<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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ........... TO ............
COMMISSION FILE NUMBER 1-8997
RAYONIER TIMBERLANDS, L.P.
A Delaware Limited Partnership
I.R.S. Employer Identification Number 06-1148227
1177 Summer Street, Stamford, Connecticut 06905-5529
(Principal Executive Office)
Telephone Number: (203) 348-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES /X/ NO / /
<PAGE> 2
RAYONIER TIMBERLANDS, L.P.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Income for the Three Months and
Nine Months Ended September 30, 1995 and 1994 1
Balance Sheets as of September 30, 1995 and
December 31, 1994 2
Statements of Cash Flows for the Nine Months Ended
September 30, 1995 and 1994 3
Notes to Financial Statements 4 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 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. Certain
reclassifications have been made to the prior year's financial statements to
conform to current year presentation. For a full description of accounting
policies, see Notes to Financial Statements in the 1994 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 Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
SALES
Timber sales
Unaffiliated parties $ 18,430 $ 34,381 $ 85,479 $ 112,838
Rayonier 6,284 3,999 22,101 12,252
--------- --------- --------- ---------
24,714 38,380 107,580 125,090
Timberland sales 1,315 185 3,869 693
--------- --------- --------- ---------
26,029 38,565 111,449 125,783
--------- --------- --------- ---------
COSTS AND EXPENSES
Cost of timber sold
Unaffiliated parties 4,165 5,742 13,885 16,521
Rayonier 1,417 647 3,718 1,724
--------- --------- --------- ---------
5,582 6,389 17,603 18,245
Cost of timberland sold 368 64 1,048 176
Forest management, overhead and general
and administrative expenses 3,179 2,911 8,965 8,574
Commission expense paid to affiliate -- -- -- 86
--------- --------- --------- ---------
9,129 9,364 27,616 27,081
--------- --------- --------- ---------
OTHER OPERATING INCOME 1,178 1,278 2,143 2,271
--------- --------- --------- ---------
OPERATING INCOME 18,078 30,479 85,976 100,973
--------- --------- --------- ---------
OTHER INCOME AND DEDUCTIONS
Primary Account interest income from Rayonier 1,043 607 3,496 2,496
Secondary Account interest expense to Rayonier (3,318) (2,790) (9,687) (8,194)
Minority interest of General Partners in RTOC (158) (283) (798) (953)
--------- --------- --------- ---------
(2,433) (2,466) (6,989) (6,651)
--------- --------- --------- ---------
PARTNERSHIP INCOME $ 15,645 $ 28,013 $ 78,987 $ 94,322
========= ========= ========= =========
INCOME PER PUBLICLY TRADED CLASS A UNIT* $ 0.88 $ 1.48 $ 4.16 $ 4.91
========= ========= ========= =========
INCOME PER RAYONIER OWNED CLASS A UNIT* $ 0.88 $ 1.48 $ 4.16 $ 4.91
========= ========= ========= =========
</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,
1995 1994
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 189 $ 150
Receivables, net 9,346 9,942
Inventories 401 322
Prepaid logging roads 3,813 3,919
Primary Account short-term investment notes of Rayonier 31,600 42,700
Trade and intercompany receivables from Rayonier and affiliates 4,240 4,211
-------- --------
Total current assets 49,589 61,244
PRIMARY ACCOUNT LONG-TERM INVESTMENT NOTES OF RAYONIER 5,000 5,000
FIXED ASSETS, NET 896 914
TIMBER, TIMBERLANDS AND LOGGING ROADS,
LESS DEPLETION AND AMORTIZATION 274,362 270,656
-------- --------
$329,847 $337,814
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Advance deposits $ 7,859 $ 5,061
Accounts payable 1,338 1,674
Accrued liabilities
Taxes 3,038 1,527
All other 671 553
Current timber obligations 159 148
Advances from Rayonier 102 66
-------- --------
Total current liabilities 13,167 9,029
SECONDARY ACCOUNT LONG-TERM NOTES
PAYABLE TO RAYONIER 159,650 143,800
LONG-TERM TIMBER OBLIGATIONS 508 645
MINORITY INTEREST OF GENERAL PARTNERS IN RTOC 5,023 5,302
PARTNERS' CAPITAL
General Partners 4,977 5,253
Limited Partners (20,000,000 Class A Depositary
Units and 20,000,000 Class B Depositary Units
issued and outstanding) 146,522 173,785
-------- --------
$329,847 $337,814
======== ========
</TABLE>
2
<PAGE> 5
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
-------------------
1995 1994
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Partnership income $ 78,987 $ 94,322
Non-cash items included in income
Depletion, depreciation and amortization 5,625 6,141
Minority interest of General Partners in RTOC 798 953
Decrease (increase) in receivables 596 (12,479)
Decrease in prepaid logging roads 106 343
Increase in advance deposits 2,798 1,611
Increase in accounts payable and accrued liabilities 1,293 293
Other changes (72) (239)
--------- ---------
Cash provided by operating activities 90,131 90,945
--------- ---------
INVESTING ACTIVITIES
Capital expenditures (10,250) (9,551)
Sales and retirements of fixed assets, timber and timberlands 937 161
Increase in Primary Account investment
notes of Rayonier (100,600) (9,900)
Settlement of Primary Account investment
notes of Rayonier 111,700 80,600
Decrease in long-term receivables -- 903
--------- ---------
Cash provided by investing activities 1,787 62,213
--------- ---------
FINANCING ACTIVITIES
Decrease in timber obligations (126) (116)
Increase in Secondary Account long-term notes
payable to Rayonier 15,850 16,000
Partnership distributions (106,526) (166,319)
Distributions to General Partners of RTOC (1,077) (1,681)
--------- ---------
Cash used for financing activities (91,879) (152,116)
--------- ---------
CASH
Net increase in cash 39 1,042
Balance at beginning of year 150 16
--------- ---------
Balance at end of period $ 189 $ 1,058
========= =========
Supplemental disclosures of cash flow information
Cash received for interest - Primary Account $ 3,496 $ 2,496
========= =========
Cash paid for interest - Secondary Account $ 9,701 $ 8,214
========= =========
</TABLE>
3
<PAGE> 6
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
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.
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 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 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 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 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 that 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 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)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
PARTNERS' CAPITAL
The activity in the Partners' Capital accounts of RTLP for the nine months ended
September 30, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
Limited Partners General Partners Total
---------------- ---------------- -----
<S> <C> <C> <C>
Balance, January 1, 1995 $ 173,785 $ 5,253 $ 179,038
Partnership income 78,197 790 78,987
Partnership distributions (105,460) (1,066) (106,526)
--------- --------- ---------
Balance, September 30, 1995 $ 146,522 $ 4,977 $ 151,499
========= ========= =========
Balance, January 1, 1994 $ 243,844 $ 5,962 $ 249,806
Partnership income 93,379 943 94,322
Partnership distributions (164,655) (1,664) (166,319)
--------- --------- ---------
Balance, September 30, 1994 $ 172,568 $ 5,241 $ 177,809
========= ========= =========
</TABLE>
Partnership distributions 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 expense
of $86 to adjust its final accrual for commissions on sales made prior to the
legislation's effective date.
In 1994, RTLP distributions included a special distribution of $80.0 million
($4.00 per Unit) paid on March 31,1994. In addition to the RTLP distributions,
RTOC distributed $1,077 and $1,681 to its General Partners during the first nine
months of 1995 and 1994, respectively.
5
<PAGE> 8
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
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,
1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- ---------------------------------
Primary Secondary Primary Secondary
Account Account Account Account
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Timber and timberland sales $ 107,580 $ 3,869 $ 125,090 $ 693
Interest and other income, net 5,219 (9,267) 4,235 (7,662)
Costs and expenses (24,002) (3,614) (24,441) (2,554)
Interest of General Partners in RTOC (888) 90 (1,049) 95
------------ ------------ ------------ ------------
Partnership income before commission
expense 87,909 (8,922) 103,835 (9,428)
Commission expense - net of 1%
General Partner interest -- -- (85) --
------------ ------------ ------------ ------------
PARTNERSHIP INCOME $ 87,909 $ (8,922) $ 103,750 $ (9,428)
============ ============ ============ ============
<CAPTION>
Publicly Rayonier Publicly Rayonier
Traded Owned Traded Owned
A Units A Units A Units A Units
-------- -------- -------- --------
Income for Class A Units before
commission expense
95% of Primary Account $ 21,129 $ 62,385 $ 24,957 $ 73,686
4% of Secondary Account (90) (267) (95) (282)
------------ ------------ ------------ ------------
21,039 62,118 24,862 73,404
Commission expense -- -- -- (81)
------------ ------------ ------------ ------------
Total income for Class A Units $ 21,039 $ 62,118 $ 24,862 $ 73,323
============ ============ ============ ============
Units outstanding 5,060,000 14,940,000 5,060,000 14,940,000
============ ============ ============ ============
INCOME PER CLASS A UNIT $ 4.16 $ 4.16 $ 4.91 $ 4.91
============ ============ ============ ============
</TABLE>
6
<PAGE> 9
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER UNIT INFORMATION)
3. OPERATING CASH FLOW ALLOCABLE TO CLASS A UNITS
Operating cash flow allocable to Class A Units is calculated in accordance with
the Partnership agreement, should not be considered as contradictory to
information provided in the Statements of Cash Flows and is not intended as an
alternative to income per Class A Unit as an indication of performance.
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, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------------- --------------------------------
Primary Secondary Primary Secondary
Account Account Account Account
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Timber and timberland sales $ 107,580 $ 3,869 $ 125,090 $ 693
Interest and other income, net 5,219 (9,267) 4,235 (7,662)
Costs and expenses - other than non-cash
items, commissions and the General
Partners' interest in RTOC (18,533) (2,543) (18,440) (2,274)
Capital expenditures (1,135) (9,115) (1,815) (7,736)
General Partners' interest in RTOC (931) 171 (1,091) 170
------------ ------------ ------------ ------------
Operating cash flow before
commission expense 92,200 (16,885) 107,979 (16,809)
Commission expense - net of 1% General
Partner interest -- -- (85) --
------------ ------------ ------------ ------------
OPERATING CASH FLOW $ 92,200 $ (16,885) $ 107,894 $ (16,809)
============ ============ ============ ============
<CAPTION>
Publicly Rayonier Publicly Rayonier
Traded Owned Traded Owned
A Units A Units A Units A Units
------------ ------------ ------------ ------------
Cash allocable to Class A Units before
commission expense
95% of Primary Account $ 22,160 $ 65,430 $ 25,953 $ 76,627
4% of Secondary Account (171) (504) (170) (502)
------------ ------------ ------------ ------------
21,989 64,926 25,783 76,125
Commission expense -- -- -- (81)
------------ ------------ ------------ ------------
OPERATING CASH FLOW ALLOCABLE TO
CLASS A UNITS $ 21,989 $ 64,926 $ 25,783 $ 76,044
============ ============ ============ ============
Units outstanding 5,060,000 14,940,000 5,060,000 14,940,000
============ ============ ============ ============
Primary Account cash flow per unit $ 4.38 $ 4.38 $ 5.13 $ 5.12
Secondary Account cash flow per unit (.03) (.03) (.03) (.03)
------------ ------------ ------------ ------------
OPERATING CASH FLOW PER CLASS A UNIT $ 4.35 $ 4.35 $ 5.10 $ 5.09
============ ============ ============ ============
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Most of the timber harvested from Partnership lands in the Northwest is resold
by the Partnership's customers into log export markets, primarily in Japan,
Korea and China. The Partnership's contracts in this region generally provide
for payment of a fixed price per unit of volume, by species, with harvesting
required to be completed within contract periods of up to 24 months. In the
Southeast, pulpwood timber is sold by the Partnership's customers for the
production of pulp and paper with sawlog timber sold to lumber and plywood
manufacturers. The Partnership's contracts in this region generally provide for
payment of a fixed price per unit of weight, with harvesting required to be
completed within contract periods of up to 18 months.
The following tables summarize the sales, operating income, partnership income,
and selected operating statistics of the Partnership, for the periods indicated,
by United States geographic region (thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
TIMBER SALES
Northwest $ 14,670 $ 21,913 $ 64,069 $ 85,901
Southeast 10,044 16,467 43,511 39,189
--------- --------- --------- ---------
24,714 38,380 107,580 125,090
--------- --------- --------- ---------
TIMBERLAND SALES
Northwest -- -- -- 291
Southeast 1,315 185 3,869 402
--------- --------- --------- ---------
1,315 185 3,869 693
--------- --------- --------- ---------
TOTAL SALES $ 26,029 $ 38,565 $ 111,449 $ 125,783
========= ========= ========= =========
OPERATING INCOME
Northwest $ 9,382 $ 17,196 $ 49,185 $ 71,335
Southeast 9,154 13,746 38,173 31,062
Corporate and other (458) (463) (1,382) (1,424)
--------- --------- --------- ---------
$ 18,078 $ 30,479 $ 85,976 $ 100,973
========= ========= ========= =========
PARTNERSHIP INCOME $ 15,645 $ 28,013 $ 78,987 $ 94,322
========= ========= ========= =========
SELECTED OPERATING STATISTICS
Northwest harvest volumes
Stumpage (thousands of MBF) 10.6 26.0 79.0 104.8
Delivered logs (thousands of MBF) 15.8 13.1 35.9 38.4
--------- --------- --------- ---------
26.4 39.1 114.9 143.2
========= ========= ========= =========
Southeast harvest volumes
Pine (thousands of tons) 303.4 616.9 1,304.5 1,467.5
Hardwoods (thousands of tons) 72.5 74.6 163.8 125.2
--------- --------- --------- ---------
375.9 691.5 1,468.3 1,592.7
========= ========= ========= =========
</TABLE>
Sales for the nine months ended September 30, 1995 were $111.4 million, which
was $14.3 million, or 11 percent, lower than the first nine months of 1994.
Timber sales were $107.6 million, down $17.5 million, or 14 percent, from the
comparable 1994 period. Timberland sales were $3.9 million, up $3.2 million from
1994.
Partnership income for the first nine months was $79.0 million or $4.16 per
Class A Unit, which was $15.3 million, or 75 cents per Class A Unit, lower than
1994 results. Operating cash flow allocable to each Class A Unit was $4.35, down
75 cents per Class A Unit.
In the Northwest region, 1995 volume and prices were lower than the prior year.
Continued weakness in export log markets has resulted in declining contract
prices and has caused customers to delay harvesting on existing contracts. For
the nine month period
8
<PAGE> 11
ended September 30, 1995 combined stumpage and delivered log volume and prices
declined approximately 20 percent and 6 percent, respectively. As a result,
sales for the Northwest region declined $22.1 million, or 26 percent to $64.1
million while operating income for the region decreased $22.2 million, or 31
percent, to $49.2 million.
Sales in the Southeast region for the first nine months of 1995 increased $7.8
million, or 20 percent, to $47.4 million and operating income increased $7.1
million, or 23 percent, to $38.2 million. Increased demand from the pulp and
paper industry has resulted in improved stumpage prices in the Southeast, with
pine prices rising 23 percent from 1994. Operating results in 1995 were also
favorably impacted by increased timberland sales of $3.5 million. However, pine
harvest volume declined approximately 11 percent as customers delayed harvesting
Partnership timber due to seasonal weather conditions.
Operating costs and expenses for the first nine months of 1995 were $27.6
million, up $0.5 million from 1994. The increase was primarily due to higher
costs associated with the rise in Southeast timberland sales and additional
logging costs in the Northwest region resulting from increased contract logging
activities. The increase in costs and expenses was partially offset by lower
depletion costs resulting from reduced harvest volumes in both regions.
Interest income, earned mainly from the Primary Account's investment notes of
Rayonier, rose $1.0 million to $3.5 million in 1995 due to higher interest rates
partially offset by a lower average balance of investment notes of Rayonier.
Interest expense, on increased loans and advances to the Secondary Account by
Rayonier, rose $1.5 million to $9.7 million.
Third quarter 1995 Partnership income of $15.6 million, or 88 cents per Class A
Unit, was $12.4 million, or 60 cents per Class A Unit, below the 1994 third
quarter. Operating cash flow allocable to each Class A Unit was 93 cents, down
64 cents per Class A Unit from last year. Sales for the quarter were $26.0
million, $12.5 million lower than last year's third quarter.
In the Northwest region, third quarter harvest volume was approximately 32
percent lower than the prior year third quarter as customers delayed harvesting
timber under contract due to weak export log markets. Stumpage prices were
approximately 13 percent lower than the prior year third quarter, while overall
pricing, including the sale of delivered logs was approximately 1 percent lower
than the prior year. As a result, third quarter sales fell $7.2 million to $14.7
million and operating income fell $7.8 million to $9.4 million.
In the Southeast region, third quarter sales decreased $5.3 million to $11.4
million and operating income decreased $4.6 million to $9.2 million reflecting
lower harvest volume partially offset by higher prices. Dry weather in the
Southeast led to improved logging conditions increasing the overall timber
supply in the region. As a result, customers delayed harvesting on typically
drier, higher-priced Partnership timber tracts.
FUTURE OPERATIONS
The harvest level for the first nine months of 1995 in the Northwest and in the
Southeast represented approximately 65 percent and 74 percent, respectively, of
the current projection of their 1995 harvests. As of September 30, 1994, the
harvest levels in the Northwest and in the Southeast were 74 percent and 78
percent, respectively, of the actual full year harvests.
Contract terms allow customers to harvest their commitments over various time
periods, and therefore, not all volume currently under contract is expected to
be fully cut within this fiscal year. As of September 30, 1995, volume
representing approximately 116 percent of the projected 1995 harvest of stumpage
and pine was cut or committed under contract. Prices on uncut volume under
contract are approximately 2 percent lower than those realized during the first
nine months of 1995 in both the Northwest and Southeast regions. As of September
30, 1994, 111 percent of the final 1994 harvest was cut or committed.
At September 30, 1995, Rayonier held contracts representing approximately 2
percent and 10 percent of the uncut volume under contract in the Northwest and
Southeast regions, respectively. In addition, three customers under common
ownership held contracts representing approximately 35 percent of the uncut
volume under contract in the Northwest. Two additional customers held contracts
representing approximately 15 percent and 10 percent, respectively, of the uncut
Northwest volume under contract. These five customers are not affiliated with
the Partnership.
LIQUIDITY AND CASH FLOW
As of September 30, 1995, the Partnership was due trade and intercompany
receivables from Rayonier and affiliates of $4.2 million. In addition, the
Primary Account of the Partnership held $31.6 million of short-term investment
notes of Rayonier and an additional $5.0 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.
9
<PAGE> 12
The Secondary Account of the Partnership had total outstanding debt of $160.4
million at September 30, 1995 including long-term notes payable to Rayonier of
$159.7 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, 1995 and 1994 were $10.3 million and $9.6 million,
respectively. Funding of future capital requirements is expected to continue
from Rayonier.
On September 30, 1995 and 1994, the Partnership made quarterly distributions of
$31.6 million ($1.58 per Unit) and $26.0 million ($1.30 per Unit), respectively,
to all outstanding Class A unitholders. Quarterly distributions of $1.7 million
and $1.4 million also were made to Class B unitholders and to the General
Partners in the third quarter of 1995 and 1994, respectively.
On October 20, 1995 the Board of Directors of Rayonier Forest Resources Company
announced a fourth quarter distribution of $1.58 per Class A Unit. The
distribution will be paid on December 29, 1995 to unitholders of record on
November 30, 1995. When the Board announced the first quarter 1995 distribution
of $1.90, it indicated it expected that subsequent quarters' distributions in
1995 would be less. Distributions are intended to approximate actual Partnership
results each year by keeping the distribution relatively constant in the second,
third, and fourth quarters and by making an adjustment in the first quarter of
the following year to bring the cumulative distribution in line with Partnership
results. The Board indicated that it would continue to maintain a minimum of
cash in working capital to be distributed following the end of the Initial Term.
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. DISTRIBUTIONS TO UNITHOLDERS WILL THEN BE SUBSTANTIALLY LIMITED FOR
SEVERAL YEARS AS A RESULT OF THE REPAYMENT OF SECONDARY ACCOUNT DEBT THAT WILL
MATURE ON JANUARY 1, 2001. AS A RESULT, IT IS EXPECTED THAT THE MARKET PRICE OF
CLASS A UNITS SHOULD 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 13, 1995
11
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION LOCATION
- ----------- ----------- --------
<S> <C> <C>
2 Plan of acquisition, reorganization, arrangement, None
liquidation, or succession
3(a) Partnership Agreement of the Partnership No amendments
3(b) Forms of Class A Certificate of Limited Partnership No amendments
and Class B Certificate of Limited Partnership
of the Partnership
3(c) Partnership Agreement of Operating Partnership No amendments
3(d) Forms of Class A Certificate of Limited Partnership No amendments
and Class B Certificate of Limited Partnership
of the Operating Partnership
4 Instruments defining the rights of security holders, None
including indentures
10 Material contracts None
11 Statement re computation of per share earnings Not applicable
15 Letter re unaudited interim financial information None
18 Letter re change in accounting principles Not applicable
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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 189
<SECURITIES> 0
<RECEIVABLES> 9,346
<ALLOWANCES> 0
<INVENTORY> 401
<CURRENT-ASSETS> 49,589
<PP&E> 1,801
<DEPRECIATION> 905
<TOTAL-ASSETS> 329,847
<CURRENT-LIABILITIES> 13,167
<BONDS> 159,650
<COMMON> 0
0
0
<OTHER-SE> 151,499
<TOTAL-LIABILITY-AND-EQUITY> 329,847
<SALES> 111,449
<TOTAL-REVENUES> 111,449
<CGS> 18,651
<TOTAL-COSTS> 18,651
<OTHER-EXPENSES> 7,620
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,191
<INCOME-PRETAX> 78,987
<INCOME-TAX> 0
<INCOME-CONTINUING> 78,987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 78,987
<EPS-PRIMARY> 4.16
<EPS-DILUTED> 4.16
</TABLE>
