UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
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
1301 Riverplace Boulevard, Jacksonville, Florida 32207
(Principal Executive Office)
Telephone Number: (904) 357-9100
Former Address
50 North Laura Street, Jacksonville, Florida 32202
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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨ (Do not check if a smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES ¨ NO x
As of October 22, 2010, there were outstanding 80,564,846 Common Shares of the Registrant.
TABLE OF CONTENTS
PART I.
Item l.
Item 2.
Item 3.
Item 4.
PART II.
Item 1a.
Item 6.
RAYONIER INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share data)
SALES
Costs and Expenses
Cost of sales
Selling and general expenses
Other operating income, net (Note 2)
Equity in income (loss) of New Zealand joint venture
OPERATING INCOME BEFORE GAIN ON SALE OF APORTION OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE
Gain on sale of a portion of the interest in the New Zealand joint venture (Note 6)
OPERATING INCOME
Interest expense
Interest and miscellaneous income, net
INCOME BEFORE INCOME TAXES
Income tax expense
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments
Joint venture cash flow hedges
Amortization of pension and postretirement benefit costs, net of income tax expense (benefit) of $661 and $347, and ($1,705) and $1,013
COMPREHENSIVE INCOME
EARNINGS PER COMMON SHARE
Basic earnings per share
Diluted earnings per share
See Notes to Condensed Consolidated Financial Statements.
1
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $349 and $1,150
Inventory
Finished goods
Work in process
Raw materials
Manufacturing and maintenance supplies
Total inventory
Income tax and alternative fuel mixture credit receivable
Prepaid and other current assets
Total Current Assets
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
PROPERTY, PLANT AND EQUIPMENT
Land
Buildings
Machinery and equipment
Total property, plant and equipment, gross
Less – accumulated depreciation
Total property, plant and equipment, net
INVESTMENT IN JOINT VENTURE
OTHER ASSETS
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable
Bank loans and current maturities
Accrued interest
Accrued customer incentives
Current liabilities for dispositions and discontinued operations (Note 11)
Other current liabilities
TOTAL CURRENT LIABILITIES
LONG-TERM DEBT
NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS (Note 11)
PENSION AND OTHER POSTRETIREMENT BENEFITS (Note 13)
OTHER NON-CURRENT LIABILITIES
COMMITMENTS AND CONTINGENCIES (Notes 10 and 12)
SHAREHOLDERS’ EQUITY
Common Shares, 240,000,000 and 120,000,000 shares authorized, 80,549,849 and 79,541,974 shares issued and outstanding
Retained earnings
Accumulated other comprehensive loss
TOTAL SHAREHOLDERS’ EQUITY
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization
Non-cash cost of real estate sold
Stock-based incentive compensation expense
Gain on sale of a portion of the interest in the New Zealand joint venture
Amortization of convertible debt discount
Deferred income tax expense (benefit)
Excess tax benefits on stock-based compensation
Other
Changes in operating assets and liabilities:
Receivables
Inventories
Other current assets
Accrued liabilities
Other assets
Other non-current liabilities
Expenditures for dispositions and discontinued operations
CASH PROVIDED BY OPERATING ACTIVITIES
INVESTING ACTIVITIES
Capital expenditures
Change in restricted cash
CASH USED FOR INVESTING ACTIVITIES
FINANCING ACTIVITIES
Issuance of debt
Repayment of debt
Dividends paid
Proceeds from the issuance of common shares
Purchase of exchangeable note hedge
Proceeds from issuance of warrant
Debt issuance costs
Repurchase of common shares
CASH USED FOR FINANCING ACTIVITIES
EFFECT OF EXCHANGE RATE CHANGES ON CASH
CASH AND CASH EQUIVALENTS
Increase in cash and cash equivalents
Balance, beginning of year
Balance, end of period
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period:
Interest
Income taxes
Non-cash investing activity:
Capital assets purchased on account
3
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands unless otherwise stated)
BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS
Basis of Presentation
The unaudited condensed consolidated financial statements and notes thereto of Rayonier Inc. and its subsidiaries (“Rayonier” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information in the financial statements of the Company’s Annual Report on Form 10-K has been condensed. In the opinion of management, these financial statements and notes reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the financial statements and supplementary data included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC.
Subsequent Events
The Company evaluated events and transactions that occurred after the balance sheet date but before financial statements were issued, and two subsequent events warranted disclosure. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) and Note 13 – Employee Benefit Plans for additional information.
New or Recently Adopted Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance related to consolidation which replaced the quantitative-based risks and rewards calculation for determining which enterprise has a controlling interest in a variable interest entity with an approach primarily qualitative in nature. This Standard requires additional disclosures about an enterprise’s involvement in variable interest entities and was effective January 1, 2010 for Rayonier. The Company’s application of this guidance had no effect on the accompanying condensed consolidated financial statements. See Note 9 – Fair Value Measurements for additional information about the Company’s variable interest entity.
Also in June 2009, the FASB issued new guidance related to the accounting for transfers of financial assets. The new standard eliminates the concept of a “qualifying special-purpose entity” (“QSPE”) and associated guidance and creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale. Entities formerly classified as QSPEs are now evaluated for consolidation under the provisions related to the consolidation of controlling and non-controlling interests in an entity. Under the new guidance, the Company’s investment in a special purpose entity does not require consolidation. See Note 9 – Fair Value Measurements for additional information about this entity.
ALTERNATIVE FUEL MIXTURE CREDIT (“AFMC”) AND CELLULOSIC BIOFUEL PRODUCER CREDIT (“CBPC”)
The U.S. Internal Revenue Code allowed a tax credit for taxpayers that produced and used an alternative fuel in the operation of their business. Rayonier produces and uses an alternative fuel (“black liquor”) at its Jesup, Georgia and Fernandina Beach, Florida Performance Fibers mills, which qualified for the $0.50 per gallon credit of alternative fuel used in operations through December 31, 2009. Accordingly, the Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2009, include income of $55.8 million and $141.8 million, net of associated expenses, recorded in “Other operating income, net” for black liquor produced and used.
Subsequent Event
In October 2010, the Internal Revenue Service released clarification that both the AFMC and CBPC can be claimed in the same taxable year for different volumes of black liquor. Rayonier has applied for the cellulosic biofuel producer registration. If IRS approval is received, Rayonier will be able to claim the CBPC credit, which is $1.01 per gallon, for black liquor used in the operation of its business in 2009 which was not claimed for the AFMC. Rayonier will recognize the benefits for CBPC when approval is received.
4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following table provides details of the calculation of basic and diluted earnings per common share:
Shares used for determining basic earnings per common share
Dilutive effect of:
Stock options
Performance and restricted shares
Shares used for determining diluted earnings per common share
Basic earnings per common share:
Diluted earnings per common share:
INCOME TAXES
Rayonier is a real estate investment trust (“REIT”). In general, only Rayonier TRS Holdings Inc. (“TRS”), the Company’s wholly-owned taxable subsidiary whose businesses include the Company’s non-REIT qualified activities, is subject to corporate income taxes. However, Rayonier Inc. is subject to U.S. federal corporate income tax on built-in gains (the excess of fair market value over tax basis for property held upon REIT election at January 1, 2004) on taxable sales of such property during calendar years 2004 through 2010 and 2012 through 2013. Accordingly, the provision for corporate income taxes relates principally to current and deferred taxes on certain property sales and on TRS income.
The Company’s effective tax rate is below the 35 percent U.S. statutory tax rate primarily due to tax benefits associated with being a REIT. Effective tax rates before discrete items were 19.2 percent and 25.2 percent for the three months ended September 30, 2010 and 2009, respectively. Year-to-date effective tax rates before discrete items were 18.3 percent and 22.1 percent in 2010 and 2009, respectively. The lower rates in 2010 were due to proportionately higher earnings from the REIT.
Including discrete items, the effective tax rates for the quarter and year-to-date were 20.9 percent and 16.0 percent compared to 17.8 percent and 14.6 percent in 2009, respectively.
RESTRICTED DEPOSITS
In order to qualify for like-kind exchange (“LKE”) treatment, the proceeds from real estate sales must be deposited with a third party intermediary. These proceeds are accounted for as restricted cash until a suitable replacement property is acquired. In the event that LKE purchases are not completed, the proceeds are returned to the Company after 180 days and reclassified as available cash. As of September 30, 2010 and December 31, 2009, the Company had $13.3 million and $0.1 million, respectively, of proceeds from real estate sales classified as restricted cash in Other Assets, which were deposited with an LKE intermediary.
JOINT VENTURE INVESTMENT
The Company owns an interest in Matariki Forestry Group (“Matariki”), a joint venture (“JV”) that owns or leases approximately 0.3 million acres of New Zealand timberlands. In addition to this investment, Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary of Rayonier, serves as the manager of the JV forests and operates a log trading business.
Rayonier’s investment in the JV is accounted for using the equity method of accounting. Income from the JV is reported in the Timber segment as operating income since the Company manages the forests and its JV interest is an extension of the Company’s operations. A portion of Rayonier’s investment is recorded at historical cost which generates a difference between the book value of the Company’s investment and its proportionate share of the JV’s net assets. The difference represents the Company’s unrecognized gain from RNZ’s sale of timberlands to the JV in 2005. The deferred gain is recognized on a straight-line basis over the estimated number of years the JV expects to harvest the timberlands.
5
In the third quarter of 2008, Rayonier’s Board of Directors approved a plan to offer to sell the Company’s 40 percent interest in the JV as well as the operations of RNZ. As a result, the operating results of the JV and RNZ were segregated from continuing operations in the Condensed Consolidated Statements of Income and Comprehensive Income and reported as discontinued operations.
In the second quarter of 2009, as a result of distressed capital markets and the weak global economic conditions, Rayonier and its joint venture partners decided to discontinue the sale process and continue with ongoing operations. Accordingly, the operating results of the joint venture are included in continuing operations in the Condensed Consolidated Statements of Income and Comprehensive Income for all periods presented.
In February 2010, the JV sold a 35 percent interest in the JV to a new investor for NZ$167 million. Matariki issued new shares to the investor and used the proceeds entirely to pay down a portion of its outstanding NZ$367 million debt. Upon closing, Rayonier’s ownership interest in Matariki declined from 40 percent to 26 percent. As a result of this transaction, results for 2010 include a gain of $11.5 million, net of $0.9 million in tax, or $0.14 per diluted share.
An analysis of shareholders’ equity for the nine months ended September 30, 2010 and the year ended December 31, 2009 is shown below (share amounts not in thousands):
Balance, December 31, 2008
Dividends ($2.00 per share)
Issuance of shares under incentive stock plans
Equity portion of convertible debt
Warrants and hedge, net
Stock-based compensation
Excess tax benefit on stock-based compensation
Net gain from pension and postretirement plans
Foreign currency translation adjustment
Balance, December 31, 2009
Dividends ($1.50 per share)
Amortization of pension and postretirement benefit costs
Balance, September 30, 2010
6
SEGMENT INFORMATION
Rayonier operates in four reportable business segments: Timber, Real Estate, Performance Fibers, and Wood Products. Timber sales include all activities that relate to the harvesting of timber. Real Estate sales include all property sales, including those designated for higher and better use (“HBU”). The assets of the Real Estate segment include HBU property held by the Company’s real estate subsidiary, TerraPointe LLC. The Performance Fibers segment includes two major product lines, cellulose specialties and absorbent materials. The Wood Products segment is comprised of lumber operations. The Company’s remaining operations include harvesting and selling timber acquired from third parties (log trading). These operations are reported in “Other Operations.” Sales between operating segments are made based on fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. The Company evaluates financial performance based on the operating income of the segments.
Operating income (loss) as presented in the Condensed Consolidated Statements of Income and Comprehensive Income is equal to segment income (loss). Certain income (loss) items in the Condensed Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include gains (losses) from certain asset dispositions, interest income (expense), miscellaneous income (expense) and income tax (expense) benefit, are not considered by Company management to be part of segment operations.
Total assets, sales, operating income (loss) and depreciation, depletion and amortization by segment including Corporate were as follows:
ASSETS
Timber
Real Estate
Performance Fibers
Wood Products
Other Operations
Corporate and other
TOTAL
Intersegment Eliminations
7
OPERATING INCOME (LOSS)
Three and nine months ended September 30, 2009 include $55.8 million and $141.8 million relating to the AFMC. For additional information, see Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”).
Includes a gain of $12.4 million from the sale of a portion of the Company’s interest in its New Zealand joint venture. See Note 6 –Joint Venture Investment for additional information.
DEPRECIATION, DEPLETIONAND AMORTIZATION
FAIR VALUE MEASUREMENTS
The following table presents the carrying amount and estimated fair values of financial instruments held by the Company at September 30, 2010 and December 31, 2009, using market information and what the Company believes to be appropriate valuation methodologies under generally accepted accounting principles:
Asset (liability)
Short-term debt
Long-term debt
8
Rayonier uses the following methods and assumptions in estimating the fair value of its financial instruments:
Cash and cash equivalents — The carrying amount is equal to fair market value.
Debt — The Company’s short-term bank loans and floating rate debt approximate fair value. The fair value of fixed rate long-term debt is based upon quoted market prices for debt with similar terms and maturities.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
Asset
Investment in special-purpose entity
The fair value of the investment in the special-purpose entity is determined by summing the discounted value of future principal and interest payments that Rayonier will receive from the special-purpose entity. The interest rate of a similar instrument is used to determine the discounted value of the payments.
Variable Interest Entity
Rayonier holds a variable interest in a bankruptcy-remote, limited liability subsidiary (“special-purpose entity”) which was created in 2004 when Rayonier monetized a $25.0 million installment note and letter of credit received in connection with a timberland sale. The Company contributed the note and a letter of credit to the special-purpose entity and using the installment note and letter of credit as collateral, the special-purpose entity issued $22.6 million of 15-year Senior Secured Notes and remitted cash of $22.6 million to the Company. There are no restrictions that relate to the transferred financial assets. Rayonier maintains a $2.6 million interest in the entity and receives immaterial cash payments equal to the excess of interest received on the installment note over the interest paid on the Senior Secured Notes. The Company’s interest is recorded at fair value and is included in “Other Assets” in the Condensed Consolidated Balance Sheets. In addition, the Company calculated and recorded a de minimus guarantee liability to reflect its obligation of up to $2.6 million under a make-whole agreement pursuant to which it guaranteed certain obligations of the entity. This guarantee obligation is also collateralized by the letter of credit. The Company’s interest in the entity, together with the make-whole agreement, represents the maximum exposure to loss as a result of the Company’s involvement with the special-purpose entity. Upon maturity of the Senior Secured Notes in 2019 and termination of the special purpose entity, Rayonier will receive the remaining $2.6 million of cash. The Company determined, based upon an analysis under the variable interest entity guidance, that it does not have the power to direct activities that most significantly impact the entity’s economic success. Therefore, Rayonier is not the primary beneficiary and is not required to consolidate the entity.
GUARANTEES
The Company provides financial guarantees as required by creditors, insurance programs, and state and foreign governmental agencies. As of September 30, 2010, the following financial guarantees were outstanding:
Standby letters of credit (a)
Guarantees (b)
Surety bonds (c)
Total
Approximately $39 million of the standby letters of credit serve as credit support for industrial revenue bonds. The remaining letters of credit support obligations under various insurance related agreements, primarily workers’ compensation and pollution liability policy requirements. These letters of credit expire at various dates during 2010 and 2011 and will be renewed as required.
In conjunction with a timberland sale and note monetization in the first quarter of 2004, the Company issued a make-whole agreement pursuant to which it guaranteed $2.6 million of obligations of a special-purpose entity that was established to complete the monetization. At September 30, 2010, the Company has recorded a de minimus liability to reflect the fair market value of its obligation to perform under the make-whole agreement.
9
Rayonier issued surety bonds primarily to secure timber in the State of Washington and to provide collateral for the Company’s workers’ compensation self-insurance program in Washington and Georgia. These surety bonds expire at various dates during 2010, 2011 and 2014, and are expected to be renewed as required.
LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS
An analysis of activity in the liabilities for dispositions and discontinued operations for the nine months ended September 30, 2010 and the year ended December 31, 2009, is as follows:
Balance, January 1
Expenditures charged to liabilities
Increase to liabilities
Less: Current portion
Non-current portion
Subject to the factors described in the next paragraph of this footnote and in Note 16 – Liabilities for Dispositions and Discontinued Operations in the 2009 Annual Report on Form 10-K, the Company believes established liabilities are sufficient for costs expected to be incurred over the next 20 years with respect to its dispositions and discontinued operations. Remedial actions for these sites vary, but can include, among other remedies, on-site (and in certain cases off-site) removal or treatment of contaminated soils and sediments, recovery and treatment/remediation of groundwater, and other remediation and/or control of contamination sources.
In addition, the Company is exposed to the risk of reasonably possible additional losses in excess of the established liabilities. As of September 30, 2010, it is estimated that this amount could range up to $36 million and arises from uncertainty over the availability or effectiveness of certain remediation technologies, additional or different contamination that may be discovered, development of new or improved environmental remediation technologies, changes in applicable law and the exercise of discretion in interpretation of applicable law and regulations by governmental agencies.
For additional information on the Company’s environmental liabilities refer to Note 16 – Liabilities for Dispositions and Discontinued Operations in the 2009 Annual Report on Form 10-K.
CONTINGENCIES
Rayonier is engaged in various legal actions, including certain environmental proceedings. The Company has been named as a defendant in various other lawsuits and claims arising in the normal course of business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, it has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance and general liability. These other lawsuits and claims, either individually or in the aggregate, are not expected to have a material effect on the Company’s financial position, results of operations, or cash flow.
There have been no material changes in the status of the other specific matters referenced in Note 16 – Liabilities for Dispositions and Discontinued Operations in the 2009 Annual Report on Form 10-K.
EMPLOYEE BENEFIT PLANS
The Company has four qualified non-contributory defined benefit pension plans covering the majority of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. Three of the qualified plans, as well as the unfunded plan, are closed to new participants. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.
10
The net periodic benefit costs of the Company’s pension and postretirement plans (medical and life insurance) are shown in the following table:
Components of Net Periodic Benefit Cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost
Amortization of plan amendment
Amortization of losses
Net periodic benefit cost
The Company made no discretionary contributions to the pension plans during the nine months ended September 30, 2010.
In October 2010, Rayonier made a $50 million discretionary pension contribution in order to improve funded status. The Company does not expect to make any additional discretionary contributions in 2010.
DEBT
In March 2010, TRS borrowed $75 million under a five-year term loan agreement with a group of banks at LIBOR plus 275 basis points. There were no other significant changes to the Company’s outstanding debt as reported in Note 13 – Debt of the Company’s 2009 Annual Report on Form 10-K.
11
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated Other Comprehensive Income (Loss) was comprised of the following:
Unrecognized components of employee benefit plans, net of tax
CONSOLIDATING FINANCIAL STATEMENTS
In October 2007, TRS issued $300 million of 3.75% Senior Exchangeable Notes due 2012, and in August 2009 TRS issued $172.5 million of 4.50% Senior Exchangeable Notes due 2015. The notes for both transactions are guaranteed by Rayonier and are non-callable. In connection with these exchangeable notes, the Company provides the following condensed consolidating financial information in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in wholly-owned subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of Rayonier incurred for the benefit of its subsidiaries.
On July 29, 2010, Rayonier Inc. reorganized its operating structure by creating a new wholly owned operating entity Rayonier Operating Company LLC (“ROC”), and entering into a contribution agreement under which Rayonier Inc. contributed all assets and liabilities to ROC. As part of this agreement, ROC guarantees the TRS notes mentioned above. Rayonier Inc.’s guarantee of the TRS notes was unchanged by the transaction. Accordingly, the Company has revised its presentation of previously reported consolidating financial statements to reflect ROC as a subsidiary guarantor.
12
(Dollar amounts in thousands unless otherwise stated)
Other operating expense (income), net
Equity in (loss) income of New Zealand joint venture
OPERATING (LOSS) INCOME
Interest and miscellaneous income (expense), net
Equity in income from subsidiaries
Income tax (expense) benefit
13
Interest income (expense)
14
OPERATING (LOSS) INCOME BEFORE GAIN ON SALE OF A PORTION OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE
15
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Accounts receivable, less allowance for doubtful accounts
Intercompany interest receivable
Total current assets
NET PROPERTY, PLANT AND EQUIPMENT
INVESTMENT IN SUBSIDIARIES
INTERCOMPANY/NOTES RECEIVABLE
Current liabilities for dispositions and discontinued operations
Total current liabilities
NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS
PENSION AND OTHER POSTRETIREMENT BENEFITS
INTERCOMPANY PAYABLE
TOTAL LIABILITIES
17
NON-CURRENT LIABILITIES FOR DISPOSITIONS ANDDISCONTINUED OPERATIONS
18
Purchase of timberlands
Purchase of real estate
Distributions to parent
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
Change in cash and cash equivalents
19
Investment in Subsidiaries
Distributions to / from Parent
20
When we refer to “we,” “us,” “our,” “the Company,” or “Rayonier,” we mean Rayonier Inc. and its consolidated subsidiaries. References herein to “Notes to Financial Statements” refer to the Notes to the Condensed Consolidated Financial Statements of Rayonier Inc. included in Item 1 of this Report.
The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors which may affect future results. Our MD&A should be read in conjunction with the 2009 Annual Report on Form 10-K.
Forward - Looking Statements
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to Rayonier’s future financial and operational performance, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “anticipate” and other similar language.
Forward looking statements are subject to future events, risks and uncertainties (many of which are beyond our control or are currently unknown to us) as well as potentially inaccurate estimates, assumptions and judgments by us that could cause actual results to differ materially from results contemplated by our forward-looking statements. Some of these events, risks and uncertainties are set forth in Item 1A – Risk Factors in our 2009 Annual Report on Form 10-K. Forward-looking statements are not guarantees of future performance and undue reliance should not be placed on these statements.
Critical Accounting Policies and Use of Estimates
The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates under different conditions. For a full description of our critical accounting policies, see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2009 Annual Report on Form 10-K.
Segments
We are a leading international forest products company primarily engaged in timberland management, the sale and entitlement of real estate, and the production and sale of high value specialty cellulose fibers and fluff pulp. We operate in four reportable business segments: Timber, Real Estate, Performance Fibers, and Wood Products. The Timber sales include all activities which relate to the harvesting of timber. Real Estate sales include all property sales, including those designated for higher and better use (“HBU”). The assets of the Real Estate segment include HBU property held by the Company’s real estate subsidiary, TerraPointe LLC. The Performance Fibers segment includes two major product lines, cellulose specialties and absorbent materials. The Wood Products segment is comprised of lumber operations. Our remaining operations include harvesting and selling timber acquired from third parties (log trading). These operations are combined and reported in “Other Operations.” Sales between operating segments are made based on fair market value, and intercompany sales, purchases and profits or losses are eliminated in consolidation.
We evaluate financial performance based on the operating income of the segments. Operating income, as presented in the Condensed Consolidated Statements of Income and Comprehensive Income, is equal to segment income (loss). Certain income (loss) items in the Condensed Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include gains (losses) from certain asset dispositions, interest income (expense), miscellaneous income (expense) and income tax (expense) benefit, are not considered by Company management to be part of segment operations.
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Results of Operations, Three and Nine Months Ended September 30, 2010 Compared to Three and Nine Months Ended September 30, 2009.
Financial Information (in millions)
Sales
Development
Rural
Non-Strategic Timberlands
Total Real Estate
Cellulose specialties
Absorbent materials
Total Performance Fibers
Other operations
Total Sales
Operating Income (Loss)
Corporate and other expenses / eliminations (1)
Total Operating Income
Interest Expense
Interest / Other income
Net Income
Diluted Earnings Per Share
The nine months ended September 30, 2010 includes a first quarter gain of $12.4 million from the sale of a portion of the Company’s interest in its New Zealand joint venture. See Note 6 – Joint Venture Investment for additional information. The three and nine months ended September 30, 2009 include $55.8 million and $141.8 million, respectively, related to the alternative fuel mixture credit (“AFMC”). See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information.
22
TIMBER
Sales (in millions)
Three months ended September 30,
Eastern
Western
New Zealand
Nine months ended September 30,
In the Eastern region, average prices rose 15 percent and 28 percent in the three and nine months ended September 30, 2010 compared to the prior year periods, respectively, primarily from restricted timber supply, strong pulpwood demand and wet weather conditions in the first half of the year. Volumes declined 27 percent and 22 percent in third quarter and year-to-date 2010 from the prior year periods, respectively, as we returned to more normalized thinning volumes. Year-to-date volumes were also unfavorably impacted by the weather-related restricted hardwood supply in the first quarter.
In the Western region, prices increased 42 percent and 36 percent in the three and nine months ended September 30, 2010 from the respective 2009 periods reflecting improved export demand. Overall volumes declined eight percent for third quarter but increased five percent for the nine months as we accelerated the year’s harvest schedule to the first half to capitalize on increased prices. The sales impact of the year-to-date volume increase also reflects a mix shift to higher-priced delivered logs.
New Zealand sales represent timberland management fees for services provided to the joint venture, of which Rayonier has a 26 percent equity interest.
Operating Income (Loss) (in millions)
New Zealand/Other
Total Operating Income (Loss)
In the Eastern region, third quarter and year-to-date operating income improved from the 2009 periods as higher sales prices more than offset lower volumes. The 2010 periods were also favorably impacted by lower costs primarily from depletion and logging expenses due to geographic sales mix and improved production and transportation costs.
In the Western region, operating income in the third quarter and year-to-date improved from the prior year periods as higher prices more than offset increased logging costs and an unfavorable shift in sales mix.
New Zealand operating income primarily represents equity earnings related to the joint venture’s timber activities which have increased from the prior year periods primarily due to improved export demand.
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REAL ESTATE
Operating Income (in millions)
For third quarter 2010, sales and operating income improved from 2009 levels primarily due to higher volumes. Third quarter 2010 included 10,000 acres of rural and 13,000 acres of non-strategic timberland sales compared to 8,000 acres and 3,000 acres in third quarter 2009, respectively. Although non-strategic prices declined in third quarter 2010 from the prior year period mainly due to the mix of properties sold, the impact was partially offset by lower basis in properties sold.
Year-to-date, sales and operating income were consistent with 2009 results. While rural acres sold increased 27 percent year-to-date from the prior year period, rural prices decreased primarily due to a change in geographic mix. Non-strategic timberland acres sold year-to-date declined 18 percent from the prior year while prices and costs increased due to site specific characteristics.
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PERFORMANCE FIBERS
Cellulose specialties sales improved for the three and nine months ended September 30, 2010 as volume increased seven percent and 11 percent, respectively, from the prior year periods reflecting strong demand. While prices were one percent higher for the quarter, year-to-date prices were two percent below the prior year period due to the removal of a cost-based surcharge in third quarter 2009.
Absorbent materials sales increased for the quarter and year-to-date as prices rose 41 percent and 17 percent, respectively, mainly due to tight supply. Sales volumes declined by one percent and ten percent for the three and nine months, respectively, due to the timing of customer orders, a shift in production to cellulose specialties and production issues.
Operating income improved in both 2010 periods primarily due to increased cellulose specialties volumes and higher absorbent materials prices. Third quarter 2010 was unfavorably impacted by higher wood, chemical and transportation costs, while year-to-date costs continued to be favorable to 2009 as lower chemical and energy costs more than offset higher wood costs.
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WOOD PRODUCTS
Operating (Loss) Income (in millions)
Total Operating (Loss) Income
Sales and operating income improved from the prior year as prices rose five percent and 29 percent for the three and nine months ended September 30, 2010. Supply constraints caused by wet weather in the first half of the year began easing in the third quarter, however prices still remained above prior year.
Although below historical averages, volumes increased five percent and eight percent in third quarter and year-to-date 2010 from the 2009 periods as we increased production to capitalize on improved pricing. Operating income was unfavorably impacted by higher costs in both 2010 periods, primarily due to increased conversion costs in third quarter and higher wood costs on a year-to-date basis.
OTHER OPERATIONS
Sales and operating results improved from the prior year periods primarily due to foreign exchange gains and higher earnings from log trading.
Corporate and Other Expenses
The nine months ended September 30, 2010 results include a first quarter gain of $12 million from the sale of a portion of the Company’s interest in its New Zealand joint venture. See Note 6 – Joint Venture Investment for additional information. The three and nine months ended September 30, 2009 results include $56 million and $142 million, respectively, relating to the AFMC. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information. Excluding these special items, corporate and other expenses were $8 million and $5 million for the three months ended September 30, 2010 and 2009, respectively, and $21 million and $18 million for the nine months ended September 30, 2010 and 2009, respectively. The three months ended September 30, 2009 benefited from a $3 million favorable insurance settlement. The increase in expense for the nine months ended September 30, 2010 from the prior year period primarily reflects higher incentive compensation accruals.
Interest Expense and Other Income, Net
For the three and nine months ended September 30, 2010, interest and other expenses were comparable to the prior year periods.
Income Tax Expense
Third quarter effective tax rates before discrete items were 19.2 percent and 25.2 percent in 2010 and 2009, respectively. For the nine months, the effective tax rates were 18.3 percent and 22.1 percent in 2010 and 2009, respectively. The decreased rates in 2010 were due to proportionately higher earnings from the REIT.
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Two recent tax developments, the cellulosic biofuel producer credit (“CBPC”) and the Small Business Jobs Act, are expected to benefit the Company in future periods.
In October 2010 the Internal Revenue Service (“IRS”) released clarification that both the AFMC and CBPC can be claimed in the same year for different volumes of black liquor. The Company has applied for the cellulosic biofuel producer registration. If IRS approval is received, the CBPC would increase fourth quarter 2010 net income by approximately $23 million, or $0.28 per share. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information.
In September 2010 the Small Business Jobs Act was enacted, which has a provision that eliminates the built-in gains tax for Rayonier in 2011. The built-in gains tax was approximately $9 million in 2009 and is expected to be approximately $6 million in 2010.
Outlook
Our actions to create value are driving strong cash flows and operating results in 2010. We expect to be at the upper end of our guidance for earnings of $2.05 to $2.20 per share for 2010, excluding special items, and CAD of $360 million to $380 million.
Liquidity and Capital Resources
Historically, our operations have generally produced consistent cash flows and required limited capital resources. Short-term borrowings have helped fund cyclicality and seasonality in working capital needs and long-term debt has been used to fund major acquisitions.
$75 million Five-Year Term Loan Agreement
In March 2010, TRS borrowed $75 million under a five-year term loan agreement with a group of banks at LIBOR plus 275 basis points. We expect to use these funds for general corporate purposes.
Summary of Liquidity and Financing Commitments (in millions of dollars)
Cash and cash equivalents (a)
Total debt
Shareholders’ equity
Total capitalization (total debt plus equity)
Debt to capital ratio
Cash and cash equivalents consisted primarily of time deposits with original maturities of 90 days or less.
Cash Provided by Operating Activities (in millions of dollars)
Cash provided by operating activities for the nine months ended September 30, 2010 increased primarily due to a cash refund of $189 million related to the AFMC received in April 2010. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information. Excluding the impact of the AFMC, cash provided by operating activities increased by approximately $70 million primarily due to improved operating results.
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Cash Used for Investing Activities (in millions of dollars)
Cash used for investing activities increased primarily due to a planned increase in capital expenditures for cost reduction and efficiency projects as well as environmental expenditures at our Jesup, Georgia Performance Fibers mill required under a 2008 consent decree. Additionally, restricted cash increased over prior year due to the timing of like-kind exchange (“LKE”) transactions.
Cash Used for Financing Activities (in millions of dollars)
Cash used for financing activities decreased mainly due to higher cash proceeds on stock options exercised.
Expected 2010 Expenditures
As previously announced, we increased our quarterly dividend by eight percent to $0.54 per share in fourth quarter 2010, which will raise our quarterly dividend payment to approximately $43 million, compared to $40 million in the third quarter. Income tax payments totaled $5 million during the first nine months of 2010 compared to payments of $10 million in the same period 2009. Cash payments for income taxes during 2010 are anticipated to be between $10 million and $14 million. The expected 2010 tax payments include a benefit from the AFMC and CBPC. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information.
A cash refund of $189 million related to the AFMC was received in April 2010. The proceeds from the AFMC were partially used to increase 2010 pension contributions and capital expenditures. We made no discretionary pension contributions in the first nine months of 2010; however, we made a discretionary pension contribution of $50 million on October 20, 2010. We do not expect to make any additional discretionary contributions in 2010. Capital expenditures in 2010 are forecasted to be between $140 million and $145 million compared to $92 million in 2009.
Expenditures related to dispositions and discontinued operations were $6 million for the first nine months of 2010 and 2009; full year 2010 expenditures of approximately $10 million are anticipated.
Performance and Liquidity Indicators
The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures of financial results: Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“EBITDA”) and Adjusted Cash Available for Distribution (“Adjusted CAD”). These measures are not defined by Generally Accepted Accounting Principles (“GAAP”) and the discussion of EBITDA and Adjusted CAD is not intended to conflict with or change any of the GAAP disclosures described above. Management considers these measures to be important to estimate the enterprise and shareholder values of the Company as a whole and of its core segments, and for allocating capital resources. In addition, analysts, investors and creditors use these measures when analyzing our operating performance, financial condition and cash generating ability. Management uses EBITDA as a performance measure and Adjusted CAD as a liquidity measure. EBITDA is defined by the Securities and Exchange Commission. Adjusted CAD as defined, however, may not be comparable to similarly titled measures reported by other companies.
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We reconcile EBITDA to Net Income for the consolidated Company and Operating Income for the Segments, as those are the nearest GAAP measures for each. Below is a reconciliation of Net Income to EBITDA for the respective periods (in millions of dollars):
Interest, net
EBITDA
EBITDA by segment is a critical valuation measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. EBITDA by segment for the respective periods was as follows (millions of dollars):
EBITDA by Segment
Three and nine months ended September 30, 2009 results include $55.8 million and $141.8 million, respectively, related to the AFMC. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information.
Nine months ended September 30, 2010 results include a gain of $12.4 million from the sale of a portion of the Company’s interest in the New Zealand joint venture. See Note 6 – Joint Venture Investment for additional information.
For the three months ended September 30, 2010, EBITDA was $20 million below the prior year period primarily due to the inclusion of $56 million in the 2009 results related to the AFMC. Excluding the AFMC, EBITDA was $36 million above prior year primarily due to higher operating results.
For the nine months ended September 30, 2010, EBITDA was $74 million below the prior year period primarily due to the inclusion of $142 million in the 2009 results related to the AFMC. Excluding the AFMC, 2010 EBITDA was $68 million above prior year primarily due to higher operating results and a $12 million gain from the sale of a portion of Rayonier’s interest in its New Zealand joint venture.
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The following tables reconcile Operating Income by segment to EBITDA by segment (millions of dollars):
Three Months Ended September 30, 2010
Operating income (loss)
Add: Depreciation, depletionand amortization
Three Months Ended September 30, 2009
Nine Months Ended September 30, 2010
Nine Months Ended September 30, 2009
Operating (loss) income
Adjusted CAD is a non-GAAP measure of cash generated during a period which is available for dividend distribution, repurchasing common shares, debt reduction and for strategic acquisitions net of associated financing (e.g. realizing LKE tax benefits). We define Cash Available for Distribution (“CAD”) as Cash Provided by Operating Activities adjusted for capital spending, the tax benefits associated with certain strategic acquisitions, the change in committed cash, and other items which include cash provided by discontinued operations, proceeds from matured energy forward contracts, excess tax benefits on stock based compensation and the change in capital expenditures purchased on account. Committed cash represents outstanding checks that have been drawn on our zero balance bank accounts but have not been paid. In compliance with Securities and Exchange Commission requirements for non-GAAP measures, we reduce CAD by mandatory debt repayments which results in the measure entitled “Adjusted CAD.”
Below is a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars):
Cash used for investing activities
Cash used for financing activities
Cash provided by operating activities
Change in committed cash
CAD
Mandatory debt repayments
Adjusted CAD
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For the nine months ended September 30, 2010, adjusted CAD was $235 million higher than the prior year period primarily due to the receipt of $189 million related to the AFMC and higher operating results. Adjusted CAD generated in any period is not necessarily indicative of amounts that may be generated in future periods.
Liquidity Facilities
We have a $250 million unsecured revolving credit facility at an interest rate of LIBOR plus 40 basis points. The facility expires in August 2011. At September 30, 2010, the available borrowing capacity was $245 million.
In connection with our installment notes, $75 million five-year term loan agreement, and $250 million revolving credit facility, covenants must be met, including ratios based on the covenant definition of EBITDA, Funds from Operations, and ratios of cash flows to fixed charges. At September 30, 2010, we are in compliance with all of these covenants.
In addition to these financial covenants, the installment notes, five-year term loan agreement and credit facility include customary covenants that limit the incurrence of debt, the disposition of assets, and the making of certain payments between Rayonier Forest Resources, L.P. (“RFR”) and Rayonier among others. An asset sales covenant in the RFR installment note-related agreements requires us, subject to certain exceptions, to either reinvest cumulative timberland sales proceeds for individual sales greater than $10 million (the “excess proceeds”) in timberland-related investments and activities or, once the amount of excess proceeds not reinvested exceeds $50 million, to offer the note holders prepayment of the notes ratably in the amount of the excess proceeds. As of December 31, 2009, the excess proceeds were $19.8 million. During March 2010, the excess proceeds exceeded the $50 million limit and as a result, repayment of $53.0 million was offered to the note holders. The note holders declined the offer and the excess proceeds were reset to zero. As of September 30, 2010, the excess proceeds were $12.2 million.
Contractual Financial Obligations and Off-Balance Sheet Arrangements
We have no material changes to the Contractual Financial Obligations table as presented in Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2009 Annual Report on Form 10-K. See Note 10 — Guarantees for details on the letters of credit, surety bonds and guarantees as of September 30, 2010.
For information on new or recently adopted accounting pronouncements, see Note 1 – Basis of Presentation and New Accounting Pronouncements.
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Sales Volumes by Segment:
Western region, in millions of board feet
Eastern region, in thousands of short green tons
Acres sold
Non-strategic timberlands
Sales Volume
Cellulose specialties, in thousands of metric tons
Absorbent materials, in thousands of metric tons
Lumber
Sales volume, in millions of board feet
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Market and Other Economic Risks
Our exposures to market risk have not changed materially since December 31, 2009. For quantitative and qualitative disclosures about market risk, see Item 7A – Quantitative and Qualitative Disclosures about Market Risk in our 2009 Annual Report on Form 10-K.
Rayonier management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)), are designed with the objective of ensuring that information required to be disclosed by the Company in reports filed under the Exchange Act, such as this quarterly report on Form 10-Q, is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Because of the inherent limitations in all control systems, no control evaluation can provide absolute assurance that all control exceptions and instances of fraud have been prevented or detected on a timely basis. Even systems determined to be effective can provide only reasonable assurance that their objectives are achieved.
Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that the design and operation of the disclosure controls and procedures were effective as of September 30, 2010.
In the quarter ended September 30, 2010, based upon the evaluation required by paragraph (d) of SEC Rule 13a-15, there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting.
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There were no material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2009, except as noted below. For a full description of these risk factors, please refer to Item 1A – Risk Factors, in the 2009 Annual Report on Form 10-K.
The following has been added as a risk factor:
Cellulosic biofuel producer credit.
The Company has disclosed information concerning its eligibility for the cellulosic biofuel producer credit. See Note 2 – Alternative Fuel Mixture Credit (“AFMC”) and Cellulosic Biofuel Producer Credit (“CBPC”) for additional information. The tax credit is based on the burning of black liquor used in the Company’s performance fibers business in 2009. There can be no assurance that the IRS will approve the Company’s eligibility for, and amount of, such tax credit.
Issuer Purchases of Equity Securities
The following table provides information regarding our purchases of Rayonier common stock during the quarter ended September 30, 2010:
Period
July 1 to July 31
August 1 to August 31
September 1 to September 30
Repurchased to satisfy the minimum tax withholding requirements related to the vesting of restricted shares under the 2004 Rayonier Incentive Stock Plan.
See Item 5 – Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our 2009 Annual Report on Form 10-K for additional information regarding our Common Share repurchase program.
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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.
Hans E. Vanden Noort
Senior Vice President and Chief Financial Officer (Principal Accounting Officer)
October 28, 2010
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