<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 MARCH 31, 1997
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 ( )
As of May 1, 1997, there were 20,000,000 Class A Depositary Units of the
Partnership outstanding, of which 14,940,000 Class A Depositary Units were owned
by Rayonier.
<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 Ended
March 31, 1997 and 1996 1
Balance Sheets as of March 31, 1997 and
December 31, 1996 2
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 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. For a full description of
accounting policies, see Notes to Financial Statements in the 1996 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 March 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
SALES
Timber sales
Unaffiliated parties $ 38,261 $ 39,882
Rayonier 3,114 5,615
-------- --------
41,375 45,497
Timberland sales 413 1,345
-------- --------
41,788 46,842
-------- --------
COSTS AND EXPENSES
Cost of timber sold
Unaffiliated parties 5,809 5,678
Rayonier 480 814
-------- --------
6,289 6,492
Cost of timberland sold 60 398
Forest management, overhead and general
and administrative expenses 2,958 2,883
-------- --------
9,307 9,773
-------- --------
OTHER OPERATING INCOME 469 344
-------- --------
OPERATING INCOME 32,950 37,413
-------- --------
OTHER INCOME AND DEDUCTIONS
Primary Account interest income from Rayonier 1,086 951
Secondary Account interest expense to Rayonier (4,012) (3,503)
Minority interest of General Partners in RTOC (300) (349)
-------- --------
(3,226) (2,901)
-------- --------
PARTNERSHIP INCOME $ 29,724 $ 34,512
======== ========
INCOME PER CLASS A UNIT* $ 1.60 $ 1.78
======== ========
</TABLE>
* Refer to calculations on page 6.
1
<PAGE> 4
RAYONIER TIMBERLANDS, L.P.
BALANCE SHEETS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 18 $ 88
Receivables, net 7,197 5,304
Inventories 435 588
Prepaid logging roads 3,602 4,291
Primary Account short-term investment notes of Rayonier 46,900 46,800
Trade and intercompany receivables from Rayonier 4,182 4,172
-------- --------
Total current assets 62,334 61,243
LONG-TERM RECEIVABLES 338 --
PRIMARY ACCOUNT LONG-TERM INVESTMENT NOTES
OF RAYONIER 5,000 5,000
FIXED ASSETS, NET 1,018 1,045
TIMBER, TIMBERLANDS AND LOGGING ROADS,
LESS DEPLETION AND AMORTIZATION 284,689 283,359
-------- --------
$353,379 $350,647
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Advance deposits $ 8,381 $ 5,965
Accounts payable 848 2,149
Accrued liabilities
Taxes 1,866 1,744
All other 575 663
Current timber obligations 162 149
Advances from Rayonier 57 98
-------- --------
Total current liabilities 11,889 10,768
SECONDARY ACCOUNT LONG-TERM NOTES
PAYABLE TO RAYONIER 204,400 196,500
LONG-TERM TIMBER OBLIGATIONS 175 337
MINORITY INTEREST OF GENERAL PARTNERS IN RTOC 4,825 4,887
PARTNERS' CAPITAL
General Partners 4,783 4,844
Limited Partners (20,000,000 Class A Depositary
Units and 20,000,000 Class B Depositary Units
issued and outstanding) 127,307 133,311
-------- --------
$353,379 $350,647
======== ========
</TABLE>
2
<PAGE> 5
RAYONIER TIMBERLANDS, L.P.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
----------------------
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Partnership income $ 29,724 $ 34,512
Non-cash items included in income
Depletion, depreciation and amortization 2,860 2,000
Minority interest of General Partners in RTOC 300 349
Increase in receivables (1,893) (12)
Decrease in prepaid logging roads 689 351
Increase in advance deposits 2,416 3,320
Decrease in accounts payable and accrued liabilities (1,267) (850)
Other changes 102 224
-------- --------
Cash provided by operating activities 32,931 39,894
-------- --------
INVESTING ACTIVITIES
Capital expenditures less sales and retirements
of $27 and $320 in 1997 and 1996 (4,163) (3,849)
Increase in Primary Account investment
notes of Rayonier (46,900) (44,500)
Settlement of Primary Account investment
notes of Rayonier 46,800 33,300
Increase in long-term receivables (338) (1,003)
-------- --------
Cash used for investing activities (4,601) (16,052)
-------- --------
FINANCING ACTIVITIES
Decrease in timber obligations (149) (137)
Increase in Secondary Account long-term notes
payable to Rayonier 7,900 7,100
Partnership distributions (35,789) (30,105)
Distributions to General Partners of RTOC (362) (304)
-------- --------
Cash used for financing activities (28,400) (23,446)
-------- --------
CASH
Net (decrease) increase in cash (70) 396
Balance, beginning of year 88 282
-------- --------
Balance, end of period $ 18 $ 678
======== ========
Supplemental disclosures of cash flow information
Cash received for interest - Primary Account $ 1,086 $ 951
======== ========
Cash paid for interest - Secondary Account $ 4,046 $ 3,550
======== ========
</TABLE>
3
<PAGE> 6
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT INFORMATION)
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 U.S.
timberlands business (the Timberlands) 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.
NATURE OF BUSINESS OPERATIONS
The Partnership is engaged in the timberlands business, which includes forestry
management, reforestation, timber thinning and the marketing and sale of
standing timber and logs from the Timberlands. The Partnership will occasionally
purchase, for short-term resale, standing timber from third parties. 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 to fund its cash distribution policy, as determined from time to time
by the Managing General Partner's Board of Directors.
The Partnership negotiates and contracts for the sale of standing timber
(stumpage) at fixed prices 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 also conducts, or contracts for third parties to conduct, harvesting
operations and sells logs harvested 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.
4
<PAGE> 7
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(THOUSANDS OF DOLLARS, EXCEPT PER UNIT INFORMATION)
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 and pre-commercial thinning, 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 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 Investment Notes of Rayonier to repay the Secondary Account
Long-Term Notes Payable to Rayonier.
PARTNERS' CAPITAL
An analysis of the activity in the Partners' Capital accounts of RTLP for the
three months ended March 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Limited Partners General Partners Total
---------------- ---------------- -----
<S> <C> <C> <C>
Balance, January 1, 1997 $ 133,311 $ 4,844 $ 138,155
Partnership income 29,427 297 29,724
Partnership distributions (35,431) (358) (35,789)
--------- ------- ---------
Balance, March 31, 1997 $ 127,307 $ 4,783 $ 132,090
========= ======= =========
Balance, January 1, 1996 $ 147,722 $ 4,989 $ 152,711
Partnership income 34,167 345 34,512
Partnership distributions (29,804) (301) (30,105)
--------- ------- ---------
Balance, March 31, 1996 $ 152,085 $ 5,033 $ 157,118
========= ======= =========
</TABLE>
In addition to the RTLP distributions, RTOC distributed $362 and $304 to its
General Partners during the first three months of 1997 and 1996, respectively.
5
<PAGE> 8
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(THOUSANDS OF DOLLARS, 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 three months ended March 31, 1997
and 1996:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
Primary Secondary Primary Secondary
Account Account Account Account
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
Timber and timberland sales $ 41,375 $ 413 $ 45,468 $ 1,374
Interest and other income, net 1,160 (3,617) 1,011 (3,219)
Costs and expenses (8,408) (899) (8,577) (1,196)
Interest of General Partners in RTOC (341) 41 (379) 30
-------- ------- -------- -------
PARTNERSHIP INCOME $ 33,786 $(4,062) $ 37,523 $(3,011)
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Total for Total for
All A Units All A Units
----------- -----------
<S> <C> <C>
Income for Class A Units
95% of Primary Account $ 32,097 $ 35,647
4% of Secondary Account (162) (120)
------------ ------------
Total income for Class A Units $ 31,935 $ 35,527
============ ============
Units outstanding 20,000,000 20,000,000
============ ============
INCOME PER CLASS A UNIT $ 1.60 $ 1.78
============ ============
</TABLE>
6
<PAGE> 9
RAYONIER TIMBERLANDS, L.P.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(THOUSANDS OF DOLLARS, 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 three
months ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------
Primary Secondary Primary Secondary
Account Account Account Account
------- --------- ------- ---------
<S> <C> <C> <C> <C>
Timber and timberland sales $ 41,375 $ 413 $ 45,468 $ 1,374
Interest and other income, net 1,160 (3,617) 1,011 (3,219)
Costs and expenses - other than non-cash
items and the General
Partners' interest in RTOC (5,624) (791) (6,633) (821)
Capital expenditures (1,039) (3,151) (565) (3,604)
General Partners' interest in RTOC (359) 71 (393) 63
-------- ------- -------- -------
OPERATING CASH FLOW $ 35,513 $(7,075) $ 38,888 $(6,207)
======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Total for Total for
All A Units All A Units
----------- -----------
<S> <C> <C>
Cash allocable to Class A Units
95% of Primary Account $ 33,737 $ 36,944
4% of Secondary Account (283) (248)
------------ ------------
OPERATING CASH FLOW ALLOCABLE TO
CLASS A UNITS $ 33,454 $ 36,696
============ ============
Units outstanding 20,000,000 20,000,000
============ ============
Primary Account cash flow per unit $ 1.69 $ 1.84
Secondary Account cash flow per unit (.02) (.01)
------------ ------------
OPERATING CASH FLOW PER CLASS A UNIT $ 1.67 $ 1.83
============ ============
</TABLE>
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
More than half 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 or weight, 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 chip 'n saw and 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 table summarizes 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
Ended March 31,
---------------
1997 1996
---- ----
<S> <C> <C>
TIMBER SALES
Northwest $ 26,326 $ 31,617
Southeast 15,049 13,880
-------- --------
41,375 45,497
-------- --------
TIMBERLAND SALES
Northwest -- --
Southeast 413 1,345
-------- --------
413 1,345
-------- --------
TOTAL SALES $ 41,788 $ 46,842
======== ========
OPERATING INCOME
Northwest $ 21,975 $ 25,868
Southeast 11,664 12,036
Corporate and other (689) (491)
-------- --------
$ 32,950 $ 37,413
======== ========
PARTNERSHIP INCOME $ 29,724 $ 34,512
======== ========
SELECTED OPERATING STATISTICS
Northwest harvest volumes
Stumpage (thousands of MBF) 49.6 45.1
Delivered logs (thousands of MBF) 9.4 15.2
-------- --------
59.0 60.3
======== ========
Southeast harvest volumes
Pine (thousands of tons) 531.3 456.6
Hardwood (thousands of tons) 29.8 56.0
-------- --------
561.1 512.6
======== ========
</TABLE>
Sales for the first quarter of 1997 of $41.8 million were $5.1 million or 11
percent lower than last year's first quarter. Timber sales were $41.4 million,
$4.1 million lower than the prior year primarily as a result of reduced prices
caused by weak export and domestic log markets. Timberland sales of $0.4 million
were down $0.9 million.
Partnership income was $29.7 million, or $1.60 per Class A Unit, which is $4.8
million, or 18 cents per Class A Unit, below the 1996 first quarter. Operating
cash flow allocable to each Class A Unit was $1.67, or 16 cents per Class A Unit
lower than 1996 results.
8
<PAGE> 11
In the Northwest region, realized prices for the first quarter declined 16
percent from prior year levels reflecting the effect of declining export and
domestic log markets 12-18 months ago when the related stumpage contracts were
signed. Also, the combined stumpage and delivered log volume was slightly below
prior year levels. As a result, first quarter sales decreased $5.3 million to
$26.3 million and operating income declined $3.9 million to $22.0 million.
In the Southeast region, first quarter sales increased $0.2 million from the
prior year to $15.5 million reflecting a 9 percent increase in harvest volume,
driven by a strong lumber market, offset by lower prices. Operating income
decreased $0.4 million to $11.7 million as pine prices declined 6 percent from
the prior year first quarter reflecting weak demand from pulp and paper
producers. Operating results in 1997 were also unfavorably impacted by reduced
timberland sales of $0.9 million and higher timber depletion costs.
Interest income, earned mainly from the Primary Account's investment notes of
Rayonier, increased slightly to $1.1 million in 1997 due to an overall higher
average balance of investment notes of Rayonier partially offset by lower
average interest rates. Interest expense rose $0.5 million to $4.0 million due
to increased loans and advances to the Secondary Account by Rayonier.
FUTURE OPERATIONS
For the first three months of 1997, the harvest levels in the Northwest and the
Southeast represented approximately 34 percent and 27 percent, respectively, of
the current projection of the 1997 harvests whereas in the first three months of
1996 the harvest levels in the Northwest and the Southeast were 31 percent and
25 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 March 31, 1997, volume representing approximately
97 percent of the projected 1997 stumpage harvest had been cut or committed
under contract. As of March 31, 1996, 87 percent of the actual 1996 harvest in
both regions had been cut or committed. In the Northwest region, average
stumpage prices on outstanding contracts as of March 31, 1997 were approximately
20 percent below average prices realized during 1996. In the Southeast region,
average pine prices on outstanding contracts as of March 31, 1997 were
approximately the same as average prices realized during 1996. The Partnership
does not expect full year 1997 earnings or cash flow from operations to be as
strong as in the prior year.
At March 31, 1997, Rayonier held contracts representing approximately 5 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 30
percent, 23 percent and 19 percent, respectively, of the uncut volume under
contract in the Northwest. One unrelated customer held contracts representing
approximately 10 percent of the uncut volume under contract in the Southeast.
These six customers are not affiliated with the Partnership.
LIQUIDITY AND CASH FLOW
As of March 31, 1997, 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 $46.9 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 may redeem the
investment notes at any time to fund Partnership working capital requirements,
capital expenditures and reserves.
The Secondary Account of the Partnership had total outstanding debt of $204.7
million at March 31, 1997, including long-term notes payable to Rayonier of
$204.4 million that mainly represent the obligations incurred as a result of
Secondary Account expenditures for costs such as site preparation, reforestation
and pre-commercial thinning.
Capital expenditures for the three months ended March 31, 1997 and 1996
representing reforestation, capitalized lease payments, property taxes and other
improvements to the land and timber assets were $4.2 million in both years.
Funding of future capital requirements is expected to continue from Rayonier.
On March 31, 1997 and 1996, the Partnership made quarterly distributions of
$34.0 million ($1.70 per Unit) and $28.6 million ($1.43 per Unit), respectively,
to all outstanding Class A unitholders. Quarterly distributions of $1.8 million
and $1.5 million were also made to Class B unitholders and to the General
Partners in the first quarter of 1997 and 1996, respectively.
9
<PAGE> 12
On May 8, 1997, the Board of Directors of the Managing General Partner declared
a second quarter distribution of $1.24 per Class A Unit. The distribution will
be paid on June 30, 1997 to unitholders of record on May 30, 1997. The Board
determines the amount of quarterly distributions that are made to Class A
unitholders from cash available from operations after provision for working
capital, capital expenditures, asset acquisitions and other reserves. The Board
intends to have distributions 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 year following
to bring the cumulative distribution in line with Partnership results. Since
actual Partnership results vary each year, the level of total distributions in
each year will also vary. The Managing General Partner noted when it announced
the March 1997 distribution of $1.70 that it expected Partnership results for
1997 to be lower than in 1996 and that distributions related to 1997 results
will total less than distributions related to 1996 results.
WHEN THE INITIAL TERM OF THE PARTNERSHIP ENDS ON DECEMBER 31, 2000, THE PRIMARY
ACCOUNT OF THE PARTNERSHIP WILL BE CLOSED BUT THE UNITHOLDERS WILL NOT BE
ENTITLED TO HAVE THEIR PARTNERSHIP CAPITAL ACCOUNTS REDEEMED UNTIL THE
PARTNERSHIP FORMALLY ENDS IN THE YEAR 2035. AFTER DECEMBER 31, 2000, THE
INTEREST OF CLASS A UNITHOLDERS IN THE PARTNERSHIP'S FUTURE REVENUES, EXPENSES
AND CASH FLOWS WILL DECREASE FROM 95 PERCENT TO 4 PERCENT. ON A PRO FORMA BASIS,
USING 1996 RESULTS AS AN EXAMPLE, CASH FLOW ALLOCABLE PER CLASS A UNIT WOULD
DECLINE FROM $5.69 TO APPROXIMATELY $0.24. IN ADDITION, THERE WILL BE
SUBSTANTIAL SECONDARY ACCOUNT DEBT THAT WILL MATURE ON JANUARY 1, 2001. THIS
DEBT (INCURRED TO FUND LONG-TERM INVESTMENT IN SUCH AREAS AS REFORESTATION AND
SILVICULTURAL ACTIVITIES INCLUDING ACCRUED INTEREST) IS EXPECTED TO EXCEED $350
MILLION, MORE THAN THREE TIMES 1996'S NET OPERATING CASH FLOW. IN ACCORDANCE
WITH THE PARTNERSHIP AGREEMENT, ALL SECONDARY ACCOUNT DEBT MUST BE REPAID BEFORE
ANY DISTRIBUTION OF PARTNERSHIP CASH FLOW RESUMES. AS A RESULT, IT IS EXPECTED
THAT THE MARKET PRICE OF CLASS A UNITS SHOULD BE DECREASING SUBSTANTIALLY AS
DECEMBER 31, 2000 APPROACHES.
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)
May 12, 1997
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 the 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 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 18
<SECURITIES> 0
<RECEIVABLES> 7,197
<ALLOWANCES> 0
<INVENTORY> 435
<CURRENT-ASSETS> 62,334
<PP&E> 2,063
<DEPRECIATION> 1,045
<TOTAL-ASSETS> 353,379
<CURRENT-LIABILITIES> 11,889
<BONDS> 204,400
0
0
<COMMON> 0
<OTHER-SE> 132,090
<TOTAL-LIABILITY-AND-EQUITY> 353,379
<SALES> 41,788
<TOTAL-REVENUES> 41,788
<CGS> 6,349
<TOTAL-COSTS> 6,349
<OTHER-EXPENSES> 2,789
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,926
<INCOME-PRETAX> 29,724
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,724
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.60
</TABLE>
