Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

OR

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 

COMMISSION FILE NUMBER 1-6780

RAYONIER INC.

Incorporated in the State of North Carolina

I.R.S. Employer Identification Number 13-2607329

50 North Laura Street, Jacksonville, FL 32202

(Principal Executive Office)

Telephone Number: (904) 357-9100

Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x    NO   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES  ¨    NO   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES  ¨    NO   x

As of May 3, 2010, there were outstanding 80,182,860 Common Shares of the Registrant.

 

 

 


Table of Contents

TABLE OF CONTENTS

 

          PAGE
PART I.    FINANCIAL INFORMATION   

Item 1.

   Financial Statements   
   Condensed Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2010 and 2009    1
   Condensed Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009    2
   Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009    3
   Notes to Condensed Consolidated Financial Statements    4

Item 2.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations    18

Item 3.

   Quantitative and Qualitative Disclosures about Market Risk    27

Item 4.

   Controls and Procedures    27
PART II.    OTHER INFORMATION   

Item 2.

   Unregistered Sales of Equity Securities and Use of Proceeds    28

Item 6.

   Exhibits    29
   Signature    30


Table of Contents

PART I. FINANCIAL INFORMATION

 

Item1. Financial Statements

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands, except per share data)

 

     Three Months Ended March 31,  
     2010     2009  

SALES

     $ 310,200        $ 279,385   
                

Costs and Expenses

    

Cost of sales

     232,853        224,347   

Selling and general expenses

     16,967        14,642   

Other operating income, net

     (4,568     (4,012
                
     245,252        234,977   

Equity in loss of New Zealand joint venture

     (455     (1,237
                

OPERATING INCOME BEFORE GAIN ON SALE OF A PORTION OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE

     64,493        43,171   

Gain on sale of a portion of the interest in the New Zealand joint venture (Note 2)

     12,367        -       
                

OPERATING INCOME

     76,860        43,171   

Interest expense

     (12,486     (12,593

Interest and miscellaneous income, net

     188        68   
                

INCOME BEFORE INCOME TAXES

     64,562        30,646   

Income tax expense

     (7,609     (4,725
                

NET INCOME

     56,953        25,921   
                

OTHER COMPREHENSIVE INCOME (LOSS)

    

Foreign currency translation adjustments

     (1,215     (4,878

Joint venture cash flow hedges

     209        (2,350

Amortization of pension and postretirement plans, net of income tax (benefit) expense of ($2,587) and $466

     4,104        425   
                

COMPREHENSIVE INCOME

     $ 60,051        $ 19,118   
                

EARNINGS PER COMMON SHARE

    

Basic earnings per share

     $ 0.71        $ 0.33   
                

Diluted earnings per share

     $ 0.71        $ 0.33   
                

See Notes to Condensed Consolidated Financial Statements.

 

1


Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands)

 

     March 31,
2010
    December 31,
2009
 
ASSETS   

CURRENT ASSETS

    

Cash and cash equivalents

     $ 152,970        $ 74,964   

Accounts receivable, less allowance for doubtful accounts of $1,313 and $1,150

     92,402        103,740   

Inventory

    

Finished goods

     71,485        70,548   

Work in process

     9,688        8,884   

Raw materials

     6,554        6,829   

Manufacturing and maintenance supplies

     2,227        2,243   
                

Total inventory

     89,954        88,504   

Income tax and alternative fuel mixture credit receivable

     191,530        192,579   

Prepaid and other current assets

     52,565        49,909   
                

Total Current Assets

     579,421        509,696   
                

TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION

     1,158,861        1,188,559   

PROPERTY, PLANT AND EQUIPMENT

    

Land

     24,812        24,789   

Buildings

     125,100        126,443   

Machinery and equipment

     1,295,702        1,275,955   
                

Total property, plant and equipment

     1,445,614        1,427,187   

Less - accumulated depreciation

     (1,089,990     (1,082,248
                
     355,624        344,939   
                

INVESTMENT IN JOINT VENTURE

     63,548        50,999   

OTHER ASSETS

     175,471        158,738   
                

TOTAL ASSETS

     $ 2,332,925        $ 2,252,931   
                
LIABILITIES AND SHAREHOLDERS’ EQUITY   

CURRENT LIABILITIES

    

Accounts payable

     $ 69,907        $ 58,584   

Bank loans and current maturities

            4,650   

Accrued interest

     11,996        6,512   

Accrued customer incentives

     5,808        25,644   

Current liabilities for dispositions and discontinued operations (Note 10)

     10,910        10,648   

Other current liabilities

     64,533        69,073   
                

TOTAL CURRENT LIABILITIES

     163,154        175,111   
                

LONG-TERM DEBT

     762,028        694,999   

NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS (Note 10)

     85,683        87,943   

PENSION AND OTHER POSTRETIREMENT BENEFITS (Note 12)

     111,890        111,662   

OTHER NON-CURRENT LIABILITIES

     35,238        37,010   

COMMITMENTS AND CONTINGENCIES (Notes 9 and 11)

    

SHAREHOLDERS’ EQUITY

    

Common Shares, 120,000,000 shares authorized, 80,064,618 and 79,541,974 shares issued and outstanding

     570,673        561,962   

Retained earnings

     680,903        663,986   

Accumulated other comprehensive loss

     (76,644     (79,742
                

TOTAL SHAREHOLDERS’ EQUITY

     1,174,932        1,146,206   
                

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

     $     2,332,925        $ 2,252,931   
                

See Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

     Three Months Ended March 31,  
     2010     2009  

OPERATING ACTIVITIES

    

Net income

   $ 56,953      $ 25,921   

Adjustments to reconcile net income to total cash provided by operating activities:

    

Depreciation, depletion and amortization

     43,329        38,519   

Non-cash cost of real estate sold

     2,194        3,490   

Stock-based incentive compensation expense

     4,344        4,338   

Gain on sale of a portion of the interest in the New Zealand joint venture

     (11,545     -       

Amortization of convertible debt discount

     2,029        1,442   

Deferred income tax expense (benefit)

     45        (1,238

Excess tax benefits on stock-based compensation

     (3,153     (68

Other

     2,253        2,231   

Changes in operating assets and liabilities:

    

Receivables

     11,202        (1,408

Inventories

     (446     (6,470

Accounts payable

     3,017        (1,755

Income tax and alternative fuel mixture credit receivable

     1,050        637   

Other current assets

     (1,504     (1,407

Accrued liabilities

     (15,712     3,516   

Other assets

     (103     (454

Other non-current liabilities

     (513     (217

Expenditures for dispositions and discontinued operations

     (2,029     (2,285
                

CASH PROVIDED BY OPERATING ACTIVITIES

     91,411        64,792   
                

INVESTING ACTIVITIES

    

Capital expenditures

     (36,165     (29,828

Change in restricted cash

     (9,809     (2,964

Other

     8,359        4,118   
                

CASH USED FOR INVESTING ACTIVITIES

     (37,615     (28,674
                

FINANCING ACTIVITIES

    

Issuance of debt

     127,000        20,000   

Repayment of debt

     (66,650     (20,000

Dividends paid

     (39,910     (39,416

Proceeds from the issuance of common shares

     7,211        218   

Excess tax benefits on stock-based compensation

     3,153        68   

Debt issuance costs

     (397     -       

Repurchase of common shares

     (5,997     (1,388
                

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES

     24,410        (40,518
                

EFFECT OF EXCHANGE RATE CHANGES ON CASH

     (200     169   
                

CASH AND CASH EQUIVALENTS

    

Increase (decrease) in cash and cash equivalents

     78,006        (4,231

Balance, beginning of year

     74,964        61,685   
                

Balance, end of period

   $ 152,970      $ 57,454   
                

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

    

Cash paid during the period:

    

Interest

   $ 4,441      $ 1,217   
                

Income taxes

   $ 2,699      $ 729   
                

Non-cash investing activity:

    

Capital assets purchased on account

   $ 17,082      $ 14,034   
                

See Notes to Condensed Consolidated Financial Statements.

 

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

1.

BASIS OF PRESENTATION AND NEW ACCOUNTING PRONOUNCEMENTS

Basis of Presentation

The unaudited condensed consolidated financial statements and notes thereto of Rayonier Inc. and its subsidiaries (“Rayonier” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, these financial statements and notes reflect all adjustments (including normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the financial statements and supplementary data included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission.

Subsequent Events

The Company evaluated events and transactions that occurred after the balance sheet date but before financial statements were issued, and no subsequent events were identified.

Reclassifications

Certain 2009 amounts have been reclassified to conform to current year presentation. See Note 2 – Joint Venture Investment for information regarding reclassifications for discontinued operations.

New or Recently Adopted Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (“FASB”) issued new guidance related to consolidation which replaced the quantitative-based risks and rewards calculation for determining which enterprise has a controlling interest in a variable interest entity with an approach primarily qualitative in nature. This Standard requires additional disclosures about an enterprise’s involvement in variable interest entities and was effective January 1, 2010 for Rayonier. The Company’s application of this guidance had no effect on the accompanying condensed consolidated financial statements. See Note 8 – Fair Value Measurements for additional information about the Company’s variable interest entity.

Also in June 2009, the FASB issued new guidance related to the accounting for transfers of financial assets. The new standard eliminates the concept of a “qualifying special-purpose entity” (“QSPE”) and associated guidance and creates more stringent conditions for reporting a transfer of a portion of a financial asset as a sale. Entities formerly classified as QSPEs are now evaluated for consolidation under the provisions related to the consolidation of controlling and non-controlling interests in an entity. Under the new guidance, the Company’s investment in a special purpose entity does not require consolidation. See Note 8 – Fair Value Measurements for additional information about this entity.

 

2.

JOINT VENTURE INVESTMENT

The Company owns an interest in Matariki Forestry Group (“Matariki”), a joint venture (“JV”) that owns or leases approximately 0.3 million acres of New Zealand timberlands. In addition to the investment, Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary of Rayonier serves as the manager of the JV forests and operates a log trading business.

Rayonier’s investment in the JV is accounted for using the equity method of accounting. Income from the JV is reported in the Timber segment as operating income since the Company manages the forests and its JV interest is an extension of the Company’s operations. A portion of Rayonier’s investment is recorded at historical cost which generates a difference between the book value of the Company’s investment and its proportionate share of the JV’s net assets. The difference represents the Company’s unrecognized gain from RNZ’s sale of timberlands to the JV in 2005. The deferred gain is recognized on a straight-line basis over the estimated number of years the JV expects to harvest the timberlands.

In the third quarter of 2008, Rayonier’s Board of Directors approved a plan to offer to sell the Company’s 40 percent interest in the JV as well as the operations of RNZ. As a result, the operating results of the JV and RNZ were segregated from continuing operations in the Condensed Consolidated Statements of Income and Comprehensive Income and reported as discontinued operations.

In the second quarter of 2009, as a result of distressed capital markets and the weak global economic conditions, Rayonier and its joint venture partners decided to discontinue the sale process and continue with on-going operations. Accordingly, the operating results of the joint venture are included in continuing operations in the Condensed Consolidated Statements of Income and Comprehensive Income for all periods presented.

In December of 2009, the JV signed an agreement to sell a 35 percent interest in the JV to a new investor for NZ$167 million. Matariki issued new shares to the investor and used the proceeds entirely to pay down a portion of the outstanding NZ$367 million debt. Consummation of this transaction occurred in February 2010. Upon closing, Rayonier’s ownership interest in Matariki

declined from 40 percent to 26 percent. As a result of this transaction, Rayonier recognized a gain of $11.5 million, net of $0.9 million in tax, or $0.15 per diluted share.

 

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

 

3. EARNINGS PER COMMON SHARE

The following table provides details of the calculation of basic and diluted earnings per common share:

 

     Three Months Ended
March  31,
    
     2010    2009   

Net income

     $ 56,953          $ 25,921       
                

Shares used for determining basic earnings per common share

         79,741,538              78,806,973       

Dilutive effect of:

        

Stock options

     390,915          221,962       

Performance and restricted shares

     576,944          243,542       
                

Shares used for determining diluted earnings per common share

     80,709,397          79,272,477       
                

Basic earnings per common share:

     $ 0.71          $ 0.33       
                

Diluted earnings per common share:

     $ 0.71          $ 0.33       
                

 

4. INCOME TAXES

Rayonier is a real estate investment trust (“REIT”). In general, only Rayonier TRS Holdings, Inc. (“TRS”), the Company’s wholly-owned taxable subsidiary whose businesses include the Company’s non-REIT qualified activities, is subject to corporate income taxes. However, the Company is subject to U.S. federal corporate income tax on built-in gains (the excess of fair market value over tax basis for property held by the Company upon REIT election at January 1, 2004) on taxable sales of such property during the first 10 years following the election to be taxed as a REIT. Accordingly, the provision for corporate income taxes relates principally to current and deferred taxes on certain property sales and on TRS income.

The Company’s effective tax rate is below the 35 percent U.S. statutory tax rate primarily due to tax benefits associated with being a REIT and like-kind exchange (“LKE”) transactions. Effective tax rates before discrete items were 16.3 percent and 19.4 percent for the three months ending March 31, 2010 and 2009, respectively. The lower rate in 2010 was due to proportionately higher earnings from the REIT.

Including discrete items, the effective tax rate for the quarter was 11.8 percent compared to 15.4 percent in 2009.

 

5. RESTRICTED DEPOSITS

In order to qualify for LKE treatment, the proceeds from real estate sales must be deposited with a third party intermediary. These proceeds are accounted for as restricted cash until a suitable replacement property is acquired. In the event that LKE purchases are not completed, the proceeds are returned to the Company after 180 days and reclassified as available cash. As of March 31, 2010 and December 31, 2009, the Company had $9.9 million and $0.1 million, respectively, of proceeds from real estate sales classified as restricted cash in Other Assets, which were deposited with an LKE intermediary.

 

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

6. SHAREHOLDERS’ EQUITY

An analysis of shareholders’ equity for the three months ended March 31, 2010 and the year ended December 31, 2009 is shown below (share amounts not in thousands):

 

    

 

Common Shares

    Retained
Earnings
    Accumulated
Other
Comprehensive
Income (Loss)
    Shareholders’
Equity
 
     Shares     Amount        

Balance, December 31, 2008

   78,814,431      $ 527,302       $ 509,931      $ (98,296   $ 938,937   

Net income

                 312,541               312,541   

Dividends ($2.00 per share)

                 (158,486            (158,486

Issuance of shares under incentive stock plans

   776,905        11,115                      11,115   

Equity portion of convertible debt

          8,850                      8,850   

Warrants and hedge, net

          (2,391                   (2,391

Stock-based compensation

          15,754                      15,754   

Excess tax benefit on stock-based compensation

          2,720                      2,720   

Repurchase of common shares

   (49,362     (1,388)                      (1,388

Net gain from pension and postretirement plans

                        4,879        4,879   

Foreign currency translation adjustment

                        15,980        15,980   

Joint venture cash flow hedges

                        (2,305     (2,305
                                      

Balance, December 31, 2009

   79,541,974      $ 561,962       $ 663,986      $ (79,742   $ 1,146,206   

Net income

                 56,953               56,953   

Dividends ($0.50 per share)

                 (40,036            (40,036

Issuance of shares under incentive stock plans

   658,090        7,211                       7,211   

Stock-based compensation

          4,344                       4,344   

Excess tax benefit on stock-based compensation

          3,153                       3,153   

Repurchase of common shares

   (135,446     (5,997                   (5,997

Amortization of pension and postretirement plans

                        4,104        4,104   

Foreign currency translation adjustment

                        (1,215     (1,215

Joint venture cash flow hedges

                        209        209   
                                      

Balance, March 31, 2010

     80,064,618      $   570,673      $   680,903      $ (76,644   $ 1,174,932   
                                      

 

7. SEGMENT INFORMATION

Rayonier operates in four reportable business segments: Timber, Real Estate, Performance Fibers, and Wood Products. Timber sales include all activities that relate to the harvesting of timber. Real Estate sales include all property sales, including those designated for higher and better use (“HBU”). The assets of the Real Estate segment include HBU property held by the Company’s real estate subsidiary, TerraPointe LLC, and parcels under contract previously in the Timber segment. Allocations of depletion expense and non-cash costs of real estate sold are recorded when the Real Estate segment sells an asset from the Timber segment. The Performance Fibers segment includes two major product lines, cellulose specialties and absorbent materials. The Wood Products segment is comprised of lumber operations. The Company’s remaining operations include harvesting and selling timber acquired from third parties (log trading). These operations are reported in “Other Operations.” Sales between operating segments are made based on fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation. The Company evaluates financial performance based on the operating income of the segments.

Operating income (loss) as presented in the Condensed Consolidated Statements of Income and Comprehensive Income is equal to segment income (loss). Certain income (loss) items in the Condensed Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include gains (losses) from certain asset dispositions, interest income (expense), miscellaneous income (expense) and income tax (expense) benefit, are not considered by Company management to be part of segment operations.

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

Total assets, sales, operating income (loss) and depreciation, depletion and amortization by segment including Corporate were as follows:

 

     March 31,     December 31,      
     2010     2009    

ASSETS

      

Timber

     $ 1,249,844        $ 1,259,675     

Real Estate

     81,852        71,118     

Performance Fibers

     516,085        517,941     

Wood Products

     22,995        21,972     

Other Operations

     19,805        19,432     

Corporate and other

     442,344        362,793     
                  

TOTAL

     $     2,332,925        $     2,252,931     
                  
     Three Months Ended
March 31,
     
     2010     2009    

SALES

      

Timber

     $ 47,108        $ 34,925     

Real Estate

     33,018        26,593     

Performance Fibers

     199,772        203,635     

Wood Products

     15,932        11,752     

Other Operations

     17,108        5,700     

Intersegment Eliminations

     (2,738     (3,220  
                  

TOTAL

     $     310,200        $     279,385     
                  
     Three Months Ended
March 31,
     
     2010     2009    

OPERATING INCOME (LOSS)

      

Timber

     $ 8,209        $ (2,338  

Real Estate

     17,355        14,413     

Performance Fibers

     44,857        40,849     

Wood Products

     41        (3,573  

Other Operations

     610        737     

Corporate and other 1

     5,788        (6,917  
                  

TOTAL

     $     76,860        $     43,171     
                  

 

  1

2010 results includes a gain of $12.4 million from the sale of a portion of the Company’s interest in its New Zealand joint venture. See Note 2 – Joint Venture Investment for additional information.

 

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Table of Contents

RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

     Three Months Ended
March 31,
    
     2010    2009   

DEPRECIATION, DEPLETION

AND AMORTIZATION

        

Timber

     $ 16,751        $ 17,436     

Real Estate

     9,516        5,389     

Performance Fibers

     15,805        14,288     

Wood Products

     1,065        1,218     

Other Operations

     1        1     

Corporate and other

     191        187     
                

TOTAL

     $     43,329        $     38,519     
                

 

8. FAIR VALUE MEASUREMENTS

The following table presents the carrying amount and estimated fair values of financial instruments held by the Company at March 31, 2010 and December 31, 2009, using market information and what the Company believes to be appropriate valuation methodologies under generally accepted accounting principles:

 

    March 31,
2010
    December 31,
2009
     

Asset (liability)

  Carrying
Amount
    Fair Value     Carrying
Amount
    Fair Value    

Cash and cash equivalents

   $         152,970       $     152,970      $ 74,964      $ 74,964     

Short-term debt

                  (4,650     (4,650  

Long-term debt

    (762,028     (877,608     (694,999     (790,763  

Rayonier uses the following methods and assumptions in estimating the fair value of its financial instruments:

Cash and cash equivalents—The carrying amount is equal to fair market value.

Debt—The Company’s short-term bank loans and floating rate debt approximate fair value. The fair value of fixed rate long-term debt is based upon quoted market prices for debt with similar terms and maturities.

Assets and liabilities measured at fair value on a recurring basis are summarized below:

 

 Asset   Carrying Value at
       March 31, 2010       
      Level 2        

 Investment in special-purpose entity

   $   2,733               $     2,733     
 Asset   Carrying Value at
    December 31, 2009    
      Level 2        

 Investment in special-purpose entity

   $   2,733               $   2,733     

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

Variable Interest Entity

Rayonier holds a variable interest in a bankruptcy-remote, limited liability subsidiary (“special-purpose entity”) which was created in 2004 when Rayonier monetized a $25.0 million installment note and letter of credit received in connection with a timberland sale. The Company contributed the note and a letter of credit to the special-purpose entity and using the installment note and letter of credit as collateral, the special-purpose entity issued $22.5 million of 15-year Senior Secured Notes and remitted cash of $22.5 million to the Company. There are no restrictions that relate to the transferred financial assets. Rayonier maintains a $2.5 million interest in the entity and receives immaterial cash payments equal to the excess of interest received on the installment note over the interest paid on the Senior Secured Notes. The Company’s interest is recorded at fair value and is included in “Other Assets” in the Condensed Consolidated Balance Sheets. In addition, the Company calculated and recorded a de minimus guarantee liability to reflect its obligation of up to $2.5 million under a make-whole agreement pursuant to which it guaranteed certain obligations of the entity. This guarantee obligation is also collateralized by the letter of credit. The Company’s interest in the entity, together with the make-whole agreement, represent the maximum exposure to loss as a result of the Company’s involvement with the special purpose entity. Upon maturity of the Senior Secured Notes in 2019 and termination of the special purpose entity, Rayonier will receive the remaining $2.5 million of cash. The Company determined, based upon an analysis under the variable interest entity guidance, that it does not have the power to direct activities that most significantly impact the entity’s economic success. Therefore, Rayonier is not the primary beneficiary and is not required to consolidate the entity.

 

9. GUARANTEES

The Company provides financial guarantees as required by creditors, insurance programs, and state and foreign governmental agencies. As of March 31, 2010, the following financial guarantees were outstanding:

 

      Maximum
Potential
Payment
   Carrying
    Amount of    
Liability
    

 Standby letters of credit (1)

    $         43,893       $         38,110     

 Guarantees (2)

     3,756        53     

 Surety bonds (3)

     11,658        1,871     
                

 Total

    $     59,307       $     40,034     
                

 

  (1)

Approximately $39 million of the standby letters of credit serve as credit support for industrial revenue bonds. The remaining letters of credit support obligations under various insurance related agreements, primarily workers’ compensation and pollution liability policy requirements. These letters of credit expire at various dates during 2010 and will be renewed as required.

 

  (2)

In conjunction with RNZ’s sale of timberlands to the New Zealand JV in October 2005, the Company guaranteed five years of Crown Forest license obligations. The JV is the primary obligor and has posted a bank performance bond with the New Zealand government. If the JV fails to pay the obligation, the New Zealand government will demand payment from the bank that posted the bond. If the bank defaults on the bond, the Company would then have to perform. As of March 31, 2010, one annual payment of $1.2 million remains. This guarantee expires in 2010.

In conjunction with a timberland sale and note monetization in the first quarter of 2004, the Company issued a make-whole agreement pursuant to which it guaranteed $2.5 million of obligations of a special-purpose entity that was established to complete the monetization. At March 31, 2010 and December 31, 2009, the Company has recorded a de minimus liability to reflect the fair market value of its obligation to perform under the make-whole agreement.

 

  (3)

Rayonier issued surety bonds primarily to secure timber in the State of Washington and to provide collateral for the Company’s workers’ compensation self-insurance program in Washington and Georgia. These surety bonds expire at various dates during 2010, 2011 and 2014, and are expected to be renewed as required.

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

10. LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS

An analysis of activity in the liabilities for dispositions and discontinued operations for the three months ended March 31, 2010 and the year ended December 31, 2009, is as follows:

 

           March 31, 2010                December 31, 2009           

Balance, January 1

    $                   98,591        $         104,575      

Expenditures charged to liabilities

     (2,029)        (8,095)     

Increase (reduction) to liabilities

     31         2,111      
                

Balance, end of period

     96,593         98,591      

Less: Current portion

     (10,910)        (10,648)     
                

Non-current portion

    $ 85,683        $ 87,943      
                

Subject to the factors described in the next paragraph of this footnote, the Company believes established liabilities are sufficient for costs expected to be incurred over the next 20 years with respect to its dispositions and discontinued operations. Remedial actions for these sites vary, but can include, among other remedies, on-site (and in certain cases off-site) removal or treatment of contaminated soils and sediments, recovery and treatment/remediation of groundwater, and source remediation and/or control.

In addition, the Company is exposed to the risk of reasonably possible additional losses in excess of the established liabilities. As of March 31, 2010, this amount could range up to $36 million and arises from uncertainty over the availability or effectiveness of certain remediation technologies, additional or different contamination that may be discovered, development of new or improved environmental remediation technologies, changes in applicable law and the exercise of discretion in interpretation of applicable law and regulations by governmental agencies.

For additional information on the Company’s environmental liabilities refer to Note 16 – Liabilities for Dispositions and Discontinued Operations in the 2009 Annual Report on Form 10-K.

 

11. CONTINGENCIES

Rayonier is engaged in various legal actions, including certain environmental proceedings. The Company has been named as a defendant in various other lawsuits and claims arising in the normal course of business. While the Company has procured reasonable and customary insurance covering risks normally occurring in connection with its businesses, it has in certain cases retained some risk through the operation of self-insurance, primarily in the areas of workers’ compensation, property insurance and general liability. These other lawsuits and claims, either individually or in the aggregate, are not expected to have a material effect on the Company’s financial position, results of operations, or cash flow.

There have been no material changes in the status of the other specific matters referenced in Note 16 – Liabilities for Dispositions and Discontinued Operations in the 2009 Annual Report on Form 10-K.

 

12. EMPLOYEE BENEFIT PLANS

The Company has four qualified non-contributory defined benefit pension plans covering the majority of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. Three of the qualified plans, as well as the unfunded plan, are closed to new participants. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

The net periodic benefit costs of the Company’s pension and postretirement plans (medical and life insurance) are shown in the following table:

 

     Pension     Postretirement  
     Three Months Ended
March 31,
    Three Months Ended
March 31,
 
     2010     2009     2010     2009  

Components of Net Periodic Benefit Cost

        

 Service cost

    $ 1,646       $ 1,842       $ 146       $ 90   

 Interest cost

     4,579        4,349        257        301   

 Expected return on plan assets

     (5,410     (5,291     -        -   

 Amortization of prior service cost

     311        354        22        22   

 Amortization of plan amendment

     -        -        (2,392     (2,392

 Amortization of losses

     2,098        1,349        1,478        1,558   
                                

Net periodic benefit cost

    $         3,224       $         2,603       $         (489    $         (421
                                

The Company made no discretionary contributions to the pension plans during the three months ended March 31, 2010. The Company’s 2010 full year discretionary pension contributions may be in the $40 million to $50 million range in order to improve funded status.

 

13. DEBT

In March 2010, TRS borrowed $75 million under a five-year term loan agreement with a group of banks at LIBOR plus 275 basis points. There were no other significant changes to the Company’s outstanding debt as reported in Note 13 – Debt of the Company’s 2009 Annual Report on Form 10-K.

 

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated Other Comprehensive Income (Loss) was comprised of the following:

 

           March 31, 2010               December 31, 2009      

Foreign currency translation adjustments

    $ 25,554       $ 26,769   

Joint venture cash flow hedges

     (2,096     (2,305

Unrecognized components of employee benefit plans, net of tax

     (100,102     (104,206
                

Total

    $         (76,644    $         (79,742
                

 

15. CONSOLIDATING FINANCIAL STATEMENTS

In October 2007, TRS issued $300 million of 3.75% Senior Exchangeable Notes due 2012, and in August 2009 TRS issued $172.5 million of 4.50% Senior Exchangeable Notes due 2015. The notes for both transactions are guaranteed by Rayonier and are non-callable. In connection with these exchangeable notes, the Company provides the following condensed consolidating financial information in accordance with SEC Regulation S-X Rule 3-10, Financial Statements of Guarantors and Issuers of Guaranteed Securities Registered or Being Registered. Each entity in the consolidating financial information follows the same accounting policies as described in the consolidated financial statements, except for the use of the equity method of accounting to reflect ownership interests in wholly-owned subsidiaries which are eliminated upon consolidation and the allocation of certain expenses of Rayonier incurred for the benefit of its subsidiaries.

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

 

    CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Three Months Ended March 31, 2010
 
    Rayonier Inc.
(Parent
Guarantor)
    Rayonier TRS
Holdings Inc.
(Issuer)
    Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
    Consolidating
Adjustments
    Total
Consolidated
 

SALES

    $ -        $ -        $ 284,568        $ 101,458        $ (75,826     $ 310,200   
                                               

Costs and Expenses

           

Cost of sales

    -        -        233,842        42,169        (43,158     232,853   

Selling and general expenses

    2,000        -        14,190        777        -        16,967   

Other operating income, net

    (4     -        (2,059     (2,505     -        (4,568
                                               
    1,996        -        245,973        40,441        (43,158     245,252   

Equity in (loss) income of New Zealand joint venture

    (810     -        355        -        -        (455
                                               

OPERATING INCOME BEFORE GAIN ON SALE OF A PORTION OF THE INTEREST IN THE NEW ZEALAND JOINT VENTURE

    (2,806     -        38,950        61,017        (32,668     64,493   

Gain on sale of a portion of the interest in the New Zealand joint venture

    4,670        -        7,697        -        -        12,367   
                                               

OPERATING INCOME

    1,864        -        46,647        61,017        (32,668     76,860   

Interest expense

    (111     (7,391     (4,935     (49     -        (12,486

Interest and miscellaneous income (expense), net

    8,928        (1,299     (11,610     4,169        -        188   

Equity in income from subsidiaries

    47,474        20,523        -        -        (67,997     -   
                                               

INCOME BEFORE INCOME TAXES

    58,155        11,833        30,102        65,137        (100,665     64,562   

Income tax (expense) benefit

    (1,202     3,172        (9,579     -        -        (7,609
                                               

NET INCOME

    $ 56,953        $ 15,005        $ 20,523        $ 65,137        $ (100,665     $ 56,953   
                                               

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

 

 

    CONDENSED CONSOLIDATING STATEMENTS OF INCOME
For the Three Months Ended March 31, 2009
 
    Rayonier Inc.
(Parent
Guarantor)
    Rayonier TRS
Holdings Inc.
(Issuer)
    Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
    Consolidating
Adjustments
    Total
Consolidated
 

SALES

    $        $        $ 237,675        $ 51,216        $ (9,506     $ 279,385   
                                               

Costs and Expenses

           

Cost of sales

                  200,218        34,543        (10,414     224,347   

Selling and general expenses

    2,489               11,311        842               14,642   

Other operating income, net

    (105            (1,568     (2,339            (4,012
                                               
    2,384               209,961        33,046        (10,414     234,977   

Equity in loss of New Zealand joint venture

    (753            (484                   (1,237
                                               

OPERATING (LOSS) INCOME

    (3,137            27,230        18,170        908        43,171   

Interest expense

    (110     (4,607     (6,718     (1,158            (12,593

Interest and miscellaneous income (expense), net

    795        (773     (1,208     1,283        (29     68   

Equity in income from subsidiaries

    29,463        13,705                      (43,168       
                                               

INCOME BEFORE INCOME TAXES

    27,011        8,325        19,304        18,295        (42,289     30,646   

Income tax (expense) benefit

    (1,090     1,964        (5,599                   (4,725
                                               

NET INCOME

    $ 25,921        $ 10,289        $ 13,705        $ 18,295        $ (42,289     $ 25,921   
                                               

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

 

    CONDENSED CONSOLIDATING BALANCE SHEETS
As of March 31, 2010
    Rayonier Inc.
(Parent
Guarantor)
  Rayonier TRS
Holdings Inc.
(Issuer)
  Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
  Consolidating
Adjustments
    Total
Consolidated

ASSETS

           

CURRENT ASSETS

           

Cash and cash equivalents

    $ 55,366     $     $ 87,699        $ 9,905     $        $ 152,970

Accounts receivable, less allowance for doubtful accounts

    75         89,701        2,626            92,402

Inventory

            104,794            (14,840     89,954

Intercompany interest receivable

                   3,955     (3,955    

Income tax and alternative fuel mixture credit receivable

            191,530                   191,530

Prepaid and other current assets

    3,552     764     46,514        1,735            52,565
                                       

Total current assets

    58,993     764     520,238        18,221     (18,795     579,421
                                       

TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION

    1,807         64,861        1,092,193            1,158,861

NET PROPERTY, PLANT AND EQUIPMENT

    1,395         352,594        877     758        355,624

INVESTMENT IN JOINT VENTURE

    75,824         (12,276                63,548

INVESTMENT IN SUBSIDIARIES

    1,185,730     871,881                (2,057,611    

OTHER ASSETS

    23,416     10,984     685,990        13,898     (558,817     175,471
                                       

TOTAL ASSETS

    $ 1,347,165     $ 883,629     $ 1,611,407        $ 1,125,189     $ (2,634,465     $ 2,332,925
                                       

LIABILITIES AND SHAREHOLDERS’ EQUITY

           

CURRENT LIABILITIES

           

Accounts payable

    $ 934     $     $ 68,405        $ 568     $        $ 69,907

Accrued interest

    564     6,158     5,243        31            11,996

Accrued customer incentives

            5,808                   5,808

Current liabilities for dispositions and discontinued operations

            10,910                   10,910

Other current liabilities

    14,421         39,786        10,326            64,533
                                       

Total current liabilities

    15,919     6,158     130,152        10,925            163,154
                                       

LONG-TERM DEBT

        443,362     318,666                   762,028

NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS

            85,683                   85,683

PENSION AND OTHER POSTRETIREMENT BENEFITS

    86,914         24,976                   111,890

OTHER NON-CURRENT LIABILITIES

    11,643         22,986        609            35,238

INTERCOMPANY PAYABLE

    57,757         157,063        5,973     (220,793    
                                       

TOTAL LIABILITIES

    172,233     449,520     739,526        17,507     (220,793     1,157,993
                                       

TOTAL SHAREHOLDERS’ EQUITY

    1,174,932     434,109     871,881        1,107,682     (2,413,672     1,174,932
                                       

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

    $ 1,347,165     $ 883,629     $ 1,611,407        $ 1,125,189     $ (2,634,465     $ 2,332,925
                                       

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

 

    CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2009
    Rayonier Inc.
(Parent
Guarantor)
  Rayonier TRS
Holdings Inc.
(Issuer)
  Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
  Consolidating
Adjustments
    Total
Consolidated

ASSETS

           

CURRENT ASSETS

           

Cash and cash equivalents

    $ 2,895     $     $ 69,722        $ 2,347     $        $ 74,964

Accounts receivable, less allowance for doubtful accounts

            101,710        2,030            103,740

Inventory

            114,187            (25,683     88,504

Intercompany interest receivable

                   1,081     (1,081    

Income tax and alternative fuel mixture credit receivable

            192,579                   192,579

Prepaid and other current assets

    1,430     758     44,722        2,999            49,909
                                       

Total current assets

    4,325     758     522,920        8,457     (26,764     509,696
                                       

TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION

    1,807         87,747        1,099,005            1,188,559

NET PROPERTY, PLANT AND EQUIPMENT

    1,493         341,790        1,147     509        344,939

INVESTMENT IN JOINT VENTURE

    75,248         (24,249                50,999

INVESTMENT IN SUBSIDIARIES

    1,173,256     869,169                (2,042,425    

OTHER ASSETS

    23,135     11,668     496,195        4,313     (376,573     158,738
                                       

TOTAL ASSETS

    $ 1,279,264     $ 881,595     $ 1,424,403        $ 1,112,922     $ (2,445,253     $ 2,252,931
                                       

LIABILITIES AND SHAREHOLDERS’ EQUITY

           

CURRENT LIABILITIES

           

Accounts payable

    $ 3,057     $     $ 54,871        $ 656     $        $ 58,584

Bank loans and current maturities

            4,650                   4,650

Accrued interest

    519     5,286     707                   6,512

Accrued customer incentives

            25,644                   25,644

Current liabilities for dispositions and discontinued operations

            10,648                   10,648

Other current liabilities

    18,885         37,726        12,462            69,073
                                       

Total current liabilities

    22,461     5,286     134,246        13,118            175,111
                                       

LONG-TERM DEBT

    5,000     441,332     243,667        5,000            694,999

NON-CURRENT LIABILITIES FOR DISPOSITIONS AND DISCONTINUED OPERATIONS

            87,943                   87,943

PENSION AND OTHER POSTRETIREMENT BENEFITS

    86,522         25,140                   111,662

OTHER NON-CURRENT LIABILITIES

    13,352         23,035        23,553     (22,930     37,010

INTERCOMPANY PAYABLE

    5,723         41,203        8,706     (55,632    
                                       

TOTAL LIABILITIES

    133,058     446,618     555,234        50,377     (78,562     1,106,725
                                       

TOTAL SHAREHOLDERS’ EQUITY

    1,146,206     434,977     869,169        1,062,545     (2,366,691     1,146,206
                                       

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

    $ 1,279,264     $ 881,595     $ 1,424,403        $ 1,112,922     $ (2,445,253     $ 2,252,931
                                       

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollars in thousands unless otherwise stated)

 

    CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2010
 
    Rayonier Inc.
(Parent
Guarantor)
    Rayonier TRS
Holdings, Inc.
(Issuer)
    Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
    Consolidating
Adjustments
    Total
Consolidated
 

CASH PROVIDED BY OPERATING ACTIVITIES

  $ 96,233      $ 15,000      $ 19,281      $ 74,820      $ (113,923   $ 91,411    
                                               

INVESTING ACTIVITIES

           

Capital expenditures

    (66            (28,563     (7,535     (1     (36,165

Purchase of timberlands

                         (22,931     22,931          

Purchase of real estate

                  (39,694            39,694          

Change in restricted cash

                         (9,809            (9,809

Other

                  10,346        (1,987            8,359   
                                               

CASH USED FOR INVESTING ACTIVITIES

    (66            (57,911     (42,262     62,624        (37,615
                                               

FINANCING ACTIVITIES

           

Issuance of debt

                  75,000        52,000               127,000   

Repayment of debt

    (5,000            (4,650     (57,000            (66,650

Dividends paid

    (39,910                                 (39,910

Proceeds from the issuance of common shares

    7,211                                    7,211   

Excess tax benefits on stock-based compensation

                  3,153                      3,153   

Debt issuance costs

                  (397                   (397

Repurchase of common shares

    (5,997                                 (5,997

Distributions to parent

           (15,000     (16,299     (20,000     51,299          
                                               

CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES

    (43,696     (15,000     56,807        (25,000     51,299        24,410   
                                               

EFFECT OF EXCHANGE RATE CHANGES ON CASH

                  (200                   (200
                                               

CASH AND CASH EQUIVALENTS

           

Change in cash and cash equivalents

    52,471               17,977        7,558               78,006   

Balance, beginning of year

    2,895               69,722        2,347               74,964   
                                               

Balance, end of period

  $ 55,366      $      $ 87,699      $ 9,905      $      $ 152,970   
                                               

 

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RAYONIER INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(Dollar amounts in thousands unless otherwise stated)

 

    CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2009
 
    Rayonier Inc.
(Parent
Guarantor)
    Rayonier TRS
Holdings Inc.
(Issuer)
    Subsidiaries of
Rayonier TRS
Holdings Inc.
(Non-guarantors)
    All Other
Subsidiaries
(Non-
guarantors)
    Consolidating
Adjustments
    Total
Consolidated
 

CASH PROVIDED BY OPERATING ACTIVITIES

    $ 32,543        $ 15,000        $ 14,702         $ 56,915        $ (54,368     $ 64,792   
                                               

INVESTING ACTIVITIES

           

Capital expenditures

    (3            (20,153     (9,672            (29,828

Purchase of timberlands

                         (2,594     2,594          

Change in restricted cash

                         (2,964            (2,964

Other

                  4,102         16               4,118   
                                               

CASH USED FOR INVESTING ACTIVITIES

    (3            (16,051     (15,214     2,594        (28,674
                                               

FINANCING ACTIVITIES

           

Issuance of debt

                         20,000               20,000   

Repayment of debt

                         (20,000            (20,000

Dividends paid

    (39,416                                 (39,416

Proceeds from the issuance of common shares

    218                                    218   

Excess tax benefits on stock-based compensation

                  68                      68   

Repurchase of common shares

    (1,388                                 (1,388

Distributions to Parent

           (15,000     (15,774     (21,000     51,774          
                                               

CASH USED FOR FINANCING ACTIVITIES

    (40,586     (15,000     (15,706     (21,000     51,774         (40,518
                                               

EFFECT OF EXCHANGE RATE CHANGES ON CASH

                  169                      169   
                                               

CASH AND CASH EQUIVALENTS

           

Change in cash and cash equivalents

    (8,046            (16,886     20,701               (4,231

Balance, beginning of year

    9,741               47,082        4,862               61,685   
                                               

Balance, end of period

    $ 1,695        $        $ 30,196        $ 25,563        $        $ 57,454   
                                               

 

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

When we refer to “we,” “us,” “our,” “the Company,” or “Rayonier,” we mean Rayonier Inc. and its consolidated subsidiaries. References herein to “Notes to Financial Statements” refer to the Notes to the Condensed Consolidated Financial Statements of Rayonier Inc. included in Item 1 of this Report.

The Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors which may affect future results. Our MD&A should be read in conjunction with the 2009 Annual Report on Form 10-K.

Forward - Looking Statements

Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, provide a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their companies. Certain statements in this document regarding anticipated financial outcomes including earnings guidance, if any, business and market conditions, outlook and other similar statements relating to Rayonier’s future financial and operational performance, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “anticipate” and other similar language.

Forward looking statements are subject to future events, risks and uncertainties (many of which are beyond our control or are currently unknown to us) as well as potentially inaccurate estimates, assumptions and judgments by us that could cause actual results to differ materially from results contemplated by our forward-looking statements. Some of these events, risks and uncertainties are set forth in Item 1A – Risk Factors in our 2009 Annual Report on Form 10-K. Forward-looking statements are not guarantees of future performance and undue reliance should not be placed on these statements.

Critical Accounting Policies and Use of Estimates

The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates under different conditions. For a full description of our critical accounting policies, see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2009 Annual Report on Form 10-K.

Segments

We are a leading international forest products company primarily engaged in timberland management, the sale and entitlement of real estate, and the production and sale of high value specialty cellulose fibers and fluff pulp. We operate in four reportable business segments: Timber, Real Estate, Performance Fibers, and Wood Products. The Timber sales include all activities which relate to the harvesting of timber. Real Estate sales include all property sales, including those designated for higher and better use (“HBU”). The assets of the Real Estate segment include HBU property held by the Company’s real estate subsidiary, TerraPointe LLC, and parcels under contract previously in the Timber segment. The Performance Fibers segment includes two major product lines, cellulose specialties and absorbent materials. The Wood Products segment is comprised of lumber operations. Our remaining operations include harvesting and selling timber acquired from third parties (log trading). These operations are combined and reported in “Other Operations.” Sales between operating segments are made based on fair market value, and intercompany sales, purchases and profits or losses are eliminated in consolidation.

We evaluate financial performance based on the operating income of the segments. Operating income, as presented in the Condensed Consolidated Statements of Income and Comprehensive Income, is equal to segment income (loss). Certain income (loss) items in the Condensed Consolidated Statements of Income and Comprehensive Income are not allocated to segments. These items, which include gains (losses) from certain asset dispositions, interest income (expense), miscellaneous income (expense) and income tax (expense) benefit, are not considered by Company management to be part of segment operations.

 

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Table of Contents

Results of Operations, Three Months Ended March 31, 2010 Compared to Three Months Ended March 31, 2009.

 

Financial Information (in millions)

   Three Months Ended
March 31,
 
     2010     2009  

Sales

    

Timber

     $ 47.1        $ 34.9   

Real Estate

    

  Development

     1.1        0.2   

  Rural

     3.4        3.8   

  Non-Strategic Timberlands

     28.5        22.6   
                

  Total Real Estate

     33.0        26.6   
                

Performance Fibers

    

  Cellulose specialties

     157.3        156.7   

  Absorbent materials

     42.5        46.9   
                

  Total Performance Fibers

     199.8        203.6   
                

Wood Products

     15.9        11.8   

Other operations

     17.1        5.7   

Intersegment Eliminations

     (2.7     (3.2
                

Total Sales

     $ 310.2        $ 279.4   
                

Operating Income (Loss)

    

Timber

     $ 8.2        $ (2.3

Real Estate

     17.4        14.4   

Performance Fibers

     44.9        40.8   

Wood Products

     -          (3.6

Other operations

     0.6        0.7   

Corporate and other expenses / eliminations 1

     5.8        (6.8
                

Total Operating Income

     76.9        43.2   

Interest Expense

     (12.5     (12.6

Interest / Other income

     0.2        -     

Income tax expense

     (7.6     (4.7
                

Net Income

     $ 57.0        $ 25.9   
                

Diluted Earnings Per Share

     $ 0.71        $ 0.33   
                

 

1

The three months ended March 31, 2010 includes a gain of $12.4 million from the sale of a portion of the Company’s interest in its New Zealand joint venture. See Note 2 – Joint Venture Investment for additional information.

 

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Table of Contents

TIMBER

 

Sales (in millions)

        Changes Attributable to:        
    2009     Price   Volume     Mix/Other     2010  

Three months ended March 31,

         

  Eastern

    $ 23.9        $ 2.3     (2.2     $ 5.5        $ 29.5   

  Western

    9.3        2.4     3.8        (0.2     15.3   

  New Zealand

    1.7                   0.6        2.3   
                                     

  Total Sales

    $     34.9        $     4.7     $     1.6        $     5.9        $     47.1   
                                     

Operating Income (Loss) (in millions)

        Changes Attributable to:        
    2009     Price   Volume/Mix     Cost/Other     2010  

Three months ended March 31,

         

  Eastern

  $ 3.0      $ 2.3   $ (1.1   $ 4.1      $ 8.3   

  Western

    (3.9     2.4     0.2        1.7        0.4   

  New Zealand/Other

    (1.4                0.9        (0.5
                                     

  Total Operating Income (Loss)

  $ (2.3   $ 4.7   $ (0.9   $ 6.7      $ 8.2   
                                     

In the Eastern region, sales increased from the prior year period due to higher stumpage prices and a change in sales mix from stumpage to higher-priced delivered logs. Average prices improved 24 percent from first quarter 2009 due to strong pulpwood demand and restricted timber supply caused by wet logging conditions. Pine volumes increased slightly above prior year, while hardwood volumes declined 64 percent primarily due to weather-related supply constraints on hardwood.

Operating income in the Eastern region improved from the prior year period reflecting increased prices as well as lower depletion and log production costs due to geographic sales mix.

In the Western region, sales and operating income improved from first quarter 2009 as sawlog prices and volumes rose 17 percent and 41 percent, respectively, due to weather-related supply shortages and increased demand, primarily from the export market. Lower logging and transportation costs also contributed to the improvement in operating income.

In February 2010, our New Zealand joint venture, Matariki Forestry Group (“Matariki”), sold a 35 percent interest in the joint venture to a new investor for NZ$167 million. Matariki issued new shares to the investor and used the proceeds entirely to pay down a portion of the outstanding NZ$367 million debt. The transaction reduced our ownership interest in Matariki from 40 percent to 26 percent. Rayonier will continue to manage the joint venture.

REAL ESTATE

 

Sales (in millions)

        Changes Attributable to:          
     

 

2009

   Price     Volume/Mix    2010   

Three months ended March 31,

             

Development

     $ 0.2      $ (3.8     $ 4.7      $ 1.1   

Rural

     3.8      (2.2     1.8      3.4   

Non-Strategic Timberlands

     22.6             5.9      28.5   
                               

Total Sales

     $   26.6      $   (6.0     $   12.4      $   33.0   
                               

 

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Table of Contents

Operating Income (in millions)

        Changes Attributable to:      
     2009    Price     Volume/Mix    Cost/Other     2010

Three months ended March 31,

            

Total Operating Income

     $         14.4      $           (6.0     $           9.6      $         (0.6     $         17.4
                                    

Sales of $33 million were $6 million above first quarter 2009, while operating income of $17 million improved $3 million. Sales and operating income increased from the prior year period as higher volumes resulting from solid demand more than offset declines in rural and development per acre prices primarily due to geographic sales mix.

PERFORMANCE FIBERS

 

Sales (in millions)

        Changes Attributable to:      
     2009    Price     Volume/Mix     2010

Three months ended March 31,

         

Cellulose specialties

     $ 156.7      $ (3.3     $ 3.9        $ 157.3

Absorbent materials

     46.9      (2.5     (1.9     42.5
                             

Total Sales

     $         203.6      $           (5.8     $         2.0        $       199.8
                             

Cellulose specialties sales increased slightly from the prior year period as higher volumes were mostly offset by lower prices. Volumes increased three percent from first quarter 2009 due to strong demand. However, prices decreased two percent reflecting the third quarter 2009 removal of a cost-based surcharge offset in part by an annual price increase.

Absorbent materials sales decreased from first quarter 2009 as prices and volumes declined by six percent and five percent, respectively, primarily due to weaker markets. However, prices have increased from fourth quarter 2009 as market conditions have improved.

 

Operating Income (in millions)

        Changes Attributable to:     
     2009    Price     Volume/Mix    Costs/Other    2010

Three months ended March 31,

             

Total Operating Income

     $         40.8      $         (5.8     $         1.0      $         8.9      $         44.9
                                   

Operating income increased primarily due to lower chemical costs offset in part by higher wood costs caused by wet logging conditions.

WOOD PRODUCTS

 

Sales (in millions)

         Changes Attributable to:          
                       
     2009     Price    Volume    2010   

Three months ended March 31,

             

Total Sales

     $ 11.8          $ 3.6        $ 0.5        $ 15.9     
                               

Operating Loss (in millions)

         Changes Attributable to:     
     2009     Price    Volume/Mix    Costs    2010

Three months ended March 31,

             

Total Operating Loss

     $         (3.6     $         3.6      $         -       $         -       $         - 
                                   

 

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Sales and operating results improved from the prior year period primarily due to a 29 percent increase in prices resulting from supply constraints caused by wet conditions.

OTHER OPERATIONS

Sales of $17 million for the quarter were $11 million above the prior year period while operating income of $1 million was consistent with the prior year. Operating income in first quarter 2009 was primarily comprised of foreign exchange gains.

Corporate and Other Expenses

Excluding the gain on the JV interest sale, corporate and other expenses were consistent with the prior year period as higher incentive compensation and employment costs were offset by a favorable insurance settlement.

Interest Expense and Other Income, Net

Interest and other expenses for the quarter were comparable to the prior year period as higher average debt balances were offset by lower average interest rates.

Income Tax Expense

The first quarter effective tax rate before discrete items was 16.3 percent in 2010 versus 19.4 percent in 2009. The lower rate in 2010 was due to proportionately higher earnings from the REIT. Including discrete items, the first quarter 2010 effective tax rate was 11.8 percent compared to 15.4 percent in the prior year.

Outlook

We are optimistic that the economic recovery is broadening and that the housing market is gradually improving. We see tremendous value in our timberlands based on improving near-term markets and strong long-term fundamentals. Our timberland portfolio will be further enhanced by the value we capture through rural and conservation sales. We anticipate continued strong demand for our cellulose specialties and absorbent materials products, contributing to another record year for Performance Fibers.

As a result, we are increasing our 2010 guidance. We now expect earnings of $1.80 to $2.00 per share for 2010, excluding the gain on the New Zealand joint venture transaction, and CAD of $330 million to $350 million, reflecting the AFMC refund net of higher capital expenditures and pension contributions.

Liquidity and Capital Resources

Historically, our operations have generally produced consistent cash flows and required limited capital resources. Short-term borrowings have helped fund cyclicality and seasonality in working capital needs and long-term debt has been used to fund major acquisitions.

$75 million Five-Year Term Loan Agreement

In March 2010, TRS borrowed $75 million under a five-year term loan agreement with a group of banks at LIBOR plus 275 basis points. We intend to use these funds for general corporate purposes.

 

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Table of Contents

Summary of Liquidity and Financing Commitments (in millions of dollars)

 

     As of March 31,
2010
   As of December 31,
2009

Cash and cash equivalents 1

     $                         153        $                         75  

Total debt

     762        700  

Shareholders’ equity

     1,175        1,146  

Total capitalization (total debt plus equity)

     1,937        1,846  

Debt to capital ratio

     39%       38% 

 

1

Cash and cash equivalents consisted primarily of time deposits with original maturities of 90 days or less.

Cash Provided by Operating Activities (in millions of dollars)

 

         2010            2009            Increase    

Three months ended March 31,

     $     91        $     65        $     26  

Cash provided by operating activities increased $26 million primarily due to improved operating results.

Cash Used for Investing Activities (in millions of dollars)

 

         2010            2009            Increase    

Three months ended March 31,

     $     38        $     29        $     9  

Cash used for investing activities increased $9 million primarily due to an increase in restricted cash and capital expenditures.

Cash Provided by (Used for) Financing Activities (in millions of dollars)

 

         2010            2009            Increase    

Three months ended March 31,

     $     24        $     (41)       $     65  

Cash provided by financing activities increased $65 million due to higher net borrowings of $60 million in 2010 versus no net borrowings in 2009.

Expected 2010 Expenditures

Income tax payments totaled $3 million during the first quarter of 2010 compared to payments of $1 million in the same period 2009. Cash payments for income taxes during 2010 are anticipated to be between $3 million and $6 million. A cash refund of $189 million related to the alternative fuel mixture credit was received in April 2010. The credit was effective for alternative fuel used in operations through December 31, 2009. See Note 3 – Alternative Fuel Mixture Credit (“AFMC”) in the 2009 Annual Report on Form 10-K for additional information. We made no discretionary pension contributions in the first quarter of 2010; however, discretionary pension contributions may be in the $40 million to $50 million range later in the year, funded primarily by proceeds from the AFMC. Capital expenditures in 2010 are forecasted to be between $140 million and $145 million compared to $92 million in 2009. Environmental expenditures related to dispositions and discontinued operations were $2 million for the first three months ended March 31, 2010 versus $2 million in the same period 2009. Full year 2010 expenditures of approximately $10 million are anticipated.

Performance and Liquidity Indicators

The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures of financial results: Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“EBITDA”) and Adjusted Cash Available for Distribution (“Adjusted CAD”). These measures are not defined by Generally Accepted Accounting Principles (“GAAP”) and the discussion of EBITDA and Adjusted CAD is not intended to conflict with or change any of the GAAP disclosures described above. Management considers these measures to be important to estimate the enterprise and shareholder values of the Company as a whole and of its core segments, and for allocating capital resources. In addition, analysts, investors and creditors use these measures when analyzing our operating performance, financial condition and cash generating ability. Management uses EBITDA

 

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as a performance measure and Adjusted CAD as a liquidity measure. EBITDA is defined by the Securities and Exchange Commission. Adjusted CAD as defined, however, may not be comparable to similarly titled measures reported by other companies.

We reconcile EBITDA to Net Income for the consolidated Company and Operating Income for the Segments, as those are the nearest GAAP measures for each. Below is a reconciliation of Net Income to EBITDA for the respective periods (in millions of dollars):

 

          Three Months Ended    
March 31,
      2010    2009

 Net Income

     $ 57.0        $ 25.9  

 Income tax expense

     7.6        4.7  

 Interest, net

     12.3        12.6  

 Depreciation, depletion and amortization

     43.3        38.5  
             

 EBITDA

     $     120.2        $       81.7  
             

EBITDA by segment is a critical valuation measure used by our Chief Operating Decision Maker, existing shareholders and potential shareholders to measure how the Company is performing relative to the assets under management. EBITDA by segment for the respective periods was as follows (millions of dollars):

 

          Three Months Ended    
March 31,
      2010    2009

EBITDA by Segment

     

Timber

     $ 25.0        $ 15.1  

Real Estate

     26.9        19.8  

Performance Fibers

     60.7        55.1  

Wood Products

     1.1        (2.4) 

Other Operations

     0.6        0.7  

Corporate and other 1

     5.9        (6.6) 
             

Total

     $     120.2        $       81.7  
             

 

1

2010 results include a gain of $12.4 million from the sale of a portion of the Company’s interest in the New Zealand joint venture. See Note 2 - Joint Venture Investment for additional information.

For the three months ended March 31, 2010, EBITDA was $39 million above the prior year period primarily due to higher operating results and a $12 million gain from the sale of a portion of Rayonier’s interest in its New Zealand joint venture.

The following tables reconcile Operating Income by segment to EBITDA by segment (millions of dollars):

 

     Timber   Real
Estate
  Performance
Fibers
  Wood
Products
  Other
Operations
  Corporate
and other
  Total

Three Months Ended March 31, 2010

             

Operating income

    $ 8.2       $ 17.4       $ 44.9       $ -        $ 0.6       $ 5.8       $ 76.9  

Add: Depreciation, depletion and amortization

    16.8       9.5       15.8       1.1       -        0.1       43.3  
                                         

EBITDA

    $ 25.0       $ 26.9       $ 60.7       $ 1.1       $ 0.6       $ 5.9       $ 120.2  
                                         

Three Months Ended March 31, 2009

             

Operating income (loss)

    $ (2.3)      $ 14.4       $ 40.8       $ (3.6)      $ 0.7       $ (6.8)      $ 43.2  

Add: Depreciation, depletion and amortization

    17.4       5.4       14.3       1.2       -        0.2       38.5  
                                         

EBITDA

    $   15.1       $   19.8       $   55.1       $   (2.4)      $   0.7       $   (6.6)      $   81.7  
                                         

 

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Adjusted CAD is a non-GAAP measure of cash generated during a period which is available for dividend distribution, repurchasing common shares, debt reduction and for strategic acquisitions net of associated financing (e.g. realizing LKE tax benefits). We define Cash Available for Distribution (“CAD”) as Cash Provided by Operating Activities adjusted for capital spending, the tax benefits associated with certain strategic acquisitions, the change in committed cash, and other items which include cash provided by discontinued operations, proceeds from matured energy forward contracts, excess tax benefits on stock based compensation and the change in capital expenditures purchased on account. Committed cash represents outstanding checks that have been drawn on our zero balance bank accounts but have not been paid. In compliance with Securities and Exchange Commission requirements for non-GAAP measures, we reduce CAD by mandatory debt repayments which results in the measure entitled “Adjusted CAD.”

Below is a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars):

 

      Three Months Ended March 31,  
          2010     2009      

Cash provided by operating activities

     $             91.4        $             64.8   

Capital expenditures

     (36.2     (29.8

Change in committed cash

     9.9        13.4   

Other

     11.6        4.2   
                

CAD

     76.7        52.6   

Mandatory debt repayments

     -          -     
                

Adjusted CAD

     $ 76.7        $ 52.6   
                

For the three months ended March 31, 2010, adjusted CAD was $24 million higher than the prior year period primarily due to higher earnings. Adjusted CAD generated in any period is not necessarily indicative of amounts that may be generated in future periods.

Liquidity Facilities

We have a $250 million unsecured revolving credit facility at an interest rate of LIBOR plus 40 basis points. The facility expires in August 2011. At March 31, 2010, the available borrowing capacity was $245 million.

In connection with our installment notes, $75 million five-year term loan agreement, and $250 million revolving credit facility, covenants must be met, including ratios based on the facility’s definition of EBITDA, Funds from Operations, and ratios of cash flows to fixed charges. At March 31, 2010, we are in compliance with all covenants.

In addition to these financial covenants, the installment notes, five-year term loan agreement and credit facility include customary covenants that limit the incurrence of debt, the disposition of assets, and the making of certain payments between RFR and Rayonier among others. An asset sales covenant in the RFR installment note-related agreements requires us, subject to certain exceptions, to either reinvest cumulative timberland sales proceeds for individual sales greater than $10 million (the “excess proceeds”) in timberland-related investments and activities or, once the amount of excess proceeds not reinvested exceeds $50 million, to offer the note holders prepayment of the notes ratably in the amount of the excess proceeds. As of December 31, 2009, the excess proceeds were $19.8 million. During March 2010, the excess proceeds exceeded the $50 million limit and as a result, repayment of $53.0 million was offered to the note holders. The note holders declined the offer and the excess proceeds were reset to zero.

Contractual Financial Obligations and Off-Balance Sheet Arrangements

We have no material changes to the Contractual Financial Obligations table as presented in Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2009 Annual Report on Form 10-K. See Note 9 - Guarantees for details on the letters of credit, surety bonds and guarantees as of March 31, 2010.

New or Recently Adopted Accounting Pronouncements

For information on new or recently adopted accounting pronouncements see Note 1 – Basis of Presentation and New Accounting Pronouncements.

 

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Sales Volumes by Segment:

 

      Three Months Ended March 31,
          2010    2009    

Timber

     

Western region, in millions of board feet

   47      33  

Eastern region, in thousands of short green tons

   1,415      1,572  

Real Estate

     

Acres sold

     

Development

   310      10  

Rural

   2,002      1,368  

Non-strategic timberlands

   23,996      19,069  
         

Total

   26,308      20,447  

Performance Fibers

     

Sales Volume

     

Cellulose specialties, in thousands of metric tons

   111      108  

Absorbent materials, in thousands of metric tons

   61      65  

Lumber

     

Sales volume, in millions of board feet

   55      53  

 

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market and Other Economic Risks

Our exposures to market risk have not changed materially since December 31, 2009. For quantitative and qualitative disclosures about market risk, see Item 7A - Quantitative and Qualitative Disclosures about Market Risk in our 2009 Annual Report on Form 10-K.

 

Item 4. Controls and Procedures

Rayonier management is responsible for establishing and maintaining adequate disclosure controls and procedures. Disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)), are designed with the objective of ensuring that information required to be disclosed by the Company in reports filed under the Exchange Act, such as this quarterly report on Form 10-Q, is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s (“SEC”) rules and forms and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Because of the inherent limitations in all control systems, no control evaluation can provide absolute assurance that all control exceptions and instances of fraud have been prevented or detected on a timely basis. Even systems determined to be effective can provide only reasonable assurance that their objectives are achieved.

Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that the design and operation of the disclosure controls and procedures were effective as of March 31, 2010.

In the quarter ended March 31, 2010, based upon the evaluation required by paragraph (d) of SEC Rule 13a-15, there were no changes in our internal control over financial reporting that would materially affect or are reasonably likely to materially affect our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table provides information regarding our purchases of Rayonier common stock during the quarter ended March 31, 2010:

 

Period

   Total Number
of Shares
Purchased (1)
   Average
Price Paid
per Share
   Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
   Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs

January 1 to January 31

               118,132        $             44.65                              -                       2,483,169  

February 1 to February 28

   14,580        41.57      -          2,483,169  

March 1 to March 31

   2,734        42.55      -          2,483,169  
                 

Total

   135,446         -          2,483,169  
                 

 

(1)

Repurchased to satisfy the minimum tax withholding requirements related to the vesting of performance and restricted shares under the 2004 Rayonier Incentive Stock Plan.

See Item 5 – Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in our 2009 Annual Report on Form 10-K for additional information regarding our Common Share repurchase program.

 

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Item 6. Exhibits

 

3.1    Amended and Restated Articles of Incorporation       Incorporated by reference to Exhibit 3.1 to the Registrant’s May 22, 2007 Form 8-K
3.2    Bylaws       Incorporated by reference to Exhibit 3.2 to the Registrant’s October 21, 2009 Form 8-K
31.1    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act       Filed herewith
31.2    Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act       Filed herewith
32    Certification pursuant to Section 906 of the Sarbanes-Oxley Act       Furnished herewith

 

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SIGNATURE

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

RAYONIER INC.
By:   /s/ HANS E. VANDEN NOORT
 

Hans E. Vanden Noort

Senior Vice President and Chief Financial Officer

May 7, 2010

 

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