1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) (x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 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 13-2607329 1177 Summer Street, Stamford, Connecticut 06905-5529 (Principal Executive Office) Telephone Number: (203) 348-7000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) As of October 29, 1998, there were 27,854,509 Common Shares of the Registrant outstanding.
2 RAYONIER INC. TABLE OF CONTENTS <TABLE> <CAPTION> PAGE ---- <S> <C> <C> PART I. FINANCIAL INFORMATION Item 1. Financial Statements Statements of Consolidated Income for the Three Months and Nine Months Ended September 30, 1998 and 1997 1 Consolidated Balance Sheets as of September 30, 1998 and December 3l, 1997 2 Statements of Consolidated Cash Flows for the Nine Months Ended September 30, 1998 and 1997 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 5-8 Item 3. Selected Operating Data 9 Selected Supplemental Financial Data 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 Signature 11 Exhibit Index 12 </TABLE> 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 1997 Annual Report on Form 10-K. RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> SALES $ 258,740 $ 266,853 $ 738,165 $ 817,064 --------- --------- --------- --------- Costs and expenses Cost of sales 223,663 216,726 618,143 666,867 Selling and general expenses 7,960 10,402 25,719 30,636 Other operating expense (income), net 1,749 (2,169) (394) (3,881) --------- --------- --------- --------- 233,372 224,959 643,468 693,622 --------- --------- --------- --------- OPERATING INCOME 25,368 41,894 94,697 123,442 Interest expense (9,092) (6,080) (26,076) (17,987) Interest and miscellaneous income (expenses), net 64 (523) 561 431 Minority interest -- (5,072) -- (19,359) --------- --------- --------- --------- Income before income taxes 16,340 30,219 69,182 86,527 Provision for income taxes (3,499) (6,978) (19,705) (25,129) --------- --------- --------- --------- NET INCOME $ 12,841 $ 23,241 $ 49,477 $ 61,398 ========= ========= ========= ========= NET INCOME PER COMMON SHARE Basic EPS $ 0.46 $ 0.81 $ 1.75 $ 2.12 ========= ========= ========= ========= Diluted EPS $ 0.45 $ 0.79 $ 1.72 $ 2.08 ========= ========= ========= ========= </TABLE> 1
4 RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS) ASSETS <TABLE> <CAPTION> September 30, December 31, 1998 1997 ---- ---- <S> <C> <C> CURRENT ASSETS Cash and short-term investments $ 8,791 $ 10,661 Accounts receivable, less allowance for doubtful accounts of $4,349 and $4,481 112,443 115,704 Inventories Finished goods 55,841 51,398 Work in process 16,391 17,491 Raw materials 18,130 19,740 Manufacturing and maintenance supplies 22,816 25,519 ---------- ---------- Total inventories 113,178 114,148 Timber purchase agreements 37,464 31,758 Other current assets 13,742 13,955 Deferred income taxes 17,908 24,288 ---------- ---------- Total current assets 303,526 310,514 OTHER ASSETS 62,883 55,791 TIMBER PURCHASE AGREEMENTS 25,274 28,248 TIMBER, TIMBERLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 545,675 497,110 PROPERTY, PLANT AND EQUIPMENT Land, buildings, machinery and equipment 1,306,903 1,266,431 Less - accumulated depreciation 612,517 562,536 ---------- ---------- 694,386 703,895 ---------- ---------- $1,631,744 $1,595,558 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 66,796 $ 74,269 Bank loans and current maturities 3,850 4,194 Accrued taxes 12,784 10,973 Accrued payroll and benefits 20,618 18,694 Accrued interest 10,827 6,076 Other current liabilities 39,661 66,085 Current reserves for dispositions and discontinued operations 24,975 26,247 ---------- ---------- Total current liabilities 179,511 206,538 DEFERRED INCOME TAXES 118,723 113,442 LONG-TERM DEBT 504,066 421,325 NON-CURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS 162,345 172,615 OTHER NON-CURRENT LIABILITIES 30,771 31,997 MINORITY INTEREST -- 16,959 SHAREHOLDERS' EQUITY Common Shares, 60,000,000 shares authorized, with shares issued and outstanding of 27,878,409 and 28,283,634 82,537 102,175 Retained earnings 553,791 530,507 ---------- ---------- 636,328 632,682 ---------- ---------- $1,631,744 $1,595,558 ========== ========== </TABLE> 2
5 RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS) <TABLE> <CAPTION> Nine Months Ended September 30, 1998 1997 ---- ---- <S> <C> <C> OPERATING ACTIVITIES Net income $ 49,477 $ 61,398 Non-cash items included in income Depreciation, depletion and amortization 74,601 71,247 Deferred income taxes 7,427 9,971 Write-off of property, plant and equipment -- 2,100 (Decrease) increase in other non-current liabilities (1,226) 2,687 Change in accounts receivable, inventories and accounts payable (3,242) 19,946 (Increase) decrease in current timber purchase agreements (5,706) 5,461 Decrease in other current assets 213 1,215 (Decrease) increase in accrued liabilities (17,938) 3,673 --------- --------- CASH FROM OPERATING ACTIVITIES 103,606 177,698 --------- --------- INVESTING ACTIVITIES Capital expenditures, net of sales, retirements and reclassifications of $4,714 and $(236) (64,836) (106,076) Acquisition of Rayonier Timberlands, L.P. Class A Units (48,821) -- Expenditures for dispositions and discontinued operations, net of tax benefits of $4,234 and $7,013 (7,308) (12,115) Change in timber purchase agreements and other assets (4,118) 4,861 --------- --------- CASH USED FOR INVESTING ACTIVITIES (125,083) (113,330) --------- --------- FINANCING ACTIVITIES Issuance of debt 204,877 225,117 Repayments of debt (122,480) (221,234) Dividends paid (26,193) (25,963) Repurchase of Common Shares (21,890) (35,331) Issuance of Common Shares 2,252 2,216 Buyout of minority interest (16,959) (1,769) --------- --------- CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 19,607 (56,964) --------- --------- CASH AND SHORT-TERM INVESTMENTS (Decrease) increase in cash and short term investments (1,870) 7,404 Balance, beginning of period 10,661 3,432 --------- --------- Balance, end of period $ 8,791 $ 10,836 ========= ========= Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 21,519 $ 19,493 ========= ========= Income taxes $ 12,547 $ 6,191 ========= ========= </TABLE> 3
6 RAYONIER INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA) 1. 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 and nine months ended September 30, 1998 and 1997. <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net Income $ 12,841 $ 23,241 $ 49,477 $ 61,398 =========== =========== =========== =========== Shares used for determining basic EPS 28,079,736 28,685,581 28,219,896 28,956,747 Dilutive effect of: Stock options 241,123 488,039 283,410 373,605 Contingent shares 231,084 223,500 231,084 223,500 ----------- ----------- ----------- ----------- Shares used for determining diluted EPS 28,551,943 29,397,120 28,734,390 29,553,852 =========== =========== =========== =========== Basic EPS $ 0.46 $ 0.81 $ 1.75 $ 2.12 =========== =========== =========== =========== Diluted EPS $ 0.45 $ 0.79 $ 1.72 $ 2.08 =========== =========== =========== =========== </TABLE> 2. NEW ACCOUNTING STANDARD In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. SFAS No.133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS No.133 is effective for fiscal years beginning after June 15, 1999, but may be adopted as of the beginning of any fiscal quarter after issuance. SFAS No.133 is not expected to have a material impact on the Company's consolidated financial position or results of operations. 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 and nine months ended September 30, 1998 and 1997 were as follows (thousands of dollars): <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> SALES TIMBER AND WOOD PRODUCTS Trading and merchandising $ 74,872 $ 64,989 $ 162,878 $ 199,299 Timberlands management 33,806(a) 43,986 135,698(a) 137,645 Wood products 32,079 34,898 93,562 103,198 Intrasegment eliminations (2,850) (6,089) (8,674) (18,007) --------- --------- --------- --------- Total Timber and Wood Products 137,907 137,784 383,464 422,135 --------- --------- --------- --------- SPECIALTY PULP PRODUCTS Chemical cellulose 74,848 76,243 218,379 243,309 Fluff and specialty paper pulps 46,293 49,236 138,191 132,393 --------- --------- --------- --------- Total Specialty Pulp Products 121,141 125,479 356,570 375,702 --------- --------- --------- --------- Intersegment eliminations (308) (682) (1,869) (1,660) --------- --------- --------- --------- Total before dispositions 258,740 262,581 738,165 796,177 Dispositions -- 4,272 -- 20,887 --------- --------- --------- --------- Total sales $ 258,740 $ 266,853 $ 738,165 $ 817,064 ========= ========= ========= ========= OPERATING INCOME Timber and Wood Products $ 15,248(b) $ 31,421 $ 75,724(b) $ 100,112 Specialty Pulp Products 12,585 13,861 28,170 35,272 Corporate and other (2,408) (4,159) (9,120) (12,506) Intersegment eliminations (57) (8) (77) 143 --------- --------- --------- --------- Total before dispositions 25,368 41,115 94,697 123,021 Dispositions -- 779 -- 421 --------- --------- --------- --------- Total operating income $ 25,368 $ 41,894 $ 94,697 $ 123,442 ========= ========= ========= ========= </TABLE> (a) Includes salvage timber sales of $1.7 million. (b) Operating income was reduced by $6.7 million resulting from Southeast U.S. forest fires during the third quarter of 1998, including $4.0 million on lower pricing for salvage timber and $2.7 million on the write-off of destroyed timber assets and other fire related expenses. RESULTS OF OPERATIONS SALES AND OPERATING INCOME Sales for the third quarter of 1998 were $259 million, $8 million or 3 percent lower than the third quarter of 1997. Sales for the nine months ended September 30, 1998 of $738 million were $79 million or 10 percent lower than the prior year. Sales for both periods declined primarily due to reduced Asian demand for logs, lower chemical cellulose pulp volume, decreased lumber selling prices and the absence of sales from the Company's Port Angeles pulp mill, permanently closed in February 1997. These 5
8 reductions were partially offset by additional sales from the Company's new medium-density fiberboard (MDF) and wood products trading businesses. Operating income for the third quarter of 1998 of $25 million was $17 million less than the prior year. Operating income for the nine-month period was $95 million, $29 million or 23 percent less than the prior year. The declines resulted from lower lumber and log pricing, reduced chemical cellulose pulp shipments, losses at the Company's MDF plant in New Zealand which began commercial operations October 1, 1997, and forest fire losses. Forest fires in the Southeast U.S. in early July damaged pre-merchantable timber resulting in a $2.7 million write-off of timber assets and $4 million in reduced timber sales revenue due to lower realized prices for fire-damaged timber. In addition, unusually wet weather conditions in the first half of the year disrupted production schedules and raised the cost of wood fiber at the Company's pulp and sawmills in the Southeast U.S. TIMBER AND WOOD PRODUCTS Timber and Wood Products' sales for the three month period ended September 30, 1998 were $138 million, comparable to last year's results. Sales for the nine-month period were $383 million, $39 million below 1997, reflecting lower log trading activity in Asian markets and lower lumber prices. Operating income for the quarter of $15 million was $16 million lower than the same period last year. Year to date operating income of $76 million was $24 million lower than 1997. The declines resulted from the forest fires described above, lower lumber margins and losses at the Company's MDF plant in New Zealand, which began commercial operations October 1, 1997. Trading and merchandising sales of $163 million for the nine month period were $36 million lower than 1997, reflecting significantly lower export log volumes from North America and New Zealand and reduced selling prices due to weakness in Asian markets, partly offset by sales from a newly established wood products trading business. Operating income was lower than 1997 due to lower log trading margins. Timberlands management sales of $136 million for the nine-month period were $2 million below last year due to lower prices in the Northwest U.S. and lower prices and volumes in New Zealand. Operating income improved from 1997 as a result of a strong Southeast U.S. timber market in the first half of the year, when unusually wet weather conditions led to restricted supply, and stronger Southeast U.S. land sales. Third quarter operating income included the $6.7 million adverse impact associated with the Southeast U.S. forest fires. Wood products sales of $94 million for the nine month period were $10 million lower than 1997. Operating income declined as a result of lower lumber sales prices and higher log costs, and losses from the MDF business. SPECIALTY PULP PRODUCTS Sales of Specialty Pulp Products for the three-month period were $121 million, $4 million lower than last year. Sales for the first nine months of 1998 were $357 million, $19 million lower than 1997. The declines were primarily due to reduced customer demand for chemical cellulose pulps. Operating income for the first nine months was $28 million, $7 million lower than 1997, as a result of lower chemical cellulose volumes, higher wood and production costs in the first half of the year, partially offset by slightly higher selling prices. Third quarter operating income of $13 million was $1 million below 1997 due to lower chemical cellulose volumes and higher wood costs. CORPORATE AND OTHER Corporate and other costs for the third quarter and first nine months of 1998 were favorable to 1997, reflecting lower administrative and general expenses. OTHER INCOME / EXPENSE Interest expense of $26 million for the first nine months of 1998 was $8 million higher than 1997, reflecting lower capitalized interest following start up of the New Zealand MDF plant and interest expense associated with the $66 million purchase in January of the publicly traded Class A Units of the Company's U.S. timberlands partnership. The effect of that purchase was to eliminate the minority interest in the partnership earnings, which was $19 million in the first nine months of 1997. The positive impact was partially offset by higher interest and depletion costs in 1998. The effective tax rate of 28.5 percent for the first nine months of 1998 is comparable to 1997. The effective tax rates are below U.S. statutory rates as 1998 includes tax benefits associated with a weaker New Zealand currency while 1997 reflects higher research and investment tax credits. 6
9 NET INCOME Net income for the third quarter was $12.8 million or $0.45 per Common Share, compared to $23.2 million, or $0.79 cents per Common Share in 1997. Net income for the nine months ended September 30, 1998 was $49.5 million or $1.72 per Common Share, compared to $61.4 million, or $2.08 per Common Share earned last year. The forest fires in the Southeast U.S. in early July reduced earnings by approximately 15 cents per share in the third quarter. The impact included a charge of 5 cents per share to reflect the loss of pre-merchantable timber and a reduction in earnings of 10 cents per share from the sale of fire-damaged timber. OTHER ITEMS The soft global economic situation continues to affect specialty pulp, timber and wood products markets, and prices are expected to remain under pressure at least through the first quarter of next year. However, log export markets appear to have stabilized due to supply restrictions in Russia and China combined with worldwide timber harvest reductions due to low selling prices. Overall fourth quarter timber harvest activity for the Company, primarily by Northwest U.S. customers, is expected to be stronger than in the third quarter. 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. YEAR 2000 COMPLIANCE Rayonier began its company-wide Year 2000 Project in 1996 and expects all phases to be completed by the end of the third quarter of 1999. The Project is designed to identify Year 2000 problems and take corrective action covering business and process control systems, networking communications, personal computer applications, embedded microprocessors and third party supplier and customer risks. The Company has engaged outside consultants to advise on, assist in and monitor compliance. The project team reports directly to the Company's senior executive officers and regularly provides program updates to the Audit Committee of the Board of Directors. The estimated total amount expended on the Year 2000 Project through the third quarter of 1998 was less than $1 million and the Company estimates that future costs could range up to $2 million. Many of the Company's systems were upgraded or replaced in the ordinary course of business during the last five years, and costs related to those upgrades and replacements are not included in the Year 2000 Project expenses. The Company believes that with the completion of its Year 2000 Project as scheduled, the risks will be minimized and the possibility of significant interruptions of operations reduced. However, if the Company and its third party suppliers and customers do not complete in a timely manner their assessment, remediation and testing for Year 2000 compliance, there can be no assurance that Year 2000 problems will not materially adversely affect the Company's results of operations or its relationships with its suppliers and customers. The Company has not yet been able to clearly identify the most reasonably likely worst case scenarios and the appropriate contingency plans for such scenarios. As the Company completes all phases of its Year 2000 Project, it will prepare contingency plans to deal with any areas where it determines that risks of non-compliance are significant. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities of $104 million for the first nine months of 1998 decreased $74 million from 1997 as a result of lower income and increased 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 nine months of 1998 of $170 million decreased $6 million from 1997 results. Cash from operating activities and additional borrowings helped to finance capital expenditures of $70 million, dividends of $26 million and the repurchase of Common Shares for $22 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. Third quarter ending debt was $508 million and the debt-to-capital-ratio was 44.4 percent compared to 40.2 percent at December 31, 1997. The Company repurchased 516,079 of its shares during the first nine months of 1998 at an average cost of $42.42 for a total of $22 million. Over the same period of 1997, the Company repurchased 840,500 shares at an average cost of $42.04 per share for a total of $35 million. In July 1998, the Company's Board of Directors increased the authorized number of common shares to be repurchased by 200,000. All of these shares were repurchased in the third quarter of 1998. In October 1998, the Board authorized the repurchase of an additional one million shares through December 31, 2000. These share repurchases are in addition 7
10 to the 1.5 percent of outstanding shares normally repurchased each year to offset the dilutive effect of incentive stock programs on earnings per share. The Company has unsecured credit facilities totaling $300 million, which were used for direct borrowings of $40 million and as support for $150 million of outstanding commercial paper. As of September 30, 1998, the Company had $110 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 $200 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 Comments about market trends and anticipated earnings and activities in the fourth quarter and in the first quarter of next year and disclosures about the Company's project to address Year 2000 compliance are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Changes in factors referred to in such comments and disclosures as well as changes in the following additional important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: changes in the estimates of fire damage; final results of negotiations with the Company's property insurance carrier; competitive products and pricing, as well as fluctuations in demand, particularly for specialty fluff pulps, 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 global market conditions on prices and volumes; production costs for MDF and for specialty pulps, particularly for raw materials such as wood and chemicals; governmental policies and regulations affecting the environment, import and export controls and taxes; and interest rate and currency movements. 8
11 ITEM 3. SELECTED OPERATING DATA <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> TIMBER AND WOOD PRODUCTS Log trading volume North America, in millions of board feet 61 54 130 174 New Zealand, in thousands of cubic meters 174 277 550 802 Other, in thousands of cubic meters 47 56 136 247 Timber sales volume Northwest U.S., in millions of board feet 30 39 154 147 Southeast U.S., in thousands of short green tons 558(a) 567 1,788(a) 1,711 New Zealand, in thousands of cubic meters 280 336 650 835 Lumber sales volume, in millions of board feet 84 85 241 248 Medium-density fiberboard sales volume, 24 -- 61 -- in thousands of cubic meters Intercompany timber sales volume Northwest U.S., in millions of board feet 3 1 8 11 Southeast U.S., in thousands of short green tons 12 22 62 60 New Zealand in thousands of cubic meters 103 175 257 446 SPECIALTY PULP PRODUCTS (b) Pulp sales volume Chemical cellulose, in thousands of metric tons 82 88 245 277 Fluff and specialty paper pulp, in thousands of metric tons 87 94 262 255 Production as a percent of capacity 98.6% 102.9% 98.6% 100.1% </TABLE> (a) Includes salvage timber sales of 177 resulting from the Southeast U.S. forest fires. (b) Excludes 1997 third quarter and nine months sales by the Port Angeles pulp mill of 4 and 22, respectively, for chemical cellulose and 0 and 5, respectively, for fluff and specialty paper pulp. 9
12 SELECTED SUPPLEMENTAL FINANCIAL DATA (thousands of dollars, except per share data) <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, 1998 1997 1998 1997 ---- ---- ---- ---- <S> <C> <C> <C> <C> GEOGRAPHICAL DATA (NON-U.S.) Sales New Zealand $ 15,349 $ 24,284 $ 42,960 $ 63,865 Other 2,981 4,247 11,094 19,854 --------- --------- --------- --------- Total $ 18,330 $ 28,531 $ 54,054 $ 83,719 ========= ========= ========= ========= Operating Income New Zealand $ (3,361) $ 4,333 $ (11,863) $ 6,723 Other (363) (1,737) (2,530) (3,679) --------- --------- --------- --------- Total $ (3,724) $ 2,596 $ (14,393) $ 3,044 ========= ========= ========= ========= TIMBERLANDS MANAGEMENT Sales Northwest U.S. $ 11,609 $ 16,373 $ 59,032 $ 63,193 Southeast U.S. 15,139(a) 16,837 60,274(a) 49,578 New Zealand 7,058 10,776 16,392 24,874 --------- --------- --------- --------- Total $ 33,806 $ 43,986 $ 135,698 $ 137,645 ========= ========= ========= ========= Operating Income Northwest U.S. $ 7,486 $ 10,660 $ 42,961 $ 47,257 Southeast U.S 7,218(b) 10,979 41,560 33,906 New Zealand 1,616 2,897 4,717 6,201 --------- --------- --------- --------- Total $ 16,320 $ 24,536 $ 89,238 $ 87,364 ========= ========= ========= ========= EBITDA per Share Northwest U.S. $ 0.30 $ 0.38 $ 1.60 $ 1.64 Southeast U.S 0.37 0.44 1.74 1.38 New Zealand 0.15 0.21 0.41 0.50 --------- --------- --------- --------- Total $ 0.82 $ 1.03 $ 3.75 $ 3.52 ========= ========= ========= ========= </TABLE> (a) Includes salvage timber sales of $1.7 million. (b) Operating income was reduced by $6.7 million due to the Southeast U.S. forest fires, including $4.0 million on lower pricing for salvage timber and $2.7 million on the write-off of destroyed timber assets and other fire related expenses. 10
13 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 which was reported in Rayonier's 10-K for 1997. The plaintiffs filed a notice of appeal on June 10, 1998 with the U.S. Court of Appeals for the Eleventh Circuit. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index. (b) Rayonier Inc. filed a Current Report on Form 8-K on September 25, 1998 with a press release issued on that date. 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 KENNETH P. JANETTE ------------------ Kenneth P. Janette Vice President and Corporate Controller November 12, 1998 (Chief Accounting Officer) 11
14 EXHIBIT INDEX <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- <S> <C> <C> 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 including indentures filed. The 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. 10.1 Rayonier 1994 Incentive Stock Plan, as amended Filed herewith 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 </TABLE> 12