-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SgqX+rV2RXHk0y7RZXrQey1URBpCnbc3RSOfyc5gvhbqQbF5hYx+IWjlqz8lZ+Ol MWLPUWWajVz/0lWa02N+QA== 0000052827-96-000001.txt : 19960513 0000052827-96-000001.hdr.sgml : 19960513 ACCESSION NUMBER: 0000052827-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960510 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAYONIER INC CENTRAL INDEX KEY: 0000052827 STANDARD INDUSTRIAL CLASSIFICATION: PULP MILLS [2611] IRS NUMBER: 132607329 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06780 FILM NUMBER: 96560344 BUSINESS ADDRESS: STREET 1: 1177 SUMMER ST CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2033487000 MAIL ADDRESS: STREET 1: 1177 SUMMER STREET CITY: STAMFORD STATE: CT ZIP: 06905-5529 FORMER COMPANY: FORMER CONFORMED NAME: ITT RAYONIER INC /CT/ DATE OF NAME CHANGE: 19940422 FORMER COMPANY: FORMER CONFORMED NAME: ITT RAYONIER INC DATE OF NAME CHANGE: 19920703 10-Q 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, 1996 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 Number l3-2607329 l177 Summer Street, Stamford, Connecticut 06905-5529 (Principal Executive Office) Telephone Number: (203) 348-7000 Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) As of May 9, 1996, there were 29,542,283 Common Shares of the Registrant outstanding. RAYONIER INC. TABLE OF CONTENTS PAGE PART I.FINANCIAL INFORMATION Item l.Financial Statements Statements of Consolidated Income for the Three Months Ended March 31, 1996 and 1995 1 Consolidated Balance Sheets as of March 31, 1996 and December 3l, 1995 2 Statements of Consolidated Cash Flows for the Three Months Ended March 31, 1996 and 19953 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 1.Legal Proceedings 8 Item 6.Exhibits and Reports on Form 8-K 8 Signature 8 Exhibit Index 9 i PART I. FINANCIAL INFORMATION Item l. Financial Statements The following unaudited financial statements reflect, in the opinion of Rayonier Inc. (Rayonier or 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 the prior year's financial statements to conform to current year presentation. For a full description of accounting policies, please refer to Notes to Consolidated Financial Statements in the l995 Annual Report on Form l0-K. RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (unaudited) (Thousands of dollars, except per share data) Three Months Ended March 31, -------------------- 1996 1995 ------- ------- Sales $ 293,980 $ 285,832 Costs and expenses ------- ------- Cost of sales 225,674 224,044 Selling and general expenses 8,843 8,387 Other operating income, net (429) (1,443) ------- ------- 234,088 230,988 ------- ------- Operating income 59,892 54,844 Interest expense (7,146) (8,535) Interest and miscellaneous income, net 1,488 668 Minority interest (8,988) (9,300) ------- ------- Income before income taxes 45,246 37,677 Provision for income taxes (13,769) (12,528) ------- ------- Net income $ 31,477 $ 25,149 ======= ======= Net income per Common Share $ 1.05 $ 0.84 ======= ======= Weighted average Common Shares outstanding 30,089,060 29,847,437 ========== ========== RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (unaudited) (Thousands of dollars) ASSETS March 31, December 31, 1996 1995 -------- ------- CURRENT ASSETS Cash and short-term investments $ 5,606 $ 10,932 Accounts receivable, less allowance for doubtful accounts of $4,308 and $4,420 126,175 128,478 Inventories Finished goods 73,131 71,307 Work in process 25,083 25,681 Raw materials 53,846 44,350 Manufacturing and maintenance supplies 31,279 28,740 ------- ------- Total inventories 183,339 170,078 Timber stumpage 42,720 49,464 Other current assets 22,603 15,412 Deferred income taxes 15,031 15,208 ------- ------- Total current assets 395,474 389,572 OTHER ASSETS 48,009 47,239 TIMBER STUMPAGE 27,750 29,396 TIMBER, TIMBERLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 478,821 476,463 PROPERTY, PLANT AND EQUIPMENT Land, buildings, machinery and equipment 1,310,325 1,292,059 Less - accumulated depreciation 601,396 586,796 --------- --------- 708,929 705,263 --------- --------- $1,658,983 $1,647,933 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 86,936 $102,938 Bank loans and current maturities 1,841 3,040 Accrued taxes 24,253 9,941 Accrued payroll and benefits 17,204 26,554 Accrued interest 8,017 5,268 Other current liabilities 36,717 39,943 Current reserves for dispositions 17,100 16,047 ------- ------- Total current liabilities 192,068 203,731 DEFERRED INCOME TAXES 162,335 160,574 LONG-TERM DEBT 447,247 446,696 NON-CURRENT RESERVES FOR DISPOSITIONS 20,360 23,542 OTHER NON-CURRENT LIABILITIES 26,438 25,204 MINORITY INTEREST 20,567 18,815 SHAREHOLDERS' EQUITY Common Shares, 60,000,000 shares authorized, 29,613,278 and 29,653,278 shares issued and outstanding 156,752 159,032 Retained earnings 633,216 610,339 ------- ------- 789,968 769,371 --------- --------- $1,658,983 $1,647,933 ========= ========= RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (unaudited) (Thousands of dollars) Three Months Ended March 31, ---------------------- 1996 1995 ------- ------- OPERATING ACTIVITIES Net income $31,477 $25,149 Non-cash items included in income Depreciation, depletion and amortization 24,136 24,492 Deferred income taxes 1,617 2,465 Increase in other non-current liabilities 1,234 1,132 Change in accounts receivable, inventories and accounts payable (26,960) (39,115) Decrease (increase) in current timber stumpage 6,744 (9,581) Increase in other current assets (7,191) (401) Increase in accrued liabilities 4,485 12,189 Change in reserves for dispositions (1,250) (1,274) ------- ------- Cash from operating activities 34,292 15,056 ======= ======= INVESTING ACTIVITIES Capital expenditures, net of sales and retirements of $543 and $652 (30,160) (30,791) Expenditures for dispositions, net of tax benefits of $321 and $732 (558) (1,235) Change in timber stumpage and other assets 876 (224) ------- ------- Cash used for investing activities (29,842) (32,250) ======= ======= FINANCING ACTIVITIES Issuance of debt 700 27,444 Repayments of debt (1,348) (126) Dividends (8,600) (7,402) (Redemption) issuance of Common Shares (2,280) 682 Increase (decrease) in minority interest 1,752 (314) ------- ------- Cash (used for) provided by financing activities (9,776) 20,284 ======= ======= CASH AND SHORT-TERM INVESTMENTS (Decrease) increase during the period (5,326) 3,090 Balance, beginning of period 10,932 9,178 ------ ------ Balance, end of period $ 5,606 $12,268 ====== ====== Supplemental disclosures of cash flow information Cash paid (received) during the period for: Interest $ 4,830 $ 4,835 ====== ====== Income taxes, net of refunds $ (898) $(2,768) ====== ====== Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations The sales and operating income of Rayonier's business segments for the three months ended March 31, 1996 and 1995 were as follows (thousands of dollars): Three Months Ended March 31, ---------------------- 1996 1995 ------- ------- Sales Timber and Wood Products Log trading and merchandising $ 67,792 $ 80,001 Timberlands management and stumpage 49,749 50,153 Wood products 20,638 15,123 Intrasegment eliminations (5,129) (4,184) ------- ------- Total Timber and Wood Products 133,050 141,093 ------- ------- Specialty Pulp Products Chemical cellulose 104,644 83,606 Fluff and specialty paper pulps 57,882 67,160 ------- ------- Total Specialty Pulp Products 162,526 150,766 ------- ------- Intersegment eliminations (1,596) (6,027) ------- ------- Total sales $293,980 $285,832 ======= ======= Operating Income Timber and Wood Products $37,183 $42,754 Specialty Pulp Products 25,140 15,273 Corporate and other (2,496) (2,171) Intersegment eliminations 65 (1,012) ------ ------ Total operating income $59,892 $54,844 ====== ====== Results of Operations Sales and Operating Income Sales of $294 million for the first quarter of 1996 rose $8 million or 3 percent from the first quarter of 1995. Operating income of $60 million was $5 million or 9 percent higher than last year's first quarter. Strong first quarter results reflected higher pricing for the Company's specialty dissolving pulps, which offset a drop in prices for fluff and paper pulps. Timber and Wood Products Timber and Wood Products' sales in the first quarter were $133 million, $8 million lower than the same period of 1995. Operating income for the quarter of $37 million was down $6 million from the prior year. Log trading and merchandising sales and operating income, which include the Company's New Zealand log sales, were down from the 1995 first quarter due to continuing softness in Asian markets. In North America, both volume and selling prices were down from 1995 resulting in reduced sales and margins. In New Zealand, export log volume was up slightly but margins were down due to lower export selling prices. Timberlands management and stumpage sales and margins were slightly below last year's first quarter. In the Northwest U.S. region, harvest volumes increased 32 percent from the 1995 first quarter as customers accelerated harvests amid fears that export markets could weaken further in the second and third quarters. These gains were offset in the Southeast U.S. where timber stumpage harvest volume and prices declined as pulp and paper mills and sawmills took market downtime. Wood products sales increased over the prior year mainly due to higher volume associated with the second quarter 1995 acquisition of a lumber manufacturing facility in Idaho; however, operating margins declined due to lower sales prices. Specialty Pulp Products Sales of Specialty Pulp Products increased to $163 million, up 8 percent from last year's first quarter, and operating income rose $10 million to $25 million. Stable volumes and favorable pricing resulted in continued strong performance in dissolving grade pulps. Approximately 60 percent of the Company's pulp business is in specialty dissolving grades. The balance of the Company's pulp business is primarily fluff pulps, for which prices fell significantly since reaching record highs late in 1995. Favorable wood costs helped offset some of the price erosion. Intersegment First quarter intersegment sales of $2 million in 1996 were less than the comparable 1995 amount due to lower stumpage sales from the Timber and Wood Products segment to the Specialty Pulp Products segment. Other Items As previously announced, the Company's results for 1996 are expected to be below last year's results unless there is a significant rebound in fluff pulp prices, which is unlikely. Prices for fluff pulps appear to have bottomed out in the second quarter at approximately 30 percent below first quarter prices and approximately $50 a ton below recent expectations. In addition, unless a significant rebound in commodity pulp prices occurs in the near future, the prices for some of the Company's higher-value pulp grades will begin to come under price pressure from competitors and customers. The Company also believes that the current high cost of North American logs in Japan and high log inventories in Korea will likely result in lower demand and prices for export logs and timber in the second quarter. As a result, margins for Timber and Wood Products are expected to decline approximately 20 percent from first quarter levels. Interest expense was $7 million for the first quarter of 1996, $1 million favorable to 1995, reflecting lower interest rates and a lower average debt level. Minority interest in the earnings of Rayonier's subsidiary, Rayonier Timberlands, L.P. (RTLP) was slightly below that of the prior year period, reflecting lower Southeast U.S. stumpage prices and volume offset to a great extent by higher Northwest U.S. stumpage volume. The minority participation in the earnings of RTLP will change from approximately 24 percent to approximately 1 percent effective January 1, 2001. The effective tax rate for the first quarter of 1996 was 30.4 percent compared to 33.3 percent in the 1995 first quarter. The change reflects 1996 recognition of a tax asset related to a prior year transaction following resolution of various uncertainties related to its realization. Net Income Net income for the first quarter was $31 million or $1.05 per Common Share, up $6 million or $0.21 per Common Share from 1995. Liquidity and Capital Resources Cash flow from operating activities of $34 million in the first quarter of 1996 increased from $15 million in 1995 as a result of higher earnings and reduced working capital requirements. EBITDA (defined as earnings from continuing operations before non-recurring items, interest expense, income taxes and depreciation, depletion and amortization) for the first quarter of 1996 of $77 million increased $6 million over the comparable period of 1995. Cash from operations financed capital expenditures of $31 million, dividends of $9 million and the repurchase of Common Shares of $3 million. First quarter ending debt of $449 million approximated year-end debt and the Company's debt-to-total-capital-ratio decreased one percentage point to 36 percent. During the first quarter of 1996, the Company began a common share repurchase program to minimize the dilutive effect on earnings per share of its employee incentive stock plans. The number of shares that may be repurchased each year is limited to the greater of 1.5 percent of the Company's outstanding shares or the number of incentive stock shares issued to employees during the year. The Company expects to repurchase approximately 300,000 to 450,000 shares in 1996. In the first quarter, 76,100 shares were repurchased at an average cost of $35.19 per share with a total cost of approximately $3 million. The Company has unsecured credit facilities totaling $300 million, which are used for direct borrowings and as support for $115 million of outstanding commercial paper. As of March 31, 1996, the Company had $185 million of available borrowings under its revolving credit facilities. In addition, through currently effective shelf registration statements filed with the Securities and Exchange Commission, the Company may offer up to $141 million of new public debt securities. The Company believes that internally generated funds combined with available external financing will enable Rayonier to fund capital expenditures, share repurchases, working capital and other liquidity needs for the foreseeable future. Item 3. Selected Operating Data Three Months Ended March 31, --------------- 1996 1995 ---- ---- Timber and Wood Products Log sales North America - millions of board feet 51 60 New Zealand - thousands of cubic meters 429 387 Other - millions of board feet 6 2 Timber harvest Northwest U.S. - millions of board feet 61 46 Southeast U.S. - thousands of short green tons 570 673 New Zealand - thousands of cubic meters 257 280 Lumber sold - millions of board feet 61 41 Intercompany sales Logs - millions of board feet 2 1 Northwest U.S. timber stumpage - millions of board feet 9 7 Southeast U.S. timber stumpage - thousands of short green tons 48 165 Specialty Pulp Products Pulp sales Chemical cellulose sales - thousands of metric tons 111 105 Fluff and specialty paper pulp sales - thousands of metric tons 82 93 Production as a percent of capacity 93% 100% Selected Supplemental Information (thousands of dollars) New Zealand - Sales $25,296 $24,282 ====== ====== New Zealand - Operating Income $ 1,420 $ 3,693 ====== ====== PART II. OTHER INFORMATION Item 1. Legal Proceedings On April 18, 1996 the United States Court of Appeals for the Fifth Circuit reversed and remanded for a new trial a jury verdict in favor of Rayonier's wholly-owned subsidiary, Southern Wood Piedmont Company ("SWP"), an intervenor in an action brought by the U.S. Environmental Protection Agency ("EPA") against Marine Shale Processors, Inc. ("MSP"). SWP had shipped over 170,000 tons of materials containing hazardous waste for thermal processing by MSP. The verdict, among other things, found that MSP had produced a product consistent with certain regulations under the Resource Conservation and Recovery Act with material received from SWP so long as that material remained unmixed with material received from other MSP customers. Because such a product cannot be considered a hazardous waste, the verdict helped to limit SWP's potential liability for material sent to MSP under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"). The outcome of the new trial may result in a potential CERCLA liability related to this material for SWP. Item 6. Exhibits and Reports on Form 8-K (a) See Exhibit Index. (b) Rayonier Inc. did not file a 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 l934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RAYONIER INC. (Registrant) BY /S/ KENNETH P. JANETTE ----------------------- Kenneth P. Janette Vice President and Corporate Controller May 10, 1996 (Chief Accounting Officer) EXHIBIT INDEX EXHIBIT NO. DESCRIPTION LOCATION ---------- ----------- -------- 2 Plan of acquisition, None reorganization, arrangement, liquidation or succession 3.1 Amended and restated articles No Amendments of incorporation 3.2 By-laws No amendments 4 Instruments defining the rights Not required to of security holders, including be filed. The indentures Registrant hereby agrees to file with the Commission a copy of any instrument defining the rights of holders of the Registrant's long- term debt upon request of the Commission. 10 Material contracts None 11 Statement re computation of Not required to per share earnings be filed 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 holders None 22 Published report regarding matters None submitted 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 5,606 0 130,483 4,308 183,339 395,474 1,310,325 601,396 1,658,983 192,068 447,247 156,752 0 0 633,216 1,658,983 293,980 293,980 225,674 225,674 15,914 0 7,146 45,246 13,769 31,477 0 0 0 31,477 1.05 1.05
EX-12 3 EXHIBIT 12 RAYONIER INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (unaudited) (Thousands of dollars) Three Months Ended March 31, -------------------- 1996 1995 ------ ------ Earnings: Net Income $ 31,477 $ 25,149 Add: Income Taxes 13,769 12,528 Minority Interest 8,988 9,300 Amortization of Capitalized Interest 491 411 ------ ------ 54,725 47,388 Adjustments to Earnings for Fixed Charges: Interest and Other Financial Charges 7,146 8,535 Interest Factor Attributable to Rentals 361 369 ------ ------ 7,507 8,904 ------ ------ Earnings as Adjusted $ 62,232 $ 56,292 ====== ====== Fixed Charges: Fixed Charges above $ 7,507 $ 8,904 Capitalized Interest 433 190 ------ ------ Total Fixed Charges $ 7,940 $ 9,094 ====== ====== Ratio of Earnings as Adjusted to Total Fixed Charges 7.84 6.19 ====== ====== -----END PRIVACY-ENHANCED MESSAGE-----