<PAGE> 1
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, 1995
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 13-2607329
1177 Summer Street, Stamford, Connecticut 06905-5529
(Principal Executive Office)
Telephone Number: (203) 348-7000
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 and (2) has been subject to such filing requirements for
the past 90 days.
YES (X) NO ( )
As of August 1, 1995, there were 29,629,779 Common Shares of the Registrant
outstanding.
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RAYONIER INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Consolidated Income for the
Three Months and Six Months
Ended June 30, 1995 and 1994 1
Consolidated Balance Sheets as of June 30, 1995
and December 31, 1994 2
Statements of Consolidated Cash Flows for the
Six Months Ended June 30, 1995 and 1994 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 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 8
Exhibit Index 9
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements reflect, in the opinion of Rayonier
Inc. (Rayonier or 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. For a full description of accounting policies, see Notes to
Consolidated Financial Statements in the 1994 Annual Report on Form 10-K.
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------------- --------------------------------
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
SALES $ 313,564 $ 250,770 $ 599,396 $ 508,497
------------- ------------- ------------- -------------
COSTS AND EXPENSES
Cost of sales 252,213 210,222 476,257 409,354
Selling and general expenses 9,426 7,545 17,813 14,253
Other operating income, net (1,766) (2,228) (3,209) (1,513)
------------- ------------- ------------- -------------
259,873 215,539 490,861 422,094
------------- ------------- ------------- -------------
OPERATING INCOME 53,691 35,231 108,535 86,403
Interest expense (8,773) (7,845) (17,308) (14,591)
Interest and miscellaneous income, net 999 751 1,667 1,284
Minority interest (7,272) (6,295) (16,572) (17,371)
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 38,645 21,842 76,322 55,725
Income taxes (12,307) (7,728) (24,835) (19,892)
------------- ------------- ------------- -------------
NET INCOME $ 26,338 $ 14,114 $ 51,487 $ 35,833
============= ============= ============= =============
NET INCOME PER COMMON SHARE $ 0.88 $ 0.48 $ 1.72 $ 1.21
============= ============= ============= =============
Weighted average Common Shares
outstanding 29,955,149 29,670,364 29,895,951 29,652,744
============= ============= ============= =============
</TABLE>
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RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
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<S> <C> <C>
CURRENT ASSETS
Cash $ 5,354 $ 9,178
Accounts receivable, less allowance for
doubtful accounts of $4,341 and $4,358 128,998 103,892
Inventories
Finished goods 60,654 39,929
Work in process 24,804 18,221
Raw materials 54,398 34,022
Manufacturing and maintenance supplies 29,719 27,567
---------- ----------
169,575 119,739
Deferred income taxes 4,486 4,382
Prepaid timber stumpage 47,070 47,338
Other current assets 15,596 12,692
---------- ----------
Total current assets 371,079 297,221
OTHER ASSETS 28,416 29,439
TIMBER STUMPAGE 38,866 36,756
TIMBER, TIMBERLANDS AND LOGGING ROADS,
NET OF DEPLETION AND AMORTIZATION 481,434 476,132
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment 1,250,274 1,202,484
Less -- accumulated depreciation 562,855 530,857
---------- ----------
687,419 671,627
---------- ----------
$1,607,214 $1,511,175
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 98,229 $ 83,658
Bank loans and current maturities of long-term debt 51,086 302
Accrued taxes 6,637 7,676
Accrued payroll and benefits 19,478 20,043
Other current liabilities 33,323 41,831
Current reserves for dispositions and discontinued operations 20,744 25,370
---------- ----------
Total current liabilities 229,497 178,880
DEFERRED INCOME TAXES 137,819 127,638
LONG-TERM DEBT 482,708 482,920
NONCURRENT RESERVES FOR DISPOSITIONS AND
DISCONTINUED OPERATIONS (Net of discontinued
operations' assets of $12,549 and $13,023) 16,599 20,325
OTHER NONCURRENT LIABILITIES 26,374 23,695
MINORITY INTEREST 21,479 22,516
SHAREHOLDERS' EQUITY
Common Shares, 60 million shares authorized,
29,621,937 and 29,574,807 shares issued and outstanding 158,439 157,581
Retained earnings 534,299 497,620
---------- ----------
Total shareholders' equity 692,738 655,201
---------- ----------
$1,607,214 $1,511,175
========== ==========
</TABLE>
2
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RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
1995 1994
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 51,487 $ 35,833
Non-cash items included in income:
Depreciation, depletion and amortization 47,238 45,448
Deferred income taxes 7,912 2,451
Increase in other noncurrent liabilities 2,679 830
Change in accounts receivable, inventories
and accounts payable (60,371) (16,199)
Decrease (increase) in prepaid timber stumpage 268 (15,244)
(Decrease) increase in accrued taxes (1,039) 6,299
Change in reserves for dispositions and discontinued operations (2,533) (2,252)
Other changes in working capital (11,977) (6,726)
---------- ----------
Cash provided by operating activities 33,664 50,440
========== ==========
INVESTING ACTIVITIES
Capital expenditures, net of sales and retirements
of $713 and $220 (68,332) (45,823)
Expenditures for dispositions and discontinued operations, net
of tax benefits of $2,165 and $2,359 (3,654) (3,981)
Change in other assets and timber stumpage (1,087) (10,745)
---------- ----------
Cash used for investing activities (73,073) (60,549)
========== ==========
FINANCING ACTIVITIES
Issuance of debt 50,773 188,000
Repayments of debt (201) (147,981)
Dividends (14,808) (10,644)
Issuance of Common Shares 858 64
Decrease in minority interest (1,037) (15,962)
---------- ----------
Cash provided by financing activities 35,585 13,477
========== ==========
CASH
Net (decrease) increase in cash (3,824) 3,368
Balance at beginning of period 9,178 5,989
---------- ----------
Balance at end of period $ 5,354 $ 9,357
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 16,755 $ 15,685
========== ==========
Income taxes, net of refunds $ 19,251 $ 11,316
========== ==========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The sales and operating income of Rayonier's business segments for the three
months and six months ended June 30, 1995 and 1994 were as follows (thousands of
dollars):
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SALES
TIMBER AND WOOD PRODUCTS:
Log Trading and Merchandising $ 121,301 $ 85,117 $ 201,302 $ 160,709
Timberlands Management and Stumpage 37,508 35,007 87,661 90,286
Wood Products 19,409 21,155 34,532 40,383
---------- ---------- ---------- ----------
Total Before Intrasegment Eliminations 178,218 141,279 323,495 291,378
Intrasegment Eliminations (5,564) (5,334) (9,748) (9,830)
---------- ---------- ---------- ----------
TOTAL TIMBER AND WOOD PRODUCTS 172,654 135,945 313,747 281,548
---------- ---------- ---------- ----------
SPECIALTY PULP PRODUCTS:
Chemical Cellulose 82,423 74,114 166,029 145,121
Fluff and Specialty Paper Pulps 64,933 41,518 132,093 83,566
---------- ---------- ---------- ----------
TOTAL SPECIALTY PULP PRODUCTS 147,356 115,632 298,122 228,687
---------- ---------- ---------- ----------
Intersegment Eliminations (6,446) (807) (12,473) (1,738)
---------- ---------- ---------- ----------
TOTAL SALES $ 313,564 $ 250,770 $ 599,396 $ 508,497
========== ========== ========== ==========
OPERATING INCOME
Timber and Wood Products $ 35,747 $ 37,938 $ 78,501 $ 91,428
Specialty Pulp Products 20,374 (1,001) 35,647 (469)
Corporate and Other (3,330) (1,749) (5,501) (4,652)
Intersegment Eliminations 900 43 (112) 96
---------- ---------- ---------- ----------
TOTAL OPERATING INCOME $ 53,691 $ 35,231 $ 108,535 $ 86,403
========== ========== ========== ==========
</TABLE>
RESULTS OF OPERATIONS
Sales and Operating Income
Sales of $314 million for the second quarter of 1995 were $63 million or 25
percent higher than second quarter of 1994 due to stronger sales prices for
Specialty Pulp Products and increased sales volume from Log Trading and
Merchandising. Operating income for the quarter of $54 million was $18 million
or 52 percent higher than last year's level reflecting increased pulp prices.
Sales for the six months ended June 30, 1995 of $599 million were $91 million or
18 percent higher than the prior year, and operating income of $109 million
increased $22 million or 26 percent from the prior year.
4
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Timber and Wood Products
Timber and Wood Products' sales in the second quarter were $173 million, up $37
million from the second quarter of 1994. The improvement in sales was driven by
a significant increase in worldwide log trading volume. Operating income for the
quarter of $36 million was down slightly from the second quarter of 1994 as
improved log trading volume was offset by lower lumber selling prices and higher
log costs.
Sales for the six month period were $314 million, up $32 million from the same
period of 1994, with operating income of $79 million down $13 million from the
prior year period. In the first quarter of 1994, results for the Timber and Wood
Products segment were unusually strong as a result of a late 1993 market
correction that caused customers to delay the harvesting of high-priced
Northwest timber from 1993 to 1994.
Log trading and merchandising sales, which include the Company's New Zealand log
sales, improved significantly from the 1994 second quarter due to stronger
volume and selling prices in both export and domestic markets. However, overall
margins were unchanged as higher log costs largely offset selling price gains.
Timberlands management and stumpage sales and operating margins were up from
last year's second quarter due to higher stumpage prices in the Southeast U.S.
region and increased harvest volume in the Northwest U.S. region. Wood products
sales and operating margins were down from the prior year due to lower sales
prices caused by weak domestic construction activity. Wood products margins were
also negatively impacted by increased log costs.
Specialty Pulp Products
Specialty Pulp Products' second quarter sales were $147 million, up $32 million
from last year's second quarter, and operating income rose $21 million. Stronger
pulp pricing and improved operating rates were partially offset by higher wood
and chemical costs.
First half results for Specialty Pulp Products benefited from improved prices
and operating rates. Sales for the six month period increased $69 million to
$298 million and operating income improved from break-even in 1994 to $36
million. Pulp markets have continued to strengthen in 1995 and Specialty Pulp
Products will benefit in the third quarter from another round of fluff pulp
price increases and the second substantial price increase this year for chemical
cellulose.
Intersegment
Six months intersegment sales of $12 million in 1995 were greater than the
comparable 1994 amount due to higher stumpage sales from the Timber and Wood
Products segment to the Specialty Pulp Products segment.
Other Items
Interest expense of $17 million for the first half of 1995 increased $3 million
over 1994 primarily due to higher short term interest rates.
Minority interest in the earnings of Rayonier's subsidiary, Rayonier
Timberlands, L.P. (RTLP), decreased $1 million to $17 million in the first half,
due to decreased partnership earnings resulting from the absence of the
Northwest stumpage carry-over earnings in 1994 partially offset by the favorable
Southeast stumpage volume and prices. The minority participation in the earnings
of RTLP will change from approximately 25 percent to approximately 1 percent
effective January 1, 2001.
Income Taxes
The effective income tax rate for the first half of 1995 was 32.5 percent versus
35.7 percent in the 1994 first half. This decrease reflects benefits from tax
reorganizations made following the spin-off from ITT as well as tax benefits on
increased pulp export sales.
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Net Income
Net income for the second quarter was $26 million or $0.88 per common share, up
$12 million or $0.40 per common share from the 1994 level. Net income for the
six months ended June 30, 1995 was $51 million or $1.72 per common share, up $16
million or $0.51 per common share from 1994's net income.
On July 12, 1995, the Company announced an agreement to sell for $46 million a
75 percent interest in 9 percent of its New Zealand timber base to a timber
investment fund. Closing is scheduled for the third quarter at which time
Rayonier will record a pretax gain of approximately $36 million, or $0.83 per
common share, after tax. The net proceeds from the sale will be used to reduce
debt.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities was $34 million in the first six months of
1995. Cash from operating activities together with an increase in debt of $51
million financed capital expenditures of $68 million, common dividends of $15
million and $4 million (after tax benefits) of environmental remediation and
other costs relating to discontinued operations and units held for disposition.
The Company's June 30, 1995 debt/capital ratio of 44 percent is 1 percent above
the December 1994 level.
EBITDA (defined as earnings before provision for dispositions, interest expense,
income taxes and depreciation, depletion and amortization) for the first six
months of 1995 was $141 million, or $4.71 per common share, an increase of $25
million over the comparable period of 1994.
As of June 30, 1995, the Company had $51 million of bank loans and current
maturities of long-term debt which includes medium-term notes scheduled to
mature in the third quarter of 1995. The Company intends to refinance these
notes with long-term securities issued in the public debt markets.
As of June 30, 1995, the Company had $100 million of available 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 $174 million of new public debt securities. 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.
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ITEM 3. SELECTED OPERATING DATA
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
TIMBER AND WOOD PRODUCTS
Log Sales Volume
North America - millions of board feet 108 67 168 125
New Zealand - thousands of cubic meters 465 413 852 827
Other - millions of board feet 4 3 6 5
Timber Harvest Volume
Northwest U.S. - millions of board feet 42 38 88 104
Southeast U.S. - thousands of short green tons 476 490 1,148 953
New Zealand - thousands of cubic meters 324 289 604 567
Lumber Sold - millions of board feet 53 56 94 105
Intercompany Sales
Logs - millions of board feet 10 1 11 1
Northwest U.S. Timber Stumpage
- millions of board feet 10 6 17 14
Southeast U.S. Timber Stumpage
- thousands of short green tons 37 19 202 46
SPECIALTY PULP PRODUCTS
Pulp Sales Volume
Chemical Cellulose - thousands of metric tons 103 107 208 204
Fluff and Specialty Paper Pulps - thousands of metric tons 81 87 174 176
Production as a Percentage of Capacity 90% 84% 95% 91%
SELECTED SUPPLEMENTAL INFORMATION (thousands of dollars)
New Zealand - Sales $28,794 $25,933 $53,076 $50,848
======= ======= ======= =======
New Zealand - Operating Income $ 3,714 $ 3,975 $ 7,407 $ 7,177
======= ======= ======= =======
</TABLE>
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's Form 10-K for 1994 reported seven civil cases pending
against the Company and its wholly owned subsidiary, Southern Wood
Piedmont Company. One of these cases, Inez Tucker, et al. v. Southern
Wood Piedmont Co., et al., was settled on June 12, 1995 for amounts
not material to the Company and two of the other cases have been
consolidated into one action.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of the Company was held on May 19,
1995. At that meeting, four directors were elected as follows (there
were no broker non-votes with respect to the election of directors):
<TABLE>
<CAPTION>
VOTES FOR VOTES WITHHELD
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<S> <C> <C>
Directors of Class I, Term Expires in 1998:
Ronald M. Gross 24,254,773 139,606
Katherine D. Ortega 24,242,677 151,702
Burnell R. Roberts 24,243,722 150,657
Director of Class III, Term Expires in 1997:
Nicholas L. Trivisonno 24,244,634 149,745
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index.
(b) Rayonier Inc. did not file a 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 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
RAYONIER INC. (Registrant)
By /s/ KENNETH P. JANETTE
----------------------------------------
Kenneth P. Janette
Vice President and Corporate Controller
August 14, 1995 (Chief Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
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<S> <C> <C>
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
3.1 Amended and restated articles of incorporation No amendments
3.2 By-laws No amendments
4 Instruments defining the rights of security Not required to be filed. The
holders, including indentures 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 Material contracts None
11 Statement re computation of per share earnings Not required
12 Statement re computation of ratios Filed herewith
15 Letter re unaudited interim financial information None
18 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
27 Financial data schedule Filed herewith
99 Additional exhibits None
</TABLE>
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EXHIBIT 12
RAYONIER INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Earnings:
Net Income $ 51,487 $ 35,833
Add:
Income Taxes 24,835 19,892
Minority Interest 16,572 17,371
Amortization of Capitalized Interest 822 706
--------- ---------
93,716 73,802
Adjustments to Earnings for Fixed Charges:
Interest and Other Financial Charges 17,308 14,591
Interest Factor Attributable to Rentals 738 880
--------- ---------
18,046 15,471
--------- ---------
EARNINGS AS ADJUSTED $ 111,762 $ 89,273
========= =========
Fixed Charges:
Fixed Charges above $ 18,046 $ 15,471
Capitalized Interest 511 21
--------- ---------
TOTAL FIXED CHARGES $ 18,557 $ 15,492
========= =========
RATIO OF EARNINGS AS ADJUSTED TO
TOTAL FIXED CHARGES 6.02 5.76
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,354
<SECURITIES> 0
<RECEIVABLES> 133,339
<ALLOWANCES> 4,341
<INVENTORY> 169,575
<CURRENT-ASSETS> 371,079
<PP&E> 1,250,274
<DEPRECIATION> 562,855
<TOTAL-ASSETS> 1,607,214
<CURRENT-LIABILITIES> 229,497
<BONDS> 482,708
<COMMON> 158,439
0
0
<OTHER-SE> 534,299
<TOTAL-LIABILITY-AND-EQUITY> 1,607,214
<SALES> 599,396
<TOTAL-REVENUES> 599,396
<CGS> 476,257
<TOTAL-COSTS> 476,257
<OTHER-EXPENSES> 29,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,308
<INCOME-PRETAX> 76,322
<INCOME-TAX> 24,835
<INCOME-CONTINUING> 51,487
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,487
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 1.72
</TABLE>
