<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ........... TO ............
Commission File Number 1-8997
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
----------------------
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 ( )
<PAGE> 2
RAYONIER TIMBERLANDS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income for the Three Months Ended and the
Nine Months Ended September 30, 1994 and 1993 1
Balance Sheets as of September 30, 1994 and
December 31, 1993 2
Statements of Cash Flows for the Nine Months Ended
September 30, 1994 and 1993 3
Notes to Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - Nine Months Ended September 30, 1994
and 1993 8 - 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signature 11
Exhibit Index 12
</TABLE>
i
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements reflect, in the opinion of
Rayonier Forest Resources Company, the managing general partner of Rayonier
Timberlands, L.P., all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the results of operations,
the financial position, and the cash flows for the periods presented. For a
full description of accounting policies, see notes to financial statements in
the 1993 annual report on Form 10-K.
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT INFORMATION)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SALES
Timber sales
Unaffiliated parties $34,381 $13,120 $112,838 $62,293
Rayonier 3,999 1,928 12,252 13,823
------- ------- -------- ------
38,380 15,048 125,090 76,116
Timberland sales 185 198 693 711
------- ------- -------- ------
38,565 15,246 125,783 76,827
------- ------- -------- ------
COSTS AND EXPENSES
Cost of timber sold
Unaffiliated parties 5,742 2,902 16,521 9,794
Rayonier 647 490 1,724 2,171
------- ------- -------- ------
6,389 3,392 18,245 11,965
Cost of timberland sold 64 46 176 138
Forest management, overhead and general
and administrative expenses 2,911 3,096 8,574 8,428
Commission expense paid to affiliate - 349 86 781
------- ------- -------- ------
9,364 6,883 27,081 21,312
------- ------- -------- ------
OTHER OPERATING INCOME 1,278 1,324 2,271 1,994
------- ------- --------- -------
OPERATING INCOME 30,479 9,687 100,973 57,509
------- ------- -------- ------
OTHER INCOME AND DEDUCTIONS
Primary Account interest income from Rayonier 607 1,274 2,496 3,930
Secondary Account interest expense to Rayonier (2,790) (2,415) (8,194) (7,099)
Minority interest of General Partners in RTOC (283) (85) (953) (543)
------- ------- -------- ------
(2,466) (1,226) (6,651) (3,712)
------- ------- -------- ------
PARTNERSHIP INCOME $28,013 $ 8,461 $ 94,322 $53,797
====== ======= ======= ======
Income Per Publicly Traded Class A Unit* $ 1.48 $ 0.55 $ 4.91 $ 2.97
====== ======= ======= ======
Income Per Rayonier Owned Class A Unit* $ 1.48 $ 0.53 $ 4.91 $ 2.92
====== ======= ======= ======
</TABLE>
* Refer to calculations on page 6.
1
<PAGE> 4
RAYONIER TIMBERLANDS, L.P.
BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,058 $ 16
Receivables - net 17,277 4,798
Inventories 611 362
Prepaid logging roads 3,716 3,948
Primary Account short-term investment notes of Rayonier 32,500 106,200
Trade and intercompany receivables from Rayonier and affiliates 4,127 4,146
------- -------
Total current assets 59,289 119,470
LONG-TERM RECEIVABLES 220 1,123
PRIMARY ACCOUNT LONG-TERM INVESTMENT NOTES OF RAYONIER 3,000 -
OTHER ASSETS 1 112
FIXED ASSETS - NET 967 983
TIMBER, TIMBERLANDS AND LOGGING ROADS,
LESS DEPLETION AND AMORTIZATION 269,034 265,769
------- -------
$332,511 $387,457
======= =======
<CAPTION>
LIABILITIES AND PARTNERS' CAPITAL
<S> <C> <C>
CURRENT LIABILITIES
Advance deposits $ 6,893 $ 5,282
Accounts payable 1,049 2,257
Accrued liabilities
Taxes 3,041 1,580
All other 651 611
Current timber obligations 148 138
Advances from Rayonier 64 73
------- -------
Total current liabilities 11,846 9,941
SECONDARY ACCOUNT LONG-TERM NOTES
PAYABLE TO RAYONIER 136,900 120,900
LONG-TERM TIMBER OBLIGATIONS 667 793
MINORITY INTEREST OF GENERAL PARTNERS IN RTOC 5,289 6,017
PARTNERS' CAPITAL
General Partners 5,241 5,962
Limited Partners (20,000,000 Class A Depositary
Units and 20,000,000 Class B Depositary Units
issued and outstanding) 172,568 243,844
------- -------
$332,511 $387,457
======= =======
</TABLE>
2
<PAGE> 5
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
----------------------------------------
1994 1993
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Partnership income $ 94,322 $53,797
Non-cash items included in income
Depletion, depreciation and amortization 6,141 5,023
Minority interest of General Partners in RTOC 953 543
Increase in receivables (12,479) (126)
Decrease (increase) in prepaid logging roads 232 (51)
Increase in advance deposits 1,611 1,933
Increase in accounts payable and accrued liabilities 293 616
Other changes in working capital (239) (253)
-------- -------
Cash provided by operating activities 90,834 61,482
======== =======
INVESTING ACTIVITIES
Capital expenditures less sales and retirements
of $161 and $91 in 1994 and 1993 (9,390) (9,462)
Increase in Primary Account investment
notes of Rayonier (9,900) (75,000)
Settlement of Primary Account investment
notes of Rayonier 80,600 80,000
Decrease in long-term receivables 903 -
Decrease in other assets 111 14
-------- -------
Cash provided by (used for) investing activities 62,324 (4,448)
======== =======
FINANCING ACTIVITIES
Decrease in timber obligations (116) (323)
Increase in Secondary Account long-term notes
payable to Rayonier 16,000 15,750
Partnership distributions (166,319) (72,632)
Distributions to General Partners of RTOC - net (1,681) (726)
Recontributions by Rayonier and
General Partners of RTLP - 655
-------- -------
Cash used for financing activities (152,116) (57,276)
======== =======
CASH
Net increase (decrease) in cash 1,042 (242)
Balance at beginning of year 16 263
-------- -------
Balance at end of period $ 1,058 $ 21
======== =======
Supplemental disclosures of cash flow information
Cash received for interest - Primary Account $ 2,496 $ 3,932
======== =======
</TABLE>
3
<PAGE> 6
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
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.
The officers, directors and employees of Rayonier and RFR perform all
management and business activities for RTLP and RTOC. RTLP and RTOC have no
officers, directors or employees.
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 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 PARTICIPATE IN 4 PERCENT OF THE REVENUES AND
EXPENSES OF RTLP, AND 4 PERCENT OF ITS CASH FLOW 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 are invested with Rayonier in accordance with the
Partnership Agreement and are 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 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 1, 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 or the Primary
Account Long-Term Investment Notes of Rayonier to repay the Secondary Account
Long-Term Notes Payable to Rayonier.
4
<PAGE> 7
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
PARTNERS' CAPITAL
An analysis of the activity in the Partners' Capital accounts of RTLP for the
nine months ended September 30, 1994 and 1993 follows (thousands of dollars):
<TABLE>
<CAPTION>
Limited Partners General Partners Total
---------------- ---------------- ---------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ 243,844 $ 5,962 $ 249,806
Partnership Income 93,379 943 94,322
Partnership Distributions - net (164,655) (1,664) (166,319)
-------- ------ --------
Balance, September 30, 1994 $ 172,568 $ 5,241 $ 177,809
======== ====== ========
Balance, January 1, 1993 $ 257,366 $ 6,097 $ 263,463
Partnership Income 53,258 539 53,797
Partnership Distributions - net (71,258) (719) (71,977)
------- ------ --------
Balance, September 30, 1993 $ 239,366 $ 5,917 $ 245,283
======== ====== ========
</TABLE>
Partnership Distributions - net represent RTLP distributions less
recontributions by Rayonier and RFR. The amount recontributed by Rayonier and
RFR is equal to the foreign sales commission expense paid by the Partnership
during the period, which is fully allocated to Rayonier and the General
Partners. Effective August 10, 1993 legislation was enacted eliminating tax
benefits related to log exports for foreign sales corporations. Accordingly,
the Partnership will not incur foreign sales commission expense for sales made
after August 10, 1993. However, during the second quarter of 1994, the
Partnership recorded commission expenses of $0.1 million to adjust its final
accrual for commissions on sales made prior to the legislation's effective
date.
In addition to the RTLP distributions, RTOC distributed $1.7 million and $0.7
million to its General Partners during the first nine months of 1994 and 1993,
respectively. Recontributions were made to RTOC by the General Partners for
their interest in the commission expense paid.
5
<PAGE> 8
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
2. 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 nine months ended September 30,
1994 and 1993 (thousands of dollars, except per unit information):
<TABLE>
<CAPTION>
1994 1993
----------------------------- ------------------------------
Primary Secondary Primary Secondary
Account Account Account Account
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Timber and Timberland Sales $125,090 $ 693 $76,116 $ 711
Interest and Other Income - net 4,235 (7,662) 5,639 (6,814)
Costs and Expenses (24,441) (2,554) (18,307) (2,224)
Interest of General Partners in RTOC (1,049) 95 (634) 83
------- ------ ------ ------
Partnership Income before Commission Expense 103,835 (9,428) 62,814 (8,244)
Commission Expense - net of 1%
General Partner interest (85) - (773) -
------- ------ ------ ------
PARTNERSHIP INCOME $103,750 $(9,428) $62,041 $(8,244)
======= ====== ====== ======
<CAPTION>
Publicly Rayonier Publicly Rayonier
Traded Owned Traded Owned
A Units A Units A Units A Units
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
Income for Class A Units before
Commission Expense
95% of Primary Account $24,957 $73,686 $15,097 $44,576
4% of Secondary Account (95) (282) (83) (247)
------ ------ ------ ------
24,862 73,404 15,014 44,329
Commission Expense - (81) - (734)
------ ------ ------ ------
Total Income for Class A Units $24,862 $73,323 $15,014 $43,595
====== ====== ====== ======
Units Outstanding 5,060,000 14,940,000 5,060,000 14,940,000
========= ========== ========= ==========
INCOME PER CLASS A UNIT $ 4.91 $ 4.91 $ 2.97 $ 2.92
====== ====== ====== ======
</TABLE>
6
<PAGE> 9
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. 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 nine
months ended September 30, 1994 and 1993 (thousands of dollars, except per unit
information):
<TABLE>
<CAPTION>
1994 1993
------------------------------ ------------------------------
Primary Secondary Primary Secondary
Account Account Account Account
--------- ----------- --------- -----------
<S> <C> <C> <C>
Timber and Timberland Sales $125,090 $ 693 $ 76,116 $ 711
Interest and Other Income - net 4,235 (7,662) 5,639 (6,814)
Costs and Expenses - other than non-cash
items, commissions and the General
Partners' interest in RTOC (18,440) (2,274) (13,427) (1,993)
Capital Expenditures (1,815) (7,736) (1,533) (8,020)
General Partners' interest in RTOC (1,091) 170 (668) 161
------- ------- ------- -------
Operating Cash Flow before
Commission Expense 107,979 (16,809) 66,127 (15,955)
Commission Expense - net of 1% General
Partner interest (85) - (773) -
------- ------- ------- -------
OPERATING CASH FLOW $107,894 $(16,809) $ 65,354 $(15,955)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Publicly Rayonier Publicly Rayonier
Traded Owned Traded Owned
A Units A Units A Units A Units
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Allocable to Class A Units before
Commission Expense
95% of Primary Account $ 25,953 $ 76,627 $ 15,894 $ 46,927
4% of Secondary Account (170) (502) (161) (477)
--------- ---------- --------- ----------
25,783 76,125 15,733 46,450
Commission Expense - (81) - (734)
--------- ---------- --------- ----------
OPERATING CASH FLOW ALLOCABLE TO
CLASS A UNITS $ 25,783 $ 76,044 $ 15,733 $ 45,716
======== ========== ========= ==========
Units Outstanding 5,060,000 14,940,000 5,060,000 14,940,000
========= ========== ========= ==========
Primary Account Cash Flow Per Unit $ 5.13 $ 5.12 $ 3.14 $3.09
Secondary Account Cash Flow Per Unit (.03) (.03) (.03) (.03)
--------- ---------- --------- ----------
OPERATING CASH FLOW PER CLASS A UNIT $ 5.10 $ 5.09 $ 3.11 $ 3.06
========= ========== ========= ==========
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993
RESULTS OF OPERATIONS
Results for the first nine months of 1994 improved over the comparable 1993
period reflecting increased harvest volumes and higher stumpage prices.
The following table summarizes the sales, operating income, partnership income
and selected operating statistics of the Partnership, for the periods
indicated, by United States geographic region (in thousands of dollars):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
TIMBER SALES
Northwest $21,913 $ 9,102 $ 85,901 $ 44,263
Southeast 16,467 5,946 39,189 31,853
------ ------ ------- -------
38,380 15,048 125,090 76,116
------ ------ ------- -------
TIMBERLAND SALES
Northwest - 27 291 109
Southeast 185 171 402 602
------ ------ ------- -------
185 198 693 711
------ ------ ------- -------
TOTAL SALES $38,565 $15,246 $125,783 $ 76,827
====== ====== ======= =======
OPERATING INCOME
Northwest $17,196 $ 5,865 $ 71,335 $35,072
Southeast 13,746 4,636 31,062 24,612
Corporate and Other (463) (814) (1,424) (2,175)
------ ------ ------- -------
$30,479 $ 9,687 $100,973 $ 57,509
====== ====== ======= =======
PARTNERSHIP INCOME $28,013 $ 8,461 $ 94,322 $ 53,797
====== ====== ======= =======
SELECTED OPERATING STATISTICS
Northwest Harvest Volumes
Stumpage (millions of board feet) 26.0 11.3 104.8 79.4
Delivered Logs (millions of board feet) 13.1 8.0 38.4 21.3
------ ------ ------- -------
39.1 19.3 143.2 100.7
====== ====== ======= =======
Southeast Harvest Volumes
Pine (thousands of tons) 616.9 229.1 1,467.5 1,227.3
Hardwoods (thousands of tons) 74.6 66.7 125.2 109.4
------ ------ ------- -------
691.5 295.8 1,592.7 1,336.7
====== ====== ======= =======
</TABLE>
Sales for the nine months ended September 30, 1994 were $125.8 million, up
$49.0 million, or 64 percent, from the first nine months of 1993. Timber sales
were $125.1 million, up $49.0 million, or 64 percent, from the comparable 1993
period primarily as a result of increased harvest volumes in both the Northwest
and Southeast regions and higher stumpage prices in the Northwest . Timberland
sales were $0.7 million in both 1994 and 1993.
Partnership income for the first nine months was $94.3 million or $4.91 per
(publicly traded) Class A Unit, up $40.5 million, or $1.94 per Class A Unit,
from 1993 results. Operating cash flow allocable to each Class A Unit rose
$1.99 to $5.10 for the nine months ended September 30, 1994.
Most of the timber from Partnership lands in the Northwest is resold by the
Partnership's customers into log export markets, primarily in Japan, Korea and
China. Both volume and prices were significantly greater than the prior year.
Unfavorable market conditions during the second half of 1993 caused many
customers to defer harvesting until 1994. As a result, the Northwest harvest
level was
8
<PAGE> 11
unusually low in 1993 and unusually high in 1994. For the nine months ended
September 30, 1994, the combined stumpage and delivered log volume was 42
percent greater than that of the prior year. Stumpage prices for the first nine
months of 1994 rose 49 percent from 1993 as stumpage prices were favorably
impacted by the carryover of higher priced 1993 contracts. Delivered log
prices for the first nine months of 1994 were relatively unchanged reflecting
an increase in the quality of the log mix sold, offset by declining prices. As
a result of increased harvest levels and higher stumpage prices, sales for the
Northwest region increased $41.8 million, or 94 percent, to $86.2 million while
operating income for the region increased $36.3 million, or 103 percent, to
$71.3 million.
In the Southeast, pulpwood timber harvested from Partnership lands is sold by
customers to mills for the production of pulp and paper, and sawlog timber is
sold to lumber and plywood manufacturers. Sales for the first nine months of
1994 increased $7.1 million, or 22 percent, to $39.6 million and operating
income increased $6.5 million, or 26 percent, to $31.1 million. Harvest volume
increased 19 percent due to strengthening demand from the pulp and paper
industry. Southeast pine prices were relatively unchanged from last year.
Corporate and other operating income is comprised of general and administrative
expenses not specifically attributable to either the Northwest or Southeast
regions. Corporate expenses decreased $0.8 million during the first nine
months of 1994 primarily due to lower commission expenses paid to a foreign
sales corporation affiliated with the Partnership's Special General Partner,
Rayonier. Legislation, enacted effective August 10, 1993, eliminated tax
benefits related to log exports for foreign sales corporations. The
Partnership's commission expense was 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. For a full description, see
Notes to Financial Statements - Note 1 - Special Allocations in the
Partnership's 1993 annual report on Form 10-K.
Operating costs and expenses for the first nine months of 1994 were $27.1
million, up $5.8 million from 1993. The increase was primarily due to higher
depletion costs resulting from increased harvest volumes in both regions and
additional logging costs in the Northwest region resulting from increased
contract logging and commercial thinning activities.
Interest income, earned mainly from the Primary Account's investment notes of
Rayonier, decreased $1.4 million to $2.5 million in 1994 due to a lower average
balance of investment notes. Interest expense, on increased loans and advances
to the Secondary Account by Rayonier, rose $1.1 million to $8.2 million.
Third quarter 1994 sales of $38.6 million were $23.3 million higher than 1993
third quarter sales and Partnership income of $28.0 million increased $19.6
million from the prior year. Income per Class A Unit rose 93 cents to $1.48
while operating cash flow allocable to each Class A Unit increased $1.00 to
$1.57.
In the Northwest region, third quarter harvest volume was significantly greater
than the comparable period of 1993. In 1993, the third quarter harvest was
abnormally low due to a mid-year market correction resulting from high log
inventories in Pacific Rim countries. Also, compared to last year's third
quarter, stumpage harvest prices were approximately 23 percent higher. As a
result of the increased harvest volume and prices, third quarter sales rose
$12.8 million to $21.9 million and operating income rose $11.3 million to $17.2
million.
In the Southeast region, sales in the third quarter rose $10.5 million to $16.7
million and operating income rose $9.1 million to $13.7 million, reflecting
higher pine harvest volume. Harvest volume increased due to higher demand from
the pulp and paper industry and because heavy rains and flooding caused
customers to accelerate harvesting on drier Partnership lands. In addition,
pine prices rose 7 percent reflecting an increase in demand for high quality
sawlogs.
FUTURE OPERATIONS
For the first nine months of 1994, the harvest level of stumpage and delivered
logs from the Northwest and pine from the Southeast represented approximately
77 percent and 79 percent, respectively, of the current projection of the 1994
harvests whereas in the first nine months of 1993 the harvest levels of
stumpage and delivered logs in the Northwest and pine in the Southeast were 70
percent and 71 percent, respectively, of the actual full year harvests.
Contract terms allow customers to harvest their commitments over various time
periods, and therefore, volume currently under contract may not be fully cut
within this fiscal year. As of September 30, 1994, volume representing
approximately 115 percent of the projected 1994 stumpage of pine and harvest
had been cut or committed under contract whereas volume representing
approximately 110 percent of the final 1993 harvest had been cut or committed
for as of September 30, 1993.
9
<PAGE> 12
At September 30, 1994, Rayonier held contracts representing approximately 15
percent and 1 percent of the uncut volume under contract in the Northwest and
Southeast regions, respectively. In addition, three customers under common
ownership and two additional unrelated customers held contracts representing
approximately 19 percent, 24 percent and 10 percent, respectively, of the uncut
volume in the Northwest while one customer accounts for approximately 11
percent of the uncut volume under contract in the Southeast; none of these
customers are affiliated with the Partnership.
LIQUIDITY AND CASH FLOW
At September 30, 1994, the Partnership held trade and intercompany receivables
from Rayonier and affiliates of $4.1 million. In addition, the Primary Account
of the Partnership held $32.5 million of short-term investment notes of
Rayonier and an additional $3.0 million of long-term investment notes of
Rayonier resulting from the cumulative net cash flow, since inception, of the
Primary Account after distributions to unitholders. The Partnership can call
the investment notes at any time to fund Partnership working capital
requirements, capital expenditures and reserves. At the end of the first
quarter of 1994, the Partnership called, or allowed to mature, $75.0 million
of the short-term investment notes to fund a special distribution of $4.00 per
Class A Unit which was paid on March 31, 1994. As a result of this
transaction, second and third quarter interest income of the Partnership was
significantly below that of the prior year and interest income for the
remainder of 1994 is expected to be lower than the prior year.
The Secondary Account of the Partnership had total outstanding debt of $137.8
million at September 30, 1994 including long-term notes payable to Rayonier of
$136.9 million that mainly represent the obligations incurred as a result of
Secondary Account advances by Rayonier. Capital expenditures for the nine
months ended September 30, 1994 and 1993 were $9.6 million in each period.
Funding of future capital requirements is expected to continue from Rayonier.
On September 30, 1994 and 1993, the Partnership made quarterly distributions of
$26.0 million ($1.30 per Unit) and $23.0 million ($1.15 per Unit),
respectively, to all outstanding Class A unitholders. Quarterly distributions
of $1.4 million and $1.2 million were also made to Class B unitholders and to
the General Partners in the third quarter of 1994 and 1993, respectively. On
September 30, 1993, recontributions of $0.1 million were made by Rayonier and
the General Partners of RTLP relating to the commission expense paid to a
Rayonier affiliated foreign sales corporation.
On October 18, 1994 the Board of Directors of Rayonier Forest Resources Company
announced a fourth quarter distribution of $1.30 per Class A Unit. The
distribution will be paid December 30, 1994 to unitholders of record on
November 30, 1994.
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. Available cash flows will be substantially reduced by
Secondary Account debt that will have to be repaid. As a result, it is
expected that the market price of Class A Units will begin to decline
substantially sometime prior to December 31, 2000.
10
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index
(b) Rayonier Timberlands, L.P. did not file any Report on Form 8-K
during the quarter covered by this report.
SIGNATURE
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RAYONIER TIMBERLANDS, L.P.
(A Delaware Limited Partnership)
By: RAYONIER FOREST RESOURCES
COMPANY
Managing General Partner
By KENNETH P. JANETTE
------------------
Kenneth P. Janette
Vice President and Corporate Controller
(Chief Accounting Officer)
November 14, 1994
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
----------- --------------------------------------------------- --------
<S> <C> <C>
2 Plan of acquisition, reorganization, arrangement, None
liquidation or succession
4 Instruments defining the rights of security holders, None
including indentures
10 Material contracts None
11 Statement re computation of per share earnings None
15 Letter re unaudited interim financial information None
18 Letter re change in accounting principles None
19 Report furnished to security holders None
22 Published report regarding matters submitted None
to vote of security holders
23 Consents of experts and counsel None
24 Power of attorney None
27 Financial data schedule Filed herewith
99 Additional exhibits None
</TABLE>
12
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 1,058
<SECURITIES> 0
<RECEIVABLES> 17,277
<ALLOWANCES> 0
<INVENTORY> 611
<CURRENT-ASSETS> 59,289
<PP&E> 1,811
<DEPRECIATION> 844
<TOTAL-ASSETS> 332,511
<CURRENT-LIABILITIES> 11,846
<BONDS> 136,900
<COMMON> 0
0
0
<OTHER-SE> 177,809
<TOTAL-LIABILITY-AND-EQUITY> 332,511
<SALES> 125,783
<TOTAL-REVENUES> 125,783
<CGS> 18,421
<TOTAL-COSTS> 18,421
<OTHER-EXPENSES> 7,342
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,698
<INCOME-PRETAX> 94,322
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,322
<EPS-PRIMARY> 4.91
<EPS-DILUTED> 4.91
</TABLE>
