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, 1999 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 November 3, 1999, there were outstanding 27,464,308 Common Shares of the Registrant. ----------
2 <TABLE> <CAPTION> RAYONIER INC. TABLE OF CONTENTS PAGE ---- <S> <C> <C> PART I. FINANCIAL INFORMATION Item l. Financial Statements Statements of Consolidated Income for the Three Months and Nine Months Ended September 30, 1999 and 1998 1 Consolidated Balance Sheets as of September 30, 1999 and December 3l, 1998 2 Statements of Consolidated Cash Flows for the Nine Months Ended September 30, 1999 and 1998 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 l998 Annual Report on Form l0-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, ------------------------------- ------------------------------- 1999 1998 1999 1998 ------------- ------------- ------------- ------------- <S> <C> <C> <C> <C> SALES $ 255,453 $ 258,740 $ 739,872 $ 738,165 ------------- ------------- ------------- ------------- Costs and expenses Cost of sales 217,950 223,663 621,829 618,143 Selling and general expenses 6,771 7,960 26,021 25,719 Other operating (income) expense, net (1,381) 1,749 (3,286) (394) ------------- ------------- ------------- ------------- 223,340 233,372 644,564 643,468 ------------- ------------- ------------- ------------- OPERATING INCOME 32,113 25,368 95,308 94,697 Interest expense (7,306) (9,092) (22,693) (26,076) Interest and miscellaneous income (expense), net 114 64 595 561 ------------- ------------- ------------- ------------- Income before income taxes 24,921 16,340 73,210 69,182 Provision for income taxes (7,787) (3,499) (23,869) (19,705) ------------- ------------- ------------- ------------- NET INCOME $ 17,134 $12,841 $ 49,341 $ 49,477 ============= ============= ============= ============= NET INCOME PER COMMON SHARE Basic EPS $ 0.62 $ 0.46 $ 1.78 $ 1.75 ============= ============= ============= ============= Diluted EPS $ 0.61 $ 0.45 $ 1.75 $ 1.72 ============= ============= ============= ============= </TABLE> 1
4 RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (THOUSANDS OF DOLLARS) ASSETS <TABLE> <CAPTION> September 30, December 31, 1999 1998 ---------------- --------------- <S> <C> <C> CURRENT ASSETS Cash and short-term investments $ 3,666 $ 6,635 Accounts receivable, less allowance for doubtful accounts of $5,066 and $4,843 106,308 118,762 Inventories Finished goods 63,080 47,109 Work in process 14,845 15,762 Raw materials 12,787 13,212 Manufacturing and maintenance supplies 24,601 22,827 ---------------- --------------- Total inventories 115,313 98,910 Timber purchase agreements 31,135 35,776 Other current assets 11,256 13,192 Deferred income taxes 7,398 8,559 ---------------- --------------- Total current assets 275,076 281,834 OTHER ASSETS 57,858 65,988 TIMBER PURCHASE AGREEMENTS 18,974 20,922 TIMBER, TIMBERLANDS AND LOGGING ROADS, NET OF DEPLETION AND AMORTIZATION 543,431 544,190 PROPERTY, PLANT AND EQUIPMENT Land, buildings, machinery and equipment 1,340,527 1,304,188 Less - accumulated depreciation 664,915 616,266 ---------------- --------------- 675,612 687,922 ---------------- --------------- $ 1,570,951 $ 1,600,856 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 68,014 $ 65,844 Bank loans and current maturities 6,504 4,094 Accrued taxes 14,722 8,728 Accrued payroll and benefits 23,058 21,460 Accrued interest 11,001 6,182 Other current accrued liabilities 40,348 44,279 Current reserves for dispositions and discontinued operations 18,483 22,167 ---------------- --------------- Total current liabilities 182,130 172,754 DEFERRED INCOME TAXES 126,006 115,405 LONG-TERM DEBT 432,544 485,850 NON-CURRENT RESERVES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS 151,987 159,198 OTHER NON-CURRENT LIABILITIES 28,279 28,690 SHAREHOLDERS' EQUITY Common Shares, 60,000,000 shares authorized, 27,558,308 and 27,767,309 shares issued and outstanding 67,118 79,561 Retained earnings 582,887 559,398 ---------------- --------------- 650,005 638,959 ---------------- --------------- $ 1,570,951 $ 1,600,856 ================ =============== </TABLE> 2
5 RAYONIER INC. AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED) (THOUSANDS OF DOLLARS) <TABLE> <CAPTION> Nine Months Ended September 30, ------------------- 1999 1998 ---------------- ---------------- OPERATING ACTIVITIES <S> <C> <C> Net income $ 49,341 $ 49,477 Non-cash items included in income Depreciation, depletion and amortization 77,313 74,601 Deferred income taxes 7,772 7,427 Decrease in other non-current liabilities (411) (1,226) Change in accounts receivable, inventories and accounts payable (1,779) (3,242) Decrease (increase) in current timber purchase agreements 4,641 (5,706) Decrease in other current assets 1,936 213 Change in accrued liabilities 8,480 (17,938) --------- --------- CASH FROM OPERATING ACTIVITIES 147,293 103,606 --------- --------- INVESTING ACTIVITIES Capital expenditures, net of sales and retirements of $442 and $4,714 (64,244) (64,836) Acquisition of Rayonier Timberlands, L.P. Class A Units - (48,821) Expenditures for dispositions and discontinued operations, net of tax benefits of $3,990 and $4,234 (6,905) (7,308) Change in timber purchase agreements and other assets 10,078 (4,118) --------- --------- CASH USED FOR INVESTING ACTIVITIES (61,071) (125,083) --------- --------- FINANCING ACTIVITIES Issuance of debt 116,879 204,877 Repayments of debt (167,775) (122,480) Dividends paid (25,852) (26,193) Repurchase of Common Shares (16,438) (21,890) Issuance of Common Shares 3,995 2,252 Buyout of minority interest - (16,959) --------- --------- CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (89,191) 19,607 --------- --------- CASH AND SHORT-TERM INVESTMENTS Decrease in cash and short-term investments (2,969) (1,870) Balance, beginning of period 6,635 10,661 --------- --------- Balance, end of period $ 3,666 $ 8,791 ========= ========= Supplemental disclosures of cash flow information Cash paid during the period for: Interest $ 18,188 $ 21,519 ========= ========== Income taxes $ 12,094 $ 12,547 ========= ========== </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 The following table provides details of the calculation of basic and diluted EPS in accordance with Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" for the three months and nine months ended September 30, 1999 and 1998. <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- <S> <C> <C> <C> <C> Net Income $ 17,134 $ 12,841 $ 49,341 $ 49,477 ========= ========= ========= ========= Shares used for determining basic EPS 27,698,598 28,079,736 27,763,251 28,219,896 Dilutive effect of: Stock options 270,402 241,123 269,705 283,410 Contingent shares 240,000 231,084 240,000 231,084 ------- ------- ------- ------- Shares used for determining diluted EPS 28,209,000 28,551,943 28,272,956 28,734,390 ========== ========== ========== ========== Basic EPS $ 0.62 $ 0.46 $ 1.78 $ 1.75 ============== ============== ============= ============= Diluted EPS $ 0.61 $ 0.45 $ 1.75 $ 1.72 ============== ============== ============= ============= </TABLE> 4
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEGMENT INFORMATION Rayonier operates in two major business segments: Timber and Wood Products, and Specialty Pulp Products. The Timber and Wood Products segment includes two reportable business units: Forest Resources and Trading, and Wood Products. Chemical Cellulose, and Fluff and Specialty Paper Pulps are product lines within the Specialty Pulp Products segment. The amounts and relative contributions to sales and operating income attributable to each of Rayonier's reportable business units for the three months and nine months ended September 30, 1999 and 1998 were as follows (thousands of dollars): <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ------------- ------------- ------------- ------------ <S> <C> <C> <C> <C> SALES Timber and Wood Products Forest Resources and Trading $ 111,255 $ 105,828(a) $ 330,399 $ 289,902(a) Wood Products 31,995 32,079 89,409 93,562 ------------- ------------- ------------- ------------- Total Timber and Wood Products 143,250 137,907 419,808 383,464 ------------- ------------- ------------- ------------- Specialty Pulp Products Chemical Cellulose 67,072 74,848 199,857 218,379 Fluff and Specialty Paper Pulps 45,442 46,293 120,767 138,191 ------------- ------------- ------------- ------------- Total Specialty Pulp Products 112,514 121,141 320,624 356,570 ------------- ------------- ------------- ------------- Intersegment Eliminations (311) (308) (560) (1,869) ------------- ------------- ------------- ------------- TOTAL SALES $ 255,453 $ 258,740 $ 739,872 $ 738,165 ============= ============= ============= ============= OPERATING INCOME Timber and Wood Products Forest Resources and Trading $ 20,517 $ 17,411(b) $ 78,926 $87,117(b) Wood Products 1,745 (2,163) 2,808 (11,393) ------------- ------------- ------------- ------------- Total Timber and Wood Products 22,262 15,248 81,734 75,724 Specialty Pulp Products 10,394 12,585 22,416 28,170 Corporate and Other (543) (2,465) (8,842) (9,197) ------------- ------------- ------------- ------------- TOTAL OPERATING INCOME $ 32,113 $ 25,368 $ 95,308 $ 94,697 ============= ============= ============= ============= </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 1999 were $255 million, $3 million lower than the third quarter of 1998, while sales for the nine months ended September 30, 1999 of $740 million were $2 million higher than the prior year. Third quarter sales decreased in the Specialty Pulp Products segment, as a result of reduced chemical cellulose prices and lower pulp volume, and were partly offset by improved sales in Timber and Wood Products due to higher Southeast U.S. timber volume and prices. Year-to-date September sales increased 5
8 due to higher Forest Resources and Trading activity, partially offset by weaker U.S. timber prices and reduced sales in the Specialty Pulp Products segment due to lower chemical cellulose prices and pulp volume. Operating income for the third quarter of 1999 of $32 million was $7 million above prior year while operating income for the nine-month period ended September 30, 1999 of $95 million was $1 million above prior year. Wood Products improved over prior year, as a result of a strong domestic lumber market and higher medium-density fiberboard (MDF) margins. This was partially offset by the decline in Specialty Pulp Products, due to reduced chemical cellulose prices and lower pulp volume, weaker Forest Resources and Trading results, due to lower U.S. timber prices, and the negative impact from weather-related disruptions caused by Hurricane Floyd of $1 million. The 1998 results for Forest Resources and Trading include the negative impact of last summer's Southeast U.S. forest fires which reduced sales and operating income by $4.0 million and $6.7 million, respectively. TIMBER AND WOOD PRODUCTS Timber and Wood Products' sales for the third quarter were $143 million, $5 million higher than prior year due to higher timber sales volumes and log trading activity. Sales for the nine-month period were $420 million, $36 million higher than the prior year, resulting from higher trading activity partially offset by lower timber prices and Wood Products sales. Operating income for the third quarter of $22 million was $7 million above prior year due to stronger Southeast U.S. timber sales volumes and prices, higher U.S. lumber prices and improved margins for MDF. Year-to-date operating income of $82 million increased $6 million from last year due to higher Wood Products results partially offset by lower income from Forest Resources and Trading. FOREST RESOURCES AND TRADING Forest Resources and Trading sales for the third quarter were $111 million, $5 million above prior year resulting from growth of wood products trading activities and higher U.S. timber volume. For the nine month period ending September 30, 1999 sales were $330 million, $40 million above 1998 principally due to the higher wood products trading activity and improved log trading volume in Asian and U.S. domestic markets, partially offset by lower U.S. timber prices and Southeast U.S. land sales. Operating income for the third quarter was $21 million, $3 million above 1998, resulting from higher Southeast U.S. sales volume. Third quarter 1998 operating income included the $6.7 million adverse impact associated with the Southeast U.S. forest fires. Operating income for the nine-month period of 1999 of $79 million was $8 million below prior year due to reduced timber prices partially offsetting an increase in Northwest U.S. sales volume. Timber prices were unusually high in Southeast U.S. markets during the first half of 1998 due to unusually wet weather that led to restricted supply because of difficult logging conditions. In 1999, prices declined in the Northwest U.S. due to the impact of the Asian economic crisis on export products and in the Southeast U.S. due to reduced pulpwood demand resulting from pulp and paper mill closures and downtime in the region. WOOD PRODUCTS Wood Products sales for the third quarter were $32 million, relatively unchanged from the prior year, and for the nine month period were $89 million, $4 million below 1998. The decrease was due to reduced lumber volume resulting from the absence of sales from the Company's Plummer, ID mill. This lumber mill was closed in July 1998, after the facility was damaged by fire, and subsequently sold in September 1999. This sales decline was partly offset by a strong Southeast U.S. lumber market and improved volume and sales prices for the Company's MDF plant. Operating income for the third quarter was $2 million, $4 million higher than prior year. Operating income for the nine months was $3 million, $14 million above prior year. The improvement resulted from higher prices for both lumber and MDF and lower operating costs for MDF. During the third quarter of 1999, the MDF margin contribution increased $2 million over the prior year. SPECIALTY PULP PRODUCTS Sales of Specialty Pulp Products for the third quarter were $113 million, $9 million below prior year due to reduced volume and lower chemical cellulose prices. For the nine-month period sales were $321 million, $36 million lower than 1998. The decline was primarily due to weaker demand for both fluff and chemical cellulose pulps and lower chemical cellulose pricing. Operating income of $10 million and $22 million for the third quarter and the nine-month period of 1999, respectively, were $2 million and $6 million below prior year. The decline resulted from lower fluff and chemical cellulose pulp volumes, lower chemical cellulose pricing and market related shutdown costs for the Fernandina Beach, FL pulp mill, partially offset by lower wood, chemical and maintenance costs. 6
9 CORPORATE AND OTHER Corporate and other costs for the third quarter were below 1998 levels reflecting lower management incentive compensation expense related to share performance plans. On a year-to-date basis, Corporate and other costs were comparable to the prior year. OTHER INCOME / EXPENSE Interest expense of $23 million for the nine-month period of 1999 was $3 million below 1998 due to lower average interest rates and debt balances. The effective tax rate of 32.6 percent for the nine-month period of 1999 compared to 28.5 percent in 1998. The lower 1998 rate reflects increased tax benefits from foreign operations and higher prior years' research and development tax credits. NET INCOME Net income for the third quarter of 1999 was $17.1 million or $0.61 per Common Share, compared to $12.8 million or $0.45 per Common Share in 1998. Net income for the nine months ended September 30, 1999 was $49.3 million or $1.75 per share compared to $49.5 million or $1.72 per share last year. Third quarter 1999 earnings reflect a two cent per share negative impact from weather related disruptions caused by Hurricane Floyd. Third quarter 1998 earnings were reduced by approximately 15 cents per share due to the forest fires in the Southeast U.S. in early July. The impact of the forest fires 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 In its third quarter earnings release on October 18, the Company indicated that it is optimistic about market conditions in the coming months as the improving Asian markets are benefiting most aspects of its business, both in the U.S. and New Zealand. Specialty Pulp results are expected to improve as fluff and specialty paper demand and pricing continue to strengthen and because of the Company's continuous focus on cost reduction. However, the Company expects to take some downtime at its Fernandina Beach, FL pulp mill due to softness in chemical cellulose markets, which typically lag the recovery in fluff and paper. In the fourth quarter, strengthening U.S. timber and log sales may be offset somewhat by lower lumber prices. On October 29th, the Company completed the previously announced sale of a non-strategic marine terminal and related assets for $9.5 million, resulting in a one-time after tax gain of $5.8 million, or 20 cents per share. This gain will be essentially offset by a fourth quarter non-cash charge for an unrelated contract dispute of $2.9 million, or 10 cents per share, and $2.4 million, or 8 cents per share, related to expenses of the previously announced corporate headquarters relocation to Jacksonville, FL. In an October 25 press release, the Company announced the completion of the 969,000-acre timberland asset purchase from Smurfit-Stone Container Corporation for $710 million. The Company expects EBITDA and free cash flow per share from the acquisition to be accretive to the Company's results in the year 2000, on a pro forma basis, by approximately $2.65 per share and 37 cents per share, respectively. Quarterly earnings will be reduced next year by approximately 18 cents per share due to higher interest expense and timber depletion costs. LIQUIDITY AND CAPITAL RESOURCES Cash flow from operating activities of $147 million for the nine-month period of 1999 increased $44 million from 1998 principally as a result of decreased working capital requirements. EBITDA for the nine-month period of 1999 of $173 million increased $3 million from 1998 results primarily due to higher cash operating income. Cash from operating activities helped to finance capital expenditures of $65 million, dividends of $26 million and the repurchase of Common Shares for $16 million and also reduce debt by $51 million. In 1999, third quarter ending debt was $439 million and the debt-to-capital-ratio was 40.3 percent compared to debt of $490 million and a debt-to-capital ratio of 43.4 percent at December 31, 1998. The Company repurchased 373,300 of its shares during the nine-month period of 1999 at an average cost of $44.03 for a total cost of $16 million. Over the same period of 1998, the Company repurchased 516,079 shares, at an average cost of $42.42 per share for a total cost of $22 million. The Company has unsecured credit facilities totaling $300 million, which were used as support for $95 million of outstanding commercial paper. At September 30, 1999, the Company had $205 million available under its revolving credit facilities. In addition, the Company has on file with the Securities and Exchange Commission shelf registration statements to offer $150 million of new 7
10 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. YEAR 2000 COMPLIANCE Rayonier began its company-wide Year 2000 Project in 1996. The Project was 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. As of the end of the third quarter of 1999, all internal systems are compliant. All third party supplier and customer risks have been evaluated and contingency plans have been developed as needed. We will continue to monitor supplier Y2K status through the turn of the century. 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 total amount expended on the Year 2000 Project through the third quarter of 1999 was approximately $3.5 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 the risks have been 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 prepared contingency plans for critical systems to deal with any areas where risks of non-compliance are significant. The Company has identified its hypercritical systems, the failure of which could constitute a worst case scenario, and has finalized contingency plans to deal with any Year 2000 related failures. SAFE HARBOR Comments about market trends, anticipated earnings and future activities, including disclosures about the Company's Year 2000 project, 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 disclosures, and changes in the following additional important factors, among others, could cause actual results to differ materially from those expressed in the forward-looking statements: failure of the Asian markets to recover as expected; fluctuations in demand for specialty chemical cellulose and fluff pulps, export and domestic logs, and wood products; the impact of such market factors on the Company's timber sales in the U.S. and New Zealand; production costs for wood products and for specialty pulps, particularly for raw materials such as wood and chemicals; failure to realize operation efficiencies; actual costs of relocation varying significantly from cost estimates; adverse weather conditions in the Company's operating areas; the possibility of forest fires; governmental policies and regulations affecting the environment, import and export controls, and taxes; and stock market, interest rate and currency movements. 8
11 ITEM 3. SELECTED OPERATING DATA <TABLE> <CAPTION> Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- <S> <C> <C> <C> <C> TIMBER AND WOOD PRODUCTS Log trading sales volume North America, in millions of board feet 57 61 132 130 New Zealand, in thousands of cubic meters 306 174 897 550 Other, in thousands of cubic meters 157 47 429 136 Timber sales volume Northwest U.S., in millions of board feet 33 30 165 154 Southeast U.S., in thousands of short green tons 664 558(a) 1,795 1,788 New Zealand, in thousands of cubic meters 324 280 915 650 Lumber sales volume, in millions of board feet 65 84 (b) 189 241(b) Medium-density fiberboard sales volume, in thousands of cubic meters 33 24 91 61 Intercompany timber sales volume Northwest U.S., in millions of board feet 3 3 21 8 Southeast U.S., in thousands of short green tons 15 12 26 62 New Zealand, in thousands of cubic meters 159 103 428 257 SPECIALTY PULP PRODUCTS Pulp sales volume Chemical cellulose, in thousands of metric tons 80 82 235 245 Fluff and specialty paper pulp, in thousands of metric tons 85 87 231 262 Production as a percent of capacity 95.4% 98.6% 94.7% 98.6% </TABLE> (a) Includes salvage timber sales of 177 resulting from the Southeast U.S. forest fires. (b) Includes sales for the three months and for the nine months ended September 30, 1998 of 11 and 48, respectively, by the Plummer, ID lumber mill. This mill was closed in July 1998 after fire damaged the facility, and subsequently sold in September 1999. 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, ------------------- ------------------- 1999 1998 1999 1998 ---- ---- ---- ---- <S> <C> <C> <C> <C> GEOGRAPHICAL DATA (NON-U.S.) Sales New Zealand $ 20,678 $ 15,349 $ 60,483 $ 42,960 Other 9,662 2,981 30,745 11,094 --------- --------- --------- ----------- Total $ 30,340 $ 18,330 $ 91,228 $ 54,054 ========= ========= ========= =========== Operating Income New Zealand $ (2,462) $ (3,361) $ (5,165) $ (11,863) Other (352) (363) (620) (2,530) ---------- --------- --------- ----------- Total $ (2,814) $ (3,724) $ (5,785) $ (14,393) ========= ========= ========= =========== FOREST RESOURCES Sales Northwest U.S. $ 11,488 $ 11,609 $ 59,070 $ 59,032 Southeast U.S. 19,701 15,139(a) 51,397 60,274(a) New Zealand 6,035 7,058 18,827 16,392 --------- --------- --------- ----------- Total $ 37,224 $ 33,806 $ 129,294 $ 135,698 ========= ========= ========= =========== Operating Income Northwest U.S. $ 6,576 $ 7,486 $ 43,846 $ 42,961 Southeast U.S. 14,597 7,218(b) 37,592 41,560(b) New Zealand 1,277 1,616 4,742 4,717 --------- --------- --------- ----------- Total $ 22,450 $ 16,320 $ 86,180 $ 89,238 ========= ========= ========= =========== EBITDA per Share Northwest U.S. $ 0.26 $ 0.30 $ 1.65 $ 1.60 Southeast U.S. 0.62 0.37 1.61 1.74 New Zealand 0.16 0.15 0.51 0.41 ---- ---- ---- ---- Total $ 1.04 $ 0.82 $ 3.77 $ 3.75 ==== ==== ==== ==== </TABLE> (a) Includes salvage timber sales of $1.7 million. (b) Operating income was reduced by $6.7 million resulting from the 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. 10
13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Rayonier's 10-K for 1998 reported that the U.S. Court of Appeals for the Eleventh Circuit on March 10, 1999 affirmed summary judgment in favor of Rayonier in an action brought by Powell-Duffryn Terminals. Subsequently, on March 31, 1999, Powell-Duffryn filed a motion for rehearing by the same court. This motion was denied on May 11, 1999. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) See Exhibit Index. (b) Rayonier Inc. filed current reports on Form 8-K dated July 29, 1999 and August 23, 1999 including press releases issued on each of those dates. Rayonier Inc. also filed a Form 8-K on November 9, 1999 and a Form 8-K/A, Amendment No. 1 on November 12, 1999. 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 C. KAY ------------------------- George C. Kay Vice President and Corporate Controller November 15, 1999 (Chief Accounting Officer) 11
14 EXHIBIT INDEX ------------- <TABLE> <CAPTION> EXHIBIT NO. DESCRIPTION LOCATION ----------- ----------- -------- <S> <C> <C> 2 Plan of acquisition, reorganization, arrangement, liquidation or succession None 3.1 Amended and restated articles of incorporation No amendments 3.2 By-laws No amendments 4.1 Credit Agreement dated as of October 25, 1999 Filed herewith between Rayonier Timberlands Operating Company, L.P. and Credit Suisse First Boston , Morgan Stanley Senior Funding, Inc. and Citibank, N.A.,. 4.2 Note Purchase Agreement dated as of October 25, 1999 Filed herewith between Rayonier Timberlands Operating Company , L.P. and Timber Capital Holdings LLC. 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 submitted to vote of security holders None 23 Consents of experts and counsel None 24 Power of attorney None 27 Financial data schedule Filed herewith 99 Additional exhibits None </TABLE> 12