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MERGER WITH POPE RESOURCES | 3 Months Ended
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Mar. 31, 2021
Business Combinations [Abstract] |
MERGER WITH POPE RESOURCES | MERGER WITH POPE RESOURCES On May 8, 2020, Rayonier Inc. and Rayonier, L.P. acquired Pope Resources and became the general partner of Pope Resources. Pope Resources was a master limited partnership that primarily owned and managed timberlands in the U.S. Pacific Northwest. Pope Resources also managed and co-invested in three private equity timber funds and developed and sold real estate properties. For additional information about the merger, see Note 2 - Merger with Pope Resources in the 2020 Form 10-K. The total purchase price was as follows (in millions):
Cash consideration | $247,318 |
Equity consideration | 172,640 |
Redeemable Operating Partnership Unit consideration | 106,752 |
Fair value of Pope Resources units held by us (a) | 11,211 |
Total purchase price | $537,921 |
(a)Based on the closing price of Pope Resources units on the NASDAQ on May 7, 2020. We recognized approximately $2.5 million of merger-related costs that were expensed during first quarter of 2020. See Note 24 — Charges for Integration and Restructuring for descriptions of the components of merger-related costs. The acquisition of Pope Resources has been accounted for as a business combination under ASC 805, Business Combinations, (“ASC 805”). Under ASC 805, assets acquired and liabilities assumed in a business combination must be recorded at their fair value as of the acquisition date. Recorded fair valuation of assets acquired and liabilities assumed related to the acquisition of Pope Resources is preliminary and will be completed as soon as practicable, but no later than one year after the consummation of the transaction. Pursuant to ASC 805, the financial statements will not be retrospectively adjusted for any provisional amount changes that occur in subsequent periods. Rather, we will recognize any provisional amount adjustments during the reporting period in which the adjustments are determined. We will also be required to record, in the same period's financial statements, the effect on earnings of changes in depletion, depreciation, amortization, or other income effects, if any, as a result of any change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. As a result of refinements to the preliminary purchase price allocation, higher and better use timberlands increased by approximately $8.2 million. This includes development properties in the town of Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets. The preliminary estimate of fair value required the use of significant assumptions and estimates. Critical estimates included, but were not limited to, future expected cash flows, including projected revenues and expenses, and the applicable discount rates. These estimates were based on assumptions that we believe to be reasonable; however, actual results may differ from these estimates. The assessment of fair value is preliminary and is based on information that was available to management at the time the consolidated financial statements were prepared. Those estimates and assumptions are subject to change as we obtain additional information related to those estimates during the applicable measurement periods (up to one year from the acquisition date). The most significant open items necessary to complete are related to timberlands, property, plant and equipment, higher and better use timberlands and real estate development investments, long-term debt instruments, environmental liabilities, intangible assets and tax related matters. The preliminary fair value estimates were generally based on significant inputs that are not observable in the market and thus represent Level 3 measurements as defined in ASC 820, Fair Value Measurement, (“ASC 820”) with the exception of certain long-term debt instruments assumed in the merger that can be valued using observable market inputs and are therefore Level 2 measurements. See Note 11 — Fair Value Measurements for further information on the fair value hierarchy. The following summarizes the fair value methodology utilized in our preliminary fair value estimates for significant assets and liabilities: Income Approach — Estimates fair value for an asset based on the present value of cash flow projected to be generated by the asset. Projected cash flows are discounted at rates of return that reflect the relative risk of achieving the cash flows and the time value of money. This approach was primarily used to value acquired timber in both our Pacific Northwest and Timber Funds segment. Cost Approach — Estimates value by determining the current cost of replacing an asset with another of equivalent economic utility. This approach was primarily used for property and equipment. Market Approach — Estimates fair value for an asset based on values of recent comparable transactions. This approach was primarily used to value timberlands, higher and better use timberlands and real estate developments investments, certain land and building assets and long-term debt instruments. The preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed was based on preliminary estimates of fair value as of May 8, 2020, and is as follows (in thousands):
| Core Timberlands |  | Timber Funds |  | Total
Timberland and Real Estate Business |  |  |  |  |
Cash | $7,380 |  |  | $8,870 |  |  | $16,250 |
Accounts receivable | 2,459 |  |  | 1,787 |  |  | 4,246 |
Other current assets | 703 |  |  | 260 |  |  | 963 |
Timber and Timberlands | 507,526 |  |  | 432,500 |  |  | 940,026 |
Higher and Better Use Timberlands and Real Estate Development Investments | 34,748 |  |  | — |  |  | 34,748 |
Property, plant and equipment | 11,616 |  |  | — |  |  | 11,616 |
Other assets | 3,736 |  |  | 269 |  |  | 4,005 |
Total identifiable assets acquired | $568,168 |  |  | $443,686 |  |  | $1,011,854 |
Accounts payable | 274 |  |  | 293 |  |  | 567 |
Current maturities of long-term debt | — |  |  | 25,084 |  |  | 25,084 |
Accrued interest | 244 |  |  | 275 |  |  | 519 |
Other current liabilities | 9,038 |  |  | 2,080 |  |  | 11,118 |
Long-term debt | 53,502 |  |  | 35,759 |  |  | 89,261 |
Long-term environmental liabilities | 10,748 |  |  | — |  |  | 10,748 |
Other non-current liabilities (a) | 2,616 |  |  | — |  |  | 2,616 |
Total liabilities assumed | $76,422 |  |  | $63,491 |  |  | $139,913 |
Net identifiable assets | $491,746 |  |  | $380,195 |  |  | $871,941 |
Less: noncontrolling interests | (3,816) |  |  | (330,204) |  |  | (334,020) |
Total net assets acquired | $487,930 |  |  | $49,991 |  |  | $537,921 |
(a)Other non-current liabilities includes a $2.6 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope Resources’ assets and liabilities. These estimated fair values are preliminary in nature and subject to adjustments, which could be material. We have not identified any material unrecorded pre-merger contingencies where the related asset, liability or impairment is probable and the amount can be reasonably estimated. Our valuations will be finalized when certain information arranged to be obtained has been received and our review of that information has been completed. Prior to the finalization of the purchase price allocation, if information becomes available that would indicate it is probable that such events had occurred and the amounts can be reasonably estimated, such items will be included in the final purchase price allocation. Pursuant to ASC 805, unaudited supplemental pro forma results of operations for the three months ended March 31, 2020, assuming the acquisition had occurred as of January 1, 2020, are presented below (in thousands, except per share and unit amounts):
|  |  |  | Three Months Ended
|  |  |  |  |  |  | March 31, 2020
Sales |  |  |  |  |  |  | $283,500 |
Net income attributable to Rayonier Inc. |  |  |  |  |  |  | $18,398 |
Basic earnings per share attributable to Rayonier Inc. |  |  |  |  |  |  | $0.13 |
Diluted earnings per share attributable to Rayonier Inc. |  |  |  |  |  |  | $0.13 |
Net income attributable to Rayonier, L.P. |  |  |  |  |  |  | $18,998 |
Basic earnings per unit attributable to Rayonier, L.P. |  |  |  |  |  |  | $0.13 |
Diluted earnings per unit attributable to Rayonier, L.P. |  |  |  |  |  |  | $0.13 |
The unaudited pro forma results include certain pro forma adjustments to net earnings that were directly attributable to the acquisition, assuming the acquisition had occurred on January 1, 2020, including the following: •additional depletion expense that would have been recognized relating to the basis increase in the acquired Timber and Timberlands; •adjustment to interest expense to reflect the removal of Pope Resources debt and the additional borrowings we incurred in conjunction with the acquisition; and •a reduction in expenses for the three months ended March 31, 2020 of $7.7 million for acquisition-related transaction costs. Pro forma data may not be indicative of the results that would have been obtained had these events occurred at the beginning of the periods presented, nor is it intended to be a projection of future results.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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