-----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, BtsuG6wtR07IHbOQKgOsJh+MS3CNgXro9t774vaSVCWWVlXQj9KsEr407EFoy3z/ 4BprXkjlclHgC5/LKiAG2g== 0000950123-98-004929.txt : 19980514 0000950123-98-004929.hdr.sgml : 19980514 ACCESSION NUMBER: 0000950123-98-004929 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAYONIER INC CENTRAL INDEX KEY: 0000052827 STANDARD INDUSTRIAL CLASSIFICATION: LUMBER & WOOD PRODUCTS (NO FURNITURE) [2400] IRS NUMBER: 132607329 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06780 FILM NUMBER: 98618345 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 FORM 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, 1998 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 1, 1998, there were 28,286,773 Common Shares of the Registrant outstanding. 2 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, 1998 and 1997 1 Consolidated Balance Sheets as of March 31, 1998 and December 3l, 1997 2 Statements of Consolidated Cash Flows for the Three Months Ended March 31, 1998 and 1997 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-7 Item 3. Selected Operating Data 8 Selected Supplemental Financial Data 9 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 Item 6. Exhibits and Reports on Form 8-K 10 Signature 10 Exhibit Index 11
i 3 PART I. FINANCIAL INFORMATION ITEM 1. 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. For a full description of accounting policies, please refer to Notes to Consolidated Financial Statements in the l997 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, 1998 1997 --------- --------- SALES $ 225,414 $ 260,138 --------- --------- Costs and expenses Cost of sales 184,179 209,781 Selling and general expenses 8,347 10,505 Other operating income, net (1,269) (621) --------- --------- 191,257 219,665 --------- --------- OPERATING INCOME 34,157 40,473 Interest expense (7,912) (5,856) Interest and miscellaneous income, net 295 397 Minority interest -- (8,079) --------- --------- Income before income taxes 26,540 26,935 Provision for income taxes (8,344) (8,539) --------- --------- NET INCOME $ 18,196 $ 18,396 ========= ========= NET INCOME PER COMMON SHARE Basic EPS $ 0.64 $ 0.63 ========= ========= Diluted EPS $ 0.63 $ 0.62 ========= =========
1 4 RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS)
ASSETS March 31, December 31, 1998 1997 ---------- ---------- CURRENT ASSETS Cash and short-term investments $ 8,457 $ 10,661 Accounts receivable, less allowance for doubtful accounts of $4,500 and $4,481 106,283 115,704 Inventories Finished goods 55,979 51,398 Work in process 15,578 17,491 Raw materials 18,509 19,740 Manufacturing and maintenance supplies 25,685 25,519 ---------- ---------- Total inventories 115,751 114,148 Timber purchase agreements 30,904 31,758 Other current assets 12,103 13,955 Deferred income taxes 22,791 24,288 ---------- ---------- Total current assets 296,289 310,514 OTHER ASSETS 57,674 55,791 TIMBER PURCHASE AGREEMENTS 32,726 28,248 TIMBER, TIMBERLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 546,875 497,110 PROPERTY, PLANT AND EQUIPMENT Land, buildings, machinery and equipment 1,283,663 1,266,431 Less - accumulated depreciation 579,350 562,536 ---------- ---------- 704,313 703,895 ---------- ---------- $1,637,877 $1,595,558 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 68,635 $ 74,269 Bank loans and current maturities 3,703 4,194 Accrued taxes 14,443 10,973 Accrued payroll and benefits 19,088 18,694 Accrued interest 9,381 6,076 Other current liabilities 44,392 66,085 Current reserves for dispositions and discontinued operations 24,828 26,247 ---------- ---------- Total current liabilities 184,470 206,538 DEFERRED INCOME TAXES 118,155 113,442 LONG-TERM DEBT 488,419 421,325 NON-CURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS 170,493 172,615 OTHER NON-CURRENT LIABILITIES 35,884 31,997 MINORITY INTEREST -- 16,959 SHAREHOLDERS' EQUITY Common Shares, 60,000,000 shares authorized, 28,295,655 and 28,283,634 shares issued and outstanding 100,534 102,175 Retained earnings 539,922 530,507 ---------- ---------- 640,456 632,682 ---------- ---------- $1,637,877 $1,595,558 ========== ==========
2 5 RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS)
Three Months Ended March 31, ------------------------------ 1998 1997 --------- -------- OPERATING ACTIVITIES Net income $ 18,196 $ 18,396 Non-cash items included in income Depreciation, depletion and amortization 22,913 24,800 Deferred income taxes 4,912 7,239 Increase in other non-current liabilities 3,887 172 Change in accounts receivable, inventories and accounts payable 2,184 (17,358) Decrease in current timber purchase agreements 854 7,204 Decrease (increase) in other current assets 1,852 (5,440) Decrease in accrued liabilities (14,524) (10,200) --------- -------- CASH FROM OPERATING ACTIVITIES 40,274 24,813 --------- -------- INVESTING ACTIVITIES Capital expenditures, net of sales and retirements of $677 and $612 (24,275) (39,622) Acquisition of Rayonier Timberlands, L.P. Class A Units (48,821) -- Expenditures for dispositions and discontinued operations, net of tax benefits of $1,298 and $1,095 (2,243) (1,893) Change in timber purchase agreements and other assets (6,361) 1,487 --------- -------- CASH USED FOR INVESTING ACTIVITIES (81,700) (40,028) --------- -------- FINANCING ACTIVITIES Issuance of debt 143,770 31,734 Repayments of debt (77,167) (149) Dividends paid (8,781) (8,770) Repurchase of Common Shares (2,313) (8,167) Issuance of Common Shares 672 536 Buyout of minority interest (16,959) (523) --------- -------- CASH PROVIDED BY FINANCING ACTIVITIES 39,222 14,661 --------- -------- CASH AND SHORT-TERM INVESTMENTS Decrease in cash and short term investments (2,204) (554) Balance, beginning of period 10,661 3,432 --------- -------- Balance, end of period $ 8,457 $ 2,878 ========= ======== Supplemental disclosures of cash flow information Cash paid (received) during the period for: Interest $ 4,703 $ 4,228 ========= ======== Income taxes, net of refunds $ 3,612 $ (52) ========= ========
3 6 RAYONIER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) EARNINGS PER COMMON SHARE In 1997, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." The following table provides details of the calculation of basic and diluted EPS for the three months ended March 31, 1998 and 1997.
1998 1997 ----------- ----------- Net Income $ 18,196 $ 18,396 =========== =========== Shares used for determining basic EPS 28,311,424 29,231,589 Dilutive effect of: Stock options 279,187 266,097 Contingent shares 231,084 223,500 ----------- ----------- Shares used for determining diluted EPS 28,821,695 29,721,186 =========== =========== Basic EPS $ 0.64 $ 0.63 =========== =========== Diluted EPS $ 0.63 $ 0.62 =========== ===========
4 7 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, 1998 and 1997 were as follows (thousands of dollars):
Three Months Ended March 31, --------------- 1998 1997 --------- --------- SALES TIMBER AND WOOD PRODUCTS Trading and merchandising $ 35,157 $ 56,737 Timberlands management 51,870 49,514 Wood products 29,207 29,663 Intrasegment eliminations (2,598) (6,287) --------- --------- Total Timber and Wood Products 113,636 129,627 --------- --------- SPECIALTY PULP PRODUCTS Chemical cellulose 67,745 80,216 Fluff and specialty paper pulps 45,114 43,194 --------- --------- Total Specialty Pulp Products 112,859 123,410 --------- --------- Intersegment eliminations (1,081) (625) --------- --------- Total before dispositions 225,414 252,412 Dispositions -- 7,726 --------- --------- Total sales $ 225,414 $ 260,138 ========= ========= OPERATING INCOME Timber and Wood Products $ 29,636 $ 33,647 Specialty Pulp Products 7,892 12,387 Corporate and other (3,075) (4,144) Intersegment eliminations (296) 112 --------- --------- Total before dispositions 34,157 42,002 Dispositions -- (1,529) --------- --------- Total operating income $ 34,157 $ 40,473 ========= =========
RESULTS OF OPERATIONS SALES AND OPERATING INCOME Sales for the first quarter of 1998 were $225 million, $35 million or 13 percent lower than the first quarter of 1997. The decline in sales was primarily due to sharply reduced Asian demand for logs, lower chemical cellulose volume, and the absence of disposition sales from the Company's Port Angeles pulp mill, permanently closed in February 1997. Operating income of $34 million was $6 million or 16 percent below the prior year, as a result of losses from the Company's medium-density fiberboard (MDF) plant and the effects of weather related wood supply disruptions on the Southeast U.S. pulp and lumber operations, partially offset by stronger Southeast timber prices. 5 8 TIMBER AND WOOD PRODUCTS Timber and Wood Products' sales for the first quarter of 1998 were $114 million, $16 million below last year's results. The decline reflects lower log trading activity in Asian markets. Operating income for the quarter of $30 million was $4 million lower than the same period last year due to lower lumber margins and a $4.7 million loss from the Company's MDF plant in New Zealand, which began commercial operations October 1, 1997. Trading and merchandising sales of $35 million were $22 million lower than 1997, reflecting lower North American and New Zealand export log volumes and selling prices resulting from weakness in Asian wood markets. Operating income improved slightly from 1997, resulting from improved margins in the U.S. domestic market. Timberlands management sales of $52 million were $2 million above last year. Operating income improved $3 million from 1997 as a result of increased Northwest U.S. timber harvest volume and higher Southeast U.S. timber prices. The increased Northwest volume was driven by a strong domestic housing market, while Southeast timber price improvements were due to unusually wet weather that led to difficult logging conditions and restricted supply. Wood products sales were in line with the 1997 first quarter. Operating income declined $8 million from 1997 as a result of losses from the MDF plant, as it developed markets and increased production of its Patinna(TM) brand, and lower lumber margins due to lower lumber sales prices and higher log costs as abnormally wet weather in the Southeast U.S. interrupted wood supply and forced mill downtime. SPECIALTY PULP PRODUCTS Sales of Specialty Pulp Products were $113 million compared to $123 million for last year's first quarter. The decline was primarily due to weak fluff pulp markets and lower chemical cellulose production volume caused by wet weather conditions in the Southeast U.S. that interrupted wood supply. Operating income was $8 million, $5 million below the 1997 first quarter due to lower chemical cellulose prices and volumes, higher wood costs and mill downtime. OTHER INCOME / EXPENSE Interest expense was $8 million for the first quarter of 1998, $2 million higher than 1997, reflecting lower capitalized interest following start up of the MDF plant and interest expense associated with the $66 million purchase of the publicly traded Class A Units of the Company's U.S. timberlands partnership. Elimination of the minority interest expense in the partnership contributed $7 million, pretax, to first quarter results. NET INCOME Net income for the first quarter was $18.2 million or $0.63 per Common Share, compared to $18.4 million, or $0.62 cents per Common Share in 1997. The increase in earnings per share on slightly lower net income resulted from fewer shares outstanding in 1998 due to the Company's share repurchase program. Second quarter earnings are expected to be slightly higher than the first quarter because of higher pulp and lumber volumes and lower wood costs as weather conditions improve in the Southeast. OTHER ITEMS In January 1998, Rayonier acquired all of the publicly traded Class A Units of its master limited partnership, Rayonier Timberlands, L.P., for a cash purchase price of $13.00 per unit. The acquisition was accounted for under the purchase method and was financed by the utilization of existing credit facilities. 6 9 LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities of $40 million for the first three months of 1998 increased $15 million from 1997 as a result of reduced working capital requirements. EBITDA (defined as earnings from continuing operations before significant non-recurring items, provision for dispositions, interest expense, income taxes and depreciation, depletion and amortization) for the first quarter of 1998 of $57 million approximated 1997 first quarter results. Cash from operating activities financed capital expenditures of $25 million, dividends of $9 million and the repurchase of Common Shares for $2 million. The Company also increased its borrowings to finance the $66 million acquisition of the outstanding publicly traded Class A Unit minority interest in Rayonier Timberlands, L.P. The Company repurchased 52,080 of its own shares during the first three months of 1998 at an average cost of $44.42. Over the same period in 1997, in connection with an expanded one-year repurchase program, the Company repurchased 214,000 shares at an average cost of $38.16 per share for $8 million. First quarter ending debt was $492 million and the debt-to-capital-ratio was 43.5 percent compared to 40.2 percent at December 31, 1997. The Company has unsecured credit facilities totaling $300 million, which were used for direct borrowings of $10 million and as support for $150 million of outstanding commercial paper. As of March 31, 1998, the Company had $140 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 $100 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. SAFE HARBOR Except for the information about past operations and results, the comments in this report are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Changes in the following important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: competitive products and pricing, as well as fluctuations in demand, particularly for specialty fluff pulps and for export and domestic logs and wood products, including MDF; the impact of such market factors on the Company's timber sales in the U.S. and New Zealand; the impact of Asia market conditions on prices and volumes; abnormal weather conditions; production costs for MDF and for specialty pulps, particularly for raw materials and chemicals; governmental policies and regulations affecting the environment, import and export controls and taxes; and interest rate and currency movements. 7 10 ITEM 3. SELECTED OPERATING DATA
Three Months Ended March 31, --------------- 1998 1997 ---- --- TIMBER AND WOOD PRODUCTS Trading volume North America logs, in millions of board feet 33 45 New Zealand logs, in thousands of cubic meters 151 237 Other logs, in thousands of cubic meters 38 133 Timber sales volume Northwest U.S., in millions of board feet 67 59 Southeast U.S., in thousands of short green tons 609 610 New Zealand, in thousands of cubic meters 126 211 Lumber sales volume, in millions of board feet 74 74 Medium-density fiberboard sales volume, in thousands of cubic meters 13 -- Intercompany sales volume Northwest U.S. timber, in millions of board feet 2 6 Southeast U.S. timber, in thousands of short green tons 32 25 New Zealand timber, in thousands of cubic meters 60 130 SPECIALTY PULP PRODUCTS Pulp sales volume (a) Chemical cellulose, in thousands of metric tons 77 89 Fluff and specialty paper pulp, in thousands of metric tons 86 81 Production as a percent of capacity 98.4% 97.9% (a) Excludes Port Angeles statistics reflected below: Chemical cellulose sales, in thousands of metric tons -- 9 Fluff and specialty paper pulp sales, in thousands of metric tons -- 4
8 11 SELECTED SUPPLEMENTAL FINANCIAL DATA (thousands of dollars, except per share data)
Three Months Ended March 31, --------------- GEOGRAPHICAL DATA (NON-U.S.) 1998 1997 -------- -------- Sales New Zealand $ 11,066 $ 17,151 Other 3,136 8,531 -------- -------- Total $ 14,202 $ 25,682 ======== ======== Operating Income New Zealand $ (5,280) $ 211 Other (1,249) (1,017) -------- -------- Total $ (6,529) $ (806) ======== ======== TIMBERLANDS MANAGEMENT Sales Northwest U.S. $ 26,834 $ 26,370 Southeast U.S. 21,580 17,190 New Zealand 3,456 5,954 -------- -------- Total $ 51,870 $ 49,514 ======== ======== Operating Income Northwest U.S. $ 20,982 $ 21,560 Southeast U.S. 16,377 11,843 New Zealand 655 1,200 -------- -------- Total $ 38,014 $ 34,603 ======== ======== EBITDA per Share Northwest U.S. $ 0.75 $ 0.74 Southeast U.S. 0.64 0.49 New Zealand 0.08 0.12 -------- -------- Total $ 1.47 $ 1.35 ======== ========
9 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On April 20, 1998, the U.S. District Court for the Southern District of Georgia granted summary judgment in favor of Rayonier in the action brought by Powell Duffryn Terminals, Inc. which was reported in Rayonier's 10-K for 1997. The plaintiff filed a Motion for Relief from Judgment with the trial court on April 30, 1998. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index. (b) Reports on Form 8-K: Rayonier Inc. filed a Current Report on Form 8-K on January 16, 1998 announcing its election to purchase all of the 5,060,000 outstanding Class A Depositary Units of Rayonier Timberlands, L.P. in January 1998 for a cash purchase price of $13.00 per unit. 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 KENNETH P. JANETTE ---------------------------- Kenneth P. Janette Vice President and Corporate Controller May 13, 1998 (Chief Accounting Officer) 10 13 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- 2 Plan of acquisition, reorganization, None arrangement, liquidation or succession 3.1 Amended and restated articles of incorporation No amendments 3.2 By-laws No amendments 4 Instruments defining the rights of security holders, Not required to be filed. The including 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 per share earnings Not required to be filed 12 Statement re computation of ratios Filed herewith 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 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
11 EX-12 2 STATEMENT RE COMPUTATION OF RATIOS 1 EXHIBIT 12 RAYONIER INC. AND SUBSIDIARIES RATIO OF EARNINGS TO FIXED CHARGES (UNAUDITED) (THOUSANDS OF DOLLARS)
Three Months Ended March 31, -------------------------- 1998 1997 ------- ------- Earnings: Net Income $18,196 $18,396 Add: Income Taxes 8,344 8,539 Minority Interest -- 8,079 Amortization of Capitalized Interest 566 268 ------- ------- 27,106 35,282 Adjustments to Earnings for Fixed Charges: Interest and Other Financial Charges 7,912 5,856 Interest Factor Attributable to Rentals 494 547 ------- ------- 8,406 6,403 ------- ------- EARNINGS AS ADJUSTED $35,512 $41,685 ======= ======= Fixed Charges: Fixed Charges above $ 8,406 $ 6,403 Capitalized Interest 96 1,328 ------- ------- TOTAL FIXED CHARGES $ 8,502 $ 7,731 ======= ======= RATIO OF EARNINGS AS ADJUSTED TO TOTAL FIXED CHARGES 4.18 5.39 ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 8,457 0 110,783 4,500 115,751 296,289 1,283,663 579,350 1,637,877 184,470 488,419 0 0 100,534 539,922 1,637,877 225,414 225,414 184,179 184,179 6,783 0 7,912 26,540 8,344 18,196 0 0 0 18,196 0.64 0.63
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