<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 SEPTEMBER 30, 1998
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 October 29, 1998, there were 27,854,509 Common Shares of the Registrant
outstanding.
<PAGE> 2
RAYONIER INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Consolidated Income for the
Three Months and Nine Months
Ended September 30, 1998 and 1997 1
Consolidated Balance Sheets as of September 30, 1998
and December 3l, 1997 2
Statements of Consolidated Cash Flows for the
Nine Months Ended September 30, 1998 and 1997 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 5-8
Item 3. Selected Operating Data 9
Selected Supplemental Financial Data 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 11
Exhibit Index 12
</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, please refer to Notes to
Consolidated Financial Statements in the 1997 Annual Report on Form 10-K.
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 258,740 $ 266,853 $ 738,165 $ 817,064
--------- --------- --------- ---------
Costs and expenses
Cost of sales 223,663 216,726 618,143 666,867
Selling and general expenses 7,960 10,402 25,719 30,636
Other operating expense (income), net 1,749 (2,169) (394) (3,881)
--------- --------- --------- ---------
233,372 224,959 643,468 693,622
--------- --------- --------- ---------
OPERATING INCOME 25,368 41,894 94,697 123,442
Interest expense (9,092) (6,080) (26,076) (17,987)
Interest and miscellaneous income (expenses), net 64 (523) 561 431
Minority interest -- (5,072) -- (19,359)
--------- --------- --------- ---------
Income before income taxes 16,340 30,219 69,182 86,527
Provision for income taxes (3,499) (6,978) (19,705) (25,129)
--------- --------- --------- ---------
NET INCOME $ 12,841 $ 23,241 $ 49,477 $ 61,398
========= ========= ========= =========
NET INCOME PER COMMON SHARE
Basic EPS $ 0.46 $ 0.81 $ 1.75 $ 2.12
========= ========= ========= =========
Diluted EPS $ 0.45 $ 0.79 $ 1.72 $ 2.08
========= ========= ========= =========
</TABLE>
1
<PAGE> 4
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash and short-term investments $ 8,791 $ 10,661
Accounts receivable, less allowance for doubtful
accounts of $4,349 and $4,481 112,443 115,704
Inventories
Finished goods 55,841 51,398
Work in process 16,391 17,491
Raw materials 18,130 19,740
Manufacturing and maintenance supplies 22,816 25,519
---------- ----------
Total inventories 113,178 114,148
Timber purchase agreements 37,464 31,758
Other current assets 13,742 13,955
Deferred income taxes 17,908 24,288
---------- ----------
Total current assets 303,526 310,514
OTHER ASSETS 62,883 55,791
TIMBER PURCHASE AGREEMENTS 25,274 28,248
TIMBER, TIMBERLANDS AND LOGGING ROADS,
NET OF DEPLETION AND AMORTIZATION 545,675 497,110
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment 1,306,903 1,266,431
Less - accumulated depreciation 612,517 562,536
---------- ----------
694,386 703,895
---------- ----------
$1,631,744 $1,595,558
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 66,796 $ 74,269
Bank loans and current maturities 3,850 4,194
Accrued taxes 12,784 10,973
Accrued payroll and benefits 20,618 18,694
Accrued interest 10,827 6,076
Other current liabilities 39,661 66,085
Current reserves for dispositions and discontinued operations 24,975 26,247
---------- ----------
Total current liabilities 179,511 206,538
DEFERRED INCOME TAXES 118,723 113,442
LONG-TERM DEBT 504,066 421,325
NON-CURRENT RESERVES FOR DISPOSITIONS
AND DISCONTINUED OPERATIONS 162,345 172,615
OTHER NON-CURRENT LIABILITIES 30,771 31,997
MINORITY INTEREST -- 16,959
SHAREHOLDERS' EQUITY
Common Shares, 60,000,000 shares authorized, with shares
issued and outstanding of 27,878,409 and 28,283,634 82,537 102,175
Retained earnings 553,791 530,507
---------- ----------
636,328 632,682
---------- ----------
$1,631,744 $1,595,558
========== ==========
</TABLE>
2
<PAGE> 5
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1998 1997
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 49,477 $ 61,398
Non-cash items included in income
Depreciation, depletion and amortization 74,601 71,247
Deferred income taxes 7,427 9,971
Write-off of property, plant and equipment -- 2,100
(Decrease) increase in other non-current liabilities (1,226) 2,687
Change in accounts receivable, inventories
and accounts payable (3,242) 19,946
(Increase) decrease in current timber purchase agreements (5,706) 5,461
Decrease in other current assets 213 1,215
(Decrease) increase in accrued liabilities (17,938) 3,673
--------- ---------
CASH FROM OPERATING ACTIVITIES 103,606 177,698
--------- ---------
INVESTING ACTIVITIES
Capital expenditures, net of sales, retirements and reclassifications
of $4,714 and $(236) (64,836) (106,076)
Acquisition of Rayonier Timberlands, L.P. Class A Units (48,821) --
Expenditures for dispositions and discontinued operations,
net of tax benefits of $4,234 and $7,013 (7,308) (12,115)
Change in timber purchase agreements and other assets (4,118) 4,861
--------- ---------
CASH USED FOR INVESTING ACTIVITIES (125,083) (113,330)
--------- ---------
FINANCING ACTIVITIES
Issuance of debt 204,877 225,117
Repayments of debt (122,480) (221,234)
Dividends paid (26,193) (25,963)
Repurchase of Common Shares (21,890) (35,331)
Issuance of Common Shares 2,252 2,216
Buyout of minority interest (16,959) (1,769)
--------- ---------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 19,607 (56,964)
--------- ---------
CASH AND SHORT-TERM INVESTMENTS
(Decrease) increase in cash and short term investments (1,870) 7,404
Balance, beginning of period 10,661 3,432
--------- ---------
Balance, end of period $ 8,791 $ 10,836
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 21,519 $ 19,493
========= =========
Income taxes $ 12,547 $ 6,191
========= =========
</TABLE>
3
<PAGE> 6
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
1. EARNINGS PER COMMON SHARE
In 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings Per Share." The following table provides details
of the calculation of basic and diluted EPS for the three and nine months
ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 12,841 $ 23,241 $ 49,477 $ 61,398
=========== =========== =========== ===========
Shares used for determining basic EPS 28,079,736 28,685,581 28,219,896 28,956,747
Dilutive effect of:
Stock options 241,123 488,039 283,410 373,605
Contingent shares 231,084 223,500 231,084 223,500
----------- ----------- ----------- -----------
Shares used for determining diluted EPS 28,551,943 29,397,120 28,734,390 29,553,852
=========== =========== =========== ===========
Basic EPS $ 0.46 $ 0.81 $ 1.75 $ 2.12
=========== =========== =========== ===========
Diluted EPS $ 0.45 $ 0.79 $ 1.72 $ 2.08
=========== =========== =========== ===========
</TABLE>
2. NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards requiring that derivative instruments be recorded
on the balance sheet as either an asset or liability measured at fair
value. SFAS No.133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met.
SFAS No.133 is effective for fiscal years beginning after June 15, 1999,
but may be adopted as of the beginning of any fiscal quarter after
issuance. SFAS No.133 is not expected to have a material impact on the
Company's consolidated financial position or results of operations.
4
<PAGE> 7
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 and
nine months ended September 30, 1998 and 1997 were as follows (thousands of
dollars):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES
TIMBER AND WOOD PRODUCTS
Trading and merchandising $ 74,872 $ 64,989 $ 162,878 $ 199,299
Timberlands management 33,806(a) 43,986 135,698(a) 137,645
Wood products 32,079 34,898 93,562 103,198
Intrasegment eliminations (2,850) (6,089) (8,674) (18,007)
--------- --------- --------- ---------
Total Timber and Wood Products 137,907 137,784 383,464 422,135
--------- --------- --------- ---------
SPECIALTY PULP PRODUCTS
Chemical cellulose 74,848 76,243 218,379 243,309
Fluff and specialty paper pulps 46,293 49,236 138,191 132,393
--------- --------- --------- ---------
Total Specialty Pulp Products 121,141 125,479 356,570 375,702
--------- --------- --------- ---------
Intersegment eliminations (308) (682) (1,869) (1,660)
--------- --------- --------- ---------
Total before dispositions 258,740 262,581 738,165 796,177
Dispositions -- 4,272 -- 20,887
--------- --------- --------- ---------
Total sales $ 258,740 $ 266,853 $ 738,165 $ 817,064
========= ========= ========= =========
OPERATING INCOME
Timber and Wood Products $ 15,248(b) $ 31,421 $ 75,724(b) $ 100,112
Specialty Pulp Products 12,585 13,861 28,170 35,272
Corporate and other (2,408) (4,159) (9,120) (12,506)
Intersegment eliminations (57) (8) (77) 143
--------- --------- --------- ---------
Total before dispositions 25,368 41,115 94,697 123,021
Dispositions -- 779 -- 421
--------- --------- --------- ---------
Total operating income $ 25,368 $ 41,894 $ 94,697 $ 123,442
========= ========= ========= =========
</TABLE>
(a) Includes salvage timber sales of $1.7 million.
(b) Operating income was reduced by $6.7 million resulting from Southeast U.S.
forest fires during the third quarter of 1998, including $4.0 million on
lower pricing for salvage timber and $2.7 million on the write-off of
destroyed timber assets and other fire related expenses.
RESULTS OF OPERATIONS
SALES AND OPERATING INCOME
Sales for the third quarter of 1998 were $259 million, $8 million or 3 percent
lower than the third quarter of 1997. Sales for the nine months ended September
30, 1998 of $738 million were $79 million or 10 percent lower than the prior
year. Sales for both periods declined primarily due to reduced Asian demand for
logs, lower chemical cellulose pulp volume, decreased lumber selling prices and
the absence of sales from the Company's Port Angeles pulp mill, permanently
closed in February 1997. These
5
<PAGE> 8
reductions were partially offset by additional sales from the Company's new
medium-density fiberboard (MDF) and wood products trading businesses.
Operating income for the third quarter of 1998 of $25 million was $17 million
less than the prior year. Operating income for the nine-month period was $95
million, $29 million or 23 percent less than the prior year. The declines
resulted from lower lumber and log pricing, reduced chemical cellulose pulp
shipments, losses at the Company's MDF plant in New Zealand which began
commercial operations October 1, 1997, and forest fire losses. Forest fires in
the Southeast U.S. in early July damaged pre-merchantable timber resulting in a
$2.7 million write-off of timber assets and $4 million in reduced timber sales
revenue due to lower realized prices for fire-damaged timber. In addition,
unusually wet weather conditions in the first half of the year disrupted
production schedules and raised the cost of wood fiber at the Company's pulp and
sawmills in the Southeast U.S.
TIMBER AND WOOD PRODUCTS
Timber and Wood Products' sales for the three month period ended September 30,
1998 were $138 million, comparable to last year's results. Sales for the
nine-month period were $383 million, $39 million below 1997, reflecting lower
log trading activity in Asian markets and lower lumber prices. Operating income
for the quarter of $15 million was $16 million lower than the same period last
year. Year to date operating income of $76 million was $24 million lower than
1997. The declines resulted from the forest fires described above, lower lumber
margins and losses at the Company's MDF plant in New Zealand, which began
commercial operations October 1, 1997.
Trading and merchandising sales of $163 million for the nine month period were
$36 million lower than 1997, reflecting significantly lower export log volumes
from North America and New Zealand and reduced selling prices due to weakness in
Asian markets, partly offset by sales from a newly established wood products
trading business. Operating income was lower than 1997 due to lower log trading
margins.
Timberlands management sales of $136 million for the nine-month period were $2
million below last year due to lower prices in the Northwest U.S. and lower
prices and volumes in New Zealand. Operating income improved from 1997 as a
result of a strong Southeast U.S. timber market in the first half of the year,
when unusually wet weather conditions led to restricted supply, and stronger
Southeast U.S. land sales. Third quarter operating income included the $6.7
million adverse impact associated with the Southeast U.S. forest fires.
Wood products sales of $94 million for the nine month period were $10 million
lower than 1997. Operating income declined as a result of lower lumber sales
prices and higher log costs, and losses from the MDF business.
SPECIALTY PULP PRODUCTS
Sales of Specialty Pulp Products for the three-month period were $121 million,
$4 million lower than last year. Sales for the first nine months of 1998 were
$357 million, $19 million lower than 1997. The declines were primarily due to
reduced customer demand for chemical cellulose pulps. Operating income for the
first nine months was $28 million, $7 million lower than 1997, as a result of
lower chemical cellulose volumes, higher wood and production costs in the first
half of the year, partially offset by slightly higher selling prices. Third
quarter operating income of $13 million was $1 million below 1997 due to lower
chemical cellulose volumes and higher wood costs.
CORPORATE AND OTHER
Corporate and other costs for the third quarter and first nine months of 1998
were favorable to 1997, reflecting lower administrative and general expenses.
OTHER INCOME / EXPENSE
Interest expense of $26 million for the first nine months of 1998 was $8 million
higher than 1997, reflecting lower capitalized interest following start up of
the New Zealand MDF plant and interest expense associated with the $66 million
purchase in January of the publicly traded Class A Units of the Company's U.S.
timberlands partnership. The effect of that purchase was to eliminate the
minority interest in the partnership earnings, which was $19 million in the
first nine months of 1997. The positive impact was partially offset by higher
interest and depletion costs in 1998.
The effective tax rate of 28.5 percent for the first nine months of 1998 is
comparable to 1997. The effective tax rates are below U.S. statutory rates as
1998 includes tax benefits associated with a weaker New Zealand currency while
1997 reflects higher research and investment tax credits.
6
<PAGE> 9
NET INCOME
Net income for the third quarter was $12.8 million or $0.45 per Common Share,
compared to $23.2 million, or $0.79 cents per Common Share in 1997. Net income
for the nine months ended September 30, 1998 was $49.5 million or $1.72 per
Common Share, compared to $61.4 million, or $2.08 per Common Share earned last
year.
The forest fires in the Southeast U.S. in early July reduced earnings by
approximately 15 cents per share in the third quarter. The impact included a
charge of 5 cents per share to reflect the loss of pre-merchantable timber and a
reduction in earnings of 10 cents per share from the sale of fire-damaged
timber.
OTHER ITEMS
The soft global economic situation continues to affect specialty pulp, timber
and wood products markets, and prices are expected to remain under pressure at
least through the first quarter of next year. However, log export markets appear
to have stabilized due to supply restrictions in Russia and China combined with
worldwide timber harvest reductions due to low selling prices. Overall fourth
quarter timber harvest activity for the Company, primarily by Northwest U.S.
customers, is expected to be stronger than in the third quarter.
In January 1998, Rayonier acquired all of the publicly traded Class A Units of
its master limited partnership, Rayonier Timberlands, L.P., for a cash purchase
price of $13.00 per unit. The acquisition was accounted for under the purchase
method and was financed by the utilization of existing credit facilities.
YEAR 2000 COMPLIANCE
Rayonier began its company-wide Year 2000 Project in 1996 and expects all phases
to be completed by the end of the third quarter of 1999. The Project is designed
to identify Year 2000 problems and take corrective action covering business and
process control systems, networking communications, personal computer
applications, embedded microprocessors and third party supplier and customer
risks. The Company has engaged outside consultants to advise on, assist in and
monitor compliance. The project team reports directly to the Company's senior
executive officers and regularly provides program updates to the Audit Committee
of the Board of Directors.
The estimated total amount expended on the Year 2000 Project through the third
quarter of 1998 was less than $1 million and the Company estimates that future
costs could range up to $2 million. Many of the Company's systems were upgraded
or replaced in the ordinary course of business during the last five years, and
costs related to those upgrades and replacements are not included in the Year
2000 Project expenses.
The Company believes that with the completion of its Year 2000 Project as
scheduled, the risks will be minimized and the possibility of significant
interruptions of operations reduced. However, if the Company and its third party
suppliers and customers do not complete in a timely manner their assessment,
remediation and testing for Year 2000 compliance, there can be no assurance that
Year 2000 problems will not materially adversely affect the Company's results of
operations or its relationships with its suppliers and customers. The Company
has not yet been able to clearly identify the most reasonably likely worst case
scenarios and the appropriate contingency plans for such scenarios. As the
Company completes all phases of its Year 2000 Project, it will prepare
contingency plans to deal with any areas where it determines that risks of
non-compliance are significant.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operating activities of $104 million for the first nine months of
1998 decreased $74 million from 1997 as a result of lower income and increased
working capital requirements. EBITDA (defined as earnings from continuing
operations before significant non-recurring items, provision for dispositions,
interest expense, income taxes and depreciation, depletion and amortization) for
the nine months of 1998 of $170 million decreased $6 million from 1997 results.
Cash from operating activities and additional borrowings helped to finance
capital expenditures of $70 million, dividends of $26 million and the repurchase
of Common Shares for $22 million. The Company also increased its borrowings to
finance the $66 million acquisition of the outstanding publicly traded Class A
Unit minority interest in Rayonier Timberlands L.P. Third quarter ending debt
was $508 million and the debt-to-capital-ratio was 44.4 percent compared to 40.2
percent at December 31, 1997.
The Company repurchased 516,079 of its shares during the first nine months of
1998 at an average cost of $42.42 for a total of $22 million. Over the same
period of 1997, the Company repurchased 840,500 shares at an average cost of
$42.04 per share for a total of $35 million. In July 1998, the Company's Board
of Directors increased the authorized number of common shares to be repurchased
by 200,000. All of these shares were repurchased in the third quarter of 1998.
In October 1998, the Board authorized the repurchase of an additional one
million shares through December 31, 2000. These share repurchases are in
addition
7
<PAGE> 10
to the 1.5 percent of outstanding shares normally repurchased each year to
offset the dilutive effect of incentive stock programs on earnings per share.
The Company has unsecured credit facilities totaling $300 million, which were
used for direct borrowings of $40 million and as support for $150 million of
outstanding commercial paper. As of September 30, 1998, the Company had $110
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 $200 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, share repurchases, working capital and other liquidity
needs for the foreseeable future.
SAFE HARBOR
Comments about market trends and anticipated earnings and activities in the
fourth quarter and in the first quarter of next year and disclosures about the
Company's project to address Year 2000 compliance are forward-looking and are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Changes in factors referred to in such comments and
disclosures as well as changes in the following additional important factors,
among others, could cause actual results to differ materially from those
expressed in the forward-looking statements: changes in the estimates of fire
damage; final results of negotiations with the Company's property insurance
carrier; competitive products and pricing, as well as fluctuations in demand,
particularly for specialty fluff pulps, export and domestic logs, and wood
products (including MDF); the impact of such market factors on the Company's
timber sales in the U.S. and New Zealand; the impact of global market conditions
on prices and volumes; production costs for MDF and for specialty pulps,
particularly for raw materials such as wood and chemicals; governmental policies
and regulations affecting the environment, import and export controls and taxes;
and interest rate and currency movements.
8
<PAGE> 11
ITEM 3. SELECTED OPERATING DATA
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
TIMBER AND WOOD PRODUCTS
Log trading volume
North America, in millions of board feet 61 54 130 174
New Zealand, in thousands of cubic meters 174 277 550 802
Other, in thousands of cubic meters 47 56 136 247
Timber sales volume
Northwest U.S., in millions of board feet 30 39 154 147
Southeast U.S., in thousands of short green tons 558(a) 567 1,788(a) 1,711
New Zealand, in thousands of cubic meters 280 336 650 835
Lumber sales volume, in millions of board feet 84 85 241 248
Medium-density fiberboard sales volume, 24 -- 61 --
in thousands of cubic meters
Intercompany timber sales volume
Northwest U.S.,
in millions of board feet 3 1 8 11
Southeast U.S.,
in thousands of short green tons 12 22 62 60
New Zealand
in thousands of cubic meters 103 175 257 446
SPECIALTY PULP PRODUCTS (b)
Pulp sales volume
Chemical cellulose, in thousands of metric tons 82 88 245 277
Fluff and specialty paper pulp, in thousands of metric tons 87 94 262 255
Production as a percent of capacity 98.6% 102.9% 98.6% 100.1%
</TABLE>
(a) Includes salvage timber sales of 177 resulting from the Southeast U.S.
forest fires.
(b) Excludes 1997 third quarter and nine months sales by the Port Angeles pulp
mill of 4 and 22, respectively, for chemical cellulose and 0 and 5,
respectively, for fluff and specialty paper pulp.
9
<PAGE> 12
SELECTED SUPPLEMENTAL FINANCIAL DATA (thousands of dollars, except per share
data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
GEOGRAPHICAL DATA (NON-U.S.)
Sales
New Zealand $ 15,349 $ 24,284 $ 42,960 $ 63,865
Other 2,981 4,247 11,094 19,854
--------- --------- --------- ---------
Total $ 18,330 $ 28,531 $ 54,054 $ 83,719
========= ========= ========= =========
Operating Income
New Zealand $ (3,361) $ 4,333 $ (11,863) $ 6,723
Other (363) (1,737) (2,530) (3,679)
--------- --------- --------- ---------
Total $ (3,724) $ 2,596 $ (14,393) $ 3,044
========= ========= ========= =========
TIMBERLANDS MANAGEMENT
Sales
Northwest U.S. $ 11,609 $ 16,373 $ 59,032 $ 63,193
Southeast U.S. 15,139(a) 16,837 60,274(a) 49,578
New Zealand 7,058 10,776 16,392 24,874
--------- --------- --------- ---------
Total $ 33,806 $ 43,986 $ 135,698 $ 137,645
========= ========= ========= =========
Operating Income
Northwest U.S. $ 7,486 $ 10,660 $ 42,961 $ 47,257
Southeast U.S 7,218(b) 10,979 41,560 33,906
New Zealand 1,616 2,897 4,717 6,201
--------- --------- --------- ---------
Total $ 16,320 $ 24,536 $ 89,238 $ 87,364
========= ========= ========= =========
EBITDA per Share
Northwest U.S. $ 0.30 $ 0.38 $ 1.60 $ 1.64
Southeast U.S 0.37 0.44 1.74 1.38
New Zealand 0.15 0.21 0.41 0.50
--------- --------- --------- ---------
Total $ 0.82 $ 1.03 $ 3.75 $ 3.52
========= ========= ========= =========
</TABLE>
(a) Includes salvage timber sales of $1.7 million.
(b) Operating income was reduced by $6.7 million due to the Southeast U.S.
forest fires, including $4.0 million on lower pricing for salvage timber
and $2.7 million on the write-off of destroyed timber assets and other fire
related expenses.
10
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 20, 1998, the U.S. District Court for the Southern District of
Georgia granted summary judgment in favor of Rayonier in the action
brought by Powell-Duffryn Terminals which was reported in Rayonier's
10-K for 1997. The plaintiffs filed a notice of appeal on June 10, 1998
with the U.S. Court of Appeals for the Eleventh Circuit.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index.
(b) Rayonier Inc. filed a Current Report on Form 8-K on September 25, 1998
with a press release issued on that date.
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 KENNETH P. JANETTE
------------------
Kenneth P. Janette
Vice President and Corporate Controller
November 12, 1998 (Chief Accounting Officer)
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
----------- ----------- --------
<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 holders, Not required to be
including indentures filed. 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 Rayonier 1994 Incentive Stock Plan, as amended Filed herewith
11 Statement re computation of per share earnings Not required to be filed
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>
12
<PAGE> 1
EXHIBIT 10.1
1994 RAYONIER INCENTIVE STOCK PLAN
1. PURPOSE
The purpose of the 1994 Rayonier Incentive Stock Plan is to motivate
and reward superior performance on the part of employees of Rayonier and its
subsidiaries and to thereby attract and retain employees of superior ability. In
addition, the Plan is intended to further opportunities for stock ownership by
such employees in order to increase their proprietary interest in Rayonier and,
as a result, their interest in the success of the Company. Awards will be made,
in the discretion of the Committee, to Key Employees (including officers and
directors who are also employees) whose responsibilities and decisions directly
affect the performance of any Participating Company and its subsidiaries. Such
incentive awards may consist of stock options, stock appreciation rights payable
in stock or cash, performance shares, restricted stock or any combination of the
foregoing, as the Committee may determine.
2. DEFINITIONS
When used herein, the following terms shall have the following
meanings:
"Act" means the Securities Exchange Act of 1934.
"Award" means an award granted to any Key Employee in accordance with
the provisions of the Plan in the form of Options, Rights, Performance Shares or
Restricted Stock, or any combination of the foregoing.
"Award Agreement" means the written agreement evidencing each Award
granted to a Key Employee under the Plan.
"Beneficiary" means the beneficiary or beneficiaries designated
pursuant to Section 10 to receive the amount, if any, payable under the Plan
upon the death of a Key Employee.
"Board" means the Board of Directors of the Company.
"CHANGE IN CONTROL" HAS THE MEANING SPECIFIED IN THE RETIREMENT PLAN.
"Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended. (All citations to sections of the Code are to such sections
as they may from time to time be amended or renumbered.)
"Committee" means the Compensation and Management Development Committee
of the Board or such other committee as may be designated by the Board to
administer the Plan.
"Company" means Rayonier Inc. and its successors and assigns.
"Fair Market Value", unless otherwise indicated in the provisions of
this Plan, means, as of any date, the composite closing price for one share of
Stock on the New York Stock Exchange or, if no sales of Stock
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<PAGE> 2
have taken place on such date, the composite closing price on the most recent
date on which selling prices were quoted, the determination to be made in the
discretion of the Committee.
"Incentive Stock Option" means a stock option qualified under Section
422 of the Code.
"Key Employee" means an employee (including any officer or director who
is also an employee) of any Participating Company whose responsibilities and
decisions, in the judgment of the Committee, directly affect the performance of
the Company and its subsidiaries.
"Limited Stock Appreciation Right" means a stock appreciation right
which shall become exercisable automatically upon the occurrence of an
Acceleration Event as described in Section 9 of the Plan.
"Option" means an option awarded under Section 5 of the Plan to
purchase Stock of the Company, which option may be an Incentive Stock Option or
a non-qualified stock option.
"Participating Company" means the Company or any subsidiary or other
affiliate of the Company; provided, however, for Incentive Stock Options only,
"Participating Company" means the Company or any corporation which at the time
such Option is granted qualifies as a "subsidiary" of the Company under Section
425(f) of the Code.
"Performance Share" means a performance share awarded under Section 6
of the Plan.
"Plan" means the 1994 Rayonier Incentive Stock Plan, as the same may be
amended, administered or interpreted from time to time.
"Plan Year" means the calendar year.
"Retirement" means eligibility to receive immediate retirement benefits
under a Participating Company pension plan.
"Restricted Stock" means Stock awarded under Section 7 of the Plan
subject to such restrictions as the Committee deems appropriate or desirable.
"Retirement Plan" means the Retirement Plan for Salaried Employees of
Rayonier Inc., as amended effective July 18, 1997, and as the same may be
thereafter amended from time to time prior to the occurrence of a Change in
Control.
"Right" means a stock appreciation right awarded in connection with an
option under Section 5 of the Plan.
"Stock" means the common shares of the Company.
"Total Disability" means the complete and permanent inability of a Key
Employee to perform all of his or her duties under the terms of his or her
employment with any Participating Company, as determined by the Committee upon
the basis of such evidence, including independent medical reports and data, as
the Committee deems appropriate or necessary.
"Voting Securities" means any securities of the Company that vote
generally in the election of directors.
2
<PAGE> 3
3. SHARES SUBJECT TO THE PLAN
The aggregate number of shares of Stock which may be awarded under the
Plan in any Plan Year shall be subject to an annual limit. The maximum number of
shares of Stock for which Awards may be granted under the Plan in each Plan Year
shall be 1.5 percent (l.5%) of the total of the issued and outstanding shares of
Stock reported in the Annual Report on Form 10-K of the Company for the fiscal
year ending immediately prior to any Plan Year. Any unused portion of the annual
limit for any Plan Year shall be carried forward and be made available for
awards in succeeding Plan Years.
No more than twenty percent (20%) of such total number of shares on a
cumulative basis shall be available for restricted stock and performance shares
Awards. In addition to the foregoing, in no event shall more than one million
(1,000,000) shares of Stock be cumulatively available for Awards of incentive
stock options under the Plan. For any Plan Year, no individual employee may
receive an Award of stock options for more than ten percent (10%) of the annual
limit on available shares applicable to that Plan Year.
Subject to the above limitations, shares of Stock to be issued under
the Plan may be made available from the authorized but unissued shares, or from
shares purchased in the open market. For the purpose of computing the total
number of shares of Stock available for Awards under the Plan, there shall be
counted against the foregoing limitations the number of shares of Stock which
equal the value of performance share Awards, in each case determined as at the
dates on which such Awards are granted. If any Awards under the Plan are
forfeited, terminated, expire unexercised, are settled in cash in lieu of Stock
or are exchanged for other Awards, the shares of Stock which were theretofore
subject to such Awards shall again be available for Awards under the Plan to the
extent of such forfeiture or expiration of such Awards. Further, any shares that
are exchanged (either actually or constructively) by optionees as full or
partial payment to the Company of the purchase price of shares being acquired
through the exercise of a stock option granted under the Plan may be available
for subsequent Awards, provided however, that such shares may be awarded only to
those participants who are not directors or executive officers (as that term is
defined in the rules and regulations under Section 16 of the Exchange Act).
4. GRANT OF AWARDS AND AWARD AGREEMENTS
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of Key
Employees to whom Awards are to be granted; (ii) determine the form or forms of
Award to be granted to any Key Employee; (iii) determine the amount or number of
shares of Stock subject to each Award; and (iv) determine the terms and
conditions of each Award.
(b) Each Award granted under the Plan shall be evidenced by a written
Award Agreement. Such agreement shall be subject to and incorporate the express
terms and conditions, if any, required under the Plan or required by the
Committee.
3
<PAGE> 4
5. STOCK OPTIONS AND RIGHTS
(a) With respect to Options and Rights, the Committee shall (i)
authorize the granting of Incentive Stock Options, non-qualified stock options,
or a combination of Incentive Stock Options and non-qualified stock options;
(ii) authorize the granting of Rights which may be granted in connection with
all or part of any Option granted under this Plan, either concurrently with the
grant of the option or at any time thereafter during the term of the Option;
(iii) determine the number of shares of Stock subject to each Option or the
number of shares of Stock that shall be used to determine the value of a Right;
and (iv) determine the time or times when and the manner in which each Option or
Right shall be exercisable and the duration of the exercise period.
(b) Any option issued hereunder which is intended to qualify as an
Incentive Stock Option shall be subject to such limitations or requirements as
may be necessary for the purposes of Section 422 of the Code or any regulations
and rulings thereunder to the extent and in such form as determined by the
Committee in its discretion.
(c) Rights may be granted only to Key Employees who may be considered
directors or officers of the Company for purposes of Section 16 of the Act.
(d) The exercise period for a non-qualified stock option and any
related Right shall not exceed ten years and two days from the date of grant,
and the exercise period for an Incentive Stock Option and any related Right
shall not exceed ten years from the date of grant.
(e) The Option price per share shall be determined by the Committee at
the time any Option is granted and shall be not less than the Fair Market Value
of one share of Stock on the date the Option is granted.
(f) No part of any Option or Right may be exercised until the Key
Employee who has been granted the Award shall have remained in the employ of a
Participating Company for such period after the date of grant as the Committee
may specify, if any, and the Committee may further require exercisability in
installments; provided, however, the period during which a Right is exercisable
shall commence no earlier than six months following the date the Option or Right
is granted.
(g) The purchase price of the shares as to which an Option shall be
exercised shall be paid to the Company at the time of exercise either in cash or
Stock already owned by the optionee having a total Fair Market Value equal to
the purchase price, or a combination of cash and Stock having a total fair
market value, as so determined, equal to the purchase price. The Committee shall
determine acceptable methods for tendering Stock as payment upon exercise of an
Option and may impose such limitations and prohibitions on the use of Stock to
exercise an Option as it deems appropriate.
(h) Unless Section 9 shall provide otherwise, Rights granted to a
director or officer shall terminate when such person ceases to be considered a
director or officer of the Company subject to Section 16 of the Act.
(i) In case of termination of employment, the following provisions
shall apply:
(A) If a Key Employee who has been granted an Option shall die
before such Option has expired, his or her Option may be exercised in
full by the person or persons to whom the Key Employee's rights under
the Option pass by will, or if no such person has such right, by his or
her executors or administrators, at any time, or from time to time,
within five years after the date of the
4
<PAGE> 5
Key Employee's death or within such other period, and subject to such
terms and conditions as the Committee may specify, but not later than
the expiration date specified in Section 5(d) above.
(B) If the Key Employee's employment by any Participating
Company terminates because of his or her Retirement or Total
Disability, he or she may exercise his or her Options in full at any
time, or from time to time, within five years after the date of the
termination of his or her employment or within such other period, and
subject to such terms and conditions as the Committee may specify, but
not later than the expiration date specified in Section 5(d) above. Any
such Options not fully exercisable immediately prior to such optionee's
retirement shall become fully exercisable upon such retirement unless
the Committee, in its sole discretion, shall otherwise determine.
(C) Except as provided in Section 9, if the Key Employee shall
voluntarily resign before eligibility for Retirement or he or she is
terminated for cause as determined by the Committee, the Options or
Rights shall be cancelled coincident with the effective date of the
termination of employment.
(D) If the Key Employee's employment terminates for any other
reason, he or she may exercise his or her Options, to the extent that
he or she shall have been entitled to do so at the date of the
termination of his or her employment, at any time, or from time to
time, within three months after the date of the termination of his or
her employment or within such other period, and subject to such terms
and conditions as the Committee may specify, but not later than the
expiration date specified in Section 5(d) above.
(j) No Option or Right granted under the Plan shall be transferable
other than by will or by the laws of descent and distribution. During the
lifetime of the optionee, an Option or Right shall be exercisable only by the
Key Employee to whom the Option or Right is granted.
(k) With respect to an Incentive Stock Option, the Committee shall
specify such terms and provisions as the Committee may determine to be necessary
or desirable in order to qualify such Option as an "incentive stock option"
within the meaning of Section 422 of the Code.
(1) With respect to the exercisability and settlement of Rights:
(i) Upon exercise of a Right, the Key Employee shall
be entitled, subject to such terms and conditions the
Committee may specify, to receive upon exercise thereof all or
a portion of the excess of (A) the Fair Market Value of a
specified number of shares of Stock at the time of exercise,
as determined by the Committee, over (B) a specified amount
which shall not, subject to Section 5(e), be less than the
Fair Market Value of such specified number of shares of Stock
at the time the Right is granted. Upon exercise of a Right,
payment of such excess shall be made as the Committee shall
specify in cash, the issuance or transfer to the Key Employee
of whole shares of Stock with a Fair Market Value at such time
equal to any excess, or a combination of cash and shares of
Stock with a combined Fair Market Value at such time equal to
any such excess, all as determined by the Committee. The
Company will not issue a fractional share of Stock and, if a
fractional share would otherwise be issuable, the Company
shall pay cash equal to the Fair Market Value of the
fractional share of Stock at such time.
(ii) For the purposes of Subsection (i) of this
Section 5(l), in the case of any such Right or portion
thereof, other than a Right related to an Incentive Stock
Option,
5
<PAGE> 6
exercised for cash during a "window period" specified by Rule
16b-3 under the Act, the Fair Market Value of the Stock at the
time of such exercise shall be the highest composite daily
closing price of the Stock during such window period.
(iii) In the event of the exercise of such Right, the
Company's obligation in respect of any related Option or such
portion thereof will be discharged by payment of the Right so
exercised.
6. PERFORMANCE SHARES
(a) Subject to the provisions of the Plan, the Committee shall (i)
determine and designate from time to time those Key Employees or groups of Key
Employees to whom Awards of Performance Shares are to be made, (ii) determine
the Performance Period (the "Performance Period") and Performance Objectives
(the "Performance Objectives") applicable to such Awards, (iii) determine the
form of settlement of a Performance Share and (iv) generally determine the terms
and conditions of each such Award. At any date, each Performance Share shall
have a value equal to the Fair Market Value of a share of Stock at such date;
provided that the Committee may limit the aggregate amount payable upon the
settlement of any Award.
(b) The Committee shall determine a Performance Period of not less than
two nor more than five years. Performance Periods may overlap and Key Employees
may participate simultaneously with respect to Performance Shares for which
different Performance Periods are prescribed.
(c) The Committee shall determine the Performance Objectives of Awards
of Performance Shares. Performance Objectives may vary from Key Employee to Key
Employee and between groups of Key Employees and shall be based upon such
performance criteria or combination of factor as the Committee may deem
appropriate, including, but not limited to, minimum earnings per share or return
on equity. If during the course of a Performance Period there shall occur
significant events which the Committee expects to have a substantial effect on
the applicable Performance Objectives during such period, the Committee may
revise such Performance Objectives.
(d) At the beginning of a Performance Period, the Committee shall
determine for each Key Employee or group of Key Employees the number of
Performance Shares or the percentage of Performance Shares which shall be paid
to the Key Employee or member of the group of Key Employees if Performance
Objectives are met in whole or in part.
(e) If a Key Employee terminates service with all Participating
Companies during a Performance Period because of death, Total Disability,
Retirement, or under other circumstances where the Committee in its sole
discretion finds that a waiver would be in the best interests of the Company,
that Key Employee may, as determined by the Committee, be entitled to an Award
of Performance Shares at the end of the Performance Period based upon the extent
to which the Performance Objectives were satisfied at the end of such period,
which Award, in the discretion of the Committee, may be maintained without
change or reduced and prorated for the portion of the Performance Period during
which the Key Employee was employed by any Participating Company; provided,
however, the Committee may provide for an earlier payment in settlement of such
Performance Shares in such amount and under such terms and conditions as the
Committee deems appropriate or desirable. If a Key Employee terminates service
with all Participating Companies during a Performance Period for any other
reason, then such Key Employee shall not be entitled to any Award with respect
to that Performance Period unless the Committee shall otherwise determine.
6
<PAGE> 7
(f) Each Award of a Performance Share shall be paid in whole shares of
Stock, or cash, or a combination of Stock and cash either as a lump sum payment
or in annual installments, all as the Committee shall determine, with payment to
commence as soon as practicable after the end of the relevant Performance
Period.
7. RESTRICTED STOCK
(a) Restricted Stock shall be subject to a restriction period (after
which restrictions will lapse) which shall mean a period commencing on the date
the Award is granted and ending on such date as the Committee shall determine
(the "Restriction Period"). The Committee may provide for the lapse of
restrictions in installments where deemed appropriate.
(b) Except when the Committee determines otherwise pursuant to Section
7(d), if a Key Employee terminates employment with all Participating Companies
for any reason before the expiration of the Restriction Period, all shares of
Restricted Stock still subject to restriction shall be forfeited by the Key
Employee and shall be reacquired by the Company.
(c) Except as otherwise provided in this Section 7, no shares of
Restricted Stock received by a Key Employee shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of during the
Restriction Period.
(d) In cases of death, Total Disability or Retirement or in cases of
special circumstances, the Committee may, in its sole discretion when it finds
that a waiver would be in the best interests of the Company, elect to waive any
or all remaining restrictions with respect to such Key Employee's Restricted
Stock.
(e) The Committee may require, under such terms and conditions as it
deems appropriate or desirable, that the certificates for Stock delivered under
the Plan may be held in custody by a bank or other institution, or that the
Company may itself hold such shares in custody until the Restriction Period
expires or until restrictions thereon otherwise lapse, and may require, as a
condition of any Award of Restricted Stock that the Key Employee shall have
delivered a stock power endorsed in blank relating to the Restricted Stock.
(f) Nothing in this Section 7 shall preclude a Key Employee from
exchanging any shares of Restricted Stock subject to the restrictions contained
herein for any other shares of Stock that are similarly restricted.
(g) Subject to Section 7(e) and Section 8, each Key Employee entitled
to receive Restricted Stock under the Plan shall be issued a certificate for the
shares of Stock. Such certificate shall be registered in the name of the Key
Employee, and shall bear an appropriate legend reciting the terms, conditions
and restrictions, if any, applicable to such Award and shall be subject to
appropriate stop-transfer orders.
8. CERTIFICATES FOR AWARDS OF STOCK
(a) The Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (i) the listing of such shares on any
stock exchange on which the Stock may then be listed and (ii) the completion of
any registration or qualification of such shares under any federal or state law,
or any ruling or regulation of any government body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
7
<PAGE> 8
(b) All certificates for shares of Stock delivered under the Plan shall
also be subject to such stop-transfer orders and other restrictions as the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. The foregoing
provisions of this Section 8(b) shall not be effective if and to the extent that
the shares of Stock delivered under the Plan are covered by an effective and
current registration statement under the Securities Act of 1933, or if and so
long as the Committee determines that application of such provisions is no
longer required or desirable. In making such determination, the Committee may
rely upon an opinion of counsel for the Company.
(c) Except for the restrictions on Restricted Stock under Section 7,
each Key Employee who receives Stock in settlement of an Award of Stock, shall
have all of the rights of a shareholder with respect to such shares, including
the right to vote the shares and receive dividends and other distributions. No
Key Employee awarded an Option, a Right or Performance Share shall have any
right as a shareholder with respect to any shares covered by his or her Option,
Right or Performance Share prior to the date of issuance to him or her of a
certificate or certificates for such shares.
9. CHANGE IN CONTROL
Notwithstanding any provisions in this Plan to the contrary:
(a) Each outstanding Option granted under the Plan shall
become immediately exercisable in full for the aggregate number of
shares covered thereby and all related Rights shall also become
exercisable upon the occurrence of a Change in Control and shall
continue to be exercisable in full for cash for a period of 60 calendar
days beginning on the date that such Change in Control occurs and
ending on the 60th calendar day following that date; provided, however,
that (A) no Right shall become exercisable earlier than six months
following the date the Right is granted, and (B) no Option or Right
shall be exercisable beyond the expiration date of its original term.
(b) Options and Rights shall not terminate and shall continue
to be fully exercisable for a period of seven months following the
occurrence of a Change in Control in the case of an employee who is
terminated other than for just cause or who voluntarily terminates his
or her employment because he or she in good faith believes that as a
result of such Change in Control he or she is unable effectively to
discharge his or her present duties or the duties of the position he or
she occupied just prior to the occurrence of such Change in Control.
For purposes of Section 9 only, termination shall be for "just cause"
only if such termination is based on fraud, misappropriation or
embezzlement on the part of the employee which results in a final
conviction of a felony. Under no circumstances, however, shall any
Option or Right be exercised beyond the expiration date of its original
term.
(c) Any Right or portion thereof may be exercised for cash
within the 60-calendar-day period following the occurrence of a Change
in Control with settlement, except in the case of a Right related to an
Incentive Stock Option, based on the "Formula Price" which shall be the
highest of (A) the highest composite daily closing price of the Stock
during the period beginning on the 60th calendar day prior to the date
on which the Right is exercised and ending on the date such Right is
exercised, (B) the highest gross price paid for the Stock during the
same period of time, as reported in a report on Schedule 13D filed with
the Securities and Exchange Commission or (C) the highest gross price
paid or to be paid for a share of Stock (whether by way of exchange,
conversion,
8
<PAGE> 9
distribution upon merger, liquidation or otherwise) in any of the
transactions set forth in the definition of "Change in Control" in the
Retirement Plan.
(d) Upon the occurrence of a Change in Control, Limited Stock
Appreciation Rights shall automatically be granted as to any Option
with respect to which Rights are not then outstanding; provided,
however, that Limited Stock Appreciation Rights shall be provided at
the time of grant of any Incentive Stock Option subject to
exercisability upon the occurrence of a Change in Control. Limited
Stock Appreciation Rights shall entitle the holder thereof, upon
exercise of such rights and surrender of the related Option or any
portion thereof, to receive, without payment to the Company (except for
applicable withholding taxes), an amount in cash equal to the excess,
if any, of the Formula Price as that term is defined in Section 9 over
the option price of the Stock as provided in such Option; provided that
in the case of the exercise of any such Limited Stock Appreciation
Right or portion thereof related to an Incentive Stock Option, the Fair
Market Value of the Stock at the time of such exercise shall be
substituted for the Formula Price. Each such Limited Stock Appreciation
Right shall be exercisable only during the period beginning on the
first business day following the occurrence of such Change in Control
and ending on the 60th calendar day following such date and only to the
same extent the related Option is exercisable. In the case of persons
who are considered directors or officers of the Company for purposes of
Section 16 of the Act, Limited Stock Appreciation Rights shall not be
so exercisable until they have been outstanding for at least six
months. Upon exercise of a Limited Stock Appreciation Right and
surrender of the related Option, or portion thereof, such Option, to
the extent surrendered, shall not thereafter be exercisable.
(e) The restrictions applicable to Awards of Restricted Stock
issued pursuant to Section 7 shall lapse upon the occurrence of a
Change in Control and the Company shall issue stock certificates
without a restrictive legend. Key Employees holding Restricted Stock on
the date of a Change in Control may tender such Restricted Stock to the
Company which shall pay the Formula Price as that term is defined in
Section 9; provided, such Restricted Stock must be tendered to the
Company within 60 calendar days of the Change in Control.
(f) If a Change in Control occurs during the course of a
Performance Period applicable to an Award of Performance Shares
pursuant to Section 6, then the Key Employee shall be deemed to have
satisfied the Performance Objectives and settlement of such Performance
Shares shall be based on the Formula Price, as defined in this Section
9.
10. BENEFICIARY
(a) Each Key Employee shall file with the Company a written designation
of one or more persons as the Beneficiary who shall be entitled to receive the
Award, if any, payable under the Plan upon his or her death. A Key Employee may
from time-to-time revoke or change his or her Beneficiary designation without
the consent of any prior Beneficiary by filing a new designation with the
Company. The last such designation received by the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Company prior to the Key Employee's death,
and in no event shall it be effective as of a date prior to such receipt.
(b) If no such Beneficiary designation is in effect at the time of a
Key Employee's death, or if no designated Beneficiary survives the Key Employee
or if such designation conflicts with law, the Key Employee's estate shall be
entitled to receive the Award, if any, payable under the Plan upon his or her
death. If the Committee is in doubt as to the right of any person to receive
such Award, the Company may retain such Award, without liability for any
interest thereon, until the Committee determines the rights thereto, or the
9
<PAGE> 10
Company may pay such Award into any court of appropriate jurisdiction and such
payment shall be a complete discharge of the liability of the Company therefor.
11. ADMINISTRATION OF THE PLAN
(a) Each member of the Committee shall be both a member of the Board
and a "non-employee director" within the meaning of Rule 16b-3(b)(3)(i) under
the Act or successor rule or regulation. No member of the Committee shall be, or
shall have been, eligible to receive an Award under the Plan or any other plan
maintained by any Participating Company to acquire stock, stock options, stock
appreciation rights, performance shares or restricted stock of a Participating
Company at any time within the one year immediately preceding the member's
appointment to the Committee.
(b) All decisions, determinations or actions of the Committee made or
taken pursuant to grants of authority under the Plan shall be made or taken in
the sole discretion of the Committee and shall be final, conclusive and binding
on all persons for all purposes.
(c) The Committee shall have full power, discretion and authority to
interpret, construe and administer the Plan and any part thereof, and its
interpretations and constructions thereof and actions taken thereunder shall be,
except as otherwise determined by the Board, final, conclusive and binding on
all persons for all purposes.
(d) The Committee's decisions and determinations under the Plan need
not be uniform and may be made selectively among Key Employees, whether or not
such Key Employees are similarly situated.
(e) The Committee may, in its sole discretion, delegate such of its
powers as it deems appropriate.
(f) If a Change in Control has not occurred and if the Committee
determines that a Key Employee has taken action inimical to the best interests
of any Participating Company, the Committee may, in its sole discretion,
terminate in whole or in part such portion of any Option (including any related
Right) as has not yet become exercisable at the time of termination, terminate
any Performance Share Award for which the Performance Period has not been
completed or terminate any Award of Restricted Stock for which the Restriction
Period has not lapsed.
12. AMENDMENT, EXTENSION OR TERMINATION
The Board may, at any time, amend or terminate the Plan and,
specifically, may make such modifications to the Plan as it deems necessary to
avoid the application of Section 162(m) of the Code and the Treasury regulations
issued thereunder. However, no amendment shall, without approval by a majority
of the Company's stockholders, (a) alter the group of persons eligible to
participate in the Plan, (b) except as provided in Section 13 increase the
maximum number of shares of Stock which are available for Awards under the Plan
or (c) extend the period during which awards may be granted beyond December 31,
2003. If a Change in Control has occurred, no amendment or termination shall
impair the rights of any person with respect to a prior Award.
13. ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK
In the event of any recapitalization, reclassification, split-up or
consolidation of shares of Stock or, stock dividend, merger or consolidation of
the Company or sale by the Company of all or a portion of its
10
<PAGE> 11
assets, the Committee may make such adjustments in the Stock subject to Awards,
including Stock subject to purchase by an Option, or the terms, conditions or
restrictions on Stock or Awards, including the price payable upon the exercise
of such Option, as the Committee deems equitable.
14. MISCELLANEOUS
(a) Except as provided in Section 9, nothing in this Plan or any Award
granted hereunder shall confer upon any employee any right to continue in the
employ of any Participating Company or interfere in any way with the right of
any Participating Company to terminate his or her employment at any time. No
Award payable under the Plan shall be deemed salary or compensation for the
purpose of computing benefits under any employee benefit plan or other
arrangement of any Participating Company for the benefit of its employees unless
the Company shall determine otherwise. No Key Employee shall have any claim to
an Award until it is actually granted under the Plan. To the extent that any
person acquires a right to receive payments from the Company under this Plan,
such right shall be no greater than the right of an unsecured general creditor
of the Company. All payments to be made hereunder shall be paid from the general
funds of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
provided in Section 7(e) with respect to Restricted Stock.
(b) The Committee may cause to be made, as a condition precedent to the
payment of any Award, or otherwise, appropriate arrangements with the Key
Employee or his or her Beneficiary, for the withholding of any federal, state,
local or foreign taxes.
(c) The Plan and the grant of Awards shall be subject to all applicable
federal and state laws, rules, and regulations and to such approvals by any
government or regulatory agency as may be required.
(d) The terms of the Plan shall be binding upon the Company and its
successors and assigns.
(e) Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.
15. EFFECTIVE DATE, TERM OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan was March 1, 1994 and was approved by
the Company's shareholders within twelve months before such date. The Plan was
amended and restated effective October 16, 1998. No Award shall be granted under
this Plan after the Plan's termination date. The Plan's termination date shall
be December 31, 2003. The Plan will continue in effect for existing Awards as
long as any such Award is outstanding.
11
<PAGE> 1
EXHIBIT 12
RAYONIER INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
1998 1997
---- ----
<S> <C> <C>
Earnings:
Net Income $ 49,477 $ 61,398
Add:
Income Taxes 19,705 25,129
Minority Interest -- 19,359
Amortization of Capitalized Interest 1,679 806
-------- --------
70,861 106,692
Adjustments to Earnings for Fixed Charges:
Interest and Other Financial Charges 26,076 17,987
Interest Factor Attributable to Rentals 1,480 1,640
-------- --------
27,556 19,627
-------- --------
EARNINGS AS ADJUSTED $ 98,417 $126,319
======== ========
Fixed Charges:
Fixed Charges above $ 27,556 $ 19,627
Capitalized Interest 194 4,849
-------- --------
TOTAL FIXED CHARGES $ 27,750 $ 24,476
======== ========
RATIO OF EARNINGS AS ADJUSTED TO
TOTAL FIXED CHARGES 3.55 5.16
======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 8,791
<SECURITIES> 0
<RECEIVABLES> 116,792
<ALLOWANCES> 4,349
<INVENTORY> 113,178
<CURRENT-ASSETS> 303,526
<PP&E> 1,306,903
<DEPRECIATION> 612,517
<TOTAL-ASSETS> 1,631,744
<CURRENT-LIABILITIES> 179,511
<BONDS> 504,066
0
0
<COMMON> 82,537
<OTHER-SE> 553,791
<TOTAL-LIABILITY-AND-EQUITY> 1,631,744
<SALES> 738,165
<TOTAL-REVENUES> 738,165
<CGS> 618,143
<TOTAL-COSTS> 618,143
<OTHER-EXPENSES> 24,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,076
<INCOME-PRETAX> 69,182
<INCOME-TAX> 19,705
<INCOME-CONTINUING> 49,477
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,477
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.72
</TABLE>
