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, 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 1-6780
RAYONIER INC.
Incorporated in the State of North Carolina
I.R.S. Employer Identification No. 13-2607329
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 6, 1994, there were outstanding 29,566,372 Common Shares of the
Registrant.
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RAYONIER INC.
TABLE OF CONTENTS
PAGE
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Consolidated Income for the
Quarters Ended March 31, 1994 and 1993 1
Consolidated Balance Sheets as of March 31, 1994
and December 3l, 1993 2
Statements of Consolidated Cash Flows for the
Quarters Ended March 31, 1994 and 1993 3
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 4-6
Item 3. Selected Operating Data 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 8
Exhibit Index 9-10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited financial statements reflect, in the opinion of
Rayonier Inc. (the Company), all adjustments (which include only normal
recurring adjustments) necessary for a fair presentation of the results of
operations, the financial position, and the cash flows for the periods
presented. Certain reclassifications have been made to 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 1993 annual
report on Form 10-K.
RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Quarters Ended March 31, 1994 and 1993
(unaudited)
(thousands of dollars, except per share data)
1994 1993
---- ----
Sales $257,727 $216,320
------- -------
Costs and expenses
Cost of sales 199,132 173,259
Selling and general expenses 6,708 6,700
Other operating expenses (income), net 715 (288)
------- -------
206,555 179,671
------- -------
Operating income 51,172 36,649
Interest expense (6,746) (5,374)
Interest and miscellaneous income, net 533 379
Minority interest (11,076) (6,240)
------- -------
Income before income taxes 33,883 25,414
Income taxes (12,164) (8,594)
------- -------
Net income $ 21,719 $ 16,820
======= =======
Net income per Common Share $0.73 $0.57
==== ====
Weighted average Common Shares
outstanding 29,589,292 29,565,392
========== ==========
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RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(thousands of dollars)
ASSETS
March 31, December 31,
1994 1993
--------- ------------
CURRENT ASSETS
Cash and short-term investments $ 9,270 $ 5,989
Accounts receivable, less allowance for
doubtful accounts of $4,383 and $4,268 96,831 82,696
Inventories
Finished goods 61,104 46,516
Work in process 16,697 16,235
Raw materials 37,456 44,057
Manufacturing and maintenance supplies 28,352 26,751
--------- ---------
143,609 133,559
Deferred income taxes 9,773 10,498
Prepaid timber stumpage 61,117 55,770
Other current assets 12,008 10,752
--------- ---------
Total current assets 332,608 299,264
OTHER ASSETS 28,429 24,025
TIMBER STUMPAGE 10,136 12,480
TIMBER, TIMBERLANDS AND LOGGING ROADS,
NET OF DEPLETION AND AMORTIZATION 472,164 470,077
PROPERTY, PLANT AND EQUIPMENT
Land, buildings, machinery and equipment 1,154,998 1,149,447
Less - accumulated depreciation 491,719 480,518
--------- ---------
663,279 668,929
--------- ---------
$ 1,506,616 $ 1,474,775
========= =========
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 68,117 $ 67,783
Bank loans and current maturities of long-term debt 98,213 182,003
Accrued taxes 20,575 2,480
Accrued payroll and benefits 19,062 18,525
Other current liabilities 38,698 39,776
Current reserves for dispositions and
discontinued operations 28,105 27,280
--------- ---------
Total current liabilities 272,770 337,847
DEFERRED INCOME TAXES 125,465 126,176
LONG-TERM DEBT 416,012 316,138
NONCURRENT RESERVES FOR DISPOSITIONS
AND DISCONTINUED OPERATIONS (Net of
discontinued operations' assets of $13,037 and $12,986) 32,248 35,920
OTHER NONCURRENT LIABILITIES 16,449 15,741
MINORITY INTEREST 20,970 36,649
COMMON SHAREHOLDERS' EQUITY
Common Shares, 60 million shares authorized,
29,565,392 shares issued and outstanding 157,426 157,426
Retained earnings 465,276 448,878
--------- ---------
622,702 606,304
--------- ---------
$ 1,506,616 $ 1,474,775
========= =========
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RAYONIER INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the Quarters Ended March 31, 1994 and 1993
(unaudited)
(thousands of dollars)
1994 1993
---- ----
OPERATING ACTIVITIES
Net income $21,719 $16,820
Non-cash items included in income
Depreciation, depletion and amortization 24,036 18,965
Deferred portion of provision for income taxes 14 10,371
Increase (decrease) in other noncurrent liabilities 708 (145)
Change in accounts receivable, inventories
and accounts payable (23,851) (14,834)
Increase in prepaid timber stumpage (5,347) (1,535)
Increase in accrued taxes 18,095 458
Other changes in working capital (1,797) 6,819
------ ------
Cash from operating activities 33,577 36,919
====== ======
INVESTING ACTIVITIES
Capital expenditures net of sales and retirements
of $101 and $45 (20,473) (12,542)
Expenditures for dispositions and discontinued operations (2,847) (9,243)
Change in other assets and timber stumpage (2,060) (1,954)
------ ------
Cash used for investing activities (25,380) (23,739)
====== ======
FINANCING ACTIVITIES
Issuance of debt 106,500 18,000
Repayments of debt (90,416) (23,803)
Dividends (5,321) (9,594)
(Decrease) increase in minority interest (15,679) 421
------ ------
Cash used for financing activities (4,916) (14,976)
====== ======
CASH AND SHORT-TERM INVESTMENTS
Increase (decrease) during the quarter 3,281 (1,796)
Balance at beginning of quarter 5,989 10,731
------ ------
Balance at end of quarter $ 9,270 $ 8,935
====== ======
Supplemental disclosures of cash flow information
Cash paid (received) during the period for
Interest $ 4,273 $ 3,609
====== ======
Income taxes, net of refunds $(4,015) $(4,054)
====== ======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On February 28, 1994, ITT Corporation (ITT), Rayonier's sole shareholder,
distributed, as a special dividend, all of the Common Shares of Rayonier to the
holders of ITT Common Stock and Series N Preferred Stock. In connection with
this transaction (the Distribution), the Company changed its name from ITT
Rayonier Incorporated to Rayonier Inc. and became a publicly traded Company
listed on the New York Stock Exchange under the symbol "RYN". On March 31,
1994, there were approximately 29.6 million Common Shares of Rayonier
outstanding.
SEGMENT INFORMATION
The amounts and relative contributions to sales and operating income
attributable to each of Rayonier's business segments for the quarters ended
March 31, 1994 and 1993 were as follows ($ in thousands):
Sales Quarters Ended March 31
- ----- -----------------------------
1994 1993
---- ----
Timber and Wood Products:
Log Trading and Merchandising $ 75,592 $ 76,317
Timberlands Management and Stumpage
(Standing Timber) Sales 55,279 32,058
Wood Products Sales 19,228 10,092
------- -------
Total Before Intrasegment Eliminations 150,099 118,467
Intrasegment Eliminations (4,496) (4,504)
------- -------
Total Timber and Wood Products 145,603 113,963
Specialty Pulp Products:
Chemical Cellulose 71,007 65,825
Fluff and Specialty Paper Pulps 42,048 46,436
------- -------
Total Specialty Pulp Products 113,055 112,261
Intersegment Eliminations (931) (9,904)
------- -------
Total Sales $ 257,727 $ 216,320
======= =======
Operating Income
Timber and Wood Products $ 53,490 $ 37,809
Specialty Pulp Products 532 2,503
Corporate and Other (2,903) (1,913)
Intersegment Eliminations 53 (1,750)
------- -------
Total Operating Income $ 51,172 $ 36,649
====== ======
RESULTS OF OPERATIONS
SALES AND OPERATING INCOME
Sales of $258 million for the quarter ended March 31, 1994 were $41 million (19
percent) higher than the comparable period of 1993. Operating income of $51
million for the quarter ended March 31, 1994 increased $15 million over the
comparable 1993 period.
Timber and Wood Products
Sales for the Timber and Wood Products segment were $146 million, representing
an increase of $32 million (28 percent) over 1993 sales. Operating income for
the Timber and Wood Products segment was $53 million in 1994 increasing 41
percent over 1993's operating income of $38 million.
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Timber and Wood Products prices rebounded in the quarter from a second half
1993 market correction that lasted into the fourth quarter. Export prices
firmed for both the Company's United States and New Zealand log trading
activity. A primary factor contributing to the Timber and Wood Products
segment's improved first quarter results was activity in the Company's
Northwest U.S. timberland management region, where both volume and prices were
significantly greater than the prior year's. Prices realized on stumpage
contracts in the first quarter of 1994 were almost double those realized in
1993's first quarter. Northwest volume in this year's first quarter was 50
percent greater than that of the prior year as a decline in export prices in
1993 caused customers to delay harvesting their timber sales contracts until
1994. The Company estimates that sales and operating income of approximately
$14 million resulted from those timber sales contracts that normally would have
been harvested by customers in 1993.
Operating results of this segment were also positively impacted by increased
wood products sales which reflected a 68 percent increase in sales volume
primarily attributable to the Company's October 1993 acquisition of a lumber
manufacturing facility in Georgia. In addition, lumber prices in the first
quarter continued an overall 15 month upward trend, although they showed some
softness during the later half of the quarter.
Specialty Pulp Products
Sales for the Specialty Pulp Products segment were $113 million, declining $1
million (1 percent) from 1993. Operating income for the segment was $1 million
in the first quarter of 1994, a decrease of $2 million from 1993's operating
income of $3 million.
Shipment volume exceeded that of the prior year but was offset by product
prices that were down considerably from last year's first quarter. Lower
selling prices reflected excess capacity in the pulp industry combined with
weak domestic and international markets. The Company has noted that an upward
trend in commodity paper pulp prices since December 1993 has helped stop the
price erosion for the Company's specialty pulp products. Prices realized on
the sale of specialty pulp products in the first quarter of 1994 were stable
when compared to prices realized in the fourth quarter of 1993, although some
spot discounting was still occurring.
Intersegment sales were $1 million in the first quarter of 1994 declining $9
million from the comparable period of 1993 due to significantly lower volume of
stumpage sales from the Timber and Wood Products segment to the Specialty Pulp
Products segment.
OTHER ITEMS
Interest expense of $7 million reflected an increase of $1 million (26 percent)
over 1993 primarily as a result of additional debt incurred by the Company in
December 1993 to finance a $90 million special dividend to ITT and to settle
intercompany accounts with ITT.
Minority interest in the earnings of Rayonier's subsidiary, Rayonier
Timberlands, L.P. (RTLP), increased $5 million (78%) to $11 million in 1994 due
to significantly higher partnership earnings resulting from the increased
stumpage volume and prices in the Company's Northwest U.S. timberland
management region.
Income taxes increased $4 million in 1994 primarily due to higher pretax
earnings. The 1994 provision for income taxes was also negatively impacted by
tax reform legislation enacted on August 10, 1993 which increased the U.S.
Federal income tax rate and eliminated tax benefits related to log exports for
foreign sales corporations.
NET INCOME
Net income for the first quarter was $22 million, increasing $5 million (29
percent) over 1993. Net income per common share was $0.73 per share compared
to $0.57 in 1993. The Company estimated that approximately $7 million or $0.23
per share resulted from timber sales contracts that normally would have been
harvested by customers in 1993.
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LIQUIDITY AND CAPITAL RESOURCES
Cash from the Company's operating activities (after interest and taxes) was $34
million in the first quarter of 1994 versus $37 million in 1993. Cash from
operating activities along with an increase in debt of $16 million were used to
fund capital expenditures of $21 million, dividends of $5 million paid to
holders of Rayonier Common Shares, a special distribution of $20 million paid
to the minority unitholders of RTLP and $3 million of environmental remediation
and other closure costs relating to discontinued operations and units held for
disposition.
The Company's strong performance resulted in a first quarter EBITDA (defined as
earnings before interest expense, income taxes and depreciation, depletion and
amortization) of $65 million in 1994, an increase of $15 million or 30% over
the comparable period of 1993. Free cash flow (EBITDA less capital
expenditures) was $44 million compared to $37 million in 1993. After cash
payments for interest of $4 million, common dividends of $5 million,
expenditures for dispositions and discontinued operations of $3 million and
income tax refunds of $4 million, net cash flow was insufficient to fund the
$20 million special distribution of RTLP and to fund $32 million in working
capital, timber purchases and other operating requirements. As a result, the
Company's debt increased in the quarter by $16 million to $514 million, but the
Company's debt/capital ratio remained at the 1993 year-end level of 45%.
On March 29, 1994, the Company filed a shelf registration statement with the
Securities and Exchange Commission on Form S-3 covering $150 million of new
debt securities. The Company is considering offering $100 million of debentures
under this registration statement. The net proceeds of this offering would be
used to retire bank debt incurred as bridge financing for the $90 million
special dividend paid to ITT and for the settlement of intercompany accounts
with ITT. The above-referenced registration statement also served as a
post-effective amendment to a previous shelf registration statement which, as
amended, permits Rayonier to offer up to $174 million of medium term notes.
In April 1994, the Company closed on revolving credit agreements with a group
of banks which provide the Company with unsecured credit facilities totaling
$300 million. The Company used $100 million of these credit facilities to
retire outstanding short-term debt. Accordingly, $100 million of outstanding
short-term bank debt has been reclassified to long-term debt on the Company's
March 31, 1994 balance sheet. As a result, the Company's net working capital
position improved from negative net working capital of $39 million at December
31, 1993 to positive net working capital of $60 million at March 31, 1994. The
Company also intends to utilize the revolving credit facilities to retire
medium term debt and to provide back-up commitments for a commercial paper
program that the Company plans to initiate in the second quarter.
The Company believes that internally generated funds combined with available
external financing will enable Rayonier to fund capital expenditures, working
capital and other liquidity needs for the foreseeable future.
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ITEM 3. SELECTED OPERATING DATA
1994 1993
---- ----
TIMBER AND WOOD PRODUCTS
Log Sales
North America - million board feet 58 70
New Zealand - thousand cubic meters 414 274
Other - million board feet 2 -
Timber Harvested
Northwest U.S. - million board feet 66 44
Southeast U.S. - thousand short green tons 463 606
New Zealand - thousand cubic meters 278 175
Lumber Sold - million board feet 49 29
INTERCOMPANY SALES
Logs - million board feet - -
Northwest U.S. Timber Stumpage - million board feet 8 10
Southeast U.S. Timber Stumpage - thousand short green tons 27 177
SPECIALTY PULP PRODUCTS
Chemical Cellulose - thousand metric tons 97 87
Fluff and Specialty Paper Pulps - thousand metric tons 89 81
Production as a Percentage of Capacity 98% 89%
SELECTED SUPPLEMENTAL INFORMATION ($ in thousands)
New Zealand - Sales $ 24,915 $ 14,827
====== ======
New Zealand - Operating Income $ 3,202 $ 4,505
===== =====
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the first quarter of 1994, ITT as the sole shareholder of the Company
took three actions by written consent prior to the Distribution. The subject
matter of these consents and their respective effective dates were: (1)
approval of an amendment to the Company's Amended and Restated Articles of
Incorporation changing its name to "Rayonier Inc." (consent effective February
2, 1994; Articles of Amendment were filed on February 17, 1994); (2) approval
of certain compensation plans (consent effective February 28, 1994); and (3)
election as directors of the individuals listed in Item 10 of the Company's
1993 Form 10-K (consent in lieu of the 1994 Annual Meeting of Shareholder
effective February 28, 1994).
ITEM 5. OTHER INFORMATION
On March 29, 1994, the Company filed a shelf registration statement with the
Securities and Exchange Commission on Form S-3 covering debt securities. In
addition, in April 1994, the Company closed on revolving credit agreements with
a group of banks which provide the Company with unsecured credit facilities
totaling $300 million. For further information regarding these matters,
please refer to the Liquidity and Capital Resources section of Item 2.,
Management's Discussion and Analysis of Financial Condition and Results of
Operations
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index.
(b) Rayonier Inc. 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 INC. (Registrant)
---------------------------
BY GEORGE S. ARESON
----------------
George S. Areson
Acting Corporate Controller
May 16, 1994
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
- ---------- ----------- --------
2 Plan of acquisition, reorganization, None
arrangement, liquidation or succession
4.1 $100 million 364 day Revolving Credit Filed Herewith
Agreement dated as of April 21, 1994 among
Rayonier Inc. as Borrower and the banks
named therein as Banks, Citibank, N.A. as
Administrative Agent and Citicorp Securities,
Inc. and the Toronto-Dominion Bank as
Arrangers.
4.2 $200 million Revolving Credit Agreement Filed Herewith
dated as of April 21, 1994 among
Rayonier Inc. as Borrower and the banks
named therein as Banks, Citibank, N.A. as
Administrative Agent and Citicorp Securities,
Inc. and the Toronto-Dominion Bank as
Arrangers.
4.3 Other instruments defining the rights of Not required to be filed. The
security holders, including indentures Registrant hereby agrees to file
with the Commission a copy of
any other instrument defining
the rights of holders of the
Registrant's long-term debt upon
request of the Commission.
10.1 Form of Indemnification Agreement Filed herewith
between Registrant and directors of
Rayonier Forest Resources Company,
its wholly-owned subsidiary which is
Managing General Partner of Rayonier
Timberlands, L.P., who are not also
directors of Registrant
10.2 Other material contracts None
11 Statement re computation of per share Not required
earnings
12 Statement re computation of ratios Filed Herewith
15 Letter re unaudited interim None
financial information
18 Letter re change in accounting None
principles
19 Report furnished to security None
holders
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION
- ---------- ----------- --------
22 Published report regarding matters None
submitted to vote of security holders
23 Consents of experts and counsel None
24 Power of attorney None
99 Additional exhibits None
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