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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Rayonier Inc.
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(Name of Registrant as Specified In Its Charter)
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
Corporate Headquarters
[Rayonier LOGO]
March 28, 2002
Dear Shareholder:
The Notice of Annual Meeting and Proxy Statement for the 2002 Annual Meeting
of Rayonier Shareholders are enclosed. We have reformatted the Proxy Statement
this year to make it easier for you to read and understand, and welcome any
comments you may have on the new format.
As in previous years, the 2002 Annual Meeting is intended to be business
only. The one formal item on the agenda is the election of three directors. The
Proxy Statement provides information about each nominee. We do not expect any
other items of business to be raised, and no speeches or presentations are
planned.
We hope you find our new Proxy Statement format helpful, and urge you to
vote your shares promptly. As always, your vote is important.
Sincerely yours,
/s/ W.L. Nutter
W. L. NUTTER
Chairman, President and Chief
Executive Officer
RAYONIER INC. . 50 NORTH LAURA STREET . JACKSONVILLE, FL 32202
TELEPHONE (904) 357-9100 . FAX (904) 357-9101
Corporate Headquarters
[LOGO] Rayonier
NOTICE OF ANNUAL MEETING
March 28, 2002
Notice is hereby given that the 2002 Annual Meeting of the Shareholders of
Rayonier Inc., a North Carolina corporation, will be held at the Omni
Jacksonville Hotel, 245 Water Street, Jacksonville, Florida on Thursday, May
16, 2002 at 4:00 P.M., local time, for purposes of:
1) electing three Class II directors; and
2) acting upon such other matters as may properly come before the meeting.
All Rayonier shareholders of record at the close of business on March 18,
2002 are entitled to vote at the meeting. This notice and the accompanying
Proxy Statement and proxy card are first being mailed to shareholders on or
about March 28, 2002.
We urge you to vote your shares over the Internet, by telephone or through
the mail at the earliest convenience.
/s/ W. Edwin Frazier III
W. EDWIN FRAZIER, III
Corporate Secretary
RAYONIER INC. . 50 NORTH LAURA STREET . JACKSONVILLE, FL 32202
TELEPHONE (904) 357-9100 . FAX (904) 357-9101
PROXY STATEMENT
TABLE OF CONTENTS
-----------------
QUESTIONS AND ANSWERS................................................................ 1
ELECTION OF DIRECTORS................................................................ 4
Information as to Nominees for Election to the Board of Directors................. 4
Information as to Other Directors................................................. 5
Committees of the Board of Directors.............................................. 6
Directors' Compensation........................................................... 7
Directors' Charitable Award Program............................................... 7
REPORT OF THE AUDIT COMMITTEE........................................................ 8
Information Regarding Independent Auditors........................................ 8
REPORT OF THE COMPENSATION AND MANAGEMENT
DEVELOPMENT COMMITTEE............................................................. 9
EXECUTIVE COMPENSATION............................................................... 12
Summary Compensation Table........................................................ 12
Option Grants in Last Fiscal Year................................................. 14
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values. 14
Awards of Contingent Performance Shares in Last Fiscal Year....................... 15
Other Executive Compensation...................................................... 15
SHARE OWNERSHIP...................................................................... 18
Principal Holders of Common Shares................................................ 18
Section 16 Reports................................................................ 19
Share Ownership Guidelines for Directors and Senior Management.................... 20
SHAREHOLDER PERFORMANCE GRAPH........................................................ 21
MISCELLANEOUS........................................................................ 22
Costs of Proxy Solicitation....................................................... 22
Annual Reports.................................................................... 22
APPENDIX A........................................................................... A-1
PROXY STATEMENT
Annual Meeting of Shareholders
Thursday, May 16, 2002
QUESTIONS AND ANSWERS
-----------------
Q: WHAT AM I VOTING ON?
A: You are being asked by the Company to vote on the re-election of three
directors, Paul G. Kirk, Jr., Carl S. Sloane and Gordon I. Ulmer. For
more information on each nominee, turn to "Information as to Nominees
for Election to the Board of Directors" beginning on page 4.
Q: WHO IS ENTITLED TO VOTE?
A: Each of the 27,611,356 recordholders of Rayonier common stock ("Common
Shares") at the close of business on March 18, 2002 is entitled to one
vote for each share they own.
Q: HOW DO I VOTE?
A: You can vote in any one of the following ways:
. You can vote on the Internet by following the "Vote by Internet"
instructions on your proxy card. If you vote on the Internet, you do not
need to mail in your proxy card.
. You can vote by telephone by following the "Vote by Telephone"
instructions on your proxy card. If you vote by telephone, you do not
need to mail in your proxy card.
. You can vote by mail by signing and dating your proxy card, and mailing
it in the enclosed prepaid envelope. If you mark your voting instructions
on the proxy card, your shares will be voted as you instruct. If you
return a signed card but do not provide voting instructions, your shares
will be voted for the three named nominees for election as directors.
. You can vote in person at the Annual Meeting by delivering your completed
proxy card in person at the Annual Meeting or by completing a ballot
available upon request at the meeting. However, if you hold your shares
in a bank or brokerage account rather than in your own name, you must
obtain a legal proxy from your stockbroker in order to vote at the
meeting.
Regardless of how you choose to vote, your vote is important and we
encourage you to vote promptly.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxy cards, ballots and reports of voting results that identify individual
shareholders are mailed or returned directly to Automatic Data
Processing, Inc., our vote tabulator, and handled in a manner that
protects your privacy. Your vote will not be disclosed except:
. as needed to permit Automatic Data Processing to tabulate and certify the
vote;
. as required by law;
1
. if we determine in good faith that a genuine dispute exists as to the
accuracy or authenticity of a proxy, ballot or vote; or
. in the event of a proxy contest where all parties to the contest do not
agree to follow our confidentiality policy.
Q: WILL ANY OTHER MATTERS BE VOTED ON?
A: We do not expect any other matters to be considered at the Annual Meeting.
However, if a matter not listed on the proxy card is legally and
properly brought before the Annual Meeting by a shareholder, the proxies
will vote on the matter in accordance with their judgment of what is in
the best interest of Rayonier. Under the Company's bylaws, shareholder
proposals must have been received by November 21, 2001 to be considered
at the Annual Meeting. To date, we have received no shareholder
proposals.
Q: HOW MANY VOTES ARE NEEDED TO HOLD THE MEETING?
A: In order to conduct the Annual Meeting, a majority of the Common Shares
outstanding as of the close of business on March 18, 2002, must be
present, either in person or represented by proxy.
Q: HOW MANY VOTES ARE NEEDED TO ELECT THE NOMINEES FOR DIRECTOR?
A: The three nominees who receive the largest number of votes will be elected.
Q: WHO WILL COUNT THE VOTES?
A: Representatives of Automatic Data Processing, Inc. will count the votes. A
representative from The Bank of New York, the Company's
transfer agent, will act as inspector of elections.
Q: HOW ARE VOTES COUNTED?
A: In determining whether we have a quorum, we count all properly submitted
proxies and ballots, including abstentions, broker non-votes and
withheld votes, as present and entitled to vote. However, abstentions
and broker non-votes, as well as votes withheld, are not considered
votes cast and will not be counted for or against a matter or nominee.
Q: WHAT SHARES ARE COVERED BY MY PROXY CARD?
A: You should have been provided a proxy card for each account in which you
own Common Shares either:
. directly in your name as the shareholder of record, which includes shares
purchased through any of our employee benefit plans; or
. indirectly through a broker, bank or other holder of record.
2
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts in which you own Common Shares.
Please vote all proxy cards you receive to ensure that all your shares
are voted. However, for your convenience we recommend that you contact
your broker, bank or our transfer agent to consolidate as many accounts
as possible under a single name and address. Our transfer agent is The
Bank of New York. All communications concerning shares you hold in your
name, including address changes, name changes, requests to transfer
shares and similar issues, can be handled by making a toll-free call to
The Bank of New York at 1-800-659-0158.
Q: HOW CAN I CHANGE MY VOTE?
A: You can revoke your proxy and change your vote at any time before the polls
close at the Annual Meeting. You can do this by:
. voting by telephone or on the Internet (only your most recent telephone
or Internet proxy is counted);
. signing and submitting another proxy with a later date; or
. voting again at the meeting.
Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING OF SHAREHOLDERS
DUE?
A: All shareholders who wish to include a proposal in our Proxy Statement for
the Annual Meeting in 2003 must provide notice to our Corporate
Secretary by certified mail--return receipt requested to Corporate
Secretary, Rayonier, 50 North Laura St., 19/th /Floor, Jacksonville,
Florida 32202 by no later than November 28, 2002. The notice must
satisfy the requirements for shareholder proposals under the federal
securities laws.
Under our bylaws, this deadline applies to any shareholder proposal sought
to be considered at the 2003 Annual Meeting, not just to those sought
to be included in the Proxy Statement and form of proxy for the
Annual Meeting.
Q: MAY I ACCESS THIS YEAR'S ANNUAL REPORT AND PROXY STATEMENT ELECTRONICALLY?
A: Rayonier's 2001 Annual Report and this Proxy Statement may be accessed at
the Investor Relations section of the Rayonier website at:
www.rayonier.com. In addition, most shareholders can elect to
receive future proxy statements, annual reports and proxy cards
over the Internet instead of receiving paper copies in the mail.
With Internet delivery, you should receive the materials more
quickly and also help the Company reduce printing and postage
costs. We encourage you to enroll in this delivery option
through links provided at the Investor Relations section of our
website.
3
ELECTION OF DIRECTORS
-----------------
The Board of Directors is responsible for establishing broad corporate
policies and for overseeing management and the overall performance of Rayonier.
The Board reviews significant developments affecting the Company and acts on
matters requiring Board approval. The Board held nine meetings during 2001.
The Board is divided into three classes (I, II and III) serving staggered
three-year terms. The terms of the Class II directors, Paul G. Kirk, Jr., Carl
S. Sloane and Gordon I. Ulmer, will expire at the 2002 Annual Meeting, and each
has been nominated for re-election for a term expiring in 2005. The Board has
no reason to believe that any nominee will be unable to serve as a director.
If, however, a nominee should be unable to serve at the time of the Annual
Meeting, Common Shares properly represented by valid proxies will be voted for
the election of a substitute nominee recommended by the Board.
A biography of each member of Rayonier's current Board of Directors,
including the three nominees for re-election, is set forth below.
Information As To Nominees For Election To The Board Of Directors
Class II, Term Expires in 2002
PAUL G. KIRK, JR., Age 64 Elected to Board in 1994
Mr. Kirk became a partner in the law firm of Sullivan & Worcester in 1977
and is presently of Counsel to the firm. He served as Chairman of the
Democratic National Committee from 1985 to 1989. Mr. Kirk is also Chairman,
President and a director of Kirk & Associates, Inc. He is a Trustee of
Stonehill College and St. Sebastian's School and Chairman of the Board of the
Directors of the John F. Kennedy Library Foundation. Mr. Kirk serves as
Co-Chairman of the Commission on Presidential Debates. He is also a director of
The Hartford Financial Services Group, Inc. Mr. Kirk is a graduate of Harvard
College and Harvard Law School.
CARL S. SLOANE, Age 65 Elected to Board in 1997
Mr. Sloane is Professor Emeritus, Harvard University Graduate School of
Business Administration, where he was the Ernest L. Arbuckle Professor of
Business Administration from 1991 until his retirement in 2000. Prior to
joining the Harvard faculty, he spent 30 years in management consulting, the
last 20 with the firm he co-founded, Temple, Barker & Sloane, Inc., and its
successor firm, Mercer Management Consulting, where he served as Chairman and
Chief Executive. Mr. Sloane is also a director of Ionics, Inc., MedSource
Technologies, Inc., The Pittston Company and Sapient Corporation. He is a
graduate of Harvard College and the Harvard University Graduate School of
Business Administration.
GORDON I. ULMER, Age 69 Elected to Board in 1994
Mr. Ulmer is the former Chairman and Chief Executive Officer of Connecticut
Bank and Trust Company and retired President of the Bank of New England
Corporation. He joined Connecticut Bank and Trust Company (CBT) in 1957 and
held numerous positions before being elected Chairman and Chief Executive
Officer in 1985. In 1988 he was elected President of the Bank of New England
Corporation, the holding company of CBT, holding such position until his
retirement in 1990. Mr. Ulmer also serves as a director of The Hartford
Financial Services Group, Inc. He is a graduate of Middlebury College, the
American Institute of Banking and the Harvard University Graduate School of
Business Administration Advanced Management Program, and attended New York
University's Graduate School of Engineering.
4
Information As To Other Directors
Class III, Term Expires in 2003
RAND V. ARASKOG, Age 70 Elected to Board in 1994
Mr. Araskog is the retired Chairman and Chief Executive of ITT Corporation
(a diversified global corporation engaged in the hospitality and entertainment
businesses and the information services businesses). He served as Chairman and
Chief Executive of ITT Corporation from 1980 until his retirement in 1998. He
is also a director of The Hartford Financial Services Group, Inc., ITT
Educational Services, Inc., ITT Industries, Inc. and Dow Jones & Company, Inc.
Mr. Araskog is a graduate of the U.S. Military Academy at West Point and
attended the Harvard University Graduate School of Arts and Sciences.
W. LEE NUTTER, Age 58 Elected to Board in 1996
Mr. Nutter is Chairman, President and Chief Executive Officer of Rayonier.
He joined Rayonier in 1967 in the Northwest Forest Operations and was named
Vice President, Timber and Wood in 1984; Vice President, Forest Products in
1985; Senior Vice President, Operations in 1986 and Executive Vice President in
1987. He was elected President and Chief Operating Officer and a director of
Rayonier in July 1996, and was elected to his present position effective
January 1, 1999. Mr. Nutter is a member of the Board of Directors and the
Executive Committee of the American Forest and Paper Association and serves on
the Executive Committee of the National Council for Air and Stream Improvement.
He is a graduate of the University of Washington and the Harvard University
Graduate School of Business Administration Advanced Management Program.
RONALD TOWNSEND, Age 60 Elected to Board in 2001
Mr. Townsend is a Communications Consultant and has been based in
Jacksonville, Florida since 1997. He retired from Gannett Company (a
diversified news and information company) in 1996 after serving 22 years in
positions of increasing responsibility, most recently as President of Gannett
Television Group. Mr. Townsend also serves as a director of ALLTEL Corporation,
Bank of America Corporation and Winn-Dixie Stores, Inc. He attended The City
University of New York, Bernard Baruch.
Class I, Term Expires in 2004
RONALD M. GROSS, Age 68 Elected to Board in 1978
Mr. Gross is Chairman Emeritus, and the former Chairman and Chief Executive
Officer of Rayonier. He joined Rayonier in 1978 as President and Chief
Operating Officer and a director, and was given the additional responsibilities
of Chief Executive Officer in 1981 and Chairman in 1984. He served as Chairman
and Chief Executive Officer from 1984 until his retirement in December 1998,
and was named Chairman Emeritus effective January 1, 1999. Mr. Gross also
serves as a director of Corn Products International, Inc. and The Pittston
Company. He is a graduate of Ohio State University and the Harvard University
Graduate School of Business Administration.
KATHERINE D. ORTEGA, Age 67 Elected to Board in 1994
Ms. Ortega is a former Treasurer of the United States. She served as the
38th Treasurer of the United States from 1983 to 1989 and as Alternate
Representative of the United States to the United Nations General Assembly
during 1990 to 1991. Prior to these appointments, she served as a Commissioner
on the Copyright Royalty Tribunal, and was a member of the President's Advisory
Committee on Small and Minority Business. Ms. Ortega also serves as a director
of State Farm Federal Savings Bank and The Kroger Co. and is a member of the
Washington Mutual Investors Fund Advisory Board. She is a graduate of Eastern
New Mexico University and holds three honorary Doctor of Law Degrees and one
honorary Doctor of Social Science Degree.
5
BURNELL R. ROBERTS, Age 74 Elected to Board in 1994
Mr. Roberts is the retired Chairman of the Boards of Sweetheart Holdings,
Inc. and Sweetheart Cup Company (producer of plastic and paper disposable food
service and food packaging products), having served in such positions from 1993
until March 1998. He previously served as Chairman of the Board and Chief
Executive Officer of The Mead Corporation (an integrated manufacturer of paper
and forest products) until his retirement in 1992. Mr. Roberts also serves as a
director of DPL Inc. and p4A.com Ltd.; as a Limited Partner of American
Industrial Partners, L.P. and Metapoint Partners, L.P.; and as a trustee of
Granum Value Fund. He is a graduate of the University of Wisconsin and the
Harvard University Graduate School of Business Administration.
Committees of the Board of Directors
Our Board of Directors has the following committees:
Number of
Name of Committee and Members Functions of the Committee Meetings in 2001
----------------------------- -------------------------- ----------------
AUDIT: This Committee is comprised entirely of non-employee 5
Paul G. Kirk, Jr., Chair directors and its responsibilities include:
Katherine D. Ortega . monitoring the independence and performance of the
Burnell R. Roberts Company's external auditors and advising the Board on
Gordon I. Ulmer such auditors' selection, evaluation and discharge;
. monitoring the Company's accounting and financial
reporting process and systems of internal control;
. overseeing and providing direction on the Company's
conduct of its business and compliance with its ethical
and legal responsibilities; and
. facilitating open communication among the Board, senior
management, internal audit and the external auditors.
COMPENSATION AND MANAGEMENT This Committee is comprised entirely of non-employee 5
DEVELOPMENT: directors and its responsibilities include:
Rand V. Araskog, Chair . overseeing the compensation and benefits of employees;
Burnell R. Roberts . evaluating management performance;
Carl S. Sloane . establishing executive compensation;
Ronald Townsend . reviewing management succession and development
matters; and
. approving individual compensation actions for the
Chairman, President and Chief Executive Officer and all
senior executives.
FINANCE: This Committee is responsible for advising the Board 3
Ronald M. Gross, Chair concerning certain issues with respect to the financial
Rand V. Araskog structure of the Company, including:
W. Lee Nutter . financial and tax strategies;
Carl S. Sloane . capital structure;
Gordon I. Ulmer . financings;
. risk management policies;
. dividend policies;
. investment policies; and
. performance of the pension and savings plans.
6
Number of
Name of Committee and Members Functions of the Committee Meetings in 2001
----------------------------- -------------------------- ----------------
NOMINATING: This Committee is comprised entirely of non-employee 3
Katherine D. Ortega, Chair directors and its responsibilities include:
Paul G. Kirk, Jr. . advising the Board concerning the organization, size and
Ronald Townsend composition of the Board and its Committees;
. proposing nominees for election to the Board and its
Committees;
. considering the qualifications, compensation,
performance and retirement of directors; and
. considering shareholders' recommendations for nominees
for membership on the Board.
On average, our directors attended over 96 percent of all meetings of the
Board of Directors and Committees on which they served during 2001, and no
director attended less than 83 percent of such meetings.
Directors' Compensation
Each non-employee director receives an annual retainer of $20,000 in cash
plus an award of 500 Common Shares. They also receive a fee of $1,000 for
attendance at each Board and Committee meeting, for each trip they take to one
of the Company's facilities for a business purpose other than a Board or
Committee meeting, and for any other business trip taken at the request of
management. Mr. Nutter, as an employee of Rayonier, is not compensated for
service on the Board or its Committees.
Mr. Gross has provided consulting services to the Board under a Consulting
Agreement since January 1, 1999. Under this Agreement, he is paid an annual
retainer of $50,000 for as long as he remains a director. The Agreement
provides that the Company will recommend Mr. Gross for nomination for
re-election as a director and, if elected, that Mr. Gross will continue to
serve through the date of the Company's Annual Meeting in 2007.
Directors' Charitable Award Program
The Company established the Directors' Charitable Award Program in 1995 to
recognize the interest of Rayonier and its directors in supporting worthy
educational institutions and other charitable organizations. Under this Program
each director may nominate up to five organizations to share a total
contribution of $1 million from The Rayonier Foundation, a tax-exempt
charitable foundation funded by the Company. These contributions will be made
by the Foundation in 10 annual installments after the death of any director who:
. has completed 60 full months of service as a director;
. dies or becomes disabled while serving as a director; or
. is actively serving as a director at the time of a change in control of
the Company.
The cost of this Program is minimal to Rayonier as the Company has acquired
joint life insurance contracts on the lives of directors, the proceeds of which
will be adequate to fund Rayonier's contributions to the Foundation related to
the Program, as well as to fund the premium costs of the contracts. Directors
receive no financial benefit from this Program since the charitable deduction
and insurance proceeds accrue solely to the Company.
7
REPORT OF THE AUDIT COMMITTEE
-----------------
Management has primary responsibility for the Company's financial statements
and the reporting process, including the Company's internal control system. The
independent auditors are responsible for auditing the Company's financial
statements and rendering an opinion as to the conformity of such statements to
accounting principles generally accepted in the United States.
The Audit Committee's role is to assist the Board of Directors in oversight
of the Company's financial reporting process. The Committee is composed of four
directors, all of who have been determined by the Board of Directors to be
"independent" and "financially literate" as defined under applicable rules of
the New York Stock Exchange. In addition, the Board of Directors has determined
that at least one member of the Committee has "financial expertise" as required
under the Exchange rules. The Committee operates under a written charter
adopted by the Board of Directors, a copy of which is attached as Appendix A.
The Committee held five regular meetings during 2001.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company for the fiscal year ended December 31, 2001 with
management and with Arthur Andersen LLP ("Andersen"), the Company's independent
auditors for 2001. In addition, the Committee has held discussions with
Andersen covering the matters required by Statement of Auditing Standards No.
61 (Communication with Audit Committees), as amended. Andersen was invited to
discuss with the Committee any unusual items observed during their quarterly
reviews of the Company's interim results. However, no such discussions were
held during 2001. The Committee has also received the written disclosures and
the letter from Andersen required by Independence Standards Board Standard No.
1 (Independence Discussions with Audit Committees), and has held discussions
with Andersen regarding their independence.
The Audit Committee discussed with the Company's internal audit director and
with Andersen representatives the overall scope and plans for their respective
audits, and met with each of them to discuss the results of their examinations,
their evaluations of the adequacy of the Company's internal controls and the
overall quality of the Company's financial reporting. Separate private meetings
without management present were also held with the Company's internal audit
director and with representatives of Andersen at four meetings of the Committee
in 2001.
In reliance on the Audit Committee's reviews and discussions with management
and the independent auditors as discussed above, the Committee recommended that
the Board of Directors include the audited financial statements of the Company
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2001 for filing with the Securities and Exchange Commission.
Information Regarding Independent Auditors
The Audit Committee is responsible for recommending the appointment of the
Company's independent auditors to the Board of Directors. Upon recommendation
of the Committee, in December 2001 the Board of Directors reappointed Andersen
as independent auditors of the Company for 2002. However, given current
circumstances, upon recommendation of the Committee the Board rescinded that
appointment in March 2002. The Committee is currently evaluating the
appointment of an independent auditor for 2002 and will act expeditiously in
making a recommendation to the Board. In the interim, the Committee has
authorized management to engage Andersen as needed on a special appointment
basis to provide independent auditing services. Andersen has served as
independent auditors of Rayonier and its subsidiaries for many years, and its
long-term knowledge of the Company has enabled it to carry out its audits with
effectiveness and efficiency. In keeping with established policy, partners and
employees of Andersen engaged in auditing Rayonier are periodically rotated,
giving the Company the benefit of new expertise and experience. The Board of
Directors, at its discretion, may change the appointment of the independent
auditor at any point if it determines that such a change is in the best
interest of the Company and its shareholders.
8
Representatives of Andersen will attend the Annual Meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
Andersen charged the Company the following fees for services performed in
fiscal 2001:
Audit Fees. The aggregate fees billed or to be billed by Andersen for the
fiscal year 2001 audit, and the review of Forms 10-Q, were $582,900.
Financial Information Systems Design and Implementation Fees. Andersen did
not render any services to the Company related to financial information systems
design and implementation for the fiscal year ended December 31, 2001.
All Other Fees. Aggregate fees billed or to be billed for all other
services rendered by Andersen to Rayonier for the fiscal year ended December
31, 2001 were $682,697. The specific services and related fees were as follows:
. Audit-related services....................... $152,674
. Tax Consultation............................. 128,347
. Expatriate and Employee Taxes................ 88,176
. U.S. Tax Compliance and Return Preparation... 313,500
Audit-related services included services such as audits of benefit plans, a
separate creditor-required audit report for Rayonier Timberlands Operating
Company, L.P. and statutory reporting for foreign subsidiaries. After
consideration, the Audit Committee has determined that the provision of these
services is not incompatible with maintaining Andersen's independence.
This report is furnished by the members of the Audit Committee.
Paul G. Kirk, Jr.,
Committee Chairman Katherine D. Ortega
Burnell R. Roberts Gordon I. Ulmer
REPORT OF THE COMPENSATION AND MANAGEMENT DEVELOPMENT COMMITTEE
-----------------
The Compensation and Management Development Committee (the "Committee")
oversees the compensation and benefits of Rayonier employees. The Committee
must approve individual compensation actions for the Chairman, President and
Chief Executive Officer and all senior executives. Specifically, the Committee
must approve base salaries, annual bonuses and long-term incentive awards. The
Committee uses outside compensation expertise and outside legal counsel.
Components of Compensation
The key elements of the Company's executive compensation program are base
salary, annual bonus incentives and long-term compensation. These key elements
are addressed separately below. In determining each component of compensation,
the Committee also considers all other elements of an executive's total
compensation package, including insurance and other benefits.
The Committee believes that the Company's direct competitors for executive
talent, especially at senior levels, are to be found not only in the forest
products sector but also in broader-based general industry. Therefore, the
Committee relates total compensation levels for the Company's senior executives
to the median
9
compensation paid to executives of comparative companies within the forest
products and general industry sectors.
Base Salary
The Committee has oversight of the general administration of base salaries,
salary grades and salary range structure for the Company's 50 executives, and
regularly reviews each senior executive's base salary. Base salaries are
competitive and are targeted at market levels. The Committee authorizes base
salary adjustments in recognition of the executive's level of responsibilities,
performance, prior experience, breadth of knowledge, internal equity issues and
external pay practices.
While the normal interval between salary reviews for most executives is 12
months, on October 1, 2001 salary reviews were extended to 15 months. Executive
salary actions, comprised of merit pay, equity adjustments and promotional
increases for 2001 averaged 4.10 percent on an annualized basis. Merit
increases averaged 3.89 percent. Mr. Nutter's year 2001 base salary was
$575,000.
Annual Bonus Incentive
The Rayonier Annual Incentive Bonus Plan ("Annual Plan") provides eligible
executives and key managers with the opportunity to earn cash bonuses for
achieving specific annual company, business unit and individual performance
goals.
The current Annual Plan formula measures actual net income, return on total
capital ("ROTC") and operating funds flow ("OFF") against the approved budgeted
amounts for the year for each performance measure. Net income, ROTC and OFF
performance are weighted 60 percent, 25 percent and 15 percent, respectively.
The maximum bonus pool is 150 percent of the aggregate standard bonus pool
established under the Annual Plan. Individual bonus amounts within the
authorized pool are determined on a discretionary basis, taking into account
specific personal contributions during the year. Bonuses earned in the calendar
year are paid out in the first quarter of the subsequent year. 2001 corporate
performance was at 76 percent of targeted financial goals and the bonus pool
was set at that level. All bonuses were awarded by February 15, 2002.
Under the Annual Plan, as reflected in the Summary Compensation Table on
page 12, Mr. Nutter was paid $375,000 in connection with 2001 Company and
individual performance. Mr. Nutter's bonus is competitive with annual incentive
compensation paid to other executives at comparable forest products and general
industry sector companies.
Long-Term Incentives
The Rayonier 1994 Incentive Stock Plan ("Stock Plan") provides for the award
of incentive stock options, non-qualified stock options, stock appreciation
rights, restricted stock, performance shares or any combination thereof to
executives and key employees as long-term compensation incentives.
In making awards under the Stock Plan, the Committee considers individual
performance criteria, levels of responsibility and prior experience, as well as
historical award data and compensation practices at comparable forest products
sector and general industry companies.
Long-term incentive grants for 2001 under the Stock Plan are reflective of
Rayonier's approach to total compensation, which considers market level pay
practices of comparable companies, with a greater emphasis on at-risk rewards
that closely align management performance with shareholder value.
10
Stock Options. Non-qualified stock options to acquire Common Shares are
granted at an option price that is not less than the fair market value of a
Common Share on the date of grant. The size of the grant is based primarily on
competitive practice and is generally targeted to be at the median of option
values granted by comparative forest products and general industry sector
companies, adjusted based upon individual factors and historical award data. In
2001, non-qualified stock option awards totaling 368,550 shares were granted to
134 executives and key employees.
On January 2, 2001, the Committee awarded Mr. Nutter non-qualified options
to acquire 50,000 Common Shares at an exercise price of $38.31, the market
price on that day.
Performance Shares. In addition to traditional non-qualified stock options,
the Committee has used the flexibility provided under the Stock Plan to grant
long-term incentives in the form of Contingent Performance Shares.
Contingent Performance Shares are granted to senior executives responsible
for sustained Total Shareholder Return ("TSR") performance, as measured against
the average performance of a representative peer group of forest products
companies over a designated period. TSR is calculated by measuring the growth
in value of a hypothetical $100 investment in each of the forest products peer
group companies over the performance period, assuming all dividends are
reinvested quarterly.
Award payment is in the form of Common Shares and may range from zero to a
maximum of 150 percent of the target awards based upon TSR performance. The
Share Award Valuation Formula provides a 100 percent share award when Rayonier
outperforms the peer group companies' average by 20 percent. The TSR goals
reflect the Company's emphasis on creation of long-term shareholder value. In
determining the size of Contingent Performance Share grants, the Committee
considers the contingent value of the award, competitive practices and the
level of responsibility of each senior executive.
Contingent Performance Shares granted to seven senior executives on January
1, 1998 (1998 Class) measured Rayonier TSR performance against that of 12
forest products peer group companies for the 36-month period from January 1,
1998 through December 31, 2000. Rayonier's TSR performance for the period was
below targeted levels and, therefore, no award payments were made in 2001. A
total of 91,500 Common Shares were returned to the Stock Plan.
A total of 69,000 Contingent Performance Shares (2001 Class) were granted to
seven senior executives in 2001. Grants were made for a 36-month performance
period commencing January 1, 2001 through December 31, 2003. Mr. Nutter's grant
was for 20,000 Contingent Performance Shares.
Beginning with the 2001 Class, the Committee approved adoption of a blended
Standard & Poors Paper and Forest Products Index as the TSR benchmark for peer
group performance comparisons under the Company's Contingent Performance Share
Program. Additionally, the Committee approved elimination of the Program's peer
group award threshold in favor of direct measurement against peer group
performance.
Policy with Respect to the $1 Million Deduction Limit
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the Proxy
Statement to $1 million, unless certain requirements are met. Compensation
payable solely on account of the attainment of performance goals is excluded
from the $1 million
11
limitation. Based upon an analysis of total executive compensation for 2001,
there are no executives within the Company whose non-performance based
compensation exceeds the deduction limitation threshold.
This report is furnished by the members of the Compensation and Management
Development Committee.
Rand V. Araskog,
Committee Chairman Burnell R. Roberts
Carl S. Sloane Ronald Townsend
EXECUTIVE COMPENSATION
-----------------
Summary Compensation Table
This table discloses compensation received by Rayonier's Chief Executive
Officer and the four other most highly paid executive officers in the Company
for 2001, 2000 and 1999.
Long-Term Compensation
--------------------------------------------
Name and Principal Annual Compensation Awards Payouts
Position ---------------------------- ----------------------- -------
Other Securities
Annual Restricted Underlying LTIP All Other
Salary Bonus Compensation Stock Awards Options Payouts Compensation
Year ($) ($) (1) ($) (2) ($) (#) (3) ($) (4) ($)
---- ------- ------- ------------ ------------ ---------- ------- ------------
W. Lee Nutter 2001 574,614 375,000 82,558 -- 50,000 -- 153,154
Chairman,
President and 2000 524,186 525,000 167,051 -- 50,000 691,080 161,977
Chief Executive
Officer 1999 419,769 400,000 -- $227,800 30,000 342,633 113,870
William S. Berry 2001 289,694 100,000 -- -- 20,000 -- 24,922
Executive Vice
President, 2000 275,992 160,000 97,937 -- 25,000 531,600 50,998
Forest Resources
and 1999 263,938 130,000 -- -- 12,000 256,975 62,603
Wood Products
Gerald J. Pollack 2001 314,884 120,000 -- -- 20,000 -- 20,740
Senior Vice
President and 2000 299,587 200,000 123,614 -- 25,000 372,120 39,766
Chief Financial
Officer 1999 244,500 140,000 -- -- 12,000 228,422 56,253
John P. O'Grady 2001 283,396 101,000 -- -- 20,000 -- 20,086
Senior Vice
President, 2000 269,730 155,000 96,232 -- 25,000 318,960 37,405
Administration
1999 232,375 128,000 -- -- 12,000 171,317 45,958
William A. Kindler 2001 245,925 75,000 -- -- 15,000 -- 17,213
Senior Vice
President, 2000 231,519 140,000 -- -- 15,000 212,640 25,341
Performance
Fibers 1999 223,385 80,000 -- -- 7,500 -- 19,983
--------
(1) The amount shown for 2001 includes $75,891 paid to Mr. Nutter to reimburse
him for expenses associated with relocation, plus tax gross-up. The amounts
for 2000 include amounts paid to reimburse moving expenses and to cover
other expenses associated with relocation of Messrs. Nutter, Berry, Pollack
and O'Grady. Such amounts, including tax gross-up, were as follows: Mr.
Nutter, $162,386; Mr. Berry, $97,937; Mr. Pollack, $108,347; and Mr.
O'Grady, $90,775.
12
(2) On January 4, 1999, Mr. Nutter received an award of 5,000 restricted shares
which vested on January 4, 2002. All dividends paid on such shares during
the period prior to vesting were withheld and accumulated by the Company.
Upon vesting, the Company paid Mr. Nutter an amount equal to all dividends
paid and accumulated with respect to the shares, together with interest
thereon at a rate equal to the prime rate as reported in The Wall Street
Journal, adjusted and compounded annually. The total value as of December
31, 2001 of these restricted stock holdings was $275,441.
(3) No Contingent Performance Share award payments were made in 2001 (see
"Performance Shares" on page 11).
The amounts shown for 2000 represent the value on October 5, 2000 of award
payments made on that date pursuant to the vesting of Contingent Performance
Shares awarded on January 3, 1997. The gross number of Common Shares paid
were as follows: Mr. Nutter, 19,500 shares; Mr. Berry, 15,000 shares; Mr.
Pollack, 10,500 shares; Mr. O'Grady, 9,000 shares; and Mr. Kindler, 6,000
shares.
The amounts shown for 1999 represent the value on January 13, 1999 of award
payments made on that date pursuant to the vesting of Contingent Performance
Shares awarded on January 2, 1996. The gross number of Common Shares paid
were as follows: Mr. Nutter, 7,572 shares; Mr. Berry, 5,679 shares; Mr.
Pollack, 5,048 shares; and Mr. O'Grady, 3,786 shares.
(4) For 2001, includes the following amounts paid to enable each of the
individuals to purchase an insurance policy to protect their right to
receive deferred benefits earned under programs sponsored by the Company or
ITT Industries Inc. (formerly ITT Corporation), including tax gross-up: Mr.
Nutter, $125,820; Mr. Berry, $9,723; Mr. Pollack, $5,430; and Mr. O'Grady,
$6,685. These policies are limited to coverage of deferred benefits valued
as of December 31, 1999, and will expire on December 31, 2004. The limited
coverage and duration of these policies led to the creation of two Rabbi
Trusts to protect benefits not covered by insurance (see "Legal Resources
and Supplemental Severance Trusts" on page 16).
These amounts also include Company contributions in 2001 to the Rayonier
Investment and Savings Plan for Salaried Employees ("Savings Plan") and the
Rayonier Excess Savings and Defined Compensation Plan ("Excess Plan") and
premiums for group life insurance and individual split-dollar life insurance
as follows:
Name Savings Plan Excess Plan Group Life Split Dollar
---- ------------ ----------- ---------- ------------
W. Lee Nutter..... 4,275 18,476 2,451 2,132
William S. Berry.. 4,200 6,855 1,866 2,278
Gerald J. Pollack. 6,120 5,961 1,368 1,861
John P. O'Grady... 4,200 6,706 1,213 1,282
William A. Kindler 4,725 4,812 996 ____
The 2001 amount for Mr. Kindler includes $6,680 for cash-out of accrued
vacation upon his retirement from the Company effective December 31, 2001.
13
Option Grants in Last Fiscal Year
This table provides information on awards of options to purchase Common
Shares made to the named Rayonier executives during 2001:
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (2)
------------------------------------ -----------------------
Number of
Securities % of Total
Underlying Stock
Options Options Granted Exercise
Granted to Employees Price ($/ Expiration
Name (#) in 2001 share)(1) Date 5%($) 10%($)
---- ---------- --------------- --------- ---------- --------- ---------
W. Lee Nutter..... 50,000 13.59% 38.31 1/4/2011 1,204,648 3,052,814
William S. Berry.. 20,000 5.43% 38.31 1/4/2011 481,859 1,221,125
Gerald J. Pollack. 20,000 5.43% 38.31 1/4/2011 481,859 1,221,125
John P. O'Grady... 20,000 5.43% 38.31 1/4/2011 481,859 1,221,125
William A. Kindler 15,000 4.08% 38.31 12/31/2006(3) 361,394 915,844
--------
(1) The exercise price per share is equal to the fair market value of a Common
Share on the grant date, January 2, 2001. The exercise price may be paid in
cash or in Common Shares valued at their fair market value on the date of
exercise. Options granted to the named officers become exercisable in
one-third increments on the first, second and third anniversary of the date
of grant. However, upon the occurrence of a change in control of Rayonier
(a) all options will generally become immediately exercisable for a period
of 60 days, and (b) options will continue to be exercisable for a period of
seven months for an employee terminated other than for cause or who
voluntarily leaves the Company because of a good faith belief that they
will not be able to discharge their duties.
(2) At the end of the term of these options, the projected price of a Common
Share would be $62.40 at an assumed annual appreciation rate of five
percent and $99.37 at an assumed annual appreciation rate of ten percent.
Gains to all shareholders at those assumed annual appreciation rates would
be approximately $659 million and $1.67 billion, respectively, over the
term of the options.
(3) Mr. Kindler's options will expire no later than five years after his
retirement date.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
This table shows all stock option exercises in 2001 by the named Rayonier
executives and the number and value of such executives' unexercised stock
options at December 31, 2001.
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options Options Held at
Options Exercised During 2001 at 12/31/01 12/31/01(2)
------------------------------ -------------------- --------------------
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) (1) ($) Unexercisable(#) Unexercisable($)
---- --------------- -------------- -------------------- --------------------
W. Lee Nutter..... 22,009 547,974 191,209/93,333 2,646,904/781,099
William S. Berry.. -0- -0- 108,539/40,667 1,576,338/324,841
Gerald J. Pollack. 7,500 128,935 53,505/40,667 516,673/324,841
John P. O'Grady... 5,000 65,654 70,333/40,667 858,189/324,841
William A. Kindler -0- -0- 74,500/-0-(3) 593,305/-0-
--------
(1) Before taxes.
(2) Based on the New York Stock Exchange consolidated trading closing price of
a Common Share on December 31, 2001 of $50.47.
14
(3) Mr. Kindler's unvested options vested upon his retirement on December 31,
2001.
Awards Of Contingent Performance Shares In Last Fiscal Year
This table shows awards of Contingent Performance Shares made to the named
Rayonier executives during 2001.
Estimated Future Payouts
------------------------
Number Target
of Performance Shares Maximum
Name Shares(1) Period (#)(2) Shares (#)
---- --------- ----------- ------ ----------
W. Lee Nutter......... 20,000 36 months 20,000 30,000
William S. Berry...... 12,000 36 months 12,000 18,000
Gerald J. Pollack..... 12,000 36 months 12,000 18,000
John P. O'Grady....... 10,000 36 months 10,000 15,000
William A. Kindler (3) 7,000 36 months 7,000 10,500
--------
(1) Awards of Common Shares granted under the Stock Plan (see "Performance
Shares" on page 11).
(2) For 2001, the award threshold was eliminated in favor of direct measurement
against peer group performance, subject to the maximum payout limitation
shown above.
(3) In accordance with the Stock Plan, any payout under the 2001 Contingent
Performance Share award will be prorated to reflect Mr. Kindler's
retirement on December 31, 2001.
Other Executive Compensation
Rayonier Senior Executive Severance Pay Plan. The Rayonier Supplemental
Senior Executive Severance Pay Plan (the "Executive Severance Plan") provides
severance benefits for covered executives selected by the Compensation and
Management Development Committee based primarily on their position within the
Company. Under the Executive Severance Plan, if any covered executive is
terminated in a qualifying termination within two years after the occurrence of
a "Change in Control" of the Company (as defined in the Retirement Plan for
Salaried Employees), he or she is entitled to receive severance benefits, based
on his or her tenure with the Company, equal to up to three times annual base
salary, plus an amount calculated to equal the incremental value to the
executive of up to an additional 36 months of participation under the Company's
retirement plans. Covered executives may elect (prior to a Change in Control)
to receive these benefits over time, rather than in a lump-sum, provided the
covered executive is available to perform advisory, consultative and similar
services during the salary continuation period. Executives electing salary
continuation will be eligible to continue to participate in the Company
retirement plans and certain welfare benefits of the Company during the
continuation period.
The Executive Severance Plan also provides for payment of a lump sum equal
to up to three times the executive's target bonus award for the prior year,
together with a prorated bonus award in respect of the year of termination. The
target bonus award is based on the prior year's bonus plan, assuming a 100
percent performance factor.
The Executive Severance Plan provides for a gross-up for any excise taxes
payable with respect to payments under the Plan and income taxes payable on the
gross-up payment, reimbursement for outplacement services and the continuation
of certain perquisites. As of March 1, 2002, Messrs. Nutter, Pollack, Berry and
O'Grady were covered by the Plan. However, Mr. Nutter's right to receive
severance benefits under the Executive Severance Plan based on a multiple of
his base salary and target bonus award is offset by benefits under the Change
in Control Agreement discussed below.
15
Rayonier Split-Dollar Life Insurance-Deferred Compensation Retention Benefit
Program. The Rayonier Split-Dollar Life Insurance-Deferred Compensation
Retention Benefit Program (the "Retention Benefit Program") is designed to
promote retention of eligible senior executives by providing enhanced benefits
for a 15-year period from date of retirement. This Program includes an early
retirement benefit option available at the later of age 60 or five years
following the Program implementation date (January 1, 2000). An executive must
remain in Rayonier's employ until retirement to be eligible for the enhanced
benefits.
The Company has purchased a split-dollar life insurance policy for each of
the four eligible executives to facilitate funding of Program benefits.
Premiums paid by the Company will be recaptured upon the executive's death. If
death occurs prior to retirement, the premiums are refunded from the death
benefit with the remainder paid to the executive's estate. If the executive's
death is post-retirement, the Company will receive the entire death benefit
proceeds.
Change in Control protection is provided for Program benefits both prior to
and after retirement by virtue of the individual split-dollar life insurance
policies being held in a trust established by the Company. Under the Trust
Agreement, upon a Change in Control, the Company would transfer any amounts due
the eligible executives or their beneficiaries under the Program to the trust,
with subsequent payment to the executive, or his/her beneficiary, made directly
by the trust.
The annual benefits under the Retention Benefit Program for each eligible
executive, in the event of early retirement and at age 65 retirement,
respectively, are as follows: Mr. Nutter, $60,000 and $70,000; Mr. Berry,
$50,000 and $60,000; Mr. Pollack, $40,000 and $50,000; and Mr. O'Grady, $40,000
and $50,000.
Change in Control Agreement for W. Lee Nutter. The Company entered into a
Change in Control Agreement with Mr. Nutter in August 2001. The Agreement
provides: (i) if within 60 months following a Change in Control, Mr. Nutter is
terminated by the Company for any reason or he terminates for "good reason" (as
defined in the Executive Severance Plan), he will receive a termination payment
of $5 million; (ii) should the termination payment be subject to federal excise
tax, Mr. Nutter will be entitled to receive an additional payment in an amount
such that the net proceeds to Mr. Nutter, after deduction of the excise tax on
the termination payment and all applicable taxes on the additional payment,
shall be equal to $5 million; (iii) covenants by Mr. Nutter regarding his
continued employment in the event of a potential Change in Control; and (iv) a
covenant by the Company to deposit funds into the Supplemental Severance Trust
(discussed below) in the event of a Change in Control.
Legal Resources and Supplemental Severance Trusts. On December 31, 2001,
Rayonier established two Rabbi Trusts, the Legal Resources Trust and the
Supplemental Severance Trust, each intended to be grantor trusts under Section
671 of the Internal Revenue Code, to protect deferred benefits historically
protected by insurance as described in footnote 4 on page 13.
Rayonier is, for tax purposes, the beneficiary of each of the Rabbi Trusts.
The assets of each of these trusts, as assets of the Company, will be subject
to the claims of Rayonier's creditors in the event of bankruptcy or insolvency.
The Company will contribute the sum of $250,000 per participant to the Legal
Resources Trust to fund any litigation and similar expenses incurred by a
covered executive in efforts to collect any amounts due under their benefit
arrangements. Under the terms of the Legal Resources Trust, the Trustee will
undertake to pay, to the extent permitted by law, all legal fees and expenses
that a covered executive (or his or her beneficiaries) reasonably incurs in
pursuing in good faith payment of any amount due to the executive or such
beneficiaries under any benefit arrangement, or as a result of any contest by
the Company or others of the validity or enforceability of, or liability under,
any provision of any benefit arrangement or any guarantee of performance
thereof, following a Change in Control.
16
The Company established the Supplemental Severance Trust to preserve
severance benefits provided to eligible executives following a Change in
Control. The Trust was initially funded in the amount of $1 million. Upon the
occurrence of a Change in Control, the Company is required to fund the
Supplemental Severance Trust in an amount that is sufficient to pay the
benefits to which participants may become entitled under the Executive
Severance Plan and the Change in Control Agreement in the event of a
termination of employment.
Severance Arrangement with William S. Berry. As part of a management
reorganization, Mr. Berry announced his retirement effective March 31, 2002. In
recognition of his years of service and leadership contributions, Mr. Berry
will receive: (1) 21-month salary continuation; (2) full-term stock option
exercise rights; (3) any resulting payouts under the 2000 and 2001 Class
Contingent Performance Share awards; (4) a $100,000 lump sum payment on or
about March 31, 2002; and (5) retirement benefits under the Retention Benefit
Program commencing January 1, 2005.
Retirement Program. The following table illustrates the estimated annual
benefits payable from the Rayonier Salaried Employees Retirement Plan, a tax
qualified retirement plan (the "Retirement Plan"), and the Rayonier Excess
Benefit Plan, a non-qualified retirement plan (the "Excess Plan"), at
retirement at age 65 based on the assumptions set forth below. Calculation of
benefits is uniform for all participants in the Retirement Plan and the Excess
Plan, including the named Rayonier executives. The Retirement Plan covers
substantially all eligible salaried employees of the Company and the cost of
the Retirement Plan and the Excess Plan is borne entirely by the Company.
Pension Plan Table
Years of Service
--------------------------------------------
Average Final
Compensation 20 25 30 35 40
------------ -------- -------- -------- -------- --------
$ 50,000 $ 20,000 $ 25,000 $ 28,750 $ 32,000 $ 36,250
100,000 40,000 50,000 57,500 65,000 72,500
300,000 120,000 150,000 172,500 195,000 217,500
500,000 200,000 250,000 287,500 325,000 362,500
750,000 300,000 375,000 431,250 487,500 543,750
1,000,000 400,000 500,000 575,000 650,000 725,000
The Retirement Plan "mirror images" retirement benefits provided previously
to eligible Rayonier salaried employees and executives under the provisions of
the ITT Retirement Plan for Salaried Employees of ITT Industries, Inc. ("ITT").
Retirement benefits earned under the former ITT plan continue on a dynamic
credit basis under arrangements with ITT for eligibility and benefit service
prior to March 1, 1994.
The annual pension amounts to two percent of a member's average final
compensation for each of the first 25 years of benefit service, plus one and
one-half percent of a member's average final compensation for each of the next
15 years of benefit service, reduced by one and one-quarter percent of the
member's primary Social Security benefit for each year of benefit services to a
maximum of 40 years, provided that no more than one-half of the member's
primary Social Security benefit is used for such reduction. A member's average
final compensation (including salary plus approved bonus payments) is defined
under the Plan as the total of (1) a member's average annual base salary for
the five calendar years of the last 120 consecutive calendar months of
eligibility service affording the highest such average plus (2) a member's
average annual compensation not including base salary for the five calendar
years of the member's last 120 consecutive calendar months of eligibility
service affording the highest such average. For the named Rayonier executives,
final compensation for purposes of pension calculations consists of salary and
bonus payments as set forth in the Summary Compensation Table on page 12. The
Retirement Plan also provides for undiscounted early retirement pensions for
members who retire at or after age 60 following completion of 15 years of
eligibility service. A member is vested in benefits accrued under the
Retirement Plan upon completion of five years of eligibility service.
17
Applicable federal legislation limits the amount of benefits that can be
paid and the compensation that may be recognized under a tax-qualified
retirement plan. In order to provide benefits at retirement that cannot be paid
from the qualified Retirement Plan, Rayonier has adopted the Excess Plan to
meet the retirement needs of this small segment of its salaried employee
population affected by the limiting federal legislation. Where applicable,
retirement benefits earned under the former ITT excess plan have been carried
forward to Rayonier and have been incorporated in the Excess Plan. The
practical effect of the Excess Plan is to continue calculation of benefits
after retirement to all employees on a uniform basis.
Credited years of service for the named Rayonier executives as of March 1,
2002 are as follows: W. Lee Nutter, 34.7 years; William S. Berry, 21.8 years;
Gerald J. Pollack, 19.8 years; John P. O'Grady, 26.3 years; and William A.
Kindler, 5.3 years.
SHARE OWNERSHIP
-----------------
Principal Holders Of Common Shares
This table shows, as of December 31, 2001, the holdings of persons known to
us to beneficially own more than five percent of the outstanding Common Shares.
Amount
and Nature
Of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class(a)
------------------------------------ ---------- ----------
Southeastern Asset Management, Inc......... 4,938,600(b) 18.1%
6075 Poplar Ave., Suite 900
Memphis, TN 38119
Arnold and S. Bleichroeder Holdings, Inc. . 2,155,000(c) 7.88%
Arnold and S. Bleichroeder Advisers, Inc.
1345 Avenue of Americas
New York, NY 10105
Perkins, Wolf, McDonnell & Company......... 1,995,780(d) 7.3%
310 S. Michigan Ave., Ste. 2600
Chicago, IL 60604
--------
(a) Based on 27,345,395 total Common Shares outstanding at December 31, 2001.
(b) Holdings as of December 31, 2001 as reported to the Securities and Exchange
Commission ("SEC") on Schedule 13G/A dated February 12, 2002.
(c) Holdings as of December 31, 2001 as reported to the SEC on Schedule 13F/A
dated March 8, 2002.
(d) Holdings as of December 31, 2001 as reported to the SEC on Schedule 13G
dated February 26, 2002.
18
This table gives information concerning Common Shares beneficially owned as
of March 1, 2002 by each of the Company's directors, each of the named Rayonier
executives and all directors and executive officers as a group. All Common
Shares listed below are owned directly by the individual concerned unless
otherwise indicated:
Beneficial Ownership
---------------------------------------------
(5)
(3) (4) Sum of
(2) Column Exercisable Columns (2)
Common (2) as Stock And (4) as
(1) Shares Percent Options Percent of
Name of Beneficial Owner Owned of Class (a) Class
------------------------ ------- -------- ----------- -----------
Rand V. Araskog......................................... 201,351 * -0- *
Ronald M. Gross......................................... 133,210 * 230,841 1.31%
Paul G. Kirk, Jr........................................ 3,681 * -0- *
W. Lee Nutter........................................... 173,544(b)(c) * 234,542 1.47%
Katherine D. Ortega..................................... 3,700 * -0- *
Burnell R. Roberts...................................... 4,000 * -0- *
Carl S. Sloane.......................................... 2,900 * -0- *
Ronald Townsend......................................... 625 * -0- *
Gordon I. Ulmer......................................... 5,000 * -0- *
William S. Berry........................................ 18,766(b) * 66,334 *
Gerald J. Pollack....................................... 22,703(c) * 72,506 *
John P. O'Grady......................................... 28,811(c) * 84,334 *
William A. Kindler...................................... 8,867(b) * 74,500 *
Directors and executive officers as a group (17 persons) 618,291(b) 2.24% 799,066 5.00%
--------
* Less than 1%.
(a) Pursuant to SEC regulations, shares receivable through exercise of employee
stock options exercisable within 60 days after March 1, 2002 are deemed to
be beneficially owned as of March 1, 2002.
(b) All Common Shares are owned directly except as set forth in this Note (b).
The following amounts were allocated under the Rayonier Investment and
Savings Plan for Salaried Employees as of March 1, 2002 to the accounts of:
Mr. Nutter, 19,554 shares; Mr. Berry, 4,790 shares; Mr. Kindler, 1,531
shares; and all directors and executive officers as a group, 36,009 shares.
(c) Includes restricted stock awards granted January 2, 2002 as follows: Mr.
Nutter, 7,500 shares; Mr. Pollack, 5,000 shares; and Mr. O'Grady, 4,000
shares.
Section 16 Reports
The federal securities laws require Rayonier directors and executive
officers, and persons who own more than 10 percent of the outstanding Common
Shares, to file with the Securities and Exchange Commission and the New York
Stock Exchange initial reports of ownership and reports of changes in ownership
of any equity securities of the Company. To our knowledge, based solely on
representations by these individuals that no other reports were required, the
required reports have been filed on a timely basis on behalf of all persons
subject to these requirements.
19
Share Ownership Guidelines For Directors And Senior Management
The Board of Directors believes that it is important for directors and
senior management to acquire a substantial ownership position in the Company to
underscore the level of commitment Rayonier's management team has to the future
success of the business. Our guidelines encourage Rayonier share ownership by
directors at a level equal to three times their annual retainer, and by
officers at the level of Vice President or above as follows:
Share Ownership Guidelines
Position/Level as Multiple of Base Salary
-------------- --------------------------
Chairman, President and Chief Executive Officer 4X
Executive Vice President....................... 3X
Senior Vice President.......................... 2X
Vice President................................. 1X
These ownership levels for directors and officers are to be achieved over a
three-year period. While participation in the share ownership program is
voluntary, as of the end of 2001 all persons who had held the position of Vice
President or higher for three or more years had met their target level of
ownership.
20
SHAREHOLDER PERFORMANCE GRAPH
-----------------
This table compares the performance from 1996-2001 of Common Shares
(assuming reinvestment of dividends) with a broad-based market index (Standard
& Poor's 500), an industry-specific index (Standard & Poor's 1500 Paper and
Forest Products Index) and a Custom Composite Index. The Custom Composite Index
contains 13 stocks of 12 forest products companies and formed the comparison
group for purposes of Contingent Performance Shares awarded to senior
executives of Rayonier in 2000. A complete description of the Custom Composite
Index is provided in Note (a) below. Mergers and consolidations in the industry
have forced repeated realignment of peer group companies for Contingent
Performance Share award purposes. As the Company believes frequent realignment
of "set" peer group companies is not only difficult to administer but also not
in the long-term interests of the Performance Share award program, effective
January 1, 2001 the comparison group comprising the Composite Index was
replaced with the Standard & Poor's 1500 Paper and Forest Products Index (see
"Performance Shares" on page 11).
CUMULATIVE TOTAL RETURN
Based upon an initial investment of $100 on December 31, 1996
with dividends reinvested
[CHART]
31-Dec-96 31-Dec-97 31-Dec-98 31-Dec-99 31-Dec-00 31-Dec-01
--------- --------- --------- --------- --------- ---------
Rayonier Inc............................ $100 $114 $127 $137 $117 $153
S&P 500(R).............................. $100 $133 $171 $208 $189 $166
S&P 1500 Paper and Forest Products Index $100 $106 $104 $137 $114 $115
Custom Composite Index (13 Stocks)(a)... $100 $108 $109 $152 $121 $126
21
--------
(a) The 13-Stock Custom Composite Index consists of Boise Cascade Corp.,
Buckeye Technologies Inc., Champion International Corp. (through First
Quarter 2000), Georgia-Pacific Corp., Georgia-Pacific Timber Group
(included since its issuance by Georgia-Pacific on December 17, 1997
through its merger with Plum Creek Timber Co., L.P. on October 6, 2001),
International Paper Co., Longview Fibre Co., Mead Corp., Potlatch Corp.,
Plum Creek Timber Co., L.P., Westvaco Corp., Weyerhaeuser Co. and
Willamette Industries Inc.
MISCELLANEOUS
-----------------
Costs of Proxy Solicitation
We will pay the expenses of soliciting proxies for the 2002 Annual Meeting,
including the costs of preparing, printing and mailing this Proxy Statement,
and payments to brokerage firms, banks and others for forwarding solicitation
materials to indirect owners of Common Shares. In addition to use of the mail,
proxies may be solicited personally or by telephone by present and former
officers, directors and other employees of Rayonier without additional
compensation, as well as by employees of Automatic Data Processing, Inc., the
Company's vote tabulator. If utilized, payment to Automatic Data Processing,
Inc. for such services will be based on actual expenses incurred, including
time spent.
Annual Reports
If you were a shareholder of record on March 18, 2002, you should have
received a copy of Rayonier's 2001 Annual Report to Shareholders either with
this Proxy Statement or prior to its receipt. If you have not received the
Annual Report to Shareholders, please write to the Corporate Secretary at the
address below and a copy will be sent to you. In addition, a copy of Rayonier's
annual report on form 10-K (without exhibits) for the fiscal year ended
December 31, 2001 is available to each record and beneficial owner of Common
Shares without charge upon written request to the Corporate Secretary.
Requests for copies of the Annual Report to Shareholders or the Annual
Report on Form 10-K should be sent to: Corporate Secretary, Rayonier, 50 North
Laura Street, 19th Floor, Jacksonville, Florida 32202.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ W. Edwin Frazier III
W. EDWIN FRAZIER, III
Corporate Secretary
Dated: March 28, 2002
22
APPENDIX A
Rayonier Inc.
Charter of the Audit Committee of the Board of Directors
Amended March 15, 2002
I. General
The Audit Committee of the Board of Directors of Rayonier Inc. is
responsible for overseeing and monitoring the financial accounting and
reporting, the system of internal control and the internal and external audit
process of the Company. The Audit Committee operates under a charter of
specific responsibilities and procedures, competency and independence
requirements for its members, and reports on and makes recommendations to the
Board of Directors as to the selection, evaluation and replacement of the
independent external auditors. The Audit Committee has the authority to retain
special legal, accounting or other experts or consultants to advise the
Committee.
II. Membership
The Audit Committee consists of four members who are independent under the
New York Stock Exchange listing requirements. The members of the Committee are
financially literate with at least one member having accounting or financial
management expertise.
III. Responsibilities
The Audit Committee role is one of independent oversight operating under a
set of specific procedures to ensure the integrity of the financial reporting
and system of internal controls. Specific responsibilities include:
1. Establishing an annual calendar of meetings (no less than four a year)
including pre-selecting subjects to be discussed at each meeting;
2. Reviewing the Company's principal policies for accounting, internal
control and financial reporting;
3. Reviewing the independence of the external auditors, evaluating their
performance, ensuring their ultimate accountability to the Committee and
Board of Directors, judging their independence as external auditors, and
recommending to the Board of Directors the engagement or discharge of
the external auditors;
4. Reviewing with both the internal and external auditors the plan, scope,
timing and results of their audit(s);
5. Reviewing the adequacy of the Company's systems for internal accounting
control and for data security, and the external auditors' annual report
on internal control recommendations;
6. Reviewing the annual financial statements (Form 10-K) of the Company,
before they are filed, and reviewing with the independent auditors the
results of their annual audit and the required communications under
Statements of Auditing Standards, including a discussion of events,
transactions, and changes in accounting estimates that may have affected
the quality of the Company's financial reporting;
A-1
7. Discussing the accounting for any transactions in the Company's interim
financial statements of an unusual nature requiring non-routine
judgments, as raised by the independent auditors, that would normally be
included in the external auditors' reports under SAS No. 61;
8. Reviewing reports of the external and internal auditors with management;
9. Reviewing the external auditors' audit fees, and reviewing a report from
the external auditor on non-attest services provided and associated fees
charged and on any relationships with the Company or others that might
affect their independence;
10. Serving as a channel of communications between the senior internal
auditing executive and the Board;
11. Meeting privately at each regular non-telephonic Committee meeting with
both the internal and external auditors, and at least annually with the
Company's Ombudsman;
12. Reviewing the internal audit department's annual audit of expense
reports of the Company's senior officers, fees paid to outside
consultants, including law firms and investment bankers, and potential
or existing conflicts of interest of senior officers and directors;
13. Reviewing reports from management and advising the Board on compliance,
or material noncompliance, with the Company's Code of Conduct and
governmental, tax and other legal compliance programs;
14. Reviewing and recommending to the Board of Directors proposed actions on
environmental compliance and regulatory matters which could have a
significant impact on the business and strategic operating objectives of
the Company and its subsidiaries;
15. Reviewing and considering material claims and litigation, and legal,
regulatory, patent and related government policy matters affecting the
Company and its subsidiaries; and
16. Reviewing this Charter annually to assess its adequacy, and proposing
any necessary amendments to the Board.
IV. Reporting
The Audit Committee will report to the Board on a timely basis with respect
to its activities and will issue an annual report, for inclusion in the
Company's Proxy Statement, outlining its responsibilities, procedures and
compliance with its Charter, including having had independent discussions with
the external auditors and its recommendation to the Board that the annual
financial statements be accepted.
A-2
[RAYONIER LOGO]
VOTE BY INTERNET - www.proxyvote.com
Rayonier Inc. -----------------
50 North Laura Street, Suite 1900 Use the Internet to transmit your voting
Jacksonville, FL 32202 instructions and for electronic delivery
of information up until 11:59 P.M.
Eastern Time the day before the meeting
date. Have your proxy card in hand when
you access this web site. You will be
prompted to enter your 12-digit Control
Number located below to obtain your
records and to create an electronic
voting instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit
your voting instructions up until 11:59
P.M. Eastern Time the day before the
meeting date. Have your proxy card in
hand when you call. You will be
prompted to enter your 12-digit Control
Number located below and then follow the
simple instructions.
VOTE BY MAIL
Mark, sign, and date your proxy card and
return it in the postage-paid envelope we
have provided or return it to Rayonier
Inc., c/o ADP, 51 Mercedes Way, Edgewood,
NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK, AS FOLLOWS: RAYONIER KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
RAYONIER INC.
THE DIRECTORS RECOMMEND A VOTE "FOR" ITEM 1.
Vote On Directors For Withhold For All To withhold authority to vote, mark "For All Except"
All All Except and write the nominee's number on the line below.
1. Election of the nominees listed below
as Class II Directors of Rayonier Inc. [ ] [ ] [ ] ----------------------------------------------------
01) Paul G. Kirk, Jr.
02) Carl S. Sloane
03) Gordon I. Ulmer
The shares represented by this proxy when properly executed
will be voted in the manner directed herein by the undersigned
Shareholder(s). If no direction is made, this proxy will
be voted FOR all three nominees for Director. If any other
matters properly come before the meeting, or if cumulative
voting is required, the persons named in this proxy will
vote in their discretion.
------------------------------------------------------------- ------------------------------------------------------------
Signature (PLEASE SIGN WITHIN BOX) Date Signature (Joint Owners) Date
Rayonier
PROXY/VOTING INSTRUCTION CARD
This proxy is solicited on behalf of the Board of Directors of Rayonier Inc.
for the Annual Meeting on May 16, 2002
By signing this card, I(we) hereby authorize W. LEE NUTTER, JILL WITTER and
W. EDWIN FRAZIER, III, or any of them, each with full power to appoint his or
her substitute, to vote as Proxy for me(us) at the Annual Meeting of
Shareholders of Rayonier to be held at the Omni Jacksonville Hotel, 245 Water
Street, Jacksonville, Florida or Thursday, May 16, 2002 at 4:00 p.m., or at any
adjournment thereof, the number of shares which I(we) would be entitled to vote
if personally present. The proxies shall vote subject to the directions
indicated on the reverse side of this card and proxies are authorized to vote in
their discretion upon such other business as may properly come before the
meeting and any adjournments thereof.
YOU MAY VOTE BY INTERNET OR PHONE BY FOLLOWING THE INSTRUCTIONS ON THE REVERSE
SIDE. IF YOU CHOOSE TO VOTE BY MAIL, PLEASE MARK, SIGN AND DATE THIS PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued, and to be signed and dated, on the reverse side.)