<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
F O R M 1 0 - K
(Mark One)
( x ) Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] For the Year
ended December 31, 1993
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required] For the
Transition Period from . . . . . . . . . to . . . . . . . .
Commission File Number 1-8997
RAYONIER TIMBERLANDS, L.P.
A Delaware Limited Partnership
I.R.S. Employer Identification No. 06-1148227
1177 SUMMER STREET, STAMFORD, CT 06905-5529
(Principal Executive Office)
Telephone Number: (203) 348-7000
Securities registered pursuant to Section 12 (b) of the Act:
Class A Depositary Units . . . . Registered on the New York Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act: None
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 ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. ( )
The aggregate market value of the Class A Units held by non-affiliates of the
Registrant as of March 7, 1994 was approximately $174,570,000 (For the purposes
of determining the above stated amount only, all directors and officers of the
special general partner and the managing general partner of the Registrant are
presumed to be affiliates.)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C> <C>
PART I
1. Business 1 - 11
2. Properties 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 12
6. Selected Financial Data 12-13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-17
8. Financial Statements and Supplementary Data 17
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 17
PART III
10. Directors and Executive Officers of the Registrant 18 - 20
11. Executive Compensation 21
12. Security Ownership of Certain Beneficial Owners and Management 21
13. Certain Relationships and Related Transactions 21
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 21
</TABLE>
i
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Management F-1
Report of Independent Public Accountants F-2
Statements of Income for the Three Years Ended
December 31, 1993 F-3
Balance Sheets as of December 31, 1993 and 1992 F-4
Statements of Cash Flows for the Three Years Ended
December 31, 1993 F-5
Statements of Partners' Capital for the Three Years Ended
December 31, 1993 F-6
Notes to Financial Statements F-7 to F-13
Quarterly Results for 1993 and 1992 F-14
</TABLE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
(All schedules not listed below have been omitted because they are not
applicable, the required matter is not present, the amounts are
insignificant or immaterial, or the information has been otherwise
supplied in the financial statements or the notes thereto.)
<TABLE>
<S> <C> <C>
Schedule V - Plant, Property and Equipment S-1
Schedule VI - Accumulated Depreciation, Depletion and Amortization of
Plant, Property and Equipment S-2
Signatures A
Exhibit Index B to C
</TABLE>
ii
<PAGE> 4
PART I
ITEM 1. BUSINESS
INTRODUCTION
Rayonier Timberlands, L.P. (the Partnership or RTLP) is a Delaware
limited partnership formed by Rayonier Inc. (Rayonier) in October 1985 to
succeed to substantially all of Rayonier's timberlands business. Rayonier
Forest Resources Company (RFR or Managing General Partner), a wholly owned
subsidiary of Rayonier formed in September 1985, is the Managing General
Partner of the Partnership and Rayonier is the Special General Partner.
On November 19, 1985, Rayonier contributed approximately 1.19 million
acres of its timberlands owned in fee or held under long-term leases (the
Timberlands) to the Partnership in exchange for 20,000,000 Class A Depositary
Units (Class A Units) representing Class A limited partners' interests in the
Partnership and 20,000,000 Class B Depositary Units (Class B Units)
representing Class B limited partners' interests in the Partnership. Also on
such date, in a registered public offering, Rayonier offered and sold 5,060,000
Class A Units. Therefore, at all times after such date to and including
December 31, 1993, Rayonier has held 74.7 percent of the Partnership's issued
and outstanding Class A Units and 100 percent of the Partnership's issued and
outstanding Class B Units.
On February 28, 1994, ITT Corporation (ITT), Rayonier's sole
shareholder, distributed all the Common Shares of Rayonier to ITT's
shareholders. In connection with the distribution, Rayonier changed its name
from ITT Rayonier Incorporated to Rayonier Inc. and became a publicly traded
company listed on the New York Stock Exchange under the symbol "RYN". RTLP
will continue to be listed separately and trade under the symbol "LOG." Class
A unitholders' financial interest will not be affected in any manner by ITT's
distribution of Rayonier to its shareholders.
DESCRIPTION OF BUSINESS
The Partnership is engaged in the timberlands business, which includes
forestry management, reforestation, timber thinning and the marketing and sale
of standing timber from the Timberlands. The Partnership will occasionally
purchase, for short term resale, standing timber from other ownerships. The
Partnership's business plan is to operate the Timberlands for sustained long-
range harvest and to satisfy the Partnership's need to generate regular cash
flow in light of its cash distribution policy as determined from time to time
by the Managing General Partner's Board of Directors.
The Partnership operates through Rayonier Timberlands Operating
Company, L.P. (the Operating Partnership or RTOC), a Delaware limited
partnership formed by Rayonier in October 1985 in which the Partnership holds a
99 percent limited partner's interest. RFR is the Managing General Partner of
the Partnership and the Operating Partnership, and Rayonier is the Special
General Partner of both partnerships. As general partners, Rayonier and RFR
hold an aggregate 1 percent interest in each partnership and, therefore, have
an aggregate 1.99 percent interest in the Partnership and the Operating
Partnership on a combined basis. Unless the context otherwise requires, all
references in this Form 10-K to the Partnership are also references to the
Operating Partnership.
The Partnership negotiates and contracts for the sale of standing
timber (stumpage) with buyers who generally cut and pay for the trees during
the contract period. Current contracts usually entail a 20 percent deposit
and/or performance bond and generally have a 12 to 24 month life. The
Partnership conducts, or contracts for third parties to conduct, harvesting
operations if the Managing General Partner believes that the timber cannot be
sold as profitably as stumpage or that the tract in question is particularly
environmentally sensitive. In addition, the Partnership may sell or exchange
portions of the Timberlands and acquire additional timber properties for cash,
additional Units or other consideration.
Partnership sales to Rayonier for use in Rayonier's specialty pulp,
log trading and wood products businesses are an important contributor to
Partnership results. For further information, see "Timber Markets and Sales;
Affiliated Party Transactions."
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<PAGE> 5
In 1993, two customers under common ownership (not affiliated with the
Partnership) accounted for approximately 15 percent of total revenues while in
1992 two unaffiliated customers accounted for approximately 34 percent of total
revenues. See Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations." No unaffiliated
customer accounted for sales in excess of 10 percent of total revenues in 1991.
The Partnership and the Operating Partnership have no officers,
directors or employees; in addition, RFR has no employees. Officers of RFR and
officers and employees of Rayonier perform all management functions for the
Partnership. As of December 31, 1993, Rayonier had approximately 2,600
employees of which approximately 150 are active in its Forest Resources
Division.
FORESTRY OPERATIONS
The Partnership's forest management operations and harvesting
schedules are based on biological information, environmental issues, and other
data concerning species, site index, classification of soils, estimates of
timber inventory and the types, size and age classification of the timber base.
From this information the Partnership routinely refines its long-term harvest
schedule based on existing and anticipated economic and market conditions, with
a view toward maximizing the value of its timber and timberland assets.
Particular forestry practices vary by geographic region and depend
upon factors such as soil productivity, tree size, age and stocking. Forest
stands may be thinned periodically to improve stand quality until they are
harvested. Different areas within a forest may be planted or seeded in
successive years to provide a distribution of age classes within the forest. A
distribution of age classes will tend to provide a regular source of cash flow
as the various timber stands reach harvestable age. The Partnership's forest
management practices include thinning of timber stands, controlled burning,
fertilization of timber plantations, disease and insect control and
reforestation. Reforestation activities include intensive land preparation and
planting. The Partnership has a fully established tree improvement program in
the Southeast which, in conjunction with its seed orchards and seedling
nursery, supplies up to 100 percent of the annual planting requirements with
first and second generation genetically improved planting stock. The
Partnership also maintains a genetics program in the Northwest, but it cannot
yet fully supply that region's seedling needs.
The Partnership's activities include the maintenance and building of
roads as necessary for timber access within the Timberlands. In the Northwest
either the Partnership or the timber purchaser will build and maintain roads,
depending on contract requirements. In the Southeast it is typically the
obligation of the landowner. Each of the major regions within the Timberlands
has well established road systems that permit access to substantially the
entire area throughout the year. The Timberlands contain over 4,000 miles of
roads that, together with public roads and roads built by other private
landowners, provide such access.
The timing of harvest of merchantable timber depends in part on the
maturing cycles of timber and on economic conditions. Timber on the
Partnership's 369,000 acres of timberlands in the state of Washington (the
Northwestern Timberlands), consisting predominantly of conifer species, is
currently thinned at approximately 15 years of age and is harvested after
attaining approximately 45-50 years of age. The Partnership's long standing
policy has been to reach a sustainable annual harvest level in the Northwest by
gradually reducing its harvest volume each year. Although 1994's harvest
volume is expected to include 1993's shortfall, management's projection of the
annual harvest in this region from 1995 through 2000 remains at approximately
80 percent of the 1992 harvest.
Timber on the Partnership's 793,000 acres of timberland in Georgia,
Florida and South Carolina (the Southeastern Timberlands) typically has a
shorter maturity cycle than timber in the Northwestern United States. Pine
plantations in the Southeastern Timberlands are harvested after they reach
approximately 20-25 years of age. Due to intensive forest and land management
as well as silvicultural investment, pine volume available for harvest on the
Southeastern Timberlands is expected generally to increase 2 to 3 percent
annually. See Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Results of Operations." By the year
2000, the annual pine harvest rate in this region is now expected to be nearly
16 percent greater than the 1993 harvest.
See "Federal and State Regulation" for a description of issues which
may impact Partnership's timber harvest rates.
DESCRIPTION OF TIMBERLANDS
The Timberlands consist of approximately 1.16 million acres, as of
December 31, 1993, located in the state of Washington, primarily on the Olympic
Peninsula, and in Georgia, Florida and South Carolina. Approximately 1.03
- 2 -
<PAGE> 6
million acres are owned in fee, while approximately 137,000 acres are held
under long-term lease. Each of these regions contains tracts of timber located
within the operating radius of a number of pulp and paper mills, sawmills,
plywood mills, and wood treating plants.
ACREAGE. The following table sets forth, as of December 31, 1993, the
location and type of ownership that the Partnership has with respect to the
Timberlands.
<TABLE>
<CAPTION>
HELD UNDER
OWNED IN LONG-TERM
FEE LEASE1 TOTAL
--- ----- -----
(thousands of acres)
<S> <C> <C> <C>
Northwestern Timberlands
Olympic Peninsula of Washington 369 - 369
----- ----- -----
Southeastern Timberlands
Georgia 490 47 537
Florida 165 90 255
South Carolina 1 - 1
----- ----- -----
Total Southeastern 656 137 793
----- ----- -----
Total Timberlands 1,025 137 1,162
===== ===== =====
</TABLE>
1 The long-term leases permit the Partnership as lessee to manage and harvest
timberlands throughout the term of the lease. These leases typically have
initial terms of approximately 30 to 65 years, with renewal provisions in
some cases. The remaining portions of the initial terms of these leases
averaged 23 years as of December 31, 1993. Annual rentals are paid to the
lessor and, in some cases, the leases provide for payment of a percentage
of stumpage values to the lessor as timber is cut. In addition, the leases
impose certain duties on the lessee regarding management and reforestation
of the leased acres. In general, leased acreage has less value than the
same acreage would have if owned in fee because of the obligations imposed
upon the lessee under the terms of the lease.
TIMBER INVENTORY. The Timberlands owned in fee or held under long-term
leases include, as of December 31, 1993, total estimated merchantable timber
inventory of approximately 10.3 million cunits of wood, of which approximately
81 percent is softwood (see definition of "Merchantable Timber"). A cunit
represents 100 cubic feet of fiber and is the customary common unit of measure
to consolidate regional information based on local commercial measurements such
as board feet or tons. The following table sets forth the volumes of
merchantable timber on the Timberlands by location and type, as of December 31,
1993.
<TABLE>
<CAPTION>
ESTIMATED MERCHANTABLE TIMBER INVENTORY1
---------------------------------------
REGION SOFTWOOD HARDWOOD TOTAL
------ -------- -------- -----
(thousand cunits)
<S> <C> <C> <C>
Northwestern Timberlands 4,851 405 5,256
Southeastern Timberlands 3,483 1,576 5,059
----- ----- ------
Total 8,334 1,981 10,315
===== ===== ======
</TABLE>
1 The merchantable timber inventory volumes represent estimates by the
Partnership for management purposes based on its continuing inventory
system, which involves periodic statistical sampling of the Timberlands,
with updating adjustments made on the basis of growth estimates and harvest
information. It is not a reflection of the amount of timber that will be
available to cut in any specific period of time (see "Forestry Operations")
as future growth is not predicted.
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<PAGE> 7
THE NORTHWESTERN TIMBERLANDS. The Northwestern Timberlands are located
in Washington, primarily on the Olympic Peninsula. All of these Timberlands
are owned in fee. The Northwestern Timberlands include approximately 314,000
acres of conifer (softwood) stands, approximately 74 percent of which is
stocked with hemlock and the remainder of which is stocked with Douglas fir,
western red cedar and white fir. The Northwestern Timberlands also include
approximately 18,000 acres of hardwood timber stands, consisting principally of
alder and maple, with lesser amounts of conifers. The remaining 37,000 acres
are classified as non-forest lands.
Rain, site and soil conditions typically cause softwood timber in the
Northwest, particularly hemlock, to maintain a relatively high growth rate for
a longer period of time in comparison with softwood timber in other parts of
the United States, resulting in longer rotation cycles. Site indices for
conifer lands in the Northwestern United States generally range from 90 to 145,
and average approximately 105. The average site index of the conifer lands in
the Northwestern Timberlands is also 90 to 145 and averages approximately 110.
The Northwestern Timberlands are near ocean ports and are
well-positioned to serve the Pacific Rim export market. Approximately 70
percent of the timber sold from the Northwestern Timberlands has been of export
quality. Rayonier operates a pulp mill at Port Angeles. There are also eight
pulp and paper mills and numerous sawmills, plywood plants, and other wood
converting facilities in the region.
THE SOUTHEASTERN TIMBERLANDS. The Southeastern Timberlands are located
in Georgia, Florida and South Carolina and include approximately 656,000 acres
of timberlands owned in fee and approximately 137,000 acres held under
long-term leases. The Southeastern Timberlands include approximately 508,000
acres of pine (softwood) lands, approximately 270,000 acres of hardwood lands
and approximately 15,000 non-forest acres.
The predominant pine species are loblolly and slash pine. Site indices
for pine lands in the Southeastern United States generally range from 55 to 65
and average approximately 60. The pine lands included in the Southeastern
Timberlands have an average site index of 60. Hardwood lands included in the
Southeastern Timberlands are principally bottomlands. Principal hardwood
species are red oak, sweet gum, black gum, red maple, cypress and green ash.
The Southeastern region is generally recognized as being the most
competitive timberlands area in the United States. There are 19 pulp and paper
mills and numerous sawmills, plywood plants and treating plants for poles and
pilings located in the area of the Southeastern Timberlands. Rayonier operates
two sawmills and two pulp mills in this region.
STUMPAGE PRICES AND INDUSTRY CONDITIONS
Stumpage prices vary depending on the market for end use products which
rely on timber and wood fiber as raw materials. Stumpage values tend to be
higher for larger diameter trees because of higher value end uses. Larger
diameter trees are used as sawtimber which is processed into lumber, plywood,
and poles, while smaller diameter trees are used as pulpwood for the
manufacture of paper and pulp. International, as well as domestic, supply and
demand forces (including the value of the U.S. dollar in foreign exchange
markets) also affect U.S. regional stumpage prices. Local stumpage prices are
dependent upon factors such as geographic location of the property, proximity
to a mill or export facility, logging conditions, accessibility of the timber,
size and quality of the timber, species composition of the stand and the timber
volume per acre.
The Northwest and the Southeast represent major timber growing regions
of the United States. In both areas, timber markets are very competitive, but
each region has different types of timber, markets and competitive factors.
For further information see Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Results of
Operations" and "Future Operations."
- 4 -
<PAGE> 8
COMPETITION
Timber and wood fiber consuming facilities tend to purchase raw
materials within relatively small geographic areas, generally within a 100 mile
radius. Competitive factors within a market area generally will include price,
species and grade, proximity to wood consuming facilities and ability to meet
delivery requirements. The Partnership competes in the timber market with
numerous private industrial and non-industrial land and timber owners as well
as with the Department of Natural Resources of Washington State and the U.S.
Government, principally the U.S. Forest Service and the Bureau of Land
Management. Currently, timber availability continues to be restricted by
legislation, litigation and pressure from various preservationist groups. See
"Federal and State Regulation."
TIMBER MARKETS AND SALES; AFFILIATED PARTY TRANSACTIONS
The Partnership sells timber provided by the Timberlands to Rayonier
and to unaffiliated domestic purchasers. See "Stumpage Prices and Industry
Conditions" for a discussion of end-use markets for the Partnership's timber.
Since the inception of the Partnership, 38 percent of its timber sales
in the Northwest and 14 percent of its timber sales in the Southeast have been
to Rayonier. The following table shows the volumes of timber sold by the
Partnership to Rayonier for the three years ended December 31, 1993. It also
shows the volumes of timber on the Timberlands that were sold to unaffiliated
purchasers for the periods indicated.
<TABLE>
<CAPTION>
TIMBER SOLD BY THE PARTNERSHIP TO RAYONIER
AND STUMPAGE SALES TO UNAFFILIATED PURCHASERS
(In cunits)
Year Ended December 31
-----------------------------------------------------------------------------------------
1993 1992 1991
------------------------- --------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Timber Stumpage Timber Stumpage Timber Stumpage
Sold Sales to Sold Sales to Sold Sales to
to Unaffiliated to Unaffiliated to Unaffiliated
Rayonier Purchasers Rayonier Purchasers Rayonier Purchasers
-------- ---------- -------- ---------- -------- ----------
Northwest 63,731 264,937 100,283 349,110 157,492 271,536
Southeast 63,869 434,613 45,012 430,771 95,819 429,393
------- ------- ------- ------- ------- -------
Total 127,600 699,550 145,295 779,881 253,311 700,929
======= ======= ======= ======= ======= =======
</TABLE>
Rayonier continues to rely on the Timberlands as one of its major
sources of timber for its pulp mills, sawmill facilities and its log export
business. For example, although Rayonier purchased directly only 13 percent of
the Partnership's 1993 Southeast harvest volume, the Partnership estimates that
an additional 9 percent of its pulpwood timber sold in the Southeast in 1993
was purchased by Rayonier on the open market from Partnership customers. See
"Conflicts of Interest." Any shutdowns of plants or curtailments of sales by
customers for Partnership timber, including Rayonier, could adversely affect
future volumes of timber sales by the Partnership or the prices at which such
sales are made.
Rayonier's Forest Resources Division is responsible for management of
the Timberlands for the benefit of the Partnership; its organization is
separate from Rayonier's log export and wood procurement organizations, which
are responsible for timber procurement by Rayonier. In conducting the
activities described in the following paragraphs with respect to negotiations
and other relationships between the Partnership and Rayonier, employees of
Rayonier's Forest Resources Division act on behalf of the Partnership and
employees of Rayonier's log export and wood procurement organizations act on
behalf of Rayonier.
The Partnership develops an annual sales plan identifying the specific
tracts to be sold. The Partnership's strategy is to award contracts during
those periods of the year (typically the first and fourth quarters) in which it
expects to receive the best prices. However, under current market conditions,
the Partnership is placing fewer sales out for bid at one time. See Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations."
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<PAGE> 9
Before the Partnership offers a tract for sale, it determines whether
the highest price is likely to be achieved through public bid or direct
negotiation. The decision considers such factors as timber quality, unusual
logging conditions, number of potential bidders, and general market activity.
In 1993, approximately 95 percent in the Northwest and 73 percent in the
Southeast of the total contract value of contracts entered into by the
Partnership were awarded through public bid; when Rayonier submits a bid, it is
treated no differently than bids from unaffiliated parties. Occasionally,
tract and market circumstances favor a negotiated sale to a target buyer. Of
the contract value awarded through direct negotiation in 1993, approximately 7
percent in the Southeast were purchased by Rayonier. In 1993, there were no
directly negotiated sales with Rayonier in the Northwest.
Typically, the Partnership attempts to structure sales contracts with
Rayonier and unaffiliated purchasers as transactions in which the Partnership
retains title to timber until it is severed and the purchaser assumes
responsibility for delivery. In these cases the Partnership recognizes income
for both financial statement and tax purposes when and as the timber is cut and
measured. Accordingly, there is a time lag between the signing of a sales
contract and the recognition by the Partnership of income therefrom.
The Partnership's contracts, whether with Rayonier or with
unaffiliated purchasers, generally provide for payment of a fixed price per
unit (by species and volume in the Northwest and by weight in the Southeast),
cutting over periods of up to 24 months in the Northwest and up to 18 months in
the Southeast, an initial deposit and utilization standards which the buyer
must satisfy when cutting and removing timber from the property. The
Partnership's contracts with unaffiliated purchasers may require a performance
bond from the buyer, whereas the Partnership does not require such a bond from
Rayonier. All contracts between Rayonier and the Partnership are subject to
review by the Conflicts Committee established by RFR's Board of Directors. See
"Conflicts of Interest."
For information as to timber sales contracts in effect at December 31,
1993, see Item 7 - "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Results of Operations."
CONFLICTS OF INTEREST
Conflicts of interest can arise in selecting, pricing and scheduling
timber sold to Rayonier. Other conflicts of interest can arise in allocating
revenues and costs between the Class A Units and the Class B Units, in
scheduling timber sales to occur before or after the Initial Term expires, and
in setting the terms of any loans between the Partnership and Rayonier. The
Conflicts Committee of the Board of Directors of RFR, which is comprised of
non-employee directors, reviews these transactions and obtains opinions from
outside consultants as to their fairness.
ENVIRONMENTAL PROTECTION
Management of the Timberlands to protect the environment is a
continuing concern of the Partnership. The Partnership expends considerable
efforts to comply with regulatory requirements for the use of pesticides and
minimization of stream sedimentation and soil erosion. From time to time the
Partnership volunteers to, or may be required to, clean up certain dump sites
created by the general public. The Partnership also participates in
cooperative projects with environmental agencies such as a program with the
Georgia Department of Natural Resources to monitor hairy rattleweed, a
threatened species, and another effort with the U.S. Fish and Wildlife Service
to develop an information base on whether Bartram's Ixia constitutes an
endangered species. See "Federal and State Regulation."
The costs of environmental compliance by the Partnership have not been
significant and are not expected to be significant in the future. The
Partnership does not project any significant capital expenditures for
environmental protection.
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<PAGE> 10
FEDERAL AND STATE REGULATION
In the management and operation of the Timberlands, the Partnership is
subject to various state and federal laws regulating land use. To some degree,
these laws may operate as constraints on the manner in which portions of the
Timberlands are managed and operated and the markets into which the timber from
the Timberlands may be sold.
Regional timber availability continues to be restricted by
legislation, litigation and pressure from various preservationist groups. Over
the past three years, harvest of timber from private lands in the state of
Washington has been restricted as a result of the listing of the northern
spotted owl as a threatened species under the Endangered Species Act (ESA).
These restrictions have caused the Partnership to restructure and reschedule
some of its harvest plans. The U.S. Fish and Wildlife Service (FWS) is
developing a proposed rule under the ESA to redefine protective measures for
the northern spotted owl on private lands. This rule, as currently drafted,
would reduce the harvest restrictions on private lands except within specified
Special Emphasis Areas, where restrictions would be increased. One proposed
Special Emphasis Area is on the Olympic Peninsula, where a significant portion
of the Partnership's Washington timberlands is located. The new rule may also
include guidelines for the protection of the marbled murrelet, also recently
listed as a threatened species. Separately, the state of Washington Forest
Practices Board is in the process of adopting new harvest regulations to
protect the northern spotted owl and the marbled murrelet. The state
Department of Natural Resources draft of this rule also provides for a special
emphasis area to protect the northern spotted owl on the Olympic Peninsula,
which would increase harvest restrictions on the Partnership's lands. The
Partnership is unable at this time to predict the form in which the federal or
state rules will eventually be adopted. However, if either rule is adopted in
the form proposed by the respective agencies, the result will be some reduction
in the volume of Partnership timber available for harvest.
The Partnership's operations are subject to laws restricting or
regulating to some extent development and/or logging activity near coastal
shorelines. In addition, land located in areas exposed to flood hazard are
subject to regulations specifying acceptable types of development. The federal
government regulates the use of "wetlands" pursuant to the Clean Water Act, the
Rivers and Harbors Act and the Federal Water Pollution Control Act. The
Timberlands include property designated as wetlands, and the Partnership is
subject to permit procedures imposed by both federal and state agencies in
connection with any logging or developmental activity on such land. In
addition, activity is regulated on lands adjacent to scenic rivers designated
under federal and state Wild and Scenic Rivers Acts. Reforestation by
independent contractor crews is regulated by the federal Migrant and Seasonal
Worker Protection Act, which imposes upon the landowner the burden of insuring
to the federal government regulatory compliance by the contractor.
Portions of the Timberlands are located within, or adjacent to,
National Forests. Access to such parcels may be obtained generally through
road use permits subject to the terms and conditions of applicable regulations.
Access across Forest Service land may be restricted where habitat of threatened
or endangered species is involved.
The state of Washington has enacted several laws that regulate or
limit forestry operations. The most comprehensive of these is the Forest
Practices Act, which addresses many growing, harvesting and processing
activities on forest lands. Among other requirements, the Forest Practices Act
imposes certain reforestation obligations on the owner of forest land. The Act
restricts the size of clear-cut harvests, restricts timber harvest to protect
wildlife listed as threatened or endangered and requires that timber be left
standing in stream buffers and wildlife management areas. Other Washington
state laws regulate timber slash burning, operations during fire hazard
periods, logging activities affecting or utilizing watercourses or in proximity
to certain ocean and inland shorelines and some grading and road construction
activities.
The states of Georgia and Florida also regulate forestry operations.
Subsequent to July 1, 1993, Georgia statutory law mandates all timber sales to
be by tonnage or actual measured volume, prohibiting sales where payment is
based upon conversion factors from volume to tonnage or vice-versa. Florida
and Georgia both regulate slash burns, control burns and logging activities
within streamside management zones. Florida law and regulation limits
activities allowable or permittable in wetlands, and is developing integrated
regulations under statutory mandate for ecosystem management. Under one such
rule, the St. Johns Water Management District (a semi-autonomous Florida agency
whose regulatory jurisdiction includes much of the Partnership's Florida
timberlands) published regulations for July 1, 1994 implementation which would
regulate timber road grading, construction, maintenance and management and a
variety of surface water management restrictions. The final form of the rule
may change before implementation, however the District must have an ecosystem
management rule of this sort adopted by July 1, 1994.
The Partnership is complying, and intends to comply, with these
Federal and state laws regulating its use of the Timberlands and does not
expect them, as currently enacted, to be materially burdensome. There can be
no assurance, however, that future legislative, regulatory or judicial
decisions would not adversely affect the Partnership or its ability to harvest
the Timberlands in the manner otherwise contemplated. In particular, although
recently imposed restrictions on
- 7 -
<PAGE> 11
the export of logs from the Northwest have only affected state lands, political
pressure to restrict log exports from the Northwest continues. If in the
future restrictions should be imposed on the export of logs from private lands,
the revenue and earnings of the Partnership could be adversely affected.
PARTNERSHIP'S TITLE; CLAIMS AND INTERESTS OF OTHERS
Rayonier transferred record title to the Timberlands, excluding any
oil, gas or mineral interests, to the Partnership without warranty. The
Partnership's title to the Timberlands is subject to presently existing
easements, rights of way, flowage rights, servitudes, cemeteries, camp sites,
hunting and other leases, licenses, permits, undertakings and any other
existing encumbrances or title defects. Properties acquired by the Partnership
in the future generally will be acquired and held on record in the
Partnership's name, but Rayonier will have the right to purchase the underlying
mineral interests.
The Partnership owns only the merchantable timber rights (except for
50 trees per acre) on approximately 18,000 acres of real estate owned by
Rayonier and Rayland Company, Inc., a real estate subsidiary of Rayonier.
Pursuant to the right given to it under the Partnership Agreement,
Rayonier has withdrawn 3,309 acres of the Southeastern Timberlands from the
Partnership. This withdrawal will not have a material impact on Partnership
operations during the Initial Term of the Partnership and was reviewed by the
Conflicts Committee of the Board of Directors of RFR.
The state of Florida claims title to lands within Florida that were
under navigable waters in 1845 when Florida became a state. Affected lands
include not only those still under water but lands that are now uplands due to
drainage, fill or other category. The Partnership does not believe that the
encumbrances or defects to which its title is subject or any possible
reclamation by the state of Florida would have a material adverse impact on the
Timberlands as a whole.
DESCRIPTION OF PARTNERSHIP
ALLOCATIONS OF PARTNERSHIP INTEREST. The Partnership records all of
its activities in two accounts, the Primary Account and the Secondary Account.
Income and expenses are recorded in the Primary Account if they affect timber
that is expected to be harvested on or before December 31, 2000 (the Initial
Term), and in the Secondary Account if they relate to the Partnership's other
assets (including timber that is not planned to be harvested until after
December 31, 2000). During the Initial Term, the Secondary Account is
essentially an investment account to which the expenditures and debt related to
longer-term harvests are assigned.
The Class A unitholders, the Class B unitholders, and the General
Partners all participate in both accounts, but in different percentages. The
participation of the partners in the revenues and expenses of the Partnership
is as follows:
Primary Secondary
Account Account
------- ---------
Class A unitholders 95% 4%
Class B unitholders 4% 95%
General Partners 1% 1%
When the Partnership makes a sale of timberland that includes
timber, the proceeds are divided between the Primary and Secondary Accounts.
Proceeds arising from trees that would have been harvested prior to December
31, 2000 are allocated to the Primary Account. The balance of the proceeds,
which apply to the underlying land and timber planned to be harvested beyond
the year 2000, are allocated to the Secondary Account.
TERMS OF THE PARTNERSHIP AGREEMENT. The Partnership Agreement
provides that the Partnership continues in existence until December 31, 2035,
but that the Initial Term of the Partnership will end on December 31, 2000. At
the end of the Initial Term there will be no distributions of the partners'
capital accounts, but the Primary Account will be closed following distribution
of any cash remaining in that account (after the repayment of all Partnership
borrowings attributed to the Primary Account) concurrently to all partners in
accordance with their respective Primary Account percentage interests as
indicated in the above table. The Managing General Partner expects that most
of the cash credited to the Primary Account (and not used to repay borrowings)
will have been distributed prior to the end of the Initial Term. Therefore,
unitholders should not expect to receive a return of their original investment,
or any substantial amount of cash, as a result of the end of the Initial Term
on December 31, 2000. After 2000, all unitholders and General Partners will
only participate in the Secondary Account, so that Class A unitholders will
then have a 4 percent interest in all Partnership activities. Through the
Initial Term, the Secondary Account will incur substantial debt attributable to
reforestation and the
- 8 -
<PAGE> 12
management of the timber base to be cut after the year 2000. This debt will
have to be repaid from future cash flow beginning in 2001 and will reduce the
amount available for distribution after the end of the Initial Term.
CLASS A UNITHOLDERS SHOULD EXPECT THAT THE MARKET PRICE OF CLASS A
UNITS WILL BEGIN TO DECREASE SUBSTANTIALLY SOMETIME PRIOR TO DECEMBER 31, 2000.
AS INDICATED ABOVE, THEY WILL PROBABLY NOT RECEIVE ANY SIGNIFICANT AMOUNT OF
CASH AS A RESULT OF THE END OF THE INITIAL TERM IN THE YEAR 2000. THE
PERCENTAGE OF CASH AVAILABLE TO THEM FROM PARTNERSHIP HARVESTING ACTIVITIES
AFTER THAT YEAR (AFTER ALLOWING FOR THE REPAYMENT OF SECONDARY ACCOUNT DEBT)
WILL DECLINE FROM 95 PERCENT TO 4 PERCENT.
DISTRIBUTIONS. A unitholder (Limited Partner) of Rayonier
Timberlands, L.P., assuming there are sufficient sales and profits, will
receive cash distributions from the Primary Account activity. In accordance
with the Partnership Agreement, the distribution policy is to make quarterly
distributions to Class A unitholders from cash available from operations after
provision for working capital, capital expenditures, asset acquisitions and
such other reserves as the Managing General Partner's Board of Directors deems
appropriate.
On February 8, 1994, the Board declared a special distribution of
$4.00 per Class A Unit, payable on March 31, 1994 to unitholder's of record
February 28, 1994. A portion of these distributions represents a return of
capital, depending on each unitholder's tax basis. The special distribution
was declared since the Managing General Partner estimated that cash and
investment balances were substantially in excess of funding requirements for
the balance of the Initial Term ending December 31, 2000. As of March 31,
1994, approximately $1.00 per Class A Unit will remain for capital expenditure,
working capital and other funding requirements.
TAXES. Rayonier Timberlands, L.P., is a partnership and is not
taxed as a corporation. Each unitholder is responsible for taxes on his or her
proportionate share of the Partnership's income. Each year, the Managing
General Partner will provide unitholders with the necessary tax information
based on the unitholder's apportioned share of income and expense from the
Partnership. The income reported for each individual unitholder will vary
substantially from the income reported in the financial statements, as the
unitholder's income is based on his or her costs of acquisition (the market
price of the unit at the time of acquisition), and not on the Partnership's
historical cost basis as reported in the financial statements.
During 1993, the Partnership made distributions totaling $4.60 per
Class A Unit. TO THE EXTENT DISTRIBUTIONS EXCEED THE INCOME REPORTED FOR A
UNITHOLDER AND THE UNITHOLDER HAS REMAINING TAX BASIS IN THE UNITS, SUCH
DISTRIBUTIONS ARE TREATED AS A RETURN OF CAPITAL AND ARE NOT TAXABLE. As such,
the distributions serve to reduce the unitholder's basis in the units.
For tax-exempt entities (including individual retirement accounts
(IRAs) and other retirement plans) that acquired Partnership units after
December 17, 1987, the gross income through 1993 attributable to their
investment in the Partnership constitutes unrelated business taxable income.
Such entities may be required to report income from the Partnership to the
Internal Revenue Service and to pay taxes on such income. Beginning with 1994,
only a small portion of the Partnership's income will constitute such unrelated
business income.
- 9 -
<PAGE> 13
GLOSSARY OF FORESTRY TERMS
The terms defined below relate to the timber industry in general.
BOARD FOOT (BF): A unit of measure for sawtimber as well as lumber which is 12
inches square and one inch thick.
BOTTOMLANDS: The flood plains of streams, creeks and rivers which generally
support quality hardwood stands.
CLEAR-CUT: Harvesting all trees in a stand of timber at the same time. Usually
done to prepare for establishing a plantation or for converting the land to
crop, pasture or other use.
CONTROLLED BURNING: Setting fire to the forest floor to reduce the accumulation
of logging debris, dead and fallen timber, weeds and underbrush which pose a
wildfire hazard or compete with the trees for water and nutrients.
CORD: A unit of measure equal to a stack of wood 4x4x8 feet, or 128 cubic feet
of wood, bark and air. A common unit of measure for pricing pulpwood.
CUNIT: A unit of measure for standing timber equal to one hundred cubic feet of
solid wood. It is the customary common unit of measure to consolidate regional
information based on local commercial measurements such as board feet or tons.
A cunit equals approximately .43 MBF or 3.83 tons.
CUTTING CONTRACTS: A contractual right to cut certain described timber over a
specified period of time on a specified tract of property.
D.B.H.: The abbreviation means "diameter at breast height," a term frequently
used to describe a tree measurement taken 4 1/2 feet above the average ground
level.
HARDWOODS: Trees that usually have broad leaves and are deciduous (losing
leaves every year).
MBF: One thousand board feet. A common unit of measure for pricing standing
timber as well as lumber.
MERCHANTABLE TIMBER: Minimum size timber for which there might be a commercial
market. In the South, trees as small as five inches D.B.H. can be used by the
industry while in the Northwest trees must be much larger to be usable. For
convenience, the Partnership follows the convention that timber older than 13
years in the Southeast and 40 years in the Northwest is of minimum merchantable
size. It should be recognized that timber of minimum merchantable size has not
yet reached its optimum economic value and the typical harvest cycle is about
25 years in the Southeast and 55 years in the Northwest.
NATURAL REGENERATION: The process of a forest regenerating itself with seeds
from mature trees or sprouts from stumps or roots. Natural regeneration
results in new tree growth without regard to genetic quality of the trees.
NATURAL STAND: A forest stand resulting from natural regeneration.
NON-FOREST LANDS: Lands consisting of or containing roads, water or easements,
such as gas and electric transmission lines, timbered buffers not harvested due
to environmental concerns, currently non-commercially viable acreage and
certain wastelands.
PLANTATION: A timber stand established by planting seedlings in a prepared
seedbed. Trees in a plantation are of the same age and size, which tends to
simplify harvesting.
POLES: Straight, tall trees suitable for manufacturing telephone poles, wharf
pilings or the like, typically at least eight inches in diameter at the base
and at least 25 feet tall. Trees suitable for use as poles generally command a
superior price.
PRE-MERCHANTABLE TIMBER: Usually young, or small size timber for which no
commercial market exists. For example, in the Southeast, pine trees under five
inches D.B.H. and in the Northwest, timber stands less than 40 years of age.
PULPWOOD: Wood used to produce pulp in the manufacture of paper and other
cellulose products; normally cut from trees that are approximately five to
eight inches D.B.H., or trees over eight inches D.B.H. which are either too
small, of inferior quality or the wrong species to be used in the manufacture
of lumber or plywood.
- 10 -
<PAGE> 14
SAWTIMBER: Trees containing logs of sufficient size and quality to be suitable
for conversion into lumber or plywood.
SEEDLINGS: Live trees less than one inch in diameter at ground level.
SILVICULTURE: The practice of cultivating forest crops based on the knowledge
of forestry; more particularly, controlling the establishment, composition and
growth of forests.
SITE INDEX: A measure of forest site quality, which takes into account
topography, soil fertility, moisture and other factors affecting forest growth
rates. A site index indicates the height (in feet) an average dominant tree of
a given species will attain on that site in a well-stocked stand in a given
period, generally 50 years in the Northwest and 25 years in the Southeast.
SOFTWOODS: Coniferous trees, usually evergreen and having needle or scale-like
leaves, such as Douglas fir, white pine, spruce and loblolly pine. In the
Pacific Northwest, softwood timber is commonly referred to as conifer.
STAND: An area of trees possessing sufficient uniformity of age, size and
composition to be distinguishable from adjacent areas so as to form a
management unit. The term is usually applied to forests of commercial value.
STOCKING: An indication of the number of trees in a stand as compared to the
desirable number for best growth and management, such as well-stocked,
over-stocked or partially stocked.
STUMPAGE VALUE: The value of standing timber (timber as it stands uncut in the
woods).
SUPERIOR SEEDLINGS: Seedlings that are the product of a genetic breeding
program. Superior seedlings produce trees that grow faster, are of higher
quality and are more disease resistant than their ordinary counterparts.
THINNING: Removal of selected trees, usually to eliminate overcrowding, to
remove diseased trees and to promote more rapid growth of desired trees.
TIMBER DEED: An instrument conveying certain described timber on a specific
tract of property and providing a term during which the timber may be cut and
removed.
TIMBER INVENTORY: As defined under "Description of Timberlands - Timber
Inventory."
WOOD FIBER: Generally refers to pulpwood or chips used in the manufacture of
pulp and paper.
ITEM 2. PROPERTIES
See "Item 1. Business."
ITEM 3. LEGAL PROCEEDINGS
The Partnership is a party to several legal proceedings incidental to its
business. Neither the Partnership nor its counsel believes that any liability
or costs related to such proceedings will have a material adverse effect on the
financial position or results of operations of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the period
covered by this report.
- 11 -
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
<TABLE>
<CAPTION>
Class A Units - Market Price (dollars)
--------------------------------------
1993 1992
---- ----
High Low High Low
---- ---- ---- ---
<S> <C> <C> <C> <C>
QUARTER ENDED
---------------
March 31 $43.00 $30.75 $30.75 $24.63
June 30 37.88 32.63 35.00 29.25
September 30 37.63 34.75 40.00 33.13
December 31 36.88 26.00 43.50 27.00
</TABLE>
The above table reflects the range of market prices of RTLP Class A
Units as reported in the consolidated transaction reporting system of the New
York Stock Exchange, the principal market in which this security is traded,
under the trading symbol "LOG."
During the two-month period ended February 28, 1994, the high and low
market prices of RTLP Class A Units were $40.00 and $27.63.
Class A Units - Distributions (dollars)
---------------------------------------
1993 1992
QUARTER ENDED
-------------
March 31 $1.15 $ .90
June 30 1.15 .90
September 30 1.15 .90
December 31 1.15 .90
On February 8, 1994, the Board of Directors of RFR declared a special
distribution of $4.00 per Class A Unit as well as a first quarter distribution
of $1.30 per Class A Unit, payable on March 31, 1994 to all unitholders of
record as of February 28, 1994. See Item 7 - "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and Cash
Flow."
There were approximately 2,850 unitholders of record of Class A Units as
of February 28, 1994.
ITEM 6. SELECTED FINANCIAL DATA
The selected historical financial information set forth below is
derived from the financial statements of Rayonier Timberlands, L.P. Such
selected historical financial information should be read in conjunction with
such financial statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
For the 1993 Quarter Ended (Unaudited) For The Year Ended
--------------------------------------- ------------------------------------------------
Mar June Sept Dec 1993 1992 1991 1990 1989
--- ---- ---- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING DATA
(thousands of cunits) 1
Timber sold to Rayonier 65.1 23.9 9.9 28.7 127.6 145.3 253.3 188.8 244.5
Timber sold to unaffiliated
purchasers 177.8 186.5 112.3 223.0 699.6 779.9 700.9 747.6 824.1
----- ----- ----- ----- ----- ----- ----- ----- -------
Timber sales volumes 242.9 210.4 122.2 251.7 827.2 925.2 954.2 936.4 1,068.6
===== ===== ===== ===== ===== ===== ===== ===== =======
REGIONAL OPERATING DATA
Northwest 2
Timber sales
(thousands of dollars) $16,561 $18,600 $ 9,102 $26,362 $70,625 $64,998 $55,188 $63,634 $65,517
======= ======= ======= ======= ======= ======= ======= ======= =======
Stumpage (thousands of MBF) 32.2 32.5 11.3 32.8 108.8 168.8 164.7 184.7 256.2
Delivered logs
(thousands of MBF) 8.1 5.2 8.0 12.8 34.1 26.6 21.8 17.4 12.9
--- --- --- ---- ---- ---- ---- ---- ----
Total Northwest 40.3 37.7 19.3 45.6 142.9 195.4 186.5 202.1 269.1
==== ==== ==== ==== ===== ===== ===== ===== =====
</TABLE>
- 12 -
<PAGE> 16
<TABLE>
<CAPTION>
For the 1993 Quarter Ended (Unaudited) For The Year Ended
----------------------------------------- -----------------------------------------------------
Mar June Sept Dec 1993 1992 1991 1990 1989
--- ----- ---- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Southeast 3
Timber sales
(thousands of dollars) $14,552 $11,355 $5,946 $12,459 $44,312 $33,645 $36,016 $33,293 $28,069
====== ====== ===== ====== ====== ====== ====== ====== ======
Pine (thousands of tons) 552.3 445.9 229.1 491.7 1,719.0 1,608.4 1,851.7 1,652.5 1,509.1
Hardwood
(thousands of tons) 19.0 23.7 66.7 65.8 175.2 199.6 144.1 140.1 199.3
------ ------ ----- ------ ------ ------ ------ ------ ------
Total Southeast 571.3 469.6 295.8 557.5 1,894.2 1,808.0 1,995.8 1,792.6 1,708.4
====== ====== ===== ====== ======= ======= ======= ======= =======
INCOME DATA
(thousands of dollars)
Total sales $31,209 $30,372 $15,246 $39,220 $116,047 $116,395 $101,223 $105,656 $94,772
Total expenses - net 8,195 8,050 6,785 10,791 33,821 30,809 28,176 26,660 22,748
Partnership Income 23,014 22,322 8,461 28,429 82,226 85,586 73,047 78,996 72,024
CLASS A UNIT DATA (dollars)
Income Per Publicly Traded
Class A Unit $1.23 $1.19 $0.55 $1.48 $4.45 $4.49 $3.93 $4.24 $3.76
Operating Cash Flow
Allocable to a Publicly
Traded Class A Unit 1.30 1.24 0.57 1.55 4.66 4.72 4.22 4.53 4.01
Cash Distributions 1.15 1.15 1.15 1.15 4.60 3.60 3.60 3.60 2.65
ASSET, LIABILITY AND CAPITAL DATA
(thousands of dollars)
Timber, timberlands and
logging roads - net $261,012 $262,548 $264,308 $265,769 $265,769 $259,958 $255,123 $251,264 $245,703
Total assets 384,416 388,044 377,027 387,457 387,457 377,413 347,783 333,037 304,737
Total liabilities 121,760 127,117 131,744 137,651 137,651 113,950 95,835 80,184 58,714
Total indebtedness 105,131 110,131 114,781 121,831 121,831 99,354 81,460 63,193 45,424
Partners' capital 262,656 260,927 245,283 249,806 249,806 263,463 251,948 252,853 246,023
</TABLE>
1 The consolidated harvest activity is expressed in cunits, a unit of measure
for standing timber equal to one hundred cubic feet of solid wood. A cunit
is the customary common unit of measure that is used to consolidate
regional information based on local commercial measurements such as
thousand board feet (MBF) or tons. A cunit equals approximately .43 MBF or
3.83 tons.
2 The Northwestern Timberlands are in the state of Washington and consist of
approximately 369,000 acres owned in fee, and contain approximately 2.3
million MBF of wood, approximately 92 percent of which is softwood.
Stumpage volumes for 1992, 1991 and 1990 exclude the Quinault timberland
sales.
3 The Southeastern Timberlands are in the states of Georgia, Florida and
South Carolina and consist of approximately 793,000 acres owned in fee or
held under long-term leases, and contain approximately 19.8 million tons of
wood, approximately 67 percent of which is pine.
- 13 -
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In 1993, limited timber availability, particularly in the Northwest
United States, fueled a period of strongly rising prices, leading to a record
year in timber sales. Excluding the effect of two timberland sales that
occurred in 1992, year over year partnership income increased 17 percent.
The following table summarizes the sales and operating income of the
Partnership, for the periods indicated, by United States geographic region (in
thousands of dollars):
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1993 1992 1991
----------------------------------------------------------
<S> <C> <C> <C>
TIMBER SALES
Northwest $ 70,625 $ 64,998 $ 55,188
Southeast 44,312 33,645 36,016
-------- -------- --------
Total Timber Sales 114,937 98,643 91,204
-------- -------- --------
TIMBERLAND SALES
Northwest 109 16,987 8,190
Southeast 1,001 765 1,829
-------- -------- --------
Total Timberland Sales 1,110 17,752 10,019
-------- -------- --------
Total Sales $116,047 $116,395 $101,223
======== ======== ========
OPERATING INCOME
Northwest $ 56,249 $ 68,318 $ 52,063
Southeast 33,457 23,608 26,502
Corporate and Other (2,308) (3,279) (4,322)
-------- -------- --------
Total Operating Income $ 87,398 $ 88,647 $ 74,243
======== ======== ========
PARTNERSHIP INCOME $ 82,226 $ 85,586 $ 73,047
======== ======== ========
</TABLE>
Timber and timberland sales in 1993 of $116.0 million were $0.4 million
lower than 1992 sales of $116.4 million with a current year increase of $16.3
million in timber sales offsetting $16.8 million realized in 1992 from two
timberland sales. Partnership income for 1993 of $82.2 million decreased $3.4
million, or 4 percent, compared to 1992, which included $15.6 million from the
timberland sales. Sales in 1992 increased 15 percent from 1991 sales of $101.2
million, and Partnership income in 1992 increased 17 percent from 1991 income of
$73.0 million.
Timber sales for 1993 of $114.9 million represented an increase of $16.3
million or 17 percent versus the prior year's timber sales, following an
increase of 8 percent from 1991 to 1992. Higher 1993 sales reflected an overall
improvement in prices due to worldwide concern over timber availability and
increased harvest activity in the Southeast region, partially offset by reduced
harvest volume in the Northwest region. In 1992, timber sales increased $7.4
million from 1991 levels as prices improved due to stronger demand for
exportable timber from increased harvest activity in the Northwest region,
partially offset by reduced harvest volume in the Southeast region.
In both 1993 and 1992, timber sales to Rayonier represented 17 percent
of total timber sales as compared to 32 percent in 1991. In addition, timber
sales to two customers under common ownership (not affiliated with the
Partnership) accounted for approximately 15 percent and 10 percent of total
timber sales in 1993 and 1992, respectively. In 1992, the Partnership also had
one other unaffiliated customer who accounted for approximately 12 percent of
timber sales. See Note 4 of the accompanying Notes to Financial Statements for
further information.
Timberland sales in 1993 of $1.1 million were $16.7 million lower than
1992 levels which, in turn, were $7.8 million higher than 1991. Sales for 1992
and 1991 include $16.8 million and $8.0 million, respectively, from major
timberland tract sales in the Northwest region to the Quinault Indian Nation.
The two tracts sold in 1992 completed the Partnership's program to divest land
within the Quinault Indian Reservation. The Quinault sales contributed $15.6
million and $7.6 million to Partnership income in 1992 and 1991, respectively.
- 14 -
<PAGE> 18
Income per publicly traded Class A Unit was $4.45 in 1993, a
decrease of 4 cents or 1 percent from 1992's income of $4.49 per Class A Unit.
Excluding the effect of last year's Quinault timberland sales, income per
publicly traded Class A Unit improved 57 cents. Results in 1992 reflected a
per unit increase of 56 cents or 14 percent compared to the 1991's level of
$3.93. Income per Class A Unit in 1992 and 1991 include 61 cents and 31 cents
respectively from the timberland sales.
Operating cash flow allocable to Class A unitholders, after capital
expenditures and certain provisions for working capital, was $92.5 million in
1993, a decrease of $0.4 million from the 1992 level of $92.9 million, and, on
a per unit basis, a decrease of 6 cents, or 1 percent, to $4.66 from the 1992
level of $4.72 per unit. Excluding the effect of last year's Quinault
timberland sales, operating cash flow improved 57 cents. Operating cash flow in
1992 was $10.6 million higher than the 1991 level of $82.3 million and
represented an increase of 50 cents per unit from the $4.22 generated in 1991.
The amounts for operating cash flow allocable to a Class A Unit include 63
cents and 32 cents in 1992 and 1991, respectively, from the timberland sales.
In the Northwest, most of the timber from Partnership lands is resold
by the Partnership's customers into log export markets, primarily in Japan,
Korea and China. Timber sales in the Northwest of $70.6 million increased $5.6
million from 1992 sales levels, after having increased $9.8 million from 1991
levels. Operating income in 1993 of $56.2 million decreased $12.1 million
reflecting lower 1993 Northwest timberland sales. In 1992, operating income
increased $16.2 million from 1991's level as a result of higher 1992 timber and
timberland sales in the region. Average stumpage prices in the Northwest were
53 percent above 1992 levels as limited timber availability throughout the
Northwest, due to environmental restrictions and litigation, caused contract
stumpage prices to rise steadily late in 1992 and into the second quarter of
1993. During the second half of 1993 prices declined due to high consumer
inventories and a marked increase in alternative global timber supplies. In
1992, average stumpage prices increased 10 percent from 1991 prices as the
decline in the availability of competitive timber resulting from an overall
reduced level of harvest-eligible timber, as well as environmental and legal
restrictions related to the spotted owl, caused stumpage prices to increase
throughout the year, particularly in the second half. Total 1993 sales volume
in the Northwest of 143 million board feet represented a decrease of 27 percent
from the 1992 levels as harvesting of contract timber slowed in response to
changing market conditions and the Partnership's continuing program of
gradually reducing the amount of timber offered in the region. See "Future
Operations." This decrease followed a 5 percent increase from 1991 to 1992, as
a result of customers accelerating their harvesting at the end of 1992 to take
advantage of higher selling prices for logs.
In the Southeast, pulpwood timber harvested from Partnership lands is
sold by our customers to mills for the production of pulp and paper with sawlog
timber sold to lumber and plywood manufacturers. Timber sales in 1993 in the
Southeast of $44.3 million rose $10.7 million from 1992 reflecting both
improved pricing and increased harvest volumes which, in turn, caused operating
income in the Southeast of $33.5 million to rise $9.9 million from 1992.
Timber sales of $33.6 million in 1992 declined $2.4 million from 1991 while
operating income decreased $2.9 million from 1991's level of $26.5 million
reflecting lower harvest volumes in 1992 partially offset by improved pricing.
Southeast pine prices in 1993 were 24 percent greater than 1992 levels,
benefiting from the worldwide concern over timber availability and from strong
demand for lumber as a result of the resurgence in U.S. housing. In 1992,
average pine prices were 6 percent higher than 1991, as log demand from lumber
mills and a continuation of wet weather conditions limited the supply of
available pulpwood in the region to the Partnership's primary customers. In
1993, Southeast pine volume was 1.7 million tons, increasing 7 percent from
1992. In 1992, pine volume was 13 percent below the 1991 level due to a
planned reduction in available harvest volumes to balance 1991's higher than
planned harvest.
Corporate and other operating income is comprised of general
and administrative expenses not specifically attributable to either the
Northwest or Southeast region. Corporate expenses decreased $1.0 million
during 1993 to $2.3 million reflecting lower commission expenses paid to a
foreign sales corporation affiliated with the Partnership's Special General
Partner, Rayonier Inc. (Rayonier). In 1992, corporate expenses decreased $1.0
million from 1991's level of $4.3 million reflecting lower commission and
software amortization costs in 1992.
Overall harvesting activity in 1993 and 1992 followed the historical
cutting pattern that is more concentrated in the first half of the year, with
59 percent and 60 percent, respectively, of the total cut completed by June 30.
During 1991, harvesting activity was more evenly distributed with 45 percent
being cut in the first half. Early in 1991, customers in both the Northwest
and Southeast regions delayed harvesting to the second half of the year due to
environmental and market concerns.
The Partnership is continuing its strategy of gradually reducing the
amount of timber offered each year in the Northwest until it reaches a
sustainable harvest level. See "Future Operations." However, because
customers postponed harvesting under 1993 contracts, Northwest harvest volume
in 1994 is expected to be higher than the 1993 level. At
- 15 -
<PAGE> 19
December 31, 1993 approximately 25 percent of 1994's Northwest harvest plan,
including volume remaining on delayed 1993 harvesting, was under contract
compared to 49 percent of 1993's harvest that was under contract as of the
prior year-end. Three customers under common ownership (not affiliated with
the Partnership) accounted for approximately 78 percent of the harvest volume
under contract as of December 31, 1993. Average prices on uncut contracts at
December 31, 1993 were 52 percent higher than the average of harvest prices
realized in 1993.
The Southeast 1994 harvest plan anticipates a volume increase of
approximately 6 percent versus 1993. In the Southeast, in anticipation of more
favorable prices occurring early in 1994, the Partnership had awarded contracts
for only 16 percent of the 1994 harvest plan volume as of December 31, 1993 as
compared to 18 percent as of December 31, 1992. Two customers (not affiliated
with the Partnership) accounted for approximately 12 percent and 10 percent,
respectively, of the harvest volume under contract as of December 31, 1993.
Average prices on uncut contracts at December 31, 1993 were approximately 2
percent higher than those realized for the 1993 actual harvest in the region.
Operating costs and expenses in 1993 were $30.9 million, representing
an increase of $1.1 million over 1992, after an increase of $1.0 million from
1991 to 1992. Cost of timber sold rose $2.7 million in 1993, reflecting higher
logging costs in the Northwest region resulting from increased contract logging
and pre-commercial thinning activities. Cost of timber sold rose $0.2 million
from 1991 to 1992, reflecting the introduction of a timber severance tax on
harvest volume in Georgia partially offset by lower depletion costs resulting
from a decreased Southeast harvest. Cost of timberland sold decreased $1.7
million during 1993 due primarily to the Quinault timberland sales in 1992.
Legislation, enacted effective August 10, 1993, eliminated tax benefits
related to log exports for foreign sales corporations. Accordingly, commission
expense for sales agency services, paid to a foreign sales corporation
affiliated with the Partnership's Special General Partner, Rayonier, declined
$1.0 million during 1993 to $0.7 million. The Partnership's commission expense
had been fully allocated to Rayonier and the General Partners, and therefore
the legislation did not impact the earnings or cash flows of the publicly
traded Class A Units. See Note 1 of the accompanying Notes to Financial
Statements for further information. Commission expense in 1992 was $0.5
million lower than 1991 due to lower timber sales to Rayonier.
Interest income, earned mainly from the Primary Account's short-term
investment notes of Rayonier, decreased by $0.8 million to $5.1 million in 1993
due to lower interest rates. Interest expense of $9.5 million, primarily on
Rayonier's loans and advances to the Secondary Account, was $1.4 million higher
than 1992 levels due to higher loan balances.
FUTURE OPERATIONS
The Partnership's harvesting plans and therefore its earnings and cash
flow can be substantially affected by the cyclical nature of timber markets
both in general and on a geographical basis. In addition, various legislative
initiatives, such as major restrictions on timber clear-cutting, export
restrictions on logs sourced from privately owned properties, harvest
restrictions to protect threatened or endangered species and limitations on
timber harvesting on wetlands, could adversely affect Partnership results.
Moreover, in certain economic situations, Partnership results can be adversely
affected by reductions in the rate at which stumpage is harvested as well as
the failure of buyers to fulfill their contractual obligations.
The Partnership's long standing policy has been to reach a sustainable
annual harvest level in the Northwest by gradually reducing its harvest volume
each year. Although 1994's harvest volume is expected to include 1993's
shortfall, the projected annual harvest in this region from 1995 through 2000
remains at approximately 80 percent of the 1992 harvest. In the Southeast, due
to intensive forest and land management as well as silvicultural investment,
pine volume available for harvest is expected to increase 2 to 3 percent
annually.
Regional timber availability continues to be restricted by legislation,
litigation and pressure from various preservationist groups. Over the past
three years, harvest of timber from private lands in the state of Washington
has been restricted as a result of the listing of the northern spotted owl as a
threatened species under the Endangered Species Act (ESA). These restrictions
have caused the Partnership to restructure and reschedule some of its harvest
plans. The U.S. Fish and Wildlife Service (FWS) is developing a proposed rule
under the ESA to redefine protective measures for the northern spotted owl on
private lands. This rule, as currently drafted, would reduce the harvest
restrictions on private lands except within specified Special Emphasis Areas,
where restrictions would be increased. One proposed Special Emphasis Area is
on the Olympic Peninsula, where a significant portion of the Partnership's
Washington timberlands is located. The new rule may also include guidelines
for the protection of the marbled murrelet, also recently listed as a
threatened species. Separately, the state of Washington Forest Practices Board
is in the process of adopting new harvest regulations to protect the northern
spotted owl and the marbled murrelet. The state Department of Natural
Resources draft of this rule also provides for a special emphasis area to
protect the northern spotted owl on the Olympic Peninsula, which
- 16 -
<PAGE> 20
would increase harvest restrictions on the Partnership's lands. The
Partnership is unable at this time to predict the form in which the federal or
state rules will eventually be adopted. However, if either rule is adopted in
the form proposed by the respective agencies, the result will be some reduction
in the volume of Partnership timber available for harvest.
LIQUIDITY AND CASH FLOW
As of December 31, 1993, the Partnership was due trade and intercompany
receivables from Rayonier and affiliates of $4.1 million. In addition, the
Primary Account of the Partnership held short-term investment notes of Rayonier
of $106.2 million primarily resulting from the cumulative net cash flow, since
inception, of the Primary Account after distributions to unitholders. The
Partnership can call the short-term investment notes at any time to fund
Partnership working capital requirements, capital expenditures, asset
acquisitions and reserves. See Note 5 of the accompanying Notes to Financial
Statements for further information.
The Secondary Account of the Partnership had total outstanding debt of
$121.8 million at December 31, 1993 including long-term notes payable to
Rayonier of $120.9 million that mainly represent the obligations incurred as a
result of Secondary Account advances by Rayonier. See Note 6 of the
accompanying Notes to Financial Statements for further information.
Capital expenditures for reforestation, capitalized lease payments,
property taxes and other improvements to the land and timber assets were $13.4
million in 1993, $14.0 million in 1992 and $13.7 million in 1991. Capital
expenditures are expected to be approximately $13.3 million in 1994. Funding of
future capital requirements is expected to continue from Rayonier.
The Partnership distributed $92.0 million ($4.60 per Class A Unit) in
1993 and $72.0 million ($3.60 per Class A Unit) in both 1992 and 1991 to all
outstanding Class A unitholders. An additional $4.8 million in 1993 and $3.8
million in both 1992 and 1991 was distributed in cash to Class B unitholders
and to the General Partners. Recontributions of $1.0 million, $1.7 million and
$2.3 million were made in 1993, 1992 and 1991, respectively, by Rayonier and
the General Partners of RTLP relating to the commission expense paid to a
Rayonier affiliated foreign sales corporation.
On February 8, 1994, the Board of Directors of Rayonier Forest
Resources Company declared a special distribution of $4.00 per Class A Unit as
well as a first quarter distribution of $1.30 per Class A Unit (representing an
increase of 15 cents over the previous regular quarterly distribution), payable
on March 31, 1994 to unitholders of record February 28, 1994. A portion of
these distributions represents a return of capital, depending on each
unitholder's tax basis. The special distribution was declared following a
determination by the Managing General Partner that cash and investment balances
would likely exceed funding requirements for the balance of the Initial Term
ending December 31, 2000. As of the distribution date, it is expected that
approximately $1.00 per Class A Unit will be available for normal capital
expenditure, working capital and other funding requirements. The increase in
the quarterly distribution resulted from projections of increased operating
cash flows.
When the Initial Term ends on December 31, 2000, the Primary Account of
the Partnership will be closed but there will not be any redemption of the
partners' capital accounts. The interest of Class A unitholders in the
Partnership's future revenues, expenses and cash flows will then decrease from
95 percent to 4 percent. Positive cash flows will be substantially affected by
Secondary Account debt that will have to be repaid. As a result, it is
expected that the market price of Class A Units should begin to decrease
substantially sometime prior to December 31, 2000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements" on Page ii.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
- 17 -
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Neither the Partnership nor the Operating Partnership has any directors
or officers. Set forth below is certain information concerning directors and
executive officers of RFR. Presently, all directors and officers of RFR are
elected annually.
DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Served as
Director of
Name Position with RFR RFR Since
---- ----------------- ----------
<S> <C> <C>
Ronald M. Gross President and Director 1985
William J. Alley Director 1994
George S. Areson Acting Corporate Controller --
Macdonald Auguste Treasurer --
William S. Berry Senior Vice President --
John B. Canning Corporate Secretary --
Donald W. Griffin Director 1994
Thomas W. Keesee, Jr. 1 Director 1994 2
Gerald J. Pollack Senior Vice President and
Chief Financial Officer --
DeRoy C. Thomas 1 Director 1994 3
</TABLE>
1 Member of the Conflicts and Audit Committees of RFR's Board of
Directors.
2 Served as a Director of RFR from 1985 to 1991.
3 Served as a Director of RFR from 1987 to 1991.
RONALD M. GROSS, 60, is Chairman, President and Chief Executive
Officer of Rayonier. He joined Rayonier in March 1978 as President and Chief
Operating Officer and a Director. He was elected Chief Executive Officer in
1981 and Chairman in 1984. From 1968 to 1978, he was with Canadian Cellulose
Company Limited of Vancouver, British Columbia, where he held various senior
positions before becoming President and Chief Executive Officer and Director in
1973. Mr. Gross is currently a director of Lukens Inc. He serves as a member
of the Executive Committee of the Board of Directors of the American Forest and
Paper Association (AFPA) and is Vice Chairman of the AFPA International
Business Committee. He is a member of the Investment Policy Advisory Committee
of the United States Trade Representative.
WILLIAM J. ALLEY, 64, is Chairman of the Board and Chief Executive
Officer of American Brands, Inc., a diversified manufacturing and other
businesses company. He joined The Franklin Life Insurance Company in 1967 and
was Chairman, President and Chief Executive Officer of that organization when
it was acquired by American Brands, Inc. in 1979. He was elected to the Board
of Directors of American Brands in 1979 and subsequently held various senior
executive positions with American Brands before being elected to his present
position on June 15, 1987. He is also a director of Rayonier Inc., CIPSO
Incorporated, Bunn-O-Matic Corporation, Moorman Manufacturing Company, The
Business Council of Southwestern Connecticut (SACIA), Co-operation Ireland,
United Way of Tri-State and the Connecticut Business for Education Coalition,
Inc. and on the Advisory Board of Governors of the National Women's Economic
Alliance Foundation. He is a member of the Business Roundtable and is also a
member of The Conference
- 18 -
<PAGE> 22
Board, The Board of Overseers of the Executive Council on Foreign Diplomats,
The Ambassadors' Roundtable Advisory Council and The Economic Club of New York.
GEORGE S. ARESON, 58, was elected Acting Corporate Controller of
Rayonier and RFR on October 11, 1993. He joined Rayonier in February 1984 as
Pulp Products Controller and became Operations Controller, Pulp and Forest
Products in February 1988. Prior to employment at Rayonier, he was the
Director of Finance of Continental Corrugated, Inc. Currently he is a member
of both the American Institute of Certified Public Accountants and the New York
State Society of Certified Public Accountants. Mr. Areson did not file a Form
3 reporting that he owned no Class A Units until March 1994.
MACDONALD AUGUSTE, 45, was elected Treasurer of Rayonier effective
February 27, 1989 and Treasurer of RFR on March 6, 1989. From 1983 to February
1989, he was Assistant Treasurer of Rayonier, which he joined in April 1975 as
Cash and Financial Planning Coordinator. Previously he was employed by St.
Regis Paper Company.
WILLIAM S. BERRY, 52, was elected Senior Vice President, Forest
Resources and Corporate Development, of Rayonier in January 1994. He was
Senior Vice President, Land and Forest Resources, of Rayonier from January 1986
to January 1994. From October 1981 to January 1986 he was Vice President and
Director of Forest Products Management. Mr. Berry joined Rayonier in 1980 as
Director of Wood Products Management. Since May 1988 he has served as a Senior
Vice President of RFR after having been Vice President of RFR from September
1985. He also serves on the Executive Boards of the American Forest Council
and the Center for Streamside Studies. Prior to joining Rayonier, Mr. Berry
was employed with Champion International and Kimberly-Clark Corporation.
JOHN B. CANNING, 50, has served as Corporate Secretary and Associate
General Counsel of Rayonier since February 1985 and as Corporate Secretary of
RFR since September 1985. Mr. Canning joined Rayonier in 1977 as Associate
General Counsel - Financial. He is a member of the American Bar Association
and of the Corporate Bar Association of Westchester and Fairfield, Inc.
DONALD W. GRIFFIN, 57, is President and Chief Operating Officer of the
Olin Corporation, a diversified manufacturing corporation. He joined Olin in
1961 and was part of its Brass Division marketing organization beginning in
1963. He advanced through various managerial positions and in 1983 was elected
an Olin corporate vice president and appointed president of the Brass Division.
He became president of the Winchester Division of Olin in 1985, was appointed
president of Olin's Defense Systems Group in 1986 and was elected an executive
vice president of Olin in 1987. He became a director of Olin in 1990 and was
elected Vice Chairman of the Board for Operations on January 12, 1993. He was
elected President and Chief Operating Officer on February 24, 1994. He is also
a director of Rayonier Inc., the Sporting Arms and Ammunition Manufacturers
Institute, the Wildlife Management Institute, the National Shooting Sports
Foundation, River Bend Bancshares, Inc. and Illinois State Bank and Trust in
East Alton, Illinois. He is a trustee of the Buffalo Bill Historical Center,
the Olin Charitable Trust and the National Security Industrial Association. He
is a member of the American Society of Metals, the Association of the U.S. Army
and the American Defense Preparedness Association. He is a life member of the
Navy League of the United States and the Surface Navy Association.
THOMAS W. KEESEE, JR. 79, is a former Director, President and Chief
Executive Officer of Bessemer Securities Corporation and Bessemer Trust
Company. He is a corporate director and financial consultant. He is a
director of King Ranch Inc. and a director emeritus of ITT Corporation (ITT)
and of Duke University Asset Management Co. He is former Chairman of the Board
of Directors of the National Audubon Society. From 1985 to 1991, Mr. Keesee
served on the Board of Directors of RFR.
GERALD J. POLLACK, 52, was elected Senior Vice President and Chief
Financial Officer of Rayonier in May 1992. From July 1986 until May 1992, he
was Vice President and Chief Financial Officer. Mr. Pollack joined Rayonier in
June 1982 as Vice President and Controller. He served as Controller of RFR
from September 1985 until August 1986, when he became a Vice President as well.
He was elected Chief Financial Officer of RFR on March 6, 1989 and a Senior
Vice President of RFR on July 27, 1992. Prior to joining Rayonier, Mr. Pollack
was employed with Avis, Inc. where he held a number of positions, including
Vice President and Corporate Comptroller and finally Vice President-Operations,
Europe, Africa and Middle East Divisions in England.
DEROY C. THOMAS, 68, is a partner in the law firm of LeBoeuf, Lamb,
Greene & MacRae. He is retired President and Chief Operating Officer of ITT.
Prior to moving to the parent ITT, Mr. Thomas was Chairman, President and Chief
Executive Officer of The Hartford Insurance Group. Before going to The
Hartford, Mr. Thomas was assistant general counsel of the Association of
Casualty and Surety Companies in New York City and was an associate professor
of law at Fordham School of Law. Mr. Thomas serves on the board of directors
of ITT Hartford, as well as Connecticut Natural
- 19 -
<PAGE> 23
Gas Corporation and Houghton Mifflin Company. He also serves as Chairman of
the Old State House, Hartford, CT; Chairman of the Connecticut Health System,
Inc., Hartford, CT; Director, Goodspeed Opera House; Trustee, Fordham
University; Trustee, Wheelock College; Trustee Emeritus, University of Hartford
and as a member of the Advisory Board of Iona College. From 1987 to 1991, Mr.
Thomas served on the Board of Directors of RFR.
- 20 -
<PAGE> 24
ITEM 11. EXECUTIVE COMPENSATION
Neither Rayonier nor RFR receive any compensation as general partners
of the Partnership and the Operating Partnership in the form of promotional
interests, management fees, acquisition fees, incentive compensation or
otherwise. The Partnership and the Operating Partnership reimburse Rayonier
and RFR for all direct costs incurred in organizing and managing such
partnerships and indirect costs (principally general and administrative and
overhead costs) reasonably allocable to such partnerships. The allocations of
direct and indirect costs incurred by Rayonier between the Partnership and
Rayonier's other activities will be made solely by Rayonier.
Neither the Partnership nor the Operating Partnership has any officers
or directors. No officers or directors of Rayonier or RFR are compensated by
the Partnership or the Operating Partnership. The allocable share of
Rayonier's and RFR's general and administrative overhead expenses charged to
the Partnership includes a portion of the compensation paid by Rayonier and RFR
to their officers and directors. The three directors of RFR who were not
employed by ITT or Rayonier received a fee of $1,000 for each RFR Board meeting
or Committee meeting attended. These fees were paid by RFR and charged to the
Partnership. During 1993, the Partnership was charged for compensation paid to
13 officers and directors of RFR in an amount totaling $186,000. The
Partnership was not charged for cash compensation to any officer or director of
RFR in excess of $100,000.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All references to beneficial ownership in this Item 12 are as of March 14,
1994.
<TABLE>
<CAPTION>
Name and address Number of Partnership Units and Percent
of beneficial owner nature of beneficial ownership of class
- ------------------- -------------------------------- --------
<S> <C> <C>
Rayonier Inc. 14,940,000 Class A Units 74.7
1177 Summer Street
Stamford, Connecticut 06905-5529 20,000,000 Class B Units 100
Directors and officers No Units* 0
of RFR who perform
policy-making functions
for the Partnership (13)
</TABLE>
* Mrs. Ronald M. Gross owns 100 Class A Units of the Partnership. Her
husband, who is President of Rayonier and RFR, disclaims any beneficial
interest in those units.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Item 1. Business" for a description of transactions between the
Partnership and Rayonier. There are no other transactions or relationships to
be reported in response to this item.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
1. See Index to Financial Statements on page ii for a list of the
financial statements filed as part of this report.
2. See Index to Financial Statement Schedules on page ii for a list of
the financial statement schedules filed as a part of this report.
3. See Exhibit Index on page B for a list of the exhibits filed or
incorporated herein as a part of this report.
(b) No report on Form 8-K was filed by the registrant during the period
covered by this report.
- 21 -
<PAGE> 25
REPORT OF MANAGEMENT
Rayonier Timberlands, L.P. (RTLP), through the management of both Rayonier Inc.
(Rayonier) (the Special General Partner) and Rayonier Forest Resources Company
(RFR) (the Managing General Partner), is responsible for the preparation and
integrity of the information contained in the accompanying financial statements
and other sections of the Annual Report. The financial statements are prepared
in accordance with generally accepted accounting principles, and, where
necessary, include amounts that are based on management's informed judgments
and estimates. Other information in the Annual Report is consistent with the
financial statements.
RTLP's financial statements are audited by Arthur Andersen & Co., independent
public accountants. Management has made available to Arthur Andersen & Co.
RTLP's financial records and related data and believes that the representations
made to the independent public accountants are valid and complete.
A system of internal controls is a major element in management's responsibility
for the fair presentation of the financial statements. These internal
controls, including accounting controls and the internal auditing program, are
designed to provide reasonable assurance that the assets are safeguarded, that
transactions are executed in accordance with management's authorization and are
properly recorded, and that fraudulent financial reporting is prevented or
detected. An important part of the internal controls system is the involvement
of the General Partners who provide all required services to ensure the
adequacy of internal controls. Procedures also exist to assess compliance with
the terms of the Partnership Agreement and to identify and resolve any business
issues arising between the Partnership and the General Partners.
Internal controls provide for the careful selection and training of personnel
and for appropriate division of responsibility. The controls are documented in
written codes of conduct, policies and procedures that are communicated to
employees of Rayonier and RFR. Management continually monitors the system of
internal controls for compliance. Internal auditors independently assess the
effectiveness of internal controls and make recommendations for improvement.
Arthur Andersen & Co. also evaluate internal controls and perform tests of
procedures and accounting records to enable them to express their opinion on
RTLP's financial statements. They also make recommendations for improving
internal controls, policies and practices. Management takes appropriate action
in response to each recommendation from the internal auditors and the
independent public accountants.
The Board of Directors of RFR monitors management's administration of the
Partnership's financial and accounting policies and practices and the
preparation of financial reports.
The Audit Committee of the Board of Directors of RFR, which is comprised of
non-employee directors, meets periodically with management and with the
internal and external auditors to evaluate the effectiveness of the work
performed by them in discharging their respective responsibilities and to
assure their independent and free access to the Committee.
Rayonier controls RFR, and depends partially on the Partnership timberlands for
timber for use in Rayonier's mills and log export business. Conflicts of
interest can arise in selecting, pricing and scheduling timber sold to
Rayonier. Other conflicts of interest can arise in allocating revenues and
costs between the Class A Units and the Class B Units, in scheduling timber
sales to occur before or after the Initial Term expires, and in setting the
terms of any loans between the Partnership and Rayonier. The Conflicts
Committee of the Board of Directors of RFR, which is comprised of non-employee
directors, reviews these transactions and obtains opinions from outside
consultants as to their fairness.
F-1
<PAGE> 26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Rayonier Timberlands, L.P.:
We have audited the accompanying balance sheets of Rayonier Timberlands, L.P.
(a Delaware limited partnership) as of December 31, 1993 and 1992 and the
related statements of income, cash flows and partners' capital for each of the
three years in the period ended December 31, 1993. These financial statements
and schedules referred to below are the responsibility of Rayonier Timberlands,
L.P., through the management of both Rayonier Inc., the Special General
Partner, and Rayonier Forest Resources Company, the Managing General Partner of
the Partnership. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Rayonier Timberlands, L.P. as
of December 31, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index to
Financial Statement Schedules are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Stamford, Connecticut
March 1, 1994
F-2
<PAGE> 27
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(thousands of dollars, except per unit data)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
SALES
Timber sales
Unaffiliated parties $ 95,008 $ 81,661 $ 62,192
Rayonier 19,929 16,982 29,012
--------- --------- ---------
114,937 98,643 91,204
Timberland sales 1,110 17,752 10,019
--------- --------- ---------
116,047 116,395 101,223
--------- --------- ---------
COSTS AND EXPENSES
Cost of timber sold
Unaffiliated parties 15,064 12,980 10,622
Rayonier 3,139 2,512 4,692
--------- --------- ---------
18,203 15,492 15,314
Cost of timberland sold 362 2,085 1,006
Forest management, overhead and general
and administrative expenses 11,615 10,584 10,359
Commission expense paid to affiliate 692 1,680 2,206
--------- --------- ---------
30,872 29,841 28,885
--------- --------- ---------
OTHER OPERATING INCOME 2,223 2,093 1,905
--------- --------- ---------
OPERATING INCOME 87,398 88,647 74,243
--------- --------- ---------
OTHER INCOME AND DEDUCTIONS
Primary Account interest income from Rayonier 5,111 5,911 6,331
Secondary Account interest expense to Rayonier (9,452) (8,108) (6,789)
Minority interest of General Partners in RTOC (831) (864) (738)
--------- --------- ---------
(5,172) (3,061) (1,196)
--------- --------- ---------
PARTNERSHIP INCOME $ 82,226 $ 85,586 $ 73,047
========= ========= =========
Income Per Publicly Traded Class A Unit $ 4.45 $ 4.49 $ 3.93
========= ========= =========
Income Per Rayonier Owned Class A Unit $ 4.40 $ 4.38 $ 3.79
========= ========= =========
</TABLE>
The accompanying Notes to Financial Statements are an
integral part of these financial statements.
F-3
<PAGE> 28
RAYONIER TIMBERLANDS, L.P.
BALANCE SHEETS
AS OF DECEMBER 31, 1993 AND 1992
(thousands of dollars)
ASSETS
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 16 $ 263
Receivables - net 4,798 2,231
Inventories 362 392
Prepaid logging roads 3,948 3,391
Primary Account short-term investment notes of Rayonier 106,200 106,200
Trade and intercompany receivables from Rayonier and affiliates 4,146 3,985
--------- ---------
Total current assets 119,470 116,462
LONG-TERM RECEIVABLES 1,123 ---
OTHER ASSETS 112 114
FIXED ASSETS - NET 983 879
TIMBER, TIMBERLANDS AND LOGGING ROADS,
LESS DEPLETION AND AMORTIZATION 265,769 259,958
--------- ---------
$ 387,457 $ 377,413
========= =========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES
Advance deposits $ 5,282 $ 3,451
Accounts payable 2,257 2,732
Accrued liabilities
Taxes 1,580 1,542
All other 611 631
Current timber obligations 138 323
Advances from Rayonier 73 85
--------- --------
Total current liabilities 9,941 8,764
SECONDARY ACCOUNT LONG-TERM NOTES
PAYABLE TO RAYONIER 120,900 98,100
LONG-TERM TIMBER OBLIGATIONS 793 931
MINORITY INTEREST OF GENERAL PARTNERS IN RTOC 6,017 6,155
PARTNERS' CAPITAL
General Partners 5,962 6,097
Limited Partners (20,000,000 Class A Depositary
Units and 20,000,000 Class B Depositary
Units issued and outstanding) 243,844 257,366
--------- ---------
$ 387,457 $ 377,413
========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-4
<PAGE> 29
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(thousands of dollars)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Partnership income $ 82,226 $ 85,586 $ 73,047
Non-cash items included in income
Depletion, depreciation and amortization 7,064 7,634 8,345
Minority interest of General Partners in RTOC 831 864 738
Amortization of deferred software costs --- 119 475
(Increase) decrease in receivables (2,567) 1,702 (2,635)
Increase in prepaid logging roads (557) (824) (170)
Increase (decrease) in advance deposits 1,831 (1,430) (2,566)
(Decrease) increase in accounts payable and
accrued liabilities (457) 1,554 (76)
Other changes in working capital (143) 197 6
--------- --------- ---------
Cash provided from operating activities 88,228 95,402 77,164
--------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures less sales, retirements and withdrawals
of $374, $1,561 and $1,538 in 1993, 1992 and 1991 (12,979) (12,459) (12,187)
Increase in Primary Account short-term investment notes
of Rayonier (106,200) (135,700) (93,100)
Settlement of Primary Account short-term investment
notes of Rayonier 106,200 109,300 84,600
Increase in long-term receivables (1,123) --- ---
Decrease (increase) in other assets 2 174 (212)
--------- --------- ---------
Cash used for investing activities (14,100) (38,685) (20,899)
--------- --------- ---------
FINANCING ACTIVITIES
Decrease in timber obligations (323) (106) (133)
Increase in Secondary Account long-term notes
payable to Rayonier 22,800 18,000 18,400
Partnership distributions (96,842) (75,788) (76,218)
Distributions to General Partners of RTOC - net (969) (747) (743)
Recontributions by Rayonier and General Partners
of RTLP 959 1,717 2,266
--------- --------- ---------
Cash used for financing activities (74,375) (56,924) (56,428)
--------- --------- ---------
CASH
Net decrease in cash (247) (207) (163)
Balance at beginning of year 263 470 633
--------- --------- ---------
Balance at end of year $ 16 $ 263 $ 470
========= ========= =========
Supplemental disclosures of cash flow information
Cash received for interest - Primary Account $ 5,113 $ 5,911 $ 6,333
========= ========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-5
<PAGE> 30
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF PARTNERS' CAPITAL
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(thousands of dollars)
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
Balance, December 31, 1990 $ 246,870 $ 5,983 $ 252,853
Partnership income 72,317 730 73,047
Partnership distributions - net (73,218) (734) (73,952)
-------- --------- ---------
Balance, December 31, 1991 245,969 5,979 251,948
Partnership income 84,730 856 85,586
Partnership distributions - net (73,333) (738) (74,071)
-------- --------- ---------
Balance, December 31, 1992 257,366 6,097 263,463
Partnership income 81,403 823 82,226
Partnership distributions - net (94,925) (958) (95,883)
-------- --------- ---------
Balance, December 31, 1993 $ 243,844 $ 5,962 $ 249,806
========= ========= =========
</TABLE>
The accompanying Notes to Financial Statements are an integral
part of these financial statements.
F-6
<PAGE> 31
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CONTROL
Rayonier Timberlands, L.P. (RTLP), a Delaware limited partnership, began
operations on November 20, 1985 succeeding to substantially all of the
timberlands business of Rayonier Inc. (Rayonier). Rayonier Forest Resources
Company (RFR), a wholly owned subsidiary of Rayonier, is the Managing General
Partner of RTLP and Rayonier is the Special General Partner of RTLP.
RTLP operates through Rayonier Timberlands Operating Company, L.P. (RTOC), a
Delaware limited partnership, in which RTLP holds a 99 percent limited partner
interest, and RFR and Rayonier together hold a 1 percent general partner
interest. RFR is the Managing General Partner of RTOC and Rayonier is the
Special General Partner of RTOC.
In addition to its General Partners' interests, Rayonier is also a Limited
Partner and owns 74.7 percent of RTLP's issued and outstanding Class A Units
and 100 percent of RTLP's issued and outstanding Class B Units.
RTLP and RTOC have no officers, directors or employees. The officers,
directors and employees of Rayonier and RFR perform all management and business
activities for RTLP and RTOC.
ALLOCATIONS OF PARTNERSHIP INTEREST
RTLP records all of its activities in two accounts, the Primary Account and the
Secondary Account. The Class A unitholders, the Class B unitholders and the
General Partners all participate in both accounts, but in different
percentages. The participation in the revenues and expenses of RTLP is as
follows:
<TABLE>
<CAPTION>
Primary Secondary
Account Account
------- -------
<S> <C> <C>
Class A unitholders 95% 4%
Class B unitholders 4% 95%
General Partners 1% 1%
--- ---
Total 100% 100%
=== ===
</TABLE>
IN ACCORDANCE WITH RTLP'S PARTNERSHIP AGREEMENT THE PRIMARY ACCOUNT WILL BE
CLOSED AT THE END OF THE INITIAL TERM ON DECEMBER 31, 2000. SUBSEQUENT TO THAT
DATE THE CLASS A UNITHOLDERS WILL ONLY PARTICIPATE IN 4 PERCENT OF THE REVENUES
AND EXPENSES OF RTLP, AND CASH FLOW ONLY AFTER ALL SECONDARY ACCOUNT DEBT HAS
BEEN REPAID.
INVESTING AND FINANCING ACTIVITIES
The excess of operating cash flow generated by the Primary Account over amounts
distributed to unitholders is invested with Rayonier in accordance with the
Partnership Agreement and is repayable on demand. Interest is due quarterly
and the stated interest rates are at least equivalent to the rate Rayonier
would be charged by an outside party for equivalent short-term borrowings.
The Partnership has expenditures that relate primarily to timber that will be
harvested after the Initial Term, such as costs of site preparation, planting,
reforestation, pre-commercial thinning and similar activities, all of which are
allocated to the Secondary Account of the Partnership. Rayonier funds these
expenditures on behalf of the Partnership and, in accordance with the
Partnership Agreement, RTLP incurs obligations to Rayonier which mature on
January l, 2001.
Under the terms of the Partnership Agreement, cash credited to the Primary
Account may not be loaned or otherwise used for the benefit of the Secondary
Account. Accordingly, the Partnership is not permitted to use proceeds from
the Primary Account Short-Term Investment Notes of Rayonier to repay the
Secondary Account Long-Term Notes Payable to Rayonier.
See Notes 5 and 6 for further information.
F-7
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SPECIAL ALLOCATIONS
In 1989, the Partnership Agreements of RTLP and RTOC were amended to provide
for the special allocation of certain costs to Rayonier's and RFR's interests
as General Partners of both Partnerships and to Rayonier's interest as a
Limited Partner of RTLP. These costs reduce Rayonier's and RFR's income from
RTLP and RTOC, and the cash flow attributed to their Partnership interests.
The special allocations do not impact the interest of publicly traded Class A
Units nor their cash distributions.
On January 1, 1989, RTOC entered into a sales agency agreement with a
Rayonier-affiliated foreign sales corporation. The affiliate, RayFor Foreign
Sales Corporation (FSC), acts as a commission agent in selling Rayonier's
interest in stumpage that is eventually exported from the United States. As a
result, Rayonier gains certain tax benefits that are basically only available
to tax-paying corporations.
Effective with the first quarter of 1989, a commission expense was paid by RTOC
to FSC. The Board of Directors of the Managing General Partner approved
amendments to the Partnership Agreements of both RTLP and RTOC that allow for
the allocation of FSC commission expense and associated administrative expenses
only to Rayonier and RFR, as General Partners of RTOC and RTLP, and to Rayonier
as a Limited Partner of RTLP, and do not affect the earnings or cash flow of
publicly traded Class A Units.
Effective August 10, 1993, legislation was enacted eliminating tax benefits
related to log exports for foreign sales corporations. Since the Partnership's
commission expense had been fully allocated to Rayonier and the General
Partners, the legislation did not impact the earnings or cash flows of publicly
traded Class A Units.
CONSOLIDATION
The financial statements consolidate the accounts of RTLP and RTOC.
Intercompany transactions have been eliminated. The Rayonier and RFR 1 percent
general partner interest in RTOC is presented as minority interest in these
financial statements.
Certain reclassifications have been made to prior years' financial statements
to conform to current year presentation.
REVENUE RECOGNITION
Timber sales are generally recognized when legal ownership and the risk of loss
passes to the purchaser and the quantity sold is determinable. This generally
occurs when the purchaser severs and measures the timber.
Revenues have been based on actual harvest volumes multiplied by contractually
agreed upon prices awarded in sealed-bid auctions or negotiated at arm's length
with the purchasers, including Rayonier. These prices are periodically and
independently tested for reasonability to market prices in comparable
geographic areas.
Bulk timber sales are generally recognized when legal ownership and the risk of
loss passes to the purchaser and the amount of profit is determinable.
Timberland and land sales are recognized when legal ownership passes, the
amount of profit is determinable, and specified levels of down payment are
received.
DEFERRED SOFTWARE COSTS
Software costs related to the development of the initial tax data collection
and computation system necessary to prepare the pro forma tax return
information for individual unitholders had been capitalized and were amortized
over a period of 60 months, ending in March 1992.
TIMBER AND TIMBERLANDS
The acquisition cost of land, timber, real estate taxes, lease payments, site
preparation and other costs relating to the planting and growing of timber are
capitalized. Such costs attributed to merchantable timber are charged against
revenue at the time the timber is harvested based on the relationship of
harvested timber to the estimated volume of currently recoverable timber.
Timber and timberlands are stated at the lower of original acquisition cost,
net of timber cost depletion or market value. The timber originally
contributed by Rayonier is stated at Rayonier's historical cost.
F-8
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
LOGGING ROADS
Logging roads, including bridges, are stated at cost, less accumulated
amortization. The costs of roads developed for reforestation activities are
amortized using the straight-line method over their useful lives estimated at
40 years for roads and 20 years for bridges. Road costs associated with
harvestable timber access are charged to a prepaid account and amortized as the
related timber is sold, generally within two years.
PARTNERS' CAPITAL
The partners' capital accounts have been included on a historical cost basis as
determined by the cash and net book value of assets originally contributed to
RTLP by Rayonier and RFR. These accounts have been adjusted for the
allocation of revenues and costs in accordance with the Partnership
Agreement, for distributions made to partners and for recontributions made by
Rayonier and RFR. Revenues and costs are allocated to Primary and Secondary
Accounts based upon their relationship to the harvest plan of the Initial Term
(through December 31, 2000) or to the harvest plan subsequently (2001 and
thereafter). The partners' capital accounts were adjusted for RTLP
distributions, recontributions to RTLP and a 1991 land withdrawal by Rayonier
(see Note 3 for further information) as follows (thousands of dollars):
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Distributions to Limited Partners $95,874 $75,032 $75,032
Distributions to General Partners 968 756 756
Recontributions by Rayonier
and RFR (959) (1,717) (2,266)
Land Withdrawal by Rayonier -- -- 430
------ ------ ------
Total $95,883 $74,071 $73,952
======= ======= =======
</TABLE>
The amount recontributed by Rayonier and RFR is equal to the foreign sales
commission expense paid by the Partnership during the year, which is fully
allocated to Rayonier and the General Partners. (See Special Allocations).
In addition to the RTLP distributions, RTOC distributed $978,000 in 1993 and
$764,000 in 1992 and 1991 to its General Partners. Recontributions were also
made to RTOC by the General Partners for their interest in the commission
expense paid.
2. INCOME AND OTHER TAXES
RTLP is not a separate taxable entity for Federal or state income tax purposes.
Any taxable income or loss is reported by the partners in accordance with the
Partnership Agreement. Accrued taxes relating to obligations of RTLP as of
December 31 were as follows (thousands of dollars):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Property Taxes $1,086 $1,199
Excise Taxes 494 343
----- -----
Total $1,580 $1,542
====== ======
</TABLE>
3. RELATED PARTY TRANSACTIONS
RTLP is a major supplier of timber to Rayonier for use in its log export
business, and pulp and lumber manufacturing facilities. Timber sales to
Rayonier for the years ended December 31, 1993, 1992 and 1991 totaled
$19,929,000, $16,982,000 and $29,012,000, respectively. RTLP's related-party
revenues represent the fair market value of timber sold to Rayonier.
In 1990, Rayonier designated 3,309 acres of Southeast timberland to be
withdrawn from RTLP in accordance with the original Partnership Agreement,
which granted Rayonier the right to designate on or before December 31, 1990 up
to 15,000 acres to be retained by Rayonier. RTLP recorded the distribution of
land to Rayonier at historical cost in 1991 after review by the Conflicts
Committee of RFR's Board of Directors.
F-9
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
RTLP engages in various transactions with Rayonier and its affiliates that are
characteristic of a consolidated group under common control. Receipts,
disbursements and net cash position are currently managed by Rayonier through
an RTLP centralized treasury system. Accordingly, cash generated by and cash
requirements of RTLP flow through intercompany accounts. Any loans to or
borrowings from Rayonier are made at an interest rate equivalent to that which
would be charged Rayonier by an unrelated third party for a comparable loan for
the same period.
The balances in the current RTLP intercompany accounts with Rayonier as of
December 31 were as follows (thousands of dollars):
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Primary Account receivable $4,146 $3,985
Secondary Account payable (73) (85)
------ ------
Total due from Rayonier $4,073 $3,900
====== ======
</TABLE>
Interest income received from Rayonier on the Primary Intercompany Account
balance was $147,000 and $193,000 in 1993 and 1992 on an average outstanding
receivable of $4,185,000 and $4,381,000, respectively. Interest expense paid
to Rayonier on the Secondary Intercompany Account was $334,000 and $371,000 in
1993 and 1992 on an average outstanding payable of $11,740,000 and $9,313,000,
respectively.
RTLP is charged by Rayonier with direct costs and expenses associated with
RTLP's operations. In addition, indirect costs were allocated to RTLP for
forest management, overhead and general and administrative expenses related to
RTLP's operations. Such allocated costs totaled $6,850,000 in 1993, $6,031,000
in 1992 and $6,156,000 in 1991.
4. MAJOR UNAFFILIATED CUSTOMERS
Sales for 1992 and 1991 include $16,800,000 and $8,000,000, respectively, from
major timberland tract sales in the Northwest to the Quinault Indian Nation.
In addition, 1993 and 1992 sales include timber stumpage sales of $16,900,000
and $10,200,000, respectively, to two customers affiliated with the Quinault
Indian Nation. In 1992, the Partnership also had one other unaffiliated
customer in the Northwest to whom sales of timber stumpage represented
$12,100,000 of total sales. No unaffiliated customer accounted for sales in
excess of 10 percent of total revenues in 1991.
5. SHORT-TERM INVESTMENT NOTES OF RAYONIER
Cash balances including the excess of operating cash flow generated by the
Primary Account over amounts distributed to unitholders are being invested in
Rayonier as short-term investment notes. These funds are invested in
accordance with the Partnership Agreement and are repayable on demand.
Interest is due quarterly and the interest rates are at least equivalent to the
rate Rayonier would be charged by an outside party for equivalent short-term
borrowings. At both December 31, 1993 and 1992 the RTLP Primary Account
included short-term investment notes of Rayonier of $106,200,000. The notes
bear fixed interest rates that range from 3.9 to 4.2 percent, as of December
31, 1993, and 3.8 to 5.4 percent, as of December 31, 1992. The fair value of
the short-term investment notes of Rayonier approximates its carrying value.
The weighted average interest rate, based on the principal amount, was 4.1
percent as of December 31, 1993 and 4.6 percent as of December 31, 1992.
Interest income earned by the Primary Account on the investment notes of
Rayonier was $4,964,000 in 1993, $5,718,000 in 1992 and $6,062,000 in 1991.
6. LONG-TERM NOTES PAYABLE TO RAYONIER
The Partnership has expenditures that relate primarily to timber that will be
harvested after the Initial Term, such as costs of site preparation, planting,
reforestation, pre-commercial thinning and similar activities, all of which are
allocated to the Secondary Account of the Partnership. Rayonier funds these
expenditures on behalf of the Partnership and, in accordance with the
Partnership Agreement, RTLP incurs obligations to Rayonier which mature on
January 1, 2001. Advances made by Rayonier to the Secondary Account in any
year bear interest through December 31 of that year at the actual average rate
of Rayonier's revolving credit borrowings. On each such December 31, advances
made in that year including interest are converted into a note bearing interest
through January 1, 2001 at a fixed rate determined as of that December 31 equal
to an appropriate spread over the yield on U. S. Government Notes having a
maturity date in early 2001. Interest is due quarterly, and all or any part of
the unpaid principal may be prepaid at any time without penalty or premium.
The long-term notes payable to Rayonier amounted to $120,900,000 and
$98,100,000 as of December 31, 1993 and 1992, respectively. Based on the
spread over the current rates of U. S. Government Notes having a maturity date
in early 2001, the fair value of the long-term notes payable to Rayonier is
$135,800,000.
F-10
<PAGE> 35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 1993 interest rates on the individual notes range from 6.5
to 10.6 percent, with a weighted average interest rate of 8.7 percent. As of
December 31, 1992 the range of interest rates on the individual notes was 7.8
to 10.6 percent, with a weighted average interest rate of 9.2 percent.
Interest expense incurred by the Secondary Account on the notes payable to
Rayonier was $9,118,000 in 1993, $7,737,000 in 1992 and $6,237,000 in 1991.
7. LONG-TERM TIMBER OBLIGATIONS
As of December 31, 1993 and 1992 total timber obligations amounted to $931,000
and $1,254,000, respectively. Interest rates ranged from 6.0 to 8.6 percent,
with a weighted average interest rate of 8.4 and 8.3 percent at December 31,
1993 and 1992, respectively.
The obligations are payable as follows: 1994 - $138,000; 1995 - $148,000; 1996
- - $159,000; 1997 - $149,000; 1998 - $162,000; and $175,000 during 1999 to 2003.
8. ENVIRONMENTAL MATTERS
Over the past three years, harvest of timber from private lands in the state of
Washington has been restricted as a result of the listing of the northern
spotted owl as a threatened species under the Endangered Species Act (ESA).
These restrictions have caused the Partnership to restructure and reschedule
some of its harvest plans. The U.S. Fish and Wildlife Service (FWS) is
developing a proposed rule under the ESA to redefine protective measures for
the northern spotted owl on private lands. This rule, as currently drafted,
would reduce the harvest restrictions on private lands except within specified
Special Emphasis Areas, where restrictions would be increased. One proposed
Special Emphasis Area is on the Olympic Peninsula, where a significant portion
of the Partnership's Washington timberlands is located. The new rule may also
include guidelines for the protection of the marbled murrelet, also recently
listed as a threatened species. Separately, the state of Washington Forest
Practices Board is in the process of adopting new harvest regulations to
protect the northern spotted owl and the marbled murrelet. The state
Department of Natural Resources draft of this rule also provides for a special
emphasis area to protect the northern spotted owl on the Olympic Peninsula,
which would increase harvest restrictions on the Partnership's lands. The
Partnership is unable at this time to predict the form in which the federal or
state rules will eventually be adopted. However, if either rule is adopted in
the form proposed by the respective agencies, the result will be some reduction
in the volume of Partnership timber available for harvest.
9. SUBSEQUENT EVENTS
On February 8, 1994, the Board of Directors of Rayonier Forest Resources
Company declared a special distribution of $4.00 per Class A Unit as well as a
first quarter distribution of $1.30 per Class A Unit (representing an increase
of 15 cents over the previous regular quarterly distribution), payable on March
31, 1994 to unitholders of record on February 28, 1994. A portion of these
distributions represents a return of capital, depending on each unitholder's
tax basis. The special distribution was declared following a determination by
the Managing General Partner that cash and investment balances would likely
exceed funding requirements for the balance of the Initial Term ending December
31, 2000. As of March 31, 1994, approximately $1.00 per Class A Unit will
remain for normal capital expenditure, working capital and other funding
requirements. The increase in the quarterly distribution resulted from
projections of increased operating cash flows.
On February 28, 1994, ITT Corporation (ITT), Rayonier's sole shareholder,
distributed all the Common Shares of Rayonier to ITT's shareholders. In
connection with the distribution, Rayonier changed its name from ITT Rayonier
Incorporated to Rayonier Inc. and became a publicly traded company listed on
the New York Stock Exchange under the symbol "RYN." RTLP will continue to be
listed separately and trade under the symbol "LOG." Class A unitholder's
financial interest will not be affected in any manner by ITT's distribution of
Rayonier to its shareholders.
F-11
<PAGE> 36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
10. COMPUTATION OF INCOME PER CLASS A UNIT
The Partnership Agreement provides for the allocation of Partnership income
among the General and Limited Partners. The following tables present the
computation of income per Class A Unit for the three years ended December 31,
1993 (thousands of dollars, except per unit data):
<TABLE>
<CAPTION>
1993 1992 1991
-------------------- ------------------------ ------------------------
Primary Secondary Primary Secondary Primary Secondary
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Timber and Timberland Sales $ 114,912 $ 1,135 $ 112,199 $ 4,196 $ 99,533 $ 1,690
Interest and Other Income - net 6,891 (9,009) 7,631 (7,735) 7,927 (6,480)
Costs and Expenses (26,734) (3,446) (24,103) (4,058) (23,561) (3,118)
Interest of General Partners in RTOC (951) 113 (957) 76 (839) 79
--------- ---------- --------- ---------- --------- ----------
Partnership Income
before Commission Expense 94,118 (11,207) 94,770 (7,521) 83,060 (7,829)
Commission Expense - net of 1%
General Partner interest (685) ---- (1,663) ---- (2,184) ----
--------- ---------- --------- ---------- --------- ----------
Partnership Income $ 93,433 $ (11,207) $ 93,107 $ (7,521) $ 80,876 $ (7,829)
========= ========== ========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
Publicly Traded Rayonier Owned Publicly Traded Rayonier Owned Publicly Traded Rayonier Own
A Units A Units A Units A Units A Units A Units
------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Income for Class A Units before
Commission Expense
95% of Primary Account $ 22,621 $ 66,791 $ 22,778 $ 67,254 $ 19,963 $ 58,944
4% of Secondary Account (113) (335) (76) (225) (79) (234)
--------- ---------- --------- ---------- --------- ----------
22,508 66,456 22,702 67,029 19,884 58,710
Commission Expense ---- (651) ---- (1,580) ---- (2,075)
--------- ---------- --------- ---------- --------- ----------
Total Income for Class A Units $ 22,508 $ 65,805 $ 22,702 $ 65,449 $ 19,884 $ 56,635
--------- ---------- --------- ---------- --------- ----------
Units Outstanding 5,060,000 14,940,000 5,060,000 14,940,000 5,060,000 14,940,000
========= ========== ========= ========== ========= ==========
Income Per Class A Unit $ 4.45 $ 4.40 $ 4.49 $ 4.38 $ 3.93 $ 3.79
========= ========== ========= ========== ========= ==========
</TABLE>
F-12
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
11. OPERATING CASH FLOW ALLOCABLE TO CLASS A UNITS
Operating cash flow allocable to a Class A Unit is calculated by multiplying 99
percent (Limited Partners' interest in RTLP) of operating cash flow allocated
to the Primary and Secondary Accounts by the respective 95 percent and 4
percent Class A Unit interest in those accounts. In determining operating cash
flow, Partnership results are adjusted for non-cash costs and expenses without
the effects of changes in working capital. The following tables present the
calculations of operating cash flow allocable to Class A Units for the three
years ended December 31, 1993 (thousands of dollars, except per unit data):
<TABLE>
<CAPTION>
1993 1992 1991
-------------------- ------------------------ ------------------------
Primary Secondary Primary Secondary Primary Secondary
Account Account Account Account Account Account
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Timber and Timberland Sales $114,912 $ 1,135 $ 112,199 $ 4,196 $ 99,533 $ 1,690
Interest and Other Income - net 6,891 (9,009) 7,631 (7,735) 7,927 (6,480)
Costs and Expenses - other than non-cash
items, commissions and the General
Partners' interest in RTOC (19,867) (2,967) (16,546) (2,380) (14,653) (2,244)
Capital Expenditures (1,911) (11,442) (2,074) (11,948) (2,308) (11,417)
General Partners' interest in RTOC (1,000) 223 (1,012) 179 (905) 185
-------- -------- --------- -------- -------- --------
Operating Cash Flow before
Commission Expense 99,025 (22,060) 100,198 (17,688) 89,594 (18,266)
Commission Expense - net
of 1% General Partner interest (685) ---- (1,663) ---- (2,184) ----
-------- -------- --------- -------- -------- --------
Operating Cash Flow $ 98,340 $(22,060) $ 98,535 $(17,688) $ 87,410 $(18,266)
======== ======== ========= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Publicly Traded Rayonier Owned Publicly Traded Rayonier Owned Publicly Traded Rayonier Owned
A Units A Units A Units A Units A Units A Units
------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Cash Allocable to Class A Units
before Commission Expense
95% of Primary Account $ 23,801 $ 70,273 $ 24,083 $ 71,105 $ 21,534 $ 63,580
4% of Secondary Account (223) (659) (179) (529) (185) (546)
---------- ---------- --------- ---------- --------- ----------
23,578 69,614 23,904 70,576 21,349 63,034
Commission Expense ---- (651) ---- (1,580) ---- (2,075)
---------- ---------- --------- ---------- --------- ----------
Operating Cash Flow Allocable to
Class A Units $ 23,578 $ 68,963 $ 23,904 $ 68,996 $ 21,349 $ 60,959
---------- ---------- --------- ---------- --------- ----------
Units Outstanding 5,060,000 14,940,000 5,060,000 14,940,000 5,060,000 14,940,000
---------- ---------- --------- ---------- --------- ----------
Primary Account Cash Flow Per Unit $ 4.70 $ 4.66 $ 4.76 $ 4.66 $ 4.26 $ 4.12
Secondary Account Cash Flow Per Unit (.04) (.04) (.04) (.04) (.04) (.04)
---------- ---------- --------- ---------- --------- ----------
Operating Cash Flow Allocable to a
Class A Unit $ 4.66 $ 4.62 $ 4.72 $ 4.62 $ 4.22 $ 4.08
========== ========== ========= ========== ========= ==========
</TABLE>
F-13
<PAGE> 38
QUARTERLY RESULTS FOR 1993 AND 1992 (Unaudited) (thousands of dollars, except
per unit data):
<TABLE>
<CAPTION>
1993 Quarter Ended
- -------- ----------------------------------------------
March June September December Total
31 30 30 31 Year
----- ---- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Sales $ 31,209 $ 30,372 $ 15,246 $ 39,220 $ 116,047
Operating Income 24,223 23,599 9,687 29,889 87,398
Partnership Income 23,014 22,322 8,461 28,429 82,226
Income Per Publicly Traded
Class A Unit 1.23 1.19 .55 1.48 4.45
Operating Cash Flow Allocable
to a Publicly Traded
Class A Unit 1.30 1.24 .57 1.55 4.66
Distributions Per Publicly Traded
Class A Unit 1.15 1.15 1.15 1.15 4.60
</TABLE>
<TABLE>
<CAPTION>
1992 Quarter Ended
- -------- -------------------------------------------------
March June September December Total
31 30 30 31 Year
----- ---- --------- -------- -----
<S> <C> <C> <C> <C> <C>
Sales $ 37,158 $ 26,866 $ 28,718 $ 23,653 $ 116,395
Operating Income 29,156 20,313 22,646 16,532 88,647
Partnership Income 28,325 19,670 21,821 15,770 85,586
Income Per Publicly Traded
Class A Unit 1.41 1.08 1.11 .89 4.49
Operating Cash Flow Allocable
to a Publicly Traded
Class A Unit 1.51 1.15 1.16 .90 4.72
Distributions Per Publicly Traded
Class A Unit .90 .90 .90 .90 3.60
</TABLE>
F-14
<PAGE> 39
RAYONIER TIMBERLANDS, L.P.
SCHEDULE V - PLANT, PROPERTY AND EQUIPMENT
(thousands of dollars)
<TABLE>
<CAPTION>
Opening Retirements Ending
Balance Additions or Other Balance
Year Ended December 31, 1993 1/1/93 at Cost Sales Changes 12/31/93
- ---------------------------- ------ ------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
Fixed assets $ 1,598 $ 176 $ -- $ -- $ 1,774
Timber, net 218,673 13,164 (199) (6,871)(a) 224,767
Timberlands 36,999 13 (175) -- 36,837
Logging Roads 5,090 -- -- -- 5,090
--------- -------- ------- ------- --------
$ 262,360 $ 13,353 $ (374) $(6,871) $268,468
========= ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Opening Retirements Ending
Balance Additions or Other Balance
Year Ended December 31, 1992 1/1/92 at Cost Sales Changes 12/31/92
- ---------------------------- ------ ------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
Fixed assets $ 1,547 $ 60 $ (9) $ -- $ 1,598
Timber, net 213,572 13,935 (1,387) (7,447)(a) 218,673
Timberlands 37,145 25 (171) -- 36,999
Logging Roads 5,091 -- (1) -- 5,090
--------- -------- ------- ------- --------
$ 257,355 $ 14,020 $(1,568) $(7,447) $262,360
========= ======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Opening Retirements Ending
Balance Additions or Other Balance
Year Ended December 31, 1991 1/1/91 at Cost Sales Changes 12/31/91
- ---------------------------- ------ ------- ----- ------- --------
<S> <C> <C> <C> <C> <C>
Fixed assets $ 1,546 $ 40 $ (39) $ -- $ 1,547
Timber, net 209,295 13,575 (1,132) (8,166)(a) 213,572
Timberlands 37,441 106 (402) -- 37,145
Logging Roads 5,091 4 (4) -- 5,091
--------- -------- ------- ------- --------
$ 253,373 $ 13,725 $(1,577) $(8,166) $257,355
========= ======== ======= ======= ========
</TABLE>
NOTES
(a) Represents timber depletion charged to income and applied directly
against the asset accounts.
S-1
<PAGE> 40
RAYONIER TIMBERLANDS, L.P.
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PLANT, PROPERTY AND EQUIPMENT
(thousands of dollars)
<TABLE>
<CAPTION>
Opening Additions Ending
Balance Charged to Cost Balance
Year Ended December 31, 1993 1/1/93 and Expense Retirements 12/31/93
- ---------------------------- -------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Fixed assets $ 719 $ 72 $ -- $ 791
Logging roads 804 121 -- 925
------- --------- -------- -------
$ 1,523 $ 193 $ -- $ 1,716
======= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Opening Additions Ending
Balance Charged to Cost Balance
Year Ended December 31, 1993 1/1/93 and Expense Retirements 12/31/93
- ---------------------------- -------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Fixed assets $ 658 $ 68 $ (7) $ 719
Logging roads 685 119 -- 804
------- --------- -------- -------
$ 1,343 $ 187 $ (7) $ 1,523
======= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Opening Additions Ending
Balance Charged to Cost Balance
Year Ended December 31, 1993 1/1/93 and Expense Retirements 12/31/93
- ---------------------------- -------- --------------- ----------- --------
<S> <C> <C> <C> <C>
Fixed assets $ 640 $ 57 $ (39) $ 658
Logging roads 563 122 -- 685
------- --------- -------- -------
$ 1,203 $ 179 $ (39) $ 1,343
======= ========= ======== =======
</TABLE>
S-2
<PAGE> 41
SIGNATURES
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.
By: RAYONIER FOREST RESOURCES
COMPANY
Managing General Partner
By: GEORGE S. ARESON
---------------------------------
George S. Areson
March 30, 1994 Acting Corporate Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
RAYONIER FOREST RESOURCES COMPANY
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
RONALD M. GROSS President and Director March 30, 1994
- ----------------------------------
Ronald M. Gross
(Principal Executive Officer)
GERALD J. POLLACK Senior Vice President and March 30, 1994
- ---------------------------------- Chief Financial Officer
Gerald J. Pollack
(Principal Financial Officer)
GEORGE S. ARESON Acting Corporate Controller March 30, 1994
- ----------------------------------
George S. Areson
(Principal Accounting Officer)
* Director
- ----------------------------------
William J. Alley
* Director
- ----------------------------------
Donald W. Griffin
* Director
- ----------------------------------
Thomas W. Keesee, Jr.
Director
- ----------------------------------
DeRoy C. Thomas
* By: GERALD J. POLLACK March 30, 1994
-----------------------------
Attorney-in-fact
</TABLE>
-A-
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION LOCATION
----------- --------
NO.
---------
<S> <C> <C>
3(a) Partnership Agreement of the Incorporated by
Partnership reference to
Exhibit No. 3(a)
to Registrant's
Form 10K for
1988
3(b) Forms of Class A Certificate Incorporated by
of Limited Partnership and Class B reference to
Certificate of Limited Partnership Exhibit No. 3.2 to
of the Partnership Registration State-
ment on Form S-l,
(Reg. No. 33-587)
3(c) Partnership Agreement of Operating Incorporated by
Partnership reference to
Exhibit No. 3(c)
to Registrant's
Form 10K for
1988
3(d) Forms of Class A Certificate Incorporated by
of Limited Partnership and Class B reference to
Certificate of Limited Partnership Exhibit No. 3.4 to
of the Operating Partnership Registration State-
ment on Form S-l,
(Reg. No. 33-587)
4(a) Deposit Agreement among the Incorporated by
Partnership, Manufacturers Hanover reference to
Trust Co. as Depositary, Rayonier Exhibit No. 4.1 to
Forest Resources Company (RFR), as Registration State-
attorney-in-fact of limited partners ment on Form S-l,
in the Partnership, and all holders of (Reg. No. 33-587)
Depositary Receipts
4(b) Specimen Class A Depositary Receipt Incorporated by
reference to
Exhibit No. 4.1 to
Registration State-
ment on Form S-l,
(Reg. No. 33-587)
4(c) Specimen Secondary Account Incorporated by
Note Payable to ITT Rayonier reference to
Exhibit No. 4(c) to
Registrant's Form 10K
for 1992
9 Voting Trust Agreement None
</TABLE>
- B -
<PAGE> 43
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION LOCATION
----------- --------
NO.
---------
<S> <C> <C>
10 Conveyance Agreement among Incorporated by
Rayonier, RFR, the Partnership and reference to
the Operating Partnership Exhibit No.10.l to
Registration State-
ment on Form S-l,
(Reg. No. 33-587)
11 Statement re computation of per None
share earnings
12 Statement re computation of ratios Not Applicable
13 Annual Report to security holders, Not Applicable
Form l0-Q or quarterly report to
security holders
16 Letter re change in certifying Not Applicable
accountant
18 Letter re change in accounting Not Applicable
principles
19 Previously unfiled documents None
21 Subsidiaries of the registrant *
22 Published report regarding matters None
submitted to vote of security holders
23 Consents of experts and counsel None
24 Power of attorney Filed herewith
28 Information from reports furnished Not Applicable
to state insurance regulatory
authorities
99 Additional exhibits None
</TABLE>
* Registrant's only subsidiary is Rayonier Timberlands Operating Company, L.P.,
a Delaware limited partnership in which Registrant holds a 99% limited
partner's interest. See Item 1 - "Business - Description of Business."
- C -
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints GERALD J. POLLACK and JOHN B. CANNING his or her true
and lawful attorneys-in-fact, with full power in each to act without the other
and with full power of substitution and resubstitution to sign in the name of
such person and in each of his or her offices and capacities in Rayonier Forest
Resources Company, the Managing General Partner of Rayonier Timberlands, L.P.
(the "Partnership") the Annual Report on Form 10-K for the fiscal year ended
December 31, 1993 of the Partnership, and to file the same, and any amendments
thereto, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Dated: March 28, 1994
/S/ WILLIAM J. ALLEY
--------------------
William J. Alley
Director
/S/ DONALD W. GRIFFIN
---------------------
Donald W. Griffin
Director
/S/ THOMAS W. KEESEE, JR.
-------------------------
Thomas W. Keesee, Jr.
Director
