Item 1. Financial Statements
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
SALES
(NOTE 2)
|
|
$200,890
|
|
|
|
$184,419
|
|
|
|
$649,991
|
|
|
|
$579,874
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
Cost of sales
|
(143,261
|
)
|
|
(136,983
|
)
|
|
(466,167
|
)
|
|
(418,421
|
)
|
Selling and general expenses
|
(10,800
|
)
|
|
(9,936
|
)
|
|
(31,304
|
)
|
|
(29,771
|
)
|
Other operating (loss) income, net (Note 15)
|
(451
|
)
|
|
1,771
|
|
|
2,577
|
|
|
3,744
|
|
|
(154,512
|
)
|
|
(145,148
|
)
|
|
(494,894
|
)
|
|
(444,448
|
)
|
OPERATING INCOME
|
46,378
|
|
|
39,271
|
|
|
155,097
|
|
|
135,426
|
|
Interest expense
|
(7,838
|
)
|
|
(8,553
|
)
|
|
(23,992
|
)
|
|
(25,600
|
)
|
Interest and other miscellaneous income, net
|
495
|
|
|
1,128
|
|
|
4,020
|
|
|
1,650
|
|
INCOME BEFORE INCOME TAXES
|
39,035
|
|
|
31,846
|
|
|
135,125
|
|
|
111,476
|
|
Income tax expense (
Note 8
)
|
(8,396
|
)
|
|
(3,043
|
)
|
|
(22,443
|
)
|
|
(16,817
|
)
|
NET INCOME
|
30,639
|
|
|
28,803
|
|
|
112,682
|
|
|
94,659
|
|
Less: Net income attributable to noncontrolling interest
|
(7,207
|
)
|
|
(4,115
|
)
|
|
(12,453
|
)
|
|
(9,968
|
)
|
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
|
23,432
|
|
|
24,688
|
|
|
100,229
|
|
|
84,691
|
|
OTHER COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of income tax expense of $0, $0, $0 and $0
|
(10,527
|
)
|
|
(7,317
|
)
|
|
(30,599
|
)
|
|
16,599
|
|
Cash flow hedges, net of income tax benefit (expense) of $401, ($614), $2,012 and $534
|
4,142
|
|
|
(2,162
|
)
|
|
21,285
|
|
|
(1,597
|
)
|
Amortization of pension and postretirement plans, net of income tax expense of $711, $0, $711 and $0
|
(542
|
)
|
|
116
|
|
|
(204
|
)
|
|
349
|
|
Total other comprehensive (loss) income
|
(6,927
|
)
|
|
(9,363
|
)
|
|
(9,518
|
)
|
|
15,351
|
|
COMPREHENSIVE INCOME
|
23,712
|
|
|
19,440
|
|
|
103,164
|
|
|
110,010
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
(4,533
|
)
|
|
(2,289
|
)
|
|
(4,004
|
)
|
|
(13,537
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC.
|
|
$19,179
|
|
|
|
$17,151
|
|
|
|
$99,160
|
|
|
|
$96,473
|
|
EARNINGS PER COMMON SHARE (
Note 11
)
|
|
|
|
|
|
|
|
Basic earnings per share attributable to Rayonier Inc.
|
|
$0.18
|
|
|
|
$0.19
|
|
|
|
$0.78
|
|
|
|
$0.67
|
|
Diluted earnings per share attributable to Rayonier Inc.
|
|
$0.18
|
|
|
|
$0.19
|
|
|
|
$0.77
|
|
|
|
$0.67
|
|
|
|
|
|
|
|
|
|
Dividends declared per share
|
|
$0.27
|
|
|
|
$0.25
|
|
|
|
$0.79
|
|
|
|
$0.75
|
|
See Notes to Consolidated Financial Statements.
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
ASSETS
|
CURRENT ASSETS
|
|
|
|
Cash and cash equivalents
|
|
$146,259
|
|
|
|
$112,653
|
|
Accounts receivable, less allowance for doubtful accounts of $8 and $23
|
43,089
|
|
|
27,693
|
|
|
26,950
|
|
|
24,141
|
|
Prepaid expenses
|
15,849
|
|
|
15,993
|
|
Other current assets
|
2,443
|
|
|
3,047
|
|
Total current assets
|
234,590
|
|
|
183,527
|
|
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
|
2,386,949
|
|
|
2,462,066
|
|
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT
|
79,747
|
|
|
80,797
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
Land
|
4,131
|
|
|
3,962
|
|
Buildings
|
23,149
|
|
|
23,618
|
|
Machinery and equipment
|
4,427
|
|
|
4,440
|
|
Construction in progress
|
635
|
|
|
627
|
|
Total property, plant and equipment, gross
|
32,342
|
|
|
32,647
|
|
Less — accumulated depreciation
|
(9,540
|
)
|
|
(9,269
|
)
|
Total property, plant and equipment, net
|
22,802
|
|
|
23,378
|
|
|
45,418
|
|
|
59,703
|
|
OTHER ASSETS
|
72,709
|
|
|
49,010
|
|
TOTAL ASSETS
|
|
$2,842,215
|
|
|
|
$2,858,481
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
CURRENT LIABILITIES
|
|
|
|
Accounts payable
|
|
$22,406
|
|
|
|
$25,148
|
|
Current maturities of long-term debt (
Note 5
)
|
—
|
|
|
3,375
|
|
Accrued taxes
|
7,818
|
|
|
3,781
|
|
Accrued payroll and benefits
|
8,320
|
|
|
9,662
|
|
Accrued interest
|
7,963
|
|
|
5,054
|
|
Deferred revenue
|
13,867
|
|
|
9,721
|
|
Other current liabilities
|
21,249
|
|
|
11,807
|
|
Total current liabilities
|
81,623
|
|
|
68,548
|
|
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS (
NOTE 5
)
|
972,426
|
|
|
1,022,004
|
|
PENSION AND OTHER POSTRETIREMENT BENEFITS (
NOTE 14
)
|
28,925
|
|
|
31,905
|
|
OTHER NON-CURRENT LIABILITIES
|
58,142
|
|
|
43,084
|
|
COMMITMENTS AND CONTINGENCIES (
NOTES 7
and
9
)
|
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
|
Common Shares, 480,000,000 shares authorized,129,467,237 and 128,970,776 shares issued and outstanding
|
882,421
|
|
|
872,228
|
|
Retained earnings
|
705,531
|
|
|
707,378
|
|
Accumulated other comprehensive income (
Note 18
)
|
12,348
|
|
|
13,417
|
|
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY
|
1,600,300
|
|
|
1,593,023
|
|
Noncontrolling interest
|
100,799
|
|
|
99,917
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
1,701,099
|
|
|
1,692,940
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$2,842,215
|
|
|
|
$2,858,481
|
|
See Notes to Consolidated Financial Statements.
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
(Dollars in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
Retained
Earnings
|
|
Accumulated
Other
Comprehensive
Income
|
|
Non-controlling Interest
|
|
Shareholders’
Equity
|
|
Shares
|
|
Amount
|
|
Balance, December 31, 2016
|
122,904,368
|
|
|
|
$709,867
|
|
|
|
$700,887
|
|
|
|
$856
|
|
|
|
$85,142
|
|
|
|
$1,496,752
|
|
Cumulative-effect adjustment due to adoption of ASU No. 2016-16
|
—
|
|
|
—
|
|
|
(14,365
|
)
|
|
—
|
|
|
—
|
|
|
(14,365
|
)
|
Net income
|
—
|
|
|
—
|
|
|
148,842
|
|
|
—
|
|
|
12,737
|
|
|
161,579
|
|
Dividends ($1.00 per share)
|
—
|
|
|
—
|
|
|
(127,986
|
)
|
|
—
|
|
|
—
|
|
|
(127,986
|
)
|
Issuance of shares under incentive stock plans
|
322,314
|
|
|
4,751
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,751
|
|
Stock-based compensation
|
—
|
|
|
5,396
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,396
|
|
Repurchase of common shares
|
(5,906
|
)
|
|
(176
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(176
|
)
|
Actuarial change and amortization of pension and postretirement plan liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
(208
|
)
|
|
—
|
|
|
(208
|
)
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
7,416
|
|
|
1,698
|
|
|
9,114
|
|
Cash flow hedges
|
—
|
|
|
—
|
|
|
—
|
|
|
5,353
|
|
|
340
|
|
|
5,693
|
|
Issuance of shares under equity offering, net of costs
|
5,750,000
|
|
|
152,390
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
152,390
|
|
Balance, December 31, 2017
|
128,970,776
|
|
|
|
$872,228
|
|
|
|
$707,378
|
|
|
|
$13,417
|
|
|
|
$99,917
|
|
|
|
$1,692,940
|
|
Cumulative-effect adjustment due to adoption
of ASU No. 2018-02
|
—
|
|
|
—
|
|
|
711
|
|
|
(711
|
)
|
|
—
|
|
|
—
|
|
Net income
|
—
|
|
|
—
|
|
|
100,229
|
|
|
—
|
|
|
12,453
|
|
|
112,682
|
|
Dividends ($0.79 per share)
|
—
|
|
|
—
|
|
|
(102,787
|
)
|
|
—
|
|
|
—
|
|
|
(102,787
|
)
|
Issuance of shares under incentive stock plans
|
577,857
|
|
|
8,216
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,216
|
|
Stock-based compensation
|
—
|
|
|
4,957
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,957
|
|
Repurchase of common shares
|
(81,396
|
)
|
|
(2,980
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,980
|
)
|
Amortization of pension and postretirement plan liabilities
|
—
|
|
|
—
|
|
|
—
|
|
|
507
|
|
|
—
|
|
|
507
|
|
Foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(23,341
|
)
|
|
(7,258
|
)
|
|
(30,599
|
)
|
Cash flow hedges
|
—
|
|
|
—
|
|
|
—
|
|
|
22,476
|
|
|
(1,191
|
)
|
|
21,285
|
|
Dividend to New Zealand minority shareholder
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,122
|
)
|
|
(3,122
|
)
|
Balance, September 30, 2018
|
129,467,237
|
|
|
|
$882,421
|
|
|
|
$705,531
|
|
|
|
$12,348
|
|
|
|
$100,799
|
|
|
|
$1,701,099
|
|
See Notes to Consolidated Financial Statements.
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
OPERATING ACTIVITIES
|
|
|
|
Net income
|
|
$112,682
|
|
|
|
$94,659
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
Depreciation, depletion and amortization
|
115,726
|
|
|
96,602
|
|
Non-cash cost of land and improved development
|
17,051
|
|
|
8,631
|
|
Stock-based incentive compensation expense
|
4,957
|
|
|
4,084
|
|
Deferred income taxes
|
21,019
|
|
|
16,714
|
|
Amortization of losses from pension and postretirement plans
|
507
|
|
|
349
|
|
Gain on sale of large disposition of timberlands
|
—
|
|
|
(28,183
|
)
|
Other
|
3,470
|
|
|
29
|
|
Changes in operating assets and liabilities:
|
|
|
|
Receivables
|
(15,261
|
)
|
|
(18,639
|
)
|
Inventories
|
1,085
|
|
|
(617
|
)
|
Accounts payable
|
(825
|
)
|
|
5,018
|
|
Income tax receivable/payable
|
—
|
|
|
(126
|
)
|
All other operating activities
|
640
|
|
|
8,352
|
|
CASH PROVIDED BY OPERATING ACTIVITIES
|
261,051
|
|
|
186,873
|
|
INVESTING ACTIVITIES
|
|
|
|
Capital expenditures
|
(44,137
|
)
|
|
(45,731
|
)
|
Real estate development investments
|
(6,889
|
)
|
|
(11,780
|
)
|
Purchase of timberlands
|
(38,978
|
)
|
|
(239,052
|
)
|
Net proceeds from large disposition of timberlands
|
—
|
|
|
42,029
|
|
Rayonier office building under construction
|
—
|
|
|
(5,979
|
)
|
Other
|
2,132
|
|
|
383
|
|
CASH (USED FOR) INVESTING ACTIVITIES
|
(87,872
|
)
|
|
(260,130
|
)
|
FINANCING ACTIVITIES
|
|
|
|
Issuance of debt
|
1,014
|
|
|
63,389
|
|
Repayment of debt
|
(54,416
|
)
|
|
(95,216
|
)
|
Dividends paid
|
(101,839
|
)
|
|
(95,008
|
)
|
Proceeds from the issuance of common shares under incentive stock plan
|
8,216
|
|
|
3,665
|
|
Proceeds from the issuance of common shares from equity offering, net of costs
|
—
|
|
|
152,390
|
|
Repurchase of common shares
|
(2,980
|
)
|
|
—
|
|
Proceeds from shareholder distribution hedge
|
610
|
|
|
—
|
|
Distribution to minority shareholder
|
(3,122
|
)
|
|
—
|
|
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES
|
(152,517
|
)
|
|
29,220
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
(1,341
|
)
|
|
1,113
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH (a)
|
|
|
|
Change in cash, cash equivalents and restricted cash
|
19,321
|
|
|
(42,924
|
)
|
Balance, beginning of year
|
172,356
|
|
|
157,617
|
|
Balance, end of period
|
|
$191,677
|
|
|
|
$114,693
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
Cash paid during the period:
|
|
|
|
Interest (b)
|
|
$20,910
|
|
|
|
$23,540
|
|
Income taxes
|
824
|
|
|
495
|
|
Non-cash investing activity:
|
|
|
|
Capital assets purchased on account
|
2,848
|
|
|
4,376
|
|
|
|
(a)
|
Due to the adoption of ASU No. 2016-18, restricted cash is now included with cash and cash equivalents when reconciling the beginning-of-year and end-of-period total amounts shown and therefore changes in restricted cash are no longer reported as investing activities. Prior period amounts have been restated to conform to current period presentation. For additional information and a reconciliation of cash, see
Note 17 — Restricted Cash.
|
|
|
(b)
|
Interest paid is presented net of patronage payments received of
$4.1 million
and
$3.0 million
for the
nine
months ended
September 30, 2018
and
September 30, 2017
, respectively. For additional information on patronage payments, see Note 5 — Debt in the 2017 Form 10-K.
|
See Notes to Consolidated Financial Statements.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The unaudited 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 (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The year-end balance sheet information was derived from audited financial statements not included herein. In the opinion of management, these financial statements and notes reflect any adjustments (all of which are 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, 2017
, as filed with the SEC (the “2017 Form 10-K”).
SUMMARY OF UPDATES TO SIGNIFICANT ACCOUNTING POLICIES
REVENUE
See
Note 2 — Revenue
for significant accounting policies related to revenue that were revised upon adoption of Accounting Standards Codification (“ASC”) 606.
COST OF SALES
Cost of sales associated with real estate sold includes the cost of the land, the cost of any timber on the property that was conveyed to the buyer, any real estate development costs and any closing costs including sales commissions that may be borne by the Company. As allowed under GAAP, the Company expenses closing costs, including sales commissions, when incurred for all real estate sales with future performance obligations expected to be satisfied within one year. When developed residential or commercial land is sold, the cost of sales includes actual costs incurred and estimates of future development costs benefiting the property sold through completion. Costs are allocated to each sold unit or lot based upon the relative sales value. For purposes of allocating development costs, estimates of future revenues and development costs are re-evaluated periodically throughout the year, with adjustments being allocated prospectively to the remaining units available for sale.
For a full description of our significant accounting policies, see Note 2 —
Summary of Significant Accounting Policies
in the 2017 Form 10-K.
RECLASSIFICATIONS
Management has changed how it internally evaluates the business performance of its New Zealand Timber segment. In order to align segment reporting, the Company has reclassified New Zealand timberland sales from the New Zealand Timber segment to the Real Estate segment. All prior period amounts previously reported have been reclassified to reflect the realigned segments. See
Note 4
—
Segment and Geographic Information
.
RECENTLY ADOPTED STANDARDS
In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02
, Income Statement — Reporting Compr
ehensive
Income
(
Topic 220
)
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
. This standard allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the amendments eliminate the stranded tax effects resulting from the Tax Cuts and Jobs Act. ASU No. 2018-02 is effective for the Company's reporting period beginning on January 1, 2019; early adoption is permitted. The Company elected to adopt ASU No. 2018-02 during the third quarter of 2018, and elected to reclassify the income tax effects of the Tax Cuts and Jobs Act from AOCI to retained earnings. The reclassification decreased AOCI and increased retained earnings by
$0.7 million
, with zero net effect on total shareholders’ equity. See
Note 8 — Income Taxes
for additional information.
The Company adopted ASU No. 2014-09,
Revenue from Contracts with Customers
(
Topic 606
), on January 1, 2018. The Company elected to apply the modified retrospective method to contracts that were not completed at the date of adoption. The Company also elected not to retrospectively restate contracts modified prior to January 1, 2018.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
A cumulative effect of adoption adjustment to the opening balance of retained earnings was not recorded as there was no accounting impact to any contracts with customers not completed at the date of adoption. See
Note 2 — Revenue
for additional information.
In March 2017, the FASB issued ASU No. 2017-07,
Compensation
—
Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost
, which requires that an employer report the service cost component of net periodic benefit cost in the Consolidated Statements of Income in the same line item as other compensation costs arising from services rendered by the pertinent employees during the period. Additionally, the other components of net periodic benefit cost (interest cost, expected return on plan assets and amortization of losses or gains) are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations. ASU No. 2017-07 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, and is required to be applied retrospectively to all periods presented beginning in the period of adoption. Rayonier adopted ASU No. 2017-07 during the first quarter ended March 31, 2018 and applied the update retrospectively to all periods presented. See
Note 14 — Employee Benefit Plans
for the components of net periodic benefit cost and the location of these items in the Consolidated Statements of Income and Comprehensive Income.
In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the Consolidated Statements of Cash Flows. ASU No. 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. ASU No. 2016-18 is required to be applied retrospectively to all periods presented beginning in the period of adoption. Rayonier adopted ASU No. 2016-18 in the first quarter ended March 31, 2018 and applied the update retrospectively to all periods presented. Restricted cash is now included with cash and cash equivalents when reconciling the beginning-of-year and end-of-period total amounts shown on the Consolidated Statements of Cash Flows, and therefore changes in restricted cash are no longer reported as cash flow activities. See
Note 17 — Restricted Cash
for additional information, including the nature of restrictions on the Company’s cash, cash equivalents, and restricted cash.
The Company adopted ASU No. 2016-15,
Statement of Cash Flows (Topic 230): Classification of Certain Receipts and Cash Payments
in the first quarter ended March 31, 2018 with no material impact on the consolidated financial statements.
The Company adopted ASU No. 2018-03
, Technical Corrections and Improvements to Financial Instruments —Overall (Subtopic 825-10)
in the third quarter ended September 30, 2018 with no material impact on the consolidated financial statements.
NEW ACCOUNTING STANDARDS
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
, which currently requires lessees to recognize most leases on their balance sheets related to the rights and obligations created by those leases. ASU No. 2016-02 also requires additional qualitative and quantitative disclosures related to the nature, timing and uncertainty of cash flows arising from leases. In January 2018, the FASB issued ASU No. 2018-01,
Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842.
This update provides an optional transition practical expedient to not evaluate existing or expired land easements that were not previously accounted for as leases under the current leases guidance. An entity that elects this practical expedient should evaluate new or modified land easements under ASU No. 2016-02, once adopted. An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with the adoption of ASU No. 2016-02 to assess whether they meet the definition of a lease. This standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and is required to be applied on a modified retrospective basis beginning at the earliest period presented. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In August 2017, the FASB issued ASU No. 2017-12,
Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities
, which will make more financial and non-financial hedging strategies eligible for
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
hedge accounting. It also amends the presentation and disclosure requirements and changes how companies assess effectiveness. It is intended to more closely align hedge accounting with companies’ risk management strategies, simplify the application of hedge accounting, and increase transparency as to the scope and results of hedging programs. ASU No. 2017-12 is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted and the amended presentation and disclosure guidance is required to be applied on a prospective basis. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13,
Disclosure Framework
—
Changes to the Disclosure Requirements for Fair Value Measurement
. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements. Among the changes, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, but will be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU No. 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019; early adoption is permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. As ASU No. 2018-13 only revises disclosure requirements, it will not have a material impact on the Company’s Consolidated Financial Statements.
In August 2018, the FASB issued ASU No. 2018-14,
Disclosure Framework
—
Changes to the Disclosure Requirements for Defined Benefit Plans
. This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension and/or other postretirement benefit plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020; early adoption is permitted. As ASU 2018-14 only revises disclosure requirements, it will not have a material impact on the Company’s Consolidated Financial Statements.
SUBSEQUENT EVENTS
The Company has evaluated events occurring from
September 30, 2018
to the date of issuance of these Consolidated Financial Statements for potential recognition or disclosure in the consolidated financial statements. No events were identified that warranted recognition. See
Note 9 — Contingencies
for events that warranted disclosure.
2. REVENUE
ADOPTION OF ASC 606
For information on the adoption of ASC 606, including changes to significant accounting policies and required transition disclosures, see
Note 1 — Basis of Presentation
.
REVENUE RECOGNITION
The Company recognizes revenues when control of promised goods or services (“performance obligations”) is transferred to customers, in an amount that reflects the consideration expected in exchange for those goods or services (“transaction price”). The Company generally satisfies performance obligations within a year of entering into a contract and therefore has applied the disclosure exemption found under ASC 606-10-50-14. Unsatisfied performance obligations as of
September 30, 2018
are primarily due to advances on stumpage contracts and unearned license revenue. These performance obligations are expected to be satisfied within the next twelve months. The Company generally collects payment within a year of satisfying performance obligations and therefore has elected not to adjust revenues for a financing component.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The following tables present our revenue from contracts with customers disaggregated by product type for the three and
nine
months ended
September 30, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Elim.
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulpwood
|
|
$19,998
|
|
|
|
$3,560
|
|
|
|
$7,278
|
|
|
—
|
|
|
|
$2,487
|
|
|
—
|
|
|
|
$33,323
|
|
Sawtimber
|
13,734
|
|
|
23,495
|
|
|
56,663
|
|
|
—
|
|
|
28,321
|
|
|
—
|
|
|
122,213
|
|
Hardwood
|
1,071
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,071
|
|
Total Timber Sales
|
34,803
|
|
|
27,055
|
|
|
63,941
|
|
|
—
|
|
|
30,808
|
|
|
—
|
|
|
156,607
|
|
License Revenue, Primarily From Hunting
|
4,016
|
|
|
224
|
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,338
|
|
Other Non-Timber/Carbon Revenue
|
637
|
|
|
468
|
|
|
2,226
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,331
|
|
Agency Fee Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
172
|
|
Total Non-Timber Sales
|
4,653
|
|
|
692
|
|
|
2,324
|
|
|
—
|
|
|
172
|
|
|
—
|
|
|
7,841
|
|
Improved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
1,352
|
|
|
—
|
|
|
—
|
|
|
1,352
|
|
Unimproved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
1,175
|
|
|
—
|
|
|
—
|
|
|
1,175
|
|
Rural
|
—
|
|
|
—
|
|
|
—
|
|
|
4,489
|
|
|
—
|
|
|
—
|
|
|
4,489
|
|
Non-strategic / Timberlands
|
—
|
|
|
—
|
|
|
—
|
|
|
29,152
|
|
|
—
|
|
|
—
|
|
|
29,152
|
|
Large Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Real Estate Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
36,168
|
|
|
—
|
|
|
—
|
|
|
36,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Contracts with Customers
|
39,456
|
|
|
27,747
|
|
|
66,265
|
|
|
36,168
|
|
|
30,980
|
|
|
—
|
|
|
200,616
|
|
Other Non-Timber Sales, Primarily Lease
|
206
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
274
|
|
Intersegment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
(30
|
)
|
|
—
|
|
Total Revenue
|
|
$39,662
|
|
|
|
$27,815
|
|
|
|
$66,265
|
|
|
|
$36,168
|
|
|
|
$31,010
|
|
|
|
($30
|
)
|
|
|
$200,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulpwood
|
|
$18,260
|
|
|
|
$2,515
|
|
|
|
$7,344
|
|
|
—
|
|
|
|
$3,425
|
|
|
—
|
|
|
|
$31,544
|
|
Sawtimber
|
12,485
|
|
|
16,131
|
|
|
62,569
|
|
|
—
|
|
|
36,828
|
|
|
—
|
|
|
128,013
|
|
Hardwood
|
1,152
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,152
|
|
Total Timber Sales
|
31,897
|
|
|
18,646
|
|
|
69,913
|
|
|
—
|
|
|
40,253
|
|
|
—
|
|
|
160,709
|
|
License Revenue, Primarily from Hunting
|
4,171
|
|
|
161
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,368
|
|
Other Non-Timber Revenue
|
1,042
|
|
|
233
|
|
|
146
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,421
|
|
Agency Fee Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
433
|
|
|
—
|
|
|
433
|
|
Total Non-Timber Sales
|
5,213
|
|
|
394
|
|
|
182
|
|
|
—
|
|
|
433
|
|
|
—
|
|
|
6,222
|
|
Improved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
—
|
|
|
46
|
|
Unimproved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
13,905
|
|
|
—
|
|
|
—
|
|
|
13,905
|
|
Rural
|
—
|
|
|
—
|
|
|
—
|
|
|
3,125
|
|
|
—
|
|
|
—
|
|
|
3,125
|
|
Non-strategic / Timberlands
|
—
|
|
|
—
|
|
|
—
|
|
|
164
|
|
|
—
|
|
|
—
|
|
|
164
|
|
Large Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Real Estate Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
17,240
|
|
|
—
|
|
|
—
|
|
|
17,240
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Contracts with Customers
|
37,110
|
|
|
19,040
|
|
|
70,095
|
|
|
17,240
|
|
|
40,686
|
|
|
—
|
|
|
184,171
|
|
Other Non-Timber Sales, Primarily Lease
|
191
|
|
|
57
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
248
|
|
Total Revenue
|
|
$37,301
|
|
|
|
$19,097
|
|
|
|
$70,095
|
|
|
|
$17,240
|
|
|
|
$40,686
|
|
|
—
|
|
|
|
$184,419
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Elim.
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulpwood
|
|
$61,898
|
|
|
|
$11,648
|
|
|
|
$20,910
|
|
|
—
|
|
|
|
$10,548
|
|
|
—
|
|
|
|
$105,004
|
|
Sawtimber
|
45,452
|
|
|
77,172
|
|
|
162,627
|
|
|
—
|
|
|
105,309
|
|
|
—
|
|
|
390,560
|
|
Hardwood
|
2,882
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,882
|
|
Total Timber Sales
|
110,232
|
|
|
88,820
|
|
|
183,537
|
|
|
—
|
|
|
115,857
|
|
|
—
|
|
|
498,446
|
|
License Revenue, Primarily From Hunting
|
12,137
|
|
|
450
|
|
|
292
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,879
|
|
Other Non-Timber/Carbon Revenue
|
8,320
|
|
|
1,923
|
|
|
5,053
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,296
|
|
Agency Fee Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
460
|
|
|
—
|
|
|
460
|
|
Total Non-Timber Sales
|
20,457
|
|
|
2,373
|
|
|
5,345
|
|
|
—
|
|
|
460
|
|
|
—
|
|
|
28,635
|
|
Improved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
3,817
|
|
|
—
|
|
|
—
|
|
|
3,817
|
|
Unimproved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
8,621
|
|
|
—
|
|
|
—
|
|
|
8,621
|
|
Rural
|
—
|
|
|
—
|
|
|
—
|
|
|
10,969
|
|
|
—
|
|
|
—
|
|
|
10,969
|
|
Non-strategic / Timberlands
|
—
|
|
|
—
|
|
|
—
|
|
|
98,685
|
|
|
—
|
|
|
—
|
|
|
98,685
|
|
Large Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Real Estate Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
122,092
|
|
|
—
|
|
|
—
|
|
|
122,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Contracts with Customers
|
130,689
|
|
|
91,193
|
|
|
188,882
|
|
|
122,092
|
|
|
116,317
|
|
|
—
|
|
|
649,173
|
|
Other Non-Timber Sales, Primarily Lease
|
609
|
|
|
209
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
818
|
|
Intersegment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
66
|
|
|
(66
|
)
|
|
—
|
|
Total Revenue
|
|
$131,298
|
|
|
|
$91,402
|
|
|
|
$188,882
|
|
|
|
$122,092
|
|
|
|
$116,383
|
|
|
|
($66
|
)
|
|
|
$649,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pulpwood
|
|
$52,407
|
|
|
|
$8,683
|
|
|
|
$18,956
|
|
|
—
|
|
|
|
$9,972
|
|
|
—
|
|
|
|
$90,018
|
|
Sawtimber
|
40,088
|
|
|
54,203
|
|
|
144,550
|
|
|
—
|
|
|
105,964
|
|
|
—
|
|
|
344,805
|
|
Hardwood
|
2,895
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,895
|
|
Total Timber Sales
|
95,390
|
|
|
62,886
|
|
|
163,506
|
|
|
—
|
|
|
115,936
|
|
|
—
|
|
|
437,718
|
|
License Revenue, Primarily from Hunting
|
11,809
|
|
|
354
|
|
|
154
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,317
|
|
Other Non-Timber Revenue
|
4,184
|
|
|
2,037
|
|
|
320
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,541
|
|
Agency Fee Income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
|
—
|
|
|
1,051
|
|
Total Non-Timber Sales
|
15,993
|
|
|
2,391
|
|
|
474
|
|
|
—
|
|
|
1,051
|
|
|
—
|
|
|
19,909
|
|
Improved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
189
|
|
|
—
|
|
|
—
|
|
|
189
|
|
Unimproved Development
|
—
|
|
|
—
|
|
|
—
|
|
|
16,405
|
|
|
—
|
|
|
—
|
|
|
16,405
|
|
Rural
|
—
|
|
|
—
|
|
|
—
|
|
|
15,357
|
|
|
—
|
|
|
—
|
|
|
15,357
|
|
Non-strategic / Timberlands
|
—
|
|
|
—
|
|
|
—
|
|
|
47,558
|
|
|
—
|
|
|
—
|
|
|
47,558
|
|
Large Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
41,951
|
|
|
—
|
|
|
—
|
|
|
41,951
|
|
Total Real Estate Sales
|
—
|
|
|
—
|
|
|
—
|
|
|
121,460
|
|
|
—
|
|
|
—
|
|
|
121,460
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue from Contracts with Customers
|
111,383
|
|
|
65,277
|
|
|
163,980
|
|
|
121,460
|
|
|
116,987
|
|
|
—
|
|
|
579,087
|
|
Other Non-Timber Sales, Primarily Lease
|
584
|
|
|
203
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
787
|
|
Total Revenue
|
|
$111,967
|
|
|
|
$65,480
|
|
|
|
$163,980
|
|
|
|
$121,460
|
|
|
|
$116,987
|
|
|
—
|
|
|
|
$579,874
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
REVENUE RECOGNITION FOR TIMBER SALES AND NON-TIMBER INCOME
Revenue from the sale of timber is recognized when control passes to the buyer. The Company utilizes
two
primary methods or sales channels for the sale of timber – a stumpage/standing timber model and a delivered log model. The sales method the Company employs depends upon local market conditions and which method management believes will provide the best overall margins.
Under the stumpage model, standing timber is sold primarily under pay-as-cut contracts, with specified duration (typically
one
year or less) and fixed prices, whereby revenue is recognized as timber is severed and the sales volume is determined. The Company also sells stumpage under lump-sum contracts for specified parcels where the Company receives cash for the full agreed value of the timber prior to harvest and control passes to the buyer upon signing the contract. The Company retains interest in the land, slash products, and the use of the land for recreational and other purposes. Any uncut timber remaining at the end of the contract period reverts to the Company. Revenue is recognized for lump-sum timber sales when payment is received, the contract is signed and control passes to the buyer. A third type of stumpage sale the Company utilizes is an agreed-volume sale, whereby revenue is recognized using the output method, as periodic physical observations are made of the percentage of acreage harvested.
Under the delivered log model, the Company hires third-party loggers and haulers to harvest timber and deliver it to a buyer. Sales of domestic logs generally do not require an initial payment and are made to third-party customers on open credit terms. Sales of export logs generally require a letter of credit from an approved bank. Revenue is recognized when the logs are delivered and control has passed to the buyer. For domestic log sales, control is considered passed to the buyer as the logs are delivered to the customer’s facility. For export log sales (primarily in New Zealand), control is considered passed to the buyer upon delivery onto the export vessel.
Non-timber income is primarily comprised of hunting and recreational licenses. Such income and any related cost are recognized ratably over the term of the agreement and included in “Sales” and “Cost of sales”, respectively. Payment is generally due upon contract execution.
The following table summarizes revenue recognition and general payment terms for timber sales:
|
|
|
|
|
|
|
|
Contract Type
|
|
Performance
Obligation
|
|
Timing of
Revenue Recognition
|
|
General
Payment Terms
|
Stumpage Pay-as-Cut
|
|
Right to harvest a unit (i.e. ton, MBF, JAS m3) of standing timber
|
|
As timber is severed
(point-in-time)
|
|
Initial payment between
5% and 20% of estimated contract value; collection generally within 10 days of severance
|
Stumpage Lump Sum
|
|
Right to harvest an agreed upon acreage of standing timber
|
|
Contract execution
(point-in-time)
|
|
Full payment due upon contract execution
|
Stumpage Agreed Volume
|
|
Right to harvest an agreed upon volume of standing timber
|
|
As timber is severed
(over-time)
|
|
Payments made throughout contract term at the earlier of a specified harvest percentage or time elapsed
|
Delivered Wood (Domestic)
|
|
Delivery of a unit (i.e. ton, MBF, JAS m3) of timber to customer’s facility
|
|
Upon delivery to customer’s facility
(point-in-time)
|
|
No initial payment and on open credit terms; collection generally within 30 days of invoice
|
Delivered Wood (Export)
|
|
Delivery of a unit (i.e. ton, MBF, JAS m3) onto export vessel
|
|
Upon delivery onto export vessel
(point-in-time)
|
|
Letter of credit from an approved bank; collection generally within 30 days of delivery
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The following tables present our timber sales disaggregated by contract type for the three and
nine
months ended
September 30, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Trading
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
Stumpage Pay-as-Cut
|
|
$16,984
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$16,984
|
|
Stumpage Lump Sum
|
284
|
|
|
2,143
|
|
|
—
|
|
|
—
|
|
|
2,427
|
|
Stumpage Agreed Volume
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Stumpage
|
17,268
|
|
|
2,143
|
|
|
—
|
|
|
—
|
|
|
19,411
|
|
|
|
|
|
|
|
|
|
|
|
Delivered Wood (Domestic)
|
15,856
|
|
|
24,912
|
|
|
24,771
|
|
|
1,813
|
|
|
67,352
|
|
Delivered Wood (Export)
|
1,679
|
|
|
—
|
|
|
39,170
|
|
|
28,995
|
|
|
69,844
|
|
Total Delivered
|
17,535
|
|
|
24,912
|
|
|
63,941
|
|
|
30,808
|
|
|
137,196
|
|
|
|
|
|
|
|
|
|
|
|
Total Timber Sales
|
|
$34,803
|
|
|
|
$27,055
|
|
|
|
$63,941
|
|
|
|
$30,808
|
|
|
|
$156,607
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
Stumpage Pay-as-Cut
|
|
$18,607
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$18,607
|
|
Stumpage Lump Sum
|
1,954
|
|
|
3,987
|
|
|
—
|
|
|
—
|
|
|
5,941
|
|
Stumpage Agreed Volume
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Stumpage
|
20,561
|
|
|
3,987
|
|
|
—
|
|
|
—
|
|
|
24,548
|
|
|
|
|
|
|
|
|
|
|
|
Delivered Wood (Domestic)
|
11,336
|
|
|
14,659
|
|
|
24,440
|
|
|
1,808
|
|
|
52,243
|
|
Delivered Wood (Export)
|
—
|
|
|
—
|
|
|
45,473
|
|
|
38,445
|
|
|
83,918
|
|
Total Delivered
|
11,336
|
|
|
14,659
|
|
|
69,913
|
|
|
40,253
|
|
|
136,161
|
|
|
|
|
|
|
|
|
|
|
|
Total Timber Sales
|
|
$31,897
|
|
|
|
$18,646
|
|
|
|
$69,913
|
|
|
|
$40,253
|
|
|
|
$160,709
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Trading
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
Stumpage Pay-as-Cut
|
|
$59,348
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$59,348
|
|
Stumpage Lump Sum
|
2,358
|
|
|
11,854
|
|
|
—
|
|
|
—
|
|
|
14,212
|
|
Stumpage Agreed Volume
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Stumpage
|
61,706
|
|
|
11,854
|
|
|
—
|
|
|
—
|
|
|
73,560
|
|
|
|
|
|
|
|
|
|
|
|
Delivered Wood (Domestic)
|
44,399
|
|
|
76,966
|
|
|
70,521
|
|
|
4,317
|
|
|
196,203
|
|
Delivered Wood (Export)
|
4,127
|
|
|
—
|
|
|
113,016
|
|
|
111,540
|
|
|
228,683
|
|
Total Delivered
|
48,526
|
|
|
76,966
|
|
|
183,537
|
|
|
115,857
|
|
|
424,886
|
|
|
|
|
|
|
|
|
|
|
|
Total Timber Sales
|
|
$110,232
|
|
|
|
$88,820
|
|
|
|
$183,537
|
|
|
|
$115,857
|
|
|
|
$498,446
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
Stumpage Pay-as-Cut
|
|
$56,956
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
$56,956
|
|
Stumpage Lump Sum
|
6,997
|
|
|
6,574
|
|
|
—
|
|
|
—
|
|
|
13,571
|
|
Stumpage Agreed Volume
|
—
|
|
|
1,234
|
|
|
—
|
|
|
—
|
|
|
1,234
|
|
Total Stumpage
|
63,953
|
|
|
7,808
|
|
|
—
|
|
|
—
|
|
|
71,761
|
|
|
|
|
|
|
|
|
|
|
|
Delivered Wood (Domestic)
|
31,437
|
|
|
55,078
|
|
|
63,883
|
|
|
4,132
|
|
|
154,530
|
|
Delivered Wood (Export)
|
—
|
|
|
—
|
|
|
99,623
|
|
|
111,804
|
|
|
211,427
|
|
Total Delivered
|
31,437
|
|
|
55,078
|
|
|
163,506
|
|
|
115,936
|
|
|
365,957
|
|
|
|
|
|
|
|
|
|
|
|
Total Timber Sales
|
|
$95,390
|
|
|
|
$62,886
|
|
|
|
$163,506
|
|
|
|
$115,936
|
|
|
|
$437,718
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
REVENUE RECOGNITION FOR REAL ESTATE SALES
The Company recognizes revenue on sales of real estate generally at the point in time when cash has been received, the sale has closed, and control has passed to the buyer. A deposit of
5%
is generally required at the time a purchase and sale agreement is executed, with the balance due at closing. On sales of real estate containing future performance obligations, revenue is recognized using the input method based on costs incurred to date relative to the total costs expected to fulfill the performance obligations in the contract with the customer.
REVENUE RECOGNITION FOR LOG TRADING
Log trading revenue is generally recognized when procured logs are delivered to the buyer and control has passed. For domestic log trading, control is considered passed to the buyer as the logs are delivered to the customer’s facility. For export log trading, control is considered passed to the buyer upon delivery onto the export vessel. The Trading segment also includes sales from log agency contracts, whereby the Company acts as an agent managing export services on behalf of third parties. Revenue for log agency fees are recognized net of related costs.
Contract Balances
The timing of revenue recognition, invoicing and cash collections results in accounts receivable and deferred revenue (contract liabilities) on the Consolidated Balance Sheets. Accounts receivable are recorded when the Company has an unconditional right to consideration for completed performance under the contract. Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.
The following table summarizes revenue recognized during the three and
nine
months ended
September 30, 2018
and
2017
that was included in the contract liability balance at the beginning of each year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue recognized from contract liability balance at the beginning of the year (a)
|
|
$355
|
|
|
|
$459
|
|
|
|
$8,685
|
|
|
|
$8,369
|
|
|
|
(a)
|
Revenue recognized was primarily from hunting licenses and the use of advances on pay-as-cut timber sales.
|
|
|
3.
|
JOINT VENTURE INVESTMENT (MATARIKI FORESTRY GROUP)
|
The Company maintains a controlling financial interest in Matariki Forestry Group (the “New Zealand JV”), a joint venture that owns or leases approximately
407,000
legal acres of New Zealand timberland. Accordingly, the Company consolidates the New Zealand JV’s balance sheet and results of operations. The portions of the consolidated financial position and results of operations attributable to the New Zealand JV’s
23%
noncontrolling interest are shown separately within the Consolidated Statements of Income and Comprehensive Income and Consolidated Statements of Changes in Shareholders’ Equity. Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary of Rayonier Inc., serves as the manager of the New Zealand JV.
|
|
4.
|
SEGMENT AND GEOGRAPHICAL INFORMATION
|
Management has changed how it internally evaluates the business performance of its New Zealand Timber segment. In order to align segment reporting, the Company has reclassified New Zealand timberland sales from the New Zealand Timber segment to the Real Estate segment. All prior period amounts previously reported have been reclassified to reflect the realigned segments.
Sales between operating segments are made based on estimated fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. The Company evaluates financial performance based on segment operating income and Adjusted EBITDA. Asset information is not reported by segment, as the Company does not produce asset information by segment internally.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
Operating income as presented in the Consolidated Statements of Income and Comprehensive Income is equal to segment income. Certain income (loss) items in the Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include interest expense, interest and other miscellaneous income and income tax expense, are not considered by management to be part of segment operations and are included under “Corporate and other” or “unallocated interest expense and other.”
The following tables summarize the segment information for the three and
nine
months ended
September 30, 2018
and
2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
SALES
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Southern Timber
|
|
$39,662
|
|
|
|
$37,301
|
|
|
|
$131,298
|
|
|
|
$111,967
|
|
Pacific Northwest Timber
|
27,815
|
|
|
19,097
|
|
|
91,402
|
|
|
65,480
|
|
New Zealand Timber
|
66,265
|
|
|
70,095
|
|
|
188,882
|
|
|
163,980
|
|
Real Estate (a)
|
36,168
|
|
|
17,240
|
|
|
122,092
|
|
|
121,460
|
|
Trading
|
31,010
|
|
|
40,686
|
|
|
116,383
|
|
|
116,987
|
|
Intersegment Eliminations
|
(30
|
)
|
|
—
|
|
|
(66
|
)
|
|
—
|
|
Total
|
|
$200,890
|
|
|
|
$184,419
|
|
|
|
$649,991
|
|
|
|
$579,874
|
|
(a) The
nine
months ended September 30, 2017 includes
$42.0 million
of Large Dispositions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
OPERATING INCOME (LOSS)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Southern Timber
|
|
$9,183
|
|
|
|
$11,436
|
|
|
|
$37,061
|
|
|
|
$35,031
|
|
Pacific Northwest Timber
|
1,911
|
|
|
1,134
|
|
|
12,209
|
|
|
(1,278
|
)
|
New Zealand Timber
|
16,416
|
|
|
19,280
|
|
|
50,141
|
|
|
41,510
|
|
Real Estate (a)
|
24,726
|
|
|
11,437
|
|
|
71,645
|
|
|
72,052
|
|
Trading
|
304
|
|
|
1,142
|
|
|
680
|
|
|
3,380
|
|
Corporate and other
|
(6,162
|
)
|
|
(5,158
|
)
|
|
(16,639
|
)
|
|
(15,269
|
)
|
Total Operating Income
|
46,378
|
|
|
39,271
|
|
|
155,097
|
|
|
135,426
|
|
Unallocated interest expense and other
|
(7,343
|
)
|
|
(7,425
|
)
|
|
(19,972
|
)
|
|
(23,950
|
)
|
Total Income before Income Taxes
|
|
$39,035
|
|
|
|
$31,846
|
|
|
|
$135,125
|
|
|
|
$111,476
|
|
(a) The
nine
months ended September 30, 2017 includes
$28.2 million
of Large Dispositions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
DEPRECIATION, DEPLETION AND AMORTIZATION
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Southern Timber
|
|
$13,672
|
|
|
|
$12,736
|
|
|
|
$44,591
|
|
|
|
$37,092
|
|
Pacific Northwest Timber
|
7,802
|
|
|
6,481
|
|
|
26,687
|
|
|
23,766
|
|
New Zealand Timber
|
7,544
|
|
|
8,478
|
|
|
21,287
|
|
|
20,477
|
|
Real Estate (a)
|
5,491
|
|
|
735
|
|
|
22,296
|
|
|
22,902
|
|
Trading
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Corporate and other
|
297
|
|
|
277
|
|
|
865
|
|
|
469
|
|
Total
|
|
$34,806
|
|
|
|
$28,707
|
|
|
|
$115,726
|
|
|
|
$104,706
|
|
(a) The
nine
months ended September 30, 2017 includes
$8.1 million
from Large Dispositions.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Southern Timber
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Pacific Northwest Timber
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
New Zealand Timber
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Real Estate (a)
|
2,115
|
|
|
1,272
|
|
|
17,051
|
|
|
14,374
|
|
Trading
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
|
$2,115
|
|
|
|
$1,272
|
|
|
|
$17,051
|
|
|
|
$14,374
|
|
(a) The
nine
months ended September 30, 2017 includes
$5.7 million
from Large Dispositions.
Rayonier’s debt consisted of the following at
September 30, 2018
:
|
|
|
|
|
|
September 30, 2018
|
Term Credit Agreement borrowings due 2024 at a variable interest rate of 3.7% at September 30, 2018 (a)
|
|
$350,000
|
|
Senior Notes due 2022 at a fixed interest rate of 3.75%
|
325,000
|
|
Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of 4.0% at September 30, 2018 (b)
|
300,000
|
|
Total debt
|
975,000
|
|
Less: Deferred financing costs
|
(2,574
|
)
|
Long-term debt, net of deferred financing costs
|
|
$972,426
|
|
(a) As of September 30, 2018, the periodic interest rate on the term loan facility was LIBOR plus
1.625%
. The Company estimates the effective
fixed interest rate on the term loan facility to be approximately
3.3%
after consideration of interest rate swaps and estimated patronage refunds.
(b) As of September 30, 2018, the periodic interest rate on the incremental term loan was LIBOR plus
1.900%
. The Company estimates the
effective fixed interest rate on the incremental term loan facility to be approximately
2.8%
after consideration of interest rate swaps and
estimated patronage refunds.
Principal payments due during the next five years and thereafter are as follows:
|
|
|
|
|
2018
|
—
|
|
2019
|
—
|
|
2020
|
—
|
|
2021
|
—
|
|
2022
|
325,000
|
|
Thereafter
|
650,000
|
|
Total Debt
|
|
$975,000
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
2018 DEBT ACTIVITY
During the
nine
months ended September 30, 2018, the Company made a repayment of
$50.0 million
on the Revolving Credit Facility. As of
September 30, 2018
, the Company had available borrowings of
$189.8 million
under the Revolving Credit Facility, net of
$10.2 million
to secure its outstanding letters of credit.
In addition, the New Zealand JV made borrowings and repayments of
$1.0 million
on its working capital facility. As of
September 30, 2018
, draws totaling NZ
$40.0 million
remain available on the working capital facility. The New Zealand JV also fully repaid its shareholder loan held by the noncontrolling interest party during the nine months ended
September 30, 2018
.
DEBT COVENANTS
In connection with the Company’s
$350 million
term credit agreement (the “Term Credit Agreement”),
$300 million
incremental term loan agreement (the “Incremental Term Loan Agreement”) and
$200 million
revolving credit facility (the “Revolving Credit Facility”), customary covenants must be met, the most significant of which include interest coverage and leverage ratios.
In addition to these financial covenants listed above, the Senior Notes, Term Credit Agreement, Incremental Term Loan Agreement and Revolving Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At
September 30, 2018
, the Company was in compliance with all applicable covenants.
|
|
6.
|
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS
|
Rayonier continuously assesses potential alternative uses of its timberlands, as some properties may become more valuable for development, residential, recreation or other purposes. The Company periodically transfers, via a sale or contribution from the real estate investment trust (“REIT”) entities to taxable REIT subsidiaries (“TRS”), higher and better use (“HBU”) timberlands to enable land-use entitlement, development or marketing activities. The Company also acquires HBU properties in connection with timberland acquisitions. These properties are managed as timberlands until sold or developed. While the majority of HBU sales involve rural and recreational land, the Company also selectively pursues various land-use entitlements on certain properties for residential, commercial and industrial development in order to enhance the long-term value of such properties. For selected development properties, Rayonier also invests in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and enhance the value of such properties.
An analysis of higher and better use timberlands and real estate development investments from December 31, 2017 to
September 30, 2018
is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Higher and Better Use Timberlands and Real Estate Development Investments
|
|
Land and Timber
|
|
Development Investments
|
|
Total
|
Non-current portion at December 31, 2017
|
|
$59,653
|
|
|
|
$21,144
|
|
|
|
$80,797
|
|
Plus: Current portion (a)
|
6,702
|
|
|
11,648
|
|
|
18,350
|
|
Total Balance at December 31, 2017
|
66,355
|
|
|
32,792
|
|
|
99,147
|
|
Non-cash cost of land and improved development
|
(1,179
|
)
|
|
(2,961
|
)
|
|
(4,140
|
)
|
Timber depletion from harvesting activities and basis of timber sold in real estate sales
|
(1,335
|
)
|
|
—
|
|
|
(1,335
|
)
|
Capitalized real estate development investments (b)
|
—
|
|
|
6,889
|
|
|
6,889
|
|
Capital expenditures (silviculture)
|
161
|
|
|
—
|
|
|
161
|
|
Intersegment transfers
|
1,399
|
|
|
—
|
|
|
1,399
|
|
Total Balance at September 30, 2018
|
65,401
|
|
|
36,720
|
|
|
102,121
|
|
Less: Current portion (a)
|
(5,858
|
)
|
|
(16,516
|
)
|
|
(22,374
|
)
|
Non-current portion at September 30, 2018
|
|
$59,543
|
|
|
|
$20,204
|
|
|
|
$79,747
|
|
|
|
(a)
|
The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See
Note 16 — Inventory
for additional information.
|
|
|
(b)
|
Capitalized real estate development investments include
$0.5 million
of capitalized interest.
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
7. COMMITMENTS
The Company leases certain buildings, machinery, and equipment under various operating leases. The Company also has long-term lease agreements on certain timberlands in the Southern U.S. and New Zealand. U.S. leases typically have initial terms of approximately
30
to
65
years, with renewal provisions in some cases. New Zealand timberland lease terms range between
30
and
99
years. Such leases are generally non-cancellable and require minimum annual rental payments.
At
September 30, 2018
, the future minimum payments under non-cancellable operating leases, timberland leases and other commitments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Leases
|
|
Timberland
Leases (a)
|
|
Commitments (b)
|
|
Total
|
Remaining 2018
|
|
$331
|
|
|
|
$3,888
|
|
|
|
$5,480
|
|
|
|
$9,699
|
|
2019
|
1,173
|
|
|
8,677
|
|
|
3,239
|
|
|
13,089
|
|
2020
|
1,017
|
|
|
8,300
|
|
|
787
|
|
|
10,104
|
|
2021
|
849
|
|
|
8,301
|
|
|
612
|
|
|
9,762
|
|
2022
|
701
|
|
|
8,063
|
|
|
587
|
|
|
9,351
|
|
Thereafter (c)
|
717
|
|
|
142,876
|
|
|
929
|
|
|
144,522
|
|
|
|
$4,788
|
|
|
|
$180,105
|
|
|
|
$11,634
|
|
|
|
$196,527
|
|
|
|
(a)
|
The majority of timberland leases are subject to increases or decreases based on either the Consumer Price Index, Producer Price Index or market rates.
|
|
|
(b)
|
Commitments include $
0.5 million
of pension contribution requirements remaining in 2018 based on actuarially determined estimates and IRS minimum funding requirements, payments expected to be made on derivative financial instruments (foreign exchange contracts and interest rate swaps), construction of the Company’s Wildlight development project and other purchase obligations.
|
|
|
(c)
|
Includes
20 years
of future minimum payments for perpetual Crown Forest Licenses (“CFL”). A CFL consists of a license to use public or government owned land to operate a commercial forest. The CFL's extend indefinitely and may only be terminated upon a
35
-year termination notice from the government. If no termination notice is given, the CFLs renew automatically each year for a
one
-year term. As of
September 30, 2018
, the New Zealand JV has
two
CFL’s under termination notice that are currently being relinquished as harvest activities are concluding, as well as
two
fixed term CFL’s expiring in 2062. The annual license fee is determined based on current market rental value, with triennial rent reviews.
|
8. INCOME TAXES
The operations conducted by the Company’s REIT entities are generally not subject to U.S. federal and state income tax. The New Zealand JV is subject to corporate level tax in New Zealand. Non-REIT qualifying operations are conducted by the Company’s TRS. The primary businesses performed in Rayonier’s TRS include log trading and certain real estate activities, such as the sale, entitlement and development of HBU properties. For the three and
nine
months ended
September 30, 2018
, the Company recorded income tax expense of
$8.4 million
and
$22.4 million
, respectively. For the three and
nine
months ended
September 30, 2017
, the Company recorded income tax expense of
$3.0 million
and
$16.8 million
, respectively.
PROVISION FOR INCOME TAXES
The Company’s effective tax rate is below the
21.0%
U.S. statutory rate due to tax benefits associated with being a REIT. The Company’s annualized effective tax rate (“AETR”) as of
September 30, 2018
and
September 30, 2017
was
16.5%
and
15.1%
, respectively. The company’s tax expense is principally related to New Zealand corporate level tax on the New Zealand JV income.
In accordance with GAAP, the Company recognizes the impact of a tax position if a position is “more-likely-than-not” to prevail. For the
nine
months ended
September 30, 2018
, there were no material changes in uncertain tax positions.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
U.S. TAX REFORM
The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017 making significant changes to the Internal Revenue Code. Changes include a permanent reduction in the U.S. statutory corporate income tax rate from 35% to 21% effective January 1, 2018 and a one-time transition tax on the deemed repatriation of deferred foreign earnings in 2017.
The Company has completed its assessment of the accounting implications of the Act. The remeasurement of U.S. deferred tax assets and liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate resulted in no P&L impact as the Company has a full valuation allowance against U.S. deferred tax assets (net of liabilities). Further, mandatory deemed repatriation had no material impact as the income inclusion was offset by net operating losses (NOL).
The Act subjects a U.S. shareholder to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries effective January 1, 2018. For current year, the Company’s REIT entity has a GILTI income inclusion of
$1.4 million
. The FASB Staff Q&A, Topic 740 No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred. Due to the Company’s REIT status and the corresponding distribution requirement, the Company has neither a deferred tax related to GILTI nor any current tax expense.
ADOPTION OF ASU 2018-02
The Company evaluates releasing income tax effects from accumulated other comprehensive income each quarter as part of its analysis of AOCI. The Company elected to adopt ASU No. 2018-02 during the third quarter of 2018 and reclassified the resulting income tax effects from AOCI to retained earnings. The reclassification decreased AOCI and increased retained earnings by
$0.7 million
, with zero net effect on total shareholders’ equity.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
Following the Company’s November 10, 2014 earnings release and filing of the restated interim financial statements for the quarterly periods ended March 31 and June 30, 2014, (the “November 2014 Announcement”), on November 26, 2014, December 29, 2014, January 26, 2015, February 13, 2015, and May 12, 2015, the Company received separate letters from shareholders requesting that the Company investigate or pursue derivative claims against certain officers and directors related to the November 2014 Announcement (the “Derivative Claims”). Although these demands do not identify any claims against the Company, the Company has certain obligations to advance expenses and provide indemnification to certain current and former officers and directors of the Company. The Company has also incurred expenses as a result of costs arising from the investigation of the claims alleged in the various demands.
Following the Company’s receipt of the Derivative Claims, it entered into a series of tolling agreements with the shareholders from whom it received demands (the “Demand Shareholders”). The last of these tolling agreements ended in March of 2017. On October 13, 2017,
one
of the Demand Shareholders filed an action in the United States District Court for the Middle District of Florida, currently styled Molloy v. Boynton, et al., Civil Action No. 3:17-cv-01157-TJC-MCR (the “Derivative Lawsuit”). The complaint alleges breaches of fiduciary duties and unjust enrichment and names as defendants former officers, Paul G. Boynton, Hans E. Vanden Noort and N. Lynn Wilson, and former directors, C. David Brown, II, Mark E. Gaumond, James H. Miller, Thomas I. Morgan and Ronald Townsend (the former officers and directors named as defendants are collectively the “Individual Defendants”).
In November 2017, the parties reached an agreement to resolve all claims brought in the Derivative Lawsuit and agreed to negotiate in good faith regarding the amount of attorneys’ fees and expenses to be paid to the Demand Shareholders’ counsel, subject to court approval. The parties executed a term sheet on November 27, 2017, and agreed to schedule a mediation regarding the amount of attorneys’ fees and expenses. On November 30, 2017, Rayonier and certain of the Individual Defendants who had been served with the complaint filed an unopposed Motion to Stay or, in the Alternative, to Extend Time to Respond to the Complaint in order to allow the parties time to attempt to resolve the Derivative Lawsuit without further litigation. On December 6, 2017, the Court entered an order staying the case, directing that the case be administratively closed, and ordering the parties to file a joint status report with the Court not later than March 15, 2018. At December 31, 2017, the case was stayed, some of the Individual Defendants had not yet been served, none of the defendants had filed any responsive pleading or dispositive motion, and the Company could not determine whether there was a likelihood a material loss had been incurred nor could the range of any such loss be estimated.
On March 13, 2018, the Demand Shareholders, Rayonier, certain of Rayonier’s directors’ and officers’ insurance carriers, and certain of the Individual Defendants participated in a mediation, at the conclusion of which the parties reached an agreement in principle to settle the case and amended the term sheet to memorialize such agreement. On April 17, 2018, Plaintiff filed with the Court Plaintiff’s Unopposed Motion for Preliminary Approval of Derivative Settlement and Memorandum of Legal Authority in Support (“Motion for Preliminary Approval”). The terms of the proposed settlement (the “Settlement”) are contained in the Stipulation and Agreement of Settlement (the “Stipulation”), which was attached to the Motion for Preliminary Approval and filed with the Court. The Stipulation, executed by all parties, included the material terms of the term sheet. Pursuant to the terms of the Settlement, which is subject to Court approval and objections by shareholders, the Company agreed to certain governance reforms and to cause certain of its directors’ and officers’ liability insurance carriers to fund a settlement payment for the Demand Shareholders’ attorneys’ fees and expenses as well as incentive awards to the Demand Shareholders in the aggregate amount of
$1.995 million
. On August 17, 2018, the Court granted the Motion for Preliminary Approval, established notice requirements and scheduled the final hearing as to approval of the Settlement for October 16, 2018. On September 11, 2018, Plaintiff filed with the Court Plaintiff’s Unopposed Motion for Final Approval of Derivative Settlement and Approval of the Agreed-Upon Attorneys’ Fees and Expenses (“Motion for Final Approval”). On October 9, 2018, the Court issued an order rescheduling the hearing on the Motion for Final Approval to October 30, 2018 and the hearing went forward on that date. On November 2, 2018, the Court issued an order granting the Motion for Final Approval and dismissed the case with prejudice. The payments agreed to on March 13, 2018, including the realized amount to be funded by the insurance carriers, were reflected in the Company’s Consolidated Financial Statements as of September 30, 2018.
The Company has also 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
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
occurring in connection with its businesses, it has in certain cases retained some risk through the operation of large deductible insurance plans, primarily in the areas of executive risk, property, automobile and general liability. These pending lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flow.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The Company provides financial guarantees as required by creditors, insurance programs, and various governmental agencies.
As of
September 30, 2018
, the following financial guarantees were outstanding:
|
|
|
|
|
|
|
|
|
|
Financial Commitments
|
|
Maximum Potential
Payment
|
|
Carrying Amount
of Associated Liability
|
Standby letters of credit (a)
|
|
|
$10,176
|
|
|
—
|
|
Guarantees (b)
|
|
2,254
|
|
|
43
|
|
Surety bonds (c)
|
|
1,284
|
|
|
—
|
|
Total financial commitments
|
|
|
$13,714
|
|
|
|
$43
|
|
|
|
(a)
|
Approximately
$9.2 million
of the irrevocable standby letters of credit serve as credit support for infrastructure at the Company’s Wildlight development project. The remaining letters of credit support various insurance related agreements, primarily workers’ compensation. These letters of credit will expire at various dates during 2018 and 2019 and will be renewed as required.
|
|
|
(b)
|
In conjunction with a timberland sale and note monetization in 2004, the Company issued a make-whole agreement pursuant to which it guaranteed
$2.3 million
of obligations of a special-purpose entity that was established to complete the monetization. At
September 30, 2018
, the Company has a
de minimis liability
to reflect the fair market value of its obligation to perform under the make-whole agreement.
|
|
|
(c)
|
Rayonier issues surety bonds primarily to secure timber harvesting obligations in the State of Washington and to provide collateral for outstanding claims under the Company’s previous workers’ compensation self-insurance programs in Washington and Florida. Rayonier has also obtained performance bonds to secure the development activity at the Company’s Wildlight development project. These surety bonds expire at various dates during 2018 and 2019 and are expected to be renewed as required.
|
11. EARNINGS PER COMMON SHARE
The following table provides details of the calculations of basic and diluted earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net Income
|
|
$30,639
|
|
|
|
$28,803
|
|
|
|
$112,682
|
|
|
|
$94,659
|
|
Less: Net income attributable to noncontrolling interest
|
(7,207
|
)
|
|
(4,115
|
)
|
|
(12,453
|
)
|
|
(9,968
|
)
|
Net income attributable to Rayonier Inc.
|
|
$23,432
|
|
|
|
$24,688
|
|
|
|
$100,229
|
|
|
|
$84,691
|
|
|
|
|
|
|
|
|
|
Shares used for determining basic earnings per common share
|
129,142,931
|
|
|
128,610,696
|
|
|
129,005,074
|
|
|
126,934,003
|
|
Dilutive effect of:
|
|
|
|
|
|
|
|
Stock options
|
73,372
|
|
|
84,380
|
|
|
85,000
|
|
|
94,528
|
|
Performance and restricted shares
|
539,571
|
|
|
270,704
|
|
|
584,364
|
|
|
315,476
|
|
Shares used for determining diluted earnings per common share
|
129,755,874
|
|
|
128,965,780
|
|
|
129,674,438
|
|
|
127,344,007
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to Rayonier Inc.:
|
|
$0.18
|
|
|
|
$0.19
|
|
|
|
$0.78
|
|
|
|
$0.67
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share attributable to Rayonier Inc.:
|
|
$0.18
|
|
|
|
$0.19
|
|
|
|
$0.77
|
|
|
|
$0.67
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Anti-dilutive shares excluded from the computations of diluted earnings per share:
|
|
|
|
|
|
|
|
Stock options and performance shares
|
150,313
|
|
|
621,447
|
|
|
192,265
|
|
|
600,039
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
12.
|
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
|
The Company is exposed to market risk related to potential fluctuations in foreign currency exchange rates and interest rates. The Company uses derivative financial instruments to mitigate the financial impact of exposure to these risks.
Accounting for derivative financial instruments is governed by ASC Topic 815,
Derivatives and Hedging
, (“ASC 815”). In accordance with ASC 815, the Company records its derivative instruments at fair value as either assets or liabilities in the Consolidated Balance Sheets. Changes in the instruments’ fair value are accounted for based on their intended use. Gains and losses on derivatives that are designated and qualify for cash flow hedge accounting are recorded as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the Company’s investment in its New Zealand operations is partially or completely liquidated. The ineffective portion of any hedge, changes in the fair value of derivatives not designated as hedging instruments and those which are no longer effective as hedging instruments, are recognized immediately in earnings. The Company’s hedge ineffectiveness was de minimis for all periods presented.
FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS
The functional currency of Rayonier’s wholly owned subsidiary, Rayonier New Zealand Limited, and the New Zealand JV is the New Zealand dollar. The New Zealand JV is exposed to foreign currency risk on export sales and ocean freight payments which are mainly denominated in U.S. dollars. The New Zealand JV typically hedges
35%
to
90%
of its estimated foreign currency exposure with respect to the following
three
months forecasted sales and purchases,
25%
to
75%
of forecasted sales and purchases for the forward
three
to
12
months and up to
50%
of the forward
12
to
18
months. Foreign currency exposure from the New Zealand JV’s trading operations is typically hedged based on the following three months forecasted sales and purchases. As of
September 30, 2018
, foreign currency exchange contracts and foreign currency option contracts had maturity dates through December 2019 and February 2020, respectively.
Foreign currency exchange and option contracts hedging foreign currency risk on export sales and ocean freight payments qualify for cash flow hedge accounting. The fair value of foreign currency exchange contracts is determined by a mark-to-market valuation which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate. The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.
The Company may de-designate these cash flow hedge relationships in advance or at the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously accumulated in other comprehensive income for de-designated hedges remains in accumulated other comprehensive income until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings.
Through our ownership in the New Zealand JV, the Company is exposed to foreign currency risk on shareholder distribution payments which are denominated in N.Z. dollars. On behalf of the Company, the New Zealand JV typically hedges
60%
to
100%
of its estimated foreign currency exposure with respect to the following
three
months anticipated distributions, up to
75%
of anticipated distributions for the forward
three
to
six
months and up to
50%
of the forward
six
to
12
months. For the three and nine months ended
September 30, 2018
, the change in fair value of the foreign exchange forward contracts of
($0.2) million
and $
2.4 million
, respectively, was recorded as a (loss)/gain in “
Interest and other miscellaneous income, net
” as the contracts did not qualify for hedge accounting treatment. As of
September 30, 2018
, foreign exchange forward contracts had maturity dates through December 2018.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
In March 2018, the Company entered into a foreign currency exchange contract (notional amount of NZ
$37 million
) to mitigate the risk of fluctuations in foreign currency exchange rates when translating the New Zealand JV’s balance sheet to U.S. dollars. This contract hedged the cash portion of the Company’s net investment in New Zealand and qualified as a net investment hedge. The fair value of this contract was determined by a mark-to-market valuation, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate. This hedge qualified for hedge accounting whereby fluctuations in fair market value during the life of the hedge are recorded in AOCI and remain there permanently unless a partial or full liquidation of the investment is made. At each reporting period, the Company reviewed the hedge for ineffectiveness. In April 2018, the foreign currency exchange contract matured and the Company repatriated the cash. The Company did not have any ineffectiveness during the life of the hedge.
INTEREST RATE SWAPS
The Company is exposed to cash flow interest rate risk on its variable-rate Term Credit Agreement and Incremental Term Loan Agreement (as discussed below), and uses variable-to-fixed interest rate swaps to hedge this exposure. For these derivative instruments, the Company reports the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassifies them to earnings as interest expense in the same period in which the hedged interest payments affect earnings.
The following table contains information on the outstanding interest rate swaps as of
September 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
Outstanding Interest Rate Swaps (a)
|
Date Entered Into
|
Term
|
Notional Amount
|
Related Debt Facility
|
Fixed Rate of Swap
|
Bank Margin on Debt
|
Total Effective Interest Rate (b)
|
August 2015
|
9 years
|
$170,000
|
Term Credit Agreement
|
2.20
|
%
|
1.63
|
%
|
3.83
|
%
|
August 2015
|
9 years
|
180,000
|
Term Credit Agreement
|
2.35
|
%
|
1.63
|
%
|
3.98
|
%
|
April 2016
|
10 years
|
100,000
|
Incremental Term Loan
|
1.60
|
%
|
1.90
|
%
|
3.50
|
%
|
April 2016
|
10 years
|
100,000
|
Incremental Term Loan
|
1.60
|
%
|
1.90
|
%
|
3.50
|
%
|
July 2016
|
10 years
|
100,000
|
Incremental Term Loan
|
1.26
|
%
|
1.90
|
%
|
3.16
|
%
|
|
|
(a)
|
All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.
|
|
|
(b)
|
Rate is before estimated patronage payments.
|
CARBON OPTIONS
The New Zealand JV enters into carbon options from time to time to sell carbon assets at certain prices. The fair value of carbon options is
determined by a mark-to-market valuation using the Black-Scholes option pricing model, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate
. For the three and nine months ended
September 30, 2018
, the change in fair value of the carbon option contracts of
($0.6) million
and
($0.6) million
, respectively, was recorded as a loss in “
Interest and other miscellaneous income, net
” as the contracts did not qualify for hedge accounting treatment. As of
September 30, 2018
, carbon option contracts had maturity dates through March 2019.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The following tables demonstrate the impact of the Company’s derivatives on the Consolidated Statements of Income and Comprehensive Income for the three and
nine
months ended
September 30, 2018
and
2017
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Income Statement Location
|
|
2018
|
|
2017
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
Foreign currency exchange contracts
|
Other comprehensive (loss) income
|
|
|
($1,402
|
)
|
|
|
($1,579
|
)
|
Foreign currency option contracts
|
Other comprehensive (loss) income
|
|
(29
|
)
|
|
(716
|
)
|
Interest rate swaps
|
Other comprehensive (loss) income
|
|
5,173
|
|
|
(533
|
)
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Foreign currency exchange contracts
|
Interest and other miscellaneous income, net
|
|
(189
|
)
|
|
609
|
|
Carbon option contracts
|
Interest and other miscellaneous income, net
|
|
(577
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
Income Statement Location
|
|
2018
|
|
2017
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
|
Foreign currency exchange contracts
|
Other comprehensive (loss) income
|
|
|
($6,800
|
)
|
|
|
$1,611
|
|
Foreign currency option contracts
|
Other comprehensive (loss) income
|
|
(388
|
)
|
|
219
|
|
Interest rate swaps
|
Other comprehensive (loss) income
|
|
26,461
|
|
|
(2,921
|
)
|
|
|
|
|
|
|
Derivatives designated as a net investment hedge:
|
|
|
|
|
Foreign currency exchange contract
|
Other comprehensive (loss) income
|
|
(344
|
)
|
|
—
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Foreign currency exchange contracts
|
Interest and other miscellaneous income, net
|
|
2,419
|
|
|
283
|
|
Carbon option contracts
|
Interest and other miscellaneous income, net
|
|
(577
|
)
|
|
—
|
|
During the next 12 months, the amount of the
September 30, 2018
AOCI balance, net of tax, expected to be reclassified into earnings as a result of the maturation of the Company’s derivative instruments is a loss of approximately
$2.6 million
.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
Notional Amount
|
|
September 30, 2018
|
|
December 31, 2017
|
Derivatives designated as cash flow hedges:
|
|
|
|
Foreign currency exchange contracts
|
|
$103,000
|
|
|
|
$107,400
|
|
Foreign currency option contracts
|
20,000
|
|
|
48,000
|
|
Interest rate swaps
|
650,000
|
|
|
650,000
|
|
|
|
|
|
Derivative not designated as a hedging instrument:
|
|
|
|
Foreign currency exchange contracts
|
21,019
|
|
|
18,439
|
|
Carbon options (a)
|
7,500
|
|
|
—
|
|
(a) Notional amount for carbon options is calculated as the number of units outstanding multiplied by the spot price as of
September 30, 2018
.
The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
Location on Balance Sheet
|
|
Fair Value Assets / (Liabilities) (a)
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Derivatives designated as cash flow hedges:
|
|
|
|
|
Foreign currency exchange contracts
|
Other current assets
|
|
|
$9
|
|
|
|
$2,286
|
|
|
Other assets
|
|
—
|
|
|
538
|
|
|
Other current liabilities
|
|
(3,528
|
)
|
|
(37
|
)
|
|
Other non-current liabilities
|
|
(494
|
)
|
|
—
|
|
Foreign currency option contracts
|
Other current assets
|
|
40
|
|
|
389
|
|
|
Other assets
|
|
79
|
|
|
137
|
|
|
Other current liabilities
|
|
(104
|
)
|
|
(119
|
)
|
|
Other non-current liabilities
|
|
(79
|
)
|
|
(55
|
)
|
Interest rate swaps
|
Other assets
|
|
41,900
|
|
|
17,473
|
|
|
Other non-current liabilities
|
|
—
|
|
|
(2,033
|
)
|
|
|
|
|
|
|
Derivative not designated as a hedging instrument:
|
|
|
|
|
Foreign currency exchange contracts
|
Other current assets
|
|
2,206
|
|
|
209
|
|
|
Other current liabilities
|
|
(1
|
)
|
|
(189
|
)
|
Carbon options
|
Other current liabilities
|
|
(664
|
)
|
|
—
|
|
|
|
|
|
|
|
Total derivative contracts:
|
|
|
|
|
|
Other current assets
|
|
|
|
$2,255
|
|
|
|
$2,884
|
|
Other assets
|
|
|
41,979
|
|
|
18,148
|
|
Total derivative assets
|
|
|
|
$44,234
|
|
|
|
$21,032
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
(4,297
|
)
|
|
(345
|
)
|
Other non-current liabilities
|
|
|
(573
|
)
|
|
(2,088
|
)
|
Total derivative liabilities
|
|
|
|
($4,870
|
)
|
|
|
($2,433
|
)
|
(a) See
Note 13 — Fair Value Measurements
for further information on the fair value of the Company’s derivatives including their classification within the fair value hierarchy.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
OFFSETTING DERIVATIVES
Derivative financial instruments are presented at their gross fair values in the Consolidated Balance Sheets. The Company’s derivative financial instruments are not subject to master netting arrangements, which would allow the right of offset.
|
|
13.
|
FAIR VALUE MEASUREMENTS
|
FAIR VALUE OF FINANCIAL INSTRUMENTS
A three-level hierarchy that prioritizes the inputs used to measure fair value was established in the Accounting Standards Codification as follows:
Level 1
— Quoted prices in active markets for identical assets or liabilities.
Level 2
—
Observable inputs other than quoted prices included in Level 1.
Level 3
—
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. (a)
The following table presents the carrying amount and estimated fair values of financial instruments held by the Company at
September 30, 2018
and
December 31, 2017
, using market information and what the Company believes to be appropriate valuation methodologies under GAAP:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Asset (Liability) (a)
|
Carrying
Amount
|
|
Fair Value
|
|
Carrying
Amount
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
|
Level 1
|
|
Level 2
|
Cash and cash equivalents
|
|
$146,259
|
|
|
|
$146,259
|
|
|
—
|
|
|
|
$112,653
|
|
|
|
$112,653
|
|
|
—
|
|
Restricted cash (b)
|
45,418
|
|
|
45,418
|
|
|
—
|
|
|
59,703
|
|
|
59,703
|
|
|
—
|
|
Current maturities of long-term debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,375
|
)
|
|
—
|
|
|
(3,375
|
)
|
Long-term debt (c)
|
(972,426
|
)
|
|
—
|
|
|
(970,970
|
)
|
|
(1,022,004
|
)
|
|
—
|
|
|
(1,030,135
|
)
|
Interest rate swaps (d)
|
41,900
|
|
|
—
|
|
|
41,900
|
|
|
15,440
|
|
|
—
|
|
|
15,440
|
|
Foreign currency exchange contracts (d)
|
(1,808
|
)
|
|
—
|
|
|
(1,808
|
)
|
|
2,807
|
|
|
—
|
|
|
2,807
|
|
Foreign currency option contracts (d)
|
(64
|
)
|
|
—
|
|
|
(64
|
)
|
|
352
|
|
|
—
|
|
|
352
|
|
Carbon option contracts
|
(664
|
)
|
|
—
|
|
|
(664
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(a)
|
The Company did not have Level 3 assets or liabilities at
September 30, 2018
and
December 31, 2017
.
|
|
|
(b)
|
Restricted cash represents the proceeds from like-kind exchange sales deposited with a third-party intermediary and cash held in escrow for a real estate sale. See
Note 17 — Restricted Cash
for additional information.
|
|
|
(c)
|
The carrying amount of long-term debt is presented net of capitalized debt costs on non-revolving debt.
|
Rayonier uses the following methods and assumptions in estimating the fair value of its financial instruments:
Cash and cash equivalents and Restricted cash
— The carrying amount is equal to fair market value.
Debt
— The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities. The variable rate debt adjusts with changes in the market rate, therefore the carrying value approximates fair value.
Interest rate swap agreements
— The fair value of interest rate contracts is determined by discounting the expected future cash flows, for each instrument, at prevailing interest rates.
Foreign currency exchange contracts
— The fair value of foreign currency exchange contracts is determined by a mark-to-market valuation which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
Foreign currency option contracts
— The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.
Carbon option contracts
— The fair value of carbon option contracts is
determined by a mark-to-market valuation using the Black-Scholes option pricing model, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate
.
|
|
14.
|
EMPLOYEE BENEFIT PLANS
|
The Company has
one
qualified non-contributory defined benefit pension plan covering a portion of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plan. Both plans are closed to new participants. Effective December 31, 2016, the Company froze benefits for all employees participating in the pension plan. In lieu of the pension plan, the Company provides those employees with an enhanced 401(k) plan match. 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.
As of September 30, 2018, the Company has paid
$2.3 million
of the approximately
$2.7 million
in current year mandatory pension contribution requirements (based on actuarially determined estimates and IRS minimum funding requirements).
The net pension and postretirement benefit (credit) costs that have been recorded are shown in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit (Credit) Cost
|
Income Statement Location (a)
|
|
Pension
|
|
Postretirement
|
|
Three Months Ended September 30,
|
|
Three Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Components of Net Periodic Benefit (Credit) Cost
|
|
|
|
|
|
|
|
|
|
Service cost
|
Selling and general expenses
|
|
—
|
|
|
—
|
|
|
|
$2
|
|
|
|
$2
|
|
Interest cost
|
Interest and other miscellaneous income, net
|
|
755
|
|
|
815
|
|
|
13
|
|
|
13
|
|
Expected return on plan assets (b)
|
Interest and other miscellaneous income, net
|
|
(983
|
)
|
|
(945
|
)
|
|
—
|
|
|
—
|
|
Amortization of losses
|
Interest and other miscellaneous income, net
|
|
168
|
|
|
116
|
|
|
—
|
|
|
—
|
|
Net periodic benefit (credit) cost
|
|
|
|
($60
|
)
|
|
|
($14
|
)
|
|
|
$15
|
|
|
|
$15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit (Credit) Cost
|
Income Statement Location (a)
|
|
Pension
|
|
Postretirement
|
|
Nine Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Components of Net Periodic Benefit (Credit) Cost
|
|
|
|
|
|
|
|
|
|
Service cost
|
Selling and general expenses
|
|
—
|
|
|
—
|
|
|
|
$5
|
|
|
|
$5
|
|
Interest cost
|
Interest and other miscellaneous income, net
|
|
2,266
|
|
|
2,444
|
|
|
38
|
|
|
39
|
|
Expected return on plan assets (b)
|
Interest and other miscellaneous income, net
|
|
(2,950
|
)
|
|
(2,836
|
)
|
|
—
|
|
|
—
|
|
Amortization of losses
|
Interest and other miscellaneous income, net
|
|
505
|
|
|
349
|
|
|
2
|
|
|
—
|
|
Net periodic benefit (credit) cost
|
|
|
|
($179
|
)
|
|
|
($43
|
)
|
|
|
$45
|
|
|
|
$44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Due to the adoption of ASU No. 2017-07, the service cost component of net periodic benefit (credit) cost is now recorded to “Selling and general expenses” in the Consolidated Statements of Income and Comprehensive Income with other compensation costs arising from services rendered by employees during the period. The other components of net periodic benefit (credit) cost (interest cost, expected return on plan assets and amortization of losses) are now recorded to “
Interest and other miscellaneous income, net
” in the Consolidated Statements of Income. Prior period amounts have been reclassified to conform to current period presentation. See
Note 1 — Basis of Presentation
for additional information.
|
|
|
(b)
|
The weighted-average expected long-term rate of return on plan assets used in computing 2018 net periodic benefit cost for pension benefits is
7.2%
.
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
15.
|
OTHER OPERATING (LOSS) INCOME, NET
|
Other operating income, net comprised the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Foreign currency income (expense)
|
|
$242
|
|
|
|
$165
|
|
|
|
$264
|
|
|
|
$15
|
|
Loss on sale or disposal of property and equipment
|
(30
|
)
|
|
(63
|
)
|
|
(3
|
)
|
|
(69
|
)
|
(Loss) gain on foreign currency exchange and option contracts
|
(712
|
)
|
|
1,295
|
|
|
1,599
|
|
|
2,476
|
|
Log trading marketing fees
|
66
|
|
|
389
|
|
|
197
|
|
|
896
|
|
Income from the sale of unused Internet Protocol addresses
|
—
|
|
|
—
|
|
|
646
|
|
|
—
|
|
Income from New Zealand Timber settlement
|
—
|
|
|
—
|
|
|
—
|
|
|
420
|
|
Miscellaneous (expense) income, net
|
(17
|
)
|
|
(15
|
)
|
|
(126
|
)
|
|
6
|
|
Total
|
|
($451
|
)
|
|
|
$1,771
|
|
|
|
$2,577
|
|
|
|
$3,744
|
|
As of
September 30, 2018
and
December 31, 2017
, Rayonier’s inventory was solely comprised of finished goods, as follows:
|
|
|
|
|
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
Finished goods inventory
|
|
|
|
Real estate inventory (a)
|
|
$22,374
|
|
|
|
$18,350
|
|
Log inventory
|
4,576
|
|
|
5,791
|
|
Total inventory
|
|
$26,950
|
|
|
|
$24,141
|
|
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 LKE purchases are not completed, the proceeds are returned to the Company after
180 days
and reclassified as available cash. As of
September 30, 2018
and
December 31, 2017
, the Company had
$45.4 million
and
$59.7 million
, respectively, of proceeds from real estate sales classified as restricted cash which were deposited with an LKE intermediary as well as cash held in escrow for a real estate sale.
The following table contains the amounts of restricted cash recorded in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows for the
nine
months ended
September 30, 2018
:
|
|
|
|
|
September 30, 2018
|
Restricted cash deposited with LKE intermediary
|
$44,868
|
Restricted cash held in escrow
|
550
|
|
Total restricted cash shown in the Consolidated Balance Sheets
|
45,418
|
|
Cash and cash equivalents
|
146,259
|
|
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows
|
$191,677
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
18.
|
ACCUMULATED OTHER COMPREHENSIVE INCOME
|
The following table summarizes the changes in AOCI by component for the
nine
months ended
September 30, 2018
and the year ended
December 31, 2017
. All amounts are presented net of tax and exclude portions attributable to noncontrolling interest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gains
|
|
Net investment hedges of New Zealand JV
|
|
Cash flow hedges
|
|
Employee benefit plans
|
|
Total
|
Balance as of December 31, 2016
|
|
$8,559
|
|
|
|
$1,665
|
|
|
|
$10,831
|
|
|
|
($20,199
|
)
|
|
|
$856
|
|
Other comprehensive income before reclassifications
|
7,416
|
|
|
—
|
|
|
7,321
|
|
|
(673
|
)
|
|
14,064
|
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
—
|
|
|
(1,968
|
)
|
|
465
|
|
|
(1,503
|
)
|
Net other comprehensive income/(loss)
|
7,416
|
|
|
—
|
|
|
5,353
|
|
|
(208
|
)
|
|
12,561
|
|
Balance as of December 31, 2017
|
|
$15,975
|
|
|
|
$1,665
|
|
|
|
$16,184
|
|
|
|
($20,407
|
)
|
|
|
$13,417
|
|
Other comprehensive (loss)/income before reclassifications
|
(22,997
|
)
|
|
(344
|
)
|
|
23,042
|
|
(a)
|
—
|
|
|
(299
|
)
|
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
—
|
|
|
(566
|
)
|
|
(204
|
)
|
(b)
|
(770
|
)
|
Net other comprehensive (loss)/income
|
(22,997
|
)
|
|
(344
|
)
|
|
22,476
|
|
|
(204
|
)
|
|
(1,069
|
)
|
Balance as of September 30, 2018
|
|
($7,022
|
)
|
|
|
$1,321
|
|
|
|
$38,660
|
|
|
|
($20,611
|
)
|
|
|
$12,348
|
|
|
|
(b)
|
This component of other comprehensive income includes
$0.5 million
in the computation of net periodic pension cost. See
Note 14 — Employee Benefit Plans
for additional information. Additionally, this component includes a
$0.7 million
adjustment related to the adoption of ASU 2018-02. See
Note 1
—
Basis of Presentation
.
|
The following table presents details of the amounts reclassified in their entirety from AOCI to net income for the
nine
months ended
September 30, 2018
and
September 30, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
Details about accumulated other comprehensive income components
|
|
Amount reclassified from accumulated other comprehensive income
|
|
Affected line item in the income statement
|
|
September 30, 2018
|
|
September 30, 2017
|
|
Realized gain on foreign currency exchange contracts
|
|
|
($865
|
)
|
|
|
($2,928
|
)
|
|
Other operating income, net
|
Realized gain on foreign currency option contracts
|
|
(156
|
)
|
|
(867
|
)
|
|
Other operating income, net
|
Noncontrolling interest
|
|
235
|
|
|
873
|
|
|
Comprehensive income attributable to noncontrolling interest
|
Income tax expense from gain on foreign currency contracts
|
|
220
|
|
|
818
|
|
|
Income tax expense
|
Net gain from accumulated other comprehensive income
|
|
|
($566
|
)
|
|
|
($2,104
|
)
|
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
19.
|
CONSOLIDATING FINANCIAL STATEMENTS
|
The condensed consolidating financial information below 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 Inc. incurred for the benefit of its subsidiaries.
In
March 2012
, Rayonier Inc. issued
$325 million
of
3.75%
Senior Notes due
2022
. In connection with these 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
.
The subsidiary guarantors, Rayonier Operating Company LLC (“ROC”) and Rayonier TRS Holdings Inc., are wholly-owned by the parent company, Rayonier Inc. The notes are fully and unconditionally guaranteed on a joint and several basis by the guarantor subsidiaries.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
|
|
For the Three Months Ended September 30, 2018
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
SALES
|
—
|
|
|
—
|
|
|
|
$200,890
|
|
|
—
|
|
|
|
$200,890
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
(143,261
|
)
|
|
—
|
|
|
(143,261
|
)
|
Selling and general expenses
|
—
|
|
|
(5,094
|
)
|
|
(5,706
|
)
|
|
—
|
|
|
(10,800
|
)
|
Other operating loss, net
|
—
|
|
|
(50
|
)
|
|
(401
|
)
|
|
—
|
|
|
(451
|
)
|
|
—
|
|
|
(5,144
|
)
|
|
(149,368
|
)
|
|
—
|
|
|
(154,512
|
)
|
OPERATING (LOSS) INCOME
|
—
|
|
|
(5,144
|
)
|
|
51,522
|
|
|
—
|
|
|
46,378
|
|
Interest expense
|
(3,138
|
)
|
|
(4,676
|
)
|
|
(24
|
)
|
|
—
|
|
|
(7,838
|
)
|
Interest and miscellaneous income (expense), net
|
1,743
|
|
|
1,755
|
|
|
(3,003
|
)
|
|
—
|
|
|
495
|
|
Equity in income from subsidiaries
|
24,827
|
|
|
33,539
|
|
|
—
|
|
|
(58,366
|
)
|
|
—
|
|
INCOME BEFORE INCOME TAXES
|
23,432
|
|
|
25,474
|
|
|
48,495
|
|
|
(58,366
|
)
|
|
39,035
|
|
Income tax expense
|
—
|
|
|
(647
|
)
|
|
(7,749
|
)
|
|
—
|
|
|
(8,396
|
)
|
NET INCOME
|
23,432
|
|
|
24,827
|
|
|
40,746
|
|
|
(58,366
|
)
|
|
30,639
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(7,207
|
)
|
|
—
|
|
|
(7,207
|
)
|
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
|
23,432
|
|
|
24,827
|
|
|
33,539
|
|
|
(58,366
|
)
|
|
23,432
|
|
OTHER COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of income tax
|
(8,090
|
)
|
|
—
|
|
|
(10,527
|
)
|
|
8,090
|
|
|
(10,527
|
)
|
Cash flow hedges, net of income tax
|
4,379
|
|
|
5,174
|
|
|
(1,032
|
)
|
|
(4,379
|
)
|
|
4,142
|
|
Amortization of pension and postretirement plans, net of income tax
|
(542
|
)
|
|
(542
|
)
|
|
—
|
|
|
542
|
|
|
(542
|
)
|
Total other comprehensive (loss) income
|
(4,253
|
)
|
|
4,632
|
|
|
(11,559
|
)
|
|
4,253
|
|
|
(6,927
|
)
|
COMPREHENSIVE INCOME
|
19,179
|
|
|
29,459
|
|
|
29,187
|
|
|
(54,113
|
)
|
|
23,712
|
|
Less: Comprehensive loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(4,533
|
)
|
|
—
|
|
|
(4,533
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC.
|
|
$19,179
|
|
|
|
$29,459
|
|
|
|
$24,654
|
|
|
|
($54,113
|
)
|
|
|
$19,179
|
|
|
|
|
|
|
|
|
|
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
|
|
For the Three Months Ended September 30, 2017
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
SALES
|
—
|
|
|
—
|
|
|
|
$184,419
|
|
|
—
|
|
|
|
$184,419
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
(136,983
|
)
|
|
—
|
|
|
(136,983
|
)
|
Selling and general expenses
|
—
|
|
|
(4,096
|
)
|
|
(5,840
|
)
|
|
—
|
|
|
(9,936
|
)
|
Other operating (loss) income, net
|
—
|
|
|
(81
|
)
|
|
1,852
|
|
|
—
|
|
|
1,771
|
|
|
—
|
|
|
(4,177
|
)
|
|
(140,971
|
)
|
|
—
|
|
|
(145,148
|
)
|
OPERATING (LOSS) INCOME
|
—
|
|
|
(4,177
|
)
|
|
43,448
|
|
|
—
|
|
|
39,271
|
|
Interest expense
|
(3,139
|
)
|
|
(4,982
|
)
|
|
(432
|
)
|
|
—
|
|
|
(8,553
|
)
|
Interest and miscellaneous income (expense), net
|
2,486
|
|
|
704
|
|
|
(2,062
|
)
|
|
—
|
|
|
1,128
|
|
Equity in income from subsidiaries
|
25,341
|
|
|
33,929
|
|
|
—
|
|
|
(59,270
|
)
|
|
—
|
|
INCOME BEFORE INCOME TAXES
|
24,688
|
|
|
25,474
|
|
|
40,954
|
|
|
(59,270
|
)
|
|
31,846
|
|
Income tax expense
|
—
|
|
|
(133
|
)
|
|
(2,910
|
)
|
|
—
|
|
|
(3,043
|
)
|
NET INCOME
|
24,688
|
|
|
25,341
|
|
|
38,044
|
|
|
(59,270
|
)
|
|
28,803
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(4,115
|
)
|
|
—
|
|
|
(4,115
|
)
|
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
|
24,688
|
|
|
25,341
|
|
|
33,929
|
|
|
(59,270
|
)
|
|
24,688
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of income tax
|
(5,866
|
)
|
|
—
|
|
|
(7,317
|
)
|
|
5,866
|
|
|
(7,317
|
)
|
Cash flow hedges, net of income tax
|
(1,787
|
)
|
|
(533
|
)
|
|
(1,629
|
)
|
|
1,787
|
|
|
(2,162
|
)
|
Amortization of pension and postretirement plans, net of income tax
|
116
|
|
|
116
|
|
|
—
|
|
|
(116
|
)
|
|
116
|
|
Total other comprehensive income (loss)
|
(7,537
|
)
|
|
(417
|
)
|
|
(8,946
|
)
|
|
7,537
|
|
|
(9,363
|
)
|
COMPREHENSIVE INCOME
|
17,151
|
|
|
24,924
|
|
|
29,098
|
|
|
(51,733
|
)
|
|
19,440
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(2,289
|
)
|
|
—
|
|
|
(2,289
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC.
|
|
$17,151
|
|
|
|
$24,924
|
|
|
|
$26,809
|
|
|
|
($51,733
|
)
|
|
|
$17,151
|
|
|
|
|
|
|
|
|
|
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
|
|
For the Nine Months Ended September 30, 2018
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
SALES
|
—
|
|
|
—
|
|
|
|
$649,991
|
|
|
—
|
|
|
|
$649,991
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
(466,167
|
)
|
|
—
|
|
|
(466,167
|
)
|
Selling and general expenses
|
—
|
|
|
(14,953
|
)
|
|
(16,351
|
)
|
|
—
|
|
|
(31,304
|
)
|
Other operating (loss) income, net
|
(12
|
)
|
|
545
|
|
|
2,044
|
|
|
—
|
|
|
2,577
|
|
|
(12
|
)
|
|
(14,408
|
)
|
|
(480,474
|
)
|
|
—
|
|
|
(494,894
|
)
|
OPERATING (LOSS) INCOME
|
(12
|
)
|
|
(14,408
|
)
|
|
169,517
|
|
|
—
|
|
|
155,097
|
|
Interest expense
|
(9,417
|
)
|
|
(14,229
|
)
|
|
(346
|
)
|
|
—
|
|
|
(23,992
|
)
|
Interest and miscellaneous income (expense), net
|
7,105
|
|
|
3,265
|
|
|
(6,350
|
)
|
|
—
|
|
|
4,020
|
|
Equity in income from subsidiaries
|
102,553
|
|
|
128,786
|
|
|
—
|
|
|
(231,339
|
)
|
|
—
|
|
INCOME BEFORE INCOME TAXES
|
100,229
|
|
|
103,414
|
|
|
162,821
|
|
|
(231,339
|
)
|
|
135,125
|
|
Income tax expense
|
—
|
|
|
(861
|
)
|
|
(21,582
|
)
|
|
—
|
|
|
(22,443
|
)
|
NET INCOME
|
100,229
|
|
|
102,553
|
|
|
141,239
|
|
|
(231,339
|
)
|
|
112,682
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(12,453
|
)
|
|
—
|
|
|
(12,453
|
)
|
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
|
100,229
|
|
|
102,553
|
|
|
128,786
|
|
|
(231,339
|
)
|
|
100,229
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of income tax
|
(23,341
|
)
|
|
452
|
|
|
(31,051
|
)
|
|
23,341
|
|
|
(30,599
|
)
|
Cash flow hedges, net of income tax
|
22,476
|
|
|
26,460
|
|
|
(5,175
|
)
|
|
(22,476
|
)
|
|
21,285
|
|
Amortization of pension and postretirement plans, net of income tax
|
(204
|
)
|
|
(204
|
)
|
|
—
|
|
|
204
|
|
|
(204
|
)
|
Total other comprehensive income (loss)
|
(1,069
|
)
|
|
26,708
|
|
|
(36,226
|
)
|
|
1,069
|
|
|
(9,518
|
)
|
COMPREHENSIVE INCOME
|
99,160
|
|
|
129,261
|
|
|
105,013
|
|
|
(230,270
|
)
|
|
103,164
|
|
Less: Comprehensive loss attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(4,004
|
)
|
|
—
|
|
|
(4,004
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC.
|
|
$99,160
|
|
|
|
$129,261
|
|
|
|
$101,009
|
|
|
|
($230,270
|
)
|
|
|
$99,160
|
|
|
|
|
|
|
|
|
|
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
|
|
For the Nine Months Ended September 30, 2017
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
SALES
|
—
|
|
|
—
|
|
|
|
$579,874
|
|
|
—
|
|
|
|
$579,874
|
|
Costs and Expenses
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
—
|
|
|
—
|
|
|
(418,421
|
)
|
|
—
|
|
|
(418,421
|
)
|
Selling and general expenses
|
—
|
|
|
(11,880
|
)
|
|
(17,891
|
)
|
|
—
|
|
|
(29,771
|
)
|
Other operating (loss) income, net
|
—
|
|
|
(212
|
)
|
|
3,956
|
|
|
—
|
|
|
3,744
|
|
|
—
|
|
|
(12,092
|
)
|
|
(432,356
|
)
|
|
—
|
|
|
(444,448
|
)
|
OPERATING (LOSS) INCOME
|
—
|
|
|
(12,092
|
)
|
|
147,518
|
|
|
—
|
|
|
135,426
|
|
Interest expense
|
(9,417
|
)
|
|
(14,723
|
)
|
|
(1,460
|
)
|
|
—
|
|
|
(25,600
|
)
|
Interest and miscellaneous income (expense), net
|
7,033
|
|
|
2,087
|
|
|
(7,470
|
)
|
|
—
|
|
|
1,650
|
|
Equity in income from subsidiaries
|
87,075
|
|
|
112,253
|
|
|
—
|
|
|
(199,328
|
)
|
|
—
|
|
INCOME BEFORE INCOME TAXES
|
84,691
|
|
|
87,525
|
|
|
138,588
|
|
|
(199,328
|
)
|
|
111,476
|
|
Income tax expense
|
—
|
|
|
(450
|
)
|
|
(16,367
|
)
|
|
—
|
|
|
(16,817
|
)
|
NET INCOME
|
84,691
|
|
|
87,075
|
|
|
122,221
|
|
|
(199,328
|
)
|
|
94,659
|
|
Less: Net income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(9,968
|
)
|
|
—
|
|
|
(9,968
|
)
|
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
|
84,691
|
|
|
87,075
|
|
|
112,253
|
|
|
(199,328
|
)
|
|
84,691
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of income tax
|
13,335
|
|
|
—
|
|
|
16,599
|
|
|
(13,335
|
)
|
|
16,599
|
|
Cash flow hedges, net of income tax
|
(1,902
|
)
|
|
(2,921
|
)
|
|
1,324
|
|
|
1,902
|
|
|
(1,597
|
)
|
Amortization of pension and postretirement plans, net of income tax
|
349
|
|
|
349
|
|
|
—
|
|
|
(349
|
)
|
|
349
|
|
Total other comprehensive income (loss)
|
11,782
|
|
|
(2,572
|
)
|
|
17,923
|
|
|
(11,782
|
)
|
|
15,351
|
|
COMPREHENSIVE INCOME
|
96,473
|
|
|
84,503
|
|
|
140,144
|
|
|
(211,110
|
)
|
|
110,010
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
—
|
|
|
—
|
|
|
(13,537
|
)
|
|
—
|
|
|
(13,537
|
)
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC.
|
|
$96,473
|
|
|
|
$84,503
|
|
|
|
$126,607
|
|
|
|
($211,110
|
)
|
|
|
$96,473
|
|
|
|
|
|
|
|
|
|
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
As of September 30, 2018
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$6,245
|
|
|
|
$92,747
|
|
|
|
$47,267
|
|
|
—
|
|
|
|
$146,259
|
|
Accounts receivable, less allowance for doubtful accounts
|
1,994
|
|
|
2,738
|
|
|
38,357
|
|
|
—
|
|
|
43,089
|
|
Inventory
|
—
|
|
|
—
|
|
|
26,950
|
|
|
—
|
|
|
26,950
|
|
Prepaid expenses
|
—
|
|
|
1,534
|
|
|
14,315
|
|
|
—
|
|
|
15,849
|
|
Other current assets
|
—
|
|
|
106
|
|
|
2,337
|
|
|
—
|
|
|
2,443
|
|
Total current assets
|
8,239
|
|
|
97,125
|
|
|
129,226
|
|
|
—
|
|
|
234,590
|
|
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
|
—
|
|
|
—
|
|
|
2,386,949
|
|
|
—
|
|
|
2,386,949
|
|
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS
|
—
|
|
|
—
|
|
|
79,747
|
|
|
—
|
|
|
79,747
|
|
NET PROPERTY, PLANT AND EQUIPMENT
|
—
|
|
|
17,198
|
|
|
5,604
|
|
|
—
|
|
|
22,802
|
|
RESTRICTED CASH
|
—
|
|
|
—
|
|
|
45,418
|
|
|
—
|
|
|
45,418
|
|
INVESTMENT IN SUBSIDIARIES
|
1,875,187
|
|
|
3,031,631
|
|
|
—
|
|
|
(4,906,818
|
)
|
|
—
|
|
INTERCOMPANY RECEIVABLE
|
48,671
|
|
|
(629,661
|
)
|
|
580,990
|
|
|
—
|
|
|
—
|
|
OTHER ASSETS
|
2
|
|
|
37,532
|
|
|
35,175
|
|
|
—
|
|
|
72,709
|
|
TOTAL ASSETS
|
|
$1,932,099
|
|
|
|
$2,553,825
|
|
|
|
$3,263,109
|
|
|
|
($4,906,818
|
)
|
|
|
$2,842,215
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
—
|
|
|
|
$4,210
|
|
|
|
$18,196
|
|
|
—
|
|
|
|
$22,406
|
|
Accrued taxes
|
—
|
|
|
180
|
|
|
7,638
|
|
|
—
|
|
|
7,818
|
|
Accrued payroll and benefits
|
—
|
|
|
4,891
|
|
|
3,429
|
|
|
—
|
|
|
8,320
|
|
Accrued interest
|
6,094
|
|
|
1,869
|
|
|
—
|
|
|
—
|
|
|
7,963
|
|
Deferred revenue
|
—
|
|
|
—
|
|
|
13,867
|
|
|
—
|
|
|
13,867
|
|
Other current liabilities
|
1,994
|
|
|
1,029
|
|
|
18,226
|
|
|
—
|
|
|
21,249
|
|
Total current liabilities
|
8,088
|
|
|
12,179
|
|
|
61,356
|
|
|
—
|
|
|
81,623
|
|
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS
|
323,711
|
|
|
648,715
|
|
|
—
|
|
|
—
|
|
|
972,426
|
|
PENSION AND OTHER POSTRETIREMENT BENEFITS
|
—
|
|
|
29,609
|
|
|
(684
|
)
|
|
—
|
|
|
28,925
|
|
OTHER NON-CURRENT LIABILITIES
|
—
|
|
|
7,096
|
|
|
51,046
|
|
|
—
|
|
|
58,142
|
|
INTERCOMPANY PAYABLE
|
—
|
|
|
(18,961
|
)
|
|
18,961
|
|
|
—
|
|
|
—
|
|
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY
|
1,600,300
|
|
|
1,875,187
|
|
|
3,031,631
|
|
|
(4,906,818
|
)
|
|
1,600,300
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
100,799
|
|
|
—
|
|
|
100,799
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
1,600,300
|
|
|
1,875,187
|
|
|
3,132,430
|
|
|
(4,906,818
|
)
|
|
1,701,099
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$1,932,099
|
|
|
|
$2,553,825
|
|
|
|
$3,263,109
|
|
|
|
($4,906,818
|
)
|
|
|
$2,842,215
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING BALANCE SHEETS
|
|
As of December 31, 2017
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$48,564
|
|
|
|
$25,042
|
|
|
|
$39,047
|
|
|
—
|
|
|
|
$112,653
|
|
Accounts receivable, less allowance for doubtful accounts
|
—
|
|
|
3,726
|
|
|
23,967
|
|
|
—
|
|
|
27,693
|
|
Inventory
|
—
|
|
|
—
|
|
|
24,141
|
|
|
—
|
|
|
24,141
|
|
Prepaid expenses
|
—
|
|
|
759
|
|
|
15,234
|
|
|
—
|
|
|
15,993
|
|
Other current assets
|
—
|
|
|
14
|
|
|
3,033
|
|
|
—
|
|
|
3,047
|
|
Total current assets
|
48,564
|
|
|
29,541
|
|
|
105,422
|
|
|
—
|
|
|
183,527
|
|
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION
|
—
|
|
|
—
|
|
|
2,462,066
|
|
|
—
|
|
|
2,462,066
|
|
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS
|
—
|
|
|
—
|
|
|
80,797
|
|
|
—
|
|
|
80,797
|
|
NET PROPERTY, PLANT AND EQUIPMENT
|
—
|
|
|
21
|
|
|
23,357
|
|
|
—
|
|
|
23,378
|
|
RESTRICTED CASH
|
—
|
|
|
—
|
|
|
59,703
|
|
|
—
|
|
|
59,703
|
|
INVESTMENT IN SUBSIDIARIES
|
1,531,156
|
|
|
2,814,408
|
|
|
—
|
|
|
(4,345,564
|
)
|
|
—
|
|
INTERCOMPANY RECEIVABLE
|
40,067
|
|
|
(628,167
|
)
|
|
588,100
|
|
|
—
|
|
|
—
|
|
OTHER ASSETS
|
2
|
|
|
12,680
|
|
|
36,328
|
|
|
—
|
|
|
49,010
|
|
TOTAL ASSETS
|
|
$1,619,789
|
|
|
|
$2,228,483
|
|
|
|
$3,355,773
|
|
|
|
($4,345,564
|
)
|
|
|
$2,858,481
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
—
|
|
|
|
$2,838
|
|
|
|
$22,310
|
|
|
—
|
|
|
|
$25,148
|
|
Current maturities of long-term debt
|
—
|
|
|
—
|
|
|
3,375
|
|
|
—
|
|
|
3,375
|
|
Accrued taxes
|
—
|
|
|
48
|
|
|
3,733
|
|
|
—
|
|
|
3,781
|
|
Accrued payroll and benefits
|
—
|
|
|
5,298
|
|
|
4,364
|
|
|
—
|
|
|
9,662
|
|
Accrued interest
|
3,047
|
|
|
1,995
|
|
|
12
|
|
|
—
|
|
|
5,054
|
|
Deferred revenue
|
—
|
|
|
—
|
|
|
9,721
|
|
|
—
|
|
|
9,721
|
|
Other current liabilities
|
—
|
|
|
564
|
|
|
11,243
|
|
|
—
|
|
|
11,807
|
|
Total current liabilities
|
3,047
|
|
|
10,743
|
|
|
54,758
|
|
|
—
|
|
|
68,548
|
|
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS
|
323,434
|
|
|
663,570
|
|
|
35,000
|
|
|
—
|
|
|
1,022,004
|
|
PENSION AND OTHER POSTRETIREMENT BENEFITS
|
—
|
|
|
32,589
|
|
|
(684
|
)
|
|
—
|
|
|
31,905
|
|
OTHER NON-CURRENT LIABILITIES
|
—
|
|
|
9,386
|
|
|
33,698
|
|
|
—
|
|
|
43,084
|
|
INTERCOMPANY PAYABLE
|
(299,715
|
)
|
|
(18,961
|
)
|
|
318,676
|
|
|
—
|
|
|
—
|
|
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY
|
1,593,023
|
|
|
1,531,156
|
|
|
2,814,408
|
|
|
(4,345,564
|
)
|
|
1,593,023
|
|
Noncontrolling interest
|
—
|
|
|
—
|
|
|
99,917
|
|
|
—
|
|
|
99,917
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
1,593,023
|
|
|
1,531,156
|
|
|
2,914,325
|
|
|
(4,345,564
|
)
|
|
1,692,940
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$1,619,789
|
|
|
|
$2,228,483
|
|
|
|
$3,355,773
|
|
|
|
($4,345,564
|
)
|
|
|
$2,858,481
|
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
For the Nine Months Ended September 30, 2018
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES
|
|
($16,590
|
)
|
|
|
$165,283
|
|
|
|
$112,358
|
|
|
—
|
|
|
|
$261,051
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(58
|
)
|
|
(44,079
|
)
|
|
—
|
|
|
(44,137
|
)
|
Real estate development investments
|
—
|
|
|
—
|
|
|
(6,889
|
)
|
|
—
|
|
|
(6,889
|
)
|
Purchase of timberlands
|
—
|
|
|
—
|
|
|
(38,978
|
)
|
|
—
|
|
|
(38,978
|
)
|
Investment in subsidiaries
|
—
|
|
|
40,554
|
|
|
—
|
|
|
(40,554
|
)
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
2,132
|
|
|
—
|
|
|
2,132
|
|
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
|
—
|
|
|
40,496
|
|
|
(87,814
|
)
|
|
(40,554
|
)
|
|
(87,872
|
)
|
FINANCING ACTIVITIES (a)
|
|
|
|
|
|
|
|
|
|
Issuance of debt
|
—
|
|
|
—
|
|
|
1,014
|
|
|
—
|
|
|
1,014
|
|
Repayment of debt
|
—
|
|
|
(50,000
|
)
|
|
(4,416
|
)
|
|
—
|
|
|
(54,416
|
)
|
Dividends paid
|
(101,839
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(101,839
|
)
|
Proceeds from the issuance of common shares under incentive stock plan
|
8,216
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
8,216
|
|
Repurchase of common shares
|
(2,980
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,980
|
)
|
Proceeds from shareholder distribution hedge
|
—
|
|
|
—
|
|
|
610
|
|
|
—
|
|
|
610
|
|
Distribution to minority shareholder
|
—
|
|
|
—
|
|
|
(3,122
|
)
|
|
—
|
|
|
(3,122
|
)
|
Issuance of intercompany notes
|
(9,000
|
)
|
|
—
|
|
|
9,000
|
|
|
—
|
|
|
—
|
|
Intercompany distributions
|
79,874
|
|
|
(88,074
|
)
|
|
(32,354
|
)
|
|
40,554
|
|
|
—
|
|
CASH USED FOR FINANCING ACTIVITIES
|
(25,729
|
)
|
|
(138,074
|
)
|
|
(29,268
|
)
|
|
40,554
|
|
|
(152,517
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
—
|
|
|
—
|
|
|
(1,341
|
)
|
|
—
|
|
|
(1,341
|
)
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
|
|
|
|
|
|
|
Change in cash, cash equivalents and restricted cash
|
(42,319
|
)
|
|
67,705
|
|
|
(6,065
|
)
|
|
—
|
|
|
19,321
|
|
Balance, beginning of year
|
48,564
|
|
|
25,042
|
|
|
98,750
|
|
|
—
|
|
|
172,356
|
|
Balance, end of period
|
|
$6,245
|
|
|
|
$92,747
|
|
|
|
$92,685
|
|
|
—
|
|
|
|
$191,677
|
|
|
|
(a)
|
Non-cash financing activity: In August 2018, Rayonier Inc. waived $308.7 million and $67.2 million of intercompany loans and accrued interest, respectively, due from non-guarantors.
|
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(Dollar amounts in thousands unless otherwise stated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
|
|
For the Nine Months Ended September 30, 2017
|
|
Rayonier Inc.
(Parent
Issuer)
|
|
Subsidiary Guarantors
|
|
Non-
guarantors
|
|
Consolidating
Adjustments
|
|
Total
Consolidated
|
CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES
|
|
($40,090
|
)
|
|
|
$77,358
|
|
|
|
$149,605
|
|
|
—
|
|
|
|
$186,873
|
|
INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
—
|
|
|
(45,731
|
)
|
|
—
|
|
|
(45,731
|
)
|
Real estate development investments
|
—
|
|
|
—
|
|
|
(11,780
|
)
|
|
—
|
|
|
(11,780
|
)
|
Purchase of timberlands
|
—
|
|
|
—
|
|
|
(239,052
|
)
|
|
—
|
|
|
(239,052
|
)
|
Net proceeds from large disposition
|
—
|
|
|
—
|
|
|
42,029
|
|
|
—
|
|
|
42,029
|
|
Rayonier office building under construction
|
—
|
|
|
—
|
|
|
(5,979
|
)
|
|
—
|
|
|
(5,979
|
)
|
Investment in subsidiaries
|
—
|
|
|
12,307
|
|
|
—
|
|
|
(12,307
|
)
|
|
—
|
|
Other
|
—
|
|
|
—
|
|
|
383
|
|
|
—
|
|
|
383
|
|
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
|
—
|
|
|
12,307
|
|
|
(260,130
|
)
|
|
(12,307
|
)
|
|
(260,130
|
)
|
FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Issuance of debt
|
—
|
|
|
25,000
|
|
|
38,389
|
|
|
—
|
|
|
63,389
|
|
Repayment of debt
|
—
|
|
|
(15,000
|
)
|
|
(80,216
|
)
|
|
—
|
|
|
(95,216
|
)
|
Dividends paid
|
(95,008
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95,008
|
)
|
Proceeds from the issuance of common shares under incentive stock plan
|
3,665
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,665
|
|
Proceeds from the issuance of common shares from equity offering, net of costs
|
152,390
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
152,390
|
|
Issuance of intercompany notes
|
(32,000
|
)
|
|
—
|
|
|
32,000
|
|
|
—
|
|
|
—
|
|
Intercompany distributions
|
52,809
|
|
|
(102,521
|
)
|
|
37,405
|
|
|
12,307
|
|
|
—
|
|
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
|
81,856
|
|
|
(92,521
|
)
|
|
27,578
|
|
|
12,307
|
|
|
29,220
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
—
|
|
|
—
|
|
|
1,113
|
|
|
—
|
|
|
1,113
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
|
|
|
|
|
|
|
|
Change in cash, cash equivalents and restricted cash
|
41,766
|
|
|
(2,856
|
)
|
|
(81,834
|
)
|
|
—
|
|
|
(42,924
|
)
|
Balance, beginning of year
|
21,453
|
|
|
9,461
|
|
|
126,703
|
|
|
—
|
|
|
157,617
|
|
Balance, end of period
|
|
$63,219
|
|
|
|
$6,605
|
|
|
|
$44,869
|
|
|
—
|
|
|
|
$114,693
|
|
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)
|
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 Consolidated Financial Statements of Rayonier Inc. included in Item 1 of this report.
This 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 our Consolidated Financial Statements included in Item 1 of this report, our Annual Report on Form 10-K for the year ended December 31, 2017 (the “2017 Form 10-K”) and information contained in our subsequent reports filed with the Securities and Exchange Commission (the “SEC”).
FORWARD-LOOKING STATEMENTS
Certain statements in this document regarding anticipated financial outcomes, including Rayonier’s earnings guidance, if any, business and market conditions, outlook, expected dividend rate, Rayonier’s business strategies, including expected harvest schedules, timberland acquisitions and dispositions, the anticipated benefits of Rayonier’s business strategies, and other similar statements relating to Rayonier’s future events, developments, or financial or operational performance or results, 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,” “intend,” “project,” “anticipate” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. The risk factors contained in Item 1A —
Risk Factors
in the 2017 Form 10-K and similar discussions included in other reports that we subsequently file with the SEC, among others, could cause actual results or events to differ materially from the Company’s historical experience and those expressed in forward-looking statements made in this document.
Forward-looking statements are only as of the date they are made, and the Company undertakes no duty to update its forward-looking statements except as required by law. You are advised, however, to review any subsequent disclosures the Company makes on related subjects in its subsequent reports filed with the SEC.
NON-GAAP MEASURES
To supplement Rayonier’s financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), Rayonier uses certain non-GAAP measures, including “cash available for distribution,” and “Adjusted EBITDA,” which are defined and further explained in
Performance and Liquidity Indicators
below. Reconciliation of such measures to the nearest GAAP measures can also be found in
Performance and Liquidity Indicators
below. Rayonier’s definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.
OUR COMPANY
We are a leading timberland real estate investment trust (“REIT”) with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. Our revenues, operating income and cash flows are primarily derived from the following core business segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber, Real Estate and Trading. As of
September 30, 2018
, we owned or leased under long-term agreements approximately 2.6 million acres of timberlands located in the U.S. South (1.8 million acres) and U.S. Pacific Northwest (378,000 acres). We also have a 77% ownership interest in Matariki Forestry Group, a joint venture (the “New Zealand JV”), that owns or leases approximately 407,000 acres (290,000 net plantable acres) of timberlands in New Zealand.
SEGMENT INFORMATION
Management has changed how it internally evaluates the business performance of its New Zealand Timber segment. In order to align segment reporting, we have reclassified New Zealand timberland sales from the New Zealand Timber segment to the Real Estate segment. All prior period amounts previously reported have been reclassified to reflect the realigned segments.
The Southern Timber, Pacific Northwest Timber and New Zealand Timber segments include all activities related to the harvesting of timber and other non-timber income activities, such as the licensing of properties for hunting and the leasing of properties for mineral extraction and cell towers.
The Real Estate segment includes all U.S. and New Zealand land or leasehold sales disaggregated into five sales categories: Improved Development, Unimproved Development, Rural, Non-Strategic / Timberlands and Large Dispositions.
The Trading segment primarily reflects the log trading activities that support our New Zealand operations. The Trading segment complements the New Zealand Timber segment by adding scale and achieving cost savings that directly benefit the New Zealand Timber segment. Trading also generally contributes modestly to earnings without significant investment and provides market intelligence that benefits the timber business.
INDUSTRY AND MARKET CONDITIONS
The demand for timber is directly related to the underlying demand for pulp, paper, packaging, lumber and other wood products. The significant majority of timber sold in our Southern Timber segment is consumed domestically. With a higher proportion of pulpwood, our Southern Timber segment relies heavily on downstream markets for pulp and paper, and to a lesser extent wood pellet markets. Our Pacific Northwest Timber segment relies primarily on domestic customers but also exports a significant volume of timber, particularly to China. Both the Southern and Pacific Northwest Timber segments rely on the strength of U.S. lumber markets as well as underlying housing starts. Our New Zealand Timber segment sells timber to domestic New Zealand wood products mills and also exports a significant portion of its volume to markets in China, South Korea and India. In addition to market dynamics in the Pacific Rim, the New Zealand Timber segment is subject to foreign exchange fluctuations, which can impact the operating results of the segment in U.S. dollar terms.
The Company is also subject to the risk of price fluctuations in its major cost components. The primary components of the Company's cost of sales are the cost basis of timber sold (depletion), the cost basis of real estate sold and logging and transportation costs (cut and haul). Depletion includes the amortization of capitalized costs (site preparation, planting and fertilization, real estate taxes, timberland lease payments and certain payroll costs). Other costs include amortization of capitalized costs related to road and bridge construction and software, depreciation of fixed assets and equipment, road maintenance, severance and excise taxes, fire prevention and real estate commissions and closing costs.
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
The preparation of 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. See
Note 1 — Basis of Presentation
and
Note 2 — Revenue
contained in Part I, Item 1 of this report for a discussion of the Company’s updated accounting policies on revenue recognition and cost of sales. 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 2017 Form 10-K.
DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD
See Item 1 —
Business
—
Discussion of Timber Inventory and Sustainable Yield
in the 2017 Form 10-K.
OUR TIMBERLANDS
Our timber operations are disaggregated into three geographically distinct segments: Southern Timber, Pacific Northwest Timber and New Zealand Timber. The following table provides a breakdown of our timberland holdings as of
September 30, 2018
and
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(acres in 000s)
|
As of September 30, 2018
|
|
As of December 31, 2017
|
|
Owned
|
|
Leased
|
|
Total
|
|
Owned
|
|
Leased
|
|
Total
|
Southern
|
|
|
|
|
|
|
|
|
|
|
|
Alabama
|
229
|
|
|
14
|
|
|
243
|
|
|
229
|
|
|
14
|
|
|
243
|
|
Arkansas
|
—
|
|
|
11
|
|
|
11
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Florida
|
287
|
|
|
82
|
|
|
369
|
|
|
274
|
|
|
83
|
|
|
357
|
|
Georgia
|
620
|
|
|
82
|
|
|
702
|
|
|
622
|
|
|
82
|
|
|
704
|
|
Louisiana
|
129
|
|
|
—
|
|
|
129
|
|
|
144
|
|
|
1
|
|
|
145
|
|
Mississippi
|
67
|
|
|
—
|
|
|
67
|
|
|
67
|
|
|
—
|
|
|
67
|
|
Oklahoma
|
92
|
|
|
—
|
|
|
92
|
|
|
92
|
|
|
—
|
|
|
92
|
|
South Carolina
|
18
|
|
|
—
|
|
|
18
|
|
|
18
|
|
|
—
|
|
|
18
|
|
Tennessee
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Texas
|
180
|
|
|
—
|
|
|
180
|
|
|
182
|
|
|
—
|
|
|
182
|
|
|
1,623
|
|
|
189
|
|
|
1,812
|
|
|
1,629
|
|
|
191
|
|
|
1,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pacific Northwest
|
|
|
|
|
|
|
|
|
|
|
|
Oregon
|
61
|
|
|
—
|
|
|
61
|
|
|
61
|
|
|
—
|
|
|
61
|
|
Washington
|
316
|
|
|
1
|
|
|
317
|
|
|
316
|
|
|
1
|
|
|
317
|
|
|
377
|
|
|
1
|
|
|
378
|
|
|
377
|
|
|
1
|
|
|
378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Zealand (a)
|
179
|
|
|
228
|
|
|
407
|
|
|
179
|
|
|
231
|
|
|
410
|
|
Total
|
2,179
|
|
|
418
|
|
|
2,597
|
|
|
2,185
|
|
|
423
|
|
|
2,608
|
|
|
|
(a)
|
Represents legal acres owned and leased by the New Zealand JV, in which Rayonier owns a 77% interest. As of
September 30, 2018
, legal acres in New Zealand were comprised of 290,000 plantable acres and 117,000 non-productive acres.
|
The following tables detail activity for owned and leased acres in our timberland holdings by state from
December 31, 2017
to
September 30, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(acres in 000s)
|
Acres Owned
|
|
December 31, 2017
|
|
Acquisitions
|
|
Sales
|
|
Other
|
|
September 30, 2018
|
Southern
|
|
|
|
|
|
|
|
|
|
Alabama
|
229
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
229
|
|
Florida
|
274
|
|
|
14
|
|
|
(8
|
)
|
|
7
|
|
|
287
|
|
Georgia
|
622
|
|
|
2
|
|
|
(1
|
)
|
|
(3
|
)
|
|
620
|
|
Louisiana
|
144
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
129
|
|
Mississippi
|
67
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67
|
|
Oklahoma
|
92
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
South Carolina
|
18
|
|
|
—
|
|
|
—
|
|
|
|
|
18
|
|
Tennessee
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Texas
|
182
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
180
|
|
|
1,629
|
|
|
16
|
|
|
(26
|
)
|
|
4
|
|
|
1,623
|
|
|
|
|
|
|
|
|
|
|
|
Pacific Northwest
|
|
|
|
|
|
|
|
|
|
Oregon
|
61
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
61
|
|
Washington
|
316
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
316
|
|
|
377
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
|
|
|
|
|
|
|
|
|
New Zealand (a)
|
179
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
179
|
|
Total
|
2,185
|
|
|
16
|
|
|
(26
|
)
|
|
4
|
|
|
2,179
|
|
|
|
(a)
|
Represents legal acres owned by the New Zealand JV, in which Rayonier has a 77% interest.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(acres in 000s)
|
Acres Leased
|
|
December 31, 2017
|
|
New Leases
|
|
Sold/Expired Leases (a)
|
|
Other (b)
|
|
September 30, 2018
|
Southern
|
|
|
|
|
|
|
|
|
|
Alabama
|
14
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Arkansas
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
Florida
|
83
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
82
|
|
Georgia
|
82
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82
|
|
Louisiana
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
191
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
Pacific Northwest
|
|
|
|
|
|
|
|
|
|
Washington
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
New Zealand (b)
|
231
|
|
|
3
|
|
|
(7
|
)
|
|
1
|
|
|
228
|
|
Total
|
423
|
|
|
3
|
|
|
(9
|
)
|
|
1
|
|
|
418
|
|
|
|
(a)
|
Includes acres previously under lease that have been harvested and activity for the relinquishment of leased acres.
|
|
|
(b)
|
Represents legal acres leased by the New Zealand JV, in which Rayonier has a 77% interest.
|
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
The following table provides key financial information by segment and on a consolidated basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Financial Information (in millions)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales
|
|
|
|
|
|
|
|
Southern Timber
|
|
$39.7
|
|
|
|
$37.3
|
|
|
|
$131.3
|
|
|
|
$112.0
|
|
Pacific Northwest Timber
|
27.8
|
|
|
19.1
|
|
|
91.4
|
|
|
65.5
|
|
New Zealand Timber
|
66.3
|
|
|
70.1
|
|
|
188.9
|
|
|
164.0
|
|
Real Estate
|
|
|
|
|
|
|
|
Improved Development
|
1.4
|
|
|
0.1
|
|
|
3.8
|
|
|
0.2
|
|
Unimproved Development
|
1.2
|
|
|
13.9
|
|
|
8.6
|
|
|
16.4
|
|
Rural
|
4.5
|
|
|
3.1
|
|
|
11.0
|
|
|
15.4
|
|
Non-Strategic / Timberlands
|
29.2
|
|
|
0.2
|
|
|
98.7
|
|
|
47.6
|
|
Large Dispositions
|
—
|
|
|
—
|
|
|
—
|
|
|
42.0
|
|
Total Real Estate
|
36.2
|
|
|
17.3
|
|
|
122.1
|
|
|
121.5
|
|
Trading
|
31.0
|
|
|
40.7
|
|
|
116.4
|
|
|
117.0
|
|
Total Sales
|
|
$200.9
|
|
|
|
$184.4
|
|
|
|
$650.0
|
|
|
|
$579.9
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
|
|
|
|
|
|
Southern Timber
|
|
$9.2
|
|
|
|
$11.5
|
|
|
|
$37.1
|
|
|
|
$35.0
|
|
Pacific Northwest Timber
|
1.9
|
|
|
1.1
|
|
|
12.2
|
|
|
(1.3
|
)
|
New Zealand Timber
|
16.4
|
|
|
19.3
|
|
|
50.1
|
|
|
41.5
|
|
Real Estate (a)
|
24.7
|
|
|
11.4
|
|
|
71.6
|
|
|
72.1
|
|
Trading
|
0.3
|
|
|
1.1
|
|
|
0.7
|
|
|
3.4
|
|
Corporate and other
|
(6.2
|
)
|
|
(5.1
|
)
|
|
(16.6
|
)
|
|
(15.3
|
)
|
Operating Income
|
46.4
|
|
|
39.3
|
|
|
155.1
|
|
|
135.4
|
|
Interest expense, interest income and other
|
(7.4
|
)
|
|
(7.5
|
)
|
|
(20.0
|
)
|
|
(23.9
|
)
|
Income tax expense
|
(8.4
|
)
|
|
(3.0
|
)
|
|
(22.4
|
)
|
|
(16.8
|
)
|
Net Income
|
30.6
|
|
|
28.8
|
|
|
112.7
|
|
|
94.7
|
|
Less: Net income attributable to noncontrolling interest
|
7.2
|
|
|
4.1
|
|
|
12.5
|
|
|
10.0
|
|
Net Income Attributable to Rayonier Inc.
|
|
$23.4
|
|
|
|
$24.7
|
|
|
|
$100.2
|
|
|
|
$84.7
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (b)
|
|
|
|
|
|
|
|
Southern Timber
|
|
$22.9
|
|
|
|
$24.2
|
|
|
|
$81.7
|
|
|
|
$72.1
|
|
Pacific Northwest Timber
|
9.7
|
|
|
7.6
|
|
|
38.9
|
|
|
22.5
|
|
New Zealand Timber
|
24.0
|
|
|
27.8
|
|
|
71.4
|
|
|
62.0
|
|
Real Estate
|
32.3
|
|
|
13.4
|
|
|
111.0
|
|
|
67.2
|
|
Trading
|
0.3
|
|
|
1.1
|
|
|
0.7
|
|
|
3.4
|
|
Corporate and Other
|
(5.9
|
)
|
|
(4.8
|
)
|
|
(15.8
|
)
|
|
(14.1
|
)
|
Total Adjusted EBITDA
|
|
$83.3
|
|
|
|
$69.3
|
|
|
|
$287.9
|
|
|
|
$213.1
|
|
|
|
(a)
|
The nine months ended September 30, 2017 include
$28.2 million
from a Large Disposition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Southern Timber Overview
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales Volume (in thousands of tons)
|
|
|
|
|
|
|
|
Pine Pulpwood
|
828
|
|
|
818
|
|
|
2,676
|
|
|
2,405
|
|
Pine Sawtimber
|
427
|
|
|
469
|
|
|
1,510
|
|
|
1,494
|
|
Total Pine Volume
|
1,255
|
|
|
1,287
|
|
|
4,186
|
|
|
3,899
|
|
Hardwood
|
75
|
|
|
69
|
|
|
202
|
|
|
193
|
|
Total Volume
|
1,330
|
|
|
1,356
|
|
|
4,388
|
|
|
4,092
|
|
|
|
|
|
|
|
|
|
Percentage Delivered Sales
|
34
|
%
|
|
23
|
%
|
|
29
|
%
|
|
21
|
%
|
Percentage Stumpage Sales
|
66
|
%
|
|
77
|
%
|
|
71
|
%
|
|
79
|
%
|
|
|
|
|
|
|
|
|
Net Stumpage Pricing (dollars per ton)
|
|
|
|
|
|
|
|
Pine Pulpwood
|
|
$16.74
|
|
|
|
$16.32
|
|
|
|
$16.64
|
|
|
|
$16.43
|
|
Pine Sawtimber
|
25.55
|
|
|
25.93
|
|
|
26.06
|
|
|
25.99
|
|
Weighted Average Pine
|
|
$19.74
|
|
|
|
$19.83
|
|
|
|
$20.04
|
|
|
|
$20.10
|
|
Hardwood
|
13.34
|
|
|
15.98
|
|
|
12.20
|
|
|
13.02
|
|
Weighted Average Total
|
|
$19.36
|
|
|
|
$19.63
|
|
|
|
$19.67
|
|
|
|
$19.76
|
|
|
|
|
|
|
|
|
|
Summary Financial Data (in millions of dollars)
|
|
|
|
|
|
|
|
Timber Sales
|
|
$34.8
|
|
|
|
$31.9
|
|
|
|
$110.2
|
|
|
|
$95.4
|
|
Less: Cut, Haul & Freight
|
(9.1
|
)
|
|
(5.3
|
)
|
|
(23.9
|
)
|
|
(14.6
|
)
|
Net Stumpage Sales
|
|
$25.7
|
|
|
|
$26.6
|
|
|
|
$86.3
|
|
|
|
$80.8
|
|
|
|
|
|
|
|
|
|
Non-Timber Sales
|
4.9
|
|
|
5.4
|
|
|
21.1
|
|
|
16.6
|
|
Total Sales
|
|
$39.7
|
|
|
|
$37.3
|
|
|
|
$131.3
|
|
|
|
$112.0
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$9.2
|
|
|
|
$11.5
|
|
|
|
$37.1
|
|
|
|
$35.0
|
|
(+) Depreciation, depletion and amortization
|
13.7
|
|
|
12.7
|
|
|
44.6
|
|
|
37.1
|
|
Adjusted EBITDA (a)
|
|
$22.9
|
|
|
|
$24.2
|
|
|
|
$81.7
|
|
|
|
$72.1
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
Period-End Acres (in thousands)
|
1,812
|
|
|
1,900
|
|
|
1,812
|
|
|
1,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Pacific Northwest Timber Overview
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales Volume (in thousands of tons)
|
|
|
|
|
|
|
|
Pulpwood
|
73
|
|
|
59
|
|
|
242
|
|
|
219
|
|
Sawtimber
|
237
|
|
|
193
|
|
|
822
|
|
|
707
|
|
Total Volume
|
310
|
|
|
252
|
|
|
1,063
|
|
|
926
|
|
|
|
|
|
|
|
|
|
Sales Volume (converted to MBF)
|
|
|
|
|
|
|
|
Pulpwood
|
6,878
|
|
|
5,516
|
|
|
22,907
|
|
|
20,525
|
|
Sawtimber
|
32,194
|
|
|
25,380
|
|
|
108,418
|
|
|
91,596
|
|
Total Volume
|
39,072
|
|
|
30,896
|
|
|
131,325
|
|
|
112,121
|
|
|
|
|
|
|
|
|
|
Percentage Delivered Sales
|
90
|
%
|
|
76
|
%
|
|
83
|
%
|
|
85
|
%
|
Percentage Sawtimber Sales
|
77
|
%
|
|
76
|
%
|
|
77
|
%
|
|
76
|
%
|
|
|
|
|
|
|
|
|
Delivered Log Pricing (in dollars per ton)
|
|
|
|
|
|
|
|
Pulpwood
|
|
$48.93
|
|
|
|
$41.43
|
|
|
|
$47.94
|
|
|
|
$39.65
|
|
Sawtimber
|
102.74
|
|
|
89.62
|
|
|
100.46
|
|
|
80.79
|
|
Weighted Average Log Price
|
|
$89.37
|
|
|
|
$76.47
|
|
|
|
$87.34
|
|
|
|
$70.29
|
|
|
|
|
|
|
|
|
|
Summary Financial Data (in millions of dollars)
|
|
|
|
|
|
|
|
Timber Sales
|
|
$27.1
|
|
|
|
$18.6
|
|
|
|
$88.8
|
|
|
|
$62.9
|
|
Less: Cut and Haul
|
(11.5
|
)
|
|
(6.7
|
)
|
|
(34.5
|
)
|
|
(26.9
|
)
|
Net Stumpage Sales
|
|
$15.6
|
|
|
|
$11.9
|
|
|
|
$54.3
|
|
|
|
$36.0
|
|
|
|
|
|
|
|
|
|
Non-Timber Sales
|
0.8
|
|
|
0.5
|
|
|
2.6
|
|
|
2.6
|
|
Total Sales
|
|
$27.8
|
|
|
|
$19.1
|
|
|
|
$91.4
|
|
|
|
$65.5
|
|
|
|
|
|
|
|
|
|
Operating Income (Loss)
|
|
$1.9
|
|
|
|
$1.1
|
|
|
|
$12.2
|
|
|
|
($1.3
|
)
|
(+) Depreciation, depletion and amortization
|
7.8
|
|
|
6.5
|
|
|
26.7
|
|
|
23.8
|
|
Adjusted EBITDA (a)
|
|
$9.7
|
|
|
|
$7.6
|
|
|
|
$38.9
|
|
|
|
$22.5
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
Period-End Acres (in thousands)
|
378
|
|
|
378
|
|
|
378
|
|
|
378
|
|
Sawtimber (in dollars per MBF)
|
|
$741
|
|
|
|
$681
|
|
|
|
$759
|
|
|
|
$624
|
|
Estimated Percentage of Export Volume
|
23
|
%
|
|
30
|
%
|
|
24
|
%
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
New Zealand Timber Overview
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales Volume (in thousands of tons)
|
|
|
|
|
|
|
|
Domestic Pulpwood (Delivered)
|
136
|
|
|
131
|
|
|
390
|
|
|
336
|
|
Domestic Sawtimber (Delivered)
|
243
|
|
|
239
|
|
|
663
|
|
|
652
|
|
Export Pulpwood (Delivered)
|
21
|
|
|
28
|
|
|
60
|
|
|
83
|
|
Export Sawtimber (Delivered)
|
323
|
|
|
376
|
|
|
907
|
|
|
819
|
|
Total Volume
|
724
|
|
|
774
|
|
|
2,020
|
|
|
1,890
|
|
|
|
|
|
|
|
|
|
Delivered Log Pricing (in dollars per ton)
|
|
|
|
|
|
|
|
Domestic Pulpwood
|
|
$37.54
|
|
|
|
$34.42
|
|
|
|
$37.36
|
|
|
|
$34.16
|
|
Domestic Sawtimber
|
80.74
|
|
|
83.61
|
|
|
84.43
|
|
|
80.54
|
|
Export Sawtimber
|
114.54
|
|
|
113.35
|
|
|
117.74
|
|
|
111.62
|
|
Weighted Average Log Price
|
|
$88.35
|
|
|
|
$90.28
|
|
|
|
$90.84
|
|
|
|
$85.83
|
|
|
|
|
|
|
|
|
|
Summary Financial Data (in millions of dollars)
|
|
|
|
|
|
|
|
Timber Sales
|
|
$63.9
|
|
|
|
$69.9
|
|
|
|
$183.5
|
|
|
|
$163.5
|
|
Less: Cut and Haul
|
(22.2
|
)
|
|
(24.8
|
)
|
|
(65.1
|
)
|
|
(60.3
|
)
|
Less: Port and Freight Costs
|
(13.7
|
)
|
|
(12.9
|
)
|
|
(36.7
|
)
|
|
(28.5
|
)
|
Net Stumpage Sales
|
|
$28.1
|
|
|
|
$32.2
|
|
|
|
$81.7
|
|
|
|
$74.7
|
|
|
|
|
|
|
|
|
|
Non-Timber Sales / Carbon Credits
|
2.3
|
|
|
0.2
|
|
|
5.3
|
|
|
0.5
|
|
Total Sales
|
|
$66.3
|
|
|
|
$70.1
|
|
|
|
$188.9
|
|
|
|
$164.0
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$16.4
|
|
|
|
$19.3
|
|
|
|
$50.1
|
|
|
|
$41.5
|
|
(+) Depreciation, depletion and amortization
|
7.5
|
|
|
8.5
|
|
|
21.3
|
|
|
20.5
|
|
Adjusted EBITDA (a)
|
|
$24.0
|
|
|
|
$27.8
|
|
|
|
$71.4
|
|
|
|
$62.1
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
New Zealand Dollar to U.S. Dollar Exchange Rate (b)
|
0.6755
|
|
|
0.7328
|
|
|
0.7032
|
|
|
0.7154
|
|
Net Plantable Period-End Acres (in thousands)
|
290
|
|
|
294
|
|
|
290
|
|
|
294
|
|
Export Sawtimber (in dollars per JAS m
3
)
|
|
$133.18
|
|
|
|
$131.80
|
|
|
|
$136.90
|
|
|
|
$129.72
|
|
Domestic Sawtimber (in $NZD per tonne)
|
|
$131.48
|
|
|
|
$125.51
|
|
|
|
$132.39
|
|
|
|
$123.73
|
|
|
|
(b)
|
Represents the period average rate.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Real Estate Overview
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Sales (in millions of dollars)
|
|
|
|
|
|
|
|
Improved Development (a)
|
|
$1.3
|
|
|
|
$0.1
|
|
|
|
$3.8
|
|
|
|
$0.2
|
|
Unimproved Development
|
1.2
|
|
|
13.9
|
|
|
8.6
|
|
|
16.4
|
|
Rural
|
4.5
|
|
|
3.1
|
|
|
11.0
|
|
|
15.3
|
|
Non-Strategic / Timberlands - U.S.
|
1.0
|
|
|
0.2
|
|
|
70.6
|
|
|
23.2
|
|
Non-Strategic / Timberlands - N.Z.
|
28.1
|
|
|
—
|
|
|
28.1
|
|
|
24.3
|
|
Large Dispositions (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
42.0
|
|
Total Sales
|
|
$36.2
|
|
|
|
$17.3
|
|
|
|
$122.1
|
|
|
|
$121.6
|
|
|
|
|
|
|
|
|
|
Acres Sold
|
|
|
|
|
|
|
|
Improved Development (a)
|
5.2
|
|
|
0.2
|
|
|
13.3
|
|
|
1.5
|
|
Unimproved Development
|
126
|
|
|
1,319
|
|
|
751
|
|
|
1,449
|
|
Rural
|
1,420
|
|
|
1,128
|
|
|
2,906
|
|
|
5,140
|
|
Non-Strategic / Timberlands - U.S
|
789
|
|
|
102
|
|
|
22,700
|
|
|
9,758
|
|
Non-Strategic / Timberlands - N.Z. (c)
|
4,996
|
|
|
—
|
|
|
4,996
|
|
|
9,646
|
|
Large Dispositions (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
24,954
|
|
Total Acres Sold
|
7,336
|
|
|
2,549
|
|
|
31,366
|
|
|
50,949
|
|
|
|
|
|
|
|
|
|
Gross Price per Acre (dollars per acre)
|
|
|
|
|
|
|
|
Improved Development (a)
|
|
$260,721
|
|
|
|
$269,412
|
|
|
|
$284,225
|
|
|
|
$318,108
|
|
Unimproved Development
|
9,325
|
|
|
10,540
|
|
|
11,486
|
|
|
11,318
|
|
Rural
|
3,161
|
|
|
2,771
|
|
|
3,775
|
|
|
2,968
|
|
Non-Strategic / Timberlands - U.S.
|
1,309
|
|
|
1,616
|
|
|
3,109
|
|
|
2,382
|
|
Non-Strategic / Timberlands - N.Z.
|
5,628
|
|
|
—
|
|
|
5,628
|
|
|
2,520
|
|
Large Dispositions (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,681
|
|
Weighted Average (Total) (d)
|
|
$4,929
|
|
|
|
$6,764
|
|
|
|
$3,892
|
|
|
|
$3,072
|
|
Weighted Average (Adjusted) (e)
|
|
$4,749
|
|
|
|
$6,747
|
|
|
|
$3,772
|
|
|
|
$3,054
|
|
|
|
|
|
|
|
|
|
Sales (Excluding Large Dispositions)
|
|
$36.2
|
|
|
|
$17.3
|
|
|
|
$122.1
|
|
|
|
$79.8
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
$24.7
|
|
|
|
$11.4
|
|
|
|
$71.6
|
|
|
|
$72.1
|
|
(+) Depreciation, depletion and amortization - U.S.
|
1.0
|
|
|
0.7
|
|
|
17.8
|
|
|
5.9
|
|
(+) Depreciation, depletion and amortization - N.Z.
|
4.5
|
|
|
—
|
|
|
4.5
|
|
|
8.9
|
|
(+) Non-cash cost of land and improved development - U.S.
|
2.1
|
|
|
1.3
|
|
|
17.1
|
|
|
8.5
|
|
(+) Non-cash cost of land and improved development - N.Z.
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
(–) Large Dispositions (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
(28.2
|
)
|
Adjusted EBITDA (f)
|
|
$32.3
|
|
|
|
$13.4
|
|
|
|
$111.0
|
|
|
|
$67.2
|
|
|
|
(a)
|
Reflects land with capital invested in infrastructure improvements. Sales for the nine months ended
September 30, 2017
are presented net of
$0.3 million
of deferred revenue adjustments due to remaining performance obligations. Price per acre is calculated on gross sales of
$0.5 million
for the nine months ended
September 30, 2017
.
|
|
|
(b)
|
Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In January 2017, the Company completed a disposition of approximately 25,000 acres located in Alabama for a sale price and gain of approximately
$42.0 million
and
$28.2 million
, respectively.
|
|
|
(c)
|
New Zealand Non-Strategic / Timberlands represents productive acres.
|
|
|
(d)
|
Excludes Large Dispositions.
|
|
|
(e)
|
Excludes Improved Development and Large Dispositions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
Capital Expenditures By Segment (in millions of dollars)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Timber Capital Expenditures
|
|
|
|
|
|
|
|
Southern Timber
|
|
|
|
|
|
|
|
Reforestation, silviculture and other capital expenditures
|
|
$7.3
|
|
|
|
$5.6
|
|
|
|
$13.7
|
|
|
|
$11.4
|
|
Property taxes
|
1.8
|
|
|
1.6
|
|
|
5.0
|
|
|
6.0
|
|
Lease payments
|
0.5
|
|
|
0.5
|
|
|
2.5
|
|
|
3.0
|
|
Allocated overhead
|
1.0
|
|
|
0.9
|
|
|
3.0
|
|
|
2.6
|
|
Subtotal Southern Timber
|
|
$10.5
|
|
|
|
$8.6
|
|
|
|
$24.3
|
|
|
|
$23.1
|
|
Pacific Northwest Timber
|
|
|
|
|
|
|
|
Reforestation, silviculture and other capital expenditures
|
1.8
|
|
|
1.5
|
|
|
5.3
|
|
|
5.3
|
|
Property taxes
|
0.2
|
|
|
0.2
|
|
|
0.5
|
|
|
0.7
|
|
Allocated overhead
|
0.6
|
|
|
0.5
|
|
|
1.8
|
|
|
1.5
|
|
Subtotal Pacific Northwest Timber
|
|
$2.6
|
|
|
|
$2.2
|
|
|
|
$7.6
|
|
|
|
$7.5
|
|
New Zealand Timber
|
|
|
|
|
|
|
|
Reforestation, silviculture and other capital expenditures
|
3.3
|
|
|
2.7
|
|
|
7.1
|
|
|
6.6
|
|
Property taxes
|
0.1
|
|
|
0.2
|
|
|
0.5
|
|
|
0.5
|
|
Lease payments
|
0.9
|
|
|
0.4
|
|
|
2.4
|
|
|
2.5
|
|
Allocated overhead
|
0.7
|
|
|
0.7
|
|
|
2.1
|
|
|
2.2
|
|
Subtotal New Zealand Timber
|
|
$5.0
|
|
|
|
$4.0
|
|
|
|
$12.1
|
|
|
|
$11.8
|
|
Total Timber Segments Capital Expenditures
|
|
$18.1
|
|
|
|
$14.8
|
|
|
|
$43.9
|
|
|
|
$42.4
|
|
Real Estate
|
0.1
|
|
|
0.7
|
|
|
0.2
|
|
|
1.1
|
|
Corporate
|
—
|
|
|
0.4
|
|
|
—
|
|
|
2.2
|
|
Total Capital Expenditures
|
|
$18.2
|
|
|
|
$15.9
|
|
|
|
$44.1
|
|
|
|
$45.7
|
|
|
|
|
|
|
|
|
|
Timberland Acquisitions
|
|
|
|
|
|
|
|
Southern Timber
|
|
$2.9
|
|
|
|
$1.9
|
|
|
|
$27.3
|
|
|
|
$216.2
|
|
Pacific Northwest Timber
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
New Zealand Timber
|
4.9
|
|
|
—
|
|
|
11.7
|
|
|
21.4
|
|
Subtotal Timberland Acquisitions
|
|
$7.8
|
|
|
|
$1.9
|
|
|
|
$39.0
|
|
|
|
$239.1
|
|
|
|
|
|
|
|
|
|
Real Estate Development Investments
|
|
$2.4
|
|
|
|
$6.2
|
|
|
|
$6.9
|
|
|
|
$11.8
|
|
Rayonier Office Building
|
—
|
|
|
|
$0.4
|
|
|
—
|
|
|
|
$6.0
|
|
The following tables summarize sales, operating income and Adjusted EBITDA variances for
September 30, 2018
versus
September 30, 2017
(millions of dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
Real Estate
|
|
Trading
|
|
Total
|
Three Months Ended September 30, 2017
|
|
|
$37.3
|
|
|
|
$19.1
|
|
|
|
$70.1
|
|
|
$17.2
|
|
|
|
$40.7
|
|
|
|
$184.4
|
|
Volume/Mix
|
|
(0.5
|
)
|
|
2.8
|
|
|
(4.4
|
)
|
32.4
|
|
|
(9.6
|
)
|
|
20.7
|
|
Price
|
|
(0.4
|
)
|
|
0.9
|
|
|
(2.4
|
)
|
(13.5
|
)
|
|
0.1
|
|
|
(15.3
|
)
|
Non-timber sales (a)
|
|
(0.5
|
)
|
|
0.3
|
|
|
2.2
|
|
—
|
|
|
(0.2
|
)
|
|
1.8
|
|
Foreign exchange (b)
|
|
—
|
|
|
—
|
|
|
0.8
|
|
—
|
|
|
—
|
|
|
0.8
|
|
Other
|
|
3.8
|
|
(c)
|
4.7
|
|
(c)
|
—
|
|
0.1
|
|
|
—
|
|
|
8.5
|
|
Three Months Ended September 30, 2018
|
|
|
$39.7
|
|
|
|
$27.8
|
|
|
|
$66.3
|
|
|
$36.2
|
|
|
|
$31.0
|
|
|
|
$200.9
|
|
(a) New Zealand Timber includes
$2.2 million
of carbon credit sales during the three months ended
September 30, 2018
.
(b) Net of currency hedging impact.
(c) Includes variance due to stumpage versus delivered sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
Real Estate
|
|
Trading
|
|
Total
|
Nine Months Ended September 30, 2017
|
|
|
$112.0
|
|
|
|
$65.5
|
|
|
|
$164.0
|
|
|
$121.5
|
|
|
|
$117.0
|
|
|
|
$579.9
|
|
Volume/Mix
|
|
5.8
|
|
|
5.4
|
|
|
10.9
|
|
16.6
|
|
|
(6.5
|
)
|
|
32.2
|
|
Price
|
|
(0.4
|
)
|
|
13.0
|
|
|
10.2
|
|
25.9
|
|
|
6.4
|
|
|
55.1
|
|
Non-timber sales (a)
|
|
4.5
|
|
|
—
|
|
|
4.9
|
|
—
|
|
|
(0.5
|
)
|
|
8.9
|
|
Foreign exchange (b)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
—
|
|
|
|
|
(1.1
|
)
|
Other
|
|
9.4
|
|
(c)
|
7.5
|
|
(c)
|
—
|
|
(41.9
|
)
|
(d)
|
—
|
|
|
(25.0
|
)
|
Nine Months Ended September 30, 2018
|
|
|
$131.3
|
|
|
|
$91.4
|
|
|
|
$188.9
|
|
|
$122.1
|
|
|
|
$116.4
|
|
|
|
$650.0
|
|
(a) New Zealand Timber includes
$4.7 million
of carbon credit sales during the
nine
months ended
September 30, 2018
.
(b) Net of currency hedging impact.
(c) Includes variance due to stumpage versus delivered sales.
(d) Real Estate includes $42.0 million of sales from Large Dispositions in 2017 and $0.3 million of deferred revenue in 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Corporate and Other
|
|
Total
|
Three Months Ended September 30, 2017
|
|
|
$11.5
|
|
|
|
$1.1
|
|
|
|
$19.3
|
|
|
|
$11.4
|
|
|
|
$1.1
|
|
|
|
($5.1
|
)
|
|
|
$39.3
|
|
Volume/Mix
|
|
(0.2
|
)
|
|
0.9
|
|
|
(1.6
|
)
|
|
28.4
|
|
|
—
|
|
|
—
|
|
|
27.5
|
|
Price
|
|
(0.4
|
)
|
|
0.9
|
|
|
(2.4
|
)
|
|
(13.5
|
)
|
|
—
|
|
|
—
|
|
|
(15.4
|
)
|
Cost
|
|
—
|
|
|
(1.5
|
)
|
|
(0.2
|
)
|
|
0.5
|
|
|
(0.8
|
)
|
|
(1.1
|
)
|
|
(3.1
|
)
|
Non-timber income
|
|
(0.5
|
)
|
|
0.3
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
Foreign exchange (a)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
Depreciation, depletion & amortization
|
|
(1.2
|
)
|
|
0.2
|
|
|
(0.2
|
)
|
|
(3.6
|
)
|
|
—
|
|
|
—
|
|
|
(4.8
|
)
|
Non-cash cost of land and improved development
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
Three Months Ended September 30, 2018
|
|
|
$9.2
|
|
|
|
$1.9
|
|
|
|
$16.4
|
|
|
|
$24.7
|
|
|
|
$0.3
|
|
|
|
($6.2
|
)
|
|
|
$46.4
|
|
(a) Net of currency hedging impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Corporate and Other
|
|
Total
|
Nine Months Ended September 30, 2017
|
|
|
$35.0
|
|
|
|
($1.3
|
)
|
|
|
$41.5
|
|
|
|
$72.1
|
|
|
|
$3.4
|
|
|
|
($15.3
|
)
|
|
|
$135.4
|
|
Volume/Mix
|
|
3.2
|
|
|
1.1
|
|
|
3.8
|
|
|
11.3
|
|
|
—
|
|
|
—
|
|
|
19.4
|
|
Price
|
|
(0.4
|
)
|
|
13.0
|
|
|
2.0
|
|
|
25.9
|
|
|
—
|
|
|
—
|
|
|
40.5
|
|
Cost
|
|
(0.3
|
)
|
|
(1.1
|
)
|
|
(1.4
|
)
|
|
1.5
|
|
|
(2.7
|
)
|
|
(0.9
|
)
|
|
(4.9
|
)
|
Non-timber income
|
|
4.5
|
|
|
—
|
|
|
4.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Foreign exchange (a)
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
Depreciation, depletion & amortization
|
|
(4.9
|
)
|
|
0.5
|
|
|
0.1
|
|
|
(4.7
|
)
|
|
—
|
|
|
(0.4
|
)
|
|
(9.4
|
)
|
Non-cash cost of land and improved development
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6.4
|
)
|
|
—
|
|
|
—
|
|
|
(6.4
|
)
|
Other
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
(b)
|
(28.1
|
)
|
(c)
|
—
|
|
|
—
|
|
|
(28.5
|
)
|
Nine Months Ended September 30, 2018
|
|
|
$37.1
|
|
|
|
$12.2
|
|
|
|
$50.1
|
|
|
|
$71.6
|
|
|
|
$0.7
|
|
|
|
($16.6
|
)
|
|
|
$155.1
|
|
(a) Net of currency hedging impact.
(b) New Zealand Timber includes $0.4 million from a settlement received in 2017.
|
|
(c)
|
Real Estate includes $28.2 million of operating income from Large Dispositions in 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (a)
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
Real Estate
|
|
Trading
|
|
Corporate and Other
|
|
Total
|
Three Months Ended September 30, 2017
|
|
|
$24.2
|
|
|
|
$7.6
|
|
|
|
$27.8
|
|
|
$13.4
|
|
|
|
$1.1
|
|
|
|
($4.8
|
)
|
|
|
$69.3
|
|
Volume/Mix
|
|
(0.4
|
)
|
|
2.4
|
|
|
(2.1
|
)
|
31.9
|
|
|
—
|
|
|
—
|
|
|
31.8
|
|
Price
|
|
(0.4
|
)
|
|
0.9
|
|
|
(2.4
|
)
|
(13.5
|
)
|
|
—
|
|
|
—
|
|
|
(15.4
|
)
|
Cost
|
|
—
|
|
|
(1.5
|
)
|
|
(0.2
|
)
|
0.5
|
|
|
(0.8
|
)
|
|
(1.1
|
)
|
|
(3.1
|
)
|
Non-timber income
|
|
(0.5
|
)
|
|
0.3
|
|
|
2.0
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.8
|
|
Foreign exchange (b)
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.1
|
)
|
Three Months Ended September 30, 2018
|
|
|
$22.9
|
|
|
|
$9.7
|
|
|
|
$24.0
|
|
|
$32.3
|
|
|
|
$0.3
|
|
|
|
($5.9
|
)
|
|
|
$83.3
|
|
|
|
(b)
|
Net of currency hedging impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (a)
|
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Corporate and Other
|
|
Total
|
Nine Months Ended September 30, 2017
|
|
|
$72.1
|
|
|
|
$22.5
|
|
|
|
$62.0
|
|
|
|
$67.2
|
|
|
|
$3.4
|
|
|
|
($14.1
|
)
|
|
|
$213.1
|
|
Volume/Mix
|
|
5.8
|
|
|
4.5
|
|
|
4.9
|
|
|
16.0
|
|
|
—
|
|
|
—
|
|
|
31.2
|
|
Price
|
|
(0.4
|
)
|
|
13.0
|
|
|
2.0
|
|
|
25.9
|
|
|
—
|
|
|
—
|
|
|
40.5
|
|
Cost
|
|
(0.3
|
)
|
|
(1.1
|
)
|
|
(1.4
|
)
|
|
1.5
|
|
|
(2.7
|
)
|
|
(1.7
|
)
|
|
(5.7
|
)
|
Non-timber income
|
|
4.5
|
|
|
—
|
|
|
4.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9.1
|
|
Foreign exchange (b)
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.3
|
)
|
Other
|
|
—
|
|
|
—
|
|
|
(0.4
|
)
|
(c)
|
0.4
|
|
(d)
|
—
|
|
|
—
|
|
|
—
|
|
Nine Months Ended September 30, 2018
|
|
|
$81.7
|
|
|
|
$38.9
|
|
|
|
$71.4
|
|
|
|
$111.0
|
|
|
|
$0.7
|
|
|
|
($15.8
|
)
|
|
|
$287.9
|
|
|
|
(b)
|
Net of currency hedging impact.
|
|
|
(c)
|
New Zealand Timber includes $0.4 million of operating income from a settlement received in 2017.
|
|
|
(d)
|
Real Estate includes $0.3 million of deferred revenue in 2017.
|
SOUTHERN TIMBER
Third
quarter sales of
$39.7 million
increased
$2.4 million
, or
6%
, versus
the prior year period
. Harvest volumes
decreased
2%
to
1.33 million
tons versus
1.36 million
tons in
the prior year period
, primarily due to wet ground conditions hampering the ability to harvest. Average pine sawtimber stumpage prices
decreased
1%
to
$25.55
per ton versus
$25.93
per ton in
the prior year period
due to geographic mix and the impact of China tariffs on export prices. Average pine pulpwood stumpage prices
increased
3%
to
$16.74
per ton versus
$16.32
per ton in
the prior year period
, as wet ground conditions generated favorable spot markets in the current quarter and the prior year quarter included salvage timber volume from the West Mims fire. Overall, weighted-average stumpage prices (including hardwood)
decreased
1%
to
$19.36
per ton versus
$19.63
per ton in
the prior year period
. Operating income of
$9.2 million
decreased
$2.4 million
versus
the prior year period
due to
lower
net stumpage prices (
$0.4 million
), volume/mix changes (
$0.2 million
),
lower
non-timber income (
$0.5 million
), and
higher
depletion rates (
$1.2 million
).
Third
quarter Adjusted EBITDA of
$22.9 million
was
$1.2 million
below
the prior year period
.
Year-to-date sales of
$131.3 million
increased
$19.2 million
, or
17%
, versus the prior year period. Harvest volumes
increased
7%
to
4.4 million
tons versus
4.1 million
tons in the prior year period, primarily due to incremental volume on new acquisitions. Average pine sawtimber stumpage prices remained relatively flat at
$26.06
per ton versus
$25.99
per ton in the prior year period, while average pine pulpwood stumpage prices
increased
1%
to
$16.64
per ton versus
$16.43
per ton in the prior year period. The increase in average pulpwood prices is due to a reduction in salvage volume along the east coast, combined with wet ground conditions generating favorable spot markets. Overall, weighted-average stumpage prices (including hardwood) remained relatively flat at
$19.67
per ton versus to
$19.76
per ton in the prior year period. Operating income of
$37.1 million
increased
$1.9 million
versus the prior year period due to
higher
non-timber income (
$4.5 million
) and
higher
volumes (
$3.2 million
), which were partially offset by
lower
net stumpage prices
($0.4) million
,
higher
depletion rates (
$4.9 million
) and
higher
costs (
$0.3 million
). Adjusted EBTIDA of
$81.7 million
was
$9.4 million
above
the prior year period.
PACIFIC NORTHWEST TIMBER
Third
quarter sales of
$27.8 million
increased
$8.7 million
, or
46%
, versus
the prior year period
. Harvest volumes
increased
23%
to
310,000
tons versus
252,000
tons in
the prior year period
, as the prior year period was hampered by fire restrictions. Average delivered sawtimber prices
increased
15%
to
$102.74
per ton versus
$89.62
per ton in
the prior year period
, while average delivered pulpwood prices
increased
18%
to
$48.93
per ton versus
$41.43
per ton in
the prior year period
. The increase in delivered sawtimber prices was driven by continued strong demand from both domestic and export markets, while the increase in delivered pulpwood prices was driven primarily by price tension resulting from chip exports in the first half of the year. The increases in delivered sawtimber and pulpwood prices were partially offset by higher cut and haul costs resulting from an increased proportion of cable logging as well as increased demand for logging and trucking contractors. Operating income of
$1.9 million
increased
$0.8 million
versus
the prior year period
due to
higher
net stumpage prices (
$0.9 million
), volume/mix changes (
$0.9 million
),
higher
non-timber income (
$0.3 million
) and
lower
depletion rates (
$0.2 million
), which were partially offset by
higher
road maintenance, engineering, overhead and other costs (
$1.5 million
). Third quarter Adjusted EBITDA of
$9.7 million
was
$2.1 million
above the prior year period.
Year-to-date sales of
$91.4 million
increased
$25.9 million
, or
40%
, versus
the prior year period
.
Harvest volumes
increased
15%
to
1,063,000
tons versus
926,000
tons in the prior year period, as demand for timber was very strong in the Pacific Northwest. Average delivered sawtimber prices
increased
24%
to
$100.46
per ton versus
$80.79
per ton in the prior year period, while average delivered pulpwood prices
increased
21%
to
$47.94
per ton versus
$39.65
per ton in the prior year period. The increase in average sawtimber prices was due to strong demand from both domestic and export sawtimber markets. The increase in average pulpwood prices was due to increased competition for pulpwood, including chip exports in the first half of the year. Operating income of
$12.2 million
increased
$13.5 million
relative to an operating loss of
$1.3 million
in the prior year period due to
higher
net stumpage prices (
$13.0 million
),
higher
volume (
$1.1 million
) and
lower
depletion rates (
$0.5 million
), which were partially offset by
higher
costs (
$1.1 million
). Adjusted EBITDA of
$38.9 million
was
$16.4 million
above
the prior year period.
NEW ZEALAND TIMBER
Third
quarter sales of
$66.3 million
decreased
$3.8 million
, or
5%
, versus
the prior year period
. Volumes
decreased
7%
to
724,000
tons versus
774,000
tons in
the prior year period
, driven primarily by the timing of export shipments. Average delivered prices for export sawtimber
increased
1%
to
$114.54
per ton versus
$113.35
per ton in
the prior year period
, while average delivered prices for domestic sawtimber
decreased
3%
to
$80.74
per ton versus
$83.61
per ton in
the prior year period
. The
increase
in export sawtimber prices was primarily due to stronger demand from China relative to the prior year quarter. However, despite continued strong export demand, pricing declined versus the second quarter due to the global impacts of the U.S. / China trade tensions, including the depreciation of the Chinese
Yuan (CNY) versus the U.S. dollar. The decrease in domestic sawtimber prices (in U.S. dollar terms) versus the prior year quarter was driven primarily by the fall in the NZ$/US$ exchange rate (
US$0.68
per NZ$1.00 versus
US$0.73
per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices
increased
5%
from
the prior year period
. Operating income of
$16.4 million
decreased
$2.9 million
versus
the prior year period
as a result of
lower
volumes (
$1.6 million
),
lower
net stumpage prices (
$2.4 million
), unfavorable foreign exchange impacts (
$0.5 million
), higher depletion rates (
$0.2 million
) and higher road maintenance and overhead costs (
$0.2 million
), which were partially offset by higher non-timber income (
$2.0 million
).
Third
quarter Adjusted EBITDA of
$24.0 million
was
$3.8 million
below
the prior year period
.
Year-to-date sales of
$188.9 million
increased
$24.9 million
, or
15%
, versus the prior year period. Harvest volumes
increased
7%
to
2.0 million
tons versus
1.9 million
tons in the prior year period, driven primarily by incremental volume from prior year acquisitions. Average delivered prices for export sawtimber
increased
5%
to
$117.74
per ton versus
$111.62
per ton in the prior year period, while average delivered prices for domestic sawtimber prices
increased
5%
to
$84.43
per ton versus
$80.54
per ton in the prior year period. The increase in export sawtimber was primarily due to stronger demand from China. The increase in domestic sawtimber prices (in U.S. dollar terms) was driven by increased demand tension between export markets and local sawmills. Excluding the impact of foreign exchange rates, domestic sawtimber prices
increased
7%
from the prior year period. Operating income of
$50.1 million
increased
$8.6 million
versus the prior year period due to
higher
volume (
$3.8 million
),
higher
net stumpage prices (
$2.0 million
),
higher
non-timber income (
$4.6 million
) and
lower
capitalized bridge amortization (
$0.1 million
), partially offset by
higher
costs (
$1.4 million
), the prior year receipt of a timber damage settlement (
$0.4 million
) and
unfavorable
foreign exchange impacts (
$0.2 million
).
REAL ESTATE
Third
quarter sales of
$36.2 million
increased
$19.0 million
versus
the prior year period
, while operating income of
$24.7 million
increased
$13.4 million
versus
the prior year period
due to a higher number of acres sold (
7,336
acres sold versus
2,549
acres sold in
the prior year period
), partially offset by a
decrease
in weighted-average prices (
$4,929
per acre versus
$6,764
per acre in
the prior year period
). Improved Development closings of
$1.3 million
in the Wildlight development project included 2.2 acres of commercial property for $0.5 million ($225,000 per acre) and 20 residential lots for $0.8 million ($42,000 per lot or $288,000 per acre). Unimproved Development sales of
$1.2 million
were comprised of
126
acres at an average price of
$9,325
per acre. This compares to the prior year period sales of
$13.9 million
, comprised of
1,319
acres at an average price of
$10,540
per acre. Rural sales of
$4.5 million
were comprised of
1,420
acres at an average price of
$3,161
per acre. This compares to prior year period sales of
$3.1 million
, comprised of
1,128
acres at an average price of
$2,771
per acre. Non-strategic / Timberland sales of
$29.2 million
were comprised of
5,785
acres at an average price of
$5,039
per acre, including a
$28.1 million
timberland sale in New Zealand comprised of
4,996
productive acres at an average price of
$5,628
per acre. This compares to prior year period sales of
$0.2 million
, comprised of
102
acres at an average price of
$1,616
per acre.
Third
quarter Adjusted EBITDA of
$32.3 million
was
$18.9 million
above
the prior year period
.
Year-to-date sales of
$122.1 million
increased
$0.5 million
versus the prior year period, while operating income of
$71.6 million
decreased
$0.5 million
versus the prior year period. Prior period year-to-date sales and operating income include $42.0 million and $28.2 million, respectively, from Large Dispositions. Sales and operating income increased in the first
nine
months due to higher weighted average prices (
$3,892
per acre versus
$2,388
per acre in the prior year period), partially offset by lower volumes (
31,366
acres sold versus
50,949
acres sold in the prior year period). Year-to-date Adjusted EBITDA of
$111.0 million
increased
$43.7 million
above the prior year period.
TRADING
Third
quarter sales of
$31.0 million
decreased
$9.7 million
versus
the prior year period
due to
lower
volumes. Sales volumes
decreased
24%
to
283,000
tons versus
371,000
tons in
the prior year period
. Operating income and Adjusted EBITDA of
$0.3 million
decreased
$0.8 million
versus
the prior year period
.
Year-to-date sales of
$116.4 million
decreased
$0.1 million
versus the prior year period. Sales volumes
decreased
6%
to
1.0 million
tons versus
1.1 million
tons in the prior year period. Average prices
increased
6%
to
$113.76
per ton versus
$107.45
per ton in the prior year period primarily due to stronger demand from China. Operating income and Adjusted EBITDA of
$0.7 million
decreased
$2.7 million
versus the prior year period due to lower margins as a result of increased competition to procure wood and lower volumes.
OTHER ITEMS
CORPORATE AND OTHER EXPENSE/ELIMINATIONS
Third
quarter corporate and other operating expenses of
$6.2 million
increased
$1.1 million
versus
the prior year period
due to a reduction in overhead costs allocated to operating segments ($0.5 million), higher stock based compensation and other benefits expense ($0.3 million), higher property taxes ($0.2 million) and higher insurance costs ($0.1 million).
Year-to-date corporate and other operating expense of
$16.6 million
increased
$1.4 million
versus the prior year period due to a reduction in overhead costs allocated to operating segments ($1.0 million), higher stock-based compensation and other benefits expense ($1.0 million), higher depreciation expense (
$0.4 million
) and IT related costs ($0.3 million), partially offset by lower costs related to shareholder litigation (
$0.7 million
) and income from the sale of unused Internet Protocol addresses ($0.6 million).
Costs related to shareholder litigation in the prior year period include expenses incurred as a result of the now-concluded securities litigation and the shareholder derivative demands. For additional information related to the securities litigation, see Note 10—Contingencies of Item 8 — Financial Statements and Supplementary Data in the Company’s most recent Annual Report on Form 10-K. For additional information on the shareholder derivative demands, see
Note 9 — Contingencies
.
INTEREST EXPENSE
Third
quarter interest expense of
$7.9 million
decreased
$0.7 million
versus
the prior year period
. Year-to-date interest expense of
$24.0 million
decreased
$1.6 million
versus the prior year period. The decrease in
third
quarter and year-to-date interest expense was due to lower average debt.
NON-OPERATING INCOME
Third
quarter and year-to-date non-operating income of
$0.5 million
and
$4.0 million
, respectively, includes interest income and the unrealized gains on foreign currency derivatives used to mitigate the risk of fluctuations in foreign exchange rates with respect to anticipated distributions from the New Zealand JV.
INCOME TAX EXPENSE
Third
quarter income tax expense of
$8.4 million
increased
$5.4 million
versus the prior year period. Year-to-date income tax expense of
$22.4 million
increased $5.6 million versus the prior year period. The New Zealand JV is the primary driver of income tax expense.
OUTLOOK
Based on results for the first nine months and expectations for the balance of the year, we anticipate that full-year adjusted EBITDA will be above our prior guidance. In our Southern Timber segment, we expect to achieve full-year harvest volumes of 5.6 to 5.7 million tons and Adjusted EBITDA modestly below prior guidance, as we are choosing to pull back harvest volumes in certain market areas that have been impacted by Hurricane Michael. In our Pacific Northwest Timber segment, we expect to achieve full-year harvest volumes of approximately 1.3 million tons and Adjusted EBITDA toward the lower end of prior guidance, as domestic and export prices have softened following the announcement of tariffs on log exports into China. In our New Zealand Timber segment, we expect to achieve full-year harvest volumes of 2.6 to 2.7 million tons and Adjusted EBITDA modestly above prior guidance, as reduced log inventories in China coupled with reduced trade flows from the U.S. have led to some recent strengthening of export prices. In our Real Estate segment, we anticipate full-year Adjusted EBITDA well above prior guidance driven by the New Zealand timberland sale in the third quarter (which contributed Adjusted EBITDA and net income attributable to Rayonier of $27.7 million and $12.8 million, respectively), while we expect fourth quarter Real Estate closings will be relatively light. On balance, we remain on track to achieve our prior earnings guidance before considering the impact of the third quarter New Zealand timberland sale, which represents upside to the prior guidance.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of cash is cash flow from operations, primarily the harvesting of timber and sales of real estate. As a REIT, our main use of cash is dividends. We also use cash to maintain the productivity of our timberlands through replanting and silviculture. Our operations have generally produced consistent cash flow and required limited
capital resources. Short-term borrowings have helped fund working capital needs while acquisitions of timberlands generally require funding from external sources or asset dispositions.
SUMMARY OF LIQUIDITY AND FINANCING COMMITMENTS
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
(millions of dollars)
|
2018
|
|
2017
|
Cash and cash equivalents
|
|
$146.3
|
|
|
|
$112.7
|
|
Total debt (a)
|
975.0
|
|
|
1,028.4
|
|
Shareholders’ equity
|
1,701.1
|
|
|
1,693.0
|
|
Total capitalization (total debt plus equity)
|
2,676.1
|
|
|
2,721.4
|
|
Debt to capital ratio
|
36
|
%
|
|
38
|
%
|
Net debt to enterprise value (b)
|
16
|
%
|
|
18
|
%
|
|
|
(a)
|
Total debt as of
September 30, 2018
and
December 31, 2017
is presented gross of deferred financing costs of
$2.6 million
and
$3.0 million
, respectively.
|
|
|
(b)
|
Enterprise value is calculated as the number of shares outstanding multiplied by the Company’s share price plus net debt as of
September 30, 2018
and
December 31, 2017
.
|
CASH FLOWS
The following table summarizes our cash flows from operating, investing and financing activities for the
nine
months ended
September 30
,
2018
and
2017
.
|
|
|
|
|
|
|
|
|
(millions of dollars)
|
2018
|
|
2017
|
Cash provided by (used for):
|
|
|
|
Operating activities
|
|
$261.1
|
|
|
|
$186.9
|
|
Investing activities (a)
|
(87.9
|
)
|
|
(260.1
|
)
|
Financing activities
|
(152.5
|
)
|
|
29.2
|
|
|
|
(a)
|
Due to the adoption of ASU No. 2016-18, restricted cash is now included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown and therefore changes in restricted cash are no longer reported as investing activities. Prior period amounts have been restated to conform to current period presentation.
|
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operating activities
increased
$74.2 million
primarily due to higher operating results.
CASH USED FOR INVESTING ACTIVITIES
Cash used for investing activities
decreased
$172.3 million
compared to the prior year period primarily due to decreases in timberland acquisitions (
$200.1 million
), spending on the construction of the Company’s office building (
$6.0 million
), capital expenditures (
$1.6 million
) and real estate development investments (
$4.9 million
). These activities were offset by a decrease in net proceeds from Large Dispositions (
$42.0 million
) and other investing activities of
$1.7 million
.
CASH USED FOR FINANCING ACTIVITIES
Cash used for financing activities increased
$181.7 million
from the prior year period primarily due to decreases in equity issuances (
$147.8 million
), an increase in net debt repayments (
$21.6 million
) and an increase in dividends paid (
$6.8 million
) and shares repurchased (
$3.0 million
).
EXPECTED
2018
EXPENDITURES
Capital expenditures in
2018
are expected to be between
$63
and
$67
million, excluding any strategic timberland acquisitions we may make. Capital expenditures are expected to be comprised primarily of seedling planting, fertilization and other silvicultural activities, property taxes, lease payments, allocated overhead and other capitalized costs. Aside from capital expenditures, we may also acquire timberland as we actively evaluate acquisition opportunities.
Real estate development investments in 2018 are expected to be between $10 and $12 million, net of anticipated reimbursements from community development bonds. Expected real estate development investments are primarily
related to Wildlight, our mixed-use community development project located north of Jacksonville, Florida at the interchange of I-95 and State Road A1A.
Our
2018
dividend payments are expected to be approximately $137 million assuming no change in the quarterly dividend rate of $0.27 per share or material changes in the number of shares outstanding.
Future share repurchases, if any, will depend on the Company’s liquidity and cash flow, as well as general market conditions and other considerations including capital allocation priorities.
We have approximately $2.7 million of mandatory pension contribution requirements in
2018
and may make discretionary contributions in the future.
Cash tax payments in 2018 are expected to be approximately $1.5 million, primarily due to the New Zealand JV.
PERFORMANCE AND LIQUIDITY INDICATORS
The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, and ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures of financial results: Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“Adjusted EBITDA”) and Cash Available for Distribution (“CAD”). These measures are not defined by Generally Accepted Accounting Principles (“GAAP”), and the discussion of Adjusted EBITDA and CAD is not intended to conflict with or change any of the GAAP disclosures described above.
Management uses CAD as a liquidity measure. CAD is a non-GAAP measure that management uses to measure cash generated during a period that is available for common stock dividends, distributions to the New Zealand minority shareholder, repurchase of the Company’s common shares, debt reduction, strategic acquisitions and real estate development investments. We define CAD as cash provided by operating activities adjusted for capital spending (excluding timberland acquisitions and spending on the Company’s office building) and working capital and other balance sheet changes. CAD is not necessarily indicative of the CAD that may be generated in future periods.
Management uses Adjusted EBITDA as a performance measure. Adjusted EBITDA is a non-GAAP measure that management uses to make strategic decisions about the business and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, depletion, amortization, the non-cash cost of land and improved development, non-operating income and expense, costs related to shareholder litigation and Large Dispositions. Costs related to shareholder litigation include expenses incurred as a result of the now-concluded securities class action litigation and the shareholder derivative demands. For additional information related to the securities litigation, see Note 10 — Contingencies of Item 8 — Financial Statements and Supplementary Data in the Company’s most recent Annual Report on Form 10-K. For additional information on the shareholder derivative demands, see
Note 9 — Contingencies
.
We reconcile Adjusted EBITDA to Net Income for the consolidated Company and to Operating Income for the segments, as those are the most comparable GAAP measures for each. The following table provides a reconciliation of Net Income to Adjusted EBITDA for the respective periods (in millions of dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net Income to Adjusted EBITDA Reconciliation
|
|
|
|
|
|
|
|
Net income
|
|
$30.6
|
|
|
|
$28.8
|
|
|
|
$112.7
|
|
|
|
$94.7
|
|
Interest, net
|
7.2
|
|
|
6.8
|
|
|
22.5
|
|
|
24.2
|
|
Income tax expense
|
8.4
|
|
|
3.0
|
|
|
22.4
|
|
|
16.8
|
|
Depreciation, depletion and amortization
|
34.8
|
|
|
28.7
|
|
|
115.7
|
|
|
96.6
|
|
Non-cash cost of land and improved development
|
2.1
|
|
|
1.3
|
|
|
17.1
|
|
|
8.6
|
|
Non-operating (income) expense
|
0.1
|
|
|
0.6
|
|
|
(2.6
|
)
|
|
(0.3
|
)
|
Costs related to shareholder litigation
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
Large Dispositions (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(28.2
|
)
|
Adjusted EBITDA
|
|
$83.3
|
|
|
|
$69.3
|
|
|
|
$287.9
|
|
|
|
$213.1
|
|
|
|
(a)
|
Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In January 2017, the Company completed a disposition of approximately 25,000 acres located in Alabama for a sale price and gain of approximately
$42.0 million
and
$28.2 million
, respectively.
|
The following tables provide a reconciliation of Operating Income (Loss) by segment to Adjusted EBITDA by segment for the respective periods (in millions of dollars):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Corporate
and
other
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$9.2
|
|
|
|
$1.9
|
|
|
|
$16.4
|
|
|
|
$24.7
|
|
|
|
$0.3
|
|
|
|
($6.2
|
)
|
|
|
$46.4
|
|
Depreciation, depletion and amortization
|
13.7
|
|
|
7.8
|
|
|
7.5
|
|
|
5.5
|
|
|
—
|
|
|
0.3
|
|
|
34.8
|
|
Non-cash cost of land and improved development
|
—
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
|
—
|
|
|
—
|
|
|
2.1
|
|
Adjusted EBITDA
|
|
$22.9
|
|
|
|
$9.7
|
|
|
|
$24.0
|
|
|
|
$32.3
|
|
|
|
$0.3
|
|
|
|
($5.9
|
)
|
|
|
$83.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$11.5
|
|
|
|
$1.1
|
|
|
|
$19.3
|
|
|
|
$11.4
|
|
|
|
$1.1
|
|
|
|
($5.1
|
)
|
|
|
$39.3
|
|
Depreciation, depletion and amortization
|
12.7
|
|
|
6.5
|
|
|
8.5
|
|
|
0.7
|
|
|
—
|
|
|
0.3
|
|
|
28.7
|
|
Non-cash cost of land and improved development
|
—
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
1.3
|
|
Adjusted EBITDA
|
|
$24.2
|
|
|
|
$7.6
|
|
|
|
$27.8
|
|
|
|
$13.4
|
|
|
|
$1.1
|
|
|
|
($4.8
|
)
|
|
|
$69.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
Southern Timber
|
|
Pacific Northwest Timber
|
|
New Zealand Timber
|
|
Real Estate
|
|
Trading
|
|
Corporate
and
other
|
|
Total
|
September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
$37.1
|
|
|
|
$12.2
|
|
|
|
$50.1
|
|
|
|
$71.6
|
|
|
|
$0.7
|
|
|
|
($16.6
|
)
|
|
|
$155.1
|
|
Depreciation, depletion and amortization
|
44.6
|
|
|
26.7
|
|
|
21.3
|
|
|
22.3
|
|
|
—
|
|
|
0.9
|
|
|
115.7
|
|
Non-cash cost of land and improved development
|
—
|
|
|
—
|
|
|
—
|
|
|
17.1
|
|
|
—
|
|
|
—
|
|
|
17.1
|
|
Adjusted EBITDA
|
|
$81.7
|
|
|
|
$38.9
|
|
|
|
$71.4
|
|
|
|
$111.0
|
|
|
|
$0.7
|
|
|
|
($15.8
|
)
|
|
|
$287.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
$35.0
|
|
|
|
($1.3
|
)
|
|
|
$41.5
|
|
|
|
$72.1
|
|
|
|
$3.4
|
|
|
|
($15.3
|
)
|
|
|
$135.4
|
|
Depreciation, depletion and amortization
|
37.1
|
|
|
23.8
|
|
|
20.5
|
|
|
14.8
|
|
|
—
|
|
|
0.5
|
|
|
96.6
|
|
Non-cash cost of land and improved development
|
—
|
|
|
—
|
|
|
—
|
|
|
8.6
|
|
|
—
|
|
|
—
|
|
|
8.6
|
|
Costs related to shareholder litigation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.7
|
|
|
0.7
|
|
Large Dispositions (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
(28.2
|
)
|
|
—
|
|
|
—
|
|
|
(28.2
|
)
|
Adjusted EBITDA
|
|
$72.1
|
|
|
|
$22.5
|
|
|
|
$62.0
|
|
|
|
$67.2
|
|
|
|
$3.4
|
|
|
|
($14.1
|
)
|
|
|
$213.1
|
|
|
|
(a)
|
Large Dispositions are defined as transactions involving the sale of timberland that exceed $20 million in size and do not have a demonstrable premium relative to timberland value. In January 2017, the Company completed a disposition of approximately 25,000 acres located in Alabama for a sale price and gain of approximately
$42.0 million
and
$28.2 million
, respectively.
|
The following table provides a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars):