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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ........... to ............
COMMISSION FILE NUMBER 1-6780
RAYONIER INC.
Incorporated in the State of North Carolina
I.R.S. Employer Identification Number l3-2607329
l177 Summer Street, Stamford, Connecticut 06905-5529
(Principal Executive Office)
Telephone Number: (203) 348-7000
Indicate by check mark whether the registrant (l) has filed all
reports required to be filed by Section l3 or l5(d) of the
Securities Exchange Act of l934 during the preceding l2 months
and (2) has been subject to such filing requirements for the past
90 days.
YES (X) NO ( ).
As of August 5, 1994, there were outstanding 29,569,307 Common Shares
of the Registrant.
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RAYONIER INC.
TABLE OF CONTENTS
PAGE
PART I.FINANCIAL INFORMATION
Item l.Financial Statements
Statements of Consolidated Income for the
Second Quarter and the Six Months
Ended June 30, 1994 and 1993 1
Consolidated Balance Sheets as of June 30, 1994
and December 3l, 1993 2
Statements of Consolidated Cash Flows for the
Six Months Ended June 30, 1994 and 1993 3
Item 2.Management's Discussion and Analysis
of Financial Condition and Results of Operations 4-6
Item 3.Selected Operating Data 7
PART II. OTHER INFORMATION
Item 1.Legal Proceedings 8
Item 6.Exhibits and Reports on Form 8-K 8
Signature 8
Exhibit Index 9-10
i
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PART I. FINANCIAL INFORMATION
Item l. Financial Statements
The following unaudited financial statements reflect, in the opinion of
Rayonier Inc. (the Company), all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of
operations, the financial position and the cash flows for the periods
presented. Certain reclassifications have been made to prior year's
financial statements to conform to current year presentation. For a full
description of accounting policies, see notes to financial statements in
the l993 annual report on Form l0-K.
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(unaudited)
(thousands of dollars, except per share data)
<TABLE>
<CAPTION> Six Months Ended
Second Quarter June 30,
------------------ -------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $250,770 $256,575 $508,497 $472,895
Costs and expenses
Cost of sales 210,222 201,577 409,354 374,836
Selling and general
expenses 7,545 7,001 14,253 13,701
Other operating
income, net (2,228) (753) (1,513) (1,041)
------- ------- ------- -------
Total costs and expenses 215,539 207,825 422,094 387,496
------- ------- ------- -------
Operating income 35,231 48,750 86,403 85,399
Interest expense (7,845) (5,848) (14,591) (11,222)
Interest and
miscellaneous income,
net 751 216 1,284 595
Minority interest (6,295) (5,996) (17,371) (12,236)
------- ------- ------- -------
Income before income taxes 21,842 37,122 55,725 62,536
Income taxes (7,728) (12,332) (19,892) (20,926)
------- ------- ------- -------
Net income $ 14,114 $ 24,790 $ 35,833 $ 41,610
======= ======= ======= =======
Net income per Common
Share $0.48 $0.84 $1.21 $1.41
======= ======= ======= =======
Weighted average Common
Shares outstanding 29,670,364 29,565,392 29,652,744 29,565,392
========== ========== ========== ==========
</TABLE>
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RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands of dollars)
ASSETS
<TABLE>
<CAPTION> June 30, December 31,
1994 1993
---------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 9,357 $ 5,989
Accounts receivable, less allowance for
doubtful accounts of $4,446 and $4,268 108,906 82,696
Inventories
Finished goods 47,902 46,516
Work in process 19,355 16,235
Raw materials 44,047 44,057
Manufacturing and maintenance supplies 28,730 26,751
------- -------
Total inventories 140,034 133,559
Deferred income taxes 7,749 10,498
Prepaid timber stumpage 71,014 55,770
Other current assets 11,357 10,752
------- -------
Total current assets 348,417 299,264
OTHER ASSETS 26,979 24,025
TIMBER STUMPAGE 20,271 12,480
TIMBER, TIMBERLANDS AND LOGGING ROADS,
NET OF DEPLETION AND AMORTIZATION 470,816 470,077
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment 1,176,141 1,149,447
Less - accumulated depreciation 507,576 480,518
--------- ---------
Net property plant and equipment 668,565 668,929
--------- ---------
TOTAL ASSETS $1,535,048 $1,474,775
========= =========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 84,269 $ 67,783
Bank loans and current maturities
of long-term debt 34,223 182,003
Accrued taxes 8,779 2,480
Accrued payroll and benefits 22,359 18,525
Other current liabilities 29,821 39,776
Current reserves for dispositions and
discontinued operations 23,772 27,280
--------- ---------
Total current liabilities 203,223 337,847
DEFERRED INCOME TAXES 128,237 126,176
LONG-TERM DEBT 503,937 316,138
NONCURRENT RESERVES FOR DISPOSITIONS AND
DISCONTINUED OPERATIONS (Net of discontinued
operations' assets of $12,485 and $12,986) 30,836 35,920
OTHER NONCURRENT LIABILITIES 16,571 15,741
MINORITY INTEREST 20,687 36,649
COMMON SHAREHOLDERS' EQUITY
Common Shares, 60 million shares authorized,
29,569,307 and 29,565,392 shares issued and
outstanding 157,490 157,426
Retained earnings 474,067 448,878
--------- ---------
Total common shareholders' equity 631,557 606,304
--------- ---------
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY $1,535,048 $1,474,775
========= =========
</TABLE>
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RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For Six Months Ended June 30, 1994 and 1993
(unaudited)
(thousands of dollars)
<TABLE>
<CAPTION> 1994 1993
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 35,833 $ 41,610
Non-cash items included in income
Depreciation, depletion and amortization 45,448 38,431
Deferred portion of provision for income taxes 2,451 5,557
Increase (decrease) in other noncurrent liabilities 830 (429)
Change in accounts receivable, inventories
and accounts payable (16,199) (35,846)
Increase in prepaid timber stumpage (15,244) (22,276)
Increase in accrued taxes 6,299 10,436
Change in reserves for dispositions and discontinued
operations (2,252) -
Other changes in working capital (6,726) (1,590)
------- -------
Cash from operating activities 50,440 35,893
======= =======
INVESTING ACTIVITIES
Capital expenditures net of sales and retirements
of $220 and $84 (45,823) (32,204)
Expenditures for dispositions and discontinued
operations, net of tax benefits of $2,359 and
$6,843 (3,981) (11,546)
Change in other assets and long-term timber stumpage (10,745) (4,858)
------- -------
Cash used for investing activities (60,549) (48,608)
======= =======
FINANCING ACTIVITIES
Issuance of debt 188,000 78,635
Repayments of debt (147,981) (48,893)
Dividends (10,644) (24,472)
Issuance of common shares 64 -
(Decrease) increase in minority interest (15,962) 598
------- ------
Cash used for financing activities 13,477 5,868
======= ======
CASH AND SHORT-TERM INVESTMENTS
Increase (decrease) during the period 3,368 (6,847)
Balance at beginning of period 5,989 10,731
----- -----
Balance at end of period $ 9,357 $ 3,884
===== =====
Supplemental disclosures of cash flow information
Cash paid (received) during the period for
Interest $ 15,685 $ 12,566
====== ======
Income taxes, net of refunds $ 11,316 $ (3,822)
====== ======
</TABLE>
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The amounts and relative contributions to sales and operating income
attributable to each of Rayonier's business segments for the quarters and
six months ended June 30, 1994 and 1993 were as follows (thousands of
dollars):
<TABLE>
<CAPTION>
Six Months
Second Quarter, Ended June 30,
-------------- --------------
Sales 1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Timber and Wood Products:
Log Trading and Merchandising $ 85,117 $104,432 $160,709 $175,241
Timberlands Management and
Stumpage (Standing Timber) 35,007 31,279 90,286 63,337
Wood Products 21,155 10,204 40,383 20,296
------- ------- ------- -------
Total Before Intrasegment
Eliminations 141,279 145,915 291,378 258,874
Intrasegment Eliminations (5,334) (2,762) (9,830) (7,266)
------- ------- ------- -------
Total Timber and Wood Products 135,945 143,153 281,548 251,608
Specialty Pulp Products:
Chemical Cellulose 74,114 68,726 145,121 134,551
Fluff and Specialty Paper Pulps 41,518 46,740 83,566 93,176
------- ------- ------- -------
Total Specialty Pulp Products 115,632 115,466 228,687 227,727
Intersegment Eliminations (807) (2,044) (1,738) (6,440)
------- ------- ------- -------
Total Sales $250,770 $256,575 $508,497 $472,895
======= ======= ======= =======
Operating Income
Timber and Wood Products $ 37,938 $ 52,081 $ 91,428 $ 89,890
Specialty Pulp Products (1,001) (1,122) (469) 1,381
Corporate and Other (1,749) (1,951) (4,652) (3,864)
Intersegment Eliminations 43 (258) 96 (2,008)
------- ------- ------- -------
Total Operating Income $ 35,231 $ 48,750 $ 86,403 $ 85,399
======= ======= ======= =======
</TABLE>
Results of Operations
- ---------------------
Sales and Operating Income
- --------------------------
Sales of $251 million for the second quarter of 1994 were $6 million or 2
percent lower than the second quarter of 1993, however operating income of
$35 million for the quarter decreased $14 million or 28 percent from last
year's level primarily as a result of reduced margins in export log
activities. Sales for the six months ended June 30, 1994 were $508
million, increasing $36 million or 8 percent from the prior year with first
half operating income of $86 million increasing $1 million.
Timber and Wood Products
- ------------------------
Timber and Wood Products sales of $136 million in the second quarter were
down $7 million or 5 percent from the same period of 1993. Operating
income for the quarter of $38 million was down $14 million from the prior
year primarily due to lower margins on logs sold from North America.
Lower prices and reduced export volume in the Company's North American log
trading and merchandising business more than offset increased wood products
sales and margins. Standing timber sales from the Company's U.S.
timberlands improved as harvest price increases offset a small decline in
volume. In New Zealand, log prices remain below last year as a result of
softening in Far East export markets. Despite these generally weaker
markets, sales activity was sufficient to support a continuing increase in
harvest volume from Company owned forests in New Zealand.
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Sales for the first half of $282 million increased $30 million over 1993's
comparable period with operating income for the segment of $91 million
increasing slightly over 1993's level. Strong first quarter activity in
the Company's Northwest U.S. timberland management region, where first
quarter volume and prices were significantly greater than that of the prior
year, offset reduced second quarter log trading income resulting in
comparable first half operating income levels.
Specialty Pulp Products
- -----------------------
Second quarter sales for the Specialty Pulp Products segment of $116
million were equal to that of the prior year's level with improved sales
volumes offsetting lower chemical cellulose and fluff pulp prices.
Operating income was close to break-even in the second quarter, and
slightly ahead of the second quarter of 1993. Some production shortfalls
occurred following spring maintenance shutdowns at both the Jesup, Georgia,
and Fernandina Beach, Florida pulp mills as well as some wood cost related
market downtime at the Port Angeles, Washington, mill early in the quarter.
For the six month period ended June 30, 1994, sales of the Specialty Pulp
Products segment were $229 million, increasing $1 million from 1993, with
stronger shipments offsetting lower pulp prices. The year over year
decline in pulp prices reflected the continuation into 1994 of the downward
trend in prices caused by excess capacity in the pulp industry and weak
domestic and international markets during the past few years. However,
demand for most of the Company's pulp products was strong, particularly as
the second quarter progressed. As a result, price increases in fluff and
some specialty pulp grades have been implemented for the third quarter.
Intersegment
- ------------
Intersegment sales were $1 million in the second quarter of 1994 and $2
million in the first half of 1994 declining $1 million and $5 million,
respectively, from the comparable periods of 1993 due to significantly
lower volume of stumpage sales from the Timber and Wood Products segment to
the Specialty Pulp Products segment.
Other Items
- -----------
Interest expense of $15 million in the first half of 1994 increased $3
million over 1993 primarily as a result of additional debt incurred by the
Company to finance a $90 million special dividend to the Company's former
parent ITT Corporation (ITT) in December 1993, to settle intercompany
accounts with ITT and to fund an increase in working capital.
Minority interest in the earnings of Rayonier's subsidiary, Rayonier
Timberlands, L.P. (RTLP), increased $5 million to $17 million in the first
half of 1994 due to significantly higher partnership earnings in the first
quarter resulting from the increased stumpage volume and prices in the
Company's Northwest U.S. timberland management region.
Net Income
- ----------
Net income for the second quarter was $14 million or $0.48 per common
share, decreasing $11 million from 1993's level of $25 million or $0.84 per
common share. Net income for the six months ended June 30, 1994 was $36
million or $1.21 per common share, decreasing $6 million from 1993's net
income of $42 million or $1.41 per common share
Liquidity and Capital Resources
- -------------------------------
Cash flow from operating activities was $50 million in the first half of
1994 versus $36 million in 1993 with net income and non-cash charges in
both years partially used to fund increased working capital requirements.
Cash from operating activities along with an increase in debt of $40
million were used to fund capital expenditures of $46 million, dividends of
$11 million paid to holders of Rayonier Common Shares, a special
distribution of $20 million paid to the minority unitholders of RTLP and $4
million (after tax benefits) of environmental remediation and other closure
costs relating to discontinued operations and units held for disposition.
EBITDA (defined as earnings before interest expense, income taxes and
depreciation, depletion and amortization) for the first half of 1994 of
$116 million increased $4 million over the comparable period of 1993. Free
cash flow (EBITDA less capital expenditures) was $70 million compared to
$80 million in 1993. After cash payments for interest of $16 million,
common dividends of $11 million, gross expenditures for dispositions and
discontinued operations of $6 million and income tax payments of $11
<PAGE>
<PAGE>
million, net cash flow was insufficient to fund the $20 million special
distribution of RTLP and to fund $46 million in working capital, timber
purchases and other operating requirements. As a result, the Company's
debt increased in the first half of 1994 by $40 million to $538 million.
The Company's June 30, 1994 debt/capital ratio of 46 percent increased only
one percentage point from the December 31, 1993 level.
In April 1994, the Company closed on revolving credit agreements with a
group of banks which provide the Company with unsecured credit facilities
totaling $300 million. The Company borrowed $88 million under these credit
facilities during the second quarter mostly to repay short-term debt. The
Company also issued $100 million of commercial paper in the second quarter
under a newly implemented commercial paper program backed by the revolving
credit facilities. As a result of the refinancing described above, the
Company's net working capital position improved from negative net working
capital of $39 million at December 31, 1993 to positive net working capital
of $145 million at June 30, 1994.
As of June 30, 1994, the Company has available $112 million of unused
borrowings under its revolving credit facilities. In addition, through
currently effective shelf registration statements filed with the Securities
and Exchange Commission, the Company may offer up to $274 million of new
public debt securities as needs arise. The Company believes that internally
generated funds combined with available external financing will enable
Rayonier to fund capital expenditures, working capital and other liquidity
needs for the foreseeable future.
<PAGE>
<PAGE>
Item 3. Selected Operating Data
<TABLE>
<CAPTION> Six Months
Second Quarter Ended June 30,
-------------- --------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Timber and Wood Products
Log Sales
North America - million board feet 67 78 125 148
New Zealand - thousand cubic meters 413 362 827 636
Other - million board feet 3 - 5 -
Timber Harvested
Northwest U.S. - million board
feet 38 38 104 82
Southeast U.S. - thousand short
green tons 490 492 953 1,098
New Zealand - thousand cubic
meters 289 207 567 382
Lumber Sold - million board feet 56 29 105 58
Intercompany Sales
Northwest U.S. Timber Stumpage
- million board feet 6 6 14 16
Southeast U.S. Timber Stumpage
- thousand short green tons 19 47 46 224
Specialty Pulp Products
Chemical Cellulose - thousand
metric tons 107 92 204 179
Fluff and Specialty Paper Pulps
- thousand metric tons 87 89 176 170
Production as a Percentage
of Capacity 84% 87% 91% 88%
Selected Supplemental Information
(thousands of dollars)
New Zealand - Sales $25,933 $26,587 $50,848 $41,414
New Zealand - Operating Income $ 3,975 $10,022 $ 7,177 $14,527
</TABLE>
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the first paragraph under Item 3 - "Legal
Proceedings" in Rayonier's 1993 Form 10-K describing six cases in
which Rayonier and its wholly-owned subsidiary, Southern Wood Piedmont
Company (SWP) are defendants and which relate to former wood
preserving operations at SWP's plant located in Augusta, Georgia. A
seventh such case was filed as a class action lawsuit on July 22, 1994,
against Rayonier, SWP and ITT Corporation in the U.S. District Court
for the Southern District of Georgia seeking unspecified damages for
personal injury and $100 million in punitive damages. Counsel for the
Company continue to believe that the Company has meritorious defenses
in all of these cases.
SWP is also an intervenor in an action filed by the U.S. Environmental
Protection Agency ("EPA") in 1990 in the U.S. District Court for the
Western District of Louisiana against Marine Shale Processors, Inc.
("MSP"). The EPA claimed, among other things, that MSP's thermal
processing of certain materials, including over 200,000 tons of
materials containing hazardous waste from SWP, constituted the treatment
of hazardous waste without a permit and that MSP's facility required an
incinerator and storage permit under the Resource Conservation and
Recovery Act ("RCRA"). Because a proposed settlement by the EPA and MSP
of this action would have caused materials processed by MSP to be placed
in a landfill in breach of MSP's contract with SWP, SWP in 1993 sought
and was granted intervention to prevent the landfilling of processed
material and to establish the regulatory status of the material.
After SWP was granted intervention, the EPA filed a counterclaim against
SWP alleging it had shipped hazardous waste to an unlicensed hazardous
waste disposal facility. A jury verdict rendered in May 1994 held that
MSP had produced a product consistent with ceratin RCRA regulations
with material received from SWP as long as that material remained
unmixed with material received from other MSP customers; because such
a product cannot be considered a hazardous waste, this verdict helps
limit SWP's potential liability for material sent to MSP under the
Comprehensive Environmental Response, Compensation, and Liability Act.
It is possible that the EPA will appeal this verdict. The jury was
unable to agree on a verdict on the product status of material received
from other MSP customers and a new trial on that issue is scheduled for
the spring of 1995. A second phase of this litigation deals with the
EPA's claim that MSP did not have the necessary permits to store
hazardous waste prior to processing. On July 29, 1994, the Court
granted the EPA's motion for summary judgment against MSP on this
claim; counsel to SWP believes that this decision was erroneous
and will be reversed on appeal. In the meantime, trial on the issue of
whether SWP should be fined for sending hazardous waste to a facilty
which did not have a hazardous waste storage permit is scheduled to
commence on August 15, 1994. In this trial, the EPA is expected to seek
penalties exceeding $100,000. Because SWP had been furnished with
copies of correspondence from the Louisiana state agency to MSP
indicating that MSP had the authority to store waste from SWP, counsel
to SWP believe that any liability of SWP in this proceeding will not be
material and in any event will be covered by MSP's contractual
obligation to indemnify SWP to the extent that MSP remains financially
viable.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) Rayonier Inc. did not file any report on Form 8-K during the
quarter covered by this report.
SIGNATURE
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of l934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
RAYONIER INC. (Registrant)
BY GEORGE S. ARESON
----------------
George S. Areson
Acting Corporate Controller
August 10, 1994
<PAGE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
<S> <C> <C>
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
4 Instruments defining the rights of Not required
security The holders, including to be filed.
indentures The Registrant
hereby agrees
to file with
the Commission
a copy of any
instrument
defining the
rights of
holders of the
Registrant's
long-term debt
upon request of
the Commission.
10.1 Description of Rayonier 1994 Incentive Filed
Stock plan Contingent Performance herewith
Share Awards
10.2 Split-Dollar Life Insurance Agreement dated Filed
June 22, 1994 between Rayonier Inc. and herewith
Ronald M. Gross
10.3 Deferred Compensation/Supplemental Filed
Retirement Agreement dated June 28, 1994 herewith
between Rayonier Inc. and Ronald M. Gross
10.4 Other material contracts None
11 Statement re computation of per share Not
earnings required
12 Statement re computation of ratios Filed
herewith
15 Letter re unaudited interim financial None
information
</TABLE>
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
---------- ----------- --------
<S> <C> <C>
l8 Letter re change in accounting principles None
19 Report furnished to security holders None
22 Published report regarding matters None
submitted to vote of security holders
23 Consents of experts and counsel None
24 Power of attorney None
99 Additional exhibits None
</TABLE>
<PAGE>
EXHIBIT 10.1
RAYONIER INC.
Rayonier 1994 Incentive Stock Plan
Contingent Performance Share Awards
On May 20, 1994, the Compensation and Management Development Committee (the
"Committee") of the Board of Directors of Rayonier Inc. (the "Corporation")
granted contingent performance share awards to ten senior executives as a
part of the Corporation's 1994 Awards under the Rayonier 1994 Incentive
Stock Plan (the "Plan"). (A total of 88,500 Common Shares of the
Corporation have been reserved for this purpose from the 4,500,000 shares
registered on March 1, 1994 under the Plan on Form S-8.)
The actual number of Common Shares of the Corporation to which an executive
will become entitled as a result of the contingent performance share award
will depend on the performance of the Corporation as compared to the
performance of a peer group of Forest Products companies during the period
from May 20, 1994 through December 31, 1996, determined by comparing the
total share return (TSR) of the Corporation with that of the peer group.
The TSR will be calculated by measuring the growth in value of a
hypothetical investment of $100 in each of the peer companies, assuming
quarterly reinvestment of dividends. TSR values are based on the average
trading price over the twenty trading days preceding the relevant
measurement dates.
For a covered executive to earn 100% of the target contingent performance
share award granted, the Corporation's TSR performance over the measurement
period must be 120% of that of the peer group. No Common Shares are earned
unless the TSR performance of the Corporation is at least equal to 60% of
that of the peer group, in which case 50% of the target award is earned. A
maximum of 150% of the Common Shares reflected in the target contingent
performance share award granted are to be issued if the Corporation's TSR
performance exceeds 160% of peer group performance. (For a TSR within
these bands, the number of Common Shares earned is to be extrapolated.) If
100% of the target award is earned, the total number of Common Shares issued
will be 59,000; a maximum of 88,500 would be issued if 150% of the target is
earned. (Target awards will be prorated in cases of retirement, death or
disability subject to the provisions of the Plan.) Final payment, if any, is
to be made in Common Shares, offset by the cash needed to cover tax
liabilities.
The Committee has adopted Rules relating to the contingent performance share
awards, a copy of which are attached hereto.
The peer group of Forest Product companies is as follows:
Boise Cascade, Champion International, Georgia Pacific,
International Paper, James River Corporation, Mead Corporation,
Mosinee Paper, Plum Creek Timber LP, Union Camp, Westvaco Corporation,
Weyerhauser, Willamette
<PAGE>
<PAGE>
RAYONIER 1994 INCENTIVE STOCK PLAN
RULES ADOPTED BY THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE RELATING TO GRANTING OF
CONTINGENT PERFORMANCE SHARES
The following are the rules and regulations (the "Rules") adopted by the
Compensation and Management Development Committee (the "Committee") of the
Board of Directors of Rayonier Inc. ("Rayonier") for the administration of
Contingent Performance Share Awards under the provisions of the Rayonier 1994
Incentive Stock Plan (the "Plan"). The Rules have been adopted in
accordance with Section 6 and 11 of the Plan. Any or all of the Rules may
be amended or suspended by the Committee at any time without prior
notification to the Plan participants. In the event of any conflict between
the provisions of these Rules and the Plan, the Plan shall prevail.
1. Participation in the Contingent Performance Share Award program for the
1994 Class Year is restricted to select Rayonier executives. At the time
of award, the participant will be issued a Notice evidencing the grant of
a Contingent Performance Share Award and the criteria to be used to
calculate the ultimate payment value of the award upon vesting. The
amount of the Contingent Performance Share Award cited in such Notice
shall represent the number of contingent performance shares awarded and the
Share Award Valuation Formula. Such valuation shall be a function of
Rayonier Total Shareholder Return ("TSR") as measured against the
performance of a targeted peer group of companies for the designated
performance period.
The Committee reserves the right to add, delete or substitute a company in
the list of peer group companies at any time, if for any reason it
determines that such a change is appropriate to reflect the goals of the
Contingent Performance Share Award program. Without limiting the scope of
the foregoing, the Committee may remove a company from the peer group of
companies if the Committee determines that the share price of the stock of
that company has become too volatile or reflects unusual activity, such as
a tender offer or sale of significant assets or otherwise is inappropriate
to continue to be included in the peer group of companies.
2. Only active, full-time continuous service from the date of award through
the Vesting Date shall be considered for the purposes of vesting, except
that should a grantee die, become totally and permanently disabled or
retire after the award, but prior to the Vesting Date, vesting and payment
with respect to a particular Class Year award then remaining unvested,
shall be prorated, based upon the number of full months' lapsed since the
date of the Award. Prorata payment of the final Award values, if any,
will be based upon the final payment value of the Award applicable for
all participants, as determined on the regularly scheduled Vesting Date
for the particular Class Year Award.
3. In the event of voluntary termination of employment, other than for death,
permanent disability or retirement, as described above, and involuntary
termination for other than just cause, the provisions of Section 6(e) of
the Plan, relative to termination events, shall apply.
4. Notwithstanding the foregoing, the Committee, as requested by management,
reserves the right to determine vesting and payment in cases involving
unusual and special circumstances on an individual case basis.
These rules and regulations were adopted by the Committee at their meeting
of May 20, 1994 and will apply to all awards granted May 20, 1994 and to
future awards, and may be changed at any time by the Committee.
<PAGE>
<PAGE>
EXHIBIT 10.2
SPLIT-DOLLAR LIFE INSURANCE
AGREEMENT
THIS AGREEMENT is made as of the 22nd day of June, 1994, by and between
Rayonier, Inc. (the "Employer") and Ronald M. Gross (the "Subowner").
R E C I T A L S:
A. The Employer is a corporation duly organized and validly existing
under the laws of the state of its incorporation.
B. Ronald M. Gross (the "Employee") is a valued and trusted employee
of the Employer.
C. In consideration of the faithful performance of services by the
Employee for the Employer, the Employer wishes to benefit the
Employee by entering into a split-dollar life insurance
arrangement in accordance with the terms and conditions of this
Agreement.
D. The split-dollar arrangement provided for in this Agreement, which
the parties intend to satisfy the requirements of Rev. Rul. 64-328,
1964-2 C.B. 11, relates to life insurance policy number 6101942
(the "Policy") to be issued by Connecticut Mutual Life Insurance
Company or one of its subsidiaries (the "Insurer") on the life of
the Employee to be owned by the Employer subject to an endorsement
in favor of the Subowner.
NOW, THEREFORE, the parties mutually agree as follows:
1. Acquisition of Policy. The parties shall cooperate in applying
for and obtaining the Policy. The Policy shall be issued to the
Employer as owner with an endorsement granting to the Subowner the
rights described in Article 4 below.
2. Payment of Premiums. The Employer shall pay all of the premiums
due on the Policy.
3. Employer's Interest in Policy.
A. Employer's Interest. In consideration of the Employer's
premium payments under the split-dollar arrangement, the
Employer's Interest in the Policy shall at all times equal
the amount determined in accordance with the following
provisions. The Employer shall be entitled to recover the
Employer's Interest in the Policy in accordance with the terms
<PAGE>
<PAGE>
and conditions of this Agreement. In no event, however, shall
the Insurer be obligated to pay any amounts in excess of its
obligations under the terms of the Policy.
B. Termination of Agreement. Upon the termination of this
Agreement, the Employer's Interest in the Policy shall be an
amount equal to the Cash Surrender Value (as hereinafter
defined) at such time.
C. Death of Insured. Upon the death of the Insured, the
Employer's Interest in the Policy shall be an amount equal to
the greater of Aggregate Premiums Paid or the Cash Surrender
Value at such time.
D. Definitions. For purposes of this Agreement:
(i) The Cash Surrender Value of the Policy at any time equals
at such time the cash value set forth in the Policy's table
of values; plus the cash value of any paid-up additions;
plus the cash value of any Additional Insurance Coverage;
plus any dividend accumulations and unpaid dividends; less
any policy loans to the Employer and accrued interest
thereon at such time.
(ii) The Aggregate Premiums Paid at any time equal at such time
the cumulative premiums paid by the Employer under the
Policy reduced by the amount of any policy dividends or
interest thereon paid in cash to the Employer or used to
reduce or offset such premiums; less any policy loans to
the Employer and accrued interest thereon at such time;
less any amounts received by the Employer from the Employee
or the Subowner for the economic benefit under the split-
dollar arrangement; provided, however, that Aggregate
Premiums Paid shall not include premiums for any extr
a benefit riders or agreements other than those providing
additional life insurance coverage on the insured and shall
not include premiums waived pursuant to the terms of any
disability waiver of premiums rider.
4. Rights in the Policy.
A. Subowner's Rights. Until the retirement of the Employee, the
Subowner shall be entitled to designate the beneficiary and
elect a settlement option, and to change such designations or
elections at any time and from time to time, with respect to
that portion of the death proceeds, if any, in excess of the
Employer's Interest in the Policy (as determined under Article
3 above). The Policy shall contain an endorsement (the
"Endorsement"), in a form acceptable to the parties and the
Insurer, granting the Subowner such rights. After the
retirement of the Employee, the Subowner shall have no rights in
the Policy.
B. Employer's Rights. Except for those rights granted to the
Subowner in the Endorsement, the Employer shall have all of
the rights of the owner under the Policy and the Employer
shall be entitled to exercise all of such rights, options and
privileges without the consent of the Subowner; provided,
however, the Employer agrees not to exercise the right to
surrender the Policy except following a Termination Event
and in compliance with the provisions of Article 6 below.
C. Conflict. As between the parties hereto, in the event of any
conflict between the terms of the Endorsement and this
Agreement, the terms of this Agreement shall prevail. The
<PAGE>
<PAGE>
Insurer shall be bound, however, only by the terms of the
Policy and any endorsements thereto.
5. Death of the Employee. In the event of the Employee's death while
this Agreement is in force:
A. Employer's Recovery. The Employer shall be entitled to recover
out of the proceeds of the Policy an amount equal to the
Employer's Interest in the Policy as determined under Article
3 above.
B. Beneficiary's Recovery. That portion of the proceeds of the
Policy, if any, in excess of the Employer's Interest in the
Policy shall be paid to the beneficiary designated by the
Subowner under the Policy.
C. Collection of Death Proceeds. Promptly following the
Employee's death, the parties shall cooperate in the filing of
a death claim in accordance with the Insurer's claims
procedures and shall request distribution to the Employer of
the Employer's Interest in the Policy and the balance of the
death proceeds, if any, shall be paid by the Insurer to the
beneficiary designated by the Subowner under the Policy.
6. Termination of Agreement.
A. Termination Events. Subject to fulfillment of the obligations
arising upon termination hereinafter set forth, this Agreement
shall terminate on the first to occur of the following events
(each referred to herein as a "Termination Event"):
(i) Delivery of written notice of termination of this Agreement
by the Employer to the Subowner.
(ii) Delivery of written notice of termination of this Agreement
by the Subowner to the Employer.
(iii) Termination of the Employee's employment with the Employer
for any reason, by either the Employer or the Employee,
with or without cause.
(iv) The retirement of the Employee from employment with the
Employer.
B. Disposition of Policy Following a Termination Event.
Following a Termination Event, the Employer shall be entitled
to surrender the Policy or to remove the Endorsement from the
Policy and thereafter to deal with the Policy as the Employer
sees fit. The Subowner hereby authorizes the Employer to act
on the Subowner's behalf to sign all documents and to take
any other action required by the Insurer to remove the
Endorsement following a Termination Event. The Insurer shall
be entitled to rely on the Employer's authority upon submission
by the Employer of a photocopy of this signed Agreement.
7. Provisions Regarding the Insurer. The parties acknowledge and
agree as follows:
A. Bound Only by Policy. The Insurer shall be bound only by the
provisions of the Policy and any endorsement thereto.
B. Discharge. Any payment made or actions taken by the Insurer
in accordance with the provisions of the Policy and any
endorsement thereto shall fully discharge the Insurer from
all claims, suits and demands of all persons whatsoever.
<PAGE>
<PAGE>
C. Insurer Not a Party. The Insurer shall not be deemed a party
to, or to have notice of, this Agreement or the provisions
hereof and shall have no obligation to see to the performance
of the obligations of the parties hereunder.
8. Special Provisions. In compliance with the requirements of the
Employee Retirement Income Security Act of 1974, as amended, the
parties hereby confirm:
A. Named Fiduciary. The Employer is the named fiduciary of the
split-dollar life insurance plan of which this Agreement is
the written instrument.
B. Funding. The funding policy of the split-dollar life
insurance plan is that the Employer will pay that portion of
the premiums under the Policy required under Article 2 above.
C. ERISA Claims Procedures. The following claims procedure shall
be utilized:
(i) The claimant shall file a claim for benefits by notifying
the Employer in writing. If the claim is wholly or
partially denied, the Employer shall provide a written
notice within ninety (90) days specifying the reason for
the denial, the provisions of this Agreement on which the
denial is based, and additional material or information, if
any, necessary for the claimant to receive benefits. Such
written notice shall also indicate the steps to be taken by
the claimant if a review of the denial is desired.
(ii) If a claim is denied and a review is desired, the claimant
shall notify the Employer in writing within sixty (60) days
after receipt of written notice of a denial of a claim. In
requesting a review, the claimant may review plan documents
and submit any written issues and comments the claimant
feels are appropriate. The Employer shall then review the
claim and provide a written decision within sixty (60) days of
receipt of a request for a review. This decision shall state
the specific reasons for the decision and shall include
references to specific provisions of this Agreement, if any,
upon which the decision is based.
(iii) In no event shall the Employer's liability under this
Agreement exceed the amount of proceeds from the Policy.
9. Disability Benefit Rider. The parties may, by mutual agreement,
add an agreement or rider to the Policy providing for the waiver
of premiums in the event of the insured's disability. Any
additional premium attributable to such agreement or rider shall
be payable by the Employer.
10. Amendment. This Agreement may be altered, amended or modified,
including the addition of any extra policy provisions, but only by
a written instrument signed by all of the parties.
11. Assignment. A party may assign such party's interests and
obligations under this Agreement at any time subject to the terms
and conditions of this Agreement.
<PAGE>
<PAGE>
12. Governing Law. This Agreement shall be governed by the laws of
the State of Connecticut.
13. Entire Agreement. This Agreement sets forth the entire agreement
of the parties with respect to the subject matter hereof. Any and all
prior agreements or understandings with respect to such matters
are hereby superseded.
IN WITNESS WHEREOF, the parties have signed and sealed this Agreement
as of the day and year first above written.
RAYONIER, INC.
By: /s/ JOHN P. O'GRADY
---------------
/s/ RONALD M. GROSS
---------------
Ronald M. Gross
<PAGE>
EXHIBIT 10.3
DEFERRED COMPENSATION/SUPPLEMENTAL RETIREMENT AGREEMENT
THIS AGREEMENT is made this 28th day of June, 1994 by and
between Rayonier Inc. (the "Corporation") and Ronald M.
Gross, Chairman, President & CEO (the "Employee").
RECITALS:
A. The Employee is a valued member and leader of the
Corporation's executive team, and the Corporation wishes
to fully compensate the Employee for the Employee's
services.
B. As part of the Employee's compensation, the Board of
Directors of the Corporation has approved an unfunded
retirement supplemental benefit in accordance with the
terms and conditions of This Agreement.
C. The Employee in reliance on the benefits to be
provided hereunder, among other things, will promote the
interests of the Corporation.
NOW, THEREFORE, it is mutually agreed as follows:
1. Supplemental Retirement Benefit
(a) If at any time the Employee's employment
terminates on account of the Employee's Retirement
(defined below), the Employee shall be entitled to
payment of $132,000 per year for 15 years (the
"Payout Period"), to be paid in such monthly,
quarterly, semi-annual or annual installments as the
Corporation shall determine, in accordance with the
provisions of this Section 1 (the "Retirement
Benefit").
(b) If the Employee dies during the Payout Period,
amounts due hereunder shall be paid to the Employee's
Designated Beneficiary, or his estate, for the
balance of the Payout Period.
(c) Payment of the Retirement Benefit shall commence
as soon as is practicable after the Employee's
Retirement.
<PAGE>
<PAGE>
(d) For purposes of This Agreement, terms not
otherwise defined shall have the meaning set forth
below:
(i) "Retirement" means the termination of the
Employee's employment for any reason, other than
death, on or after the Employee's Normal
Retirement Date.
(ii) "Normal Retirement Date" means the date on
which the Employee attains age 65.
(iii) "Designated Beneficiary" means one or more
beneficiaries to whom payments, otherwise due the
Employee, shall be made in the event of the
Employee's death. The Employee shall file with
the Secretary of the Corporation a notice in
writing designating the Designated Beneficiary.
In the absence of such a beneficiary designation,
the Designated Beneficiary shall be the executors
or administrators of the Employee's estate.
2. Pre-Retirement Death of Employee
If the Employee dies prior to Retirement, no Retirement
Benefit shall be payable under This Agreement.
3. Unfunded Obligation
The amounts payable pursuant to This Agreement shall be
unfunded obligations of the Corporation payable only
under the terms stated herein, and the Employee shall
have no right or claim against any specified assets of
the Corporation and shall have only a contractual right
against the Corporation hereunder, which shall be no
greater than the right of any unsecured general creditor
of the Corporation. Nothing contained in This Agreement
nor any action taken pursuant to the provisions of This
Agreement shall create or be construed to create a trust
of any kind, or a fiduciary relationship between the
Corporation and the Employee, or any other person.
4. No Alienation
No amounts payable to This Agreement shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge or encumbrance by the Employee or any
person claiming under or through the Employee,
<PAGE>
<PAGE>
nor shall they be subject to the debts, contracts,
liabilities, engagement or torts of the Employee or any
one else prior to actual payment thereof.
5. Separate Benefit
The Retirement Benefit under This Agreement shall be
independent of, and in addition to, those under any other
plan, program or agreement that may be in effect between
the parties hereto, or any other compensation payable to
the Employee or the Employee's designated beneficiary by
the Corporation. This Agreement shall not be constructed
as a contract of employment nor does it restrict the
right of the Corporation to discharge the Employee for
proper cause or the right of the employee to terminate
employment.
6. Corporate Reorganizations
The Corporation agrees that it will not merge,
consolidate or combine with any other business entity,
unless the succeeding or continuing Corporation or
business entity expressly assumes and confirms in writing
the obligations of the Corporation under This Agreement.
7. Amendment
This Agreement may be amended by written agreement of the
Employee and the Corporation at any time, provided no
such amendment shall serve to accelerate payment of any
amounts payable hereunder.
8. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Connecticut.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused This
Agreement to be executed by its duly authorized officer,
and the Employee has set his signature on the date first
above written.
Employee Rayonier Inc.
Signed /s/ RONALD M. GROSS Signed /s/ JOHN P. O'GRADY
-------------- ---------------
Ronald M. Gross John P. O'Grady
Senior Vice President
Human Resources
Date __________________ Date __________________
<PAGE> EXHIBIT 12
RAYONIER INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(unaudited)
(thousands of dollars)
Six Months Ended
June 30,
--------------------
1994 1993
------- -------
Earnings:
Net Income $35,833 $41,610
Add (Deduct):
Income Taxes 19,892 20,926
Minority Interest 17,371 12,236
Amortization of Capitalized Interest 706 769
------ ------
73,802 75,541
Adjustments to Earnings for Fixed Charges:
Interest and Other Financial Charges 14,591 11,222
Interest Factor Attributable to Rentals 880 935
------ ------
15,471 12,157
------ ------
Earnings as Adjusted $89,273 $87,698
====== ======
Fixed Charges:
Fixed Charges above $15,471 $12,157
Capitalized Interest 21 -
------ ------
Total Fixed Charges $15,492 $12,157
====== ======
Ratio of Earnings as Adjusted to
Total Fixed Charges 5.76 7.21
===== =====
