R
A
Y
O
N
I
E
R
2
0
1
9
A
N
N
U
A
L
R
E
P
O
R
T
Rayonier Inc.
1 Rayonier Way
1 Rayonier Way
Wildlight, Florida 32097
Wildlight, Florida 32097
2019 Annual Report
2019 Annual Report
Our mission is to provide industry-leading
Our mission is to provide industry-leading
financial returns to our shareholders
financial returns to our shareholders
while serving as a responsible steward
while serving as a responsible steward
of our lands.
of our lands.
1926
2019
93 Years
93 Years
RYN
LISTED
NYSE
2.6 Million Acres
2.6 Million Acres
$5.2 Billion
$5.2 Billion
Enterprise Value
Enterprise Value
$247.8 Million
$247.8 Million
Adjusted EBITDA
Adjusted EBITDA
$142 Million of
$142 Million of
Timberlands Acquired
Timberlands Acquired
PEFC/40-23-6
SFI-00023
NZ Sustainable Certification
NZ Sustainable Certification
U.S. Sustainable Certification
U.S. Sustainable Certification
~32 Million Seedlings Planted
~32 Million Seedlings Planted
throughout U.S. and NZ
throughout U.S. and NZ
Sustainable Yield of
Sustainable Yield of
~10 Million Tons Annually
~10 Million Tons Annually
~34.4 Million tCO
~34.4 Million tCO22e e
Total Carbon Stored
Total Carbon Stored
in NZ Timberlands
in NZ Timberlands
$211,166 Avg. Price/Acre
$211,166 Avg. Price/Acre
Sold in Wildlight
Sold in Wildlight
400+ Jobs Created
400+ Jobs Created
in Wildlight
in Wildlight
~350 Employees
~350 Employees
Gender Diversity
Gender Diversity
65% Male / 35% Female
65% Male / 35% Female
2,000+ Community
2,000+ Community
Volunteer Hours
Volunteer Hours
Figures above are as of 12/31/2019 or represent full-year 2019, unless indicated otherwise.
Figures above are as of 12/31/2019 or represent full-year 2019, unless indicated otherwise.
Rayonier Inc. 2019
Board of Directors
Richard D. Kincaid [A, C]
Chairman of the Board
President and Founder
Because Foundation
David L. Nunes
President and
Chief Executive Officer
Rayonier Inc.
Keith E. Bass [A, C]
Managing Partner
Mill Creek Capital LLC
Dod A. Fraser [A, N]
President
Sackett Partners
Scott R. Jones [C]
Retired, President
Forest Capital Partners
Bernard Lanigan, Jr. [A, N]
Chairman & CEO,
Southeast Asset Advisors, Inc.;
Founder and Chairman,
Lanigan & Associates, P.C.
Blanche L. Lincoln [C, N]
Founder and Principal
Lincoln Policy Group
V. Larkin Martin [C, N]
Managing Partner
Martin Farm;
Vice President
The Albemarle Corporation
Andrew G. Wiltshire [A, N]
Founding Partner,
Folium Capital LLC;
Management and Governance
of private orchard
and farming companies
BOARD COMMITTEES: [A] Audit [C] Compensation and Management Development [N] Nominating and Corporate Governance
Executive Officers
David L. Nunes
President and
Chief Executive Officer
Mark D. McHugh
Senior Vice President and
Chief Financial Officer
Douglas M. Long
Senior Vice President,
Forest Resources
Christopher T. Corr
Senior Vice President,
Real Estate Development
Mark R. Bridwell
Vice President,
General Counsel and
Corporate Secretary
Shelby L. Pyatt
Vice President,
Human Resources and
Information Technology
W. Rhett Rogers
Vice President,
Portfolio Management
April J. Tice
Vice President,
Financial Services and
Corporate Controller
Corporate Headquarters
Rayonier Inc.
1 Rayonier Way
Wildlight, FL 32097
904.357.9100
www.rayonier.com
Investor and Media Relations
Mark D. McHugh
Senior Vice President and
Chief Financial Officer
Corporate Information
Form 10-K
Additional copies of this report
and Rayonier’s report on Form 10-K
are available without charge upon
written request to:
Rayonier Inc.
Investor Relations
1 Rayonier Way
Wildlight, FL 32097
Independent Registered
Public Accounting Firm
Ernst & Young, LLP
12926 Gran Bay Parkway West
Suite 500
Jacksonville, FL 32258
Stock Information
Listed: New York Stock Exchange
Symbol: RYN
CUSIP: 754 907 103
Transfer Agent and
Registrar Rayonier Inc.
c/o Computershare
P.O. Box 505000
Louisville, KY 40233-5000
800.659.0158 (U.S.)
201.680.6578 (International)
www.computershare.com/investor
Financial Highlights
(Dollars in millions)
Sales & Earnings
Sales
Pro Forma Sales(a)
Operating Income
Pro Forma Operating Income(a)
Net Income
Net Income attributable to Rayonier Inc.
Pro Forma Net Income(a)
Adjusted EBITDA By Segment(b)
Southern Timber
Pacific Northwest Timber
New Zealand Timber
Real Estate
Trading
(–) Corporate/Other
Total Adjusted EBITDA
Cash Flow
Cash provided by Operating Activities
Cash Available for Distribution(b)
Debt & Debt Ratios
Debt(c)
Cash
Net Debt
Net Debt to Enterprise Value(d)
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
2019
2018
2017
$ 711.6
711.6
107.0
107.0
67.7
59.1
59.1
$ 119.7
16.7
75.8
59.5
—
(23.9)
$ 816.1
816.1
170.1
170.1
117.3
102.2
102.2
$ 102.8
40.9
90.8
123.4
1.0
(21.1)
$ 819.6
724.2
215.5
149.2
161.5
148.8
82.5
$ 91.6
33.1
85.1
95.5
4.6
(19.4)
$ 247.8
$ 337.7
$ 290.5
$ 214.3
149.4
$ 310.1
240.1
$ 256.3
188.7
$ 1,057.0
68.7
988.3
$ 975.0
148.4
826.6
$ 1,028.4
112.7
915.7
19%
19%
18%
(a) These non-GAAP measures are defined and reconciled on page 9.
(a) These non-GAAP measures are defined and reconciled on page 9.
(b) Adjusted EBITDA and Cash Available for Distribution (CAD) are non-GAAP measures defined and reconciled on pages 27 and 44, respectively, within this Annual Report on Form 10-K.
(b) Adjusted EBITDA and Cash Available for Distribution (CAD) are non-GAAP measures defined and reconciled on pages 27 and 44, respectively, within this Annual Report on Form 10-K.
(c) Total debt as of December 31, 2019, 2018 and 2017 is presented gross of deferred financing costs of $1.9 million, $2.4 million and $3.0 million, respectively.
(c) Total debt as of December 31, 2019, 2018 and 2017 is presented gross of deferred financing costs of $1.9 million, $2.4 million and $3.0 million, respectively.
(d) Enterprise Value based on equity market capitalization plus net debt at year-end.
(d) Enterprise Value based on equity market capitalization plus net debt at year-end.
Adjusted EBITDA(b)
(Dollars in millions)
Total Harvest
(Tons in millions)
CAD(b)
(Dollars in millions)
$360
270
180
90
–
12
9
6
3
–
$280
210
140
70
–
2017
2018
2019
2017
2018
2019
2017
2018
2019
page 01
page 01
RAYONIER INC.
RAYONIER INC.
ANNUAL REPORT
2019 ANNUAL REPORT
2019
Dear Fellow
Shareholders:
When times are challenging, you learn a great deal about how
well your team works together to achieve its goals. We faced
significant challenges across all our timber markets in 2019,
and I’m very pleased with how well our team worked together
to make the best of a challenging year. We saw an escalation
of the U.S.-China trade war, including retaliatory tariffs on log
exports from the U.S., which impacted both the Pacific
Northwest and Southern timber segments. In addition, we
watched the unfolding European spruce beetle epidemic
deliver higher volumes of salvage timber into China, which
impacted directly or indirectly all three of our timber segments.
While we believe both of these situations will be relatively
short-lived, they have certainly been disruptive to our markets
in the near term. Nevertheless, our team did a great job of
working to maximize long-term value while at the same time
generating sufficient cash flow to fully fund our dividend.
2019 in Review
Full-year 2019 net income attributable to Rayonier was $59
million, or $0.46 per share, compared to $102 million, or $0.79
per share, in 2018. Our total Adjusted EBITDA was $248 million
in 2019, which was 27% lower than the prior year total of
$338 million due primarily to a lower contribution from our
Real Estate segment, which delivered record post-spin-off
performance in 2018. Full-year Cash Available for Distribution
(CAD) was $149 million in 2019, representing a 38% decrease
from the $240 million of CAD we generated in 2018.
While down from our post-spin-off record full-year Adjusted
EBITDA in 2018, our team worked hard to deliver solid results
in 2019. We enjoyed record Adjusted EBITDA in our Southern
Timber segment, which represents the largest component of
our asset value. Further, we continued to generate strong
premiums in our Real Estate segment, achieving the highest
revenue per acre sold since 2007. Notably, we achieved solid
2019 results in spite of deferring nearly 300,000 tons of
harvest volume across our three timber segments. These
results are a testament to the quality and diversity of our
portfolio, the strength of the markets in which we operate,
and most importantly, the dedication of our people.
Pope Resources Acquisition
Complements Pacific Northwest Portfolio
On January 15, 2020, we announced a definitive merger
agreement with Pope Resources (Pope), with the transaction
expected to close by mid-year. We are very excited to be adding
these high-quality assets to our Pacific Northwest portfolio, and
look forward to tapping into the regional expertise of Pope’s
team. Pope will contribute 124,000 acres of high-quality western
Washington timberlands to our portfolio, bringing our ownership in
the region to approximately 500,000 acres. With a complementary
age-class fit to our existing portfolio, these lands will increase our
Pacific Northwest sustainable yield by 32% and increase our
proportion of Douglas-fir merchantable timber inventory
from 60% to 68%. We will also enjoy a higher proportion of
ground-based logging given the more gentle topography of
Pope’s timberlands relative to our existing portfolio. In addition
to lowering our average harvest costs and thus improving our
cash flow metrics, these lands are located in strong log markets
that provide for greater operational flexibility in the future.
Pope’s subsidiary Olympic Resource Management will bring a
private equity timber fund business with 141,000 acres of
commercial timberlands under management in Washington,
Oregon and California. This business operates three timber
funds, which provide for added operational efficiencies and
economies of scale. As of the most recent appraisal data
from December 31, 2019, these funds have total assets
under management of $520 million. Based on Pope’s variable
co-investment level in each of the three funds, which ranges
from 5% to 20%, the value of Pope’s co-investment stake in
the funds was $59 million as of December 31, 2019, or $52
million net of fund level debt. The fund business also has an
accrued carried interest owed to Olympic Resource
Management on one of the funds that is performing above the
return threshold established for that fund.
page 02
page 02
DAVID L. NUNES
President and Chief Executive Officer
Pope also has a real estate business that is well respected in the
west Puget Sound region of Washington and is complementary
to Rayonier’s real estate and higher-and-better-use (HBU) land
sales business in the U.S. South. With improved development
projects in Gig Harbor, Bremerton, Bainbridge Island, Kingston
and Port Gamble, we envision Pope’s real estate business not
only providing additional scale and diversity to our existing
HBU real estate platform, but also contributing additional
management expertise.
As part of this transaction, we will be employing an umbrella
partnership real estate investment trust (UPREIT) structure.
While this strategy is common in the REIT space, it has never
before been employed by a public timber REIT. Pope unitholders
will have the flexibility of receiving a mix of cash, common
shares of Rayonier or units of Rayonier LP, an entity that will be
formed prior to closing the merger and serve as our operating
company. For those Pope unitholders electing to receive units
of Rayonier LP, they generally will not recognize any taxable
gain with respect to the units of Rayonier LP that they receive
as part of the transaction. The units of Rayonier LP can be
exchanged for cash based on the market price of common
shares of Rayonier or, at Rayonier’s option, common shares of
Rayonier on a 1:1 basis. This transaction structure provides
maximum flexibility for Pope unitholders both in terms of the
form of consideration and the timing of recognizing capital
gains tax liability. Under the terms of the merger agreement,
Pope unitholders will be subject to a proration of 70% equity
and 30% cash, which equates to aggregate consideration as if
each Pope unitholder received 2.751 Rayonier common shares
or Rayonier LP units and $37.50 in cash.
Based on the incremental harvest coming from Pope’s
timberlands, the favorable relative EBITDA per acre contribution
due to a higher proportion of Douglas-fir and lower logging
costs, and targeted annual synergies of $5 million, we anticipate
that the Pope acquisition will contribute incremental five-year
average Adjusted EBITDA of $38 million and CAD of $25 million.
We also expect the acquisition, excluding transaction costs, to be
accretive to CAD in the first full year. With the cash component
of this transaction, we anticipate increasing our pro forma net
debt to Adjusted EBITDA to approximately 4.5x, which is towards
the upper end of our leverage target. We expect to bring this
debt ratio down over the next few years through organic growth
in cash flows as well as targeted asset sales.
While the financial contribution from the Pope acquisition is
certainly important, it’s also worth noting the importance of
adding the people at Pope to the Rayonier team. We have a lot
of respect for Pope’s people and believe our respective cultures
are very compatible. This is an important aspect to de-risking
this transaction and critically important to a successful integration
of our two companies.
Portfolio Well Positioned for
Growth in Future Cash Flows
Notwithstanding some of the recent market headwinds we’ve
experienced, we feel very good about how our portfolio is
positioned for the future. We have worked hard to make
continuous improvements, both by addition and subtraction,
to our portfolio. In 2019, we completed 18 bolt-on acquisitions,
adding 69,000 acres across all three timber segments for total
consideration of $142 million. These additions more than offset
the 17,000 acres of dispositions and 18,000 acres of net lease
expirations in 2019. After taking into account both additions
and subtractions from our portfolio in 2019, we increased our
long-term sustainable yield by approximately 250,000 tons.
Despite challenging market conditions in 2019, I believe there
is reason for optimism about the future in each of our three
timber segments.
In the U.S. South, 61% of our 1.8 million acre portfolio is located
in top quartile markets (based on composite stumpage
prices using Timber Mart-South data), which boast an estimated
page 03
page 03
We are increasingly optimistic that with the rising level
We are increasingly optimistic that with the rising level
of U.S. housing starts and the positioning of our
of U.S. housing starts and the positioning of our
timberland assets in stronger markets with more
timberland assets in stronger markets with more
fundamental pricing leverage, we should enjoy
fundamental pricing leverage, we should enjoy
improved cash flow in the years to come.
improved cash flow in the years to come.
growth-drain ratio of 1.0, implying a balanced timber supply
situation. By contrast, only 1% of our portfolio is in bottom
quartile markets, where the growth-drain ratio is an estimated
2.4 (compared to an average U.S. South growth-drain ratio
estimated at 1.4). The relative strength of our Southern footprint
should translate to an enhanced stumpage price response
relative to our peers as log markets begin to tighten once
recently announced sawmill capacity additions reach rated
production levels.
In the Pacific Northwest, with the addition of Pope, we will have
a more balanced portfolio, both from a species composition
and log market perspective. We also expect improved cash
flow metrics with a lower proportion of more expensive cable
logging ground. Domestic sawlog customers in the Pacific
Northwest are further expected to benefit from the three billion
board feet of Canadian sawmill capacity curtailments following
the Mountain Pine beetle epidemic, which should continue to
shift production away from British Columbia.
Our New Zealand segment, in which we’ve been able to make
modest additions in recent years, has superior biological
productivity and well-diversified domestic and export market
exposure. While we are currently faced with headwinds from
elevated inventory levels in China following the coronavirus
outbreak, once these inventories are brought into balance,
we expect this market to continue to be an important source
of Rayonier’s overall market diversification and growing cash
flow profile.
We are increasingly optimistic that with the rising level of
U.S. housing starts and the positioning of our timberland
assets in stronger markets with more fundamental pricing
leverage, we should enjoy improved cash flow in the years
to come. In addition, our team continues to adopt new
technologies such as winch-assisted logging, LiDAR and
drones to more efficiently and effectively manage our land
por tfolio, all of which should ultimately translate to
improved margins and increased cash flow generation.
We also believe that our status as a pure-play timber REIT,
without exposure to manufacturing assets, helps to lower
the volatility of future cash flows.
Importance of Diversified Portfolio
While we believe our portfolio is well positioned for growth in
future cash flows, it’s also important to note the importance of
having a diversified portfolio as a defensive strategy. When we
put seedlings in the ground, we don’t have clarity on what
future market conditions will be when it comes time to harvest
that timber in 20 to 40 years. So it remains important to have a
diversified portfolio, with exposure to different log markets for
different species and grades of logs serving various sawtimber
and pulpwood customers. With our breadth of market and
product exposure across the U.S. South, Pacific Northwest and
New Zealand, we feel well-positioned to capture upticks in our
various product and geographic markets, as well as sufficiently
diversified to weather short-term market disruptions.
As we look back over recent years, we’ve seen multiple
instances where this portfolio diversification has served us well
from a defensive perspective. We’ve seen our portfolio diversi-
fication come into play with the U.S.-China trade war, where
our presence in New Zealand helped offset a reduction in
export log market opportunities out of the U.S. Our real estate
portfolio consisting of both development properties and HBU
timberlands has also served as an important source of diversi-
fication during times of soft log markets. We’ve enjoyed
impressive gains in per-acre values across all our real estate
sales categories in recent years, which has provided for greater
flexibility to defer harvest volumes during soft log market
conditions. Currently, we are faced with near-term market
disruptions on both the demand and supply fronts with the
coronavirus pandemic, which has slowed market activity in
China, as well as the European spruce beetle epidemic, which
has resulted in excess supply impacting a number of global
markets. We intend to lean on the breadth of our portfolio as
we navigate market conditions for the balance of this year.
page 04
page 04
Restoring salmon habitats
in the Pacific Northwest
We have upgraded 750 culverts and
bridges and opened 220 miles of
rivers and streams to restore salmon
habitats over the past 20 years.
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
Foresters add drones
to their toolkits
Our foresters use drones across our
ownership to manage land with a new
perspective, which increases safety,
reduces costs and optimizes their time.
page 05
page 05
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
Winch-assisted logging provides
safer working conditions
We work with logging contractors to
incorporate winch-assist machines in
steep slope harvesting, creating safer
conditions for loggers and the environment.
LiDAR improves
decision-making
Our team uses a 3D representation of
the terrain and tree canopy to aid with
harvest planning, support silvicultural
decision-making and enhance forest
inventory data.
page 06
page 06
With our breadth of market and product exposure across the
With our breadth of market and product exposure across the
U.S. South, Pacific Northwest and New Zealand, we feel well-
U.S. South, Pacific Northwest and New Zealand, we feel well-
positioned to capture upticks in our various product and
positioned to capture upticks in our various product and
geographic markets, as well as sufficiently diversified to
geographic markets, as well as sufficiently diversified to
weather short-term market disruptions.
weather short-term market disruptions.
At any given time, some portion of our portfolio may be either
exposed to or poised to benefit from potential short-term market
disruptions. We regularly discuss, from an enterprise risk
management perspective, various potential risks to our business,
many of which are outside our control. We also factor in the
diversification aspects of our portfolio when considering various
portfolio moves. We try to maintain a perspective of never being
satisfied with our portfolio, and believe this vigilance has helped
us maintain a very well-diversified portfolio that is well-positioned
for relative outperformance over the long term.
ESG Reporting Evolution
The drumbeat for more extensive Environmental, Social and
Governance (ESG) reporting is getting louder and louder,
while actual reporting standards continue to develop and
evolve from an infancy stage. At Rayonier, we’ve worked over
the past year to better understand the various ESG reporting
frameworks and to prepare our disclosures in a way that
reflects our business and the priorities that both our Board
and leadership team focus on in this arena. To this end, we
rolled out a new ESG web page (https://www.rayonier.com/
sustainability/responsible-stewardship) as a starting point in
this expanded ESG reporting. We’ve also adopted the
Sustainability Accounting Standards Board (SASB) reporting
framework with which to map our ESG disclosures, while
recognizing that this SASB framework does not fully address
all of the ESG aspects of our business.
When approaching ESG reporting, a central tenet of our approach
is to provide transparent disclosure on our sustainable harvest
level, which we have done since the spin-off in 2014. While
none of our peers report their respective sustainable harvest
levels and none of the ESG reporting frameworks focus on
this particular metric, we believe it is a critically important
aspect of ESG reporting. We define our 10 million tons of
sustainable harvest as the harvest level we can achieve into
perpetuity. We provide this metric not only for the entire
company, but for each of our three timber operating segments.
Related to this disclosure is the need to have systems and
processes to verify both our growth and yield models and our
merchantable timber inventory in order to ensure the accuracy
of our sustainable harvest level. Every year, we perform cut-out
analyses on completed harvest blocks to test the accuracy
of the projected harvest volume coming out of our timber
inventor y system. In addition, ever y year we perform
inventory verification cruises, which capture detailed timber
inventory data across thousands of inventory plots, to
validate our growth and yield models and to make adjustments
to our merchantable timber inventory as needed. Lastly, we
review these analyses with our Board each year before
updating our 10-K disclosures.
We expect ESG reporting to continue to evolve in the years to
come, based on a mix of company specific reporting priorities,
changes to third-party ESG reporting platforms, and increased
interest from investors. We believe that we have a very good
ESG story to report, but we want to be thoughtful and authentic
in how we approach it. Thus, we intend to roll out our ESG
reporting in a manner that is consistent with how we think
about our business, as opposed to putting out information
that simply checks boxes to comply with third-party reporting
frameworks or ratings criteria.
Role of Wood in Fighting Climate Change
As the world becomes increasingly aware of the potential
impacts of climate change, there is a greater recognition of the
role wood can play in combatting the effects of man-made
carbon emissions. It is now more broadly understood the role
trees, through photosynthesis, play in sequestering and storing
atmospheric carbon. In addition, there is greater recognition that
downstream solid wood products, such as lumber, can store
sequestered carbon indefinitely. In a related context, there is also
greater recognition of the higher relative energy consumption
and carbon emission footprint of competing building materials
such as steel and concrete. For all of these reasons, we are
seeing a surge in awareness of and interest in building with wood.
page 07
page 07
When approaching ESG reporting,
When approaching ESG reporting,
a central tenet of our approach is
a central tenet of our approach is
to provide transparent disclosure on
to provide transparent disclosure on
our sustainable harvest level, which
our sustainable harvest level, which
we have done since the spin-off in 2014.
we have done since the spin-off in 2014.
We believe the wider use and acceptance of regulated carbon
trading schemes, like we have in New Zealand, will both
facilitate the wider use of wood as a building material and
potentially credit timberland owners like Rayonier with an extra
layer of value that improves the financial returns associated
with growing trees.
This growing interest in wood-based construction has manifested
itself in the growth of mass timber, with a particular focus on
cross-laminated timber (CLT), which is formed by gluing lumber
together in an alternating orientation to form a sturdy, thick
panel for construction. The greater use of CLT, which has been
facilitated by the growing acceptance of mass timber in
building codes, including for mid-rise and even high-rise
buildings, is just now starting to penetrate the North American
market after having enjoyed considerable acceptance in
European markets for a number of years. We are seeing more
CLT facilities being constructed in the U.S. to support major
commercial projects such as the new Walmart headquarters
campus. In addition to being good for the environment, we
expect that this growth in future CLT demand will continue to
help the timber and wood products sectors penetrate the large
commercial construction market.
While faced with strong headwinds in a number of our markets in
2019, we nevertheless delivered a total shareholder return of
22.5% despite some intermittent periods of significant volatility.
As we enter 2020, the current economic and financial market
fallout from the coronavirus pandemic is creating new challenges
across our markets and operations. The same adaptive and
flexible management responsiveness we needed to navigate
last year’s challenges will be tested again in 2020.
Overall, I am pleased with the progress we have made towards
achieving our vision while maintaining the balance of delivering
solid annual performance year after year. I credit some of this to
our nimble approach to capital allocation decision making, and
would also like to thank our dedicated employees for their
continued engagement and commitment towards achieving
our vision. I would also like to recognize our leadership team and
Board for working together to create a culture that facilitates this
mission and positions Rayonier for future success. Lastly, I would
like to thank our shareholders for your continued trust in our
stewardship of your investment in Rayonier. As we near the antic-
ipated mid-year Pope transaction closing, I look forward to wel-
coming Pope unitholders into the ranks of our shareholder base.
As always, we welcome your input and feedback.
Staying Focused on Our Mission
In last year’s letter, I touched on our progress towards achieving
our vision of having the best-in-class assets, operations, disclosure
and transparency, while being the preferred employer for forestry
and land management professionals and the preferred timberland
investment vehicle for institutional investors. We remain steadfastly
committed to achieving this vision and believe that each element
of this vision is critically important to furthering our overall mission
of providing industry leading financial returns to our shareholders
while serving as a responsible steward of our lands. Our Board,
leadership team and employees work hard to stay focused on
growing long-term value per share, while at the same time striving
to deliver competitive short-term results.
David L. Nunes
President and Chief Executive Officer
page 08
page 08
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
Reconciliation of Non-GAAP Measures
(Dollars in millions, except per share amounts)
2019
2018
2017
PRO FORMA SALES(a)
Sales
Large Dispositions(b)
Pro Forma Sales
PRO FORMA OPERATING INCOME(c)
Operating Income
Large Dispositions(b)
Costs related to shareholder litigation(d)
Pro Forma Operating Income
PRO FORMA NET INCOME(e)
Net Income attributable to Rayonier Inc.
Large Dispositions(b)
Costs related to shareholder litigation(d)
$ 711.6
—
$711.6
$ 107.0
—
—
$ 107.0
$ 59.1
—
—
$ 816.1
—
$ 816.1
$ 170.1
—
—
$ 170.1
$ 819.6
(95.4)
$ 724.2
$ 215.5
(67.0)
0.7
$ 149.2
Per
diluted
share
$0.46
—
—
Per
diluted
share
$ 102.2
—
—
$ 0.79
—
—
$ 148.8
(67.0)
0.7
Per
diluted
share
$ 1.16
(0.52)
0.01
Pro Forma Net Income
$ 59.1
$0.46
$ 102.2
$ 0.79
$ 82.5
$ 0.65
(a)(a) Pro Forma Sales
Pro Forma Sales is defined as revenue adjusted for Large Dispositions. Rayonier believes that this non-GAAP financial measure provides investors with useful information to
is defined as revenue adjusted for Large Dispositions. Rayonier believes that this non-GAAP financial measure provides investors with useful information to
evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results.
evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results.
(b) Large Dispositions
(b)
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.
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.
(c) Pro Forma Operating Income
(c)
Pro Forma Operating Income is defined as operating income adjusted for costs related to shareholder litigation and Large Dispositions. Rayonier believes that this non-GAAP financial
is defined as operating income adjusted for costs related to shareholder litigation and Large Dispositions. Rayonier believes that this non-GAAP financial
measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results.
measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative of ongoing operating results.
(d) Costs related to shareholder litigation
(d)
is defined on page 28 within this Annual Report on Form 10-K.
Costs related to shareholder litigation is defined on page 28 within this Annual Report on Form 10-K.
(e) Pro Forma Net Income
(e)
is defined as net income attributable to Rayonier Inc. adjusted for costs related to shareholder litigation and Large Dispositions. Rayonier believes that
Pro Forma Net Income is defined as net income attributable to Rayonier Inc. adjusted for costs related to shareholder litigation and Large Dispositions. Rayonier believes that
this non-GAAP financial measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative
this non-GAAP financial measure provides investors with useful information to evaluate our core business operations because it excludes specific items that are not indicative
of ongoing operating results.
of ongoing operating results.
page 09
page 09
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
Rayonier Timberland Acreage*
Rayonier Timberland Acreage*
Total: 2.6 million acres
Total: 2.6 million acres
(*Acreage in 000’s as of 12/31/2019)
(*Acreage in 000’s as of 12/31/2019)
U.S. South
Harvest Volume
(Tons in thousands)
Adjusted EBITDA
(Dollars in millions)
Adj. EBITDA/Ton
(Dollars per ton)
» Acreage: 1.8mm acres
» Sustainable Yield:
6.1–6.5mm tons
» Planted/Plantable: 67%
» Average Site Index(1): 72 feet
7,000
5,600
4,200
2,800
1,400
–
$140
112
84
56
28
–
$25
20
15
10
5
–
2017
2018
2019
2017
2018
2019
2017
2018
2019
U.S. Pacific
Northwest
Harvest Volume
(Tons in thousands)
Adjusted EBITDA
(Dollars in millions)
Adj. EBITDA/Ton
(Dollars per ton)
» Acreage: 379,000 acres
» Sustainable Yield: 1.4mm tons
» Planted/Plantable: 79%
» Average Site Index(2): 116 feet
1,500
1,200
900
600
300
–
$45
36
27
18
9
–
$35
28
21
14
7
–
2017
2018
2019
2017
2018
2019
2017
2018
2019
page 10
page 10
(1) Site index reflects the average height of the dominant and codominant trees at a base age of 25.
(1)
Site index reflects the average height of the dominant and codominant trees at a base age of 25.
(2) Site index reflects the average height of the dominant and codominant trees at a base age of 50.
(2)
Site index reflects the average height of the dominant and codominant trees at a base age of 50.
Pacific Northwest
379,000 ACRES
379,000 ACRES
New Zealand
414,000 ACRES
414,000 ACRES
U.S. South
1.8MM ACRES
1.8MM ACRES
New Zealand
Harvest Volume
(Tons in thousands)
Adjusted EBITDA
(Dollars in millions)
Adj. EBITDA/Ton
(Dollars per ton)
» Acreage: 414,000 acres
» Sustainable Yield:
2.4–2.7mm tons
» Planted/Plantable: 71%
» Average Site Index(3): 94 feet
3,000
2,400
1,800
1,200
600
–
$100
80
60
40
20
–
$40
32
24
16
8
–
2017
2018
2019
2017
2018
2019
2017
2018
2019
Real Estate
Acres Sold(4)
(Acres in thousands)
Adjusted EBITDA(4)
(Dollars in millions)
Price/Acre(5)
(Dollars per acre)
» Focused on Monetizing Higher-
and-Better-Use Timberlands
» ~200,000 Acres in I-95
Coastal Corridor
» ~56,000 Acres with Land
Use Entitlements
» Two Active Development Projects:
Wildlight and Richmond Hill
40
32
24
16
8
–
$125
100
75
50
25
–
$5,000
4,000
3,000
2,000
1,000
–
2017
2018
2019
2017
2018
2019
2017
2018
2019
(3) Site index reflects the average height of the dominant and codominant trees at a base age of 20.
(3)
Site index reflects the average height of the dominant and codominant trees at a base age of 20.
(4) Excludes Large Dispositions.
(4)
Excludes Large Dispositions.
(5) Excludes Large Dispositions and Improved Development.
(5)
Excludes Large Dispositions and Improved Development.
page 11
page 11
RAYONIER INC.
RAYONIER INC.
2019 ANNUAL REPORT
2019 ANNUAL REPORT
Forward-Looking Statements
In addition to historical information, this Report contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking
statements, which are based on current expectations, estimates and projections about the
industry and markets in which Rayonier and Pope operate and beliefs of and assumptions
made by Rayonier’s management and Pope’s management, involve uncertainties that
could significantly affect the financial or operating results of Rayonier, Pope or the combined
company. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,””
““estimates,” “will,” “should,” “may,” “projects,” “could,” “estimates” or variations of such words
and other similar expressions are intended to identify such forward-looking statements,
which generally are not historical in nature, but not all forward-looking statements include
such identifying words.
Such forward-looking statements include, but are not limited to, projections of earnings,
statements of plans for future operations or expected revenues, statements about the
benefits of the proposed transaction involving Rayonier and Pope, including future
financial and operating results, the combined company’s plans, objectives, expectations
and intentions. All statements that address operating performance, events or developments
that we expect or anticipate will occur in the future, including statements relating to (i) the
expected benefits of the proposed transaction to stockholders, employees and other
constituents of the combined company, (ii) the expected synergies and other cost
savings as a result of completion of the proposed transaction, (iii) the expected timetable
for completing the proposed transaction or integration of the two companies, (iv) the
general economic conditions in the geographic areas where Rayonier or Pope operate,
(v) creating value for stockholders, (vi) changes in timber prices, (vii) changes in sales
or contribution volume of developed properties and (viii) the availability of capital to
finance the proposed transactions are each forward-looking statements. These statements
are not guarantees of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Although we believe the expectations
reflected in any forward-looking statements are based on reasonable assumptions,
we can give no assurance that our expectations will be attained and therefore, actual
outcomes and results may differ materially from what is expressed or forecasted in
such forward-looking statements.
The following important factors, among others, could cause actual results or events to
differ materially from those expressed in forward-looking statements that may have been
made in this document: risks associated with achieving expected synergies and other
costs savings; risks associated with the ability to complete the proposed transaction on
the terms contemplated or at all; the expected timing of the closing of the proposed
transaction; the ability to successfully integrate our operations and employees following
the closing of the proposed transaction; the cyclical and competitive nature of the industries
in which we operate; fluctuations in demand for, or supply of, our forest products and
real estate offerings; entry of new competitors into our markets; changes in global
economic conditions and world events; fluctuations in demand for our products in Asia,
and especially China; the uncertainties of potential impacts of climate-related initiatives;
the cost and availability of third party logging and trucking services; the geographic
concentration of a significant portion of our timberland; our ability to identify, finance and
complete timberland acquisitions; changes in environmental laws and regulations
regarding timber harvesting, delineation of wetlands, and endangered species, that may
restrict or adversely impact our ability to conduct our business, or increase the cost of
doing so; adverse weather conditions, natural disasters and other catastrophic events
such as hurricanes, wind storms and wildfires, which can adversely affect our timberlands
and the production, distribution and availability of our products; interest rate and
currency movements; our capacity to incur additional debt; changes in tariffs, taxes
or treaties relating to the import and export of our products or those of our competitors;
changes in key management and personnel; our ability to meet all necessary legal
requirements to continue to qualify as a real estate investment trust and changes in tax
laws that could adversely affect beneficial tax treatment; the cyclical nature of the real
estate business generally; a delayed or weak recovery in the housing market; the lengthy,
uncertain and costly process associated with the ownership, entitlement and development
of real estate, especially in Florida, which also may be affected by changes in law, policy
and political factors beyond our control; unexpected delays in the entry into or closing of
real estate transactions; changes in environmental laws and regulations that may restrict or
adversely impact our ability to sell or develop properties; the timing of construction and
availability of public infrastructure; and the availability of financing for real estate development
and mortgage loans; the potential impact of announcement of the proposed transaction or
consummation of the proposed transaction on relationships, including with employees and
customers; the unfavorable outcome of any legal proceedings that have been or may be
instituted against Rayonier or Pope; the amount of the costs, fees, expenses and charges
related to the proposed transaction and the actual terms of the financings that may be
obtained in connection with the proposed transaction; those additional risks and factors
discussed in reports filed with the Securities and Exchange Commission (the “SEC”) by
page 12
page 12
Rayonier and Pope from time to time, including those discussed under the heading “Risk
Factors” in their respective most recently filed reports on Form 10-K and 10-Q. Except to
the extent required by applicable law or regulation, Rayonier disclaims any duty to
update any forward-looking statements contained in this communication or to otherwise
update any of the above-referenced factors.
Non-GAAP Financial 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 this communication. Reconciliation of such
measures to the nearest GAAP measures can also be found in this communication.
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.
Important Additional Information and Where to Find It
In connection with the proposed merger, Rayonier and its subsidiary, Rayonier Operating
Partnership LP, will file with the SEC a registration statement on Form S-4 to register the
shares of Rayonier common stock and units representing partnership interests in
Rayonier Operating Partnership LP to be issued in connection with the merger. The reg-
istration statement will include a proxy statement/prospectus which will be sent to the
stockholders of Pope Resources seeking their approval of the merger-related proposals.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION
STATEMENT ON FORM S-4 AND THE RELATED PROXY STATEMENT/PROSPECTUS, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS AND ANY
OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH
THE PROPOSED MERGER, WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT RAYONIER, POPE RESOURCES AND THE
PROPOSED TRANSACTION.
Investors and security holders may obtain copies of these documents free of charge
through the website maintained by the SEC at www.sec.gov or from Rayonier at its website,
www.rayonier.com, or from Pope Resources at its website, www.poperesources.com.
Documents filed with the SEC by Rayonier will be available free of charge by accessing
Rayonier’s website at www.rayonier.com under the heading Investor Relations, or,
alternatively, by directing a request by telephone or mail to Rayonier at 1 Rayonier Way,
Wildlight, FL 32097, and documents filed with the SEC by Pope Resources will be
available free of charge by accessing Pope Resources’ website at www.poperesources.com
under the heading Investor Relations or, alternatively, by directing a request by telephone
or mail to Pope Resources at 19950 Seventh Avenue NE, Suite 200, Poulsbo, WA 98370.
Participants in the Solicitation
Rayonier and Pope Resources and certain of their respective directors and executive
officers and other members of management and employees may be deemed to be
participants in the solicitation of proxies from the stockholders of Pope Resources in
respect of the proposed transaction under the rules of the SEC. Information about
Pope Resources’ directors and executive officers is available in Pope Resources’ Annual
Report on Form 10-K and certain of its Current Reports on Form 8-K. Information about
Rayonier’s directors and executive officers is available in Rayonier’s proxy statement
dated April 1, 2020 for its 2020 Annual Meeting of Stockholders, and certain of its
Current Reports on Form 8-K. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by security holdings or
otherwise, will be contained in the proxy statement/prospectus and other relevant materials
to be filed with the SEC regarding the merger when they become available. Investors should
read the proxy statement/prospectus carefully when it becomes available before making any
voting or investment decisions. You may obtain free copies of these documents from
Rayonier or Pope Resources using the sources indicated above.
No Offer or Solicitation
This Report shall not constitute an offer to sell or the solicitation of an offer to buy any
securities, nor shall there be any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities shall be made except
by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities
Act of 1933, as amended.
TMTM
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
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
TM
RAYONIER INC.
(Exact name of registrant as specified in its charter)
Incorporated in the State of North Carolina
I.R.S. Employer Identification No. 13-2607329
1 RAYONIER WAY
WILDLIGHT, FL 32097
(Principal Executive Office)
Telephone Number: (904) 357-9100
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
COMMON SHARES, NO PAR VALUE
Trading Symbol
RYN
Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.
Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (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
No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2
of the Exchange Act.
Large Accelerated Filer
Non-accelerated Filer
Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
The aggregate market value of the Common Shares of the registrant held by non-affiliates at the close of business on June 30, 2019 was $3,904,678,995
based on the closing sale price as reported on the New York Stock Exchange.
As of February 14, 2020, there were outstanding 129,333,462 Common Shares of the registrant.
Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the 2020 annual meeting of
the shareholders of the registrant scheduled to be held May 14, 2020, are incorporated by reference in Part III hereof.
Page
1
13
20
21
23
23
24
26
29
46
48
105
105
105
106
106
106
106
106
107
107
Item
TABLE OF CONTENTS
3.
4.
1.
1A.
1B.
2.
PART I
Business ..............................................................................................................................................
Risk Factors ........................................................................................................................................
Unresolved Staff Comments ................................................................................................................
Properties ............................................................................................................................................
Legal Proceedings ...............................................................................................................................
Mine Safety Disclosures ......................................................................................................................
PART II
Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities ..................................................................................................................................
6.
Selected Financial Data .......................................................................................................................
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ................
7A. Quantitative and Qualitative Disclosures about Market Risk ...............................................................
8.
Financial Statements and Supplementary Data ..................................................................................
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ...............
9A.
Controls and Procedures .....................................................................................................................
9B. Other Information ................................................................................................................................
5.
PART III
Directors, Executive Officers and Corporate Governance ...................................................................
Executive Compensation .....................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters ................................................................................................................................................
Certain Relationships and Related Transactions, and Director Independence ....................................
Principal Accounting Fees and Services ..............................................................................................
PART IV
Exhibits, Financial Statement Schedules .............................................................................................
Form 10-K Summary ...........................................................................................................................
10.
11.
12.
13.
14.
15.
16.
i
PART I
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” or “Note” refer to the Notes to the Consolidated
Financial Statements of Rayonier Inc. included in Item 8 of this Report.
NOTE ABOUT 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, business strategies, harvest
schedules, timberland acquisitions, timberland sales, the anticipated benefits of Rayonier’s business strategies, and
other similar statements relating to 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 this Annual Report on 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.
Item 1.
BUSINESS
GENERAL
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 U.S. and New Zealand. The focus of our business is to invest in timberlands
and to actively manage them to provide current income and attractive long-term returns to our shareholders. As of
December 31, 2019, we owned, leased or managed approximately 2.6 million acres of timberlands located in the U.S.
South (1.84 million acres), U.S. Pacific Northwest (379,000 acres) and New Zealand (414,000 gross acres, or 295,000
net plantable acres). In addition, we engage in the trading of logs from New Zealand and Australia to Pacific Rim
markets, primarily to support our New Zealand export operations. We have an added focus to maximize the value of
our land portfolio by pursuing higher and better use (“HBU”) land sale opportunities.
We originated as the Rainier Pulp & Paper Company founded in Shelton, Washington in 1926. On June 27, 2014,
Rayonier completed the tax-free spin-off of its Performance Fibers manufacturing business from its timberland and
real estate operations, thereby becoming a “pure-play” timberland REIT.
Under our REIT structure, we are generally not required to pay U.S. federal income taxes on our earnings from
timber harvest operations and other REIT-qualifying activities contingent upon meeting applicable distribution, income,
asset, shareholder and other tests. As of December 31, 2019 and as of the date of the filing of this Annual Report on
Form 10-K, we believe the Company is in compliance with all REIT tests. See Note 10 — Income Taxes for further
discussion of REIT and non-REIT qualifying operations.
Our shares are publicly traded on the NYSE under the symbol RYN. We are a North Carolina corporation with
executive offices located at 1 Rayonier Way, Wildlight, Florida 32097. Our telephone number is (904) 357-9100.
1
OUR COMPETITIVE STRENGTHS
We believe that we distinguish ourselves from other timberland owners and managers through the following
competitive strengths:
•
•
•
•
•
•
Leading Pure-Play Timberland REIT. We are differentiated from other publicly-traded timberland REITs in that
we are invested exclusively in timberlands and real estate and do not own any pulp, paper or wood products
manufacturing assets. We are the largest publicly-traded “pure-play” timberland REIT, which provides our
investors with a focused, large-scale timberland investment alternative without taking on the risks and volatility
inherent in direct ownership of forest products manufacturing assets.
Located in Premier Softwood Growing Regions with Access to Strong Markets. Our geographically diverse
timberland holdings are strategically located in core softwood producing regions, including the U.S. South,
U.S. Pacific Northwest and New Zealand. Our most significant timberland holdings are located in the U.S.
South, in close proximity to a variety of established pulp, paper and wood products manufacturing facilities,
which provide a steady source of competitive demand for both pulpwood and higher-value sawtimber products.
Our Pacific Northwest and New Zealand timberlands benefit from strong domestic sawmilling markets and are
located near ports to capitalize on export markets serving the Pacific Rim.
Sophisticated Log Marketing Capabilities Serving Various Pacific Rim Markets. We conduct a log trading
operation based in New Zealand that serves timberland owners in New Zealand and Australia, providing access
to key export markets in China, South Korea and India. This operation provides us with superior market
intelligence and economies of scale, both of which add value to our New Zealand timber portfolio. It also
provides additional market intelligence that helps our Southern and Pacific Northwest export log marketing
and contributes to the Company’s earnings and cash flows, with minimal investment.
Attractive Land Portfolio with HBU Potential. We own approximately 200,000 acres of timberlands located in
the vicinity of Interstate 95 primarily north of Daytona Beach, FL and south of Savannah, GA, some of which
have the potential to transition to HBU over time as market conditions support increased demand. These
properties further provide us with select opportunities to add value to our portfolio through real estate
development activities, which we believe will allow us to periodically sell parcels of such land at favorable
valuations relative to timberland values through one of our taxable REIT subsidiaries.
Dedicated HBU Platform with Established Track Record. We have a dedicated HBU platform led by an
experienced team with an established track record of selling rural and development HBU properties across
our U.S. South holdings at strong premiums to timberland values. We maintain a detailed land classification
analysis of our portfolio, which allows us to identify the highest-value use of our lands and then capitalize on
identified HBU opportunities through strategies uniquely tailored to maximize value, including selectively
pursuing land-use entitlements and infrastructure improvements.
Advantageous Structure and Capitalization. Under our REIT structure, we are generally not required to pay
federal income taxes on our earnings from timber harvest operations and other REIT-qualifying activities, which
allows us to optimize the value of our portfolio in a tax efficient manner. We also maintain a strong credit profile
and have an investment grade debt rating. As of December 31, 2019, our net debt to enterprise value was
19%. We believe that our advantageous REIT structure and conservative capitalization provide us with a
competitive cost of capital and significant financial flexibility to pursue growth initiatives.
2
OUR STRATEGY
Our business strategy consists of the following key elements:
• Manage our Timberlands on a Sustainable Yield Basis for Long-term Results. We generate recurring income
and cash flow from the harvest and sale of timber and intend to actively manage our timberlands to maximize
net present value over the long term by achieving an optimal balance among biological timber growth, generation
of cash flow from harvesting activities, and responsible environmental stewardship. Our harvesting strategy
is designed to produce a long-term, sustainable yield, although we may adjust harvest levels periodically in
response to then-current market conditions.
•
•
Apply Advanced Silviculture to Increase the Productivity of our Timberlands. We use our forestry expertise
and disciplined financial approach to determine the appropriate silviculture programs and investments to
maximize returns. This includes re-planting a significant portion of our harvested acres with improved seedlings
we have developed through decades of research and cultivation. Over time, we expect these improved
seedlings will result in higher volumes per acre and a higher value product mix.
Increase the Size and Quality of our Timberland Holdings through Acquisitions. We intend to selectively pursue
timberland acquisition opportunities that improve the average productivity of our timberland holdings and
support cash flow generation from our annual harvesting activities. We expect there will be an ample supply
of attractive timberlands available for sale as a result of anticipated sales from a number of Timberland
Investment Management Organizations (“TIMOs”). Our acquisition strategy employs a disciplined approach
with rigorous adherence to strategic and financial metrics. Generally, we expect to focus our acquisition efforts
on the most commercially desirable timber-producing regions of the U.S. South, the U.S. Pacific Northwest
and New Zealand, particularly on timberlands with a geographic distribution and age-class profile that are
complementary to our existing timberland holdings. We may also consider acquisition opportunities outside
of our existing operating areas where we anticipate favorable long-term market dynamics and financial returns.
We acquired 69,000 acres of fee timberland in 2019, 26,000 acres in 2018 and 90,000 acres in 2017.
Additionally, we acquired leases or long-term forestry rights covering approximately 2,000 acres in 2019, 4,000
acres in 2018, and 19,000 acres in 2017.
• Optimize our Portfolio Value. We continuously assess potential alternative uses of our timberlands, as some
of our properties may become more valuable for development, residential, recreation or other purposes. We
intend to capitalize on such higher-valued uses by opportunistically monetizing HBU properties in our portfolio.
While the majority of our HBU sales involve rural and recreational land, we also selectively pursue various
land-use entitlements on certain properties for residential, commercial and industrial development in order to
fully realize the enhanced long-term value potential of such properties. For selected development properties,
we also invest in infrastructure improvements, such as roadways and utilities, to accelerate the marketability
and improve the value of such properties. We generally expect that sales of HBU property will comprise
approximately 1% to 2% of our Southern timberland holdings on an annual basis.
•
•
Focus on Timberland Operations to Support Cash Flow Generation. As described above, we rely primarily on
annual harvesting activities and ongoing sales of HBU properties to generate cash flow from our timberland
holdings. However, we also periodically generate income and cash flow from the sale of non-strategic and/or
non-HBU timberlands, in particular as we seek to optimize our portfolio by disposing of less desirable properties
or to fund capital allocation priorities, including share repurchases, debt repayment or acquisitions. Our strategy
is to limit reliance on planned sales of non-HBU timberlands to augment cash flow generation and instead rely
primarily on supporting cash flow from the operation, rather than sale, of our timberlands. We believe this
strategy will support the sustainability of our harvesting activities over the long term.
Promote Responsible Stewardship and Best-in-Class Disclosure. We are committed to responsible stewardship
and environmentally and economically sustainable forestry. As such, we are focused on continuing to develop
and integrate robust environmental, social and governance (“ESG”) policies and best practices within our
business. We further intend to be an industry leader in transparent disclosure, particularly relating to our
timberland holdings, harvest schedules, inventory, age-class profiles and other meaningful data regarding our
long-term sustainability. We believe our continued commitment to transparency and the stewardship of our
assets and capital will allow us to maintain our timberlands’ productivity, more effectively attract and deploy
capital and enhance our reputation as a preferred timber industry supplier and employer.
3
SEGMENT INFORMATION
Rayonier operates in five reportable business segments: Southern Timber, Pacific Northwest Timber, New Zealand
Timber, Real Estate and Trading. See Item 7 — Management’s Discussion and Analysis of Financial Condition and
Results of Operations and Note 5 — Segment and Geographical Information for information on sales and operating
income by reportable segment and geographic region.
TIMBER
The Company’s timber businesses are disaggregated into Southern Timber, Pacific Northwest Timber and New
Zealand Timber segments. Sales in the Timber segments include all activities related to the harvesting of timber in
addition to lease and license activities, other non-timber activities and carbon credit sales.
DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD
We define gross timber inventory as an estimate of all standing timber volume beyond the specified age at which
we commence calculating our timber inventory for inclusion in our inventory tracking systems. The age at which we
commence calculating our timber inventory is 10 years for our Southern timberlands, 20 years for our Pacific Northwest
timberlands, and 20 years for our New Zealand timberlands. Our estimate of gross timber inventory is based on an
inventory system that involves periodic statistical sampling and growth modeling. Periodic adjustments are made on
the basis of growth estimates, harvest information, and environmental and operational restrictions. Gross timber
inventory includes certain timber that we do not deem to be of a merchantable age as well as certain timber located
in restricted, environmentally sensitive or economically inaccessible areas.
We define merchantable timber inventory as an estimate of timber volume beyond a specified age that approximates
such timber’s earliest economically harvestable age. Our estimate includes certain timber located in restricted or
environmentally sensitive areas based on an estimate of lawfully recoverable volumes from such areas. The estimate
does not include volumes in restricted or environmentally sensitive areas that may not be lawfully harvested or volumes
located in economically inaccessible areas. The merchantable age (i.e., the age at which timber moves from pre-
merchantable to merchantable) is 15 years for our Southern timberlands, with the exception of Oklahoma which is 17
years, 35 years for our Pacific Northwest timberlands, and 20 years for radiata pine and 30 years for Douglas-fir in our
New Zealand timberlands. Our estimated merchantable timber inventory changes over time as timber is harvested,
as pre-merchantable timber transitions to merchantable timber, as existing merchantable timber inventory grows, as
we acquire and sell timberland and as we periodically update our statistical sampling and growth and yield models.
We estimate our merchantable timber inventory annually for purposes of calculating per unit depletion rates.
Timber inventory is generally measured and expressed in short green tons (SGT) in our Southern timberlands, in
thousand board feet (MBF) or million board feet (MMBF) in our Pacific Northwest timberlands, and in cubic meters
(m3) in our New Zealand timberlands. For conversion purposes, one MBF and one m3 is equal to approximately 8.0
and 1.12 short green tons, respectively. For comparison purposes, we provide inventory estimates for our Pacific
Northwest and New Zealand timberlands in MBF and cubic meters, respectively, as well as in short green tons.
The following table sets forth the estimated volumes of merchantable timber inventory by location in short green
tons as of September 30, 2019 for the South and Pacific Northwest and as of December 31, 2019 for New Zealand:
(volumes in thousands of SGT)
Location
South ...................................................................................................................................
Pacific Northwest .................................................................................................................
New Zealand .......................................................................................................................
Merchantable
Inventory (a)
67,742
7,120
16,350
91,212
%
74
8
18
100
(a) For all regions, depletion rate calculations for the upcoming year are based on estimated volumes of merchantable inventory at December 31,
2019.
4
We define sustainable yield as the average harvest level that can be sustained into perpetuity based on our
estimates of biological growth and the expected productivity resulting from our reforestation and silvicultural efforts.
Our estimated sustainable yield may change over time based on changes in silvicultural techniques and resulting
timber yields, changes in environmental laws and restrictions, changes in the statistical sampling and estimates of our
merchantable timber inventory, acquisitions and dispositions of timberlands, the expiration or renewal of timberland
leases, casualty losses, and other factors. Moreover, our harvest level in any given year may deviate from our estimated
sustainable yield due to variations in the age class of our timberlands, the product mix of our harvest (i.e., pulpwood
versus sawtimber), our deliberate acceleration or deferral of harvest in response to market conditions, our thinning
activity (in which we periodically remove some smaller trees from a stand to enhance long-term sawtimber potential
of the remaining timber), or other factors. We estimate sustainable yield for each of our Timber segments as of December
31, 2019.
We manage our U.S. timberlands in accordance with the requirements of the Sustainable Forestry Initiative® (“SFI”)
program. The timberland holdings of the New Zealand subsidiary are certified under the Forest Stewardship Council®
(“FSC”). The majority of our New Zealand timberland holdings are also certified under the Programme for the
Endorsement of Forest Certification (“PEFC”). All programs are comprehensive systems of environmental principles,
objectives and performance measures that combine the perpetual growing and harvesting of trees with the protection
of wildlife, plants, soil and water quality. Through application of our site-specific silvicultural expertise and financial
discipline, we manage timber in a way that is designed to optimize site preparation, tree species selection, competition
control, fertilization, timing of thinning and final harvest. We also have a genetic seedling improvement program to
enhance the productivity and quality of our timberlands and overall forest health. In addition, non-timber income
opportunities associated with our timberlands such as recreational licenses, as well as considerations for the future
HBU of the land, are integral parts of our site-specific management philosophy. All of these activities are designed to
maximize value while complying with SFI, FSC and PEFC requirements.
5
SOUTHERN TIMBER
As of December 31, 2019, our Southern timberlands acreage consisted of approximately 1.84 million acres
(including approximately 161,000 acres of leased lands) located in Alabama, Arkansas, Florida, Georgia, Louisiana,
Mississippi, Oklahoma, South Carolina and Texas. Approximately two-thirds of this land supports intensively managed
plantations of predominantly loblolly and slash pine. The other one-third of this land is too wet to support pine plantations,
but supports productive natural stands primarily consisting of natural pine and a variety of hardwood species. Rotation
ages typically range from 21 to 28 years for pine plantations and from 35 to 60 years for natural stands. Key consumers
of our timber include pulp, paper, wood products and biomass facilities.
We estimate that the gross timber inventory and merchantable timber inventory of our Southern timberlands was
85 million tons and 68 million tons, respectively, as of September 30, 2019. We estimate that the sustainable yield of
our Southern timberlands, including both pine and hardwoods, is approximately 6.1 to 6.5 million tons annually. We
expect that the average annual harvest volume of our Southern timberlands over the next five years (2020 to 2024)
will be generally in line with our sustainable yield. For additional information, see Item 1 — Business — Discussion of
Timber Inventory and Sustainable Yield and Item 1A — Risk Factors.
In 2019, we acquired approximately 60,000 acres of timberland in the Southern region. For additional information,
see Note 3 — Timberland Acquisitions.
The following table provides a breakdown of our Southern timberlands acreage and timber inventory by product
and age class as of September 30, 2019 (inventory volumes are estimated at December 31 to calculate a depletion
rate for the upcoming year):
Acres
(000’s)
Pine
Pulpwood
Pine
Sawtimber
Hardwood
Pulpwood
Hardwood
Sawtimber
Total
(volumes in thousands of SGT)
Age Class
Pine Plantation
0 to 4 years (a) .......................................
5 to 9 years ............................................
10 to 14 years ........................................
15 to 19 years ........................................
20 to 24 years ........................................
25 to 29 years ........................................
30 + years ..............................................
224
192
220
255
185
62
42
Total Pine Plantation ................................
1,180
Natural Pine (Plantable) (b) ...................
Natural Mixed Pine/Hardwood (c) .........
Forested Acres and Gross Inventory ...
Plus: Non-Forested Acres (d) ..................
Gross Acres ...........................................
42
540
1,762
63
1,825
—
—
8,912
13,671
7,206
2,217
1,258
33,264
425
4,283
37,972
—
—
1,013
4,549
6,812
3,179
2,769
18,322
977
7,125
26,424
—
—
37
110
112
82
111
452
780
14,986
16,218
—
—
—
1
2
2
1
6
—
—
9,962
18,331
14,132
5,480
4,139
52,044
248
2,430
4,356
4,610
30,750
85,224
Less: Pre-Merchantable Age Class
Inventory (e)
.................................................................................................................................................................
Less: Volume in Environmentally
Sensitive/Legally Restricted Areas ...............................................................................................................................
Merchantable Timber Inventory ................................................................................................................................
(10,092)
(7,390)
67,742
(a) 0 to 4 years includes clearcut acres not yet replanted.
(b) Consists of natural stands that are convertible into pine plantations once harvested.
(c) Consists of all non-plantable natural stands, including those that are in environmentally sensitive or economically inaccessible areas.
(d)
(e)
Includes roads, rights of way and all other non-forested areas.
Includes inventory that is less than 15 years old or less than 17 years old in Oklahoma.
6
PACIFIC NORTHWEST TIMBER
As of December 31, 2019, our Pacific Northwest timberlands consisted of approximately 379,000 acres located
in Oregon and Washington, of which approximately 300,000 acres were designated as productive acres, meaning land
that is capable of growing merchantable timber and where the harvesting of timber is not constrained by physical,
environmental or regulatory restrictions. These timberlands primarily comprise second and third rotation western
hemlock and Douglas-fir, as well as a small amount of other softwood species, such as western red cedar. A small
percentage also consists of natural hardwood stands of predominantly red alder. In the Pacific Northwest, rotation
ages typically range from 35 to 50 years. Our product mix in the Pacific Northwest is heavily weighted to sawtimber,
which is sold to domestic wood products facilities as well as exported primarily to Pacific Rim markets.
We estimate that the gross timber inventory and merchantable timber inventory of our Pacific Northwest
timberlands was 2,811 MMBF and 891 MMBF, respectively, as of September 30, 2019. We estimate that the sustainable
yield of our Pacific Northwest timberlands is approximately 175 to 180 MMBF (or 1.4 million tons) annually. We expect
that the average annual harvest volume of our Pacific Northwest timberlands over the next five years (2020 to 2024)
will be modestly below our sustainable yield. For additional information, see Item 1 — Business — Discussion of Timber
Inventory and Sustainable Yield and Item 1A — Risk Factors.
In 2019, we acquired approximately 2,000 acres of timberlands in the Pacific Northwest region. For additional
information, see Note 3 — Timberland Acquisitions.
The following table provides a breakdown of our Pacific Northwest timberlands acreage and timber inventory by
product and age class as of September 30, 2019 (inventory volumes are estimated at December 31 to calculate a
depletion rate for the upcoming year):
(volumes in MBF, except as noted)
Acres
(000’s)
Softwood
Pulpwood (e)
Softwood
Sawtimber (e)
Age Class
Commercial Forest
0 to 4 years (a) ..................................................................
5 to 9 years .......................................................................
10 to 14 years ...................................................................
15 to 19 years ...................................................................
20 to 24 years ...................................................................
25 to 29 years ...................................................................
30 to 34 years ...................................................................
35 to 39 years ...................................................................
40 to 44 years ...................................................................
45 to 49 years ...................................................................
50+ years ..........................................................................
Total Commercial Forest .....................................................
Non-Commercial Forest (b) ..............................................
Productive Forested Acres ..................................................
Restricted Forest (c) .........................................................
Total Forested Acres and Gross Inventory .....................
Plus: Non-Forested Acres (d) ..............................................
Gross Acres ......................................................................
Less: Pre-Merchantable Age Class Inventory ...................................................................................................
Less: Restricted Forest Inventory .....................................................................................................................
............................................................................................................................
Total Merchantable Timber
Conversion factor for MBF to SGT ...................................................................................................................
..........................................................................................
Total Merchantable Timber (thousands of SGT)
—
—
—
—
53,146
246,568
609,855
386,158
137,358
63,365
162,017
1,658,467
30,831
—
—
—
—
30,061
54,511
103,199
57,201
19,954
9,006
21,053
294,985
4,788
41
42
43
31
22
29
45
24
8
3
7
295
5
300
66
366
13
379
723,147
2,412,445
99,170
398,943
Total
—
—
—
—
83,207
301,079
713,054
443,359
157,312
72,371
183,070
1,953,452
35,619
822,317
2,811,388
(1,097,920)
(822,317)
891,151
7.99
7,120
(a) 0 to 4 years includes clearcut acres not yet replanted.
(b)
(c)
(d)
(e)
Includes non-commercial forests with limited productivity.
Includes significant portions of riparian management zones, legally restricted forests, and environmentally sensitive areas.
Includes roads, rights of way, and all other non-forested areas.
Includes a minor component of hardwood in red alder and other species.
7
NEW ZEALAND TIMBER
As of December 31, 2019, our New Zealand timberlands consisted of approximately 414,000 acres (including
approximately 229,000 acres of leased lands), of which approximately 295,000 acres (including approximately 154,000
acres of leased lands) were designated as productive or plantation acres, meaning land that is capable of growing
merchantable timber and where the harvesting of timber is not constrained by physical, environmental or regulatory
restrictions. The leased acres are generally leased through long-term arrangements including Crown Forest Licenses
(“CFLs”), forestry rights and other leases. Our New Zealand timberlands serve a domestic sawmilling market and also
export logs to Pacific Rim markets.
Our New Zealand timber operations are conducted by Matariki Forestry Group, a joint venture with Stafford Capital
Partners Limited. The Company maintains a controlling financial interest of 77% in the New Zealand subsidiary and,
accordingly, consolidates the New Zealand subsidiary’s balance sheet and results of operations. The minority owner’s
interest in the New Zealand subsidiary and its earnings are reported as noncontrolling interest in our financial statements.
Rayonier’s wholly-owned subsidiary, Rayonier New Zealand Limited (“RNZ”), serves as the manager of the New
Zealand subsidiary. For additional information, see Note 8 — New Zealand Subsidiary.
We estimate that the gross timber inventory and merchantable timber inventory of our New Zealand timberlands
were both 14.6 million cubic meters as of December 31, 2019. We estimate that the sustainable yield of our New
Zealand timberlands is approximately 2.1 to 2.4 million cubic meters (or 2.4 to 2.7 million tons) annually. We expect
that the average annual harvest volume of our New Zealand timberlands over the next five years (2020 to 2024) will
be at the higher end of our sustainable yield range. For additional information, see Item 1 — Business — Discussion
of Timber Inventory and Sustainable Yield and Item 1A — Risk Factors.
In 2019, we acquired approximately 9,000 acres of timberland (including approximately 2,000 acres of leased land)
in New Zealand. For additional information, see Note 3 — Timberland Acquisitions.
The following table provides a breakdown of our New Zealand timberlands acreage and timber inventory by product
and age class as of December 31, 2019 (inventory volumes at December 31 are used to calculate a depletion rate for
the upcoming year):
(volumes in thousands of m3, except as noted)
Age Class
Radiata Pine
0 to 4 years (a) ............................................................................
5 to 9 years .................................................................................
10 to 14 years ..............................................................................
15 to 19 years ..............................................................................
20 to 24 years ..............................................................................
25 to 29 years ..............................................................................
30 + years ...................................................................................
Total Radiata Pine .......................................................................
Other (b) .......................................................................................
Forested Acres and Merchantable Timber Inventory ...............
Conversion factor for m3 to SGT ...................................................
Total Merchantable Timber (thousands of SGT) .......................
Plus: Non-Productive Acres (c) .....................................................
Gross Acres .................................................................................
(a) 0 to 4 years includes clearcut acres not yet replanted.
Includes primarily Douglas-fir age 30 and over.
(b)
Includes natural forest and other non-planted acres.
(c)
Acres (000’s)
Pulpwood
Sawtimber
Total
—
—
—
—
1,774
483
184
2,441
1,082
3,523
—
—
—
—
7,467
1,908
530
9,905
1,205
11,110
—
—
—
—
9,241
2,391
714
12,346
2,287
14,633
1.12
16,350
58
44
41
55
49
11
3
261
34
295
119
414
8
REAL ESTATE
All of our U.S. and New Zealand land or leasehold sales, including HBU and non-HBU, are reported in our Real
Estate segment. We report our Real Estate sales in five categories:
•
•
•
•
•
Improved Development,
Unimproved Development,
Rural,
Timberlands & Non-Strategic, and
Large Dispositions.
The Improved Development category comprises properties sold for development for which Rayonier, through a
taxable REIT subsidiary, has invested in site improvements such as infrastructure, roadways, utilities, amenities and/
or other improvements designed to enhance marketability and create parcels, pads and/or lots for sale.
The Unimproved Development category comprises properties sold for development for which Rayonier has not
invested in site improvements.
The Rural category comprises properties sold in rural markets to buyers interested in the property for rural
residential, recreational or other higher and better use purposes.
The Timberlands & Non-Strategic category includes U.S. and New Zealand: 1) sales of non-core timberlands that
do not meet our strategic criteria, 2) sales of core timberlands for which we obtain attractive values, and 3) sales of
properties to conservation interests that wish to preserve the land for habitat, public recreation, natural growth, buffer
zones or other environmental purposes.
The Large Dispositions category includes sales of timberland that exceed $20 million in size and do not have a
demonstrable premium relative to timberland value. Proceeds from Large Dispositions are generally used to fund
capital allocation priorities, such as share repurchases, debt repayment or acquisitions. Sales designated as Large
Dispositions are excluded from cash flow from operations and the calculation of Adjusted EBITDA and Cash Available
for Distribution (“CAD”). See Item 7 — Performance and Liquidity Indicators for the definition of Adjusted EBITDA and
CAD.
We maintain a detailed land classification analysis for all of our timberland and HBU acres. The vast majority of
our HBU properties are managed as timberland and generate cash flow from timber operations prior to their sale or,
in the case of Improved Development properties, prior to improvement.
TRADING
Our Trading segment primarily reflects log trading activities in New Zealand and Australia conducted by our
New Zealand subsidiary. Our Trading segment complements the New Zealand Timber segment by providing added
market intelligence, increasing the scale of export operations and achieving cost savings that directly benefit the New
Zealand Timber segment. This additional market intelligence also benefits our Southern and Pacific Northwest export
log marketing efforts. Trading activities are broadly categorized into procured logs, managed export services or
marketing fees.
For procured logs, the New Zealand subsidiary buys logs directly from other forest owners at New Zealand ports
and exports them in its own name. Income from this business is generated by achieving a sales margin over the
purchase price of the procured logs. The New Zealand subsidiary, through the Trading segment, also purchases
standing timber from time to time, whereby it manages the harvest and sale of the logs for approximately one to three
years. In these instances, the cost of standing timber is capitalized as a current asset on the Consolidated Balance
Sheets and recognized as non-depletion cost of sales when sold. Revenue generated from procured log sales reflects
the full sales price of the logs and is recorded as timber sales within the Trading segment. In 2019, Trading volume
from procured logs was approximately 1.1 million tons. Of this volume, approximately 299,000 tons were sourced from
outside New Zealand, primarily Australia. Approximately 770,000 tons were purchased directly from third parties in
New Zealand, while the remaining 38,000 tons were harvested from stumpage purchases. Approximately 52% of third-
party purchases in New Zealand were purchased at spot prices, with the New Zealand subsidiary thereby assuming
some price risk on subsequent resale. The remaining 48% were purchased on a fixed margin basis, with the New
Zealand subsidiary earning either a fixed percentage of the net export revenue or a spread on the resale price irrespective
9
of subsequent price fluctuations. The New Zealand subsidiary generally seeks to mitigate its risk of loss on procured
logs by securing export orders prior to or concurrent with its spot purchases of logs.
For managed export services, the New Zealand subsidiary does not take title to the log cargo but arranges sales,
shipping and export documentation services for other forest owners for an agreed commission. Managed export service
arrangements are primarily used for logs sourced from third parties outside of New Zealand. Revenue generated from
managed export services reflects only the commission earned on the sale, as the New Zealand subsidiary does not
take title to the logs. Managed export service revenue is recorded as non-timber sales within the Trading segment.
The Trading segment also generates income from commissions and logistical services provided through our log
trading activities. This income is recorded in other operating (expense) income, net as log trading marketing fees.
FOREIGN SALES AND OPERATIONS
Sales from non-U.S. operations occur in our Real Estate, New Zealand Timber and Trading segments and comprised
approximately 50% of consolidated 2019 sales. See Note 5 — Segment and Geographical Information for additional
information.
COMPETITION
TIMBER
Timber markets in our Southern and Pacific Northwest regions are relatively fragmented with price being the
principal method of competition. In New Zealand, there are four other major private timberland owners accounting for
approximately 32% of New Zealand planted forests.
The following table provides an overview of certain major competitors in each of our Timber segments:
Segment
Southern Timber (a)
Pacific Northwest Timber (a)
Competitors
Weyerhaeuser Company
CatchMark Timber Trust
Hancock Timber Resource Group
Resource Management Service
Forest Investment Associates
Campbell Global
Weyerhaeuser Company
Hancock Timber Resource Group
Green Diamond Resource Company
Campbell Global
Port Blakely Tree Farms
Pope Resources
State of Washington Department of Natural Resources
Bureau of Indian Affairs
New Zealand (b)
Hancock Natural Resource Group
Kaingaroa Timberlands
Ernslaw One
OneFortyOne Plantations
In addition to the competitors listed, we also compete with numerous other large and small privately held timber companies.
(a)
(b) The New Zealand subsidiary competes with these and other smaller New Zealand timber companies for supply into New Zealand domestic
and export markets, predominantly China, South Korea and India. Logs supplied into Asian markets also compete with export supply from
other regions, including Europe, North America and Australia.
10
REAL ESTATE
In our Real Estate business, we compete with other owners of entitled and unentitled properties. Each property
has unique attributes, but overall quantity of supply and price for residential, commercial, industrial and rural properties
in the geographic areas in which we operate are the most significant competitive drivers.
TRADING
Our log trading operations are based out of New Zealand and performed by our New Zealand subsidiary. The New
Zealand market remains very competitive with over 20 entities competing for export log supply at different ports across
the country. We are one of the larger log trading companies in the region with access to multiple export ports and a
range of different export markets.
CUSTOMERS
In 2019, no individual customer (or group of customers under common control) represented 10% or more of 2019
consolidated sales.
SEASONALITY
Across all our segments, results are normally not impacted significantly by seasonal changes. However, significant
wet weather in areas of our Southern Timber operations can hinder access for harvesting, thereby temporarily reducing
supply in the affected areas and generally strengthening prices. Conversely, extended dry weather in an area tends
to suppress prices as timber is more accessible for harvesting.
ENVIRONMENTAL MATTERS
See Item 1A — Risk Factors.
RESEARCH AND DEVELOPMENT
The research and development activities of our timber operations include genetic seedling improvement, growth
and yield modeling, and applied silvicultural programs to identify management practices that will improve financial
returns from our timberlands. We also contribute to research cooperatives that undertake forestry research and
development.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
David L. Nunes, 58, Mr. Nunes joined the Company in June 2014 as Chief Operating Officer, and shortly thereafter
assumed the role of President and CEO following the Company’s spin-off of its Performance Fibers business. Prior to
joining the Company, Mr. Nunes served as President and CEO of Pope Resources/Olympic Resource Management
from 2002 to 2014. He joined Pope in 1997 as director of portfolio management. The following year, he was named
Vice President of portfolio development, and then served two years as Senior Vice President of acquisitions and portfolio
development before being named President and COO in 2000. Previously, Mr. Nunes spent nine years with the
Weyerhaeuser Company, joining the organization in 1988 as a business analyst and advancing through a number of
leadership roles to become director of corporate strategic planning. Mr. Nunes holds a Bachelors of Arts and Economics
from Pomona College and an MBA from the Tepper School of Business at Carnegie Mellon University.
Mark D. McHugh, 44, Mr. McHugh was appointed Senior Vice President and Chief Financial Officer in December
2014. He was previously Managing Director in the Real Estate Investment Banking group at Raymond James, where
he worked since 2008. Prior to joining Raymond James, Mr. McHugh was a Director in the Paper & Forest Products
Group within the Investment Banking Division at Credit Suisse, where he worked from 2000 to 2008. Mr. McHugh
received his B.S.B.A. in Finance from the University of Central Florida and his JD from Harvard Law School.
11
Douglas M. Long, 49, Mr. Long currently serves as Senior Vice President, Forest Resources. Previously, he served
as Vice President, U.S. Operations from November 2014 to December 2015 and as Director, Atlantic Region, U.S.
Forest Resources from March 2014 to November 2014. He joined the Company in 1995 as a GIS Forestry Analyst
and has held multiple positions of increasing responsibility within the forestry division. Mr. Long holds bachelor’s and
master’s degrees in Forest Resources and Conservation from the University of Florida.
Christopher T. Corr, 56, Mr. Corr joined the Company in July 2013 and currently serves as Senior Vice President,
Real Estate Development and President, Raydient LLC. Prior to joining Rayonier, he served as Executive Vice President,
Buildings and Places for AECOM from 2008 to 2013. Prior to that, Mr. Corr held various positions with The St. Joe
Company between 1998 and 2008, most recently as Executive Vice President. From 1992 to 1998, Mr. Corr was a
senior manager with The Walt Disney Company, where he was a key member of the team that developed the visionary
town of Celebration near Orlando, Florida. From 1990-1992, Mr. Corr served as an elected member of the Florida
House of Representatives. He holds a Bachelor of Arts degree from the University of Florida and has completed
programs with the Harvard Real Estate Institute and the Wharton School of Business at University of Pennsylvania.
Mark R. Bridwell, 57, Mr. Bridwell was promoted to Vice President and General Counsel in June 2014 and assumed
the role of Corporate Secretary in March 2015. He joined the Company in 2006 as Associate General Counsel for
Performance Fibers. In 2009, he became Associate General Counsel for Timber and Real Estate and in 2012 was
promoted to Assistant General Counsel for Land Resources. Prior to joining Rayonier, Mr. Bridwell served as counsel
for six years at Siemens Corporation. Previously, he was an attorney for five years with the international law firms of
Jones, Day, Reavis & Pogue and Seyfarth, Shaw, Fairweather & Geraldson. Mr. Bridwell has a B.S.B.A. in Finance
from the University of Central Florida, and an MBA and JD from Emory University.
Shelby L. Pyatt, 49, Ms. Pyatt was named Vice President, Human Resources and Information Technology in July
2014. Ms. Pyatt joined Rayonier in 2003 as Manager, Compensation and became Director, Compensation and
Employee Services in 2006. She was named Director, Compensation, Benefits and Employee Services in 2009 before
being promoted to her current position. Prior to joining Rayonier, Ms. Pyatt held human resources positions with CSX
Corporation and Barnett Bank. Ms. Pyatt holds a bachelor’s degree in Business Management.
W. Rhett Rogers, 43, Mr. Rogers was appointed to Vice President, Portfolio Management in February 2017. Mr. Rogers
oversees the Company’s acquisition and disposition activities, including HBU and non-strategic land sales, as well as
its land information systems function. He joined Rayonier in 2001 as a District Technical Forester, and has held numerous
roles of increasing responsibility, most recently as Director, Land Asset Management before being promoted to his
current position. Mr. Rogers holds a BS in Forestry from Louisiana Tech University, and both an MBA and MS in Forest
Resources from Mississippi State University.
April J. Tice, 46, Ms. Tice was promoted to Vice President, Financial Services and Corporate Controller in March
2019. In this position, she acts as the Company’s principal accounting officer. She joined Rayonier in 2010 and has
worked in various roles within the finance and financial reporting departments since that time. She previously served
as Director, Financial Services and Corporate Controller before being promoted to her current position. Prior to joining
Rayonier, Ms. Tice served in various accounting and/or audit roles at Deloitte & Touche, the State of Florida and two
private companies located in Florida. Ms. Tice holds a Bachelor of Fine Arts from Florida State University and a Master
of Accountancy with a tax concentration from the University of North Florida. Ms. Tice is a Certified Public Accountant
in the State of Florida.
EMPLOYEE RELATIONS
We employ 353 people, of which 260 are in the United States. We believe relations with our employees are
satisfactory.
AVAILABILITY OF REPORTS AND OTHER INFORMATION
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements
and amendments to those reports filed or furnished pursuant to Sections 13(a) or 14 of the Securities Exchange Act
of 1934 are made available to the public free of charge in the Investor Relations section of our website,
www.rayonier.com, shortly after we electronically file such material with, or furnish them to, the Securities and Exchange
Commission (“SEC”). Our corporate governance guidelines and charters of all committees of our board of directors
are also available on our website. The information on the Company’s website is not incorporated by reference into this
Annual Report on Form 10-K.
12
Item 1A. RISK FACTORS
Our operations are subject to a number of risks. When considering an investment in our securities, you should
carefully read and consider these risks, together with all other information in this Annual Report on Form 10-K. If any
of the events described in the following risk factors actually occur, our business, financial condition or operating results,
as well as the market price of our securities, could be materially adversely affected.
We are exposed to the cyclicality of the markets in which we operate and other factors beyond our control,
which could adversely affect our results of operations.
Some of the industries in which our end-use customers participate, such as the construction and home building
industries, the global pulp, packaging and paper industries and the real estate industry, are cyclical in nature, exposing
us to risks beyond our control, including general macroeconomic conditions, both in the U.S. and globally, as well as
local economic conditions.
In our Timber segments, the level of residential construction activity, including home repair and remodeling activity,
is the primary driver of sawtimber demand. In addition, demand for logs can be affected by the demand for wood chips
in the pulp and paper and engineered wood products markets, as well as the bio-energy production markets. The
ongoing level of activity in these markets is subject to fluctuation due to future changes in economic conditions, interest
rates, credit availability, population growth, weather conditions and other factors. Changes in global economic
conditions, such as new timber supply sources and changes in currency exchange rates, foreign interest rates and
foreign and domestic trade policies, can also negatively impact demand for our timber and logs. In addition, the
industries in which our customers participate are highly competitive and may experience overcapacity or reductions
in demand, all of which may affect demand for and pricing of our products.
In our Real Estate segment, our inability to sell our HBU properties at attractive prices could have a significant
effect on our results of operations. Demand for real estate can be affected by the availability of capital, changes in
interest rates, availability and terms of financing, changes in governmental agencies, changes in developer confidence,
actions by conservation organizations, actions by anti-development organizations, our ability to obtain land use
entitlements and other permits necessary for our development activities, local real estate market economic conditions,
competition from other sellers of land and real estate developers, the relative illiquidity of real estate investments,
employment rates, new housing starts, population growth, demographics and federal, state and local land use, zoning
and environmental protection laws or regulations (including any changes in laws or regulations). In addition, changes
in investor interest in purchasing timberlands could reduce our ability to execute sales of non-strategic timberlands.
These macroeconomic and cyclical factors impacting our operations are beyond our control and, if such conditions
deteriorate, could have an adverse effect on our business.
Weather and other natural conditions may limit our timber harvest and sales.
Weather conditions, changes in timber growth cycles, limitations on access (for example, due to prolonged wet
conditions) and other factors, including damage by fire, insect infestation, disease, prolonged drought and natural
disasters such as wind storms and hurricanes, may limit harvesting of our timberlands. The volume and value of timber
that can be harvested from our timberlands may be reduced by any such occurrence and other causes beyond our
control. As is typical in the forestry industry, we do not maintain insurance for any loss to our timber, including losses
due to fire and these other causes. These and other factors beyond our control could reduce our timber inventory and
our sustainable yield, thereby adversely affecting our financial results and cash flows.
We are subject to various risks related to the proposed merger transaction with Pope Resources.
As described elsewhere in this Annual Report on Form 10-K, the Company has entered into a definitive merger
agreement (the “Merger Agreement”) with Pope Resources, A Delaware Limited Partnership (“Pope Resources”)
pursuant to which the Company will acquire Pope Resources for consideration consisting of a mix of cash and equity.
The risks, contingencies and other uncertainties that could result in the failure of the transactions anticipated in the
Merger Agreement (the “Proposed Merger Transactions”) to be completed or, if completed, that could have a material
adverse effect on the results of operations, cash flows and financial position of the Company following the Proposed
Merger Transactions, and any anticipated benefits of the Proposed Merger Transactions to the Company, include:
•
the failure to obtain necessary regulatory or other approvals of the Proposed Merger Transactions, which could
result in a material delay in, or the abandonment of, the Proposed Merger Transactions or otherwise have a
material adverse effect on Rayonier or Pope Resources, or if obtained, the possibility of Rayonier being
13
subjected to conditions that could reduce or delay the expected cost savings and other benefits of the Proposed
Merger Transactions;
the failure to obtain necessary Pope Resources limited partnership unitholder and general partnership
stockholder approvals of the Proposed Merger Transactions;
the obligation of Rayonier to complete the Proposed Merger Transactions even if financing is not available or
is available only on terms other than those currently anticipated;
the failure to satisfy required closing conditions or complete the Proposed Merger Transactions in a timely
manner or at all;
the effect of the announcement of the Proposed Merger Transactions on each company’s ability to retain and
hire key personnel, maintain business relationships, and on operating results and business generally;
the risk that the Company may not be able to maintain its investment grade rating;
the potential impact of the Proposed Merger Transactions on the stock price of the Company, and the dividends
expected to be paid to Company stockholders in the future;
the failure to realize projected cost savings and other benefits from the Proposed Merger Transactions;
the incurrence of significant pre- and post-transaction related costs in connection with the Proposed Merger
Transactions that are, and will be, incurred regardless of whether the Proposed Merger Transactioons are
completed; and
the occurrence of any event giving rise to the right of a party to terminate the Merger Agreement.
•
•
•
•
•
•
•
•
•
Entitlement and development of real estate entail a lengthy, uncertain and costly approval process, which
could adversely affect our ability to grow the businesses in our Real Estate segment.
Entitlement and development of real estate entail extensive approval processes involving multiple regulatory
jurisdictions. It is common for a project to require multiple approvals, permits and consents from U.S. federal, state
and local governing and regulatory bodies. For example, in Florida, real estate projects must generally comply with
the provisions of the Community Planning Act and local land use, zoning and development regulations. In addition,
development projects in Florida that exceed certain specified regulatory thresholds (and are not located in a jurisdiction
classified as a dense urban land area or otherwise statutorily exempt) may require approval pursuant to the
Comprehensive Plan process standards. Compliance with these and other regulations and standards is more time
intensive and costly and may require additional long range infrastructure review and approvals, which can add to
project cost. In addition, development of properties containing delineated wetlands may be affected by revisions to
the definition of wetlands subject to state and/or federal regulation and may require one or more permits from the U.S.
federal government and/or state and local governmental agencies. Any of these issues can materially affect the cost,
timing and economic viability of our real estate projects.
The real estate entitlement process is frequently a political one, which involves uncertainty and often extensive
negotiation and concessions in order to secure and maintain the necessary approvals and permits. In the U.S., a
significant amount of our development property is located in jurisdictions in which local governments face challenging
issues relating to growth and development, including zoning and future land use, public services, water availability,
transportation and other infrastructure, and funding for same, and the requirements of state law, especially in the case
of Florida under the Community Planning Act process standards. In addition, anti-development groups are active,
especially in Florida, in filing litigation to oppose particular entitlement activities and development projects, and in
seeking legislation and other anti-development limitations on real estate development activities. We expect this type
of anti-development activity to continue in the future.
Entitlement and development of real estate are also subject to lengthy, uncertain and costly implementation
processes. Real estate development requires adequate soil and land conditions, water resources, access and utility
infrastructure, labor force, and weather conditions. Requirements for these items may vary depending upon the
contemplated development of the land for residential, commercial or industrial users, and may change from time to
14
time, including from the period of entitlement to the delivery of a developed property. Large-scale developments may
involve commitments from government agencies or third parties related to the delivery of infrastructure improvements
(such as roads, bridges, sidewalks, water, sewer and other utilities), the certainty and timing of which are outside of
our control. An adverse change in any of these items could materially affect the cost, timing and economic viability of
our real estate projects.
Changes in the laws, or interpretation or enforcement thereof, regarding the use and development of real estate,
changes in the political composition of state and local governmental bodies, and the identification of new facts regarding
our properties could lead to new or greater costs, delays and liabilities that could materially adversely affect our
business, profitability or financial condition.
Changes in energy and fuel costs could affect our results of operations and financial condition.
Energy costs are a significant operating expense for our logging and hauling contractors and for the contractors
who support the customers of our standing timber. Energy costs can be volatile and are susceptible to rapid and
substantial increases or decreases due to factors beyond our control, such as changing economic conditions, changing
environmental regulations, political unrest, instability in energy-producing nations, and supply and demand
considerations. Increases in the price of oil could adversely affect our business, financial condition and results of
operations. In addition, an increase in fuel costs, and its impact on the cost and availability of transportation for our
products, both domestically and internationally, and the cost and availability of third-party logging and hauling
contractors, could have a material adverse effect on the operating costs of our contractors and our standing timber
customers, as well as in defining economically accessible timber stands. Such factors could in turn have a material
adverse effect on our business, financial condition and results of operations, particularly in our Timber segments and
Trading segment.
We depend on third parties for logging and transportation services and increases in the costs or decreases
in the availability of quality service providers could adversely affect our business.
Our Timber segments depend on logging and transportation services provided by third parties, both domestically
and internationally, including by railroad, trucks, or ships. If any of our transportation providers were to fail to deliver
timber supply or logs to our customers in a timely manner, or were to damage timber supply or logs during transport,
we may be unable to sell it at full value, or at all. During the global financial crisis and subsequent downturn in U.S.
housing starts, timber harvest volumes declined significantly. As a result, many logging contractors, particularly cable
logging operators in the western U.S., permanently shut down their operations. As harvest levels have returned to
higher levels with the recovery in U.S. housing starts, this shortage of logging contractors has resulted in sharp increases
in logging costs and more limited availability of logging contractors. It is expected that the supply of qualified logging
contractors will be impacted by the availability of debt financing for equipment purchases as well as the availability of
adequately trained loggers. As housing starts continue to recover, harvest levels are expected to increase, placing
more pressure on the existing supply of logging contractors. Any significant failure or unavailability of third-party logging
or transportation providers, or increases in transportation rates or fuel costs, may result in higher logging costs or the
inability to capitalize on stronger log prices to the extent logging contractors cannot be secured at a competitive cost.
Such events could harm our reputation, negatively affect our customer relationships and adversely affect our business.
We are subject to risks associated with doing business outside of the U.S.
Although the majority of our customers are in the U.S., a significant portion of our sales are to end markets outside
of the U.S., including China, South Korea, Japan, India, and New Zealand. The export of our products into international
markets results in risks inherent in conducting business pursuant to international laws, regulations and customs. We
expect that international sales will continue to contribute to future growth. The risks associated with our business
outside the U.S. include:
•
•
•
changes in and reinterpretations of the laws, regulations and enforcement priorities of the countries in which
our products are sold;
responsibility to comply with anti-bribery laws such as the U.S. Foreign Corrupt Practices Act and similar anti-
bribery laws in other jurisdictions;
trade protection laws, policies and measures and other regulatory requirements affecting trade and investment,
including loss or modification of exemptions for taxes and tariffs, imposition of new tariffs and duties and import
and export licensing requirements;
15
•
•
•
•
•
•
•
•
continuing negative impacts from the imposition and/or threatened imposition of substantial tariffs on forest
products imports into China in connection with current trade tensions between China and the U.S.;
business disruptions arising from public health crises and outbreaks of communicable diseases, especially in
China, including the recent outbreak of the virus known as the coronavirus;
difficulty in establishing, staffing and managing non-U.S. operations;
product damage or losses incurred during shipping;
potentially negative consequences from changes in or interpretations of tax laws;
economic or political instability, inflation, recessions and interest rate and exchange rate fluctuations;
uncertainties regarding non-U.S. judicial systems, rules and procedures; and
uncertainties regarding trade policies implemented and/or under consideration by the current U.S. presidential
administration.
These risks could adversely affect our business, financial condition and results of operations.
Our estimates of timber inventories and growth rates may be inaccurate, which could impair our ability to
realize expected revenues.
We rely upon estimates of merchantable timber inventories (which include judgments regarding inventories that
may be lawfully and economically harvested), timber growth rates and end-product yields when acquiring and managing
working forests. These estimates, which are inherently inexact and uncertain in nature, are central to forecasting our
anticipated timber revenues and expected cash flows. Growth rates and end-product yield estimates are developed
using statistical sampling, harvest results and growth and yield modeling, in conjunction with industry research
cooperatives and by in-house forest biometricians, using measurements of trees in research plots spread across our
timberland holdings. The growth equations predict the rate of height and diameter growth of trees so that foresters
can estimate the volume of timber that may be present in a tree stand at a given age. Tree growth varies by species,
soil type, geographic area, and climate. Errors in or inappropriate application of growth equations in forest management
planning may lead to inaccurate estimates of future volumes. If the assumptions we rely upon change or these estimates
are inaccurate, our ability to manage our timberlands in a sustainable or profitable manner may be diminished, which
may cause our results of operations and our stock price to be adversely affected.
Our businesses are subject to extensive environmental laws and regulations that may restrict or adversely
affect our ability to conduct our business.
Environmental laws and regulations are constantly changing and are generally becoming more restrictive. Laws,
regulations and related judicial decisions and administrative interpretations affecting our business are subject to change,
and new laws and regulations are frequently enacted. These changes may adversely affect our ability to harvest and
sell timber, remediate contaminated properties and/or entitle real estate. These laws and regulations may relate to,
among other things, the protection of timberlands and endangered species, recreation and aesthetics, protection and
restoration of natural resources, surface water quality, timber harvesting practices, and remedial standards for
contaminated property and groundwater. Over time, the complexity and stringency of these laws and regulations have
increased and the enforcement of these laws and regulations has intensified. For example, the U.S. Environmental
Protection Agency (“EPA”) has pursued a number of initiatives that, if implemented, could impose additional operational
and pollution control obligations on industrial facilities like those of Rayonier’s customers, especially in the area of air
emissions and wastewater and stormwater control. In addition, as a result of certain judicial rulings and state and
federal initiatives, including some that would require timberland operators to obtain permits to conduct certain ordinary
course forestry activities, silvicultural practices on our timberlands could be impacted in the future. Environmental laws
and regulations will likely continue to become more restrictive and over time could adversely affect our business,
financial condition and results of operations.
If regulatory and environmental permits are delayed, restricted or rejected, a variety of our operations could be
adversely affected. We are required to seek permission from government agencies in the states and countries in which
we operate to perform certain activities related to our properties. Any of these agencies could delay review of, or reject,
any of our filings. In our Southern Timber, Pacific Northwest Timber and New Zealand Timber segments, any delay
associated with a filing could result in a delay or restriction in replanting, thinning, insect control, fire control or harvesting,
any of which could have an adverse effect on our operating results. For example, in Washington State, we are required
16
to file a Forest Practice Application for each unit of timberland to be harvested. These applications may be denied,
conditioned or restricted by the regulatory agency. Actions by the regulatory agencies could delay or restrict timber
harvest activities pursuant to these permits. Delays or harvest restrictions on a significant number of applications could
have an adverse effect on our operating results.
Environmental groups and interested individuals may seek to delay or prevent a variety of operations. We expect
that environmental groups and interested individuals will intervene with increasing frequency in the regulatory processes
in the states and countries where we own, lease or manage timberlands. For example, in Washington State,
environmental groups and interested individuals may appeal individual forest practice applications or file petitions with
the Forest Practices Board to challenge the regulations under which forest practices are approved. These and other
challenges could materially delay or prevent operations on our properties. For example, interveners at times may bring
legal action in Florida in opposition to entitlement and change of use of timberlands to commercial, industrial or
residential use. Delays or restrictions due to the intervention of environmental groups or interested individuals could
adversely affect our operating results. In addition to intervention in regulatory proceedings, interested groups and
individuals may file or threaten to file lawsuits that seek to prevent us from obtaining permits, implementing capital
improvements or pursuing operating plans. Any threatened or actual lawsuit could delay harvesting on our timberlands,
affect how we operate or limit our ability to modify or invest in our real estate. Among the remedies that could be
enforced in a lawsuit is a judgment preventing or restricting harvesting on a portion of our timberlands.
Third-party operators may create environmental liabilities. We lease and/or grant easements across some of our
properties to third-party operators for the purpose of operating communications towers, generating renewable energy
(wind and solar), operating pipelines for the transport of gases and liquids, and exploring, extracting, developing and
producing oil, gas, rock and other minerals. These activities are subject to federal, state and local laws and regulations.
These operations may also create risk of environmental liabilities for an unlawful discharge of oil, gas, chemicals or
other materials into the air, soil or water. Generally, these third-party operators indemnify us against any such liability,
and we require that they maintain liability insurance to the extent practical to do so. However, if for any reason our
third-party operators are not able to honor their obligations to us, or if insurance is not in effect, then it is possible that
we could be responsible for costs associated with environmental liabilities caused by such third-party operators.
The impact of existing regulatory restrictions on future harvesting activities may be significant. U.S. federal, state
and local laws and regulations, as well as those of other countries, which are intended to protect threatened and
endangered species, as well as waterways and wetlands, limit and may prevent timber harvesting, road building and
other activities on our timberlands. Restrictions relating to threatened and endangered species apply to activities that
would adversely impact a protected species or significantly degrade its habitat. The size of the restricted area varies
depending on the protected species, the time of year and other factors, but can range from less than one acre to
several thousand acres. A number of species that naturally live on or near our timberlands, including, among others,
the northern spotted owl, marbled murrelet, several species of salmon and trout in the Pacific Northwest, and the red
cockaded woodpecker, red hills salamander, Louisiana pine snake and eastern indigo snake in the Southeast, are
protected under the Federal Endangered Species Act (the “ESA”) or similar U.S. federal and state laws. A significant
number of other species, such as the southeastern gopher tortoise are currently under review for possible protection
under the ESA. As we gain additional information regarding the presence of threatened or endangered species on our
timberlands, or if other regulations, such as those that require buffers to protect water bodies, become more restrictive,
the amount of our timberlands subject to harvest restrictions could increase.
We formerly owned or operated or may own or acquire timberlands or properties that may require environmental
remediation or otherwise be subject to environmental and other liabilities. We owned or operated manufacturing facilities
and discontinued operations that we do not currently own, and we may currently own or may acquire timberlands and
other properties in the future that are subject to environmental liabilities, such as remediation of soil, sediment and
groundwater contamination and other existing or potential liabilities. In connection with the spin-off of our Performance
Fibers business, and pursuant to the related Separation and Distribution Agreement between us and Rayonier
Advanced Materials, Rayonier Advanced Materials has assumed any environmental liability of ours in connection with
the manufacturing facilities and discontinued operations related to the Performance Fibers business and has agreed
to indemnify and hold us harmless in connection with such environmental liabilities. However, in the event we seek
indemnification from Rayonier Advanced Materials, we cannot provide any assurance that a court will enforce our
indemnification right if challenged by Rayonier Advanced Materials or that Rayonier Advanced Materials will be able
to fund any amounts for indemnification owed to us. In addition, the cost of investigation and remediation of contaminated
timberlands and properties that we currently own or acquire in the future could increase operating costs and adversely
affect financial results. We could also incur substantial costs, such as civil or criminal fines, sanctions and enforcement
actions (including orders limiting our operations or requiring corrective measures, installation of pollution control
17
equipment or other remedial actions), clean-up and closure costs, and third-party claims for property damage and
personal injury as a result of violations of, or liabilities under, environmental laws and regulations related to such
timberlands or properties.
The industries in which we operate are highly competitive.
The markets in which we operate are highly competitive, and we compete with companies that have substantially
greater financial resources than we do in each of these businesses. The competitive pressures relating to our Timber
segments are primarily driven by quantity of product supply and quality of the timber offered by competitors in the
domestic and export markets, each of which may impact pricing. With respect to our Real Estate segment, we compete
with other owners of entitled and unentitled properties. Each property has unique attributes, but overall quantity of
supply and price for residential, commercial, industrial and rural properties in the geographic areas in which we operate
are the most significant competitive drivers. The markets in which our Trading segment operates are very competitive
with numerous entities competing for export log supply at different ports across New Zealand.
Our strategy will be adversely affected if we are unable to make future acquisitions.
We have pursued, and intend to continue to pursue, acquisitions of timberland and real estate properties that meet
our investment criteria and achieve our strategic goals of growing the size and average quality of our land base. The
ability to grow through acquisitions or other investments depends upon our ability to identify, negotiate, complete and
integrate suitable acquisitions or joint venture arrangements. In addition, the discount rate we use in our acquisition
underwriting has to meet our internal hurdle rate while also being competitive with that of other timberland investors.
In particular, our future success and growth depend upon our ability to make acquisitions that increase merchantable
timber inventory and complement the existing age-class structure of our ownership. If we are unable to make acquisitions
on acceptable terms or that do not support our strategic goals, our revenues and cash flows may stagnate or decline.
Our inability to access the capital markets could adversely affect our business strategy and competitive
position.
Due to the REIT income distribution requirements, we rely significantly on external sources of capital to finance
growth and acquisitions. Both our ability to obtain financing and the related cost of capital are affected by a number
of factors, many of which are outside of our control, including a decline in general market conditions, decreased market
liquidity, a downgrade to our public debt rating, increases in interest rates, an unfavorable market perception of our
growth potential, a decrease in our current or estimated future earnings or a decrease in the market price of our common
stock. If capital is not available when needed, or is available only on unfavorable terms relative to other timberland
REITs or TIMOs, or not at all, we may be unable to complete acquisitions or otherwise take advantage of business
opportunities or respond to competitive pressures. As of December 31, 2019, our credit ratings from S&P and Moody’s
Investors Service (Moody’s) were BBB- and Baa3, respectively. Any combination of the factors described above,
including our failure to maintain our investment grade credit rating, could prevent us from obtaining the capital we
require on terms that are acceptable to us, or at all, which could adversely affect our business, liquidity and competitive
position.
We are subject to risks associated with an increase in market interest rates.
One of the factors that may influence the price of our common shares is our annual dividend yield as compared
to yields on other financial instruments. Thus, an increase in market interest rates could result in higher yields on other
financial instruments and could adversely affect the relative attractiveness of an investment in the Company and,
accordingly, the trading price of our common shares. An increase in market interest rates could cause increases in
discount rates and, accordingly, a decline in property values and total returns for timberland assets. An increase in
market interest rates would also negatively impact financing costs on our floating rate debt as well as any additional
debt we may raise.
We are subject to risks associated with the discontinuation of LIBOR.
The U.K. Financial Conduct Authority announced in 2017 that it intends to phase out the London Interbank Offered
Rate (“LIBOR”) by the end of 2021. Changes in the method of calculating LIBOR, or the replacement of LIBOR with
an alternative rate or benchmark, may adversely affect interest rates and could result in higher borrowing costs. In
addition, if changes are made to the method of calculating LIBOR or LIBOR ceases to exist, we may need to amend
certain contracts, including our credit facility and swap arrangements, and we cannot predict what alternative rate or
benchmark would be negotiated. This may also result in an increase in our interest rate expense.
18
The impacts of climate-related initiatives, at the international, U.S. federal and state levels, remain uncertain
at this time.
There continue to be numerous international, U.S. federal and state-level initiatives and proposals to address
domestic and global climate issues. Within the U.S., most of these proposals would regulate and/or tax the production
of carbon dioxide and other “greenhouse gases” to facilitate the reduction of carbon compound emissions into the
atmosphere, and provide tax and other incentives to produce and use “cleaner” energy.
In late 2009, the EPA issued an “endangerment finding” under the Clean Air Act with respect to certain greenhouse
gases, leading to the regulation of carbon dioxide as a pollutant under the Clean Air Act and having significant
ramifications for Rayonier and the industry in general. In this regard, the EPA has published various regulations,
affecting the operation of existing and new industrial facilities that emit carbon dioxide. As a result of the EPA’s decision
to regulate greenhouse gases under the Clean Air Act, states will now have to consider them in permitting new or
modified facilities.
Overall, it is reasonably likely that legislative and regulatory activity in this area will in some way affect Rayonier
and the U.S. customers of our Southern Timber and Pacific Northwest Timber segments, but it is unclear at this time
what the nature of the impact will be. We continue to monitor political and regulatory developments in this area, but
their overall impact on Rayonier, from a cost, benefit and financial performance standpoint, remains uncertain at this
time. In addition, the EPA has yet to finalize the treatment of biomass under greenhouse gas regulatory schemes,
leaving Rayonier’s biomass customers in a position of uncertainty.
REIT AND TAX-RELATED RISKS
Loss of our REIT status would adversely affect our cash flow and stock price.
We intend to continue to operate in accordance with REIT requirements pursuant to the Internal Revenue Code
of 1986, as amended (the “Code”), and related U.S. Treasury regulations and administrative guidance. Qualification
as a REIT involves the application of highly technical and complex provisions of the Code, which are subject to change,
perhaps retroactively, and which are not within our control. We cannot assure that we will remain qualified as a REIT
or that new legislation, U.S. Treasury regulations, administrative interpretations or court decisions will not significantly
affect our ability to remain qualified as a REIT or the U.S. federal income tax consequences of such qualification.
We continually monitor and test our compliance with all REIT requirements. In particular, we regularly test our
compliance with the REIT “asset tests,” which require generally that, at the close of each calendar quarter: (1) at least
75% of the market value of our total assets must consist of REIT-qualifying interests in real property (such as
timberlands), including leaseholds and options to acquire real property and leaseholds, as well as cash and cash items
and certain other specified assets, (2) no more than 25% of the market value of our total assets may consist of other
assets that are not qualifying assets for purposes of the 75% test in clause (1) above, and (3) no more than 20% (25%
for calendar years prior to 2018) of the market value of our total assets may consist of the securities of one or more
“taxable REIT subsidiaries.” As of December 31, 2019, Rayonier is in compliance with these asset tests.
If in any taxable year we fail to qualify as a REIT and are not entitled to relief under the Code, we will not be allowed
a deduction for dividends paid to shareholders in computing our taxable income and we will be subject to U.S. federal
income tax on our REIT taxable income. In addition, we will be disqualified from qualification as a REIT for the four
taxable years following the year during which the qualification was lost, unless we are entitled to relief under certain
provisions of the Code. As a result, our net income and the cash available for distribution to our shareholders could
be reduced for up to five years or longer, which could have a material adverse effect on our financial condition.
If we fail to remain qualified as a REIT, we may also need to borrow funds or liquidate some investments or assets
to pay any resulting additional tax liability. Accordingly, cash available for distribution to our shareholders would be
reduced.
19
Certain of our business activities are potentially subject to prohibited transactions tax.
As a REIT, we will be subject to a 100% tax on any net income from “prohibited transactions.” In general, prohibited
transactions are sales or other dispositions of property to customers in the ordinary course of business. Sales of logs,
and dealer sales of timberlands or other real estate, constitute prohibited transactions unless the sale satisfies certain
safe harbor provisions in the Code.
We intend to avoid the 100% prohibited transactions tax by complying with the prohibited transaction safe harbor
provisions and conducting activities that would otherwise be prohibited transactions through one or more taxable REIT
subsidiaries. We may not, however, always be able to identify timberland properties that become part of our “dealer”
real estate sales business. Therefore, if we sell timberlands which we incorrectly identify as property not held for sale
to customers in the ordinary course of business, we may be subject to the 100% prohibited transactions tax.
Our cash dividends are not guaranteed and may fluctuate.
Generally, REITs are required to distribute 90% of their ordinary taxable income, but not their net capital gains
income. Accordingly, we do not generally believe that we are required to distribute material amounts of cash since
substantially all of our taxable income is generally treated as capital gains income. However, a REIT must pay corporate
level tax on its undistributed taxable income and capital gains.
Our Board of Directors, in its sole discretion, determines the amount of quarterly dividends to be paid to our
shareholders based on consideration of a number of factors. These factors include, but are not limited to, our results
of operations, cash flow and capital requirements, economic conditions, tax considerations, borrowing capacity and
other factors, including debt covenant restrictions that may impose limitations on cash payments, future acquisitions
and divestitures, harvest levels, changes in the price and demand for our products and general market demand for
timberlands, including those timberland properties that have higher and better uses. Consequently, our dividend levels
may fluctuate.
Lack of shareholder ownership and transfer restrictions in our articles of incorporation may affect our ability
to qualify as a REIT.
In order to qualify as a REIT, an entity cannot have five or fewer individuals who own, directly or indirectly after
applying attribution of ownership rules, 50% or more of the value of its outstanding shares during the last six months
in each calendar year. Although it is not required by law or the REIT provisions of the Code, almost all REITs have
adopted ownership and transfer restrictions in their articles of incorporation or organizational documents which seek
to assure compliance with that rule. While we are not in violation of the ownership rules, we do not have, nor do we
have any current plans to adopt, share ownership and transfer restrictions. As such, the possibility exists that five or
fewer individuals could acquire 50% or more of the value of our outstanding shares, which could result in our
disqualification as a REIT.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
20
Item 2. PROPERTIES
The following table provides a breakdown of our timberland holdings as of September 30, 2019 and December 31,
2019:
(acres in 000s)
As of September 30, 2019
As of December 31, 2019
Owned
Leased
Total
Owned
Leased
Total
Southern
Alabama
Arkansas
Florida
Georgia
Louisiana
Mississippi
Oklahoma
South Carolina
Texas
Pacific Northwest
Oregon
Washington
New Zealand (a)
Total
228
—
308
631
128
67
92
18
178
1,650
61
317
378
185
2,213
14
9
73
79
—
—
—
—
—
175
—
1
1
229
405
242
9
381
710
128
67
92
18
178
1,825
61
318
379
414
2,618
226
—
331
628
128
67
92
18
184
1,674
61
318
379
185
2,238
14
7
63
77
—
—
—
—
—
161
—
—
—
229
390
240
7
394
705
128
67
92
18
184
1,835
61
318
379
414
2,628
(a)
Represents legal acres owned and leased by the New Zealand subsidiary, in which Rayonier owns a 77% interest. As of December 31,
2019, legal acres in New Zealand were comprised of 295,000 plantable acres and 119,000 non-productive acres.
21
The following tables detail changes in our portfolio of owned and leased timberlands by state from December 31,
2018 to December 31, 2019:
(acres in 000s)
Southern
Alabama
Florida
Georgia
Louisiana
Mississippi
Oklahoma
South Carolina
Texas
Pacific Northwest
Oregon
Washington
New Zealand (b)
Total
December 31,
2018
Acquisitions
Sales
Other (a)
December 31,
2019
Acres Owned
229
290
622
129
67
92
18
182
1,629
61
316
377
178
2,184
—
43
10
—
—
—
—
7
60
—
2
2
7
69
(3)
(2)
(4)
(1)
—
—
—
(5)
(15)
—
(1)
(1)
—
(16)
—
—
—
—
—
—
—
—
—
—
1
1
—
1
226
331
628
128
67
92
18
184
1,674
61
318
379
185
2,238
(a)
(b)
Includes adjustments for land mapping reviews.
Represents legal acres owned by the New Zealand subsidiary, in which Rayonier has a 77% interest.
(acres in 000s)
Southern
Alabama
Arkansas
Florida
Georgia
Pacific Northwest
Washington
New Zealand (c)
Total
December 31,
2018
New Leases
Acres Leased
Sold/Expired
Leases (a)
Other (b)
December 31,
2019
14
9
73
81
177
1
230
408
—
—
—
—
—
—
2
2
—
(1)
(10)
(4)
(15)
—
(3)
(18)
—
(1)
—
—
(1)
(1)
—
(2)
14
7
63
77
161
—
229
390
Includes acres previously under lease that have been harvested and activity for the relinquishment of leased acres.
Includes adjustments for land mapping reviews.
(a)
(b)
(c) Represents legal acres leased by the New Zealand subsidiary, in which Rayonier has a 77% interest.
22
TIMBERLAND LEASES & DEEDS
See Note 4 - Leases for more information on U.S. and New Zealand timberland leases including lease terms and
renewal provisions.
The following table details the Company’s acres under lease as of December 31, 2019 by type of lease and
estimated lease expiration:
(acres in 000s)
Location
Southern ............. Fixed Term
Type of Lease
Fixed Term with Renewal Option (a)
New Zealand....... CFL - Perpetual (b)
CFL - Fixed Term (b)
CFL - Terminating (b)
Forestry Right (b)
Fixed Term Land Leases
Total Acres under Long-term Leases ..........................
Lease Expiration
Total
2020-2029
2030-2039
2040-2049
Thereafter
145
16
77
3
9
124
16
390
96
8
—
—
1
16
—
121
43
8
—
—
—
25
1
77
—
—
—
—
8
12
1
21
6
—
77
3
—
71
14
171
Includes approximately 7,000 acres of timber deeds.
(a)
(b) Estimated lease expiration / termination based on the earlier of: (1) the scheduled expiration / termination date, or (2) the estimated year of
final harvest before such expiration / termination date.
The following table details the Company’s estimated leased acres, lease expirations and lease costs over the next
five years:
(acres and dollars in 000s, except per acre amounts)
Location
Southern .................
2020
2021
2022
2023
2024
New Zealand ..........
Leased Acres Expiring (a)
Year-end Leased Acres (a)
Estimated Annual Lease Cost (a)(b)
Average Lease Cost per Acre (a)
Leased Acres Expiring
Year-end Leased Acres
Estimated Annual Lease Cost (b)(d)
Average Lease Cost per Acre (c)(d)
7
154
$4,552
$30.21
2
227
$3,988
$21.71
6
148
$4,491
$30.26
—
227
$3,988
$21.71
10
138
$4,196
$30.80
—
227
$3,932
$21.64
36
102
$3,970
$32.22
—
227
$3,932
$21.64
2
100
$3,337
$35.45
—
227
$3,932
$21.64
Includes timber deeds.
(a)
(b) Represents capitalized and expensed lease payments.
(c) Excludes lump sum payments.
(d) Based on the year-end foreign exchange rate.
OTHER NON-TIMBERLAND LEASES
See Note 4 - Leases for information on other non-timberland leases.
Item 3.
LEGAL PROCEEDINGS
The information set forth under Note 11 — Contingencies is incorporated herein by reference.
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
23
PART II
Item 5.
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
MARKET FOR THE REGISTRANT’S COMMON EQUITY
The Company’s common shares are publicly traded on the NYSE, the only exchange on which our shares are
listed, under the trading symbol RYN. Shares of the Company have no par value.
TAX CHARACTERISTICS OF DIVIDENDS
The table below summarizes the tax characteristics of the dividend paid to shareholders on a percentage basis
for the three years ended December 31, 2019:
Total cash dividend per common share .....................................................
Tax characteristics: ....................................................................................
Capital gain ...............................................................................................
2019
$1.08
2018
$1.06
2017
$1.00
100%
100%
100%
HOLDERS
There were approximately 5,351 shareholders of record of our common shares on February 14, 2020.
ISSUER REPURCHASES
In February 2016, the Board of Directors approved the repurchase of up to $100 million of Rayonier’s common
shares (the “share repurchase program”) to be made at management’s and the Board of Directors’ discretion. The
program has no time limit and may be suspended or discontinued at any time. There were no shares repurchased
under this program in the fourth quarter of 2019. Based on the period-end closing stock price of $32.76 at December 31,
2019, there was $90.9 million, or approximately 2,774,133 shares, remaining under this program.
The following table provides information regarding our purchases of Rayonier common shares during the quarter
ended December 31, 2019:
Period
October 1 to October 31................................
November 1 to November 30 ........................
December 1 to December 31 ........................
Total .................................
Total
Number of
Shares
Purchased
(a)
—
29
—
29
Average
Price
Paid per
Share
—
$30.95
—
Total Number of
Shares
Purchased as
Part of Publicly
Announced Plans
or Programs (b)
Maximum
Number of
Shares that May
Yet Be Purchased
Under the Plans
or Programs (c)
—
—
—
—
7,245,832
6,844,434
6,651,522
(a)
Includes 29 shares of the Company’s common shares purchased in November from employees in non-open market transactions. The shares
were sold by employees of the Company in exchange for cash that was used to pay withholding taxes associated with the vesting of share-
based awards under the Company’s Incentive Stock Plan. The price per share surrendered is based on the closing price of the Company’s
common shares on the respective vesting dates of the awards.
(b) Purchases made in open-market transactions under the $100 million share repurchase program announced on February 10, 2016.
(c) Maximum number of shares authorized to be purchased as of December 31, 2019 includes 3,877,389 under the anti-dilutive program and
approximately 2,774,133 under the share repurchase program. Maximum number of shares authorized to be purchased at the end of October,
November and December are based on month-end closing stock prices of $26.98, $30.63 and $32.76, respectively.
24
STOCK PERFORMANCE GRAPH
The following graph compares the performance of Rayonier’s common shares (assuming reinvestment of
dividends) with a broad-based market index (Standard & Poor’s (“S&P”) 500), and two industry-specific indices (the
S&P Global Timber and Forestry Index and the S&P 1500 Real Estate Index).1
The table and related information below shall not be deemed to be “filed” with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934,
each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.
The data in the following table was used to create the above graph as of December 31:
2014
Rayonier Inc. ................................................................................... $100
S&P 500® Index ...............................................................................
100
S&P® Global Timber and Forestry Index ..........................................
100
S&P® 1500 Real Estate Sector Index1 .............................................
100
2015
$83
101
91
107
2016
$103
114
100
115
2017
$127
138
132
132
2018
$115
132
106
131
2019
$140
173
123
179
1 Based on constituents as of December 31, 2019 and excludes entities that were not publicly traded for the entire comparative period.
25
Item 6.
SELECTED FINANCIAL DATA
The following financial data should be read in conjunction with our Consolidated Financial Statements.
At or For the Years Ended December 31,
2019
2015
2017
(dollar amounts in millions, except per share data)
2016
2018
Profitability:
Sales (a)
.................................................................................................
Operating income (b) ..............................................................................
Income from continuing operations attributable to Rayonier Inc. (b)........
Diluted earnings per common share from continuing operations .............
$711.6
107.0
59.1
0.46
$816.1
$819.6
$815.9
$568.8
170.1
102.2
0.79
215.5
148.8
1.16
255.8
212.0
1.73
77.8
46.2
0.37
Financial Condition:
Total assets ............................................................................................. $2,861.0
................................................................................................
Total debt
1,055.1
Shareholders’ equity ...............................................................................
1,537.6
1,654.6
Shareholders’ equity — per share ...........................................................
11.89
12.78
$2,780.7
$2,858.5
$2,685.8
$2,315.9
972.6
1,025.4
1,693.0
13.13
1,061.9
1,496.9
12.18
830.6
1,361.7
11.09
Cash Flows:
Cash provided by operating activities ......................................................
Cash used for investing activities ............................................................
Cash used for (provided by) for financing activities .................................
Depreciation, depletion and amortization ................................................
Cash dividends paid ...............................................................................
Dividends paid — per share ....................................................................
$214.3
$310.1
219.4
79.6
128.2
141.1
$1.08
132.9
193.7
144.1
136.8
$1.06
$256.3
235.3
$203.8
235.0
6.9
(114.4)
127.6
127.1
$1.00
115.1
122.8
$1.00
$177.2
149.5
116.5
113.7
124.9
$1.00
Non-GAAP Financial Measures:
Adjusted EBITDA (c)
Southern Timber ..............................................................................
$119.7
$102.8
$91.6
$92.9
$101.0
Pacific Northwest Timber .................................................................
New Zealand Timber ........................................................................
Real Estate ......................................................................................
Trading ............................................................................................
16.7
75.8
59.5
—
Corporate and other .........................................................................
(23.9)
40.9
90.8
123.4
1.0
(21.1)
33.1
85.1
95.5
4.6
21.2
56.5
86.6
2.0
21.7
27.1
76.7
1.2
(19.4)
(19.4)
(19.6)
Total Adjusted EBITDA (c) ......................................................
$247.8
$337.7
$290.5
$239.7
$208.1
Other:
Timberland and real estate acres — owned, leased, or managed, in
millions of acres ..................................................................................
2.6
2.6
2.6
2.7
2.7
26
Selected Operating Data:
Timber
Sales volume (thousands of tons)
2019
For the Years Ended December 31,
2017
2018
2016
Southern ....................................................................................
Pacific Northwest .......................................................................
New Zealand Domestic .............................................................
New Zealand Export ..................................................................
6,066
1,211
1,293
1,438
Total Sales Volume ...............................................................
10,008
Real Estate — acres sold
Improved Development
.............................................................
Unimproved Development .........................................................
Rural
.........................................................................................
Timberlands & Non-Strategic .....................................................
Large Dispositions (d) ................................................................
44
1,196
7,656
8,254
—
5,718
1,305
1,371
1,304
9,698
44
751
5,008
27,811
—
Total Acres Sold ....................................................................
17,151
33,614
5,314
1,247
1,300
1,239
9,100
23
1,449
6,344
25,653
49,599
83,068
5,317
1,195
1,204
1,017
8,733
47
206
6,684
28,751
92,434
2015
5,492
1,243
1,346
1,065
9,146
74
699
8,754
29,737
—
128,121
39,264
(a) The 2017 and 2016 results included sales of $95.4 million and $207.3 million, respectively, related to Large Dispositions.
(b) The 2017 and 2016 results included a gain of $67.0 million and $143.9 million, respectively, related to Large Dispositions.
(c) Adjusted EBITDA is defined 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, the gain on foreign currency derivatives and Large
Dispositions. 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. A reconciliation of Adjusted EBITDA to Operating Income (Loss) and Net
Income, respectively, is included in the following pages and Item 7 — Performance and Liquidity Indicators.
(d) 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. Sales designated as Large Dispositions are excluded from our calculation of Adjusted EBITDA and CAD.
27
Reconciliation of Operating Income (Loss) by Segment to Adjusted EBITDA by Segment
(dollars in millions)
Southern
Timber
Pacific
Northwest
Timber
New
Zealand
Timber
Real
Estate
Trading
Corporate
and
other
Total
2019
Operating income (loss) ......................................................
$57.8
($12.4)
$48.0
$38.7
Add:
Add:
Depreciation, depletion and amortization ...............
Non-cash cost of land and improved development
61.9
—
Adjusted EBITDA ................................................................
$119.7
2018
Operating income ................................................................
$44.2
Add:
Add:
Depreciation, depletion and amortization ...............
Non-cash cost of land and improved development
58.6
—
29.2
—
$16.7
$8.1
32.8
—
27.8
—
8.2
12.6
$75.8
$59.5
—
—
—
—
($25.1)
$107.0
1.2
—
128.2
12.6
($23.9)
$247.8
$62.8
$76.2
$1.0
($22.3)
$170.1
28.0
—
23.6
23.6
—
—
1.2
—
144.1
23.6
Adjusted EBITDA ................................................................
$102.8
$40.9
$90.8
$123.4
$1.0
($21.1)
$337.7
2017
Operating income ................................................................
Add:
Add:
Add:
Depreciation, depletion and amortization ...............
Non-cash cost of land and improved development
Costs related to shareholder litigation (a)...............
Less:
Large Dispositions .................................................
$42.2
49.4
—
—
—
$1.1
32.0
—
—
—
Adjusted EBITDA ................................................................
$91.6
$33.1
$85.1
2016
$57.6
$130.9
$4.6
($20.9)
$215.5
27.5
—
—
—
17.9
13.7
—
(67.0)
$95.5
—
—
—
—
0.8
—
0.7
—
127.6
13.7
0.7
(67.0)
$4.6
($19.4)
$290.5
Operating income (loss) ......................................................
Add:
Add:
Add:
Depreciation, depletion and amortization ...............
Non-cash cost of land and improved development
Costs related to shareholder litigation (a)...............
Less: Gain on foreign currency derivatives (b) ................
Less:
Large Dispositions .................................................
$43.1
49.8
—
—
—
—
($4.0)
25.2
—
—
—
—
$33.0
$202.4
$2.0
($20.8)
$255.8
23.4
—
—
—
—
16.3
11.7
—
—
(143.9)
—
—
—
—
—
0.4
—
2.2
(1.2)
115.1
11.7
2.2
(1.2)
—
(143.9)
Adjusted EBITDA ................................................................
$92.9
$21.2
$56.5
$86.6
$2.0
($19.4)
$239.7
2015
Operating income ................................................................
Add:
Depreciation, depletion and amortization ...............
Add:
Add:
Non-cash cost of land and improved development
Costs related to shareholder litigation (a)...............
$46.7
54.3
—
—
$6.9
14.8
—
—
$1.6
25.5
—
—
$45.5
$1.2
($24.1)
18.7
12.5
—
—
—
—
0.4
—
4.1
$77.8
113.7
12.5
4.1
Adjusted EBITDA ................................................................
$101.0
$21.7
$27.1
$76.7
$1.2
($19.6)
$208.1
(a) Costs related to shareholder litigation include expenses incurred as a result of the shareholder derivative demands. In addition, these costs include
the costs associated with class action securities litigation brought against the Company in a case styled In re Rayonier Inc. Securities Litigation,
filed in the United States District Court for the Middle District of Florida (Case No. 3:14-cv01395-RJC-JBT) and the Company’s response to a
subpoena it received from the SEC in November 2014. In July 2016, the Division of Enforcement of the SEC notified the Company that it had
concluded its investigation into the Company. In October 2017, the court entered orders approving the settlement of the class action securities
litigation and dismissing the case against all defendants with prejudice.
(b) The Company used foreign exchange derivatives to mitigate the risk of fluctuations in foreign exchange rates while awaiting the planned capital
contribution to the New Zealand subsidiary.
28
Item 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
EXECUTIVE SUMMARY
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 U.S. 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. We own or lease under long-term agreements approximately 2.2 million acres of
timberland and real estate in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Oklahoma, Oregon, South
Carolina, Texas and Washington. We also have a 77% ownership interest in Matariki Forestry Group, a joint venture
(“New Zealand subsidiary”), that owns or leases approximately 414,000 gross acres (295,000 net plantable acres) of
timberlands in New Zealand.
Across our timberland management segments, we sell standing timber (primarily at auction to third parties) and
delivered logs. Sales from our timber segments include all activities related to the harvesting of timber and other value-
added activities such as the licensing of properties for hunting and the leasing of properties for mineral extraction and
cell towers. We believe we are the second largest publicly-traded timberland REIT and the fifth largest private timberland
owner in the United States. Our Real Estate business manages all property sales and seeks to maximize the value of
our properties that are more valuable for development, recreational or residential uses than for growing timber, and
opportunistically sells non-strategic timberlands. Our Trading segment, also part of the New Zealand subsidiary, markets
and sells timber owned or acquired from third parties in New Zealand and Australia.
CURRENT YEAR DEVELOPMENTS
During 2019, we acquired approximately 71,000 acres of timberlands for $142.3 million. For additional information
on acquisitions, see Note 3 — Timberland Acquisitions.
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.
In 2019, pricing in the U.S. South remained relatively flat versus the prior year, with a slight increase in pulpwood
prices offset by a slight decrease in sawtimber prices. Both pulpwood and sawtimber pricing tend to be driven by local
market supply and demand dynamics, which vary considerably based on the available inventory of logs, local market
mill demand, and access to export markets. U.S. South exports declined significantly in 2019 versus 2018, due to the
implementation of tariffs on log exports to China in the third quarter of 2018, which limited overall price momentum.
In the Pacific Northwest, log prices were relatively flat throughout 2019, but considerably lower than 2018 average
prices. Prices declined in 2019 due to the implementation of tariffs on log exports to China in the third quarter of 2018,
which led to a significant decline in export demand. In New Zealand, export prices to China deteriorated during 2019
as salvage logs from Europe flooded the market. Towards the end of 2019, domestic prices also declined in response
to the lower export prices.
In Real Estate, overall demand and pricing for HBU properties remained relatively strong in 2019. In addition, we
saw increased interest in our improved development properties, specifically Wildlight, our development project north
of Jacksonville, Florida, and Richmond Hill, our development project south of Savannah, Georgia.
29
CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
The preparation of financial statements requires us to establish accounting policies and make estimates,
assumptions and judgments that affect our assets, liabilities, revenues and expenses, and to disclose contingent assets
and liabilities in our Annual Report on Form 10-K. 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.
CAPITALIZED COSTS INCLUDED IN TIMBER BASIS
Timber is stated at the lower of cost or market value. Costs relating to acquiring, planting and growing timber,
including real estate taxes, site preparation and direct support costs relating to facilities, vehicles and supplies, are
capitalized. A portion of timberland lease payments are capitalized based on the proportion of acres with merchantable
timber volume remaining to be harvested under the lease term and the residual portion of the lease payments are
expensed as incurred. Payroll costs are capitalized for time spent on timber growing activities, while interest or any
other intangible costs are not capitalized.
MERCHANTABLE INVENTORY AND DEPLETION COSTS AS DETERMINED BY TIMBER HARVEST MODELS
An annual depletion rate is established for each particular region by dividing the cost of merchantable inventory
(including costs described above) by standing merchantable inventory volume. Pre-merchantable records are
maintained for each planted year age class, including acres planted, stems per acre and costs of planting and tending.
Significant assumptions and estimates are used in the recording of timber inventory and depletion costs. Factors
that can impact timber volume include weather changes, losses due to natural causes, differences in actual versus
estimated growth rates and changes in the age when timber is considered merchantable. A 3% company-wide change
in estimated standing merchantable inventory would have caused an estimated change of approximately $3.4 million
to 2019 depletion expense.
Merchantable standing timber inventory is estimated by our land information services group annually, using industry-
standard computer software. The inventory calculation takes into account growth, in-growth (annual transfer of oldest
pre-merchantable age class into merchantable inventory), timberland sales and the annual harvest specific to each
business unit. The age at which timber is considered merchantable is reviewed periodically and updated for changing
harvest practices, future harvest age profiles and biological growth factors.
Acquisitions of timberland can also affect the depletion rate. Upon the acquisition of timberland, we make a
determination whether to combine the newly-acquired merchantable timber with an existing depletion pool or to create
a new pool. The determination is based on the geographic location of the new timber, the customers/markets that will
be served and species mix. During 2019, we acquired 69,000 acres of timberlands in Florida, Georgia, Texas,
Washington and New Zealand. These acquisitions did not have a material impact on 2019 depletion rates.
REVENUE RECOGNITION
See Note 1 - Summary of Significant Accounting Policies.
DETERMINING THE ADEQUACY OF PENSION AND OTHER POSTRETIREMENT BENEFIT ASSETS AND
LIABILITIES
We have one qualified non-contributory defined benefit pension plan covering a portion of our employees and an
unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plan. The
qualified and unfunded plans are closed to new participants.
In 2019, we recognized $0.6 million of pension and postretirement benefit cost due to the expected return on plan
assets partially offsetting interest costs and amortization of losses (gains). Numerous estimates and assumptions are
required to determine the proper amount of pension and postretirement liabilities and annual expense to record in our
financial statements. The key assumptions include discount rate, return on assets, health care cost trends, mortality
rates and longevity of employees. Although there is authoritative guidance on how to select most of the assumptions,
some degree of judgment is exercised in selecting these assumptions. Different assumptions, as well as actual versus
expected results, would change the periodic benefit cost and funded status of the benefit plans recognized in the
financial statements. Effective December 31, 2016, the Company froze benefits for all employees participating in the
pension plans. See Note 16 — Employee Benefit Plans for additional information.
30
DEFERRED TAX ITEMS
The Timber and Real Estate operations conducted within our REIT are generally not subject to U.S. income taxation.
We expect any variability in our effective tax rate and the amount of cash taxes to be paid to be driven primarily by
our New Zealand Timber and Trading segments, as our other business operations are conducted within our U.S. REIT
subsidiaries. However, the assessment of the ability to realize certain deferred tax assets, or estimate deferred tax
liabilities, remains subjective. See Note 10 — Income Taxes for additional information about our unrecognized tax
benefits.
31
RESULTS OF OPERATIONS
Summary of our results of operations for the three years ended December 31:
Financial Information (in millions of dollars)
Sales
2019
2018
2017
Southern Timber
................................................................................................................
$194.1
$170.0
$144.5
Pacific Northwest Timber
...................................................................................................
New Zealand Timber ..........................................................................................................
85.4
241.9
109.8
249.0
91.9
223.3
Real Estate
Improved Development
......................................................................................................
Unimproved Development ..................................................................................................
Rural
..................................................................................................................................
Timberlands & Non-Strategic - U.S.
...................................................................................
Timberlands & Non-Strategic - N.Z.
...................................................................................
Large Dispositions .............................................................................................................
Other (a)
............................................................................................................................
Total Real Estate ................................................................................................................
5.9
19.5
29.9
19.1
—
—
0.5
74.9
Trading ........................................................................................................................................
Intersegment Eliminations ...........................................................................................................
115.4
(0.1)
8.4
8.6
22.7
71.0
27.9
—
—
138.6
148.8
(0.1)
6.9
16.4
18.6
46.3
24.3
95.4
(0.6)
207.3
152.6
—
Total Sales .................................................................................................................................
$711.6
$816.1
$819.7
Operating Income (Loss)
Southern Timber
..........................................................................................................................
Pacific Northwest Timber .............................................................................................................
New Zealand Timber
...................................................................................................................
Real Estate (b)
............................................................................................................................
Trading ........................................................................................................................................
Corporate and other
....................................................................................................................
Operating Income ......................................................................................................................
Interest Expense .........................................................................................................................
Interest and other miscellaneous income, net ..............................................................................
Income Tax Expense ...................................................................................................................
Net Income (b)
...........................................................................................................................
Less: Net Income Attributable to Noncontrolling Interest ...........................................................
$57.8
(12.4)
48.0
38.7
—
(25.1)
107.0
(31.7)
5.3
(12.9)
67.7
(8.6)
$44.2
$42.2
8.1
62.8
76.2
1.0
(22.3)
170.1
(32.1)
4.6
(25.3)
117.3
(15.1)
1.1
57.6
130.9
4.6
(20.9)
215.5
(34.1)
1.9
(21.8)
161.5
(12.7)
Net Income Attributable to Rayonier Inc. (b) ...........................................................................
$59.1
$102.2
$148.8
Adjusted EBITDA (c)
Southern Timber
..........................................................................................................................
Pacific Northwest Timber .............................................................................................................
New Zealand Timber
...................................................................................................................
Real Estate .................................................................................................................................
Trading ........................................................................................................................................
Corporate and other
....................................................................................................................
$119.7
$102.8
$91.6
16.7
75.8
59.5
—
40.9
90.8
123.4
1.0
33.1
85.1
95.5
4.6
(23.9)
(21.1)
(19.4)
Total Adjusted EBITDA (c)
........................................................................................................
$247.8
$337.7
$290.5
(a)
(b)
(c)
Includes marketing fees and deferred revenue adjustments related to Improved Development sales. See Note 1 - Summary of Significant
Accounting Policies for a discussion of the current year reclassification of marketing fees and deferred revenue adjustments for the Real
Estate segment from Improved Development to Other.
The 2017 results included $67.0 million related to Large Dispositions.
Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
32
Southern Timber Overview
2019
2018
2017
Sales Volume (in thousands of tons)
Pine Pulpwood ......................................................................
Pine Sawtimber ....................................................................
Total Pine Volume ...............................................................
Hardwood .............................................................................
Total Volume ........................................................................
3,640
2,191
5,831
235
6,066
3,444
2,034
5,478
240
5,718
3,103
1,933
5,036
278
5,314
Percentage Delivered Sales .................................................
Percentage Stumpage Sales ................................................
33%
67%
30%
70%
22%
78%
Net Stumpage Prices (dollars per ton)
Pine Pulpwood ......................................................................
Pine Sawtimber ....................................................................
Weighted Average Pine ......................................................
Hardwood .............................................................................
Weighted Average Total .....................................................
Summary Financial Data (in millions of dollars)
Timber Sales .........................................................................
Less: Cut, Haul & Freight ......................................................
Net Stumpage Sales ...........................................................
Non-Timber Sales
Total Sales
Operating Income .................................................................
(+) Depreciation, depletion and amortization ........................
Adjusted EBITDA (a) ............................................................
$16.42
24.86
$19.59
16.93
$19.49
$159.2
(41.0)
$118.2
$35.0
$194.1
$57.8
61.9
$119.7
$16.20
25.59
$19.69
12.27
$19.37
$143.9
(33.1)
$110.8
$26.1
$170.0
$44.2
58.6
$102.8
$16.14
25.64
$19.79
12.58
$19.41
$122.6
(19.5)
$103.1
$21.9
$144.5
$42.2
49.4
$91.6
Other Data
Year-End Acres (in thousands) .............................................
1,835
1,807
1,820
(a) Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
33
Pacific Northwest Timber Overview
2019
2018
2017
Sales Volume (in thousands of tons)
Pulpwood ..............................................................................
Sawtimber .............................................................................
Total Volume ........................................................................
Sales Volume (converted to MBF)
Pulpwood ..............................................................................
Sawtimber .............................................................................
Total Volume ........................................................................
254
956
1,211
24,109
126,717
150,826
299
1,007
1,305
28,307
132,795
161,102
276
971
1,247
25,973
125,577
151,550
Percentage Delivered Sales .................................................
Percentage Sawtimber Sales ...............................................
94%
79%
86%
77%
83%
78%
Delivered Log Pricing (in dollars per ton)
Pulpwood ..............................................................................
Sawtimber .............................................................................
Weighted Average Log Price ................................................
Summary Financial Data (in millions of dollars)
Timber Sales .........................................................................
Less: Cut and Haul ...............................................................
Net Stumpage Sales ...........................................................
Non-Timber Sales
Total Sales
Operating (Loss) Income ......................................................
(+) Depreciation, depletion and amortization ........................
Adjusted EBITDA (a) ............................................................
Other Data
Year-End Acres (in thousands) .............................................
Sawtimber (in dollars per MBF) (b) .......................................
Estimated Percentage of Export Volume ..............................
$41.09
78.41
$70.34
$82.7
(45.9)
$36.8
$2.7
$85.4
($12.4)
29.2
$16.7
$47.82
96.24
$84.29
$106.5
(44.9)
$61.5
$3.4
$109.8
$8.1
32.8
$40.9
$40.62
84.55
$73.89
$88.7
(36.7)
$52.0
$3.2
$91.9
$1.1
32.0
$33.1
379
$587
17%
378
$725
23%
378
$665
26%
(a) Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
(b) Delivered Sawtimber excluding chip-n-saw.
34
New Zealand Timber Overview
2019
2018
2017
Sales Volume (in thousands of tons)
Domestic Pulpwood (Delivered) ..........................................
Domestic Sawtimber (Delivered) .........................................
Export Pulpwood (Delivered) ...............................................
Export Sawtimber (Delivered) .............................................
Total Volume ......................................................................
Delivered Log Pricing (in dollars per ton)
Domestic Pulpwood ............................................................
Domestic Sawtimber ...........................................................
Export Sawtimber ................................................................
Weighted Average Log Price ...............................................
Summary Financial Data (in millions of dollars)
Timber Sales .......................................................................
Less: Cut and Haul ..............................................................
Less: Port and Freight Costs ...............................................
Net Stumpage Sales ..........................................................
Non-Timber Sales / Carbon Credits ....................................
Total Sales .........................................................................
Operating Income ................................................................
(+) Depreciation, depletion and amortization.......................
Adjusted EBITDA (a) ...........................................................
Other Data
New Zealand Dollar to U.S. Dollar Exchange Rate (b)........
Net Plantable Year-End Acres (in thousands) .....................
Export Sawtimber (in dollars per JAS m3) ...........................
Domestic Sawtimber (in $NZD per tonne) ...........................
490
803
148
1,290
2,731
$37.93
77.85
105.65
$84.75
$231.4
(88.1)
(51.0)
$92.3
10.5
$241.9
$48.0
27.8
$75.8
507
864
94
1,210
2,675
$37.00
83.29
117.03
$90.44
$241.9
(85.9)
(49.5)
$106.5
7.1
$249.0
$62.8
28.0
$90.8
448
852
106
1,133
2,539
$33.84
81.12
112.74
$87.61
$222.5
(80.6)
(39.7)
$102.2
0.8
$223.3
$57.6
27.5
$85.1
0.6615
295
$122.84
$129.46
0.6935
289
$136.07
$132.22
0.7108
293
$131.08
$125.43
(a) Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
(b) Represents the period average rates for each year.
35
Real Estate Overview
2019
2018
2017
Sales (in millions of dollars)
Improved Development (a) ....................................................
Unimproved Development .....................................................
Rural ......................................................................................
Timberlands & Non-Strategic - U.S. ......................................
Timberlands & Non-Strategic - N.Z........................................
Large Dispositions (b) ...........................................................
Other (c) ................................................................................
Total Sales ............................................................................
Acres Sold
Improved Development (a) ....................................................
Unimproved Development .....................................................
Rural ......................................................................................
Timberlands & Non-Strategic - U.S. ......................................
Timberlands & Non-Strategic - N.Z. (d) .................................
Large Dispositions (b) ...........................................................
Total Acres Sold ..................................................................
Price per Acre (dollars per acre)
Improved Development (a)
Unimproved Development .....................................................
Rural ......................................................................................
Timberlands & Non-Strategic - U.S. .....................................
Timberlands & Non-Strategic - N.Z.......................................
Large Dispositions (b) ...........................................................
Weighted Average (Total) (e) .................................................
Weighted Average (Adjusted) (f) ...........................................
Total Sales (Excluding Large Dispositions) ...........................
Operating Income ..................................................................
(+) Depreciation, depletion and amortization - U.S................
(+) Depreciation, depletion and amortization - N.Z. ...............
(+) Non-cash cost of land and improved development - U.S.
(+) Non-cash cost of land and improved development - N.Z.
(–) Large Dispositions (b) ......................................................
Adjusted EBITDA (g) .............................................................
$5.9
19.5
29.9
19.1
—
—
0.5
$8.4
8.6
22.7
71.0
27.9
—
—
$6.9
16.4
18.6
46.3
24.3
95.4
(0.6)
$74.9
$138.6
$207.3
44
1,196
7,656
8,254
—
—
17,151
$132,412
16,290
3,899
2,318
—
—
$4,335
$4,002
$74.9
$38.7
8.2
—
12.6
—
—
$59.5
44
751
5,008
22,815
4,996
—
33,614
$189,154
11,486
4,530
3,110
5,588
—
$4,121
$3,878
23
1,449
6,344
16,007
9,645
49,599
83,068
$296,550
11,318
2,937
2,891
2,520
1,922
$3,362
$3,158
$138.6
$111.9
$76.2
19.1
4.5
23.6
—
—
$123.4
$130.9
9.0
8.9
13.6
0.1
(67.0)
$95.5
(a) Reflects land with capital invested in infrastructure improvements.
(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 2017, the Company completed two dispositions of approximately 50,000 total acres for a combined
sales price and gain of approximately $95.4 million and $67.0 million, respectively.
Includes marketing fees and deferred revenue adjustments related to Improved Development sales. See Note 1 - Summary of Significant
Accounting Policies for a discussion of the current year reclassification of marketing fees and deferred revenue adjustments for the Real Estate
segment from Improved Development to Other.
(c)
(d) New Zealand Timberlands & Non-Strategic represents productive acres.
(e) Excludes Large Dispositions.
(f) Excludes Improved Development and Large Dispositions.
(g) Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
36
Capital Expenditures By Segment
2019
2018
2017
Timber Capital Expenditures (in millions of dollars)
Southern Timber
Reforestation, silvicultural and other capital expenditures ........
Property taxes ..........................................................................
Lease and timber deed payments ............................................
Allocated overhead ...................................................................
Subtotal Southern Timber ..........................................................
Pacific Northwest Timber
Reforestation, silvicultural and other capital expenditures ........
Property taxes ..........................................................................
Allocated overhead ...................................................................
Subtotal Pacific Northwest Timber ............................................
New Zealand Timber
Reforestation, silvicultural and other capital expenditures ........
Property taxes ..........................................................................
Lease and timber deed payments ............................................
Allocated overhead ...................................................................
Subtotal New Zealand Timber ....................................................
Total Timber Segments Capital Expenditures ..........................
Real Estate ...................................................................................
Corporate ......................................................................................
Total Capital Expenditures.....................................................
Timberland Acquisitions
Southern Timber ...........................................................................
Pacific Northwest Timber ..............................................................
New Zealand Timber .....................................................................
Total Timberland Acquisitions ...............................................
Real Estate Development Investments .....................................
Rayonier Office Building ............................................................
$18.8
7.1
4.4
4.3
$34.6
7.4
0.7
3.1
$11.2
9.4
0.6
4.7
2.6
$17.4
$63.2
0.2
0.6
$64.0
$98.9
7.3
36.0
$142.3
$6.8
—
$20.0
6.6
4.6
4.2
$35.4
6.2
0.8
2.4
$9.3
9.7
0.7
4.1
2.8
$17.3
$62.0
0.3
—
$62.3
$45.9
—
11.7
$57.6
$9.5
—
$17.9
8.1
4.8
3.7
$34.5
7.3
0.9
2.0
$10.2
9.1
0.7
4.4
2.9
$17.1
$61.8
1.3
2.2
$65.3
$220.0
1.5
21.4
$242.9
$15.8
$6.1
37
RESULTS OF OPERATIONS, 2019 VERSUS 2018
(millions of dollars)
The following tables summarize sales, operating income and Adjusted EBITDA variances for 2019 versus 2018:
Sales
2018 ....................................
Volume ................................
Price ....................................
Non-timber sales .................
Foreign exchange (a) ..........
Southern
Timber
$170.0
Pacific
Northwest
Timber
New
Zealand
Timber
$109.8
$249.0
6.7
0.7
8.8
—
(4.5)
(20.2)
(0.7)
—
4.9
(17.1)
3.7
(4.5)
Real
Estate
$138.6
(67.9)
3.7
—
—
Other ...................................
7.9 (b)
1.0 (b)
5.9 (c)
0.5 (d)
Trading
Elim.
Total
$148.8
(0.1)
$816.1
(23.0)
(10.5)
0.1
—
—
—
—
—
—
—
(83.8)
(43.4)
11.9
(4.5)
15.3
2019 ....................................
$194.1
$85.4
$241.9
$74.9
$115.4
(0.1)
$711.6
(a) Net of currency hedging impact.
(b)
(c)
(d)
Includes variance due to stumpage versus delivered sales.
Includes variance due to domestic versus export sales.
Includes $0.5 million of marketing fees and deferred revenue adjustments related to Improved Development sales.
Operating Income
2018 ..................................................
Volume ..............................................
Price (a) ............................................
Cost ..................................................
Non-timber income ............................
Foreign exchange (b) ........................
Depreciation, depletion &
amortization ......................................
Non-cash cost of land and improved
development .....................................
Other (c) ............................................
Southern
Timber
$44.2
3.1
0.7
0.5
9.1
—
0.2
—
—
Pacific
Northwest
Timber
New
Zealand
Timber
Real
Estate
Trading
Corporate
and Other
Total
$8.1
(1.5)
(20.2)
0.6
(0.7)
—
1.3
—
—
$62.8
1.7
(17.1)
(1.2)
3.2
(0.9)
(0.5)
—
—
$76.2
(44.2)
3.7
(1.1)
—
—
3.9
(0.3)
0.5
$1.0
($22.3)
$170.1
—
—
(1.0)
—
—
—
—
—
—
—
—
(1.1)
—
—
—
—
(1.7)
(40.9)
(32.9)
(3.3)
11.6
(0.9)
4.9
(0.3)
(1.2)
($25.1)
$107.0
2019 ..................................................
$57.8
($12.4)
$48.0
$38.7
(a) For Timber segments, price reflects net stumpage (i.e. net of cut and haul and shipping costs).
(b) Net of currency hedging impact.
(c) Real Estate includes $0.5 million of marketing fees and deferred revenue adjustments related to Improved Development sales. Corporate
and Other includes legal expenses of $1.1 million and the sale of unused Internet Protocol addresses of $0.6 million in the prior year.
38
Adjusted EBITDA (a)
2018 ................................................
Volume ............................................
Price (b) ..........................................
Cost ................................................
Non-timber income ..........................
Foreign exchange (c) ......................
Other (d) .........................................
Southern
Timber
$102.8
6.6
0.7
0.5
9.1
—
—
Pacific
Northwest
Timber
New
Zealand
Timber
Real
Estate
Trading
Corporate
and Other
Total
$90.8
$123.4
$1.0
($21.1)
$337.7
$40.9
(3.9)
(20.2)
0.6
(0.7)
—
—
2.2
(17.1)
(1.2)
3.2
(2.1)
—
(67.0)
3.7
(1.1)
—
—
0.5
—
—
(1.0)
—
—
—
—
—
—
(1.1)
—
—
(1.7)
(62.1)
(32.9)
(3.3)
11.6
(2.1)
(1.2)
($23.9)
$247.8
2019 ................................................
$119.7
$16.7
$75.8
$59.5
(a) Adjusted EBITDA is a non-GAAP measure defined and reconciled at Item 6 — Selected Financial Data.
(b) For Timber segments, price reflects net stumpage (i.e. net of cut and haul and shipping costs).
(c) Net of currency hedging impact.
(d) Real Estate includes $0.5 million of marketing fees and deferred revenue adjustments related to Improved Development sales. Corporate
and Other includes legal expenses of $1.1 million and the sale of unused Internet Protocol addresses of $0.6 million in the prior year.
SOUTHERN TIMBER
Full-year sales of $194.1 million increased $24.1 million, or 14%, versus the prior year, which includes an increase
in non-timber sales of $8.8 million versus the prior year. Harvest volumes increased 6% to 6.07 million tons versus
5.72 million tons in the prior year. Average pine sawtimber stumpage prices decreased 3% to $24.86 per ton versus
$25.59 per ton in the prior year, while average pine pulpwood stumpage prices of $16.42 per ton were slightly above
the prior year. The decrease in average sawtimber prices was driven primarily by weaker export demand, particularly
in the second half of the year, due to the ongoing U.S.-China trade dispute.
Operating income of $57.8 million increased $13.6 million versus the prior year due to higher volumes ($3.1 million),
higher prices ($0.7 million), higher non-timber income ($9.1 million), lower costs ($0.5 million) and lower depletion
rates ($0.2 million). Full-year Adjusted EBITDA of $119.7 million was $16.9 million above the prior year.
PACIFIC NORTHWEST TIMBER
Full-year sales of $85.4 million decreased $24.5 million, or 23%, versus the prior year. Harvest volumes decreased
7% to 1.21 million tons versus 1.31 million tons in the prior year, as we deferred planned harvest in response to weak
market conditions. Average delivered sawtimber prices decreased 19% to $78.41 per ton versus $96.24 per ton in the
prior year, and average delivered pulpwood prices decreased 14% to $41.09 per ton versus $47.82 per ton in the prior
year. The decrease in delivered sawtimber prices was driven primarily by weaker export market conditions due to the
ongoing U.S.-China trade dispute as well as competition from lower-priced European salvage timber. The decrease
in delivered pulpwood prices was driven primarily by excess supply in the market.
Operating loss of $12.4 million versus operating income of $8.1 million in the prior year was primarily due to lower
prices ($20.2 million), lower volumes ($1.5 million), and lower non-timber income ($0.7 million), partially offset by lower
costs ($0.6 million) and lower depletion rates ($1.3 million). Full-year Adjusted EBITDA of $16.7 million was $24.2
million below the prior year.
39
NEW ZEALAND TIMBER
Full-year sales of $241.9 million decreased $7.2 million, or 3%, versus the prior year. Harvest volumes increased
2% to 2.73 million tons versus 2.68 million tons in the prior year. Average delivered prices for export sawtimber decreased
10% to $105.65 per ton versus $117.03 per ton in the prior year, while average delivered prices for domestic sawtimber
decreased 6% to $77.85 per ton versus $83.29 in the prior year. The decrease in export sawtimber prices was primarily
due to increased competition from lower-cost log and lumber imports, predominantly from Europe, into China. The
decrease in domestic sawtimber prices (in U.S. dollar terms) was driven primarily by the NZ$/US$ exchange rate (US
$0.66 per NZ$1.00 versus US$0.69 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber
prices decreased 2% from the prior year.
Operating income of $48.0 million decreased $14.7 million versus the prior year due to lower prices ($17.1 million),
higher forest management costs ($1.2 million), unfavorable foreign exchange impacts ($0.9 million), and higher
depletion rates ($0.5 million), which were partially offset by higher non-timber income ($3.2 million) and higher volumes
($1.7 million). Full-year Adjusted EBITDA of $75.8 million was $15.0 million below the prior year.
REAL ESTATE
Full-year sales of $74.9 million decreased $63.7 million versus the prior year, while operating income of $38.7
million decreased $37.6 million versus the prior year. Sales and operating income decreased primarily due to lower
volumes (17,151 acres sold versus 33,614 acres sold in the prior year), partially offset by higher weighted average
prices ($4,335 per acre versus $4,121 per acre in the prior year). Full-year Adjusted EBITDA of $59.5 million was $63.9
million below the prior year.
TRADING
Full-year sales of $115.4 million decreased $33.4 million versus the prior year due to lower volumes and prices.
Sales volumes decreased 16% to 1.11 million tons versus 1.31 million tons in the prior year period. Average prices
decreased 8% to $103.49 per ton versus $112.96 per ton in the prior year. Operating income decreased $1.0 million
versus the prior year due to lower trading margins resulting from lower volumes and prices.
CORPORATE AND OTHER EXPENSE/ELIMINATIONS
Full-year corporate and other operating expense of $25.1 million increased $2.8 million versus the prior year due
to elevated legal expenses ($1.6 million), prior year income from the sale of unused Internet Protocol addresses ($0.6
million), acquisition related costs ($0.3 million) and higher compensation and benefit expense ($0.3 million).
INTEREST EXPENSE
Full-year interest expense of $31.7 million decreased $0.3 million versus the prior year due to an increase in
accrued patronage payments.
INTEREST AND OTHER MISCELLANEOUS INCOME, NET
Other non-operating income of $5.3 million increased $0.7 million versus the prior year. The 2019 results include
a favorable mark-to-market adjustment on marketable equity securities, interest income, dividend income and net
periodic pension costs.
INCOME TAX EXPENSE
Full-year income tax expense of $12.9 million decreased $12.3 million versus the prior year period as a result of
lower taxable income. The New Zealand subsidiary is the primary driver of income tax expense.
RESULTS OF OPERATIONS, 2018 VERSUS 2017
Refer to Item 7 - “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section
contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 for the results of
operations discussion for the fiscal year ended December 31, 2018 compared to the fiscal year ended December 31,
2017.
40
OUTLOOK FOR 2020
In 2020, we expect to achieve full-year harvest volumes in our Southern Timber segment of 6.3 to 6.5 million tons,
while we expect overall pricing to be slightly below 2019 average pricing due to geographic mix.
In our Pacific Northwest Timber segment, we expect to achieve harvest volumes of 1.4 to 1.5 million tons, while
we expect relatively stable pricing as markets have adjusted to lower log export volumes resulting from China tariffs
and competition from European salvage volume.
We remain cautiously optimistic that export market conditions in both Southern Timber and Pacific Northwest
Timber will gradually improve as the U.S.-China Phase 1 trade agreement is implemented and as additional details of
the agreement become clear, although we expect near-term headwinds associated with the coronavirus outbreak in
China.
In our New Zealand Timber segment, we expect to achieve harvest volumes of 2.6 to 2.7 million tons, while we
expect lower average export and domestic pricing due to challenging export market conditions resulting from competition
from European salvage volume as well as the recent impacts from the coronavirus outbreak. We further expect that
Adjusted EBITDA in the New Zealand Timber segment will be negatively impacted by higher shipping costs due to the
implementation of low-sulfur fuel requirements.
In our Real Estate segment, we expect a significant increase in Adjusted EBITDA based on our current pipeline
of transactions, although we anticipate that real estate activity will be heavily weighted to the second half of the year.
Our 2020 outlook excludes the impact of our anticipated mid-year acquisition of Pope Resources and is subject
to a number of variables and uncertainties, including those discussed at Item 1A — Risk Factors.
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 Large Dispositions.
SUMMARY OF LIQUIDITY AND FINANCING COMMITMENTS
2019
(in millions of dollars)
Cash and cash equivalents ..................................................................................
$68.7
Total debt (a) ........................................................................................................ 1,057.0
Shareholders’ equity ............................................................................................ 1,537.6
59.1
Net Income Attributable to Rayonier Inc. ..............................................................
Adjusted EBITDA (b) ............................................................................................
247.8
Total capitalization (total debt plus equity)............................................................ 2,594.6
Debt to capital ratio ..............................................................................................
Debt to Adjusted EBITDA (b) ................................................................................
Net debt to Adjusted EBITDA (b)(c) .....................................................................
Net debt to enterprise value (c)(d) .......................................................................
41%
4.3
4.0
19%
As of December 31,
2018
$148.4
975.0
1,654.6
102.2
337.7
2,629.6
2017
$112.7
1,028.4
1,693.0
148.8
290.5
2,721.4
37%
2.9
2.4
19%
38%
3.5
3.2
18%
(a)
(b)
(c)
(d)
Total debt as of December 31, 2019, 2018 and 2017 is presented gross of deferred financing costs of $1.9 million, $2.4 million and $3.0
million, respectively.
For a reconciliation of Adjusted EBITDA to net income see Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Performance and Liquidity Indicators.
Net debt is calculated as total debt less cash and cash equivalents.
Enterprise value is calculated as the number of shares outstanding multiplied by the Company’s share price, plus net debt, at year-end.
LIQUIDITY FACILITIES
See Note 6 — Debt for information on liquidity facilities and other outstanding debt, as well as for information on
covenants that must be met in connection with our Senior Notes, Term Credit Agreement, Incremental Term Loan
Agreement and Revolving Credit Facility.
41
CASH FLOWS
The following table summarizes our cash flows from operating, investing and financing activities for each of the
three years ended December 31 (in millions of dollars):
Total cash provided by (used for):
Operating activities .................................................................................................. $214.3
(219.4)
Investing activities ....................................................................................................
(79.6)
Financing activities ...................................................................................................
Effect of exchange rate changes on cash ................................................................
(1.8)
($86.5)
Change in cash, cash equivalents and restricted cash ..............................................
$310.1
(132.9)
(193.7)
0.6
($15.9)
$256.3
(235.3)
(6.9)
0.6
$14.7
2019
2018
2017
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operating activities decreased $95.8 million versus the prior year primarily due to lower operating
results.
CASH USED FOR INVESTING ACTIVITIES
Cash used for investing activities increased $86.5 million versus the prior year primarily due to an $84.7 million
increase in cash used for timberland acquisitions, a $1.7 million increase in capital expenditures and a $2.8 million
increase in other investing activities, partially offset by a $2.7 million decrease in real estate development investments.
CASH USED FOR FINANCING ACTIVITIES
Cash used for financing activities in 2019 reflects dividend payments of $141.1 million, $12.7 million of share
repurchases ($8.4 million made under the share repurchase program) and $9.2 million of distributions to the minority
shareholder, partially offset by an $82.0 million draw on the Revolving Credit Facility and $1.3 million of proceeds from
the issuance of common stock under the incentive stock plan.
RESTRICTED CASH
See Note 20 — Restricted Cash for further information regarding funds deposited with a third-party intermediary.
CREDIT RATINGS
Both our ability to obtain financing and the related costs of borrowing are affected by our credit ratings, which are
periodically reviewed by the rating agencies. As of December 31, 2019, our credit ratings from S&P and Moody’s were
“BBB-” and “Baa3,” respectively, with both agencies listing our outlook as “Stable.”
STRATEGY
We continuously evaluate our capital structure. Our strategy is to maintain a weighted-average cost of capital
competitive with other timberland REITs and TIMOs, while maintaining an investment grade debt rating as well as
retaining the flexibility to actively pursue capital allocation opportunities as they become available. Overall, we believe
we have adequate liquidity and sources of capital to run our businesses efficiently and effectively and to maximize the
value of our timberland and real estate assets under management.
EXPECTED 2020 EXPENDITURES
Capital expenditures in 2020 are forecasted to be between $65 million and $69 million, excluding any strategic
timberland acquisitions we may make. Capital expenditures are expected to be primarily comprised 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 2020 are expected to be between $12 million and $15 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,
and our Richmond Hill mixed-use development project located south of Savannah, Georgia.
Our 2020 dividend payments are expected to be approximately $140 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.
42
We made $1.3 million of required pension contributions in 2019. We have approximately $3.6 million of pension
contribution requirements in 2020 and may make discretionary contributions in the future.
Cash income tax payments in 2020 are expected to be approximately $2 million, primarily due to the New Zealand
subsidiary.
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: 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 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 Adjusted EBITDA as a performance
measure and CAD as a liquidity measure. Adjusted EBITDA and CAD as defined may not be comparable to similarly
titled measures reported by other companies. These measures should not be considered in isolation from, and are
not intended to represent an alternative to, our results reported in accordance with GAAP.
Adjusted EBITDA is defined 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,
the gain on foreign currency derivatives, and Large Dispositions. Below is a reconciliation of Net Income to Adjusted
EBITDA for the five years ended December 31 (in millions of dollars):
2019
2018
2017
2016
2015
Net Income to Adjusted EBITDA Reconciliation
Net Income ....................................................................................
Interest, net, continuing operations .......................................
Income tax expense (benefit), continuing operations ............
Depreciation, depletion and amortization ..............................
Non-cash cost of land and improved development ...............
Non-operating (income) expense ..........................................
Costs related to shareholder litigation (a) .............................
Gain on foreign currency derivatives (b) ...............................
Large Dispositions (c) ...........................................................
$67.7
29.1
12.9
128.2
12.6
(2.7)
—
—
—
Adjusted EBITDA ........................................................................... $247.8
$117.3
29.7
25.2
144.1
23.6
(2.2)
—
—
—
$337.7
$161.5
32.2
21.8
127.6
13.7
—
0.7
—
(67.0)
$290.5
$217.8
33.0
5.0
115.1
11.7
—
2.2
(1.2)
(143.9)
$239.7
$43.9
34.7
(0.9)
113.7
12.5
0.1
4.1
—
—
$208.1
(a) Costs related to shareholder litigation include expenses incurred as a result of the shareholder derivative demands that ultimately resulted in
litigation brought against certain former officers and directors of the Company in a case styled Molloy, et al. v. Boynton, et al., filed in the United
States District Court for the Middle District of Florida (Case No. 3:17-cv-01157-TJC-MCR). In addition, these costs include the costs associated
with class action securities litigation brought against the Company in a case styled In re Rayonier Inc. Securities Litigation, filed in the United
States District Court for the Middle District of Florida (Case No. 3:14-cv01395-RJC-JBT) and the Company’s response to a subpoena it received
from the SEC in November 2014. In July 2016, the Division of Enforcement of the SEC notified the Company that it had concluded its investigation
into the Company. In October 2017, the court entered orders approving the settlement of the class action securities litigation and dismissing
the case against all defendants with prejudice. In November 2018, the court entered orders approving the settlement of the derivative demands
and entering final judgment in the litigation arising therefrom, thus ending the shareholder litigation matters.
(b) Gain on foreign currency derivatives is the gain resulting from the foreign exchange derivatives the Company used to mitigate the risk of
fluctuations in foreign exchange rates while awaiting the capital contribution to the New Zealand subsidiary.
(c) 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.
See Item 6 — Selected Financial Data for a reconciliation of Adjusted EBITDA to Operating Income by segment
as well as Item 7 — Results of Operations for an analysis of changes in Adjusted EBITDA from the prior year.
43
Cash Available for Distribution (CAD) is defined as cash provided by operating activities adjusted for capital
spending (excluding timberland acquisitions, real estate development investments and spending on the Rayonier office
building), and working capital and other balance sheet changes. CAD is a non-GAAP measure of 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, timberland acquisitions and real estate development
investments. In compliance with SEC requirements for non-GAAP measures, we reduce CAD by mandatory debt
repayments, which results in the measure entitled “Adjusted CAD.” CAD and Adjusted CAD generated in any period
is not necessarily indicative of the CAD that may be generated in future periods.
Below is a reconciliation of Cash Provided by Operating Activities to Adjusted CAD for the five years ended
December 31 (in millions):
Cash provided by operating activities
Capital expenditures from continuing operations (a)
Working capital and other balance sheet changes
CAD
Mandatory debt repayments (b)
Adjusted CAD
2019
$214.3
(64.0)
(0.9)
$149.4
(82.0)
$67.4
2018
$310.1
(62.3)
(7.7)
$240.1
—
$240.1
2017
$256.3
(65.3)
(2.3)
$188.7
—
$188.7
2016
$203.8
(58.7)
(0.8)
$144.3
(31.5)
$112.8
2015
$177.2
(57.3)
(2.5)
$117.4
(131.0)
($13.6)
Cash used for investing activities
Cash (used for) provided by financing activities
($219.4)
($79.6)
($132.9)
($193.7)
($235.3)
($6.9)
($235.0)
$114.4
($149.5)
($116.5)
(a) Capital expenditures exclude timberland acquisitions, real estate development investments and spending on the Rayonier office building.
(b) Excludes debt repayments on the New Zealand subsidiary noncontrolling interest shareholder loan.
The following table provides supplemental cash flow data for the five years ended December 31 (in millions):
Purchase of timberlands
Real Estate Development Investments
Distributions to New Zealand minority shareholder (a)
Rayonier Office Building
2019
2018
2017
2016
2015
($142.3)
($57.6)
($242.9)
($366.5)
($98.4)
(6.8)
(9.2)
—
(9.5)
(14.4)
—
(15.8)
(15.8)
(6.1)
(8.7)
(4.9)
(6.3)
(2.7)
(1.4)
(0.9)
(a)
Includes debt repayments on the New Zealand subsidiary noncontrolling interest shareholder loan.
OFF-BALANCE SHEET ARRANGEMENTS
We utilize off-balance sheet arrangements to provide credit support for certain suppliers and vendors in case of
their default on critical obligations, and collateral for outstanding claims under the Company’s previous workers’
compensation self-insurance programs. These arrangements consist of standby letters of credit and surety bonds. As
part of our ongoing operations, we also periodically issue guarantees to third parties. Off-balance sheet arrangements
are not considered a source of liquidity or capital resources and do not expose us to material risks or material unfavorable
financial impacts. See Note 12 — Guarantees for further discussion.
44
CONTRACTUAL FINANCIAL OBLIGATIONS
In addition to using cash flow from operations and proceeds from Large Dispositions, we finance our operations
and acquisitions through the issuance of debt and by entering into leases. These financial obligations are recorded in
accordance with accounting rules applicable to the underlying transaction, with the result that some are recorded as
liabilities on the Consolidated Balance Sheets, while others are required to be disclosed in the Notes to Consolidated
Financial Statements and Management’s Discussion and Analysis.
The following table aggregates our contractual financial obligations as of December 31, 2019 and anticipated cash
spending by period:
Contractual Financial Obligations (in millions)
Long-term debt (a) .......................................................
Current maturities of long-term debt ............................
Interest payments on long-term debt (b) ......................
Operating leases — timberland (c) ..............................
Operating leases — PP&E, offices...............................
Commitments — derivatives (d)
Commitments — other (e) ............................................
Total
$975.0
82.0
153.8
183.1
8.0
9.4
12.7
Total contractual cash obligations ........................ $1,424.0
2020
—
82.0
36.1
7.9
2.0
2.2
8.3
$138.5
Payments Due by Period
2021-2022
325.0
—
63.2
15.9
2.2
4.0
1.2
$411.5
2023-2024
$350.0
—
40.1
14.4
1.6
3.2
0.4
$409.7
Thereafter
$300.0
—
14.4
144.9
2.2
—
2.8
$464.3
(a) The book value of long-term debt, net of deferred financing costs, is currently recorded at $973.1 million on the Company’s Consolidated
Balance Sheet, but upon maturity the liability will be $975.0 million.
(b) Projected interest payments for variable-rate debt were calculated based on outstanding principal amounts and interest rates as of December 31,
2019.
(c)
Includes 20 years of future minimum payments for perpetual Crown Forest Licenses (“CFL”). A CFL is a license arrangement to use government
or privately owned lands to operate a commercial forest. CFLs generally extend indefinitely and may only be terminated upon a 35-year
termination notice. If no termination notice is given, the CFLs renew automatically each year for a one-year term. Alternatively, some CFLs
extend for a specific term. As of December 31, 2019, the New Zealand subsidiary has two CFLs under termination notice that are currently
being relinquished as harvest activities are concluded, as well as two fixed-term CFLs expiring in 2062. The annual license fee is determined
based on market rental value, with triennial rent reviews.
(d) Commitments — derivatives represent payments expected to be made on derivative financial instruments (foreign exchange contracts and
interest rate swaps). See Note 14 — Derivative Financial Instruments and Hedging Activities.
(e) Commitments — other includes pension contribution requirements based on actuarially determined estimates and IRS minimum funding
requirements, payments expected to be made on the Company’s Wildlight and Richmond Hill development projects, payments made on
timberland deeds and other purchase obligations.
45
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to various market risks, including changes in interest rates, commodity prices and foreign exchange
rates. Our objective is to minimize the economic impact of these market risks. We use derivatives in accordance with
policies and procedures approved by the Audit Committee of the Board of Directors. Derivatives are managed by the
finance department, whose responsibilities include initiating derivative transactions as well as managing and monitoring
resulting exposures. We do not enter into financial instruments for trading or speculative purposes.
Interest Rate Risk
We are exposed to interest rate risk through our variable rate debt, primarily due to changes in LIBOR. However,
we use interest rate swaps to manage our exposure to interest rate movements on our term credit agreements by
swapping existing and anticipated future borrowings from floating rates to fixed rates. As of December 31, 2019, we
had $650 million of U.S. long-term variable rate debt. The notional amount of outstanding interest rate swap contracts
with respect to this debt at December 31, 2019 was also $650 million. The term credit agreement and associated
interest rate swaps mature in August 2024 and the incremental term loan agreement and associated interest rate
swaps mature in May 2026. At this borrowing level, a hypothetical one-percentage point increase/decrease in interest
rates would result in no corresponding increase/decrease in interest payments and expense over a 12-month period.
The fair market value of our long-term fixed interest rate debt is also subject to interest rate risk. The estimated
fair value of our long-term fixed rate debt at December 31, 2019 was $332 million compared to the $325 million principal
amount. We use interest rates of debt with similar terms and maturities to estimate the fair value of our debt. Generally,
the fair market value of fixed-rate debt will increase as interest rates fall and decrease as interest rates rise. A hypothetical
one-percentage point increase/decrease in prevailing interest rates at December 31, 2019 would result in a
corresponding decrease/increase in the fair value of our long-term fixed rate debt of approximately $7 million.
We estimate the periodic effective interest rate on our U.S. long-term fixed and variable rate debt to be approximately
3.3% after consideration of interest rate swaps and estimated patronage refunds.
The following table summarizes our outstanding debt, interest rate swaps and average interest rates, by year of
expected maturity and their fair values at December 31, 2019:
(Dollars in thousands)
2020
2021
2022
2023
2024
Thereafter
Total
Fair Value
Variable rate debt:
Principal amounts
82,000
Average interest rate (a)(b)
2.99%
Fixed rate debt:
Principal amounts
Average interest rate (b)
Interest rate swaps:
Notional amount
Average pay rate
Average receive rate (b)
—
—
—
—
—
(a) Excludes estimated patronage refunds.
Interest rates as of December 31, 2019.
(b)
Foreign Currency Exchange Rate Risk
—
—
—
—
—
—
—
—
—
$325,000
3.75%
—
—
—
—
—
—
—
—
—
350,000
$300,000
$732,000
$732,000
3.33%
3.61%
3.41%
—
—
—
—
—
$325,000
$331,500
3.75%
—
350,000
$300,000
$650,000
($8,454)
2.28%
1.70%
1.49%
1.71%
1.91%
1.71%
—
—
The functional currency of the Company’s New Zealand-based operations and New Zealand subsidiary is the New
Zealand dollar. Through these operations and our ownership in the New Zealand subsidiary, we are exposed to foreign
currency risk on cash held in foreign currencies, shareholder distributions which are denominated in U.S. dollars and
on foreign export sales and ocean freight payments that are predominantly denominated in U.S. dollars. To mitigate
these risks, the New Zealand subsidiary routinely enters into foreign currency exchange contracts and foreign currency
option contracts to hedge a portion of the New Zealand subsidiary’s foreign exchange exposure.
46
Sales and Expense Exposure
At December 31, 2019, the New Zealand subsidiary had foreign currency exchange contracts with a notional
amount of $56 million and foreign currency option contracts with a notional amount of $22 million outstanding related
to foreign export sales and ocean freight payments. The amount hedged represents 69% of forecast U.S. dollar
denominated sales proceeds less distributions over the next 18 months and 74% of log trading sales proceeds over
the next 3 months.
The following table summarizes our outstanding foreign currency exchange rate risk contracts at December 31,
2019:
(Dollars in thousands)
0-1
months
1-2
months
2-3
months
3-6
months
6-12
months
12-18
months
Total
Fair
Value
Foreign exchange contracts to sell U.S. dollar for New Zealand dollar
Notional amount ............................... $3,350
$4,000
$5,000
$17,000
$20,000
$7,000
$56,350
$642
Average contract rate ....................... 1.4859
1.4854
1.4849
1.4836
1.4818
1.4802
1.4829
Foreign currency option contracts to sell U.S. dollar for New Zealand dollar
Notional amount ............................... $4,000
$2,000
Average strike price .......................... 1.5191
1.4987
—
—
—
—
$8,000
$8,000
$22,000
$303
1.5513
1.5846
1.5527
Equity Price Risk
Our marketable equity securities are subject to market price risk. Accordingly, a fluctuation in the price of each
security could have an adverse impact on the fair value of our investment. See Note 15 — Fair Value Measurements.
47
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Management’s Report on Internal Control over Financial Reporting ..............................................................
Reports of Independent Registered Public Accounting Firm ..........................................................................
Consolidated Statements of Income and Comprehensive Income for the Three Years Ended
December 31, 2019 ........................................................................................................................................
Consolidated Balance Sheets as of December 31, 2019 and 2018 ...............................................................
Consolidated Statements of Shareholders’ Equity for the Three Years Ended December 31, 2019 ..............
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 2019 ............................
Notes to Consolidated Financial Statements ..................................................................................................
Note 1 - Summary of Significant Accounting Policies ..............................................................................
Note 2 - Revenue .....................................................................................................................................
Note 3 - Timberland Acquisitions .............................................................................................................
Note 4 - Leases .......................................................................................................................................
Note 5 - Segment and Geographical Information .....................................................................................
Note 6 - Debt ...........................................................................................................................................
Note 7 - Higher and Better Use Timberlands and Real Estate Development Investments ......................
Note 8 - New Zealand Subsidiary ............................................................................................................
Note 9 - Commitments .............................................................................................................................
Note 10 - Income Taxes ...........................................................................................................................
Note 11 - Contingencies ...........................................................................................................................
Note 12 - Guarantees ..............................................................................................................................
Note 13 - Earnings Per Common Share ..................................................................................................
Note 14 - Derivative Financial Instruments and Hedging Activities ..........................................................
Note 15 - Fair Value Measurements ........................................................................................................
Note 16 - Employee Benefit Plans ...........................................................................................................
Note 17 - Incentive Stock Plans ...............................................................................................................
Note 18 - Other Operating (Expense) Income, Net ..................................................................................
Note 19 - Inventory ..................................................................................................................................
Note 20 - Restricted Cash .......................................................................................................................
Note 21 - Other Assets ............................................................................................................................
Note 22 - Accumulated Other Comprehensive (Loss) Income .................................................................
Note 23 - Quarterly Results for 2019 and 2018 (Unaudited) ....................................................................
Note 24 - Consolidating Financial Statements .........................................................................................
Page
49
50
53
54
55
56
58
58
65
67
68
69
72
74
74
75
75
78
78
79
80
83
85
89
93
93
93
94
95
96
97
48
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
To Our Shareholders:
The management of Rayonier Inc. and its subsidiaries is responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as
amended). Our system of internal controls over financial reporting is designed to provide reasonable assurance to the
Company’s management and Board of Directors regarding the preparation and fair presentation of the financial
statements for external purposes in accordance with accounting principles generally accepted in the United States of
America.
Because of the inherent limitations of internal control over financial reporting, misstatements due to error or fraud
may not be prevented or detected on a timely basis. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
Rayonier Inc.’s management, under the supervision of the Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this
assessment, we used the framework included in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on our evaluation under the
criteria set forth in Internal Control — Integrated Framework, management concluded that our internal control over
financial reporting was effective as of December 31, 2019.
Ernst & Young LLP, the independent registered public accounting firm that audited the Company’s consolidated
financial statements, has issued an audit report on the Company’s internal control over financial reporting as of
December 31, 2019. The report on the Company’s internal control over financial reporting as of December 31, 2019,
is on page 50.
RAYONIER INC.
By: /s/ DAVID L. NUNES
David L. Nunes
President and Chief Executive Officer
(Principal Executive Officer)
February 24, 2020
By:
/s/ MARK MCHUGH
Mark McHugh
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
February 24, 2020
By:
/s/ APRIL TICE
April Tice
Vice President, Financial Services and Corporate Controller
(Principal Accounting Officer)
February 24, 2020
49
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Rayonier Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Rayonier Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2019,
based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Rayonier Inc. and
subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2019, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related
consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for each of the
three years in the period ended December 31, 2019, and the related notes and schedule and our report dated
February 24, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
Jacksonville, Florida
February 24, 2020
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Rayonier Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Rayonier Inc. and subsidiaries (the Company) as
of December 31, 2019 and 2018, the related consolidated statements of income and comprehensive income,
shareholders' equity and cash flows for each of the three years in the period ended December 31, 2019, and the related
notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated
financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the
financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated February 24, 2020 expressed an unqualified opinion
thereon.
Adoption of ASU No. 2016-02, Leases (Topic 842), as amended
As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for
leases in 2019 due to the adoption of ASU No. 2016-02, Leases (Topic 842), as amended.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our
audits provide a reasonable basis for our opinion.
51
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.
Description of
the Matter
Depletion of Timber
For the year ended December 31, 2019, the Company recognized $122 million in depletion expense
and the Timber and Timberlands balance, net of depletion and amortization, was $2,482 million at
December 31, 2019. As described in Note 1 to the financial statements, the Company establishes
an annual depletion rate for each particular region. Depletion rates are determined by region by
dividing merchantable inventory cost by standing merchantable inventory volume, which is estimated
annually. The Company charges accumulated costs attributed to merchantable timber to depletion
expense (cost of sales) at the time the timber is harvested or when the underlying timberland is
sold.
Auditing management’s annual depletion rate was complex and subjective due to the estimation
uncertainty in determining the standing merchantable inventory volume utilized in the calculation of
the depletion rate for each region. In particular, estimating the standing merchantable inventory
volume involves statistical sampling and growth modeling using inputs such as growth estimates,
harvest information and environmental and operational restrictions.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls over the Company’s process for establishing the annual depletion rate for each geographic
region. For example, we tested controls over management’s review of the standing merchantable
inventory volume that was determined for each geographic region.
To test the annual depletion rates (including standing merchantable inventory volume), our audit
procedures included, among others, evaluating the methodology used and testing the completeness
and accuracy of the underlying data used by the Company. We inspected satellite images to test
timber existence and assessed the timberland for features that would impact the Company’s ability
to harvest its timber. In addition, we evaluated current year changes to harvestability, analyzed the
change in depletion as a percentage of sales, utilized published industry growth rates to assess the
increase in timber volume growth and compared actual volume harvested to the volume estimated
by the Company.
Jacksonville, Florida
February 24, 2020
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2012.
52
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Years Ended December 31,
(Thousands of dollars, except per share data)
SALES (NOTE 2) .................................................................................................
Costs and Expenses
Cost of sales ...............................................................................................
Selling and general expenses .....................................................................
Other operating (expense) income, net (Note 18)
OPERATING INCOME .........................................................................................
Interest expense ...................................................................................................
Interest and other miscellaneous income, net ......................................................
INCOME BEFORE INCOME TAXES ...................................................................
Income tax expense (Note 10) .........................................................................
NET INCOME .......................................................................................................
Less: Net income attributable to noncontrolling interest ....................................
NET INCOME ATTRIBUTABLE TO RAYONIER INC. .........................................
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of income tax effect of $0,
$0 and $0 .................................................................................................
Cash flow hedges, net of income tax effect of $664, $1,270 and $594.......
Actuarial change and amortization of pension and postretirement plan
liabilities, net of income tax effect of $0, $711 and $0 ..............................
Total other comprehensive (loss) income ...............................................
COMPREHENSIVE INCOME ..............................................................................
Less: Comprehensive income attributable to noncontrolling interest ...................
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC..................
EARNINGS PER COMMON SHARE (NOTE 13)
2019
$711,556
2018
$816,138
2017
$819,596
(558,350)
(41,646)
(4,533)
(604,529)
107,027
(31,716)
5,307
80,618
(12,940)
67,678
(8,573)
59,105
963
(30,482)
(1,350)
(30,869)
36,809
(9,146)
$27,663
(605,259)
(41,951)
1,140
(646,070)
170,068
(32,066)
4,564
142,566
(25,236)
117,330
(15,114)
102,216
(22,759)
5,029
(1,630)
(19,360)
97,970
(8,931)
$89,039
(568,253)
(40,245)
4,393
(604,105)
215,491
(34,071)
1,840
183,260
(21,681)
161,579
(12,737)
148,842
9,114
5,693
(208)
14,599
176,178
(14,775)
$161,403
Basic earnings per share attributable to Rayonier Inc.
Diluted earnings per share attributable to Rayonier Inc.
$0.46
$0.46
$0.79
$0.79
$1.17
$1.16
See Notes to Consolidated Financial Statements.
53
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
(Thousands of dollars, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents ..............................................................................................
Accounts receivable, less allowance for doubtful accounts of $24 and $8.......................
Inventory (Note 19) ...........................................................................................................
Prepaid logging roads ......................................................................................................
Prepaid expenses .............................................................................................................
Other current assets .........................................................................................................
Total current assets .................................................................................................
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION .......................
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT
INVESTMENTS (NOTE 7)
PROPERTY, PLANT AND EQUIPMENT
2019
2018
$68,735
27,127
14,518
12,128
2,600
867
125,975
2,482,047
$148,374
26,151
15,703
11,976
5,040
609
207,853
2,401,327
81,791
85,609
Land .................................................................................................................................
Buildings ...........................................................................................................................
Machinery and equipment ................................................................................................
Construction in progress ..................................................................................................
Total property, plant and equipment, gross .............................................................
Less—accumulated depreciation .....................................................................................
Total property, plant and equipment, net .................................................................
RESTRICTED CASH (NOTE 20) ..............................................................................................
RIGHT-OF-USE ASSETS (NOTE 4) .........................................................................................
OTHER ASSETS (NOTE 21) ....................................................................................................
4,131
23,095
4,339
348
31,913
(9,662)
22,251
1,233
99,942
47,757
TOTAL ASSETS ..................................................................................................... $2,860,996
4,131
22,503
3,534
567
30,735
(7,984)
22,751
8,080
—
55,046
$2,780,666
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable .............................................................................................................
Current maturities of long-term debt (Note 6) ...................................................................
Accrued taxes ...................................................................................................................
Accrued payroll and benefits ............................................................................................
Accrued interest ...............................................................................................................
Deferred revenue .............................................................................................................
Other current liabilities ......................................................................................................
Total current liabilities ..............................................................................................
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS (NOTE 6) ............................
PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 16) .....................................
LONG-TERM LEASE LIABILITY (NOTE 4) .............................................................................
OTHER NON-CURRENT LIABILITIES .....................................................................................
COMMITMENTS AND CONTINGENCIES (NOTES 9 and 11)
SHAREHOLDERS’ EQUITY
$18,160
82,000
3,032
8,869
5,205
11,440
22,480
151,186
973,129
25,311
90,481
83,247
$18,019
—
3,178
10,416
5,007
10,447
16,474
63,541
972,567
29,800
—
60,208
Common Shares, 480,000,000 shares authorized, 129,331,069 and 129,488,675 shares
888,177
issued and outstanding ...................................................................................................
583,006
Retained earnings ..............................................................................................................
(31,202)
Accumulated other comprehensive (loss) income (Note 22) ..............................................
1,439,981
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY..................................................
97,661
Noncontrolling interest .......................................................................................................
TOTAL SHAREHOLDERS’ EQUITY .............................................................................
1,537,642
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY ............................................... $2,860,996
884,263
672,371
239
1,556,873
97,677
1,654,550
$2,780,666
See Notes to Consolidated Financial Statements.
54
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Thousands of dollars, except share data)
Common Shares
Shares
Amount
Retained
Earnings
Balance, December 31, 2016 ......................... 122,904,368
$709,867
$700,887
Cumulative-effect adjustment due to adoption
of ASU No. 2016-16 .....................................
Net income ......................................................
Dividends ($1.00 per share).............................
Issuance of shares under incentive stock
plans ............................................................
Stock-based compensation ..............................
Repurchase of common shares .......................
Actuarial change and amortization of pension
and postretirement plan liabilities.................
Foreign currency translation adjustment ..........
Cash flow hedges ............................................
Issuance of shares under equity offering, net
of costs ........................................................
—
—
—
—
—
—
(14,365)
148,842
(127,986)
322,314
—
(5,906)
4,751
5,396
(176)
—
—
—
—
—
—
5,750,000
152,390
—
—
—
—
—
—
—
Accumulated
Other
Comprehensive
Income (Loss)
$856
Non-
controlling
Interest
Shareholders’
Equity
$85,142
$1,496,752
—
—
—
—
—
—
(208)
7,416
5,353
—
12,737
—
—
—
—
—
1,698
340
(14,365)
161,579
(127,986)
4,751
5,396
(176)
(208)
9,114
5,693
—
—
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 .........................................
Net income ......................................................
Dividends ($1.06 per share).............................
Issuance of shares under incentive stock
plans ............................................................
Stock-based compensation ..............................
—
—
—
—
—
—
711
102,216
(137,934)
599,422
—
8,591
6,428
Repurchase of common shares .......................
(81,523)
(2,984)
Actuarial change and amortization of pension
and postretirement plan liabilities.................
Foreign currency translation adjustment ..........
Cash flow hedges ............................................
Distribution to minority shareholder .................
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2018 ......................... 129,488,675
$884,263
$672,371
Net income ......................................................
Dividends ($1.08 per share).............................
Issuance of shares under incentive stock
plans ............................................................
Stock-based compensation ..............................
—
—
—
—
59,105
(140,040)
298,003
—
1,260
6,904
—
—
Repurchase of common shares .......................
(455,609)
(4,250)
(8,430)
Actuarial change and amortization of pension
and postretirement plan liabilities.................
Foreign currency translation adjustment ..........
Cash flow hedges ............................................
Distribution to minority shareholder .................
—
—
—
—
—
—
—
—
—
—
—
—
(711)
—
—
—
—
—
(919)
(17,329)
5,781
—
$239
—
—
—
—
—
(1,350)
784
(30,875)
—
15,114
—
—
—
—
—
(5,430)
(752)
(11,172)
$97,677
8,573
—
—
—
—
—
179
393
—
(9,161)
—
117,330
(137,934)
8,591
6,428
(2,984)
(919)
(22,759)
5,029
(11,172)
$1,654,550
67,678
(140,040)
1,260
6,904
(12,680)
(1,350)
963
(30,482)
(9,161)
Balance, December 31, 2019 ......................... 129,331,069
$888,177
$583,006
($31,202)
$97,661
$1,537,642
See Notes to Consolidated Financial Statements.
55
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
(Thousands of dollars)
OPERATING ACTIVITIES
Net income .............................................................................................................................................
$67,678
$117,330
$161,579
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation, depletion and amortization ....................................................................................
128,235
144,121
127,566
2019
2018
2017
Non-cash cost of land and improved development ......................................................................
Stock-based incentive compensation expense ............................................................................
Deferred income taxes ................................................................................................................
Amortization of losses from pension and postretirement plans ....................................................
Gain on sale of large disposition of timberlands ..........................................................................
12,565
6,904
11,314
449
—
23,553
6,428
22,832
675
—
Other ...........................................................................................................................................
(4,999)
(2,613)
Changes in operating assets and liabilities:
Receivables .................................................................................................................................
Inventories ...................................................................................................................................
Accounts payable ........................................................................................................................
Income tax receivable/payable ....................................................................................................
All other operating activities ........................................................................................................
(849)
1,224
(1,554)
—
(6,714)
765
1,773
(4,626)
—
(142)
13,684
5,396
21,980
465
(66,994)
(716)
(6,362)
(1,384)
3,435
(434)
(1,931)
CASH PROVIDED BY OPERATING ACTIVITIES .......................................................................
214,253
310,096
256,284
INVESTING ACTIVITIES
Capital expenditures ..............................................................................................................................
Real estate development investments ...................................................................................................
(63,996)
(6,803)
(62,325)
(9,501)
(65,345)
(15,784)
Purchase of timberlands ........................................................................................................................
(142,287)
(57,608)
(242,910)
Net proceeds from large disposition of timberlands ...............................................................................
Rayonier office building under construction ...........................................................................................
—
—
—
—
Other ......................................................................................................................................................
(6,304)
(3,421)
95,243
(6,084)
(373)
CASH USED FOR INVESTING ACTIVITIES ..............................................................................
(219,390)
(132,855)
(235,253)
FINANCING ACTIVITIES
Issuance of debt .....................................................................................................................................
82,000
1,014
63,389
Repayment of debt .................................................................................................................................
—
(54,416)
(100,157)
Dividends paid .......................................................................................................................................
(141,071)
(136,772)
(127,069)
Proceeds from the issuance of common shares under incentive stock plan ..........................................
Proceeds from the issuance of common shares from equity offering, net of costs .................................
Repurchase of common shares to pay withholding taxes on vested incentive stock awards .................
Repurchase of common shares under repurchase program ..................................................................
Proceeds from shareholder distribution hedge .......................................................................................
Distribution to minority shareholder ........................................................................................................
Debt issuance costs ...............................................................................................................................
1,260
—
(4,250)
(8,430)
135
(9,161)
(132)
8,591
—
(2,984)
—
2,025
(11,172)
—
CASH USED FOR FINANCING ACTIVITIES ..............................................................................
(79,649)
(193,714)
EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................................................................
(1,700)
571
4,751
152,390
(176)
—
—
—
—
(6,872)
580
CASH, CASH EQUIVALENTS AND RESTRICTED CASH (a)
Change in cash, cash equivalents and restricted cash ..........................................................................
Balance, beginning of year .....................................................................................................................
Balance, end of year ..............................................................................................................................
(86,486)
156,454
$69,968
(15,902)
172,356
14,739
157,617
$156,454
$172,356
See Notes to Consolidated Financial Statements.
56
RAYONIER INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended December 31,
(Thousands of dollars)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year:
Interest (a) ............................................................................................................................
Income taxes ........................................................................................................................
$32,782
1,691
$33,120
2,150
$36,041
514
Non-cash investing activity:
Capital assets purchased on account ...................................................................................
3,568
2,001
3,809
2019
2018
2017
(a)
Interest paid is presented net of patronage payments received of $4.0 million, $4.1 million and $3.0 million for the years ended December 31,
2019, 2018 and 2017, respectively. For additional information on patronage payments, see Note 6 — Debt.
See Notes to Consolidated Financial Statements.
57
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands unless otherwise stated)
1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The Company’s consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”). These statements include the accounts of Rayonier
Inc. and its subsidiaries, in which it has a majority ownership or controlling interest. As of March 2016, the Company
maintains a 77% ownership interest in the New Zealand subsidiary, and, as such, consolidates its results of operations
and Balance Sheet. The Company records a noncontrolling interest in its consolidated financial statements representing
the minority ownership interest (23%) of the New Zealand subsidiary’s results of operations and equity. All intercompany
balances and transactions are eliminated.
RECLASSIFICATIONS
During 2019, management reclassified Real Estate segment sales related to marketing fees and deferred revenue
adjustments from Improved Development to Other. All prior period amounts previously reported have been reclassified.
See Note 5 - Segment and Geographic Information.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and to disclose contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
There are risks inherent in estimating and therefore actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash on hand and other highly liquid investments with original maturities of
three months or less.
ACCOUNTS RECEIVABLE
Accounts receivable are primarily amounts due to the Company for the sale of timber and are presented net of an
allowance for doubtful accounts.
INVENTORY
HBU real estate properties that are expected to be sold within one year are included in inventory at the lower of
cost or net realizable value. HBU properties that are expected to be sold after one year are included in a separate
balance sheet line entitled “Higher and Better Use Timberlands and Real Estate Development Investments.” See below
for additional information.
Inventory also includes logs available to be sold by the Trading segment. Log inventory is recorded at the lower
of cost or net realizable value and expensed to cost of sales when sold to third-party buyers. See Note 19 — Inventory
for additional information.
PREPAID LOGGING ROADS
Costs for roads built in the Pacific Northwest and New Zealand to access particular tracts to be harvested in the
upcoming 24 months to 60 months are recorded as prepaid logging roads. The Company charges such costs to expense
as timber is harvested using an amortization rate determined annually as the total cost of prepaid roads divided by the
estimated tons of timber to be accessed by those roads. The prepaid balance is classified as short-term or long-term
based on the upcoming harvest schedule. See Note 21 — Other Assets for additional information.
DEFERRED FINANCING COSTS
Deferred financing costs related to revolving debt are capitalized and amortized to interest expense over the term
of the revolving debt using a method that approximates the effective interest method. See Note 21 — Other Assets for
58
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
additional information on deferred financing costs related to revolving debt. See Note 6 — Debt for additional information
on deferred financing costs related to term debt.
CAPITALIZED SOFTWARE COSTS
Software costs are capitalized and amortized over a period not exceeding five years using the straight-line method.
TIMBER AND TIMBERLANDS
Timber is stated at the lower of cost or net realizable value. Costs relating to acquiring, planting and growing timber
including real estate taxes, site preparation and direct support costs relating to facilities, vehicles and supplies, are
capitalized. A portion of timberland lease payments are capitalized based on the proportion of acres with merchantable
timber volume remaining to be harvested under the lease term and the residual portion of the lease payments are
expensed as incurred. Payroll costs are capitalized for time spent on timber growing activities, while interest or any
other intangible costs are not capitalized. An annual depletion rate is established for each particular region by dividing
merchantable inventory cost by standing merchantable inventory volume, which is estimated annually. The Company
charges accumulated costs attributed to merchantable timber to depletion expense (cost of sales) at the time the timber
is harvested or when the underlying timberland is sold.
Upon the acquisition of timberland, the Company makes a determination on whether to combine the newly acquired
merchantable timber with an existing depletion pool or to create a new, separate pool. This determination is based on
the geographic location of the new timber, the customers/markets that will be served and the species mix. If the
acquisition is similar, the cost of the acquired timber is combined into an existing depletion pool and a new depletion
rate is calculated for the pool. This determination and depletion rate adjustment normally occurs in the quarter following
the acquisition.
HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS
HBU timberland is recorded at the lower of cost or net realizable value. These properties are managed as
timberlands until sold or developed, with sales and depletion expense related to the harvesting of timber accounted
for within the respective timber segment. At the time of sale, the cost basis of any unharvested timber is recorded as
depletion expense, a component of cost of sales, within the Real Estate segment.
Real estate development investments include capitalized costs for targeted infrastructure improvements, such as
roadways and utilities. HBU timberland and real estate development investments expected to be sold within twelve
months are recorded as inventory. See Note 7 — Higher and Better Use Timberlands and Real Estate Development
Investments for additional information.
PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION
Property, plant and equipment additions are recorded at cost, including applicable freight, interest, construction
and installation costs. The Company generally depreciates its assets, including office and transportation equipment,
using the straight-line depreciation method over 3 to 25 years. Buildings and land improvements are depreciated using
the straight-line method over 15 to 35 years and 5 to 30 years, respectively.
Gains and losses on the sale or retirement of assets are included in operating income. Long-lived assets are
reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may
not be recoverable. Recoverability of assets that are held and used is measured by net undiscounted cash flows
expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized
is the amount the carrying value exceeds the fair value of the assets, which is based on a discounted cash flow model.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.
LEASES
At inception, the Company determines if an arrangement is a lease and whether that lease meets the classification
criteria of a finance or operating lease. Operating leases are included in right-of-use (“ROU”) assets, other current
liabilities, and long-term lease liability in the Consolidated Balance Sheets.
59
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities
represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities
are recognized at the lease commencement date based on the estimated present value of lease payments over the
lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental
borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term. Lease terms
may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that
option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
RIGHT-OF-USE ASSETS IMPAIRMENT
Operating lease right-of-use assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset group to which the operating lease is assigned may not be recoverable.
Recoverability of the asset group is evaluated based on forecasted undiscounted cash flows. If the carrying amount
of the asset group is not recoverable, the fair value of the asset group is compared to its carrying amount and an
impairment charge is recognized for the amount by which the carrying amount exceeds the fair value. A discounted
cash flow approach using market participant assumptions of the expected cash flows and discount rate are used to
estimate the fair value of the asset group.
INVESTMENTS
Investments at December 31, 2019 consisted of marketable equity securities. Investments are carried at fair value
based on quoted prices in their active market with both the realized and unrealized gains and losses as well as interest
and dividends reported in “Interest and other miscellaneous income, net.”
FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an
exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between
market participants at the measurement date. A three-level hierarchy that prioritizes the inputs used to measure fair
value was established 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, such as quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that
are not active, or other inputs that are observable or can be corroborated by observable market data.
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. This includes certain pricing models, discounted cash flow methodologies
and similar techniques that use significant unobservable inputs.
GOODWILL
Goodwill represents the excess of the acquisition cost of the New Zealand Timber segment over the fair value of
the net assets acquired. Goodwill is not amortized, but is periodically reviewed for impairment. An impairment test for
this reporting unit’s goodwill is performed annually and whenever events or circumstances indicate that the value of
goodwill may be impaired. The Company compares the fair value of the New Zealand Timber segment, using an
independent valuation for the New Zealand forest assets, to its carrying value including goodwill. The independent
valuation of the New Zealand forest assets is based on discounted cash flow models where the fair value is calculated
using cash flows from sustainable forest management plans. The fair value of the forest assets is measured as the
present value of cash flows from one growth cycle based on the productive forest land, taking into consideration
environmental, operational, and market restrictions. These cash flow valuations involve a number of estimates that
require broad assumptions and significant judgment regarding future performance. The annual impairment test was
performed as of October 1, 2019; the estimated fair value of the New Zealand Timber segment exceeded its carrying
value and no impairment was recorded. Except for changes in the New Zealand foreign exchange rate, there have
been no adjustments to the carrying value of goodwill since the initial recognition. Note 21 — Other Assets for additional
information.
60
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
FOREIGN CURRENCY TRANSLATION AND REMEASUREMENT
The functional currency of the Company’s New Zealand-based operations is the New Zealand dollar. All assets
and liabilities are translated into U.S. dollars at the exchange rate in effect at the respective balance sheet dates.
Translation gains and losses are recorded as a separate component of Accumulated Other Comprehensive Income
(“AOCI”), within Shareholders’ Equity.
U.S. denominated transactions of the New Zealand subsidiary are remeasured into New Zealand dollars at the
exchange rate in effect on the date of the transaction and recognized in earnings, net of related cash flow hedges. All
income statement items of the New Zealand subsidiary are translated into U.S. dollars for reporting purposes using
monthly average exchange rates with translation gains and losses being recorded as a separate component of AOCI,
within Shareholders’ Equity.
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 December 31, 2019 are primarily due to advances on stumpage contracts and unearned hunt 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.
TIMBER SALES
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 a 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.
61
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table summarizes revenue recognition and general payment terms for timber sales:
Contract Type
Performance
Obligation
Timing of
Revenue Recognition
Stumpage Pay-as-Cut
Stumpage Lump Sum
Stumpage Agreed Volume
Right to harvest a unit (i.e.
ton, MBF, JAS m3) of
standing timber
Right to harvest an agreed
upon acreage of standing
timber
Right to harvest an agreed
upon volume of standing
timber
As timber is severed
(point-in-time)
As timber is severed
(over-time)
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)
Delivered Wood (Export)
Delivery of a unit (i.e. ton,
MBF, JAS m3) onto export
vessel
Upon delivery onto export
vessel
(point-in-time)
General
Payment Terms
Initial payment between
5% and 20% of estimated
contract value; collection
generally within 10 days of
severance
Payments made throughout
contract term at the earlier of a
specified harvest percentage
or time elapsed
No initial payment and on
open credit terms; collection
generally within 30 days of
invoice
Letter of credit from an
approved bank; collection
generally within 30 days of
delivery
Contract execution
(point-in-time)
Full payment due upon
contract execution
NON-TIMBER SALES
Non-timber sales are primarily comprised of hunting and recreational licenses. Such sales and any related costs
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.
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.
REAL ESTATE
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.
COST OF SALES
Cost of sales associated with timber operations primarily include the cost basis of timber sold (depletion) 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 and fire prevention.
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. 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.
62
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
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.
EMPLOYEE BENEFIT PLANS
The determination of expense and funding requirements for Rayonier’s defined benefit pension plan, its unfunded
excess pension plan and its postretirement life insurance plan are largely based on a number of actuarial assumptions.
The key assumptions include discount rate, return on assets, salary increases, mortality rates and longevity of
employees. See Note 16 — Employee Benefit Plans for assumptions used to determine benefit obligations, and the
net periodic benefit cost for the year ended December 31, 2019.
Periodic pension and other postretirement expense is included in “Cost of sales,” “Selling and general expenses”
and “Interest and other miscellaneous income, net” in the Consolidated Statements of Income and Comprehensive
Income. The service cost component of net periodic benefit cost is included in “Cost of sales” and “Selling and general
expenses” while the other components of net periodic benefit cost (interest cost, expected return on plan assets and
amortization of losses or gains) are presented outside of income from operations in “Interest and other miscellaneous
income, net.” At December 31, 2019 and 2018, the Company’s pension plans were in a net liability position
(underfunded) of $23.8 million and $28.6 million, respectively. The estimated amount to be paid in the next 12 months
is recorded in “Accrued payroll and benefits” on the Consolidated Balance Sheets, with the remainder recorded as a
long-term liability in “Pension and Other Postretirement Benefits.” Changes in the funded status of the Company’s
plans are recorded through other comprehensive (loss) income in the year in which the changes occur. The Company
measures plan assets and benefit obligations as of the fiscal year-end. See Note 16 — Employee Benefit Plans for
additional information.
INCOME TAXES
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax
assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
financial statement carrying amounts of assets and liabilities and their respective tax bases, operating loss carryforwards
and tax credit carryforwards. Deferred tax assets and liabilities are measured pursuant to tax laws using rates expected
to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled.
The Company recognizes the effect of a change in income tax rates on deferred tax assets and liabilities in the
Consolidated Statements of Income and Comprehensive Income in the period that includes the enactment date of the
rate change. The Company records a valuation allowance to reduce the carrying amounts of deferred tax assets if it
is more-likely-than-not that such deferred tax assets will not be realized.
In determining the provision for income taxes, the Company computes an annual effective income tax rate based
on annual income by legal entity, permanent differences between book and tax, and statutory income tax rates by
jurisdiction. Inherent in the effective tax rate is an assessment of the ultimate outcome of current period uncertain tax
positions. The Company adjusts its annual effective tax rate as additional information on outcomes or events becomes
available. Discrete items such as taxing authority examination findings or legislative changes are recognized in the
period in which they occur.
The Company’s income tax returns are subject to audit by U.S. federal, state and foreign taxing authorities. In
evaluating the tax benefits associated with various tax filing positions, the Company records a tax benefit for an uncertain
tax position if it is more-likely-than-not to be realized upon ultimate settlement of the issue. The Company records a
liability for an uncertain tax position that does not meet this criterion. The Company adjusts its liabilities for uncertain
tax benefits in the period in which it is determined the issue is settled with the taxing authorities, the statute of limitations
expires for the relevant taxing authority to examine the tax position or when new facts or information become available.
See Note 10 — Income Taxes for additional information.
63
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), on January 1,
2019 and elected to apply the standard as of that day.
The Company applied the following practical expedients in the transition to the new standard as allowed under
ASC 842-10-65-1:
Practical Expedient
Reassessment of expired or existing contracts
Use of hindsight
Reassessment of existing or expired land
easements
Description
The Company elected not to reassess, at the application date, whether any
expired or existing contracts contained leases, the lease classification for any
expired or existing leases, and the accounting for initial direct costs for any
existing leases.
The Company elected to use hindsight in determining the lease term (that is,
when considering options to extend or terminate the lease and to purchase the
underlying asset) and in assessing impairment of right-of-use assets.
The Company elected not to evaluate existing or expired land easements that
were not previously accounted for as leases under ASC 840, as allowed under
the transition practical expedient. Going forward, new or modified land
easements will be evaluated under ASU No. 2016-02.
The Company adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to
Accounting for Hedging Activities in the first quarter ended March 31, 2019 with no material impact on the consolidated
financial statements.
The Company adopted ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Non-
employee Share-Based Payment Accounting in the first quarter ended March 31, 2019 with no impact on the
consolidated financial statements.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires
companies to utilize a new impairment model known as the current expected credit loss ("CECL") model to estimate
the lifetime "expected credit loss" and record an allowance that, when deducted from the amortized cost basis of the
financial asset, presents the net amount expected to be collected on the financial asset. The CECL model applies to
all financial assets, including trade receivables. ASU No. 2016-13 is effective for annual periods beginning after
December 15, 2019, and interim periods within those annual periods. The Company does not expect a material impact
on the Company’s Consolidated Financial Statements.
SUBSEQUENT EVENTS
Pope Resources Acquisition
On January 15, 2020, the Company entered into a definitive merger agreement under which Rayonier will acquire
all of the outstanding limited partnership units of Pope Resources, A Delaware Limited Partnership for consideration
consisting of equity and cash. Pursuant to the terms of the agreement, elections of cash versus equity will be subject
to proration to ensure that the ratio of cash and equity would be equal to the amounts issued as if every Pope Resources
unit received 2.751 Rayonier common shares or Rayonier operating partnership units and $37.50 in cash. The merger
agreement also provides for Rayonier to acquire the general partner entities of Pope Resources, Pope MGP, Inc. and
Pope EGP, Inc., for consideration consisting of $10 million of cash. This transaction is expected to close in mid-2020.
64
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
2.
REVENUE
Adoption of ASC 606
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.
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.
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 years ended December 31, 2019 and 2018 that
was included in the contract liability balance at the beginning of each year:
Revenue recognized from contract liability balance at the beginning of the year (a) ...........
$10,039
$9,004
(a) Revenue recognized was primarily from hunting licenses and the use of advances on pay-as-cut timber sales.
Year Ended December 31,
2019
2018
65
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following tables present our revenue from contracts with customers disaggregated by product type for the years ended
December 31, 2019, 2018 and 2017:
Southern
Timber
Pacific
Northwest
Timber
New
Zealand
Timber
Real
Estate
Trading
Elim.
Total
Year Ended
December 31, 2019
Pulpwood ......................................................
Sawtimber .....................................................
Hardwood ......................................................
Total Timber Sales ..............................
License Revenue, Primarily From Hunting ....
Other Non-Timber/Carbon Revenue .............
Agency Fee Income ......................................
Total Non-Timber Sales ......................
Improved Development .................................
Unimproved Development .............................
Rural .............................................................
Timberlands & Non-Strategic ........................
Other .............................................................
Total Real Estate Sales .......................
$86,537
67,360
5,259
159,156
18,270
16,685
—
34,955
—
—
—
—
—
—
Revenue from Contracts with Customers......
Intersegment .................................................
Total Revenue ......................................
194,111
—
$194,111
December 31, 2018
Pulpwood ......................................................
Sawtimber .....................................................
Hardwood ......................................................
Total Timber Sales ..............................
License Revenue, Primarily from Hunting .....
Other Non-Timber/Carbon Revenue .............
Agency Fee Income ......................................
Total Non-Timber Sales ......................
Improved Development .................................
Unimproved Development .............................
Rural .............................................................
Timberlands & Non-Strategic ........................
Other .............................................................
Total Real Estate Sales .......................
$80,134
60,295
3,433
143,863
16,285
9,847
—
26,132
—
—
—
—
—
—
$10,350
72,377
—
82,727
717
1,970
—
2,687
—
—
—
—
—
—
85,414
—
$85,414
$14,305
92,166
—
106,471
709
2,652
—
3,361
—
—
—
—
—
—
$32,925
198,481
—
231,406
361
10,094
—
10,455
—
—
—
—
—
—
241,861
—
$241,861
$28,737
213,206
—
241,943
401
6,670
—
7,071
—
—
—
—
—
—
—
—
—
—
—
—
—
5,882
19,476
29,852
19,133
544
74,887
74,887
—
$74,887
—
—
—
—
—
—
—
—
8,336
8,621
22,689
98,872
57
138,575
$13,351
101,255
—
114,606
—
—
677
677
—
—
—
—
—
—
— $143,163
439,473
—
5,259
—
587,895
—
19,348
—
28,749
—
677
—
48,774
—
5,882
—
19,476
—
29,852
—
19,133
—
544
—
74,887
—
115,283
155
$115,438
—
(155)
($155)
711,556
—
$711,556
$13,771
134,299
—
148,070
—
—
652
652
—
—
—
—
—
—
— $136,947
499,966
—
3,433
—
640,347
—
17,395
—
19,169
—
652
—
37,216
—
8,336
—
8,621
—
22,689
—
98,872
—
—
57
138,575
—
Revenue from Contracts with Customers......
Intersegment .................................................
Total Revenue ......................................
169,995
—
$169,995
109,832
—
$109,832
249,014
—
$249,014
138,575
—
$138,575
148,722
92
$148,814
—
(92)
($92)
816,138
—
$816,138
December 31, 2017
Pulpwood ......................................................
Sawtimber .....................................................
Hardwood ......................................................
Total Timber Sales ..............................
License Revenue, Primarily from Hunting .....
Other Non-Timber/Carbon Revenue .............
Agency Fee Income ......................................
Total Non-Timber Sales ......................
Improved Development .................................
Unimproved Development .............................
Rural .............................................................
Timberlands & Non-Strategic ........................
Large Dispositions ........................................
Other .............................................................
Total Real Estate Sales .......................
$67,836
50,891
3,912
122,639
16,004
5,867
—
21,871
—
—
—
—
—
—
—
Revenue from Contracts with Customers......
Total Revenue ......................................
144,510
$144,510
$24,934
197,521
—
222,455
227
617
—
844
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
6,889
16,405
18,632
70,590
95,351
(541)
207,326
$13,352
137,854
—
151,206
—
—
1,378
1,378
—
—
—
—
—
—
—
223,299
$223,299
207,326
$207,326
152,584
$152,584
$11,242
77,477
—
88,719
646
2,512
—
3,158
—
—
—
—
—
—
—
91,877
$91,877
66
— $117,364
463,743
—
3,912
—
585,019
—
16,877
—
8,996
—
1,378
—
27,251
—
6,889
—
16,405
—
18,632
—
70,590
—
95,351
—
(541)
—
207,326
—
819,596
—
— $819,596
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following tables present our timber sales disaggregated by contract type for the years ended December 31,
2019, 2018 and 2017:
Year Ended
December 31, 2019
Stumpage Pay-as-Cut .................................................
Stumpage Lump Sum .................................................
Total Stumpage ...................................................
Delivered Wood (Domestic) ........................................
Delivered Wood (Export) .............................................
Total Delivered ....................................................
Southern
Timber
Pacific
Northwest
Timber
New Zealand
Timber
Trading
Total
$71,943
7,428
79,371
71,054
8,731
79,785
—
2,749
2,749
79,978
—
79,978
—
—
—
—
—
—
80,974
150,432
231,406
5,488
109,118
114,606
$71,943
10,177
82,120
237,494
268,281
505,775
Total Timber Sales ......................................................
$159,156
$82,727
$231,406
$114,606
$587,895
December 31, 2018
Stumpage Pay-as-Cut .................................................
Stumpage Lump Sum .................................................
Total Stumpage ...................................................
Delivered Wood (Domestic) ........................................
Delivered Wood (Export) .............................................
Total Delivered ....................................................
$72,385
4,988
77,373
60,931
5,559
66,490
—
11,854
11,854
94,617
—
94,617
—
—
—
—
—
—
90,631
151,312
241,943
6,141
141,929
148,070
$72,385
16,842
89,227
252,320
298,800
551,120
Total Timber Sales ......................................................
$143,863
$106,471
$241,943
$148,070
$640,347
December 31, 2017
Stumpage Pay-as-Cut .................................................
Stumpage Lump Sum .................................................
Stumpage Agreed Volume ..........................................
Total Stumpage ...................................................
Delivered Wood (Domestic) ........................................
Delivered Wood (Export) .............................................
Total Delivered ....................................................
$71,120
9,093
—
80,213
42,426
—
42,426
—
10,628
1,234
11,862
76,857
—
76,857
—
—
—
—
—
—
—
—
84,221
138,234
222,455
6,044
145,162
151,206
$71,120
19,721
1,234
92,075
209,548
283,396
492,944
Total Timber Sales ......................................................
$122,639
$88,719
$222,455
$151,206
$585,019
3.
TIMBERLAND ACQUISITIONS
In 2019, the Company acquired approximately 62,000 acres of U.S. timberland located in Florida, Georgia, Texas,
and Washington through sixteen transactions for an aggregate value of $106.3 million. Approximately $29.8 million of
these acquisitions were acquired using like-kind exchange proceeds while the remaining $76.5 million were funded
from operating cash flow and the use of the Company’s revolving credit facility. Additionally, during 2019, the Company
acquired approximately 9,000 acres of timberland (including approximately 2,000 acres of leased land) in New Zealand
for approximately $36.0 million. These acquisitions were funded from operating cash flow.
In 2018, the Company acquired approximately 26,000 acres of U.S. timberland in Florida, Georgia and Texas for
$45.9 million of like-kind exchange proceeds. Additionally, in two transactions during 2018, the Company acquired
forestry rights covering approximately 4,000 acres of timberland in New Zealand for approximately $11.7 million. These
acquisitions were funded from operating cash flow and use of the New Zealand subsidiary’s working capital facility.
See Note 6 - Debt for additional information on the Company’s revolving credit facility and the New Zealand
subsidiary’s working capital facility.
67
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table summarizes the timberland acquisitions for the years ended December 31, 2019 and 2018:
Florida .................................................................................................
Georgia ...............................................................................................
Texas ...................................................................................................
Washington .........................................................................................
New Zealand .......................................................................................
Total Acquisitions ..............................................................................
2019
2018
Cost
$71,183
13,395
14,349
7,340
36,020
$142,287
Acres
42,522
10,271
6,643
2,260
9,223
70,919
Cost
$35,560
2,532
7,851
—
11,665
$57,608
Acres
20,513
2,232
3,279
—
3,833
29,857
4.
LEASES
ADOPTION OF ASC 842
For more information on the adoption of ASC 842, including required transition disclosures, see Note 1 -
Summary of Significant Accounting Policies.
TIMBERLAND LEASES
U.S. timberland leases typically have initial terms of approximately 30 to 65 years, with renewal provisions in some
cases. New Zealand timberland lease terms typically range between 30 and 99 years. New Zealand lease arrangements
generally consist of Crown Forest Licenses (“CFLs”), forestry rights and land leases. A CFL is a license arrangement
to use government or privately owned lands to operate a commercial forest. CFLs generally extend indefinitely and
may only be terminated upon a 35-year termination notice. If no termination notice is given, the CFLs renew automatically
each year for a one-year term. Alternatively, some CFLs extend for a specific term. Once a CFL is terminated, the
Company may be able to obtain a forestry right from the subsequent owner. A forestry right is a license arrangement
with a private entity to use their lands to operate a commercial forest. Forestry rights terminate either upon the issuance
of a termination notice (which can last 35 to 45 years), completion of harvest, or a specified termination date.
As of December 31, 2019, the New Zealand subsidiary has two CFLs comprising 9,000 acres under termination
notice that are being relinquished as harvest activities are concluded, as well as two fixed-term CFLs comprising 3,000
acres expiring in 2062. Additionally, the New Zealand subsidiary has two forestry rights comprising 32,000 acres under
termination notice that are being relinquished as harvest activities are concluded in 2026 and 2030.
OTHER NON-TIMBERLAND LEASES
In addition to timberland holdings, the Company leases properties for certain office locations. Significant leased
properties include a regional office in Lufkin, Texas; a Pacific Northwest Timber office in Hoquiam, Washington and a
New Zealand Timber and Trading headquarters in Auckland, New Zealand.
LEASE MATURITIES, LEASE COST AND OTHER LEASE INFORMATION
The following table details the Company’s undiscounted lease obligations as of December 31, 2019 by type of
lease and year of expiration:
Lease obligations
Operating lease liabilities
Total
2020
2021
2022
2023
2024
Thereafter
$193,320
$10,028
$9,293
$8,413
$8,355
$8,281
$148,950
Total Undiscounted Cash Flows
$193,320
$10,028
$9,293
$8,413
$8,355
$8,281
$148,950
Year of Expiration
Imputed interest
Balance at December 31, 2019
Less: Current portion
Non-current portion at December 31, 2019
(92,796)
100,524
(10,043)
$90,481
68
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table details components of the Company’s lease cost for year ended December 31, 2019:
Lease Cost Components
Operating lease cost
Variable lease cost (a)
Total lease cost (b)
Year Ended
December 31,
2019
$10,870
235
$11,105
(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) Short-term leases with an initial term of 12 months or less are not recorded on the balance sheet. Lease expense for these leases are expensed
on a straight line basis over the lease term. Short-term lease expense was not material for the year ended December 31, 2019.
The following table details components of the Company’s lease cost for the year ended December 31, 2019:
Supplemental cash flow information related to leases:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Investing cash flows from operating leases
Total cash flows from operating leases
Weighted-average remaining lease term in years - operating leases
Weighted-average discount rate - operating leases
Year Ended
December 31,
2019
$2,567
8,303
$10,870
28
5%
The Company applied the following practical expedients upon adoption of the new standard as allowed under
ASC 842:
Practical Expedient
Short-term leases
Separation of lease and non-lease
components
Description
The Company does not record right-of-use assets or liabilities for short-term leases (a
lease that at commencement date has a lease term of 12 months or less and does not
contain a purchase option that is reasonably certain to be exercised).
The Company does not separate non-lease components from the associated lease
components if they have the same timing and pattern of transfer and, if accounted for
separately, would both be classified as an operating lease.
5.
SEGMENT AND GEOGRAPHICAL INFORMATION
Rayonier operates in five reportable segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber,
Real Estate and Trading.
See Note 1 - Summary of Significant Accounting Policies for a discussion of the current year reclassification of
Real Estate segment sales related to marketing fees and deferred revenue adjustments from Improved Development
to Other.
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 (loss) and Adjusted EBITDA. Asset information is not reported by segment, as the
company does not produce asset information by segment internally.
69
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(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 income (expense), miscellaneous income (expense)
and income tax expense, are not considered by management to be part of segment operations and are included under
“Corporate and other.”
Segment information for each of the three years ended December 31, 2019 follows:
Southern Timber ................................................................................................................. $194,111
Pacific Northwest Timber ....................................................................................................
85,414
New Zealand Timber
..........................................................................................................
241,861
Real Estate
2019
Sales by Product Line
2018
$169,995
2017
$144,510
109,832
249,014
91,877
223,299
Improved Development
.............................................................................................
Unimproved Development .........................................................................................
Rural
.........................................................................................................................
Timberlands & Non-Strategic ....................................................................................
Large Dispositions ....................................................................................................
Other (a)
...................................................................................................................
5,882
19,476
29,852
19,133
—
544
8,336
8,621
22,689
98,872
—
57
Total Real Estate ................................................................................................................
Trading ...............................................................................................................................
74,887
115,438
138,575
148,814
6,889
16,405
18,632
70,590
95,351
(541)
207,326
152,584
Intersegment eliminations ..................................................................................................
(155)
Total Sales ............................................................................................................... $711,556
(92)
—
$816,138
$819,596
(a)
Includes marketing fees and deferred revenue adjustments related to Improved Development sales.
Operating Income (Loss)
2018
$44,245
2019
$57,804
2017
$42,254
(12,427)
48,035
38,665
8
8,137
62,754
76,240
953
1,127
57,567
130,856
4,578
(25,058)
(22,261)
(20,891)
107,027
170,068
215,491
(26,409)
(27,502)
(32,231)
$80,618
$142,566
$183,260
Southern Timber
Pacific Northwest Timber
................................................................................................................
...................................................................................................
New Zealand Timber ..........................................................................................................
Real Estate (a)
...................................................................................................................
Trading ..............................................................................................................................
Corporate and other ...........................................................................................................
Total Operating Income ............................................................................................
Unallocated interest expense and other .............................................................................
Total Income before Income Taxes .....................................................................................
(a) The year 2017 includes Large Dispositions of $67.0 million.
70
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
Capital Expenditures (a)
Southern Timber
..................................................................................................................
Pacific Northwest Timber .....................................................................................................
New Zealand Timber
...........................................................................................................
Real Estate ..........................................................................................................................
Corporate and other
............................................................................................................
$34,574
$35,388
$34,476
11,220
17,357
204
641
9,311
17,318
284
24
10,254
17,046
1,348
2,221
Total capital expenditures ...........................................................................................
$63,996
$62,325
$65,345
Gross Capital Expenditures
2017
2018
2019
Timberland Acquisitions
Southern Timber
..................................................................................................................
Pacific Northwest Timber .....................................................................................................
New Zealand Timber
36,020
Total timberland acquisitions ...................................................................................... $142,287
...........................................................................................................
7,340
—
11,665
1,483
21,376
$57,608
$242,910
$98,927
$45,943
$220,051
Total Gross Capital Expenditures .................................................................................... $206,283
$119,933
$308,255
(a) Excludes timberland acquisitions presented separately in addition to spending on the Rayonier office building of $6.1 million in 2017 and real
estate development investments of $6.8 million, $9.5 million and $15.8 million in the years 2019, 2018 and 2017, respectively.
Southern Timber
..................................................................................................................
Pacific Northwest Timber .....................................................................................................
New Zealand Timber
...........................................................................................................
Real Estate (a)
Corporate and other
....................................................................................................................
............................................................................................................
1,157
........................................................................................................................... $128,235
Total
Depreciation,
Depletion and Amortization
2017
2018
2019
$49,357
$58,609
$61,923
29,165
27,761
8,229
32,779
28,007
23,566
1,160
32,008
27,499
36,343
794
$144,121
$146,001
(a) The year 2017 includes Large Dispositions of $18.4 million.
Real Estate (a)
.........................................................................................................................
(a) The year 2017 includes Large Dispositions of $9.8 million.
Geographical Operating Information
Non-Cash Cost of Land and
Improved Development
2018
$23,553
2019
$12,565
2017
$23,498
2019
United States .......... $354,395
New Zealand ..........
357,161
Total .............. $711,556
Sales
2018
$390,396
2017
$419,402
Operating Income
2018
$83,357
2019
$58,945
2017
$138,528
Identifiable Assets
2018
2019
$2,282,480
$2,288,642
425,742
400,194
48,082
86,711
76,963
572,354
498,186
$816,138
$819,596
$107,027
$170,068
$215,491
$2,860,996
$2,780,666
71
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
6.
DEBT
Rayonier’s debt consisted of the following at December 31, 2019 and 2018:
Term Credit Agreement due 2024 at a variable interest rate of 3.3% at December 31, 2019
$350,000
$350,000
2019
2018
Senior Notes due 2022 at a fixed interest rate of 3.75%
Incremental Term Loan Agreement due 2026 at a variable interest rate of 3.6% at December 31,
2019
Revolving Credit Facility due 2020 at a variable interest rate of 3.0% at December 31, 2019
Total debt
Less: Current maturities of long-term debt
Less: Deferred financing costs
Long-term debt, net of deferred financing costs
325,000
325,000
300,000
300,000
82,000
—
1,057,000
975,000
(82,000)
(1,871)
—
(2,433)
$973,129
$972,567
Principal payments due during the next five years and thereafter are as follows:
2020 .........................................................................................................................................................................
2021 .........................................................................................................................................................................
2022 .........................................................................................................................................................................
2023 .........................................................................................................................................................................
2024 .........................................................................................................................................................................
82,000
—
325,000
—
350,000
Thereafter
Total debt
................................................................................................................................................................
300,000
................................................................................................................................................................. $1,057,000
TERM CREDIT AGREEMENT
In August 2015, the Company entered into a credit agreement with CoBank, ACB, as administrative agent, and a
syndicate of Farm Credit institutions and other commercial banks to provide $550 million of new credit facilities, including
a nine-year $350 million term loan facility. The periodic interest rate on the term loan facility is subject to a pricing grid
based on the Company’s leverage ratio, as defined in the credit agreement. As of December 31, 2019, the periodic
interest rate on the term loan facility was LIBOR plus 1.625%. Monthly payments of interest only are due on this loan
through maturity. Following the closing of the term loan, the Company entered into several interest rate swap transactions
to fix the cost of the term loan facility over its nine-year term. The term credit agreement allows the Company to receive
annual patronage payments, which are profit distributions made by a cooperative to its member-users based on the
quantity or value of business done with the member-user. The Company estimates the effective interest rate on the
term loan facility to be approximately 3.3% after consideration of the interest rate swaps and estimated patronage
refunds. For additional information on the Company’s interest rate swaps see Note 14 — Derivative Financial
Instruments and Hedging Activities.
3.75% SENIOR NOTES ISSUED MARCH 2012
In March 2012, Rayonier Inc. issued $325 million of 3.75% Senior Notes due 2022, guaranteed by certain
subsidiaries. Semi-annual payments of interest only are due on these notes through maturity. See Note 24 -
Consolidating Financial Statements for further information regarding the subsidiary guarantors.
72
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
INCREMENTAL TERM LOAN AGREEMENT
In April 2016, the Company entered into an incremental term loan agreement with CoBank, ACB, as administrative
agent, and a syndicate of Farm Credit institutions to provide a 10-year, $300 million incremental term loan. The periodic
interest rate on the incremental term loan agreement is subject to a pricing grid based on the Company’s leverage
ratio, as defined in the credit agreement. As of December 31, 2019, the periodic interest rate on the incremental term
loan was LIBOR plus 1.900%. Monthly payments of interest only are due on this loan through maturity. Following the
closing of the incremental term loan, the Company entered into several interest rate swap transactions to fix the cost
of the facility over its 10-year term. The Company estimates the effective interest rate on the incremental term loan
facility to be approximately 2.8% after consideration of the interest rate swaps and estimated patronage payments.
For additional information on the Company’s interest rate swaps see Note 14 — Derivative Financial Instruments and
Hedging Activities.
REVOLVING CREDIT FACILITY
In August 2015, the Company entered into a five-year $200 million unsecured revolving credit facility, replacing
the previous $200 million revolving credit facility and $100 million farm credit facility, which were scheduled to expire
in April 2016 and December 2019, respectively. The periodic interest rate on the revolving credit facility is subject to a
pricing grid based on the Company’s leverage ratio, as defined in the credit agreement. As of December 31, 2019, the
periodic interest rate on the revolving credit facility was LIBOR plus 1.250%, with an unused commitment fee of 0.175%.
Monthly payments of interest only are due on this loan through maturity. At December 31, 2019, the Company had
$116.5 million of available borrowings under this facility, net of $1.5 million to secure its outstanding letters of credit.
NEW ZEALAND SUBSIDIARY DEBT
In April 2013, Rayonier acquired an additional 39% interest in its New Zealand subsidiary, bringing its total ownership
to 65%, and as a result, the New Zealand subsidiary’s debt was consolidated effective on that date. On March 3, 2016,
as a result of a capital contribution, the Company’s ownership interest in the New Zealand subsidiary increased to
77%. See Note 8 — New Zealand Subsidiary for further information.
WORKING CAPITAL FACILITIES
In June 2019, the New Zealand subsidiary renewed its NZ$20 million working capital facility for an additional 12-
month term. The NZ$20 million working capital facility is available for short-term operating cash flow needs of the New
Zealand subsidiary. This facility holds a variable interest rate indexed to the 90-day New Zealand Bank Bill rate (“BKBM”).
The margins are set for the term of the facility. During the year ended December 31, 2019, the New Zealand subsidiary
made no borrowings and repayments on its working capital facility. At December 31, 2019, there was no outstanding
balance on the working capital facility.
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 December 31, 2019, the Company was in compliance with all covenants.
73
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
7.
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 REIT to taxable REIT subsidiaries (“TRS”), HBU timberlands to enable land-use entitlement,
development or marketing activities. The Company also periodically 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 improve the value of such properties.
An analysis of higher and better use timberlands and real estate development investments from December 31,
2018 to December 31, 2019 is shown below:
Non-current portion at December 31, 2018
Plus: Current portion (a)
Total Balance at December 31, 2018
Non-cash cost of land and improved development
Timber depletion from harvesting activities and basis of timber sold in real
estate sales
Capitalized real estate development investments (b)
Capital expenditures (silviculture)
Intersegment transfers
Total Balance at December 31, 2019
Less: Current portion (a)
Non-current portion at December 31, 2019
Higher and Better Use Timberlands and Real
Estate Development Investments
Land and
Timber
Development
Investments
Total
$59,189
$26,420
$85,609
4,239
63,428
(1,916)
(2,866)
—
204
(485)
58,365
(274)
$58,091
7,680
34,100
(4,814)
—
6,803
—
—
36,089
(12,389)
$23,700
11,919
97,528
(6,730)
(2,866)
6,803
204
(485)
94,454
(12,663)
$81,791
(a) The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 19
— Inventory for additional information.
(b) Capitalized real estate development investments includes $0.4 million of capitalized interest.
8.
NEW ZEALAND SUBSIDIARY
The Company maintains a 77% controlling financial interest in Matariki Forestry Group (the “New Zealand
subsidiary”), a joint venture that owns or leases approximately 414,000 legal acres of New Zealand timberland.
Accordingly, the Company consolidates the New Zealand subsidiary’s balance sheet and results of operations. The
portions of the consolidated financial position and results of operations attributable to the New Zealand subsidiary’s
23% noncontrolling interest are shown separately within the Consolidated Statements of Income and Comprehensive
Income and Consolidated Statements of Shareholders’ Equity. Rayonier New Zealand Limited (“RNZ”), a wholly-owned
subsidiary of Rayonier Inc., serves as the manager of the New Zealand subsidiary.
74
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
9.
COMMITMENTS
At December 31, 2019, the future minimum payments under non-cancellable commitments were as follows:
2020 ................................................................
2021 ................................................................
2022 ................................................................
2023 ................................................................
2024 ................................................................
Thereafter .......................................................
Development
Projects (a)
$4,403
178
178
178
178
2,749
$7,864
Pension
Contributions (b)
$3,599
681
—
—
—
—
$4,280
Commitments (c)
$2,510
2,122
2,027
2,007
1,171
—
$9,837
Total
$10,512
2,981
2,205
2,185
1,349
2,749
$21,981
(a) Primarily consisting of payments expected to be made on the Company’s Wildlight and Richmond Hill development projects.
(b) Pension contribution requirements are based on actuarially determined estimates and IRS minimum funding requirements.
(c) Commitments include payments expected to be made on foreign exchange contracts, timberland deeds and other purchase obligations.
10.
INCOME TAXES
Our U.S. timber operations are primarily conducted by our REIT entity and are generally not subject to U.S. federal
and state income taxation. Our New Zealand timber operations are conducted by the New Zealand subsidiary, which
is subject to corporate-level tax in New Zealand. Our non-REIT qualifying operations, which are subject to corporate-
level tax, are held by various TRS entities. These operations include our log trading business and certain real estate
activities, such as the sale, entitlement and development of HBU properties.
PROVISION FOR INCOME TAXES FROM CONTINUING OPERATIONS
The provision for income taxes for each of the three years ended December 31 follows:
Current
U.S. federal ................................................................................................
State ...........................................................................................................
Foreign .......................................................................................................
Deferred
U.S. federal ................................................................................................
State ...........................................................................................................
Foreign .......................................................................................................
Changes in valuation allowance .........................................................................
Total ....................................................................................................................
2019
2018
2017
$2
(122)
(1,542)
(1,662)
$2
37
(1,914)
(1,875)
$261
(38)
(245)
(22)
465
17
(11,278)
(10,796)
(482)
($12,940)
3,803
146
(23,360)
(19,411)
(3,950)
($25,236)
13,028
—
(21,659)
(8,631)
(13,028)
($21,681)
75
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
A reconciliation of the U.S. federal statutory income tax rate to the actual income tax rate for each of the three
years ended December 31 follows:
U.S. federal statutory income tax rate ...................................
($16,930)
(21.0)% ($29,939)
(21.0)% ($64,141)
(35.0)%
U.S. and foreign REIT income ............................................
19,902
24.7
32,949
23.1
63,813
34.8
Matariki Group and Rayonier New Zealand Ltd ..................
(11,181)
(13.9)
(23,166)
(16.2)
(19,182)
(10.5)
2019
2018
2017
Transition tax ......................................................................
—
—
—
—
(3,506)
Change in valuation allowance ...........................................
(482)
(0.6)
(3,950)
(2.8)
(13,028)
ASU No. 2016-16 adoption impact ......................................
Deemed repatriation of unremitted foreign earnings ...........
Reduction of deferred tax asset for statutory rate change ...
Internal transfer of assets deferred .....................................
Foreign income tax withholding ...........................................
Other
..................................................................................
—
—
—
(1,815)
(1,535)
(899)
—
—
—
(2.3)
(1.9)
(1.1)
—
—
—
—
—
—
—
—
(1,848)
(1.3)
718
0.5
(1.9)
(7.1)
9.1
4.0
16,631
7,368
(10,499)
(5.7)
—
—
863
—
—
0.5
Income tax expense as reported for net income ....................
($12,940)
(16.1)% ($25,236)
(17.7)% ($21,681)
(11.8)%
The Company’s effective tax rate is below the 21 percent U.S. statutory rate primarily due to tax benefits associated
with being a REIT.
DEFERRED TAXES
Deferred income taxes result from differences between the timing of recognizing revenues and expenses for
financial book purposes versus income tax purposes. The nature of the temporary differences and the resulting net
deferred tax asset/liability for the two years ended December 31 follows:
2019
2018
Gross deferred tax assets:
Pension, postretirement and other employee benefits ...................................................
New Zealand subsidiary .................................................................................................
CBPC tax credit carry forwards ......................................................................................
Capitalized real estate costs ..........................................................................................
U.S. TRS net operating loss ...........................................................................................
Land basis difference .....................................................................................................
Other ..............................................................................................................................
Total gross deferred tax assets ......................................................................................
Less: Valuation allowance ..............................................................................................
Total deferred tax assets after valuation allowance ........................................................
$1,512
23,211
14,555
6,635
5,410
10,626
4,356
66,305
(39,320)
$26,985
$1,791
14,252
14,555
7,386
5,747
11,282
4,047
59,060
(38,839)
$20,221
Gross deferred tax liabilities:
Accelerated depreciation ................................................................................................
New Zealand subsidiary .................................................................................................
Timber installment sale ..................................................................................................
Other ..............................................................................................................................
Total gross deferred tax liabilities ...................................................................................
Net deferred tax liability reported as noncurrent .....................................................................
(23)
(87,548)
—
(3,938)
(91,509)
($64,524)
(73)
(66,430)
(4,823)
(1,272)
(72,598)
($52,377)
76
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
Foreign net operating loss (“NOL”) and tax credit carryforwards as of the two years ended December 31 follows:
2019
New Zealand subsidiary NOL carryforwards ..................................................
U.S. net deferred tax asset ............................................................................
Cellulosic Biofuel Producer Credit (a) ............................................................
Total Valuation Allowance ......................................................................
2018
New Zealand subsidiary NOL carryforwards ..................................................
U.S. net deferred tax asset ............................................................................
Cellulosic Biofuel Producer Credit (a) ............................................................
Total Valuation Allowance ......................................................................
Gross
Amount
Valuation
Allowance
Expiration
$11,650
24,765
14,555
$31,052
24,284
14,555
—
(24,765)
(14,555)
($39,320)
—
(24,284)
(14,555)
($38,839)
None
None
2023
None
None
2019
(a) The Further Consolidated Appropriations Act, 2020 was signed into law on December 20, 2019. The Further Consolidated Appropriations Act,
2020 included the Taxpayer Certainty and Disaster Relief Act of 2019 (Tax Extenders Act), which temporarily renewed approximately two dozen
credits that previously expired or were set to expire at the end of 2019. The Cellulosic Biofuel Producer Credit was one of the credits extended
under this act.
UNRECOGNIZED TAX BENEFITS
A reconciliation of the beginning and ending unrecognized tax benefits for the three years ended December 31
follows:
Balance at January 1, ...............................................................................................
Decreases related to prior year tax positions (a) ......................................................
Increases related to prior year tax positions .............................................................
Balance at December 31, .........................................................................................
—
—
—
—
—
—
—
—
$135
(135)
—
—
2019
2018
2017
(a) Result of a lapse of the applicable statute of limitations.
The Company records interest (and penalties, if applicable) related to unrecognized tax benefits in non-operating
expense. The Company recorded no benefit to interest expense in 2019, 2018 and 2017, respectively and had no
recorded liabilities for the payment of interest at December 31, 2019 and 2018.
TAX STATUTES
The following table provides detail of the tax years that remain open to examination by the IRS and other significant
taxing jurisdictions:
Taxing Jurisdiction
U.S. Internal Revenue Service ...........................................................................................
New Zealand Inland Revenue ............................................................................................
Open Tax Years
2016 - 2018
2014 - 2018
77
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
11.
CONTINGENCIES
The Company has been named as a defendant in various 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 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.
12.
GUARANTEES
The Company provides financial guarantees as required by creditors, insurance programs, and various
governmental agencies. As of December 31, 2019, the following financial guarantees were outstanding:
Financial Commitments (a)
Standby letters of credit (b) .......................................................................................................
Surety bonds (c) ........................................................................................................................
Total financial commitments ......................................................................................................
Maximum Potential
Payment
$1,509
3,487
$4,996
(a) The Company has not recorded any liabilities for these financial commitments in the Consolidated Balance Sheets. The guarantees are not
subject to measurement, as the guarantees are dependent on the Company’s own performance.
(b) Approximately $0.5 million of the 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 2020 and will be renewed as required.
(c) Rayonier issues surety bonds primarily to secure performance obligations related to various operational activities and to provide collateral for
the Company’s Wildlight development project in Nassau County, Florida. These bonds expire at various dates during 2020 and are expected
to be renewed as required.
78
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
13.
EARNINGS PER COMMON SHARE
Basic earnings per share (“EPS”) is calculated by dividing net income attributable to Rayonier by the weighted
average number of common shares outstanding during the year. Diluted EPS is calculated by dividing net income
attributable to Rayonier by the weighted average number of common shares outstanding adjusted to include the
potentially dilutive effect of outstanding stock options, performance shares, restricted shares, restricted stock units and
convertible debt.
The following table provides details of the calculation of basic and diluted EPS for the three years ended
December 31:
Net Income ............................................................................................
Less: Net income attributable to noncontrolling interest .........................
Net income attributable to Rayonier Inc. ................................................
2019
2018
2017
$67,678
(8,573)
$59,105
$117,330
(15,114)
$102,216
$161,579
(12,737)
$148,842
Shares used for determining basic earnings per common share ............
129,257,202
129,043,627
127,367,608
Dilutive effect of:
Stock options ................................................................................
Performance shares, restricted shares and restricted stock units .
12,209
328,977
71,276
575,328
91,956
350,385
Shares used for determining diluted earnings per common share ..........
129,598,388
129,690,231
127,809,949
Basic earnings per common share attributable to Rayonier Inc.: ............
Diluted earnings per common share attributable to Rayonier Inc.: .........
$0.46
$0.46
$0.79
$0.79
$1.17
$1.16
Anti-dilutive shares excluded from computations of diluted earnings per
share:
Stock options, performance shares, restricted shares and
restricted stock units .......................................................................
2019
2018
2017
450,681
254,282
596,061
79
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
14.
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. The Company also uses derivative financial instruments to mitigate exposure to foreign currency risk due to the
translation of the investment in Rayonier’s New Zealand-based operations from New Zealand dollars to U.S. dollars.
Accounting for derivative financial instruments is governed by Accounting Standards Codification 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 (loss) 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 subsidiary is the New Zealand dollar. The New Zealand subsidiary is exposed to foreign currency risk on
export sales and ocean freight payments, which are mainly denominated in U.S. dollars. The New Zealand subsidiary
typically hedges 50% to 90% of its estimated foreign currency exposure with respect to the following twelve months
forecasted sales and purchases less distributions and up to 75% of the forward twelve to 18 months. Foreign currency
exposure from the New Zealand subsidiary’s trading operations is typically hedged based on the following three months
forecasted sales and purchases. As of December 31, 2019, foreign currency exchange contracts and foreign currency
option contracts had maturity dates through April 2021 and March 2021, 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 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 (loss) income for de-designated hedges remains in accumulated other
comprehensive (loss) income until the forecasted transaction affects earnings. Changes in the value of derivative
instruments after de-designation are recorded in earnings.
INTEREST RATE SWAPS
The Company is exposed to cash flow interest rate risk on its variable-rate Term Credit Agreement and Incremental
Term Loan (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. For additional information on the Company’s interest rate swaps see Note 6 — Debt.
80
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table contains information on the outstanding interest rate swaps as of December 31, 2019:
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
August 2015
April 2016
April 2016
July 2016
9 years
9 years
10 years
10 years
10 years
$170,000
Term Credit Agreement
180,000
Term Credit Agreement
100,000
Incremental Term Loan
100,000
Incremental Term Loan
100,000
Incremental Term Loan
2.20%
2.35%
1.60%
1.60%
1.26%
1.63%
1.63%
1.90%
1.90%
1.90%
3.83%
3.98%
3.50%
3.50%
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 subsidiary enters into carbon options from time to time to sell carbon assets at certain prices.
Changes in fair value of the carbon option contracts are recorded in “Interest and other miscellaneous income, net”
as the contracts do not qualify for hedge accounting treatment. As of December 31, 2019, carbon option contracts had
maturity dates through June 2020.
The following table demonstrates the impact, gross of tax, of the Company’s derivatives on the Consolidated
Statements of Income and Comprehensive Income for the years ended December 31, 2019, 2018 and 2017.
Location on Statement of Income and
Comprehensive Income
2019
2018
2017
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts ................................. Other comprehensive (loss) income
$2,211
($4,357)
$2,100
Foreign currency option contracts ....................................... Other comprehensive (loss) income
Interest rate swaps ............................................................. Other comprehensive (loss) income
159
(32,189)
(180)
8,296
(52)
4,214
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 .................................
Carbon options
Interest and other miscellaneous
income, net
Interest and other miscellaneous
income, net
$135
$2,183
(105)
(158)
$47
—
During the next 12 months, the amount of the December 31, 2019 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 gain of approximately
$0.3 million.
81
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(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 at December 31, 2019 and 2018:
Notional Amount
2019
2018
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts ...............................................................................
Foreign currency option contracts .....................................................................................
Interest rate swaps ...........................................................................................................
$56,350
22,000
650,000
$69,950
24,000
650,000
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts ...............................................................................
Carbon options (a)
............................................................................................................
—
9,592
9,396
2,517
(a) Notional amount for carbon options is calculated as the number of units outstanding multiplied by the spot price as of December 31, 2019.
The following table contains the fair values of the derivative financial instruments recorded in the Consolidated
Balance Sheets at December 31, 2019 and 2018. Changes in balances of derivative financial instruments are recorded
as operating activities in the Consolidated Statements of Cash Flows:
Location on Balance Sheet
2019
2018
Fair Value Assets (Liabilities) (a)
Derivatives designated as cash flow hedges:
Foreign currency exchange contracts .................................... Other current assets
Foreign currency option contracts .......................................... Other current assets
Other assets
Other current liabilities
Other assets
Other current liabilities
Other non-current liabilities
Interest rate swaps ................................................................. Other assets
Other non-current liabilities
Derivatives not designated as hedging instruments:
Foreign currency exchange contracts .................................... Other current assets
Other current liabilities
Carbon options (a) ................................................................. Other current liabilities
Total derivative contracts:
Other current assets .........................................................................................................................
Other assets .....................................................................................................................................
Total derivative assets .................................................................................................................
Other current liabilities .....................................................................................................................
Other non-current liabilities ..............................................................................................................
Total derivative liabilities .............................................................................................................
424
390
(172)
151
209
(27)
(30)
2,614
(11,068)
—
—
(607)
$575
3,213
$3,788
(806)
(11,098)
($11,904)
—
—
(1,569)
217
102
(106)
(68)
23,735
—
152
(24)
(322)
$369
23,837
$24,206
(2,021)
(68)
($2,089)
(a) See Note 15 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair
value hierarchy.
82
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(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.
15.
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.
The following table presents the carrying amount and estimated fair values of financial instruments held by the
Company at December 31, 2019 and 2018, using market information and what the Company believes to be appropriate
valuation methodologies under generally accepted accounting principles:
Asset (liability) (a)
December 31, 2019
December 31, 2018
Carrying
Amount
Fair Value
Carrying
Amount
Fair Value
Level 1
Level 2
Level 1
Level 2
Cash and cash equivalents ......................
$68,735
$68,735
Restricted cash (b) ...................................
1,233
1,233
Current maturities of long-term debt .........
Long-term debt (c) ....................................
Interest rate swaps (d) .............................
(82,000)
(973,129)
(8,454)
Foreign currency exchange contracts (d) .
Foreign currency option contracts (d) .......
Carbon options contracts (d) ....................
642
303
(607)
—
—
—
—
—
—
Marketable equity securities (e) ................
10,582
10,582
—
—
(82,000)
8,080
—
(981,500)
(972,567)
(8,454)
642
303
(607)
—
23,735
(1,442)
145
(322)
—
8,080
—
—
—
—
—
—
—
—
—
—
(975,845)
23,735
(1,442)
145
(322)
—
$148,374
$148,374
(a) The Company did not have Level 3 assets or liabilities at December 31, 2019 and 2018.
(b) Restricted cash represents the proceeds from like-kind exchange sales deposited with a third-party intermediary and cash held in escrow for
real estate development obligations. See Note 20 - Restricted Cash for additional information.
(c) The carrying amount of long-term debt is presented net of capitalized debt costs on non-revolving debt. See Note 6 — Debt for additional
information.
(d) See Note 14 — Derivative Financial Instruments and Hedging Activities for information regarding the Balance Sheet classification of the
Company’s derivative financial instruments.
(e) The Company’s investments in marketable equity securities are classified in “Other Assets” based on the nature of the securities and their
availability for use in current operations. See Note 21 - Other Assets for additional information.
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.
83
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
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.
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.
Marketable equity securities — The fair value of marketable equity securities is determined by quoted prices in their
active market.
The following table presents marketable equity securities that have been in a continuous unrealized gain position for
less than 12 months and for 12 months or greater at December 31, 2019 and December 31, 2018:
December 31, 2019
Carrying
Amount
Less
than 12
Months
12
Months
or
Greater
December 31, 2018
Less
than 12
Months
12
Months
or
Greater
Total
Total
Carrying
Amount
Fair value of marketable equity
securities .........................................
$10,582
$10,582
Unrealized gains ..............................
—
3,043
— $10,582
—
3,043
—
—
—
—
—
—
—
—
84
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
16.
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 plans.
The Company closed enrollment in its pension plans to salaried employees hired after December 31, 2005. 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 similar to what is currently provided
to employees hired after December 31, 2005. 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.
The following tables set forth the change in the projected benefit obligation and plan assets and reconcile the funded
status and the amounts recognized in the Consolidated Balance Sheets for the pension and postretirement benefit
plans for the two years ended December 31:
Pension
2019
2018
Postretirement
2018
2019
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year .....................
Service cost .............................................................................
Interest cost .............................................................................
Actuarial loss (gain) .................................................................
Benefits paid ............................................................................
Projected benefit obligation at end of year ........................
$79,559
—
3,197
10,828
(3,323)
$90,261
Change in Plan Assets
Fair value of plan assets at beginning of year .........................
Actual return on plan assets ....................................................
Employer contributions ............................................................
Benefits paid ............................................................................
Other expense .........................................................................
Fair value of plan assets at end of year .........................
$50,949
12,975
6,413
(3,284)
(593)
$66,460
$87,986
—
3,021
(8,160)
(3,288)
$79,559
$57,377
(4,638)
2,829
(4,002)
(617)
$50,949
$1,303
6
54
285
(14)
$1,634
$1,420
7
38
(149)
(13)
$1,303
—
—
14
(14)
—
—
—
—
13
(13)
—
—
Funded Status at End of Year:
Net accrued benefit cost ..........................................................
($23,801)
($28,610)
($1,634)
($1,303)
Amounts Recognized in the Consolidated
Balance Sheets Consist of:
Current liabilities ......................................................................
Noncurrent liabilities ................................................................
Net amount recognized ..................................................
($86)
(23,715)
($23,801)
($86)
(28,524)
($28,610)
($38)
(1,596)
($1,634)
($27)
(1,276)
($1,303)
Net gains or losses recognized in other comprehensive (loss) income for the three years ended December 31 are
as follows:
Net (losses) gains ............................................
2019
($1,514)
Pension
2018
($1,743)
2017
($583)
85
Postretirement
2018
2017
$149
($89)
2019
($285)
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
Net gains or losses reclassified from other comprehensive income and recognized as a component of pension and
postretirement expense for the three years ended December 31 are as follows:
Amortization of losses (gains) ...............................
$449
$673
2019
Pension
2018
2017
$466
Postretirement
2018
2017
2019
—
$2
($1)
Net losses that have not yet been included in pension and postretirement expense for the two years ended
December 31, but have been recognized as a component of AOCI are as follows:
Net losses .........................................................................................
Deferred income tax benefit ..............................................................
AOCI .........................................................................................
Pension
2019
($24,317)
1,216
($23,101)
2018
($23,252)
1,216
($22,036)
Postretirement
2019
2018
($292)
6
($286)
($7)
6
($1)
For pension and postretirement plans with accumulated benefit obligations in excess of plan assets, the following
table sets forth the projected and accumulated benefit obligations and the fair value of plan assets for the two years
ended December 31:
Projected benefit obligation .....................................................................................................
Accumulated benefit obligation ................................................................................................
Fair value of plan assets ..........................................................................................................
2019
$90,261
90,261
66,460
2018
$79,559
79,559
50,949
The following tables set forth the components of net pension and postretirement benefit cost (credit) that have been
recognized during the three years ended December 31:
Pension
Postretirement
2019
2018
2017
2019
2018
2017
Components of Net Periodic Benefit Cost (Credit)
Service cost ..................................................
Interest cost ..................................................
Expected return on plan assets ....................
Amortization of losses (gains).......................
Net periodic benefit cost (credit) ............................
—
3,197
(3,107)
449
$539
—
3,021
(3,934)
673
($240)
—
3,259
(3,781)
466
($56)
$6
54
—
—
$60
$7
38
—
2
$47
$6
53
—
(1)
$58
The estimated pre-tax amounts that will be amortized from AOCI into net periodic benefit cost in 2020 are as follows:
Amortization of loss .....................................................................................................
$861
Pension
Postretirement
$8
86
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table sets forth the principal assumptions inherent in the determination of benefit obligations and net
periodic benefit cost of the pension and postretirement benefit plans as of December 31:
Pension
Postretirement
2019
2018
2017
2019
2018
2017
Assumptions used to determine benefit obligations at December 31:
Discount rate ...............................................................................
3.06% 4.11% 3.48% 3.16% 4.18% 3.56%
Rate of compensation increase ...................................................
—
—
—
4.50% 4.50% 4.50%
Assumptions used to determine net periodic benefit cost for years
ended December 31:
Discount rate ...............................................................................
4.11% 3.48% 4.01% 4.18% 3.56% 4.12%
Expected long-term return on plan assets ...................................
5.72% 7.17% 7.17%
—
—
—
Rate of compensation increase ...................................................
—
—
—
4.50% 4.50% 4.50%
At December 31, 2019, the pension plan’s discount rate was 3.1%, which closely approximates interest rates on
high quality, long-term obligations. In 2019, the expected return on plan assets decreased to 5.7%, which is based on
historical and expected long-term rates of return on broad equity and bond indices and consideration of the actual
annualized rate of return. The Company utilizes this information in developing assumptions for returns, risks and
correlations of asset classes, which are then used to establish the asset allocation ranges.
INVESTMENT OF PLAN ASSETS
The Company’s pension plans’ asset allocation (excluding short-term investments) at December 31, 2019 and 2018,
and target allocation ranges by asset category are as follows:
Asset Category
Domestic equity securities ....................................................................................
International equity securities ...............................................................................
Domestic fixed income securities .........................................................................
International fixed income securities ....................................................................
Real estate fund ...................................................................................................
Total ......................................................................................................................
Percentage of
Plan Assets
2019
2018
Target
Allocation
Range
41%
28%
25%
4%
2%
100%
39% 35-45%
28% 20-30%
26% 25-29%
3-7%
2-4%
5%
2%
100%
The Company’s Pension and Savings Plan Committee and the Audit Committee of the Board of Directors oversee
the pension plans’ investment program, which is designed to maximize returns and provide sufficient liquidity to meet
plan obligations while maintaining acceptable risk levels. The investment approach emphasizes diversification by
allocating the plans’ assets among asset categories and selecting investment managers whose various investment
methodologies will be minimally correlative with each other. Investments within the equity categories may include large
capitalization, small capitalization and emerging market securities, while the international fixed income portfolio may
include emerging markets debt. Pension assets did not include a direct investment in Rayonier common shares during
the years ended December 31, 2019 and 2018.
NET ASSET VALUE MEASUREMENTS
Separate investment accounts are measured using the unit value calculated based on the Net Asset Value (“NAV”)
of the underlying assets. The NAV is based on the fair value of the underlying investments held by each fund less
liabilities divided by the units outstanding as of the valuation date. These funds are not publicly traded; however, the
unit price calculation is based on observable market inputs of the funds’ underlying assets.
87
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The following table sets forth the net asset value of the plan assets as of December 31, 2019 or 2018.
December 31, 2019
December 31, 2018
Asset Category
Investments at Net Asset Value:
Separate Investment Accounts ..................................................................
Total Investments at Net Asset Value ..........................................................
66,460
$66,460
50,949
$50,949
CASH FLOWS
Expected benefit payments to be made by the Company for the next 10 years are as follows:
Pension
Benefits
Postretirement
Benefits
2020 ...........................................................................................................................
2021 ...........................................................................................................................
2022 ...........................................................................................................................
2023 ...........................................................................................................................
2024 ...........................................................................................................................
2025-2029 ..................................................................................................................
$3,671
3,829
4,050
4,146
4,318
22,752
$38
42
45
48
51
308
The Company has approximately $3.6 million of pension contribution requirements in 2020.
DEFINED CONTRIBUTION PLANS
The Company provides a defined contribution plan to all of its employees. Company match contributions charged
to expense for these plans were $1.0 million, $0.9 million and $0.8 million for the years ended December 31, 2019,
2018 and 2017, respectively. The defined contribution plan includes Rayonier common shares with a fair market value
of $10.6 million and $9.7 million at December 31, 2019 and 2018, respectively. As of June 1, 2016, the Rayonier Inc.
Common Stock Fund was closed to new contributions. Transfers out of the fund will continue to be permitted, but no
new investments or transfers into the fund are allowed.
As discussed above, the defined benefit pension plan is currently frozen. In lieu of the pension plan, employees
are eligible to receive an enhanced match contribution. Company enhanced match contributions charged to expense
for the years ended December 31, 2019, 2018 and 2017 were $0.9 million, $0.8 million and $0.8 million, respectively.
88
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
17.
INCENTIVE STOCK PLANS
The Rayonier Incentive Stock Plan (the “Stock Plan”) provides up to 15.8 million shares to be granted for incentive
stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock and restricted
stock units, subject to certain limitations. At December 31, 2019, a total of 3.8 million shares were available for future
grants under the Stock Plan. Under the Stock Plan, shares available for issuance are reduced by 1 share for each
option or right granted and by 2.27 shares for each performance share, restricted share or restricted stock unit granted.
The Company issues new shares of stock upon the exercise of stock options, the granting of restricted stock, and the
vesting of performance shares and restricted stock units.
A summary of the Company’s stock-based compensation cost is presented below:
Selling and general expenses ........................................................................
Cost of sales ..................................................................................................
Timber and Timberlands, net (a)
Total stock-based compensation ....................................................................
2019
$6,416
378
110
$6,904
2018
$5,623
704
101
$6,428
2017
$4,784
556
56
$5,396
Tax benefit recognized related to stock-based compensation expense (b) ....
$362
$338
$249
(a) Represents amounts capitalized as part of the overhead allocation of timber-related costs.
(b) A valuation allowance is recorded against the tax benefit recognized as the Company does not expect to be able to realize the benefit in the
future.
FAIR VALUE CALCULATIONS BY AWARD
RESTRICTED STOCK
Restricted stock granted to employees under the Stock Plan generally vests in fourths on the first, second, third
and fourth anniversary of the grant date. Restricted stock granted to senior management generally vests in thirds on
the third, fourth, and fifth anniversary of the grant date. Periodically, other one-time restricted stock grants are issued
to employees for special purposes, such as new hire, promotion or retention, and can vest ratably over, or upon
completion of, a defined period of time. Generally, holders of restricted stock receive dividend equivalent payments on
outstanding restricted shares. Restricted stock granted to members of the board of directors generally vests immediately
upon issuance and is subject to certain holding requirements. The fair value of each share granted is equal to the
share price of the Company’s stock on the date of grant. Rayonier has elected to value each grant in total and recognize
the expense on a straight-line basis from the grant date of the award to the latest vesting date. As permitted, the
Company does not estimate a forfeiture rate for non-vested shares. Accordingly, unexpected forfeitures will lower stock-
based compensation during the period in which they occur.
As of December 31, 2019, there was $2.5 million of unrecognized compensation cost attributable to the Company’s
restricted stock. The Company expects to recognize this cost over a weighted average period of 2.3 years.
A summary of the Company’s restricted stock is presented below:
Restricted shares granted ......................................................................................................
Weighted average price of restricted shares granted .............................................................
Intrinsic value of restricted stock outstanding (a) ....................................................................
Grant date fair value of restricted stock vested ......................................................................
Cash used to purchase common shares from current and former employees to pay
minimum withholding tax requirements on restricted shares vested ...................................
2019
2018
2017
—
—
$5,540
4,579
87,924
$35.44
$8,792
1,582
97,643
$28.18
$8,906
1,198
1,610
334
176
(a)
Intrinsic value of restricted stock outstanding is based on the market price of the Company’s stock at December 31, 2019.
89
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
Non-vested Restricted Shares at January 1, ....................................................
Granted ............................................................................................................
Vested ..............................................................................................................
Cancelled .........................................................................................................
Non-vested Restricted Shares at December 31, ..............................................
RESTRICTED STOCK UNITS
2019
Number of
Shares
317,499
—
(142,778)
(5,607)
169,114
Weighted
Average Grant
Date Fair Value
$30.64
—
32.07
29.99
$29.45
In April 2019, the Company began granting restricted stock units instead of restricted stock to both employees and
members of the board of directors. All attributes of the Company’s restricted stock described herein, including vesting
characteristics, dividend payments, fair value measurement and expense recognition, apply equally to restricted stock
units granted under the Stock Plan.
As of December 31, 2019, there was $2.7 million of unrecognized compensation cost attributable to the Company’s
restricted stock units. The Company expects to recognize this cost over a weighted average period of 3.9 years.
A summary of the Company’s restricted stock units is presented below:
Restricted stock units granted ................................................................................................
Weighted average price of restricted stock units granted .......................................................
Intrinsic value of restricted stock units outstanding (a) ...........................................................
Grant date fair value of restricted stock units vested ..............................................................
Cash used to purchase common shares from current and former employees to pay
minimum withholding tax requirements on restricted stock units vested .............................
2019
128,226
$31.39
3,351
762
$1
2018
2017
—
—
—
—
—
—
—
—
—
—
(a)
Intrinsic value of restricted stock units outstanding is based on the market price of the Company’s stock at December 31, 2019.
Non-vested Restricted Stock Units at January 1, .............................................
Granted ............................................................................................................
Vested ..............................................................................................................
Cancelled .........................................................................................................
Non-vested Restricted Stock Units at December 31, .......................................
PERFORMANCE SHARE UNITS
2019
Number of
Shares
—
128,226
(24,664)
(1,265)
102,297
Weighted
Average Grant
Date Fair Value
—
31.39
30.90
31.77
$31.50
The Company’s performance share units generally vest upon completion of a three-year period. The number of
shares, if any, that are ultimately awarded is contingent upon Rayonier’s total shareholder return versus selected peer
group companies. The performance share payout is based on a market condition, and as such, the awards are valued
using a Monte Carlo simulation model. The model generates the fair value of the award at the grant date, which is then
recognized as expense on a straight-line basis over the vesting period. Additionally, the Company does not estimate
a forfeiture rate for non-vested units. As such, unexpected forfeitures will lower stock-based compensation during the
period in which they occur.
90
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
The Stock Plan allows for the cash settlement of the minimum required withholding tax on performance share unit
awards. As of December 31, 2019, there was $5.1 million of unrecognized compensation cost related to the Company’s
performance share unit awards, which is attributable to awards granted in 2017, 2018 and 2019. This cost is expected
to be recognized over a weighted average period of 1.8 years.
A summary of the Company’s performance share units is presented below:
Common shares reserved for performance shares granted during year ..................................
Weighted average fair value of performance share units granted ............................................
Intrinsic value of outstanding performance share units (a) ......................................................
Fair value of performance shares vested ................................................................................
Cash used to purchase common shares from current and former employees to pay
minimum withholding tax requirements on performance shares vested ...............................
2019
232,684
$35.99
10,758
6,387
2018
213,154
$40.27
9,229
5,670
2,639
2,651
2017
226,448
$32.17
10,414
—
—
(a)
Intrinsic value of outstanding performance share units is based on the market price of the Company's stock at December 31, 2019.
Outstanding Performance Share units at January 1, ..........................................
Granted ..............................................................................................................
Units Distributed .................................................................................................
Other Cancellations/Adjustments .......................................................................
Outstanding Performance Share units at December 31, ....................................
2019
Number
of Units
333,282
116,342
(114,563)
(6,675)
328,386
Weighted
Average Grant
Date Fair Value
$33.60
35.99
28.78
36.61
$36.06
Expected volatility was estimated using daily returns on the Company’s common shares for the three-year period
ending on the grant date. The risk-free rate was based on the 3-year U.S. treasury rate on the date of the award. The
dividend yield was not used to calculate fair value as awards granted receive dividend equivalents. The following table
provides an overview of the assumptions used in calculating the fair value of the awards granted for the three years
ended December 31, 2019:
Expected volatility .........................................................................................................
Risk-free rate ................................................................................................................
2018
2019
18.4% 20.8%
2.4%
2.3%
2017
23.3%
1.5%
NON-QUALIFIED EMPLOYEE STOCK OPTIONS
The exercise price of each non-qualified stock option granted under the Stock Plan is equal to the closing market
price of the Company’s stock on the grant date. Under the Stock Plan, the maximum term is 10 years from the grant
date.
91
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
A summary of the status of the Company’s stock options as of and for the year ended December 31, 2019 is
presented below.
Options outstanding at January 1, ...................................
Granted ..................................................................
Exercised ...............................................................
Cancelled or expired ..............................................
Options outstanding at December 31, ..............................
Options exercisable at December 31, ..............................
Number of
Shares
510,122
—
(57,023)
(38,697)
414,402
414,402
2019
Weighted
Average Exercise
Price
(per common
share)
Weighted
Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic
Value
$32.29
—
22.09
36.50
33.30
$33.30
2.9
2.9
$514
$514
A summary of additional information pertaining to the Company’s stock options is presented below:
Intrinsic value of options exercised (a) ....................................................................
Cash received from exercise of options ...................................................................
2019
$475
1,260
2018
$2,618
8,591
2017
$1,993
4,751
(a)
Intrinsic value of options exercised is the amount by which the fair value of the stock on the exercise date exceeded the exercise price of the
option.
As of December 31, 2019, compensation cost related to stock options was fully recognized.
92
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
18.
OTHER OPERATING (EXPENSE) INCOME, NET
The following table provides the composition of Other operating (expense) income, net for the three years ended
December 31:
(Loss) gain on foreign currency remeasurement, net of cash flow hedges .......
Gain (loss) on sale or disposal of property plant & equipment ..........................
Income from sale of unused Internet Protocol addresses .................................
Log trading marketing fees ................................................................................
Income from New Zealand Timber settlement ...................................................
Miscellaneous expense, net ..............................................................................
Total ............................................................................................................
2019
($3,077)
2018
$370
2017
$3,044
56
—
314
—
7
646
286
—
(1,826)
($4,533)
(169)
$1,140
(68)
—
1,222
420
(225)
$4,393
19.
INVENTORY
As of December 31, 2019 and 2018, Rayonier’s inventory was solely comprised of finished goods, as follows:
Finished goods inventory ......................................................................................
Real estate inventory (a) ..................................................................................
Log inventory ...................................................................................................
Total inventory ..............................................................................................
2019
2018
$12,663
1,855
$14,518
$11,919
3,784
$15,703
(a) Represents the cost of HBU real estate (including capitalized development investments) under contract to be sold. See Note 7 — Higher and
Better Use Timberlands and Real Estate Development Investments for additional information.
20.
RESTRICTED CASH
In order to qualify for like-kind exchange (“LKE”) treatment, the proceeds from real estate sales must be deposited
with a third-party intermediary. These proceeds are accounted for as restricted cash until a suitable replacement
property is acquired. In the event that the LKE purchases are not completed, the proceeds are returned to the Company
after 180 days and reclassified as available cash. As of December 31, 2019 and 2018, the Company had $1.2 million
and $8.1 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 real estate development obligations.
The following table contains the amount of restricted cash recorded in the Consolidated Balance Sheets and
Consolidated Statements of Cash Flows for the years ended December 31:
Restricted cash deposited with LKE intermediary .......................................................
Restricted cash held in escrow
Total restricted cash shown in the Consolidated Balance Sheets ...............................
Cash and cash equivalents .........................................................................................
Total cash, cash equivalents and restricted cash shown in the Consolidated
Statements of Cash Flows ..........................................................................................
2019
2018
$758
475
1,233
68,735
$7,530
550
8,080
148,374
$69,968
$156,454
93
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
21.
OTHER ASSETS
Included in Other Assets are derivatives, goodwill in the New Zealand subsidiary, long-term prepaid roads,
marketable equity securities and other deferred expenses including deferred financing costs related to revolving debt
and capitalized software costs.
See Note 14 — Derivative Financial Instruments and Hedging Activities for further information on derivatives
including their classification on the Consolidated Balance Sheets.
Changes in goodwill for the years ended December 31, 2019 and 2018 were:
Balance, January 1 (net of $0 of accumulated impairment) ...............................................
Changes to carrying amount
2019
$8,307
2018
$8,776
Acquisitions ...............................................................................................................
Impairment ................................................................................................................
Foreign currency adjustment .....................................................................................
Balance, December 31 (net of $0 of accumulated impairment) .........................................
—
—
304
$8,611
—
—
(469)
$8,307
See Note 1 — Summary of Significant Accounting Policies for additional information on goodwill.
As of December 31, 2019 and 2018, Rayonier’s prepaid logging and secondary roads follows:
Long-term and prepaid and secondary roads ....................................................................
Pacific Northwest long-term prepaid roads ....................................................................
New Zealand long-term secondary roads ......................................................................
Total long-term prepaid and secondary roads ...........................................................
2019
2018
$4,198
4,265
$8,463
$4,000
3,072
$7,072
See Note 1 — Summary of Significant Accounting Policies for additional information on prepaid logging roads.
As of December 31, 2019 and 2018, Rayonier’s deferred financing costs related to revolving debt follows:
Deferred financing costs related to revolving debt .............................................................
$102
2019
2018
$213
See Note 1 — Summary of Significant Accounting Policies for additional information on deferred financing costs
related to revolving debt.
As of December 31, 2019 and 2018, Rayonier’s capitalized software costs follows:
Capitalized software costs .................................................................................................
$3,605
2019
2018
$3,776
See Note 1 — Summary of Significant Accounting Policies for additional information on capitalized software costs.
As of December 31, 2019 and 2018, Rayonier’s investments in marketable equity securities follows:
Investments in marketable equity securities .......................................................................
2019
$10,582
2018
—
See Note 1 — Summary of Significant Accounting Policies for additional information on investments in marketable
equity securities. As of December 31, 2019, the Company’s investments in marketable equity securities consist entirely
of 114,400 limited partnership units of Pope Resources, originally purchased in an open-market transaction at $65.90
per unit.
94
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
22.
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
The following table summarizes the changes in AOCI by component for the years ended December 31, 2019 and
2018. All amounts are presented net of tax effect and exclude portions attributable to noncontrolling interest.
Balance as of December 31, 2017 ..............
Other comprehensive (loss) income before
reclassifications .......................................
Amounts reclassified from accumulated
other comprehensive (loss) income .........
Net other comprehensive (loss) income ......
Balance as of December 31, 2018 ..............
Other comprehensive (loss) income before
reclassifications .......................................
Amounts reclassified from accumulated
other comprehensive (loss) income .........
Net other comprehensive (loss) income ......
Foreign
currency
translation
gains/
(losses)
Net
investment
hedges of
New
Zealand JV
Cash flow
hedges
Employee
benefit plans
Total
$15,975
$1,665
$16,184
($20,407)
$13,417
(16,985)
(344)
5,944
(1,594)
(12,979)
—
(16,985)
($1,010)
—
(344)
(163)
5,781
(36)
(1,630)
$1,321
$21,965
($22,037)
(199)
(13,178)
$239
784
—
784
—
—
—
(31,547) (a)
(1,799)
(32,562)
672
(30,875)
($8,910)
449 (b)
1,121
(1,350)
(31,441)
($23,387)
($31,202)
Balance as of December 31, 2019 ..............
($226)
$1,321
(a)
Includes $32.2 million of other comprehensive loss related to interest rate swaps. See Note 14 — Derivative Financial Instruments and Hedging
Activities for additional information.
(b) This component of other comprehensive (loss) income is included in the computation of net periodic pension cost. See Note 16 — Employee
Benefit Plans for additional information.
The following table presents details of the amounts reclassified in their entirety from AOCI for the years
ended December 31, 2019 and 2018:
Details about accumulated other
comprehensive (loss) income
components
Realized (gain) loss on foreign currency
exchange contracts ...................................
Realized (gain) loss on foreign currency
option contracts ........................................
Noncontrolling interest ..................................
Income tax expense (benefit) from foreign
currency contracts .....................................
Net (gain) loss on cash flow hedges
reclassified from accumulated other
comprehensive income .............................
Amount reclassified from
accumulated other
comprehensive (loss) income
2019
2018
Affected line item in the income
statement
$1,246
($121) Other operating income, net
(33)
(279)
(262)
(173) Other operating income, net
Comprehensive income (loss)
68
attributable to noncontrolling interest
63
Income tax expense (Note 10)
$672
($163)
95
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
23.
QUARTERLY RESULTS FOR 2019 and 2018 (UNAUDITED)
(thousands of dollars, except per share
amounts)
2019
Quarter Ended
Mar. 31
June 30
Sept. 30
Dec. 31
Total Year
Sales ..................................................................
$191,546
$184,800
$156,417
$178,793
$711,556
Cost of sales ......................................................
(143,251)
(140,454)
(134,463)
(140,182)
(558,350)
Net Income ........................................................
Net Income attributable to Rayonier Inc. ............
Basic EPS attributable to Rayonier Inc...............
Diluted EPS attributable to Rayonier Inc. ...........
27,793
24,794
$0.19
$0.19
20,920
18,752
$0.14
$0.14
1,528
(433)
—
—
17,437
15,992
$0.12
$0.12
67,678
59,105
$0.46
$0.46
2018
Sales ..................................................................
$203,196
$245,906
$200,890
$166,146
$816,138
Cost of sales ......................................................
(138,488)
(184,418)
(143,261)
(139,092)
(605,259)
Net Income ........................................................
Net Income attributable to Rayonier Inc. ............
Basic EPS attributable to Rayonier Inc...............
Diluted EPS attributable to Rayonier Inc. ...........
42,706
40,539
$0.31
$0.31
39,338
36,258
$0.28
$0.28
30,639
23,432
$0.18
$0.18
4,647
1,987
$0.02
$0.02
117,330
102,216
$0.79
$0.79
96
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
24.
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 Year Ended December 31, 2019
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
SALES .........................................................................................
Costs and Expenses
Cost of sales ......................................................................
Selling and general expenses ............................................
Other operating (expense) income, net ..............................
OPERATING (LOSS) INCOME ....................................................
Interest expense ...........................................................................
Interest and miscellaneous income (expense), net .......................
Equity in income from subsidiaries ...............................................
INCOME BEFORE INCOME TAXES ...........................................
Income tax expense ................................................................
NET INCOME ...............................................................................
Less: Net income attributable to noncontrolling interest................
—
—
—
—
—
—
(12,556)
(1,827)
73,488
59,105
—
59,105
—
—
$711,556
(59)
(558,291)
(20,560)
(21,086)
(1,392)
(3,141)
(22,011)
(582,518)
(22,011)
(19,095)
3,061
113,284
75,239
(1,751)
73,488
—
129,038
(65)
4,073
—
133,046
(11,189)
121,857
(8,573)
—
—
—
—
—
—
—
—
(186,772)
(186,772)
—
(186,772)
—
NET INCOME ATTRIBUTABLE TO RAYONIER INC...................
59,105
73,488
113,284
(186,772)
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of income tax ....
Cash flow hedges, net of income tax .......................................
Actuarial change and amortization of pension and
postretirement plan liabilities, net of income tax ..................
Total other comprehensive (loss) income ...........................
783
(91)
(30,875)
(32,189)
(1,350)
(1,350)
(31,442)
(33,630)
1,054
1,707
—
2,761
(783)
30,875
1,350
31,442
COMPREHENSIVE INCOME .......................................................
27,663
39,858
124,618
(155,330)
$711,556
(558,350)
(41,646)
(4,533)
(604,529)
107,027
(31,716)
5,307
—
80,618
(12,940)
67,678
(8,573)
59,105
963
(30,482)
(1,350)
(30,869)
36,809
Less: Comprehensive income attributable to noncontrolling
interest ......................................................................................
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER
INC. ..........................................................................................
—
—
(9,146)
—
(9,146)
$27,663
$39,858
$115,472
($155,330)
$27,663
97
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
For the Year Ended December 31, 2018
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
SALES ..........................................................................................
Costs and Expenses
Cost of sales .......................................................................
Selling and general expenses .............................................
Other operating (expense) income, net ...............................
OPERATING (LOSS) INCOME .....................................................
Interest expense ............................................................................
Interest and miscellaneous income (expense), net ........................
Equity in income from subsidiaries ................................................
INCOME BEFORE INCOME TAXES ............................................
—
—
—
(12)
(12)
(12)
(12,556)
6,648
108,136
102,216
—
—
$816,138
(605,259)
(19,812)
(22,139)
543
609
(19,269)
(626,789)
(19,269)
(19,155)
3,863
144,916
110,355
189,349
(355)
(5,947)
—
183,047
—
—
—
—
—
—
—
—
(253,052)
(253,052)
Income tax expense .................................................................
—
(2,219)
(23,017)
—
$816,138
(605,259)
(41,951)
1,140
(646,070)
170,068
(32,066)
4,564
—
142,566
(25,236)
NET INCOME ................................................................................
102,216
108,136
160,030
(253,052)
117,330
Less: Net income attributable to noncontrolling interest ................
—
—
(15,114)
—
(15,114)
NET INCOME ATTRIBUTABLE TO RAYONIER INC....................
102,216
108,136
144,916
(253,052)
102,216
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of income tax .....
Cash flow hedges, net of income tax ........................................
Actuarial change and amortization of pension and
postretirement plan liabilities, net of income tax ...................
Total other comprehensive (loss) income ............................
(17,329)
5,782
(1,630)
(13,177)
386
8,296
(1,630)
7,052
(23,145)
(3,267)
—
(26,412)
17,329
(5,782)
1,630
13,177
COMPREHENSIVE INCOME ........................................................
89,039
115,188
133,618
(239,875)
(22,759)
5,029
(1,630)
(19,360)
97,970
Less: Comprehensive income attributable to noncontrolling
interest .......................................................................................
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER
INC. ...........................................................................................
—
—
(8,931)
—
(8,931)
$89,039
$115,188
$124,687
($239,875)
$89,039
98
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME
For the Year Ended December 31, 2017
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
SALES .........................................................................................
Costs and Expenses
Cost of sales ......................................................................
Selling and general expenses ............................................
Other operating (expense) income, net ..............................
OPERATING (LOSS) INCOME ....................................................
Interest expense ...........................................................................
Interest and miscellaneous income (expense), net .......................
Equity in income from subsidiaries ...............................................
INCOME BEFORE INCOME TAXES ...........................................
—
—
—
—
—
—
(12,556)
9,679
151,719
148,842
—
—
$819,596
(568,253)
(16,797)
(23,448)
(479)
4,872
(17,276)
(586,829)
(17,276)
(19,699)
2,878
186,388
152,291
232,767
(1,816)
(10,717)
—
220,234
—
—
—
—
—
—
—
—
(338,107)
(338,107)
Income tax expense ................................................................
—
(572)
(21,109)
—
NET INCOME ...............................................................................
148,842
151,719
199,125
(338,107)
Less: Net income attributable to noncontrolling interest
NET INCOME ATTRIBUTABLE TO RAYONIER INC.
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment, net of income tax ....
Cash flow hedges, net of income tax .......................................
Actuarial change and amortization of pension and
postretirement plan liabilities, net of income tax ..................
Total other comprehensive income ....................................
COMPREHENSIVE INCOME .......................................................
Less: Comprehensive income attributable to noncontrolling
interest ..........................................................................................
COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER
INC.
$819,596
(568,253)
(40,245)
4,393
(604,105)
215,491
(34,071)
1,840
—
183,260
(21,681)
161,579
(12,737)
148,842
9,114
5,693
(208)
14,599
176,178
—
—
(12,737)
—
148,842
151,719
186,388
(338,107)
7,416
5,353
(208)
12,561
161,403
—
4,214
(208)
4,006
155,725
9,114
1,479
—
10,593
209,718
(7,416)
(5,353)
208
(12,561)
(350,668)
—
—
(14,775)
—
(14,775)
$161,403
$155,725
$194,943
($350,668)
$161,403
99
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2019
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................................
$303
$45,792
$22,640
Accounts receivable, less allowance for doubtful accounts.
Inventory .............................................................................
Prepaid logging roads .........................................................
Prepaid expenses ...............................................................
Other current assets ...........................................................
Total current assets ..................................................
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND
AMORTIZATION ........................................................................
HIGHER AND BETTER USE TIMBERLANDS AND REAL
ESTATE DEVELOPMENT INVESTMENTS ...............................
NET PROPERTY, PLANT AND EQUIPMENT ...............................
RESTRICTED CASH .....................................................................
RIGHT-OF-USE ASSETS ..............................................................
—
—
—
—
—
303
—
—
—
—
—
4,113
—
—
1,361
111
51,377
—
—
16,568
—
32,253
23,014
14,518
12,128
1,239
756
74,295
2,482,047
81,791
5,683
1,233
67,689
—
—
—
—
—
—
—
—
—
—
—
—
INVESTMENT IN SUBSIDIARIES .................................................
1,709,958
3,072,304
—
(4,782,262)
INTERCOMPANY RECEIVABLE ...................................................
OTHER ASSETS ...........................................................................
56,935
(643,960)
587,025
2
(67)
47,822
—
—
$68,735
27,127
14,518
12,128
2,600
867
125,975
2,482,047
81,791
22,251
1,233
99,942
—
—
47,757
TOTAL ASSETS ............................................................................
$1,767,198
$2,528,475
$3,347,585
($4,782,262)
$2,860,996
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable ...............................................................
Current maturities of long-term debt ...................................
Accrued taxes .....................................................................
Accrued payroll and benefits ...............................................
Accrued interest ..................................................................
Deferred revenue ................................................................
Other current liabilities ........................................................
Total current liabilities ...............................................
—
—
—
—
3,047
—
—
3,047
$2,866
82,000
59
5,585
2,158
—
4,453
97,121
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS .
324,170
648,959
PENSION AND OTHER POSTRETIREMENT BENEFITS ............
LONG-TERM LEASE LIABILITY ...................................................
OTHER NON-CURRENT LIABILITIES ..........................................
INTERCOMPANY PAYABLE .........................................................
—
—
—
—
25,996
28,001
18,440
—
$15,294
—
2,973
3,284
—
11,440
18,027
51,018
—
(685)
62,480
64,807
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$18,160
82,000
3,032
8,869
5,205
11,440
22,480
151,186
973,129
25,311
90,481
83,247
—
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY...................
1,439,981
1,709,958
3,072,304
(4,782,262)
1,439,981
Noncontrolling interest ...................................................................
—
—
97,661
—
97,661
TOTAL SHAREHOLDERS’ EQUITY ..............................................
1,439,981
1,709,958
3,169,965
(4,782,262)
1,537,642
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY .................
$1,767,198
$2,528,475
$3,347,585
($4,782,262)
$2,860,996
100
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 31, 2018
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................................................
$361
$104,777
$43,236
Accounts receivable, less allowance for doubtful accounts.
Inventory .............................................................................
Prepaid logging roads .........................................................
Prepaid expenses ...............................................................
Other current assets ...........................................................
—
—
—
—
—
3,752
—
—
977
108
Total current assets ..................................................
361
109,614
22,399
15,703
11,976
4,063
501
97,878
TIMBER AND TIMBERLANDS, NET OF DEPLETION AND
AMORTIZATION ........................................................................
HIGHER AND BETTER USE TIMBERLANDS AND REAL
ESTATE DEVELOPMENT INVESTMENTS ...............................
NET PROPERTY, PLANT AND EQUIPMENT ...............................
RESTRICTED CASH .....................................................................
—
—
—
—
—
—
16,940
—
2,401,327
85,609
5,811
8,080
—
—
—
—
—
—
—
—
—
—
—
INVESTMENT IN SUBSIDIARIES .................................................
1,833,899
3,022,875
—
(4,856,774)
INTERCOMPANY RECEIVABLES ................................................
OTHER ASSETS ...........................................................................
49,461
(638,424)
588,963
2
19,244
35,800
—
—
$148,374
26,151
15,703
11,976
5,040
609
207,853
2,401,327
85,609
22,751
8,080
—
—
55,046
TOTAL ASSETS ............................................................................
$1,883,723
$2,530,249
$3,223,468
($4,856,774)
$2,780,666
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable ...............................................................
Accrued taxes .....................................................................
Accrued payroll and benefits ...............................................
Accrued interest ..................................................................
Deferred revenue ................................................................
Other current liabilities ........................................................
Total current liabilities ...............................................
—
—
—
3,047
—
—
3,047
LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS .
PENSION AND OTHER POSTRETIREMENT BENEFITS ............
OTHER NON-CURRENT LIABILITIES ..........................................
323,803
648,764
—
—
30,484
7,454
$1,616
$16,403
8
5,848
1,960
—
216
9,648
3,170
4,568
—
10,447
16,258
50,846
—
(684)
52,754
—
—
—
—
—
—
—
—
—
—
$18,019
3,178
10,416
5,007
10,447
16,474
63,541
972,567
29,800
60,208
TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY...................
1,556,873
1,833,899
3,022,875
(4,856,774)
1,556,873
Noncontrolling interest ...................................................................
—
—
97,677
—
97,677
TOTAL SHAREHOLDERS’ EQUITY ..............................................
1,556,873
1,833,899
3,120,552
(4,856,774)
1,654,550
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY .................
$1,883,723
$2,530,249
$3,223,468
($4,856,774)
$2,780,666
101
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2019
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES..
($21,865)
($12,730)
$248,848
INVESTING ACTIVITIES
Capital expenditures .....................................................................
Real estate development investments ..........................................
Purchase of timberlands ...............................................................
Investment in subsidiaries ............................................................
Other ............................................................................................
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ....
FINANCING ACTIVITIES
Issuance of debt ...........................................................................
Repayment of debt .......................................................................
—
—
—
—
—
—
—
—
(641)
(63,355)
—
—
(406)
(8,754)
(9,801)
82,000
—
(6,803)
(142,287)
—
2,450
(209,995)
—
—
Dividends paid ..............................................................................
(139,531)
(32,239)
30,699
Proceeds from the issuance of common shares under incentive
stock plan .....................................................................................
Repurchase of common shares ....................................................
Proceeds used for Share Buybacks ..............................................
Proceeds from shareholder distribution hedge .............................
Distribution to minority shareholder ..............................................
Issuance of intercompany notes ...................................................
Debt issuance cost .......................................................................
Intercompany distributions ............................................................
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES....
EFFECT OF EXCHANGE RATE CHANGES ON CASH ..............
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash .................
Balance, beginning of year ...........................................................
Balance, end of year .....................................................................
1,260
(4,250)
—
—
—
—
—
164,328
21,807
—
—
—
(8,430)
—
—
—
(132)
(77,653)
(36,454)
—
—
—
—
135
(9,161)
—
—
(86,269)
(64,596)
(1,700)
(58)
361
$303
(58,985)
(27,443)
104,777
$45,792
51,316
$23,873
—
—
—
—
406
—
406
—
—
—
—
—
—
—
—
—
—
(406)
(406)
—
—
—
—
$214,253
(63,996)
(6,803)
(142,287)
—
(6,304)
(219,390)
82,000
—
(141,071)
1,260
(4,250)
(8,430)
135
(9,161)
—
(132)
—
(79,649)
(1,700)
(86,486)
156,454
$69,968
102
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2018
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
6,069
(132,796)
(6,128)
(132,855)
—
—
—
—
(6,128)
—
$310,096
(62,325)
(9,501)
(57,608)
—
(3,421)
—
—
—
—
—
—
—
—
6,128
6,128
—
—
—
—
1,014
(54,416)
(136,772)
8,591
(2,984)
2,025
(11,172)
—
—
(193,714)
571
(15,902)
172,356
$156,454
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES..
$284,781
$182,057
($156,742)
INVESTING ACTIVITIES
Capital expenditures .....................................................................
Real estate development investments ..........................................
Purchase of timberlands ...............................................................
Investment in subsidiaries ............................................................
Other ............................................................................................
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ....
FINANCING ACTIVITIES
Issuance of debt ...........................................................................
Repayment of debt .......................................................................
—
—
—
—
—
—
—
—
Dividends paid ..............................................................................
(136,698)
Proceeds from the issuance of common shares under incentive
stock plan .....................................................................................
Repurchase of common shares ....................................................
Proceeds from shareholder distribution hedge .............................
Distribution to minority shareholder ..............................................
8,591
(2,984)
—
—
(59)
(62,266)
—
—
6,128
—
(9,501)
(57,608)
—
(3,421)
—
(50,000)
(74)
—
—
—
—
1,014
(4,416)
—
—
—
2,025
(11,172)
Issuance of intercompany notes ...................................................
299,715
18,961
(318,676)
Intercompany distributions ............................................................
(501,608)
(77,278)
CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES....
(332,984)
(108,391)
EFFECT OF EXCHANGE RATE CHANGES ON CASH ..............
—
—
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash .................
Balance, beginning of year ...........................................................
(48,203)
48,564
79,735
25,042
Balance, end of year .....................................................................
$361
$104,777
572,758
241,533
571
(47,434)
98,750
$51,316
103
RAYONIER INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollar amounts in thousands unless otherwise stated)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Year Ended December 31, 2017
Rayonier Inc.
(Parent
Issuer)
Subsidiary
Guarantors
Non-
guarantors
Consolidating
Adjustments
Total
Consolidated
38,546
(235,253)
(38,546)
(235,253)
—
—
—
—
—
—
(38,546)
—
$256,284
(65,345)
(15,784)
(242,910)
95,243
(6,084)
—
(373)
—
—
—
—
—
—
—
38,546
38,546
—
—
—
—
63,389
(100,157)
(127,069)
4,751
152,390
(176)
—
—
(6,872)
580
14,739
157,617
$172,356
CASH (USED FOR) PROVIDED BY OPERATING ACTIVITIES..
($48,104)
$111,431
$192,957
INVESTING ACTIVITIES
Capital expenditures .....................................................................
Real estate development investments ..........................................
Purchase of timberlands ...............................................................
Net proceeds from large disposition of timberlands ......................
Rayonier office building under construction ..................................
Investment in subsidiaries ............................................................
Other ............................................................................................
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES ....
FINANCING ACTIVITIES
Issuance of debt ...........................................................................
Repayment of debt .......................................................................
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
38,546
—
(65,345)
(15,784)
(242,910)
95,243
(6,084)
—
(373)
25,000
38,389
(15,000)
(85,157)
Dividends paid ..............................................................................
(127,069)
Proceeds from the issuance of common shares under incentive
stock plan .....................................................................................
Proceeds from the issuance of common shares from equity
offering, net of cost .......................................................................
Repurchase of common shares ....................................................
4,751
152,390
(176)
Issuance of intercompany notes ...................................................
(32,000)
—
—
—
—
—
Intercompany distributions ............................................................
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES....
EFFECT OF EXCHANGE RATE CHANGES ON CASH ..............
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Change in cash, cash equivalents and restricted cash .................
Balance, beginning of year ...........................................................
77,319
75,215
—
27,111
21,453
(144,396)
(134,396)
—
15,581
9,461
Balance, end of year .....................................................................
$48,564
$25,042
—
—
—
—
32,000
28,531
13,763
580
(27,953)
126,703
$98,750
104
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
Rayonier management is responsible for establishing and maintaining adequate disclosure controls and
procedures. Disclosure controls and procedures (as defined in Rule 13a-15(e) under 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 Annual Report on Form 10-K, is (1) recorded,
processed, summarized and reported within the time periods specified in the SEC’s 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
Annual Report on Form 10-K, 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 December 31,
2019.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
In the year ended December 31, 2019, based upon the evaluation required by paragraph (d) of 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.
Item 9B. OTHER INFORMATION
Not applicable.
105
PART III
Certain information required by Part III is incorporated by reference from the Company’s Definitive Proxy Statement
to be filed with the SEC in connection with the solicitation of proxies for the Company’s 2020 Annual Meeting of
Shareholders (the “Proxy Statement”). We will make the Proxy Statement available on our website at www.rayonier.com
as soon as it is filed with the SEC.
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
A list of our executive officers and their biographical information are found in Item 1 in this Annual Report on Form
10-K. Additional information required by this Item with respect to directors and other governance matters is incorporated
herein by reference from the sections and subsections entitled “Proposal No. 1 - Election of Directors,” “Corporate
Governance,” “Named Executive Officers” and “Report of the Audit Committee” in the Proxy Statement.
Our Standard of Ethics and Code of Corporate Conduct, which is applicable to our principal executive, financial
and accounting officers, is available on our website, www.rayonier.com. Any amendments to or waivers of the Standard
of Ethics and Code of Corporate Conduct will also be disclosed on our website.
Item 11.
EXECUTIVE COMPENSATION
The information called for by Item 11 is incorporated herein by reference from the section and subsections entitled
“Compensation Discussion and Analysis,” “Summary Compensation Table,” “CEO Pay Ratio,” “Grants of Plan-Based
Awards,” “Outstanding Equity Awards at Fiscal Year-End,” “Option Exercises and Stock Vested,” “Pension Benefits,”
“Nonqualified Deferred Compensation,” “Potential Payments Upon Termination or Change in Control,” “Director
Compensation,” “Compensation Committee Interlocks and Insider Participation; Processes and Procedures” and
“Report of the Compensation and Management Development Committee” in the Proxy Statement.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information called for by Item 12 is incorporated herein by reference from the section and subsections entitled
“Ownership of and Trading in our Shares,” “Share Ownership of Certain Beneficial Owners,” “Share Ownership of
Directors and Executive Officers” and “Equity Compensation Plan Information” in the Proxy Statement.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information called for by Item 13 is incorporated herein by reference from the section and subsections entitled
“Proposal No. 1 - Election of Directors,” “Director Independence” and “Related Person Transactions” in the Proxy
Statement.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The information called for by Item 14 is incorporated herein by reference from the subsection entitled “Information
Regarding Independent Registered Public Accounting Firm” in the Proxy Statement.
106
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
Documents filed as a part of this report:
PART IV
(1) See Index to Financial Statements on page 48 for a list of the financial statements filed as part of this report.
(2) Financial Statement Schedules:
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2019, 2018, and 2017
(In Thousands)
Description
Allowance for doubtful accounts:
Balance
at
Beginning
of Year
Additions
Charged
to Cost
and
Expenses
Deductions
Year ended December 31, 2019 ................................
Year ended December 31, 2018 ................................
Year ended December 31, 2017 ................................
$8
23
33
16
—
—
Deferred tax asset valuation allowance:
Year ended December 31, 2019 ................................
Year ended December 31, 2018 ................................
Year ended December 31, 2017 ................................
$38,839
34,889
21,861
481 (a)
3,950 (a)
13,028 (a)
—
(15)
(10)
—
—
—
(a) The 2019, 2018 and 2017 increase is comprised of valuation allowance against the TRS deferred tax assets.
Balance
at End
of Year
$24
8
23
$39,320
38,839
34,889
All other financial statement schedules have been omitted because they are not applicable, the required
matter is not present or the required information has otherwise been supplied in the financial statements
or the notes thereto.
(3) See Exhibit Index for a list of the exhibits filed or incorporated herein as part of this report. Exhibits that are
incorporated by reference to documents filed previously by the Company under the Securities Exchange
Act of 1934, as amended, are filed with the SEC under File No. 1-6780.
Item 16.
FORM 10-K SUMMARY
None.
107
EXHIBIT INDEX
The following is a list of exhibits filed as part of the Form 10-K. As permitted by the rules of the SEC, the Company has
not filed certain instruments defining the rights of holders of long-term debt of the Company or its consolidated subsidiaries
under which the total amount of securities authorized does not exceed 10 percent of the total assets of the Company and
its consolidated subsidiaries. The Company agrees to furnish to the SEC, upon request, a copy of any omitted instrument.
Exhibit No.
Description
Location
2.1 Contribution, Conveyance and Assumption Agreement dated
December 18, 2003 by and among Rayonier Inc., Rayonier
Timberlands Operating Company, L.P., Rayonier Timberlands,
L.P., Rayonier Timberlands Management, LLC, Rayonier
Forest Resources, LLC, Rayland, LLC, Rayonier TRS
Holdings Inc., Rayonier Minerals, LLC, Rayonier Forest
Properties, LLC, Rayonier Wood Products, LLC, Rayonier
Wood Procurement, LLC, Rayonier International Wood
Products, LLC, Rayonier Forest Operations, LLC, Rayonier
Properties, LLC and Rayonier Performance Fibers, LLC
Incorporated by reference to Exhibit
10.1 to the Registrant’s January 15,
2004 Form 8-K
2.2 Contribution, Conveyance and Assumption Agreement, dated
July 29, 2010, between Rayonier Inc. and Rayonier Operating
Company LLC
Incorporated by reference to Exhibit
10.7 to the Registrant’s June 30, 2010
Form 10-Q
2.3 Separation and Distribution Agreement, dated May 28, 2014,
by and between Rayonier Inc. and Rayonier Advanced
Materials Inc.**
Incorporated by reference to Exhibit 2.1
to the Registrant’s May 30, 2014 Form
8-K
3.1 Amended and Restated Articles of Incorporation
3.2 By-Laws
3.3 Limited Liability Company Agreement of Rayonier Operating
Company LLC
Incorporated by reference to Exhibit 3.1
to the Registrant’s May 23, 2012 Form
8-K
Incorporated by reference to Exhibit 3.2
to the Registrant’s October 21, 2009
Form 8-K
Incorporated by reference to Exhibit 3.3
to the Registrant’s June 30, 2010 Form
10-Q
4.1 Indenture relating to the 3.75% Senior Notes due 2022, dated
March 5, 2012, between Rayonier Inc., as issuer, and The
Bank of New York Mellon Trust Company, N.A., as trustee
Incorporated by reference to Exhibit 4.1
to the Registrant’s March 5, 2012 Form
8-K
4.2 First Supplemental Indenture relating to the 3.75% Senior
Notes due 2022, dated March 5, 2012, among Rayonier Inc.,
as issuer, the subsidiary guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee
Incorporated by reference to Exhibit 4.2
to the Registrant’s March 5, 2012 Form
8-K
4.3 Second Supplemental Indenture relating to the 3.75% Senior
Notes due 2022, dated March 5, 2012, among Rayonier Inc.,
as issuer, the subsidiary guarantors named therein and The
Bank of New York Mellon Trust Company, N.A., as trustee
Incorporated by reference to Exhibit 4.1
to the Registrant’s October 17, 2012
Form 8-K
4.4 Form of Note for 3.75% Senior Notes due 2022 (contained in
Exhibit A to Exhibit 4.4)
Incorporated by reference to Exhibit 4.2
to the Registrant’s March 5, 2012 Form
8-K
4.5 Indenture among Rayonier A.M. Products Inc., the guarantors
party thereto from time to time and Wells Fargo Bank,
National Association, as Trustee, dated as of May 22, 2014
Incorporated by reference to Exhibit 4.1
to the Registrant’s May 22, 2014 Form
8-K
4.6 Description of Registrant’s Securities Registered Pursuant to
Filed herewith
Section 12 of the Securities Exchange Act of 1934
10.1 Rayonier Investment and Savings Plan for Salaried
Employees effective March 1, 1994, amended and restated
effective April 1, 2015 and further amended effective
September 8, 2015*
Incorporated by reference to Exhibit
10.2 to the Registrant’s December 31,
2015 Form 10-K
Exhibit No.
Description
Location
10.2 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of June 1, 2016, executed
February 25, 2016*
Incorporated by reference to Exhibit
10.1 to the Registrant’s March 31, 2016
Form 10-Q
10.3 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of June 1, 2016, executed
June 13, 2016*
Filed herewith
10.4 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of January 1, 2017, executed
January 17, 2017*
Incorporated by reference to Exhibit
10.1 to the Registrant’s March 31, 2017
Form 10-Q
10.5 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of January 1, 2017, executed
July 20, 2017*
Incorporate by reference to Exhibit 10.1
to the Registrant’s June 30, 2017 Form
10-Q
10.6 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of April 1, 2017, executed
December 7, 2016*
Filed herewith
10.7 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of October 1 2017, executed
November 9, 2017*
Incorporated by reference to Exhibit
10.6 to the Registrant’s December 31,
2017 Form 10-K
10.8 Amendment to Rayonier Investment and Savings Plan for
Salaried Employees effective as of November 1, 2018,
executed December 21, 2018
Incorporated by reference to Exhibit
10.7 to the Registrant’s December 31,
2018 Form 10-K
10.9 Amended and Restated Retirement Plan for Salaried
Employees of Rayonier Inc. effective January 1, 2014*
Incorporated by reference to Exhibit
10.9 to the Registrant’s December 31,
2015 Form 10-K
10.10 First Amendment to the Retirement Plan for Salaried
Employees of Rayonier Inc. effective as of December 31,
2016*
Incorporated by reference to Exhibit
10.2 to the Registrant’s September 30,
2016 Form 10-Q
10.11 Rayonier Inc. Excess Benefit Plan, as amended*
10.12 Form of Rayonier Outside Directors Compensation Program/
Cash Deferral Option Agreement*
Incorporated by reference to Exhibit
10.2 to the Registrant’s June 30, 2010
Form 10-Q
Incorporated by reference to Exhibit
10.24 to the Registrant’s December 31,
2006 Form 10-K
10.13 Trust Agreement for the Rayonier Inc. Legal Resources Trust* Incorporated by reference to Exhibit
10.1 to the Registrant’s September 30,
2014 Form 10-Q
10.14 Amended and Restated Master Shareholder Agreement in
Relation to Matariki Forests Australia PTY Limited, Matariki
Forestry Group and Matariki Forests, dated February, 2010,
by and among SAS Trustee Corporation, Deutche Asset
Management (Australia) Limited, Rayonier Canterbury LLC,
Rayonier New Zealand Limited, Cameron and Company
Limited, Matariki Forests Australia Pty Limited, Matariki
Forestry Group and Matariki Forests
Filed herewith
10.15 Deed of Amendment and Restatement of Shareholder
Filed herewith
Agreement, dated March 31, 2016, by and among Rayonier
Canterbury LLC, Waimarie Forests Pty Limited, Matariki
Forestry Group, Matariki Forests and Phaunos Timber Fund
Limited
10.16 Intellectual Property Agreement, dated June 27, 2014, by and
between Rayonier Inc. and Rayonier Advanced Materials Inc.
Incorporated by reference to Exhibit
10.4 to the Registrant’s June 30, 2014
Form 8-K
Exhibit No.
Description
Location
10.17 Form of Indemnification Agreement between Rayonier Inc.
and its Officers and Directors*
Incorporated by reference to Exhibit
10.8 to the Registrant’s June 30, 2014
Form 10-Q
10.18 Form of Indemnification Agreement between Rayonier Inc.
Filed herewith
and its Officers
10.19 Rayonier Incentive Stock Plan, as amended*
10.20 Form of Rayonier Incentive Stock Plan Non-Qualified Stock
Option Award Agreement*
10.21 Form of Rayonier Incentive Stock Plan Restricted Stock
Award Agreement*
10.22 2017 Performance Share Award Program*
10.23 2018 Performance Share Award Program*
Incorporate by reference to Exhibit
10.21 to the Registrant’s December 31,
2018 Form 10-K
Incorporated by reference to Exhibit
10.19 to the Registrant’s December 31,
2008 Form 10-K
Incorporated by reference to Exhibit
10.5 to the Registrant’s March 31, 2015
Form 10-Q
Incorporated by reference to Exhibit
10.2 to the Registrant’s March 31, 2017
Form 10-Q
Incorporated by reference to Exhibit
10.1 to the Registrant’s March 31, 2018
Form 10-Q
10.24 2019 Performance Share Award Program*
Filed herewith
10.25 Rayonier Inc. Supplemental Savings Plan effective March 1,
2016*
10.26 Credit Agreement dated as of August 5, 2015 among
Rayonier Inc., Rayonier TRS Holdings Inc. and Rayonier
Operating Company LLC, as Borrowers, CoBank, ACB as
Administrative Agent, Swing Line Lender and Issuing Bank,
JPMorgan Chase Bank, N.A. and Farm Credit of Florida, ACA
as Co-Syndication Agents, Credit Suisse AG and SunTrust
Bank as Co-Documentation Agents and CoBank, ACB as
Sole Lead Arranger and Sole Bookrunner
10.27 First Amendment and Incremental Term Loan Agreement
dated as of April 28, 2016, by and among Rayonier Inc.,
Rayonier TRS Holdings Inc., Rayonier Operating Company
LLC, as Borrowers, CoBank, ACB, as Administrative Agent
and the several banks, financial institutions and other
institutional lenders party thereto
Incorporated by reference to Exhibit
10.2 to the Registrant’s March 31, 2016
Form 10-Q
Incorporated by reference to Exhibit
10.3 to the Registrant’s March 31, 2016
Form 10-Q
Incorporated by reference to Exhibit
10.1 to the Registrant’s May 2, 2016
Form 8-K
10.28 2016 Guarantee Agreement dated as of April 28, 2016 among
Rayonier Inc., Rayonier TRS Holdings Inc. and COBANK,
ACB, as Administrative Agent
Incorporated by reference to Exhibit
10.2 to the Registrant’s May 2, 2016
Form 8-K
10.29 Amended and Restated Executive Severance Pay Plan
effective as of December 31, 2016*
Incorporated by reference to Exhibit
10.3 to the Registrant’s September 30,
2016 Form 10-Q
10.30 LTI Supplemental Terms Vesting in Event of Retirement
Filed herewith
10.31 Rayonier Incentive Stock Plan Restricted Stock Unit Award
Filed herewith
Agreement, dated 2019*
Exhibit No.
Description
Location
10.32 Rayonier Non-Equity Incentive Plan, as amended, Effective
Filed herewith
as of January 1, 2020*
21 Subsidiaries of the registrant
23.1 Consent of Ernst & Young LLP
24 Powers of attorney
31.1 Chief Executive Officer’s Certification Pursuant to Rule
13a-14(a)/15d-14(a) and pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Chief Financial Officer’s Certification Pursuant to Rule
13a-14(a)/15d-14-(a) and pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
32 Certification of Periodic Financial Reports Under Section 906
Furnished herewith
of the Sarbanes-Oxley Act of 2002
Filed herewith
101 The following financial information from our Annual Report on
Form 10-K for the fiscal year ended December 31, 2019,
formatted in Extensible Business Reporting Language
(“XBRL”), includes: (i) the Consolidated Statements of
Income and Comprehensive Income for the Years Ended
December 31, 2019, 2018 and 2017; (ii) the Consolidated
Balance Sheets as of December 31, 2019 and 2018; (iii) the
Consolidated Statements of Shareholders’ Equity for the
Years Ended December 31, 2019, 2018 and 2017; (iv) the
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2019, 2018 and 2017; and (v) the Notes to the
Consolidated Financial Statements.
* Management contract or compensatory plan.
** Certain schedules and similar attachments have been omitted from this filing pursuant to Item 601(b)(2) of
Regulation S-K. Rayonier will furnish supplemental copies of any such schedules or attachments to the U.S.
Securities and Exchange Commission upon request.
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
RAYONIER INC.
By:
/s/ MARK MCHUGH
Mark McHugh
Senior Vice President and Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer)
February 24, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ DAVID L. NUNES
President and Chief Executive Officer
February 24, 2020
David L. Nunes
(Principal Executive Officer)
/s/ MARK MCHUGH
Senior Vice President and Chief Financial Officer
February 24, 2020
Mark McHugh
(Principal Financial Officer)
/s/ APRIL TICE
April Tice
(Principal Accounting Officer)
*
Richard D. Kincaid
*
Keith E. Bass
*
Dod A. Fraser
*
Scott R. Jones
*
Bernard Lanigan, Jr.
*
Blanche L. Lincoln
*
V. Larkin Martin
*
Andrew G. Wiltshire
*By:
/s/ MARK R. BRIDWELL
Mark R. Bridwell
Attorney-In-Fact
Vice President, Financial Services and Corporate
Controller
February 24, 2020
Chairman of the Board
Director
Director
Director
Director
Director
Director
Director
112
February 24, 2020
SUBSIDIARIES OF RAYONIER INC.
As of December 31, 2019
Name of Subsidiary
Matariki Forests
Matariki Forestry Group
Rayonier Forest Resources, L.P.
Rayonier Operating Company LLC
Rayonier TRS Forest Operations, LLC
Rayonier TRS Holdings Inc.
Raydient LLC
EXHIBIT 21
State/Country of
Incorporation/
Organization
New Zealand
New Zealand
Delaware
Delaware
Delaware
Delaware
Delaware
In accordance with Item 601(b)(21) of Regulation S–K, we have omitted some subsidiaries that, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary as of December 31, 2019 under Rule 1–02(w) of Regulation
S–X.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
1) Registration Statement (Form S-3 No. 333–225530) of Rayonier, Inc.,
2) Registration Statement (Form S-4 Amendment No. 1 to No. 333–114858) of Rayonier Inc.,
3) Registration Statement (Form S-8 No. 333–129175) pertaining to the Rayonier 1994 Incentive Stock
Plan,
4) Registration Statement (Form S-8 No. 333–129176) pertaining to the 2004 Rayonier Incentive Stock and
Management Bonus Plan, and
5) Registration Statement (Form S-8 Amendment No. 2 to No. 333–152505) pertaining to the Rayonier
Investment and Savings Plan for Salaried Employees;
of our reports dated February 24, 2020, with respect to the consolidated financial statements and schedule of
Rayonier Inc. and the effectiveness of internal control over financial reporting of Rayonier Inc. included in this
Annual Report (Form 10-K) of Rayonier Inc. for the year ended December 31, 2019.
Jacksonville, Florida
February 24, 2020
/s/ Ernst & Young LLP
EXHIBIT 31.1
I, David L. Nunes, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Rayonier Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 24, 2020
/S/ DAVID L. NUNES
David L. Nunes
President and Chief Executive Officer, Rayonier Inc.
EXHIBIT 31.2
I, Mark McHugh, certify that:
CERTIFICATION
1.
2.
3.
4.
I have reviewed this annual report on Form 10-K of Rayonier Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) for the registrant and have:
a.
b.
c.
d.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or
persons performing the equivalent functions):
a.
b.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize
and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant's internal control over financial reporting.
Date: February 24, 2020
/s/ MARK MCHUGH
Mark McHugh
Senior Vice President and
Chief Financial Officer, Rayonier Inc.
CERTIFICATION
EXHIBIT 32
The undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that
to our knowledge:
1.
2.
The Annual Report on Form 10-K of Rayonier Inc. (the “Company”) for the period ended December 31, 2019 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
The information in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
February 24, 2020
/s/ DAVID L. NUNES
David L. Nunes
President and Chief Executive Officer,
Rayonier Inc.
/s/ MARK MCHUGH
Mark McHugh
Senior Vice President and
Chief Financial Officer, Rayonier Inc.
A signed original of this written statement required by Section 906 has been provided to Rayonier and will be retained by
Rayonier and furnished to the Securities and Exchange Commission or its staff upon request.
THIS PAGE INTENTIONALLY LEFT BLANK
Our mission is to provide industry-leading
Our mission is to provide industry-leading
financial returns to our shareholders
financial returns to our shareholders
while serving as a responsible steward
while serving as a responsible steward
of our lands.
of our lands.
1926
2019
93 Years
93 Years
RYN
LISTED
NYSE
2.6 Million Acres
2.6 Million Acres
$5.2 Billion
$5.2 Billion
Enterprise Value
Enterprise Value
$247.8 Million
$247.8 Million
Adjusted EBITDA
Adjusted EBITDA
$142 Million of
$142 Million of
Timberlands Acquired
Timberlands Acquired
PEFC/40-23-6
SFI-00023
NZ Sustainable Certification
NZ Sustainable Certification
U.S. Sustainable Certification
U.S. Sustainable Certification
~32 Million Seedlings Planted
~32 Million Seedlings Planted
throughout U.S. and NZ
throughout U.S. and NZ
Sustainable Yield of
Sustainable Yield of
~10 Million Tons Annually
~10 Million Tons Annually
~34.4 Million tCO
~34.4 Million tCO22e e
Total Carbon Stored
Total Carbon Stored
in NZ Timberlands
in NZ Timberlands
$211,166 Avg. Price/Acre
$211,166 Avg. Price/Acre
Sold in Wildlight
Sold in Wildlight
400+ Jobs Created
400+ Jobs Created
in Wildlight
in Wildlight
~350 Employees
~350 Employees
Gender Diversity
Gender Diversity
65% Male / 35% Female
65% Male / 35% Female
2,000+ Community
2,000+ Community
Volunteer Hours
Volunteer Hours
Figures above are as of 12/31/2019 or represent full-year 2019, unless indicated otherwise.
Figures above are as of 12/31/2019 or represent full-year 2019, unless indicated otherwise.
Rayonier Inc. 2019
Board of Directors
Richard D. Kincaid [A, C]
Chairman of the Board
President and Founder
Because Foundation
David L. Nunes
President and
Chief Executive Officer
Rayonier Inc.
Keith E. Bass [A, C]
Managing Partner
Mill Creek Capital LLC
Dod A. Fraser [A, N]
President
Sackett Partners
Scott R. Jones [C]
Retired, President
Forest Capital Partners
Bernard Lanigan, Jr. [A, N]
Chairman & CEO,
Southeast Asset Advisors, Inc.;
Founder and Chairman,
Lanigan & Associates, P.C.
Blanche L. Lincoln [C, N]
Founder and Principal
Lincoln Policy Group
V. Larkin Martin [C, N]
Managing Partner
Martin Farm;
Vice President
The Albemarle Corporation
Andrew G. Wiltshire [A, N]
Founding Partner,
Folium Capital LLC;
Management and Governance
of private orchard
and farming companies
BOARD COMMITTEES: [A] Audit [C] Compensation and Management Development [N] Nominating and Corporate Governance
Executive Officers
David L. Nunes
President and
Chief Executive Officer
Mark D. McHugh
Senior Vice President and
Chief Financial Officer
Douglas M. Long
Senior Vice President,
Forest Resources
Christopher T. Corr
Senior Vice President,
Real Estate Development
Mark R. Bridwell
Vice President,
General Counsel and
Corporate Secretary
Shelby L. Pyatt
Vice President,
Human Resources and
Information Technology
W. Rhett Rogers
Vice President,
Portfolio Management
April J. Tice
Vice President,
Financial Services and
Corporate Controller
Corporate Headquarters
Rayonier Inc.
1 Rayonier Way
Wildlight, FL 32097
904.357.9100
www.rayonier.com
Investor and Media Relations
Mark D. McHugh
Senior Vice President and
Chief Financial Officer
Corporate Information
Form 10-K
Additional copies of this report
and Rayonier’s report on Form 10-K
are available without charge upon
written request to:
Rayonier Inc.
Investor Relations
1 Rayonier Way
Wildlight, FL 32097
Independent Registered
Public Accounting Firm
Ernst & Young, LLP
12926 Gran Bay Parkway West
Suite 500
Jacksonville, FL 32258
Stock Information
Listed: New York Stock Exchange
Symbol: RYN
CUSIP: 754 907 103
Transfer Agent and
Registrar Rayonier Inc.
c/o Computershare
P.O. Box 505000
Louisville, KY 40233-5000
800.659.0158 (U.S.)
201.680.6578 (International)
www.computershare.com/investor
R
A
Y
O
N
I
E
R
2
0
1
9
A
N
N
U
A
L
R
E
P
O
R
T
Rayonier Inc.
1 Rayonier Way
1 Rayonier Way
Wildlight, Florida 32097
Wildlight, Florida 32097
2019 Annual Report
2019 Annual Report