265	$407,716	($25,146)	$381,086	$1,909,921
Net income	—	—	58,959	—	4,461	63,420
Net income attributable to noncontrolling interests in the Operating Partnership	—	—	(1,753)	—	—	(1,753)
Dividends ($0.27 per share) (a)	—	—	(37,981)	—	—	(37,981)
Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $927	2,199,459	79,994	—	—	—	79,994
Issuance of shares under incentive stock plans	185,544	3,325	—	—	—	3,325
Stock-based compensation	—	2,852	—	—	—	2,852
Repurchase of common shares	(42,425)	(1,453)	—	—	—	(1,453)
Measurement period adjustment of noncontrolling interests in consolidated affiliates	—	—	—	—	9,034	9,034
Adjustment of noncontrolling interests in the Operating Partnership	—	—	(15,410)	—	—	(15,410)
Conversion of units into common shares	6,439	241	—	—	—	241
Amortization of pension and postretirement plan liabilities	—	—	—	294	—	294
Foreign currency translation adjustment	—	—	—	1,025	214	1,239
Cash flow hedges	—	—	—	(9,833)	(186)	(10,019)
Allocation of other comprehensive income to noncontrolling interests in the Operating Partnership	—	—	—	253	—	253
Distributions to noncontrolling interests in consolidated affiliates	—	—	—	—	(6,474)	(6,474)
Balance, June 30, 2021	141,319,907	$1,231,224	$411,531	($33,407)	$388,135	$1,997,483

Table of Contents

Common Shares

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Noncontrolling Interests in Consolidated Affiliates

Shareholders’
Equity

Amount