RAYONIER INC 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”) When we refer to “Rayonier” or “the Company” we mean Rayonier Inc. and its consolidated subsidiaries. References to the “Operating Partnership” mean Rayonier, L.P. and its consolidated subsidiaries. References to “we,” “us,” or “our,” mean collectively Rayonier Inc., the Operating Partnership and entities/subsidiaries owned or controlled by Rayonier Inc. and/or the Operating Partnership. References herein to “Notes to Financial Statements” refer to the Notes to Consolidated Financial Statements of Rayonier Inc. and Rayonier, L.P. included in Item 1 of this report. This MD&A is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors which may affect future results. Our MD&A should be read in conjunction with our Consolidated Financial Statements included in Item 1 of this report, our Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”) and information contained in our subsequent reports filed with the Securities and Exchange Commission (the “SEC”). FORWARD-LOOKING STATEMENTS Certain statements in this document regarding anticipated financial outcomes, including our earnings guidance, if any, business and market conditions, outlook, expected dividend rate, our business strategies, including the potential effects of the ongoing global novel coronavirus (“COVID-19”) pandemic, the recent acquisition of Pope Resources, expected harvest schedules, timberland acquisitions and dispositions, the anticipated benefits of our business strategies, and other similar statements relating to our 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 our 2020 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 our 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 we undertake no duty to update our forward-looking statements except as required by law. You are advised, however, to review any subsequent disclosures we make on related subjects in subsequent reports filed with the SEC. NON-GAAP MEASURES To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we use certain non-GAAP measures, including “Cash Available for Distribution,” and “Adjusted EBITDA,” which are defined and further explained in Performance and Liquidity Indicators below. Reconciliation of such measures to the nearest GAAP measures can also be found in Performance and Liquidity Indicators below. Our 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. 54 Table of Contents OUR COMPANY We are a leading timberland real estate investment trust (“REIT”) with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. We invest in timberlands and actively manage them to provide current income and attractive long-term returns to our shareholders. We conduct our business through an umbrella partnership real estate investment trust (“UPREIT”) structure in which our assets are owned by our Operating Partnership and its subsidiaries. Rayonier manages the Operating Partnership as its sole general partner. Our revenues, operating income and cash flows are primarily derived from the following core business segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber, Timber Funds, Real Estate, and Trading. As of September 30, 2021, we owned or leased under long-term agreem ents approximat ely 2.6 million acres of timberlands located in the U.S. South (1.74 million acres), U.S. Pacific Northwest (490,000 acres) and New Zealand (418,000 gross acres or 297,000 net plantable acres). We also act as the managing member in a private equity timber fund business with one fund comprising approximately 18,000 acres. On a “look-through basis,” our ownership in the timber fund business equates to approximately 4,000 acres. Following the end of the third quarter, we completed the liquidation of Fund II assets through two additional timberland dispositions. See Note 1 - Basis of Presentation for additional information on the subsequent events. SEGMENT INFORMATION The Southern Timber, Pacific Northwest Timber, New Zealand Timber, and Timber Funds segments include all activities related to the harvesting of timber and other non-timber income activities, such as the licensing of properties for hunting, the leasing of properties for mineral extraction and cell towers, and carbon credit sales. Our New Zealand operations are conducted by Matariki Forestry Group, a joint venture (the “New Zealand subsidiary”), in which we maintain a 77% ownership interest. The Timber Funds segment operations are managed by ORM LLC, a subsidiary acquired in the merger with Pope Resources. On July 21, 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds. As of September 30, 2021, we own approximately 20% of Fund II, but had commenced a process to liquidate Fund II assets. When referring to our proportionate ownership share of the Timber Funds segment, we will refer to the sums as “look-through” totals. See Note 6 - Noncontrolling Interests for additional information regarding our noncontrolling interests in the New Zealand Timber and Timber Funds segments. The Real Estate segment includes all U.S. and New Zealand land or leasehold sales disaggregated into six sales categories: Improved Development, Unimproved Development, Rural, Timberland & Non-Strategic, Conservation Easement and Large Dispositions. It also includes residential and commercial lease activity, primarily in the town of Port Gamble, Washington. The Trading segment primarily reflects log trading activities in New Zealand and Australia conducted by our New Zealand subsidiary. Our Trading segment activities include an export services joint venture with a third-party forest manager in which Matariki Forests Trading Ltd maintains a 50% ownership interest. The 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. ENVIRONMENTAL MATTERS For a full description of our environmental matters, see Item 1 - “Business” in our Annual Report on Form 10-K for the year ended December 31, 2020 and our sustainability report located at our Responsible Stewardship webpage. 55 Table of Contents 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 and Timber Funds segments rely primarily on domestic customers but also export a significant volume of timber, particularly to China. The Southern Timber, Pacific Northwest Timber and Timber Funds 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. As the current COVID-19 pandemic continues to evolve, the expected duration and the extent of economic disruption it may ultimately cause remain uncertain. Local, state and national governments continue to evaluate policies and restrictions in order to mitigate the spread of COVID-19. Government-mandated shutdowns or shelter-in-place orders in markets in which we operate could negatively impact our results. Further, prolonged periods of lower overall business activity as a result of COVID-19 could cause significant damage to the underlying economy, which would likely impact U.S. timber markets. We are also subject to the risk of price fluctuations in certain of our cost components, primarily logging and transportation (cut and haul), ocean freight and demurrage costs. Other major components of our cost of sales are the cost basis of timber sold (depletion) and the cost basis of real estate sold. Depletion includes the amortization of capitalized site preparation, planting and fertilization, real estate taxes, timberland lease payments and certain payroll costs. The cost basis of real estate sold includes the cost basis in land and costs directly associated with the development and construction of identified real estate projects, such as infrastructure, roadways, utilities, amenities and/or other improvements. Other costs include amortization of capitalized costs related to road and bridge construction and software, depreciation of fixed assets and equipment, road maintenance, severance and excise taxes, fire prevention and real estate commissions and closing costs. For additional information on market conditions impacting our business, see Results of Operations . CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates. For a full description of our critical accounting policies, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2020 Form 10-K. 56 DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD See Item 1 — Business — Discussion of Timber Inventory and Sustainable Yield in our 2020 Form 10-K. OUR TIMBERLANDS Our timber operations are comprised of our core timberland holdings, which are disaggregated into three geographically distinct reporting segments: Southern Timber, Pacific Northwest Timber and New Zealand Timber in addition to our timber fund holdings, which represents our ownership in Timber Fund II. The following tables provide a breakdown of our timberland holdings as of September 30, 2021 and December 31, 2020: Core Timberland Holdings (acres in 000s) As of September 30, 2021 As of December 31, 2020 Owned Leased Total Owned Leased Total Southern Alabama 223 14 237 223 14 237 Arkansas — 6 6 — 6 6 Florida 349 56 405 327 61 388 Georgia 603 64 667 602 71 673 Louisiana 140 — 140 140 — 140 Oklahoma 92 — 92 92 — 92 South Carolina 16 — 16 16 — 16 Texas 176 — 176 181 — 181 1,599 140 1,739 1,581 152 1,733 Pacific Northwest Oregon 61 — 61 61 — 61 Washington 425 4 429 442 4 446 486 4 490 503 4 507 New Zealand (a) 187 231 418 185 232 417 Total 2,272 375 2,647 2,269 388 2,657 (a) Represents legal acres owned and leased by the New Zealand subsidiary, in which we own a 77% interest. As of September 30, 2021, legal acres in New Zealand consisted of 297,000 plantable acres and 121,000 non-productive acres. Timber Fund Holdings (a) (acres in 000s) As of September 30, 2021 As of December 31, 2020 Total Look-through Total Look-through Timber Funds Oregon (b) 18 4 51 7 Washington — — 71 9 California — — 19 1 Total 18 4 141 17 (a) On July 21, 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds, for an aggregate purchase price of $35.9 million, and on September 30, 2021, we sold approximately 13,000 acres of Fund II timberland assets in Washington for an aggregate purchase price of $87.1 million. See Note 1 - Basis of Presentation and Note 6 - Noncontrolling Interests for additional information. (b) On October 5, 2021, we sold approximately 5,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of approximately $37.2 million. On November 1, 2021, we sold the remaining 13,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of $32.5 million. This transaction completes the liquidation of Fund II assets, with capital expected to be distributed to investors in the fourth quarter. See Note 1 - Basis of Presentation for additional information on these subsequent events. 57 Total Timberland under Management (acres in 000s) As of September 30, 2021 As of December 31, 2020 Total Total Southern 1,739 1,733 Pacific Northwest 490 507 New Zealand 418 417 Timber Funds (a)(b) 18 141 Total 2,665 2,798 (a) On July 21, 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds, for an aggregate purchase price of $35.9 million, and on September 30, 2021, we sold approximately 13,000 acres of Fund II timberland assets in Washington for an aggregate purchase price of $87.1 million. See Note 1 - Basis of Presentation and Note 6 - Noncontrolling Interests for additional information. (b) On October 5, 2021, we sold approximately 5,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of approximately $37.2 million. On November 1, 2021, we sold the remaining 13,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of $32.5 million. This transaction completes the liquidation of Fund II assets, with capital expected to be distributed to investors in the fourth quarter. See Note 1 - Basis of Presentation for additional information on these subsequent events. The following tables detail activity for owned and leased acres in our core timberland holdings by state from December 31, 2020 to September 30, 2021: (acres in 000s) Acres Owned December 31, 2020 Acquisitions Sales Other September 30, 2021 Southern Alabama 223 — — — 223 Florida 327 23 (1) — 349 Georgia 602 9 (8) — 603 Louisiana 140 — — — 140 Oklahoma 92 — — — 92 South Carolina 16 — — — 16 Texas 181 — (5) — 176 1,581 32 (14) — 1,599 Pacific Northwest Oregon 61 — — — 61 Washington 442 — (17) — 425 503 — (17) — 486 New Zealand (a) 185 2 — — 187 Total 2,269 34 (31) — 2,272 (a) Represents legal acres owned by the New Zealand subsidiary, in which we have a 77% interest. 58 (acres in 000s) Acres Leased December 31, 2020 New Leases Sold/Expired Leases (a) Other (b) September 30, 2021 Southern Alabama 14 — — — 14 Arkansas 6 — — — 6 Florida 61 — (3) (2) 56 Georgia 71 — (1) (6) 64 152 — (4) (8) 140 Pacific Northwest Washington (c) 4 — — — 4 New Zealand (d) 232 — (1) — 231 Total 388 — (5) (8) 375 (a) Includes acres previously under lease that have been harvested and activity for the relinquishment of leased acres. (b) Includes acres previously under lease that we have acquired as fee ownership. (c) Primarily timber reservations acquired in the merger with Pope Resources. (d) Represents legal acres leased by the New Zealand subsidiary, in which we have a 77% interest. 59 The following table details activity in our timber fund holdings by state from December 31, 2020 to September 30, 2021: (acres in 000s) Acres Owned December 31, 2020 Acquisitions Sales Other September 30, 2021 Fund II (a)(b) Oregon 18 — — — 18 Washington 13 — (13) — — Total Fund II 31 — (13) — 18 Look-through share of Fund II 6 — (2) — 4 Fund III (a) Oregon 13 — (13) — — Washington 25 — (25) — — California 19 — (19) — — Total Fund III 57 — (57) — — Look-through share of Fund III 3 — (3) — — Fund IV (a) Oregon 20 — (20) — — Washington 33 — (33) — — Total Fund IV 53 — (53) — — Look-through share of Fund IV 8 — (8) — — Total Timber Funds 141 — (123) — 18 Look-through share of Funds 17 — (13) — 4 (a) On July 21, 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds, for an aggregate purchase price of $35.9 million, and on September 30, 2021, we sold approximately 13,000 acres of Fund II timberland assets in Washington for an aggregate purchase price of $87.1 million. See Note 1 - Basis of Presentation and Note 6 - Noncontrolling Interests for additional information. (b) On October 5, 2021, we sold approximately 5,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of approximately $37.2 million. On November 1, 2021, we sold the remaining 13,000 acres of Fund II timberland assets in Oregon for an aggregate purchase price of $32.5 million. This transaction completes the liquidation Fund II assets, with capital expected to be distributed to investors in the fourth quarter. See Note 1 - Basis of Presentation for additional information on these subsequent events. 60 RESULTS OF OPERATIONS CONSOLIDATED RESULTS The following table provides key financial information by segment and on a consolidated basis: Three Months Ended September 30, Nine Months Ended September 30, Financial Information (in millions) 2021 2020 2021 2020 Sales Southern Timber $44.8 $47.7 $145.8 $147.4 Pacific Northwest Timber 31.5 28.9 108.4 86.1 New Zealand Timber 75.6 62.8 213.7 142.1 Timber Funds (a) 94.5 9.9 128.1 17.4 Real Estate Improved Development 27.8 1.3 47.4 7.8 Unimproved Development 37.5 — 37.5 8.4 Rural 6.9 23.2 37.0 52.9 Timberland & Non-Strategic — — — 9.6 Conservation Easement — 3.1 3.9 3.1 Deferred Revenue/Other (b) 1.1 1.1 (3.4) (0.5) Large Dispositions 20.0 — 56.0 116.0 Total Real Estate 93.4 28.8 178.4 197.4 Trading 25.6 22.2 76.8 65.5 Intersegment Eliminations (0.7) (1.4) (3.6) (2.3) Total Sales $364.7 $198.9 $847.6 $653.6 Operating Income (Loss) Southern Timber $12.8 $5.1 $47.1 $31.4 Pacific Northwest Timber 2.1 (1.8) 5.3 (9.5) New Zealand Timber 13.3 10.7 48.0 21.1 Timber Funds (a) 41.3 (12.4) 44.8 (14.3) Real Estate (b)(c) 60.6 9.5 112.8 61.1 Trading — (0.6) 0.6 (0.5) Corporate and Other (6.7) (8.7) (22.3) (37.3) Operating Income 123.3 1.8 236.2 52.0 Interest expense, interest income and other (10.0) (10.6) (34.1) (27.2) Income tax expense (2.8) (0.7) (13.1) (7.4) Net Income (Loss) 110.5 (9.5) 189.0 17.4 Less: Net (income) loss attributable to noncontrolling interests in consolidated affiliates (d) (32.5) 8.7 (40.8) 9.6 Net Income (Loss) Attributable to Rayonier, L.P. $78.0 ($0.8) $148.2 $27.0 Less: Net income attributable to noncontrolling interests in the Operating Partnership (2.2) — (4.3) (0.2) Net Income (Loss) Attributable to Rayonier Inc. $75.8 ($0.8) $143.9 $26.8 Adjusted EBITDA (e) Southern Timber $24.4 $26.1 $86.6 $85.8 Pacific Northwest Timber 12.5 9.1 44.1 22.8 New Zealand Timber 19.9 18.1 68.7 38.2 Timber Funds 0.5 0.2 2.8 0.8 Real Estate 63.8 22.2 97.9 65.7 Trading — (0.6) 0.6 (0.5) Corporate and Other (6.4) (7.9) (21.4) (19.9) Total Adjusted EBITDA $114.6 $67.2 $279.4 $192.9 (a) The three and nine months ended September 30, 2021 includes sales and operating income of $87.1 million and $36.0 million, respectively, from Fund II Timberland Dispositions. (b) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. (c) The three and nine months ended September 30, 2021 includes $14.5 million and $44.8 million, respectively, from Large Dispositions. The nine months ended September 30, 2020 includes $28.7 million from a Large Disposition. (d) The three and nine months ended September 30, 2021 includes a $28.8 million gain from Fund II Timberland Dispositions. (e) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 61 Three Months Ended September 30, Nine Months Ended September 30, Southern Timber Overview 2021 2020 2021 2020 Sales Volume (in thousands of tons) Pine Pulpwood 793 881 2,524 3,017 Pine Sawtimber 378 551 1,532 1,728 Total Pine Volume 1,171 1,432 4,056 4,746 Hardwood 14 51 109 116 Total Volume 1,185 1,483 4,165 4,862 Percentage Delivered Sales 47 % 46 % 40 % 39 % Percentage Stumpage Sales 53 % 54 % 60 % 61 % Net Stumpage Pricing (dollars per ton) Pine Pulpwood $19.14 $15.50 $18.25 $15.86 Pine Sawtimber 28.06 25.02 27.62 25.79 Weighted Average Pine $22.02 $19.16 $21.79 $19.48 Hardwood 10.94 11.03 14.64 11.40 Weighted Average Total $21.88 $18.88 $21.60 $19.28 Summary Financial Data (in millions of dollars) Timber Sales $39.3 $42.2 $127.2 $131.2 Less: Cut, Haul & Freight (13.4) (14.2) (37.2) (37.5) Net Stumpage Sales $25.9 $28.0 $90.0 $93.7 Non-Timber Sales 5.5 5.5 18.6 16.2 Total Sales $44.8 $47.7 $145.8 $147.4 Operating Income $12.8 $5.1 $47.1 $31.4 (+) Timber write-offs resulting from casualty events (a) — 6.0 — 6.0 (+) Depreciation, depletion and amortization 11.6 15.0 39.5 48.4 Adjusted EBITDA (b) $24.4 $26.1 $86.6 $85.8 Other Data Period-End Acres (in thousands) 1,739 1,749 1,739 1,749 (a) Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events that cannot be salvaged. (b) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 62 Three Months Ended September 30, Nine Months Ended September 30, Pacific Northwest Timber Overview 2021 2020 2021 2020 Sales Volume (in thousands of tons) Pulpwood 66 62 216 231 Sawtimber 279 284 1,066 976 Total Volume 346 346 1,282 1,207 Sales Volume (converted to MBF) Pulpwood 6,281 5,912 20,409 21,853 Sawtimber 37,239 38,892 138,155 129,144 Total Volume 43,520 44,804 158,564 150,997 Percentage Delivered Sales 89 % 95 % 86 % 89 % Percentage Sawtimber Sales 81 % 82 % 83 % 81 % Delivered Log Pricing (in dollars per ton) Pulpwood $31.34 $32.12 $29.86 $36.01 Sawtimber 107.56 93.34 97.79 81.01 Weighted Average Log Price $92.67 $82.44 $86.08 $72.06 Summary Financial Data (in millions of dollars) Timber Sales $30.2 $27.5 $104.3 $83.5 Less: Cut and Haul (12.0) (12.4) (42.4) (41.0) Net Stumpage Sales $18.3 $15.1 $61.9 $42.5 Non-Timber Sales 1.3 1.4 4.0 2.6 Total Sales $31.5 $28.9 $108.4 $86.1 Operating Income (Loss) $2.1 ($1.8) $5.3 ($9.5) (+) Depreciation, depletion and amortization 10.5 10.9 38.8 32.2 Adjusted EBITDA (a) $12.5 $9.1 $44.1 $22.8 Other Data Period-End Acres (in thousands) 490 507 490 507 Sawtimber (in dollars per MBF) $803 $677 $758 $621 Estimated Percentage of Export Volume 20 % 9 % 16 % 10 % (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 63 Three Months Ended September 30, Nine Months Ended September 30, New Zealand Timber Overview 2021 2020 2021 2020 Sales Volume (in thousands of tons) Domestic Pulpwood (Delivered) 114 136 324 343 Domestic Sawtimber (Delivered) 185 220 517 497 Export Pulpwood (Delivered) 43 38 146 82 Export Sawtimber (Delivered) 326 381 973 863 Total Volume 668 776 1,960 1,786 Delivered Log Pricing (in dollars per ton) Domestic Pulpwood $43.35 $34.71 $42.29 $33.65 Domestic Sawtimber 85.00 70.24 83.79 69.30 Export Sawtimber 149.68 94.42 140.89 95.86 Weighted Average Log Price $112.65 $76.50 $108.63 $75.99 Summary Financial Data (in millions of dollars) Timber Sales $75.3 $59.3 $212.9 $135.7 Less: Cut and Haul (23.3) (23.8) (69.3) (54.6) Less: Port and Freight Costs (26.6) (13.3) (61.7) (29.8) Net Stumpage Sales $25.4 $22.2 $81.8 $51.3 Non-Timber Sales / Carbon Credits 0.2 3.5 0.8 6.4 Total Sales $75.6 $62.8 $213.7 $142.1 Operating Income $13.3 $10.7 $48.0 $21.1 (+) Depreciation, depletion and amortization 6.6 7.3 20.8 17.1 Adjusted EBITDA (a) $19.9 $18.1 $68.7 $38.2 Other Data New Zealand Dollar to U.S. Dollar Exchange Rate (b) 0.7017 0.6614 0.7125 0.6459 Net Plantable Period-End Acres (in thousands) 297 296 297 296 Export Sawtimber (in dollars per JAS m 3 ) $174.03 $109.78 $163.81 $111.46 Domestic Sawtimber (in $NZD per tonne) $133.26 $116.83 $129.35 $118.02 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . (b) Represents the period-average rate. 64 Three Months Ended September 30, Nine Months Ended September 30, Real Estate Overview 2021 2020 2021 2020 Sales (in millions of dollars) Improved Development $27.8 $1.3 $47.4 $7.8 Unimproved Development 37.5 — 37.5 8.4 Rural 6.9 23.2 37.0 52.9 Timberland & Non-Strategic — — — 9.6 Conservation Easement — 3.1 3.9 3.1 Deferred Revenue/Other (a) 1.1 1.1 (3.4) (0.5) Large Dispositions (b) 20.0 — 56.0 116.0 Total Sales $93.4 $28.8 $178.4 $197.4 Acres Sold Improved Development 479.0 4.1 768.8 126.1 Unimproved Development 359 — 359 570 Rural 3,260 10,482 13,379 18,816 Timberland & Non-Strategic 34 75 34 11,983 Large Dispositions (b) 8,088 — 16,622 66,946 Total Acres Sold 12,219 10,562 31,162 98,441 Gross Price per Acre (dollars per acre) Improved Development $57,988 $329,412 $61,608 $61,626 Unimproved Development 104,579 — 104,579 14,780 Rural 2,128 2,218 2,765 2,810 Timberland & Non-Strategic 1,297 553 1,297 805 Large Dispositions (b) 2,479 — 3,372 1,733 Weighted Average (Total) (c) $17,490 $2,332 $8,384 $2,499 Weighted Average (Adjusted) (d) $12,179 $2,206 $5,413 $2,262 Sales (Excluding Large Dispositions) $73.4 $28.8 $122.4 $81.4 Operating Income $60.6 $9.5 $112.8 $61.1 (+) Depreciation, depletion and amortization 1.8 5.5 7.1 12.6 (+) Non-cash cost of land and improved development 15.8 7.3 22.8 20.7 (–) Large Dispositions (b) (14.5) — (44.8) (28.7) Adjusted EBITDA (e) $63.8 $22.2 $97.9 $65.7 (a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. (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. As of September 30, 2021, we have completed two dispositions of approximately 17,000 acres in total. In June 2021, we completed a disposition of approximately 9,000 acres in Washington for a sales price and gain of approximately $36.0 million and $30.3 million, respectively. In July 2021, we completed a second disposition of approximately 8,000 acres in Washington, for a sales price and gain of $20.0 million and $14.5 million, respectively. In March 2020, we completed a disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximate ly $116.0 million and $28.7 million, respectively. (c) Excludes Large Dispositions. (d) Excludes Improved Development and Large Dispositions. (e) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 65 Three Months Ended September 30, Nine Months Ended September 30, Timber Funds Overview 2021 2020 2021 2020 Sales Volume (in thousands of tons) Pulpwood 4 9 27 19 Sawtimber 57 101 354 181 Total Volume 61 110 380 200 Summary Financial Data (in millions of dollars) Timber Sales $6.8 $8.6 $37.2 $15.3 Less: Cut and Haul (3.0) (3.4) (15.9) (6.4) Net Stumpage Sales $3.9 $5.2 $21.3 $8.9 Fund II Timberland Dispositions (a) 87.1 — 87.1 — Non-Timber Sales — — 0.5 — Timberland Management Fees 0.5 1.3 3.3 2.2 Total Sales $94.5 $9.9 $128.1 $17.4 Operating Income (Loss) $41.3 ($12.4) $44.8 ($14.3) Operating (income) loss attributable to NCI in Timber Funds (30.5) 10.3 (33.3) 12.3 (-) Gain on investment in Timber Funds (b) (3.7) — (3.7) — (-) Fund II Timberland Dispositions (a) (7.2) — (7.2) — (+) Timber write-offs resulting from casualty events attributable to Rayonier (c) — 1.8 — 1.8 (+) Depreciation, depletion and amortization (“Look-through”) 0.7 0.5 2.2 1.0 Adjusted EBITDA (d) $0.5 $0.2 $2.8 $0.8 Other Data Period-End Acres (in thousands) 18 141 18 141 “Look-through” Period-End Acres (in thousands) 4 17 4 17 (a) Fund II Timberland Dispositions represents the disposition of Timber Fund II timberland assets, which we manage and own a co-investment stake in. Proceeds from Fund II Timberland Dispositions will ultimately be distributed to owners of ORM Timber Fund II and not reinvested. (b) Gain on investment in Timber Funds represents the gain recognized on the sale of rights to manage two timber funds (Funds III and IV) previously managed by our Olympic Resource Management (ORM) subsidiary, as well as our co-investment stake in both funds. (c) Timber write-offs resulting from casualty events includes the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events that cannot be salvaged. (d) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 66 Three Months Ended September 30, Nine Months Ended September 30, Trading Overview 2021 2020 2021 2020 Sales Volume (in thousands of tons) U.S. South 1 — 1 — U.S. Pacific Northwest — 1 — 1 NZ Trading - Domestic 10 6 38 21 NZ Trading - Export 166 245 522 704 Total Volume 177 252 561 726 Summary Financial Data (in millions of dollars) Trading Sales $25.1 $22.1 $75.5 $65.0 Non-Timber Sales 0.4 0.1 1.3 0.5 Total Sales $25.6 $22.2 $76.8 $65.5 Operating Income (Loss) — ($0.6) $0.6 ($0.5) Adjusted EBITDA (a) — ($0.6) $0.6 ($0.5) (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 67 Three Months Ended September 30, Nine Months Ended September 30, Capital Expenditures By Segment (in millions of dollars) 2021 2020 2021 2020 Timber Capital Expenditures Southern Timber Reforestation, silviculture and other capital expenditures $3.6 $3.7 $11.1 $13.4 Property taxes 1.7 1.7 5.0 5.1 Lease payments 0.1 0.2 1.1 1.5 Allocated overhead 1.0 1.0 3.2 3.3 Subtotal Southern Timber $6.5 $6.6 $20.4 $23.3 Pacific Northwest Timber Reforestation, silviculture and other capital expenditures 2.0 1.1 6.4 4.3 Property taxes 0.3 0.2 0.8 0.6 Allocated overhead 1.1 1.1 3.5 3.0 Subtotal Pacific Northwest Timber $3.4 $2.5 $10.7 $7.9 New Zealand Timber Reforestation, silviculture and other capital expenditures 2.9 3.2 7.9 6.7 Property taxes 0.2 0.2 0.6 0.5 Lease payments 1.2 1.0 2.3 2.2 Allocated overhead 0.8 0.7 2.2 2.0 Subtotal New Zealand Timber $5.0 $5.1 $13.1 $11.4 Total Timber Segments Capital Expenditures $14.9 $14.2 $44.2 $42.6 Timber Funds (“Look-through”) (a) 0.1 0.1 0.4 0.2 Real Estate — — 0.1 0.2 Total Capital Expenditures $15.0 $14.3 $44.7 $43.1 Timberland Acquisitions Southern Timber — — $41.0 $24.2 Pacific Northwest Timber — — — — New Zealand Timber — 0.1 10.9 0.1 Timberland Acquisitions — $0.1 $51.9 $24.4 Real Estate Development Investments (b) $2.9 $1.9 $9.2 $5.4 (a) The three and nine months ended September 30, 2021 exclude $0.3 million and $2.8 million, respectively, of capital expenditures attributable to noncontrolling interests in Timber Funds, and the three and nine months ended September 30, 2020 exclude $0.9 million and $1.6 million, respectively, of capital expenditures attributable to noncontrolling interests in Timber Funds. (b) Represents investments in master infrastructure or entitlements in our real estate development projects. Real Estate Development Investments are amortized as the underlying properties are sold and included in Non-Cash Cost of Land and Improved Development. 68 The following tables summarize sales, operating income (loss) and Adjusted EBITDA variances for September 30, 2021 versus September 30, 2020 (millions of dollars): Sales Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Intersegment Eliminations Total Three Months Ended September 30, 2020 $47.7 $28.9 $62.8 $9.9 $28.8 $22.2 ($1.4) $198.9 Volume (5.6) — (8.4) (0.1) (14.5) (6.6) — (35.2) Price 3.6 3.2 6.7 0.1 59.7 9.6 — 82.9 Non-timber sales 0.1 (0.1) (3.4) — — 0.3 — (3.1) Foreign exchange (a) — — 1.4 — — — — 1.4 Other (1.0) (b) (0.5) (b) 16.5 (c) 84.6 (d) 19.4 (e) 0.1 0.7 (f) 119.8 Three Months Ended September 30, 2021 $44.8 $31.5 $75.6 $94.5 $93.4 $25.6 ($0.7) $364.7 (a) Net of currency hedging impact. (b) Includes variance due to stumpage versus delivered sales. (c) Includes variance due to domestic versus export sales. (d) Timber Funds includes an increase in sales attributable to noncontrolling interest of $67.7 million, $17.5 million of Fund II Timberland Dispositions attributable to Rayonier, lower sales related to timberland investment management fees paid to us by the timber funds, and a variance due to stumpage versus delivered sales. (e) Includes $20.0 million of sales from a Large Disposition in the three months ended September 30, 2021 in addition to marketing fees related to Improved Development sales and r esidential and commercial lease revenue, partially offset by lower Conservation Easement sales and deferred revenue adjustments. (f) Includes a $0.8 million decrease in Intersegment eliminations related to timberland management fees paid to us by the timber funds and reported as sales within the Timber Funds segment. Sales Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Intersegment Eliminations Total Nine Months Ended September 30, 2020 $147.4 $86.1 $142.1 $17.4 $197.4 $65.5 ($2.3) $653.6 Volume (13.4) 2.6 13.7 1.3 (41.2) (14.7) — (51.7) Price 9.6 16.8 27.8 0.6 81.7 25.2 — 161.7 Non-timber sales 2.4 1.4 (6.3) — — 0.8 — (1.7) Foreign exchange (a) — — 5.4 — — — — 5.4 Other (0.2) (b) 1.5 (b) 31.0 (c) 108.8 (d) (59.5) (e) — (1.3) (f) 80.3 Nine Months Ended September 30, 2021 $145.8 $108.4 $213.7 $128.1 $178.4 $76.8 ($3.6) $847.6 (a) Net of currency hedging impact. (b) Includes variance due to stumpage versus delivered sales. (c) Includes variance due to domestic versus export sales. (d) Timber Funds includes an increase in sales attributable to noncontrolling interests of $88.6 million, $17.5 million related to disposition of Timber Fund II, sales related to timberland investment management fees paid to us by the timber funds, and a variance due to stumpage versus delivered sales. (e) Includes $116.0 million of sales from a Large Disposition in the nine months ended September 30, 2020, as well as Conservation Easement sales, r esidential and commercial lease revenue, marketing fees related to Improved Development sales and deferred revenue adjustments, partially offset by $56.0 million of sales from Large Dispositions in the nine months ended September 30, 2021. (f) Includes a $1.1 million increase in Intersegment eliminations related to timberland management fees paid to us by the timber funds and reported as sales within the Timber Funds segment. 69 Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total Three Months Ended September 30, 2020 $5.1 ($1.8) $10.7 ($12.4) $9.5 ($0.6) ($8.7) $1.8 Volume (2.6) — (1.9) — (8.8) — — (13.3) Price 3.6 3.2 6.7 0.1 59.7 — — 73.3 Cost 0.3 0.5 (0.3) 1.1 (1.1) 0.6 1.5 2.6 Non-timber income — (0.2) (3.3) — — — — (3.5) Foreign exchange (a) — — 1.2 — — — — 1.2 Depreciation, depletion & amortization 0.4 0.4 0.2 (0.3) 0.4 — 0.1 1.2 Non-cash cost of land and improved development — — — — (14.0) — — (14.0) Other (b) 6.0 — — 52.8 14.9 — 0.4 74.1 Three Months Ended September 30, 2021 $12.8 $2.1 $13.3 $41.3 $60.6 — ($6.7) $123.3 (a) Net of currency hedging impact. (b) Southern Timber includes $6.0 million in timber write-offs resulting from casualty events in the three months ended September 30, 2020. Timber Funds includes an increase in operating income attributable to noncontrolling interests of $40.8 million, $7.2 million related to the disposition of Timber Fund II, $3.7 million related to the gain on investment in Timber Funds, $1.8 million of timber write-offs from casualty events attributable to Rayonier in the prior year quarter and timberland investment management fees paid to us by the timber fund. Real Estate includes $14.5 million of operating income from Large Dispositions in addition to residential and commercial lease income, revenue true-ups, marketing fees related to Improved Development sales, and deferred revenue adjustments. Corporate and Other includes $0.4 million in costs related to the merger with Pope Resources in the three months ended September 30, 2020. Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total Nine Months Ended September 30, 2020 $31.4 ($9.5) $21.1 ($14.3) $61.1 ($0.5) ($37.3) $52.0 Volume (6.4) 0.2 3.1 (0.1) (24.5) — — (27.7) Price 9.6 16.8 27.8 0.6 81.7 — — 136.5 Cost 1.9 1.0 (0.8) (0.9) (6.7) 1.4 (1.5) (5.6) Non-timber income 2.6 1.4 (6.1) — — (0.3) — (2.4) Foreign exchange (a) — — 3.1 — — — — 3.1 Depreciation, depletion & amortization 2.0 (4.6) (0.2) — (1.1) — 0.1 (3.8) Non-cash cost of land and improved development — — — — (14.2) — — (14.2) Other (b) 6.0 — — 59.5 16.5 — 16.4 98.3 Nine Months Ended September 30, 2021 $47.1 $5.3 $48.0 $44.8 $112.8 $0.6 ($22.3) $236.2 (a) Net of currency hedging impact. (b) Southern Timber includes $6.0 million in timber write-offs resulting from casualty events in the nine months ended September 30, 2020. Timber Funds includes an increase in operating income attributable to noncontrolling interests of $45.6 million, $7.2 million related to the disposition of Timber Fund II, $3.7 million related to the gain on investment in Timber Funds, $1.8 million of timber write-offs from casualty events attributable to Rayonier in the prior year period, and timberland investment management fees paid to us by the timber fund. Real Estate includes $44.8 million of operating income from Large Dispositions in the nine months ended September 30, 2021 in addition to Conservation Easement sales, residential and commercial lease income, marketing fees related to Improved Development sales and equity income from joint venture entities, partially offset by $28.7 million of operating income from a Large Disposition in the nine months ended September 30, 2020 and deferred revenue adjustments. Corporate and Other includes $16.4 million in costs related to the merger with Pope Resources in the nine months ended September 30, 2020. 70 Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total Three Months Ended September 30, 2020 $26.1 $9.1 $18.1 $0.2 $22.2 ($0.6) ($7.9) $67.2 Volume (5.6) (0.1) (2.9) (0.1) (14.5) — — (23.2) Price 3.6 3.2 6.7 0.1 59.7 — — 73.3 Cost 0.3 0.5 (0.3) 1.1 (1.1) 0.6 1.5 2.6 Non-timber income — (0.2) (3.3) — — — — (3.5) Foreign exchange (b) — — 1.6 — — — — 1.6 Other (c) — — — (0.8) (2.5) — — (3.4) Three Months Ended September 30, 2021 $24.4 $12.5 $19.9 $0.5 $63.8 — ($6.4) $114.6 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators below. (b) Net of currency hedging impact. (c) Timber Funds includes timberland investment management fees paid to us by the timber fund. Real Estate includes deferred revenue adjustments and marketing fees related to Improved Development sales, as well as residential and commercial lease revenue. Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total Nine Months Ended September 30, 2020 $85.8 $22.8 $38.2 $0.8 $65.7 ($0.5) ($19.9) $192.9 Volume (13.3) 2.1 4.8 1.2 (41.2) — — (46.4) Price 9.6 16.8 27.8 0.6 81.7 — — 136.5 Cost 1.9 1.0 (0.8) (0.9) (6.7) 1.4 (1.5) (5.6) Non-timber income 2.6 1.4 (6.1) — — (0.3) — (2.4) Foreign exchange (b) — — 4.8 — — — — 4.8 Other (c) — — — 1.1 (1.6) — — (0.5) Nine Months Ended September 30, 2021 $86.6 $44.1 $68.7 $2.8 $97.9 $0.6 ($21.4) $279.4 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators below. (b) Net of currency hedging impact. (c) Timber Funds includes timberland investment management fees paid to us by the timber fund. Real Estate includes deferred revenue adjustments and marketing fees related to Improved Development sales, as well as residential and commercial lease revenue. SOUTHERN TIMBER Third quarter sales of $44.8 million decreased $2.8 million, or 6%, versus the prior year period. Harvest volumes decreased 20% to 1.19 million tons versus 1.48 million tons in the prior year period , as wet weather conditions and constrained trucking availability impacted production across the region. Average pine sawtimber stumpage prices increased 12% to $28.06 per ton versus $25.02 per ton in the prior year period. The increase in average pine sawtimber stumpage prices was driven by strong domestic lumber demand, as well as upward pressure on chip-n-saw pricing due to increased competition from pulp mills. Average pine pulpwood stumpage prices climbed 23% to $19.14 per ton versus $15.50 per ton in the prior year period. The significant increase in pulpwood pricing relative to the prior year period reflects strong domestic demand, constrained supply due to wet weather conditions and an increase in pulpwood exports to China. Overall, weighted-average stumpage prices (including hardwood) increased 16% to $21.88 per ton versus $18.88 per ton in the prior year period. Operating income of $12.8 million increased $7.7 million versus the prior year period due to the prior year period write-off of timber basis as a result of Hurricane Laura ($6.0 million), higher net stumpage prices ($3.6 million), lower depletion rates ($0.4 million) and lower costs ($0.3 million), partially offset by lower volumes ($2.6 million). Third quarter Adjusted EBITDA of $24.4 million was 7%, or $1.7 million, below the prior year period. Year-to-date sales of $145.8 million decreased $1.6 million, or 1%, versus the prior year period. Harvest volumes decreased 14% to 4.17 million tons versus 4.86 million in the prior year period, primarily due to operational disruptions attributable to wet ground conditions and winter snowstorms. Average pine sawtimber stumpage prices increased 7% to $27.62 per ton versus $25.79 per ton in the prior year period, primarily due to strong domestic lumber demand, upward pressure on chip-n-saw pricing due to increased competition from pulp mills and a strengthening export market along the east coast. Average pine pulpwood stumpage prices increased 15% to $18.25 per ton versus $15.86 per ton in the prior year period, driven by strong domestic demand, 71 constrained supply due to wet weather conditions and an increase in pulpwood exports to China. Overall, weighted-average stumpage prices (including hardwood) increased 12% to $21.60 per ton versus $19.28 per ton in the prior year period. Operating income of $47.1 million increased $15.7 million versus the prior year period due to higher net stumpage prices ($9.6 million), the prior year period write-off of timber basis as a result of Hurricane Laura ($6.0 million), higher non-timber income ($2.6 million), lower lease, overhead and other expenses ($1.9 million) and lower depletion rates ($2.0 million), partially offset by lower volumes ($6.4 million). Year-to-date Adjusted EBITDA of $86.6 million was $0.9 million above the prior year period. PACIFIC NORTHWEST TIMBER Third quarter sales of $31.5 million increased $2.6 million, or 9%, versus the prior year period, while harvest volumes of 346,000 tons remained flat versus the prior year period. Average delivered sawtimber prices increased 15% to $107.56 per ton versus $93.34 per ton in the prior year period, driven by favorable domestic lumber markets coupled with increased export demand. Average delivered pulpwood prices decreased 2% to $31.34 per ton versus $32.12 per ton in the prior year period, as increased lumber production resulted in an increased supply of competing sawmill residuals . Operating income of $2.1 million improved $3.9 million versus the prior year period due to higher net stumpage prices ($3.2 million), lower costs ($0.5 million) and lower depletion rates ($0.4 million), partially offset by lower non-timber income ($0.2 million). Third quarter Adjusted EBITDA of $12.5 million was 38%, or $3.5 million, above the prior year period. Year-to-date sales of $108.4 million increased $22.2 million, or 26%, versus the prior year period. Harvest volumes increased 6% to 1,282,000 tons versus 1,207,000 tons in the prior year period, primarily due to incremental volume from the Pope Resources acquisition. Average delivered sawtimber prices increased 21% to $97.79 per ton versus $81.01 per ton in the prior year period, as favorable domestic lumber markets coupled with increased export demand drove higher log prices. Average delivered pulpwood prices decreased 17% to $29.86 per ton versus $36.01 per ton in the prior year period, as increased lumber production resulted in an increased supply of competing sawmill residuals. Operating income of $5.3 million improved $14.7 million versus the prior year period due to higher net stumpage prices ($16.8 million), higher non-timber income ($1.4 million) lower costs ($1.0 million) and higher volumes ($0.2 million), partially offset by higher depletion rates ($4.6 million). Year-to-date Adjusted EBITDA of $44.1 million was $21.3 million above the prior year period. NEW ZEALAND TIMBER Third quarter sales of $75.6 million increased $12.8 million, or 20%, versus the prior year period , as higher log prices were partially offset by lower volumes. Harvest volumes decreased 14% to 668,000 tons versus 776,000 tons in the prior year period , primarily due to the government-mandated shutdown of all non-essential activity in New Zealand (including the harvesting and transport of logs) from August 18 th through August 31 st due to an outbreak of COVID-19. Average delivered prices for export sawtimber increased 59% to $149.68 per ton versus $94.42 per ton in the prior year period, while average delivered prices for domestic sawtimber increased 21% to $85.00 per ton versus $70.24 per ton in the prior year period. The increase in export sawtimber prices versus the prior year period reflects the restriction on competing log imports into China from Australia in the current year quarter, as well as the ability of log exporters to pass higher costs along to customers in the current environment. While net stumpage realizations on export volume were above prior year period levels, favorable export pricing was largely offset by significantly higher shipping costs, as supply chain issues drove increased freight and demurrage costs. The increase in domestic sawtimber prices (in U.S. dollar terms) was driven in part by the rise in the NZ$/US$ exchange rate (US$0.70 per NZ$1.00 versus US$0.66 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices improved 14% versus the prior year period , following the upward trend in the export market . Operating income of $13.3 million increased $2.6 million versus the prior year period as a result of higher net stumpage prices ($6.7 million), favorable foreign exchange impacts ($1.2 million) and lower depletion rates ($0.2 million), partially offset by lower carbon credit sales ($3.3 million), lower volumes ($1.9 million) and higher costs ($0.3 million). Third quarter Adjusted EBITDA of $19.9 million was 10%, or $1.8 million, above the prior year period. Year-to-date sales of $213.7 million increased $71.6 million, or 50%, versus the prior year period. Harvest volumes increased 10% to 1.96 million tons versus 1.79 million tons in the prior year period, driven by strong export and domestic demand versus the prior year period that was negatively impacted by COVID-19 related headwinds. Average delivered prices for export sawtimber increased 47% to $140.89 per ton versus $95.86 per ton in the prior year period, while average delivered prices for domestic sawtimber increased 21% to $83.79 per ton versus $69.30 per ton in the prior year period. The increase in export sawtimber prices was driven primarily by the restriction on competing log imports into China from Australia in the current year, as well as the ability of log 72 exporters to pass higher costs along to customers. The increase in export sawtimber prices versus the prior year period was also driven in part by significant COVID-19 disruptions in the prior year period. The increase in domestic sawtimber prices (in U.S. dollars terms) was driven primarily by the rise in the NZ$/US$ exchange rate (US$0.71 per NZ$1.00 versus US$0.65 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices improved 10% versus the prior year period, following the upward trend in the export market. Operating Income of $48.0 million increased $26.8 million versus the prior year period as a result of higher net stumpage prices ($27.8 million), higher volumes ($3.1 million) and favorable foreign exchange impacts ($3.1 million), partially offset by lower carbon credit sales ($6.1 million), higher costs ($0.8 million) and higher depletion rates ($0.2 million). Year-to-date Adjusted EBITDA of $68.7 million was $30.5 million above the prior year period. TIMBER FUNDS Third quarter sales of $94.5 million increased $84.7 million, versus the prior year period , while operating income of $41.3 million increased $53.7 million versus the prior year period . Third quarter sales and operating income included $87.1 million and $36.0 million, respectively, from the Fund II Timberland Dispositions. Third quarter operating income also included a $3.7 million gain on investment in Timber Funds, which reflects the gain recognized on the sale of our investment in Timber Funds III and IV. The prior year quarter included timber write-offs of $9.2 million resulting from two fires in Oregon. Harvest volumes decreased 44% to 61,000 tons versus 110,000 tons in the prior year period, as Timber Funds III and IV were sold during the quarter and therefore contributed volume only through the July 21st closing date. Third quarter Adjusted EBITDA of $0.5 million was $0.3 million above the prior year period. Year-to-date sales of $128.1 million increased $110.6 million, versus the prior year period, while operating income of $44.8 million increased $59.0 million versus the prior year period. Year-to-date sales and operating income included $87.1 million and $36.0 million, respectively, from the Fund II Timberland Dispositions. Year-to-date operating income also included a $3.7 million gain on investment in Timber Funds, which reflects the gain recognized on the sale of our investment in Timber Funds III and IV. The prior year period included timber write-offs of $9.2 million resulting from two fires in Oregon. Harvest volumes increased 91% to 380,000 tons versus 200,000 tons in the prior year period. The prior year period reflected results for only a portion of the year following the closing of the Pope Resources acquisition on May 8, 2020, while the current year reflects activity through July 21 for Timber Funds III and IV. Year-to-date Adjusted EBITDA of $2.8 million was $2.0 million above the prior year period. REAL ESTATE Third quarter sales of $93.4 million increased $64.6 million versus the prior year period, while operating income of $60.6 million increased $51.2 million versus the prior year period. Third quarter sales and operating income included $20.0 million and $14.5 million , respectively, from Large Dispositions . Sales and operating income increased versus the prior year period due to a significant increase in weighted-average prices ($7,554 per acre versus $2,332 per acre in the prior year period) coupled with higher acres sold (12,219 acres sold versus 10,562 acres sold in the prior year period). Improved Development sales of $27.8 million included $25.0 million from the Belfast Commerce Park development project south of Savannah, Georgia and $2.8 million from the Wildlight development project north of Jacksonville, Florida. Sales in the Belfast Commerce Park consisted of a 471-acre parcel for $25.0 million ($53,000 per acre). Sales in Wildlight consisted of 42 residential lots for $2.8 million (an average of $66,000 per lot or $354,000 per acre). This compares to prior year period Improved Development sales of $1.3 million. Unimproved Development sales of $37.5 million consisted of a 359-acre sale in Kingston, Washington for $105,000 per acre. This property was one of the Higher and Better Use assets acquired in our 2020 acquisition of Pope Resources. There were no Unimproved Development sales in the prior year period. Rural sales of $6.9 million consisted of 3,260 acres at an average price of $2,128 per acre. This compares to prior year period sales of $23.2 million, which consisted of 10,482 acres at an average price of $2,218 per acre. Timberland & Non-Strategic sales in the current quarter and the prior year quarter were negligible. Large Dispositions in the quarter totaled $20.0 million and consisted of 8,088 acres in Washington at an average price of $2,479 per acre. There were no Large Dispositions in the prior year period. There were no Conservation Easement sales in the third quarter. This compares to prior year period sales of $3.1 million. Because these transactions involve the conveyance of certain land use rights rather than an outright sale of the land, they are not reflected in our average per-acre metrics for the segment. 73 Third quarter Adjusted EBITDA of $63.8 million was $41.5 million above the prior year period. Year-to-date sales of $178.4 million decreased $19.0 million versus the prior year period, while operating income of $112.8 million increased $51.7 million versus the prior year period. Year-to-date sales and operating income include $56.0 million and $44.8 million, respectively, from Large Dispositions, compared with year-to-date sales and operating income of $116.0 million and $28.7 million from a Large Disposition in the prior year period. Sales decreased in the first nine months primarily due to lower volumes ( 31,162 acres sold versus 98,441 acres sold in the prior year period), partially offset by higher weighted-average prices ($5,711 per acre versus $1,978 per acre in the prior year period). Year-to-date Adjusted EBITDA of $97.9 million increased $32.2 million versus the prior year period. TRADING Third quarter sales of $25.6 million increased $3.4 million versus the prior year period primarily due to higher prices, partially offset by lower volumes. Sales volumes decreased 30% to 177,000 tons versus 252,000 tons in the prior year period. The Trading segment generated breakeven results versus an operating loss of $0.6 million in the prior year period. Year-to-date sales of $76.8 million increased $11.3 million versus the prior year period primarily due to higher prices, partially offset by lower volumes. Sales volumes decreased 23% to 561,000 tons versus 726,000 tons in the prior year period. Year-to-date operating income of $0.6 million increased $1.1 million versus the prior year period. OTHER ITEMS CORPORATE AND OTHER EXPENSE / ELIMINATIONS Third quarter corporate and other operating expenses of $6.7 million decreased $2.0 million versus the prior year period, primarily due to lower employee benefits costs ($0.6 million), lower legal costs ($0.5 million) and lower other overhead costs ($0.5 million), coupled with $0.4 million of costs related to the Pope Resources merger in the prior year period. Year-to-date corporate and other operating expenses of $22.3 million decreased $15.0 million versus the prior year period, which included $16.4 million of costs related to the Pope Resources merger. This positive variance was partially offset by higher overhead expenses. INTEREST EXPENSE Third quarter and year-to-date interest expense of $11.3 million and $34.3 million, respectively, increased $0.8 million and $5.8 million versus the prior year period due to higher average outstanding debt and a $2.2 million loss from the second quarter termination of a cash flow hedge related to the voluntary repayment of $100 million of term loans. INTEREST AND OTHER MISCELLANEOUS INCOME (EXPENSE), NET Third quarter interest and other miscellaneous income (expense), net of $1.3 million versus ($0.1) million in the prior year period was primarily due to a $0.9 million gain on debt extinguishment related to the voluntary repayment of our $45 million credit facility with Northwest Farm Credit Services (NWFCS), which was assumed in connection with the Pope Resources acquisition. Year-to-date interest and other miscellaneous income, net of $0.1 million versus $1.2 million in the prior year period, includes favorable mark to market adjustments on marketable equity securities and carbon options in the prior year, partially offset by costs related to debt extinguishments and modifications. INCOME TAX EXPENSE Third quarter and year-to-date income tax expense of $2.8 million and $13.1 million, respectively, increased $2.1 million and $5.7 million versus the prior year period. The New Zealand subsidiary is the primary driver of income tax expense. OUTLOOK In our Southern Timber segment, we now expect full-year harvest volumes of 5.7 to 5.8 million tons, as production has been constrained by regional weather conditions and trucking availability. We expect that improved pricing will largely offset the decline in volumes. 74 In our Pacific Northwest Timber segment, we continue to expect full-year harvest volumes of 1.7 to 1.8 million tons. We expect that weighted average log pricing in the region will be lower in the fourth quarter as compared to the third quarter, but will be fairly consistent with the pricing achieved during the first half of the year. In our New Zealand Timber segment, we now expect full-year harvest volumes of 2.5 to 2.6 million tons, as we do not expect to fully recover production lost during the third quarter due to the COVID-19 shutdown. We further expect lower export pricing during the fourth quarter as log inventories in China remain elevated. In our Real Estate segment, the successful completion of a $37.5 million Unimproved Development sale during the third quarter is the primary driver for a favorable revision to our full-year expectations, as we were able to execute on this sale sooner than previously anticipated. Following an extraordinarily strong third quarter, we expect real estate closings for the balance of the year to be relatively light. 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 an UPREIT, our main use of cash is dividends and unitholder distributions. 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. AT-THE-MARKET (“ATM”) EQUITY OFFERING PROGRAM On September 10, 2020, we entered into a distribution agreement with a group of sales agents through which we may sell common shares, from time to time, having an aggregate sales price of up to $300 million. As of September 30, 2021, $97.0 million remains available for issuance under the program. The following table outlines common stock issuances pursuant to our ATM program (dollars in millions): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Shares of common stock issued under the ATM program 1,390,968 — 4,698,241 — Average price per share sold under the ATM program $37.26 — $36.11 — Gross proceeds from common stock issued under the ATM program $51.8 — $169.6 — SUMMARY OF LIQUIDITY AND FINANCING COMMITMENTS September 30, December 31, (millions of dollars) 2021 2020 Cash and cash equivalents (excluding Timber Funds) $419.6 $80.5 Total debt (excluding Timber Funds) (a) 1,376.4 1,294.9 Noncontrolling interests in the Operating Partnership 140.6 130.1 Shareholders’ equity 1,792.5 1,862.6 Total capitalization (total debt plus permanent and temporary equity) 3,309.5 3,287.6 Debt to capital ratio 42 % 39 % Net debt to enterprise value (b)(c) 15 % 23 % (a) Total debt as of September 30, 2021 and December 31, 2020 reflects principal on long-term debt, net of fair value adjustments and gross of deferred financing costs and unamortized discounts. (b) Net debt is calculated as total debt less cash and cash equivalents. (c) Enterprise value based on market capitalization (including Rayonier, L.P. “OP” units) plus net debt based on Rayonier’s share price of $35.68 and $29.38 as of September 30, 2021 and December 31, 2020, respectively. 75 SUMMARY OF GUARANTOR FINANCIAL INFORMATION In March 2012, Rayonier Inc. issued $325 million of 3.75% Senior Notes due 2022 (the “Senior Notes due 2022”). On May 7, 2020, Rayonier Inc. contributed its 100% ownership interest in Rayonier Operating Company LLC (the “Contribution”) to Rayonier, L.P. As a result of the Contribution, Rayonier, L.P. expressly assumed all the obligations of Rayonier Inc. with respect to the outstanding Senior Notes due 20222 and Rayonier Inc. agreed to irrevocably, fully and unconditionally guarantee jointly and severally, the obligations of Rayonier, L.P. under the Indenture, including the Senior Notes due 2022. Rayonier L.P. is the current issuer of the Senior Notes due 2022. In May 2021, Rayonier, L.P. issued $450 million of 2.75% Senior Notes due 2031 (the “Senior Notes due 2031”). Rayonier TRS Holdings Inc., together with Rayonier Inc. and Rayonier Operating Company LLC agreed to irrevocably, fully and unconditionally guarantee jointly and severally, the obligations of Rayonier, L.P. in regards to the Senior Notes due 2031. As a general partner of Rayonier, L.P., Rayonier Inc. consolidates Rayonier, L.P. and has no material assets or liabilities other than its interest in Rayonier, L.P. These notes are unsecured and unsubordinated and will rank equally with all other unsecured and unsubordinated indebtedness from time to time outstanding. Rayonier, L.P. is a limited partnership, in which Rayonier Inc. is the general partner. The operating subsidiaries of Rayonier, L.P. conduct all of our operations. Rayonier, L.P.’s most significant assets are its interest in operating subsidiaries, which have been eliminated in the table below to eliminate intercompany transactions between the issuer and guarantors and to exclude investments in non-guarantors. As a result, our ability to make required payments on the notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us. There are no material restrictions on dividends from the operating subsidiaries. The summarized balance sheet information for the consolidated obligor group of debt issued by Rayonier, L.P. for the nine months ended September 30, 2021 and year ended December 31, 2020 are provided in the table below: (in millions) September 30, 2021 December 31, 2020 Current assets $397.7 $69.7 Non-current assets 56.5 48.3 Current liabilities 226.7 21.0 Non-current liabilities 1,764.6 1,942.4 Due to non-guarantors 566.6 596.7 The summarized results of operations information for the consolidated obligor group of debt issued by Rayonier, L.P. for the nine months ended September 30, 2021 and year ended December 31, 2020 are provided in the table below: (in millions) September 30, 2021 December 31, 2020 Cost and expenses ($19.5) ($43.4) Operating loss (19.4) (43.4) Net loss (53.0) (81.3) Revenue from non-guarantors 847.5 859.2 76 CASH FLOWS The following table summarizes our cash flows from operating, investing and financing activities for the nine months ended September 30, 2021 and 2020: (millions of dollars) 2021 2020 Cash provided by (used for): Operating activities $277.4 $138.0 Investing activities 69.3 (184.8) Financing activities 47.7 55.7 CASH PROVIDED BY OPERATING ACTIVITIES Cash provided by operating activities increased $139.5 million primarily due to higher operating results. CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES Cash provided by investing activities of $69.3 million compares to cash used for investing activities of $184.8 million in the prior year period. This variance is primarily due to net cash consideration transferred in our merger with Pope Resources in the prior year period ($231.1 million), net proceeds from Fund II Timberland Dispositions ($85.2 million) and net proceeds from the sale of Timber Funds III and IV ($31.1 million) in the current year period and other investing activities ($1.8 million), partially offset by lower proceeds from Large Dispositions ($61.0 million), higher timberland acquisitions ($27.5 million), higher real estate development investments ($3.7 million) and higher capital expenditures ($2.9 million). CASH PROVIDED BY FINANCING ACTIVITIES Cash provided by financing activities decreased $8.0 million from the prior year period primarily due to lower net borrowings ($161.6 million), higher distributions to consolidated affiliates ($11.3 million), make-whole fees on the prepayment of NWFCS debt ($6.2 million), higher dividends paid on common stock ($5.1 million), higher debt issuance costs ($2.4 million) and higher distributions to noncontrolling interests in the Operating Partnership ($1.0 million), partially offset by net proceeds from the issuance of common shares under the ATM equity offering program ($167.0 million), noncontrolling interests in consolidated affiliates redemption of shares in the prior year period ($5.1 million), higher proceeds from the issuance of common shares under the Company’s incentive stock plan ($4.4 million) and lower share repurchases ($3.1 million). EXPECTED 2021 EXPENDITURES Capital expenditures in 2021 are expected to be between $72 million and $75 million, excluding capital expenditures attributable to the Timber Funds and any strategic timberland acquisitions we may make. Capital expenditures are expected to primarily consist 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. We anticipate real estate development investments in 2021 to be between $13 million and $15 million, net of 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; Richmond Hill, our mixed-use development project located south of Savannah, Georgia; development properties in the town of Port Gamble, Washington; and development projects in Gig Harbor, Kingston and Bremerton, Washington. Our 2021 dividend payments on Rayonier Inc. common shares and distributions to Rayonier, L.P. unitholders are expected to be approximately $153.0 million and $4.4 million, respectively, assuming no change in the quarterly dividend rate of $0.27 per share or partnership unit, or material changes in the number of shares or partnership units outstanding. Future share repurchases, if any, will depend on the Company’s liquidity and cash flow, as well as general market conditions and other considerations including capital allocation priorities. We have no mandatory pension contribution requirements in the current year. Cash tax payments in 2021 are expected to be approximatel y $8.0 million, primarily related to the New Zealand subsidiary. 77 PERFORMANCE AND LIQUIDITY INDICATORS The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, and ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures of financial results: Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“Adjusted EBITDA”) and Cash Available for Distribution (“CAD”). These measures are not defined by Generally Accepted Accounting Principles (“GAAP”), and the discussion of Adjusted EBITDA and CAD is not intended to conflict with or change any of the GAAP disclosures described above. Management uses CAD as a liquidity measure. CAD is a non-GAAP measure of cash generated during a period that is available for common stock dividends, distributions to Operating Partnership unitholders, distributions to noncontrolling interests, repurchase of the Company’s common shares, debt reduction, timberland acquisitions and real estate development investments. CAD is defined as cash provided by operating activities adjusted for capital spending (excluding timberland acquisitions and real estate development investments), CAD attributable to noncontrolling interests in Timber Funds, working capital and other balance sheet changes. CAD is not necessarily indicative of the CAD that may be generated in future periods. Management uses Adjusted EBITDA as a performance measure. Adjusted EBITDA is a non-GAAP measure that management uses to make strategic decisions about the business and that investors can use to evaluate the operational performance of the assets under management. It removes the impact of specific items that management believes do not directly reflect the core business operations on an ongoing basis attributable to Rayonier. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, depletion, amortization, the non-cash cost of land and improved development, non-operating income and expense, operating income (loss) attributable to noncontrolling interests in Timber Funds, costs related to the merger with Pope Resources, timber write-offs resulting from casualty events, the gain on investment in Timber Funds, Fund II Timberland Dispositions and Large Dispositions. 78 We reconcile Adjusted EBITDA to Net Income for the consolidated Company and to Operating Income (Loss) for the segments, as those are the most comparable GAAP measures for each. The following table provides a reconciliation of Net Income to Adjusted EBITDA for the respective periods (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net Income to Adjusted EBITDA Reconciliation Net Income (Loss) $110.5 ($9.5) $189.0 $17.4 Operating (income) loss attributable to NCI in Timber Funds (30.5) 10.3 (33.3) 12.3 Interest, net attributable to NCI in Timber Funds 0.1 0.2 0.3 0.3 Income tax expense attributable to NCI in Timber Funds — 0.1 — 0.2 Net Income (Excluding NCI in Timber Funds) 80.1 1.1 156.0 30.2 Interest, net and miscellaneous income attributable to Rayonier 11.1 10.2 33.8 27.9 Income tax expense attributable to Rayonier 2.8 0.6 13.1 7.3 Depreciation, depletion and amortization attributable to Rayonier 31.5 39.6 109.3 112.2 Non-cash cost of land and improved development 15.8 7.3 22.8 20.7 Timber write-offs resulting from casualty events attributable to Rayonier (a) — 7.9 — 7.9 Non-operating (income) expense (1.2) 0.2 — (1.0) Costs related to the merger with Pope Resources (b) — 0.4 — 16.4 Gain on investment in Timber Funds (c) (3.7) — (3.7) — Fund II Timberland Dispositions attributable to Rayonier (d) (7.2) — (7.2) — Large Dispositions (e) (14.5) — (44.8) (28.7) Adjusted EBITDA $114.6 $67.2 $279.4 $192.9 (a) Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events that cannot be salvaged. (b) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. (c) Gain on investment in Timber Funds represents the gain recognized on the sale of rights to manage two timber funds (Funds III and IV) previously managed by the Company’s Olympic Resource Management (ORM) subsidiary, as well as its co-investment stake in both funds. (d) Fund II Timberland Dispositions represents the disposition of Timber Fund II timberland assets, which we manage and own a co-investment stake in. Proceeds from Fund II Timberland Dispositions will ultimately be distributed to owners of ORM Timber Fund II and not reinvested. (e) 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. As of September 30, 2021, we have completed two dispositions of approximately 17,000 acres in total. In June 2021, we completed a disposition of approximately 9,000 acres in Washington for a sales price and gain of approximately $36.0 million and $30.3 million, respectively. In July 2021, we completed a second disposition of approximately 8,000 acres in Washington, for a sales price and gain of $20.0 million and $14.5 million, respectively. In March 2020, we completed a disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximate ly $116.0 million and $28.7 million, respectively. 79 The following tables provide a reconciliation of Operating Income (Loss) by segment to Adjusted EBITDA by segment for the respective periods (in millions of dollars): Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total September 30, 2021 Operating income (loss) $12.8 $2.1 $13.3 $41.3 $60.6 — ($6.7) $123.3 Gain on investment in Timber Funds (a) — — — (3.7) — — — (3.7) Fund II Timberland Dispositions attributable to Rayonier (b) — — — (7.2) — — — (7.2) Operating income attributable to NCI in Timber Funds — — — (30.5) — — — (30.5) Depreciation, depletion and amortization 11.6 10.5 6.6 0.7 1.8 — 0.3 31.5 Non-cash cost of land and improved development — — — — 15.8 — — 15.8 Large Dispositions (c) — — — — (14.5) — — (14.5) Adjusted EBITDA $24.4 $12.5 $19.9 $0.5 $63.8 — ($6.4) $114.6 September 30, 2020 Operating income (loss) $5.1 ($1.8) $10.7 ($12.4) $9.5 ($0.6) ($8.7) $1.8 Operating loss attributable to NCI in Timber Funds — — — 10.3 — — — 10.3 Timber write-offs resulting from casualty events attributable to Rayonier (d) 6.0 — — 1.8 — — — 7.9 Depreciation, depletion and amortization 15.0 10.9 7.3 0.5 5.5 — 0.4 39.6 Non-cash cost of land and improved development — — — — 7.3 — — 7.3 Costs related to the merger with Pope Resources (e) — — — — — — 0.4 0.4 Adjusted EBITDA $26.1 $9.1 $18.1 $0.2 $22.2 ($0.6) ($7.9) $67.2 (a) Gain on investment in Timber Funds represents the gain recognized on the sale of rights to manage two timber funds (Funds III and IV) previously managed by the Company’s Olympic Resource Management (ORM) subsidiary, as well as its co-investment stake in both funds. (b) Fund II Timberland Dispositions attributable to Rayonier reflects the proportionate share of operating income attributable to Rayonier related to the disposition of timberland assets in Timber Fund II. (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. In July 2021, we completed the disposition of approximately 8,000 acres in Washington for a sales price and gain of $20.0 million and $14.5 million, respectively. (d) Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events that cannot be salvaged. (e) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. 80 Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Corporate and Other Total September 30, 2021 Operating income (loss) $47.1 $5.3 $48.0 $44.8 $112.8 $0.6 ($22.3) $236.2 Gain on investment in Timber Funds (a) — — — (3.7) — — — (3.7) Fund II Timberland Dispositions attributable to Rayonier (b) — — — (7.2) — — — (7.2) Operating income attributable to NCI in Timber Funds — — — (33.3) — — — (33.3) Depreciation, depletion and amortization 39.5 38.8 20.8 2.2 7.1 — 0.9 109.3 Non-cash cost of land and improved development — — — — 22.8 — — 22.8 Large Dispositions (c) — — — — (44.8) — — (44.8) Adjusted EBITDA $86.6 $44.1 $68.7 $2.8 $97.9 $0.6 ($21.4) $279.4 September 30, 2020 Operating income (loss) $31.4 ($9.5) $21.1 ($14.3) $61.1 ($0.5) ($37.3) $52.0 Operating loss attributable to NCI in Timber Funds — — — 12.3 — — — 12.3 Timber write-offs resulting from casualty events attributable to Rayonier (d) 6.0 — — 1.8 — — — 7.9 Depreciation, depletion and amortization 48.4 32.2 17.1 1.0 12.6 — 1.0 112.2 Non-cash cost of land and improved development — — — — 20.7 — — 20.7 Costs related to merger with Pope Resources (e) — — — — — — 16.4 16.4 Large Dispositions (c) — — — — (28.7) — — (28.7) Adjusted EBITDA $85.8 $22.8 $38.2 $0.8 $65.7 ($0.5) ($19.9) $192.9 (a) Gain on investment in Timber Funds represents the gain recognized on the sale of rights to manage two timber funds (Funds III and IV) previously managed by the Company’s Olympic Resource Management (ORM) subsidiary, as well as its co-investment stake in both funds. (b) Fund II Timberland Dispositions attributable to Rayonier reflects the proportionate share of operating income attributable to Rayonier related to the disposition of timberland assets in Timber Fund II. (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. As of September 30, 2021, we have completed two dispositions of approximately 17,000 acres in total. In June 2021, we completed a disposition of approximately 9,000 acres in Washington for a sales price and gain of approximately $36.0 million and $30.3 million, respectively. In July 2021, we completed a second disposition of approximately 8,000 acres in Washington, for a sales price and gain of $20.0 million and $14.5 million, respectively. In March 2020, we completed a disposition of approximately 67,000 acres located in Mississippi for a sales price and gain of approximate ly $116.0 million and $28.7 million, respectively. (d) Timber write-offs resulting from casualty events include the write-off of merchantable and pre-merchantable timber volume destroyed by casualty events that cannot be salvaged. (e) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. 81 The following table provides a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars): Nine Months Ended September 30, 2021 2020 Cash provided by operating activities $277.4 $138.0 Capital expenditures (a) (47.5) (44.7) Costs related to the merger with Pope Resources (b) — 16.4 CAD attributable to NCI in Timber Funds (12.5) (0.1) Working capital and other balance sheet changes (13.5) 14.6 CAD 203.9 124.2 Mandatory debt repayments (325.0) — CAD after mandatory debt repayments (121.1) 124.2 Cash provided by (used for) investing activities $69.3 ($184.8) Cash provided by financing activities $47.7 $55.7 (a) Capital expenditures exclude timberland acquisitions of $51.9 million and $24.4 million during the nine months ended September 30, 2021 and September 30, 2020, respectively. The nine months ended September 30, 2020 also exclude the Pope Resources acquisition. (b) Costs related to the merger with Pope Resources include legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources. The following table provides supplemental cash flow data (in millions): Nine Months Ended September 30, 2021 2020 Purchase of timberlands (a) ($51.9) ($24.4) Real Estate Development Investments (9.2) (5.4) Distributions to noncontrolling interests in consolidated affiliates (19.6) (8.2) (a) The nine months ended September 30, 2020 excludes timberlands acquired in the merger with Pope Resources. LIQUIDITY FACILITIES 2021 DEBT ACTIVITY See Note 9 — Debt for additional information. 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 our 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 15 — Guarantees for details on the letters of credit and surety bonds as of September 30, 2021. 82 CONTRACTUAL FINANCIAL OBLIGATIONS In addition to using cash flow from operations and proceeds from Large Dispositions, we finance our operations 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 September 30, 2021 and anticipated cash spending by period: Contractual Financial Obligations (in millions) Total Payments Due by Period Remaining 2021 2022-2023 2024-2025 Thereafter Long-term debt, excluding Timber Funds (a) $1,176.4 — $125.0 $23.7 $1,027.7 Current maturities of long-term debt, excluding Timber Funds (b) 200.0 — 200.0 — — Interest payments on long-term debt, excluding Timber Funds (c) 200.4 15.3 54.2 47.7 83.2 Operating leases — timberland (d) 184.2 4.2 15.4 14.3 150.3 Operating leases — PP&E, offices (d) 6.3 0.4 2.5 1.8 1.6 Commitments — development projects (e) 29.5 11.1 14.0 0.5 3.9 Commitments — environmental remediation (f) 10.9 0.2 4.7 3.7 2.3 Commitments — other (g) 53.2 3.3 26.7 14.9 8.3 Total contractual cash obligations $1,860.9 $34.5 $442.5 $106.6 $1,277.3 (a) The book value of long-term debt, excluding Timber Funds, net of deferred financing costs and unamortized discounts, is currently recorded at $1,168.0 million on our Consolidated Balance Sheets, but upon maturity the liability will be $1,176.4 million. See Note 9 — Debt for additional information. (b) The book value of current maturities of long-term debt, excluding Timber Funds, net of deferred financing costs is currently recorded at $199.9 million on our Consolidated Balance Sheets, but upon maturity the liability will be $200.0 million. See Note 9 - Debt for additional information. (c) Projected interest payments for variable rate debt were calculated based on outstanding principal amounts and interest rates as of September 30, 2021. (d) Excludes anticipated renewal options. (e) Commitments — developmental projects primarily consists of payments expected to be made on our Wildlight and Richmond Hill developmental projects. (f) Commitments — environmental remediation represents our estimate of potential liability associated with environmental contamination at Port Gamble. See Note 14 - Environmental Liabilities . (g) Commitments — other includes payments expected to be made on financial instruments (foreign exchange contracts, interest rate swaps and forward-starting interest rate swaps) and other purchase obligations. 83