What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-25 compared with 2021-02-22 · 1054 added, 1119 removed, 1768 unchanged (55% of the section changed)

2 unchanged sentences

Management’s Reports on Internal Control over Financial Reporting

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Rayonier Inc.:

11 unchanged sentences

Note 2 - Merger with Pope Resources

Note 3 - Segment and Geographical Information

Note 4 - Revenue

2 unchanged sentences

Note 7 - Noncontrolling Interests

Note 7 - Segment and Geographical Information

Note 8 - Variable Interest Entities

Note 9 - Earnings Per Share and Per Unit

Note 10 - Debt

Note 9 - Higher and Better Use Timberlands and Real Estate Development Investments

Note 11 - Derivative Financial Instruments and Hedging Activities

Note 12 - Fair Value Measurements

Note 13 - Commitments

Note 11 - Income Taxes

Note 14 - Contingencies

1 unchanged sentence

Note 16 - Guarantees

Note 15 - Earnings Per Share and Per Unit

Note 16 - Derivative Financial Instruments and Hedging Activities

Note 17 - Fair Value Measurements

Note 17 - Higher and Better Use Timberlands and Real Estate Development Investments

Note 18 - Inventory

Note 19 - Other Operating Income (Expense), Net

Note 20 - Employee Benefit Plans

Note 21 - Incentive Stock Plans

Note 20 - Other Operating (Expense) Income, Net

Note 21 - Charges For Integration and Restructuring

Note 22 - Inventory

Note 22 - Income Taxes

Note 23 - Accumulated Other Comprehensive Loss

Note 24 - Restricted Cash

1 unchanged sentence

Note 26 - Assets Held for Sale

Note 26 - Accumulated Other Comprehensive Income (Loss)

Note 27 - Variable Interest Entities

Note 27 - Charges for Integration and Restructuring

Note 28 - Related Party

21 unchanged sentences

/s/ APRIL TICE

Vice President, Financial Services and Corporate Controller

Vice President and Chief Accounting Officer

(Principal Accounting Officer)

22 unchanged sentences

/s/ APRIL TICE

Vice President, Financial Services and Corporate Controller

Vice President and Chief Accounting Officer

(Principal Accounting Officer)

47 unchanged sentences

Critical Audit Matter

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Depletion of Timber

12 unchanged sentences

In addition, we evaluated current year changes to harvestability, analyzed the change in depletion as a percentage of sales, utilized published industry growth rates to assess the increase in timber volume growth and compared actual volume harvested to the volume estimated by the Company.

Business Combination:

Valuation of Core Timber and Timberlands

Description of the Matter

On May 8, 2020, the Company completed its acquisition of Pope Resources for net consideration of $538 million, as disclosed in Note 2 to the consolidated financial statements.

The transaction was accounted for as a business combination.

Auditing the Company's accounting for its acquisition of Pope Resources was complex due to the significant estimation required by management to determine the fair value of the Core Timber and Timberlands.

The significant estimation was primarily due to the sensitivity of the respective fair values to the significant underlying assumptions, including the discount rate and harvest volumes that are used to estimate forecasted revenue.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company's controls over the valuation of the acquired Core Timber and Timberlands.

For example, we tested controls over management’s review of the valuation models and the significant assumptions used in the valuation models.

To test the fair value of the Core Timber and Timberlands we performed audit procedures that included, among others, evaluating the Company's selection of the valuation methodologies, evaluating the methods and significant assumptions used by the Company, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We involved our valuation specialists to assist with our evaluation of the methodologies used by the Company and significant assumptions included in valuation.

We compared the significant assumptions to market and economic trends, to the historical results of the acquired business and compared the overall fair value of the Core Timber and Timberlands to other third-party property appraisals that were performed close to the date of the acquisition.

/ s / Ernst & Young LLP

24 unchanged sentences

Critical Audit Matter

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

(1) related to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Depletion of Timber

12 unchanged sentences

Business Combination:

Valuation of Core Timber and Timberlands

Description of the Matter

On May 8, 2020, the Operating Partnership completed its acquisition of Pope Resources for net consideration of $538 million, as disclosed in Note 2 to the consolidated financial statements.

The transaction was accounted for as a business combination.

Auditing the Operating Partnership’s accounting for its acquisition of Pope Resources was complex due to the significant estimation required by management to determine the fair value of the Core Timber and Timberlands.

These significant assumptions are forward looking and could be affected by future economic and market conditions.

How We Addressed the Matter in Our Audit

We obtained an understanding, evaluated the design and tested the operating effectiveness of the Operating Partnership's controls over the valuation of the acquired Core Timber and Timberlands.

For example, we tested controls over management’s review of the valuation models and the significant assumptions used in the valuation models.

To test the fair value of the Core Timber and Timberlands we performed audit procedures that included, among others, evaluating the Operating Partnership's selection of the valuation methodologies, evaluating the methods and significant assumptions used by the Operating Partnership, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates.

We involved our valuation specialists to assist with our evaluation of the methodologies used by the Operating Partnership and significant assumptions included in valuation.

/ s / Ernst & Young LLP

13 unchanged sentences

Selling and general expenses ( 57,791 ) ( 50,645 ) ( 41,646 )

Other operating (expense) income, net (Note 20)

Other operating income (expense), net (Note 19)

14,084 ( 21,685 ) ( 4,533 )

8 unchanged sentences

NET INCOME 210,487 29,784 67,678

Net income attributable to noncontrolling interest in the Operating Partnership ( 528 ) — —

Net loss (income) attributable to noncontrolling interest in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net income attributable to noncontrolling interests in the operating partnership ( 4,516 ) ( 528 ) —

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

NET INCOME ATTRIBUTABLE TO RAYONIER INC.

152,550 37,084 59,105

OTHER COMPREHENSIVE (LOSS) INCOME

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 and $ 0

4 unchanged sentences

12,476 ( 925 ) ( 1,350 )

Total other comprehensive loss ( 33,708 ) ( 30,869 ) ( 19,360 )

COMPREHENSIVE (LOSS) INCOME ( 3,924 ) 36,809 97,970

Total other comprehensive income (loss) 50,695 ( 33,708 ) ( 30,869 )

COMPREHENSIVE INCOME (LOSS) 261,182 ( 3,924 ) 36,809

Comprehensive income attributable to noncontrolling interests in the operating partnership ( 6,116 ) ( 3,068 ) —

Comprehensive loss (income) attributable to noncontrolling interest in consolidated affiliates 1,393 ( 9,146 ) ( 8,931 )

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RAYONIER INC.

Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates ( 48,234 ) 1,393 ( 9,146 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER INC.

$ 206,832 ($ 5,599 ) $ 27,663

14 unchanged sentences

Total cash and cash equivalents 362,173 84,507

Restricted cash, Timber Funds ( Note 2 4 )

Accounts receivable, less allowance for doubtful accounts of $ 59 and $ 25

19 unchanged sentences

Total property, plant and equipment, net 29,623 30,401

RESTRICTED CASH (NOTE 23)

RESTRICTED CASH, EXCLUDING TIMBER FUNDS (NOTE 24)

RIGHT-OF-USE ASSETS (NOTE 6)

11 unchanged sentences

Deferred revenue 17,802 11,112

Distributions payable, Timber Funds 6,341 —

Other current liabilities 25,863 29,234

Total current liabilities 231,721 91,135

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS (NOTE 8)

LONG-TERM DEBT, NET, EXCLUDING TIMBER FUNDS (NOTE 10)

1,242,819 1,300,336

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, TIMBER FUNDS (NOTE 8)

LONG-TERM DEBT, NET, TIMBER FUNDS (NOTE 10)

PENSION AND OTHER POSTRETIREMENT BENEFITS (NOTE 20)

5 unchanged sentences

NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP (NOTE 7)

133,823 130,121

SHAREHOLDERS’ EQUITY

21 unchanged sentences

Balance, December 31, 2018 129,488,675 $ 884,263 $ 672,371 $ 239 $ 97,677 $ 1,654,550

Cumulative-effect adjustment due to adoption

2018-02 — — 711 ( 711 ) — —

Net income — — 59,105 — 8,573 67,678

9 unchanged sentences

Balance, December 31, 2019 129,331,069 $ 888,177 $ 583,006 ($ 31,202 ) $ 97,661 $ 1,537,642

Net income — — 59,105 — 8,573 67,678

Dividends ($ 1.08 per share)

Issuances of shares associated with the merger with Pope Resources 7,181,071 172,418 — — — 172,418

Net income (loss) — — 37,612 — ( 7,828 ) 29,784

Net income attributable to noncontrolling interests in the operating partnership — — ( 528 ) — — ( 528 )

Dividends ($ 1.08 per share) (a)

— — ( 146,278 ) — — ( 146,278 )

Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 799

1,103,012 32,574 — — — 32,574

Issuance of shares under incentive stock plans 266,036 1,589 — — — 1,589

1 unchanged sentence

Repurchase of common shares ( 219,619 ) ( 1,605 ) ( 3,152 ) — — ( 4,757 )

Acquisition of noncontrolling interests in consolidated affiliates — — — — 333,366 333,366

Adjustment of noncontrolling interests in the operating partnership — — ( 24,393 ) — — ( 24,393 )

Conversion of units into common shares 17,253 496 — — — 496

Actuarial change and amortization of pension and postretirement plan liabilities — — — ( 925 ) — ( 925 )

1 unchanged sentence

Cash flow hedges — — — ( 62,146 ) 1,091 ( 61,055 )

Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — ( 2,540 ) — ( 2,540 )

Distributions to noncontrolling interests in consolidated affiliates — — — — ( 12,643 ) ( 12,643 )

Noncontrolling interests in consolidated affiliates redemption of shares — — — — ( 28,403 ) ( 28,403 )

Balance, December 31, 2020 137,678,822 $ 1,101,675 $ 446,267 ($ 73,885 ) $ 388,588 $ 1,862,645

Issuances of shares associated with the merger with Pope Resources 7,181,071 172,418 — — — 172,418

Net income (loss) — — 37,612 — ( 7,828 ) 29,784

Net income attributable to noncontrolling interest in the Operating Partnership — — ( 528 ) — — ( 528 )

RAYONIER INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)

(Thousands of dollars, except share data)

Common Shares Retained

Earnings Accumulated

Comprehensive

Income (Loss) Noncontrolling Interests in Consolidated Affiliates Shareholders’

Shares Amount

Balance, December 31, 2020 137,678,822 $ 1,101,675 $ 446,267 ($ 73,885 ) $ 388,588 $ 1,862,645

Net income — — 157,066 — 53,421 210,487

Net income attributable to noncontrolling interests in the operating partnership — — ( 4,516 ) — — ( 4,516 )

Dividends ($ 1.08 per share) (a)

— — ( 153,980 ) — — ( 153,980 )

Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 799

Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 2.5 million

6,357,972 233,033 — — — 233,033

2 unchanged sentences

Repurchase of common shares ( 47,705 ) ( 1,617 ) — — — ( 1,617 )

Acquisition of noncontrolling interests in consolidated affiliates — — — — 333,366 333,366

Adjustment of noncontrolling interest in the Operating Partnership — — ( 24,393 ) — — ( 24,393 )

Fund II carried interest incentive fee — — — — ( 3,807 ) ( 3,807 )

Disposition of noncontrolling interests in consolidated affiliates — — — — ( 255,486 ) ( 255,486 )

Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — — 9,690 9,690

Adjustment of noncontrolling interests in the operating partnership — — ( 42,530 ) — — ( 42,530 )

Conversion of units into common shares 1,113,159 40,676 — — — 40,676

25 unchanged sentences

Gain on sale of large disposition of timberlands ( 44,784 ) ( 28,655 ) —

Gain on Fund II timberland dispositions ( 51,522 ) — —

Gain on sale of Timber Funds III & IV ( 3,675 ) — —

Fund II carried interest incentive fee ( 3,807 ) — —

Other 9,456 ( 11,100 ) ( 4,999 )

10 unchanged sentences

Net proceeds from large disposition of timberlands 54,682 115,666 —

Net proceeds from sale of Timber Funds III & IV 31,014 — —

Net proceeds from Fund II timberland dispositions 154,740 — —

Cash consideration for merger with Pope Resources, net of cash acquired — ( 231,068 ) —

9 unchanged sentences

Repurchase of common shares to pay withholding taxes on vested incentive stock awards ( 1,617 ) ( 1,605 ) ( 4,250 )

Repurchase of common shares under repurchase program ( 3,152 ) ( 8,430 ) —

Repurchase of common shares made under repurchase program — ( 3,152 ) ( 8,430 )

Debt issuance costs ( 4,846 ) ( 2,483 ) ( 132 )

2 unchanged sentences

Distributions to noncontrolling interests in consolidated affiliates ( 108,956 ) ( 12,643 ) ( 9,161 )

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 27,002 ( 79,649 ) ( 193,714 )

Make-whole fee on NWFCS debt prepayment ( 6,234 ) — —

CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ( 16,311 ) 27,002 ( 79,649 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 889 ) ( 19 ) ( 1,700 )

22 unchanged sentences

For additional information on patronage payments, see Note 10 - Debt .

(b) Represents a capital distribution made by the New Zealand subsidiary in order to redeem certain equity interests, resulting in the recording of a noncontrolling interest share redemption of $ 5.1 million and a loan payable by the New Zealand subsidiary in the amount of $ 23.3 million.

See Note 6 - Noncontroll ing Interests and Note 8 - Debt for further information.

(b) In 2021, the New Zealand subsidiary made a capital distribution in order to redeem certain equity interests, resulting in the recording of a loan payable by the New Zealand subsidiary in the amount of $ 28.1 million.

In 2020, the New Zealand subsidiary made a capital distribution in order to redeem certain equity interests, resulting in the recording of a noncontrolling interest share redemption of $ 5.1 million and a loan payable by the New Zealand subsidiary in the amount of $ 23.3 million.

See Note 7 - Noncontrolling Interests and Note 10 - Debt for further information.

See Notes to Consolidated Financial Statements.

3 unchanged sentences

For the Years Ended December 31,

(Dollars in thousands, except per unit amounts)

(Thousands of dollars, except per unit data)

2021 2020 2019

4 unchanged sentences

Selling and general expenses ( 57,791 ) ( 50,645 ) ( 41,646 )

Other operating (expense) income, net (Note 20)

Other operating income (expense), net (Note 19)

14,084 ( 21,685 ) ( 4,533 )

8 unchanged sentences

NET INCOME 210,487 29,784 67,678

Net loss (income) attributable to noncontrolling interest in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

NET INCOME ATTRIBUTABLE TO RAYONIER, L.P.

UNITHOLDERS 157,066 37,612 59,105

OTHER COMPREHENSIVE (LOSS) INCOME

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 and $ 0

4 unchanged sentences

12,476 ( 925 ) ( 1,350 )

Total other comprehensive loss ( 33,708 ) ( 30,869 ) ( 19,360 )

COMPREHENSIVE (LOSS) INCOME ( 3,924 ) 36,809 97,970

Comprehensive loss (income) attributable to noncontrolling interest in consolidated affiliates 1,393 ( 9,146 ) ( 8,931 )

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RAYONIER, L.P.

Total other comprehensive income (loss) 50,695 ( 33,708 ) ( 30,869 )

COMPREHENSIVE INCOME (LOSS) 261,182 ( 3,924 ) 36,809

Comprehensive (income) loss attributable to noncontrolling interests in consolidated affiliates ( 48,234 ) 1,393 ( 9,146 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO RAYONIER, L.P.

UNITHOLDERS $ 212,948 ($ 2,531 ) $ 27,663

9 unchanged sentences

As of December 31,

(Dollars in thousands)

(Thousands of dollars, except unit data)

CURRENT ASSETS

2 unchanged sentences

Total cash and cash equivalents 362,173 84,507

Restricted cash, Timber Funds ( Note 2 4 )

Accounts receivable, less allowance for doubtful accounts of $ 59 and $ 25

19 unchanged sentences

Total property, plant and equipment, net 29,623 30,401

RESTRICTED CASH ( NOTE 23 )

RESTRICTED CASH, EXCLUDING TIMBER FUNDS ( NOTE 24 )

RIGHT-OF-USE ASSETS ( NOTE 6 )

11 unchanged sentences

Deferred revenue 17,802 11,112

Distributions payable, Timber Funds 6,341 —

Other current liabilities 25,863 29,234

Total current liabilities 231,721 91,135

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, EXCLUDING TIMBER FUNDS ( NOTE 8 )

LONG-TERM DEBT, NET, EXCLUDING TIMBER FUNDS ( NOTE 10 )

1,242,819 1,300,336

LONG-TERM DEBT, NET OF DEFERRED FINANCING COSTS, TIMBER FUNDS ( NOTE 8 )

LONG-TERM DEBT, NET, TIMBER FUNDS ( NOTE 10 )

PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 20 )

5 unchanged sentences

REDEEMABLE OPERATING PARTNERSHIP UNITS ( NOTE 7 ) 3,315,741 and 4,428,900 Units outstanding, respectively

133,823 130,121

General partners’ capital 17,872 15,454

11 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL

(Dollars in thousands, except share data)

(Thousands of dollars, except unit data)

Comprehensive Income (Loss) Noncontrolling Interests in Consolidated Affiliates Total Capital

1 unchanged sentence

Balance, December 31, 2018 $ 15,566 $ 1,541,068 $ 239 $ 97,677 $ 1,654,550

Cumulative-effect adjustment due to adoption of ASU No.

2018-02 7 704 ( 711 ) — —

Net income 591 58,514 — 8,573 67,678

9 unchanged sentences

Balance, December 31, 2019 $ 14,712 $ 1,456,471 ($ 31,202 ) $ 97,661 $ 1,537,642

Net income 591 58,514 — 8,573 67,678

Issuance of units associated with the merger with Pope Resources 1,724 170,694 — — 172,418

Net income (loss) 376 37,236 — ( 7,828 ) 29,784

Distributions on units ($ 1.08 per unit)

( 1,500 ) ( 148,375 ) — — ( 149,875 )

Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 799

326 32,248 — — 32,574

Issuance of units under incentive stock plans 16 1,573 — — 1,589

1 unchanged sentence

Repurchase of units ( 47 ) ( 4,710 ) — — ( 4,757 )

Adjustment of Redeemable Operating Partnership Units ( 239 ) ( 23,625 ) ( 23,864 )

Acquisition of noncontrolling interests in consolidated affiliates — — — 333,366 333,366

Conversion of units to common shares 5 491 — — 496

Actuarial change and amortization of pension and postretirement plan liabilities — — ( 925 ) — ( 925 )

2 unchanged sentences

Distributions to noncontrolling interests in consolidated affiliates — — — ( 12,643 ) ( 12,643 )

Noncontrolling interests in consolidated affiliates redemption of unit equivalents — — — ($ 28,403 ) ( 28,403 )

Balance, December 31, 2020 $ 15,454 $ 1,529,948 ($ 71,345 ) $ 388,588 $ 1,862,645

Issuance of units associated with the merger with Pope Resources 1,724 170,694 — — 172,418

Net income (loss) 376 37,236 — ( 7,828 ) 29,784

RAYONIER, L.P.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (CONTINUED)

(Thousands of dollars, except unit data)

Comprehensive Income (Loss) Noncontrolling Interests in Consolidated Affiliates Total Capital

General Partners’ Capital Limited Partners’ Capital

Balance, December 31, 2020 $ 15,454 $ 1,529,948 ($ 71,345 ) $ 388,588 $ 1,862,645

Net income 1,571 155,495 — 53,421 210,487

Distributions on units ($ 1.08 per unit)

( 1,583 ) ( 156,666 ) — — ( 158,249 )

Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 799

Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 2.5 million

2,330 230,703 — — 233,033

3 unchanged sentences

Adjustment of Redeemable Operating Partnership Units ( 444 ) ( 43,934 ) — — ( 44,378 )

Acquisition of noncontrolling interests in consolidated affiliates — — — 333,366 333,366

Conversion of units to common shares 407 40,269 — — 40,676

Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — 9,690 9,690

Fund II carried interest incentive fee — — — ( 3,807 ) ( 3,807 )

Disposition of noncontrolling interests in consolidated affiliates — — — ( 255,486 ) ( 255,486 )

Actuarial change and amortization of pension and postretirement plan liabilities — — 12,476 — 12,476

8 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

As of December 31,

(Dollars in thousands)

For the Years Ended December 31,

(Thousands of dollars)

2021 2020 2019

9 unchanged sentences

Gain on sale of large disposition of timberlands ( 44,784 ) ( 28,655 ) —

Gain on Fund II timberland dispositions ( 51,522 ) — —

Gain on sale of Timber Funds III & IV ( 3,675 ) — —

Fund II carried interest incentive fee ( 3,807 ) — —

Other 9,456 ( 11,100 ) ( 4,999 )

10 unchanged sentences

Net proceeds from large disposition of timberlands 54,682 115,666 —

Net proceeds from sale of Timber Funds III & IV 31,014 — —

Net proceeds from Fund II timberland dispositions 154,740 — —

Cash consideration for merger with Pope Resources, net of cash acquired — ( 231,068 ) —

6 unchanged sentences

Proceeds from the issuance of units under incentive stock plan 5,922 1,368 1,260

Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs 230,826 32,574 —

Repurchase of units to pay withholding taxes on vested incentive stock awards ( 1,617 ) ( 1,605 ) ( 4,250 )

Debt issuance costs ( 4,846 ) ( 2,483 ) ( 132 )

Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs 32,574 — —

Repurchase of units made under repurchase program — ( 3,152 ) ( 8,430 )

2 unchanged sentences

Distributions to noncontrolling interests in consolidated affiliates ( 108,956 ) ( 12,643 ) ( 9,161 )

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 27,002 ( 79,649 ) ( 193,714 )

Make-whole fee on NWFCS debt prepayment ( 6,234 ) — —

CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ( 16,311 ) 27,002 ( 79,649 )

EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 889 ) ( 19 ) ( 1,700 )

2 unchanged sentences

Balance, beginning of year 87,482 69,968 156,454

Balance, end of period $ 87,482 $ 69,968 $ 156,454

Balance, end of year $ 369,139 $ 87,482 $ 69,968

See Notes to Consolidated Financial Statements.

RAYONIER, L.P.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

For the Years Ended December 31,

(Thousands of dollars)

2021 2020 2019

11 unchanged sentences

For additional information on patronage payments, see Note 10 — Debt .

See Note 7 - Noncontrolling Interests and Note 10 - Debt for further information.

11 unchanged sentences

Rayonier, L.P.'s Consolidated Financial Statements include wholly-owned subsidiaries and entities in which the Operating Partnership has a controlling interest.

For additional information regarding our consolidated entities with a noncontrolling interest component, see Note 6 - Non controlling Interests for additional information.

For additional information regarding our consolidated entities with a noncontrolling interest component, see Note 7 - Noncontrolling Interests .

All intercompany balances and transactions are eliminated.

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, which constituted the transfer of all or substantially all of Rayonier’s assets under the terms of the Indenture, dated March 5, 2012 (as supplemented and amended from time to time, the “Indenture”), between Rayonier, as issuer, the subsidiary guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, Rayonier, L.P.

expressly assumed all the obligations of Rayonier under the Indenture, including obligations with respect to the outstanding $ 325 million in aggregate principal amount of 3.750 % Senior Notes due 2022 (the “2022 Notes”) issued thereunder.

On May 7, 2020, Rayonier, Rayonier, L.P., the subsidiary guarantors party thereto and the Trustee entered into the Third Supplemental Indenture, pursuant to which (1) Rayonier, L.P.

succeeded to and became substituted for the Company under the Indenture and 2022 Notes and expressly assumed all the obligations of the Company under the Indenture, including obligations with respect to the 2022 Notes, and (2) Rayonier agreed to irrevocably, fully and unconditionally guarantee, jointly and severally, the obligations of Rayonier, L.P.

under Indenture, including the 2022 Notes.

On May 8, 2020, Rayonier, L.P.

acquired Pope Resources and became the general partner of Pope Resources.

The acquisition occurred pursuant to a series of mergers (the “Mergers”) provided for in Agreement and Plan of Merger, dated as of January 14, 2020, as amended by Amendment No.

1, dated as of April 1, 2020 (as amended, the “Merger Agreement”), by and among Rayonier Inc., Rayonier, L.P., Rayonier Operating Company LLC, Rayonier Operating Company Holdings, LLC, Pacific GP Merger Sub I, LLC, Pacific GP Merger Sub II, LLC, Pacific LP Merger Sub III, LLC, Pope Resources, Pope EGP, Inc.

and Pope MGP, Inc.

As of December 31, 2021, the Company owned a 97.8 % interest in the Operating Partnership, with the remaining 2.2 % interest owned by limited partners of the Operating Partnership.

1 unchanged sentence

has exclusive control of the day-to-day m anagement of the Operating Partnership.

The Contribution was accounted for as a change in reporting entity between entities under common control in accordance with ASC 250-10-45-21.

A change in reporting entity requires retrospective application for all periods as if the Contribution had been in effect since inception of common control.

As a result, the consolidated financial statements and notes thereto for Rayonier, L.P.

in this combined report have been prepared as if the change in reporting entity occurred on January 1, 2018.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

The effect of the change in reporting entity on Rayonier, L.P.’s operating income, net income attributable to Rayonier, L.P.

and per unit amounts for the twelve months ended December 31, 2020, 2019, and 2018 are presented below (in thousands, except per unit amounts):

2020 2019 2018

Operating income — — —

Net income attributable to Rayonier, L.P.

(a) ($ 14,384 ) ($ 14,384 ) ($ 14,384 )

Basic earnings per unit attributable to Rayonier, L.P.

($ 0.11 ) ($ 0.11 ) ($ 0.11 )

Diluted earnings per unit attributable to Rayonier, L.P.

($ 0.11 ) ($ 0.11 ) ($ 0.11 )

(a) The effect of the change in net income attributable to Rayonier, L.P.

is due to the interest expense and guarantee fees associated with the 2022 Notes.

MERGER WITH POPE RESOURCES

On May 8, 2020, we completed the acquisition of Pope Resources.

Therefore, Pope Resources’ balance sheet and results of operations are included in our consolidated financial statements from and after the date of acquisition.

See Note 2 - Merger with Pope Resources , Note 8 - Debt , and Note 21 - Charges for Integration and Restructuring for further information pertaining to the merger.

As a result of the Mergers, we have revised our reportable business segments, adding one additional segment, Timber Funds.

Please see Note 7 - Segment and Geographical information for more information about our revised business segments.

DISPOSITION OF TIMBER FUNDS

Upon completion of the Pope Resources merger in May 2020, we became the manager of three private equity timber funds, Fund II, Fund III, and Fund IV, consisting of 141,000 acres in the Pacific Northwest, and obtained ownership interests in the Funds of 20 %, 5 %, and 15 %, respectively.

On July 21, 2021, we sold the rights to manage Fund III and IV, as well as our ownership interests in both funds to BTG Pactual’s Timberland Investment Group (TIG) for an aggregate sales price of $ 35.9 million.

Due to the sale of our rights to manage Fund III and Fund IV, we determined that we no longer have the power to direct the activities that most significantly impact the success of Fund III and Fund IV.

As a result, Timber Fund III and IV balance sheets and results of operations are only included in our consolidated financial statements through the date of the sale.

For additional information on Fund III and IV, see Note 7 - Noncontrolling Interests .

As of December 31, 2021, we continue to manage and maintain a 20 % ownership interest in Fund II, which is scheduled to terminate in March 2023.

Prior to the termination of Fund II, the remaining capital will be distributed to Fund II investors.

For additional information regarding Fund II, see Note 7 - Noncontrolling Interests , Note 8 - Variable Interest Entities and Note 24 - Restricted Cash .

RECLASSIFICATIONS

Effective April 1, 2020, we changed the composition of our Rural and Timberland & Non-Strategic Real Estate sales categories to better align with the way management internally evaluates real estate sales.

The Rural category now includes all real estate sales (excluding development sales) representing a demonstrable premium above timberland value.

The Timberland & Non-Strategic category now includes all real estate sales representing little to no premium to timberland value.

This category consists primarily of sales of property that management views as non-strategic to our long-term portfolio as well as sales of property for capital allocation purposes that do not fit the definition of a Large Disposition.

All prior period amounts have been reclassified to reflect the new composition of these two sales categories.

The Improved Development, Unimproved Development and Large Disposition categories remain unchanged, and this reclassification had no impact on overall segment results.

See Note 3 - Revenue .

Effective for year ended December 31, 2021, we have updated our presentation for the employee benefit pension plan to include a separate line item “Expenses paid,” which was previously reported as part of “Actuarial loss (gain).” “Actuarial loss (gain)” now solely represents changes resulting from adjustments to actuarial assumptions and estimates.

The other categories of the pension plan remain unchanged, and this reclassification had no impact on the total projected benefit obligation.

See Note 20 - Employee Benefit Plans .

USE OF ESTIMATES

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There are risks inherent in estimating and therefore actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and other highly liquid investments with original maturities of three months or less.

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash on hand and other highly liquid investments with original maturities of three months or less.

ACCOUNTS RECEIVABLE

Accounts receivable are primarily amounts due to us for the sale of timber and are presented net of an allowance for doubtful accounts.

HBU real estate properties that are expected to be sold within one year are included in inventory at the lower of cost or net realizable value.

Higher and better use (“HBU”) real estate properties that are expected to be sold within one year are included in inventory at the lower of cost or net realizable value.

HBU properties that are expected to be sold after one year are included in a separate balance sheet line entitled “Higher and Better Use Timberlands and Real Estate Development Investments.” See below for additional information.

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Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.

To estimate the incremental borrowing rate, we derive the rate by applying a spread over U.S.

Treasury rates with similar durations to our lease payments.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term.

Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

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A discounted cash flow approach using market participant assumptions of the expected cash flows and discount rate are used to estimate the fair value of the asset group.

Investments are carried at fair value based on quoted prices in their active market with both the realized and unrealized gains and losses as well as interest and dividends reported in “Interest and other miscellaneous income, net.” Investments at December 31, 2019 consisted of marketable equity securities and none were held at December 31, 2020.

RAYONIER INC.

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Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

See No te 28 – Related Party.

See Note 28 – Related Party.

BUSINESS COMBINATION

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The excess of the purchase price over the fair value of identifiable assets and liabilities is recorded as goodwill.

The preliminary allocation of purchase price in a business combination uses significant assumptions and estimates.

The allocation of purchase price in a business combination uses significant assumptions and estimates.

Critical estimates include, but are not limited to, future expected cash flows, including revenues and expenses, and applicable discount rates.

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The measurement period ends the sooner of one year from the acquisition date or when we receive the information we were seeking about facts and circumstances that existed as of the acquisition date or learn that more information is not obtainable.

See Note 2 – Merger with Pope Resources

In 2021, we finalized the purchase price allocation related to the Pope Resources merger.

S ee Note 2 – Merger with Pope Resources for more information.

REVENUE RECOGNITION

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We generally satisfy performance obligations within a year of entering into a contract and therefore have applied the disclosure exemption found under ASC 606-10-50-14.

Unsatisfied performance obligations as of December 31, 2020 are primarily due to advances on stumpage contracts and unearned hunt license revenue.

Unsatisfied performance obligations as of December 31, 2021 are primarily due to advances on stumpage contracts, unearned license revenue and post-closing obligations on real estate sales.

These performance obligations are expected to be satisfied within the next twelve months.

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Payment is generally due upon contract execution.

The New Zealand Emissions Trading Scheme (“NZ ETS”) incentivizes the lowering of greenhouse gas emissions by providing carbon credits to certain organizations that lower carbon emission.

The New Zealand Emissions Trading Scheme (“NZ ETS”) incentivizes the lowering of greenhouse gas emissions by providing carbon credits to certain organizations that lower carbon emissions.

Our New Zealand segment regularly sells carbon credits and recognizes income as they are sold to other carbon emitting entities.

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We recognize revenue on sales of real estate generally at the point in time when cash has been received, the sale has closed and control has passed to the buyer.

A deposit of 5 % is generally required at the time a purchase and sale agreement is executed, with the balance due at closing.

A deposit of 2 % to 5 % is generally required at the time a purchase and sale agreement is executed, with the balance due at closing.

On sales of development real estate containing future performance obligations, revenue is recognized using the cost input method based on development costs incurred to date relative to the total development costs allocated to the contract with the customer.

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COST OF SALES

Cost of sales associated with timber operations primarily include the cost basis of timber sold (depletion) and logging and transportation costs (cut and haul).

Cost of sales associated with timber operations primarily include the cost basis of timber sold (depletion), logging and transportation costs (cut and haul) and ocean freight and demurrage costs (port and freight).

Depletion includes the amortization of capitalized costs (site preparation, planting and fertilization, real estate taxes, timberland lease payments and certain payroll costs).

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See Note 22 — Income Taxes for additional information.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

We adopted Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments-Credit Losses (Topic 326) on January 1, 2020, with no material impact on the consolidated financial statements.

On March 2, 2020, the SEC adopted amendments to the financial disclosure requirements for guarantors and issuers of guaranteed securities, as well for affiliates whose securities collateralize a registrant’s securities.

The amendments revise Rules 3-10 and 3-16 of Regulation S-X, and relocate part of Rule 3-10 and all of Rule 3-16 to the new Article 13 in Regulation S-X, which is comprised of new Rules 13-01 and 13-02.

We early adopted the requirements of the amendments on April 1, 2020, which included replacing guarantor condensed consolidating financial information with summarized financial information for the consolidated obligor group (Parent, Issuer, and Guarantor Subsidiaries) as well as no longer requiring guarantor cash flow information, financial information for non-guarantor subsidiaries, and a reconciliation to the consolidated results.

We adopted Accounting Standards Update (“ASU”) No 2018-14, Compensation - Retirement Benefits - Defined Benefits Plans - General (Subtopic 715-20) on October 1, 2020, with no material impact on the consolidated financial statements.

We adopted Accounting Standards Update (“ASU”) No 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes on October 1, 2020, with no material impact on the consolidated financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

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2020-04, Reference Rate Reform (Topic 848) , which provides optional guidance to ease the potential burden in accounting due to reference rate reform.

The guidance in this update provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022.

We are currently evaluating our contracts and the optional expedients provided by the new standard.

ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur.

During Q2 2020, we elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

Application of these expedients preserves the presentation of derivatives consistent with past presentation.

We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

In August 2020, the FASB issued ASU 2020-06, Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging–Contracts in Entity's Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity's Own Equity , which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options , that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.

The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted.

The pronouncement eliminates the requirement that contracts legally permitting settlement in registered shares be classified as temporary equity.

As a result, Redeemable Operating Partnership Units may be classified as permanent partners’ capital in the Operating partnership’s accompanying balance sheets and the related noncontrolling interest as permanent equity in the accompanying balance sheets of Rayonier, Inc.

However, the corresponding SEC guidance on equity classification

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

has remained unchanged.

We will continue to monitor any developments in this area and will adopt this pronouncement upon agreement in guidance.

SUBSEQUENT EVENTS

We have evaluated events occurring from December 31, 2020 to the date of issuance of these Consolidated Financial Statements for potential recognition or disclosure in the consolidated financial statements.

No events were identified that warranted recognition or disclosure.

On January 3, 2022, we drew $ 200.0 million on our Revolving Credit Facility.

On January 4, 2022, we repaid the $ 325.0 million Senior Notes due 2022 with $ 125.0 million of cash and the $ 200.0 million previously drawn on the Revolving Credit Facility.

We then made a $ 200.0 million draw on our 2021 Incremental Term Loan Facility and simultaneously repaid the outstanding principal on our Revolving Credit Facility.

The periodic interest rate on the 2021 Incremental Term Loan agreement is subject to a pricing grid based on our leverage ratio, as defined in the credit agreement.

As of February 25, 2022, the periodic interest rate on the the 2021 Incremental Term Loan is LIBOR plus 1.55 %.

Monthly payments of interest only are due on this loan through maturity.

See Note 10 - Debt for additional information.

On February 1, 2022, our $ 200.0 million notional forward-starting interest rate swap matured into an active interest rate swap.

This interest rate swap will fix the cost of the 2021 Incremental Term Loan Facility over its seven-year term.

We estimate the effective interest rate on the 2021 Incremental Term Loan Facility to be approximately 1.5 % after consideration of interest rate swaps and estimated patronage refunds.

MERGER WITH POPE RESOURCES

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and Rayonier, L.P.

acquired Pope Resources in connection with the Mergers.

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.

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Pope Resources also managed and co-invested in three private equity timber funds and developed and sold real estate properties.

The merger added approximately 124,000 acres of high-quality, predominantly Douglas-fir timberlands to our Pacific Northwest timberland portfolio as well as a private equity timber fund business with three funds comprising approximately 141,000 acres.

Additionally, we believe the Mergers augmented our higher-and-better-use real estate pipeline with rural and conservation land sale opportunities and high-potential improved development projects in the West Puget Sound area.

Under the merger agreement, each outstanding unit representing limited partnership interests of Pope Resources was, at the option of its holder, exchanged for either:

• 3.929 shares of Rayonier Inc.

• 3.929 units representing limited partnership interests of Rayonier, L.P.

• $ 125.00 in cash

Holders of Pope Resources units who did not make a valid election received shares of Rayonier common stock.

The elections were subject to proration to ensure that the aggregate amount of Rayonier shares and Rayonier, L.P.

units, on the one hand, and cash, on the other hand, issued in the merger equaled the amounts issued as if every Pope Resources unit converted into merger consideration received 2.751 shares of Rayonier common stock or Rayonier, L.P.

units and $ 37.50 in cash.

Upon consummation of the merger, all outstanding Pope Resources restricted units were converted into equivalent equity awards with respect to Rayonier common shares.

Pope Resources directors and some executive employees of Pope Resources held restricted Pope Resources units that were subject to accelerated vesting in connection with the merger.

Since a portion of these Pope Resources units relate to services rendered to Pope Resources prior to the merger, a portion of the replacement Rayonier restricted stock awards’ fair value is included in the consideration transferred.

See additional details about the replacement restricted stock awards in Note 19 — Incentive Stock Plans .

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

The following table summarizes the total consideration transferred by Rayonier in the merger (dollars in thousands, except per share and per unit data):

The total purchase price was as follows:

Cash consideration $ 247,318

Pope Resources units outstanding as of May 8, 2020 4,366,636

Pope Resources units held by us ( 114,400 )

Units outstanding, net 4,252,236

Cash consideration (per Pope Resources unit) $ 37.50

Cash consideration for elections $ 159,463

General partner interest 10,000

Repayment of Pope Resources debt 65,943

Prepayment penalty and accrued interest on Pope Resources’ debt 2,275

Closing costs paid on behalf of Pope Resources 9,637

Cash consideration transferred $ 247,318

Equity consideration 172,640

Rayonier common shares issued 7,181,071

Rayonier share price (a) $ 24.01

Equity consideration for elections $ 172,418

Pope Resources replacement awards (b)(c) 222

Equity consideration transferred $ 172,640

Redeemable Operating Partnership Unit consideration 106,752

Redeemable Operating Partnership Units issued 4,446,153

Rayonier share price (a) $ 24.01

Redeemable Operating Partnership Unit consideration transferred $ 106,752

Fair value of Pope Resources units held by us (d) $ 11,211

Total consideration $ 537,921

(a) The closing price of Rayonier common stock on the NYSE on May 7, 2020.

(b) See Note 19 — Incentive Stock Plans for additional details.

(c) Represents the fair value of Rayonier replacement restricted stock awards for restricted Pope Resources units held by employees that relate to pre-merger services rendered to Pope Resources.

(d) Based on the closing price of Pope Resources units on the NASDAQ on May 7, 2020.

The following table contains the amounts of cash transferred in the merger and net cash consideration shown in the Consolidated Statements of Cash Flows for the year ended December 31, 2020:

December 31, 2020

Cash consideration transferred $ 247,318

Cash assumed in merger ( 16,250 )

Net cash consideration shown in the Consolidated Statements of Cash Flows $ 231,068

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 $ 17.2 million of merger-related costs that were expensed during the year ended December 31, 2020.

See Note 27 — Charges for Integration and Restructuring for descriptions of the components of merger-related costs.

The acquisition of Pope Resources was accounted for as a business combination under ASC 805, Business Combinations , (“ASC 805”).

Pursuant to ASC 805, we recorded an allocation of the assets acquired and liabilities assumed in the merger with Pope Resources based on their fair values as of May 8, 2020.

We completed our assessment of the fair value of the assets acquired and liabilities assumed within the one-year period from the date of acquisition.

We recorded measurement period adjustments due to additional information received primarily related to higher and better use timberlands and real estate development investments, as well as timber and timberlands.

As a result of refinements to the 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.

Additionally, refinements to the purchase price allocation resulted in an overall increase of $ 1.1 million to timber and timberlands, with the valuation of core timberlands decreasing by $ 15.5 million and Timber Funds timber and timberlands increasing by $ 16.6 million from the preliminary purchase price allocation reported in Note 2 - Merger with Pope Resources in our 2020 Form 10-K.

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

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 changes to the recorded values that occur in subsequent periods.

Rather, we will recognize any changes to the recorded values 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 changes to recorded values, calculated as if the accounting had been completed at the acquisition date.

Our consolidated financial statements as of and for the year ended December 31, 2020, include results of operations for Pope Resources from May 8, 2020 through December 31, 2020.

As a result of refinements to timberlands and property, plant and equipment preliminary recorded values, we recognized the following changes in depletion and depreciation in the fourth quarter of 2020:

Three months ended December 31, 2020

Pacific Northwest Timber Real Estate Timber Funds Corporate Total

Depletion $ 2,412 — ($ 1,000 ) — $ 1,412

Depreciation — 506 — 41 547

As a result of refinements to timberlands preliminarily recorded values, we recognized the following decreases in depletion expense during the year ended December 31, 2021:

Year ended December 31, 2021

Pacific Northwest Timber Timber Funds Total

Depletion (a) ($ 182 ) ($ 1,202 ) ($ 1,384 )

Total ($ 182 ) ($ 1,202 ) ($ 1,384 )

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, real property, higher and better use timberlands and real estate development investments, environmental liabilities 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.

(a) Pacific Northwest Timber includes an immaterial increase in depletion expense related to the year ended December 31, 2020.

Timber Funds includes an increase in depletion expense of approximately $ 0.1 million related to the year ended December 31, 2020.

The fair values of the assets acquired and liabilities assumed were determined using the income, cost or market approaches.

The fair value measurements 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 12 — Fair Value Measurements for further information on the fair value hierarchy.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

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 timberlands in our Pacific Northwest 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 and timberlands in our Timber Funds segment.

Market Approach — Estimates fair value for an asset based on values of recent comparable transactions.

This approach was primarily used to value 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):

The final allocation of purchase price to the identifiable assets acquired and liabilities assumed is as follows:

Core Timberlands Timber Funds Total

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Property, plant and equipment 11,616 — 11,616

Other assets 4,403 — 4,403

Other assets (a) 3,737 2,194 5,931

Total identifiable assets acquired $ 559,273 $ 462,184 $ 1,021,457

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Long-term debt 53,502 35,759 89,261

Long-term environmental and natural resource damage liabilities 10,748 — 10,748

Other non-current liabilities (a) 2,009 — 2,009

Long-term environmental liabilities 10,748 — 10,748

Other non-current liabilities (b) 2,724 461 3,185

Total liabilities assumed $ 76,530 $ 63,952 $ 140,482

Net identifiable assets $ 482,743 $ 398,232 $ 880,975

noncontrolling interest ( 3,379 ) ( 329,986 ) ( 333,365 )

noncontrolling interests ( 3,816 ) ( 339,238 ) ( 343,054 )

Total net assets acquired $ 478,927 $ 58,994 $ 537,921

(a) Other non-current liabilities includes a $ 2.0 million deferred income tax liability resulting from the preliminary fair value adjustment to Pope Resources’ assets and liabilities.

(a) Other assets includes a $ 1.9 million intangible asset in connection with the Timberland Investment Management business.

(b) Other non-current liabilities includes a $ 3.2 million deferred income tax liability resulting from the fair value adjustment to Pope Resources’ assets and liabilities.

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

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.

In September 2020, fires in Oregon burned approximately 6,700 acres of land owned by ORM Timber Fund II, which we manage and in which we hold a 20 % ownership interest, and approximately 400 acres of land owned by ORM Timber Fund IV, which we manage and in which we hold a 15 % ownership interest.

As a result, we wrote off $ 8.8 million and $ 0.4 million of non-salvageable timber basis in Timber Fund II and Timber Fund IV, of which $ 1.8 million and $ 0.1 million was attributable to Rayonier, respectively.

The amounts of these write-offs are based on preliminary fair value estimates of the underlying basis in the respective Funds’ timberlands and are subject to adjustments, which could be material.

As a result of refinements to the preliminary purchase allocation, value of timber write-offs from the Oregon fires increased by an inconsequential amount.

Once the purchase price allocation is finalized, the amounts of the write-offs may change.

The amount of revenue of Pope Resources included in our Consolidated Statements of Income and Comprehensive Income from the date of the merger to December 31, 2020 is approximately $ 50.8 million.

The net income effect resulting from the merger with Pope Resources for the year ended December 31, 2020 is impracticable to determine, as we immediately integrated Pope Resources into our ongoing operations.

Pursuant to ASC 805, unaudited supplemental pro forma results of operations for the years ended December 31, 2020 and 2019, assuming the acquisition had occurred as of January 1, 2019, are presented below (in thousands, except per share and unit amounts):

Sales $ 890,400 $ 821,500

Net income (loss) attributable to Rayonier Inc.

Net income attributable to Rayonier Inc.

$ 38,411 $ 28,640

Basic earnings (loss) per share attributable to Rayonier Inc.

Basic earnings per share attributable to Rayonier Inc.

$ 0.28 $ 0.21

Diluted earnings (loss) per share attributable to Rayonier Inc.

Diluted earnings per share attributable to Rayonier Inc.

$ 0.28 $ 0.21

Net income (loss) attributable to Rayonier, L.P.

Net income attributable to Rayonier, L.P.

$ 39,658 $ 29,574

Basic earnings (loss) per unit attributable to Rayonier, L.P.

Basic earnings per unit attributable to Rayonier, L.P.

$ 0.28 $ 0.21

Diluted earnings (loss) per unit attributable to Rayonier, L.P.

Diluted earnings per unit attributable to Rayonier, L.P.

$ 0.28 $ 0.21

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(Dollar amounts in thousands unless otherwise stated)

RECLASSIFICATIONS

The Rural category now includes all real estate sales (excluding development sales) representing a demonstrable premium above timberland value.

The Timberland & Non-Strategic category now includes all real estate sales representing little to no premium to timberland value.

All prior period amounts have been reclassified to reflect the new composition of these two sales categories.

The Improved Development, Unimproved Development and Large Disposition categories remain unchanged, and this reclassification had no impact on overall segment results.

NEW REAL ESTATE SALES CATEGORY

Effective September 2020, we added a new Real Estate sales category, “Conservation Easement,” in which we sell the development rights on a property but withhold the rights to grow and harvest timber.

SEGMENT AND GEOGRAPHICAL INFORMATION

Rayonier operates in six reportable segments:

Southern Timber, Pacific Northwest Timber, New Zealand Timber, Timber Funds, Real Estate, and Trading.

Sales between operating segments are made based on estimated fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation.

We evaluate financial performance based on segment operating income (loss) and Adjusted EBITDA.

Asset information is not reported by segment, as we do not produce asset information by segment internally.

Operating income as presented in the Consolidated Statements of Income and Comprehensive Income is equal to segment income.

Certain income (loss) items in the Consolidated Statements of Income and Comprehensive Income are not allocated to segments.

These items, which include interest income (expense), miscellaneous income (expense) and income tax expense, are not considered by management to be part of segment operations and are included under “unallocated interest expense and other.”

Segment information for each of the three years ended December 31 follows:

Sales by Product Line

2021 2020 2019

Southern Timber $ 204,441 $ 191,831 $ 194,111

Pacific Northwest Timber 143,021 120,809 85,414

New Zealand Timber 281,158 202,315 241,861

Timber Funds (a) 199,402 29,557 —

Improved Development 51,713 14,498 5,882

Unimproved Development 37,500 8,426 19,476

Rural 43,088 67,152 47,647

Timberland & Non-Strategic 44 19,255 1,338

Conservation Easements 3,855 3,099 —

Deferred Revenue/Other ( 2,380 ) 888 544

Large Dispositions 56,048 116,027 —

Total Real Estate 189,868 229,345 74,887

Trading 95,364 88,973 115,438

Intersegment eliminations (b) ( 3,657 ) ( 3,676 ) ( 155 )

Total Sales $ 1,109,597 $ 859,154 $ 711,556

(a) The years ended December 31, 2021 and December 31, 2020 include $ 159.1 million and $ 22.7 million, respectively, of sales attributable to noncontrolling interests in Timber Funds.

Included in sales attributable to noncontrolling interests in Timber Funds for the year ended December 31, 2021 is $ 125.4 million from Fund II Timberland Dispositions attributable to noncontrolling interests in Timber Funds.

The year ended December 31, 2021 also includes $ 31.4 million from Fund II Timberland Dispositions attributable to Rayonier.

(b) Primarily consists of the elimination of timberland investment management fees paid to us by the timber funds which are initially recognized as sales and cost of sales within the Timber Funds segment, as well as log marketing fees paid to our Trading segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Operating Income (Loss)

2021 2020 2019

Southern Timber (a) $ 66,111 $ 41,247 $ 57,804

Pacific Northwest Timber 6,827 ( 9,979 ) ( 12,427 )

New Zealand Timber 51,513 29,984 48,035

Timber Funds (b) 63,219 ( 13,195 ) —

Real Estate (c) 112,540 71,951 38,665

Trading 144 ( 462 ) 8

Corporate and other (d) ( 30,579 ) ( 45,158 ) ( 25,058 )

Total Operating Income 269,775 74,388 107,027

Unallocated interest expense and other ( 44,627 ) ( 37,595 ) ( 26,409 )

Total Income before Income Taxes $ 225,148 $ 36,793 $ 80,618

(a) The year ended December 31, 2020 includes $ 6.0 million of timber write-offs resulting from casualty events.

Timber write-offs resulting from casualty events are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of sales.”

(b) The year ended December 31, 2021 includes $ 45.6 million of operating income attributable to noncontrolling interests in Timber Funds.

Included in operating income attributable to noncontrolling interests in Timber Funds for the year ended December 31, 2021 is $ 41.2 million of income from Fund II Timberland Dispositions.

The year ended December 31, 2021 also includes $ 10.3 million of income on Fund II Timberland Dispositions attributable to Rayonier and a $ 7.5 million gain on investment in Timber Funds.

The year ended December 31, 2020 includes $ 11.6 million of operating loss attributable to noncontrolling interests in Timber Funds.

Included in operating loss attributable to noncontrolling interests in Timber Funds for the year ended December 31, 2020 is $ 7.3 million related to timber write-offs resulting from casualty events.

The year ended December 31, 2020 also includes $ 1.8 million of timber write-offs resulting from casualty events attributable to Rayonier.

Timber write-offs resulting from casualty events are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of sales.”

(c) The years ended December 31, 2021 and December 31, 2020 include $ 44.8 million and $ 28.7 million, respectively, from Large Dispositions.

(d) The year ended December 31, 2020 includes $ 17.2 million of integration and restructuring costs related to the merger with Pope Resources.

See Note 27 — Charges for Integration and Restructuring for additional details.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Gross Capital Expenditures

2021 2020 2019

Capital Expenditures (a)

Southern Timber $ 35,790 $ 35,505 $ 34,574

Pacific Northwest Timber 16,585 11,367 11,220

New Zealand Timber 20,128 16,595 17,357

Timber Funds (b) 3,271 2,606 —

Real Estate 191 428 204

Corporate and other — — 641

Total capital expenditures $ 75,965 $ 66,500 $ 63,996

Timberland Acquisitions (c)

Southern Timber $ 168,188 $ 24,241 $ 98,927

Pacific Northwest Timber — — 7,340

New Zealand Timber 10,927 454 36,020

Total timberland acquisitions $ 179,115 $ 24,695 $ 142,287

Total Gross Capital Expenditures $ 255,080 $ 91,195 $ 206,283

(a) Excludes timberland acquisitions presented separately in addition to real estate development investments of $ 12.5 million, $ 6.5 million and $ 6.8 million in the years ended December 31, 2021, 2020 and 2019, respectively.

(b) The years ended December 31, 2021 and December 31, 2020 include $ 2.8 million and $ 2.3 million, respectively, of capital expenditures attributable to noncontrolling interests in Timber Funds.

For additional information, see Note 2 - Merger with Pope Resources .

Depreciation,

Depletion and Amortization

2021 2020 2019

Southern Timber $ 54,116 $ 61,827 $ 61,923

Pacific Northwest Timber 50,487 47,107 29,165

New Zealand Timber 27,005 25,030 27,761

Timber Funds (a) 97,943 11,884 —

Real Estate (b) 17,746 53,093 8,229

Corporate and other 1,208 1,427 1,157

Total $ 248,505 $ 200,368 $ 128,235

(a) The year ended December 31, 2021 includes $ 78.9 million of depreciation, depletion, and amortization attributable to noncontrolling interests in Timber Funds.

Included in depreciation, depletion, and amortization attributable to noncontrolling interests in Timber Funds for the year ended December 31, 2021 is $ 66.4 million related to Fund II Timberland Dispositions.

The year ended December 31, 2021 also includes $ 16.6 million related to Fund II Timberland Dispositions attributable to Rayonier.

The year ended December 31, 2020 includes $ 10.3 million of depreciation, depletion and amortization attributable to noncontrolling interests in Timber Funds.

(b) The years ended December 31, 2021 and December 31, 2020 include $ 9.8 million and $ 35.4 million, respectively, from Large Dispositions.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Non-Cash Cost of Land and Improved Development

2021 2020 2019

Timber Funds (a) $ 20,239 — —

Real Estate (b) 25,070 82,008 12,565

Total $ 45,309 $ 82,008 $ 12,565

(a) The year ended December 31, 2021 includes $ 20.2 million of non-cash cost of land and improved development from Fund II Timberland Dispositions, of which $ 16.2 million was attributable to noncontrolling interests in Timber Funds and $ 4.0 million was attributable to Rayonier.

(b) The years ended December 31, 2021 and December 31, 2020 include $ 0.1 million and $ 51.6 million, respectively, from Large Dispositions.

Geographical Operating Information

Sales Operating Income Identifiable Assets

2021 2020 2019 2021 2020 2019 2021 2020

United States $ 732,995 $ 567,998 $ 354,395 $ 217,964 $ 44,877 $ 58,945 $ 3,046,707 $ 3,104,916

New Zealand 376,602 291,156 357,161 51,811 29,511 48,082 589,649 623,817

Total $ 1,109,597 $ 859,154 $ 711,556 $ 269,775 $ 74,388 $ 107,027 $ 3,636,356 $ 3,728,733

Contract Balances

23 unchanged sentences

Agency Fee Income — — — — — 1,399 — 1,399

Fund II Timberland Dispositions — — — 156,752 — — — 156,752

Total Non-Timber Sales 24,621 5,917 1,060 157,231 — 1,399 — 190,228

3 unchanged sentences

Timberland & Non-Strategic — — — — 44 — — 44

Conservation Easement — — — — 3,099 — — 3,099

Deferred Revenue/Other (b) — — — — 283 — — 283

Conservation Easements — — — — 3,855 — — 3,855

Deferred Revenue/Other (a) — — — — ( 3,532 ) — — ( 3,532 )

Large Dispositions — — — — 56,048 — — 56,048

15 unchanged sentences

Unimproved Development — — — — 8,426 — — 8,426

Rural (a) — — — — 47,647 — — 47,647

Timberland & Non-Strategic (a) — — — — 1,338 — — 1,338

Deferred Revenue/Other (b) — — — — 544 — — 544

Rural — — — — 67,152 — — 67,152

Timberland & Non-Strategic — — — — 19,255 — — 19,255

Conservation Easements — — — — 3,099 — — 3,099

Deferred Revenue/Other (a) — — — 283 — — 283

Large Dispositions — — — — 116,027 — — 116,027

Total Real Estate Sales — — — — 228,740 — — 228,740

Revenue from Contracts with Customers 191,831 120,809 202,315 26,120 228,740 88,734 — 858,549

Lease Revenue — — — — 605 — — 605

Intersegment — — — 3,437 — 239 ( 3,676 ) —

11 unchanged sentences

Unimproved Development — — — — 19,476 — — 19,476

Rural (a) — — — — 46,280 — — 46,280

Timberland & Non-Strategic (a) — — — — 75,281 — — 75,281

Deferred Revenue/Other (b) — — — — 57 — — 57

Rural — — — — 47,647 — — 47,647

Timberland & Non-Strategic — — — — 1,338 — — 1,338

Deferred Revenue/Other (a) — — — — 544 — — 544

Total Real Estate Sales — — — — 74,887 — — 74,887

2 unchanged sentences

Total Revenue $ 194,111 $ 85,414 $ 241,861 — $ 74,887 $ 115,438 ($ 155 ) $ 711,556

(a) The years ended December 31, 2019 and 2018 reflect the reclassification of certain real estate sales between the Rural and Timberland & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales.

(b) Includes deferred revenue adjustments and marketing fees related to Improved Development sales.

(a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales.

RAYONIER INC.

40 unchanged sentences

In 2021, we acquired approximately 100,000 acres of U.S.

timberland located in Alabama, Georgia, and Louisiana through three transactions for an aggregate value of $ 24.2 million.

Approximately $ 24.1 million of these acquisitions were acquired using like-kind exchange proceeds while the remaining $ 0.1 million were funded from operating cash flow.

timberland located in Florida, Georgia, and Texas through seven transactions for an aggregate value of $ 168.2 million, which were funded from operating cash flow, proceeds from the sale of the Timber Funds business and use of the Company’s at-the-market equity offering program.

Additionally, during 2021, we acquired approximately 3,000 acres of timberland (including approximately 1,000 acres of leased land) in New Zealand for approximately $ 10.9 million.

1 unchanged sentence

In 2020, we acquired approximately 13,000 acres of U.S.

timberland located in Florida, Georgia, Texas, and Washington through sixteen transactions for an aggregate value of $ 106.3 million.

Approximately $ 29.8 million of these acquisitions were acquired using like-kind exchange proceeds while the remaining $ 76.5 million were funded from operating cash flow and the use of our revolving credit facility.

timberland located in Alabama, Georgia, and Louisiana through three transactions for an aggregate value of $ 24.2 million.

Approximately $ 24.1 million of these acquisitions were acquired using like-kind exchange proceeds while the remaining $ 0.1 million were funded from operating cash flow.

Additionally, during 2020, we acquired approximately 2,000 acres of timberland (including approximately 2,000 acres of leased land) in New Zealand for approximately $ 0.5 million.

These acquisitions were funded from operating cash flow.

See Note 8 - Debt for additional information on our revolving credit facility and the New Zealand subsidiary’s working capital facility.

RAYONIER INC.

5 unchanged sentences

The following table summarizes the timberland acquisitions for the years ended December 31, 2021 and 2020:

Cost Acres (a) Cost Acres

2021 2020 (a)

Cost Acres Cost Acres

Alabama — — $ 100 56

3 unchanged sentences

Texas 98,507 51,568 — —

Washington — — 7,340 2,260

New Zealand 10,927 2,676 454 2,378

Total Acquisitions $ 179,115 103,173 $ 24,695 15,012

(a) Excludes acres and costs related to Pope Resources, for more information on assets and liabilities acquired see Note 2 - Merger with Pope Resources .

(a) Excludes acres and costs related to the Pope Resources merger.

For more information on assets and liabilities acquired see Note 2 - Merger with Pope Resources .

TIMBERLAND LEASES

9 unchanged sentences

Forestry rights terminate either upon the issuance of a termination notice (which can last 35 to 45 years), completion of harvest, or a specified termination date.

As of December 31, 2020, the New Zealand subsidiary has two CFLs comprising 9,000 gross acres or 8,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded, as well as two fixed-term CFLs comprising 3,000 gross acres or 2,000 net plantable acres expiring in 2062.

As of December 31, 2021, the New Zealand subsidiary has three CFLs comprising 11,000 gross acres or 9,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded, as well as two fixed-term CFLs comprising 3,000 gross acres or 2,000 net plantable acres expiring in 2062.

Additionally, the New Zealand subsidiary has two forestry rights comprising 32,000 gross acres or 6,000 net plantable acres under termination notice that are being relinquished as harvest activities are concluded.

32 unchanged sentences

Supplemental Cash Flow Information Related to Leases:

2021 2020 2019

Cash paid for amounts included in the measurement of lease liabilities:

5 unchanged sentences

Lessor Lease Information

In the Mergers, we acquired income generating commercial and residential leases primarily concentrated in Port Gamble, Washington.

Commercial and residential leases have non-lease components of taxes, insurance, and common area maintenance that we have elected not to separate under the ASC 842 practical expedient.

Each of these are classified as operating leases.

Buildings subject to operating leases had a preliminary cost of $ 3.5 million and accumulated depreciation of $ 0.2 million at December 31, 2020.

In the Pope Resources merger, we acquired commercial and residential properties primarily concentrated in Port Gamble, Washington, which generate lease income under operating leases.

As of December 31, 2021, properties subject to operating leases had an aggregate cost basis and accumulated depreciation of $ 3.5 million and $ 0.5 million, respectively.

These leases typically range a few years with the option to extend on a case by case basis.

Commercial and residential leases have non-lease components of taxes, insurance and common area maintenance, which we have elected not to separate under the ASC 842 practical expedient.

The following table details our lease income for the years ended December 31, 2021, 2020 and 2019:

Year Ended December 31,

Lease Income Components 2021 2020 2019

20 unchanged sentences

Accordingly, we consolidate the New Zealand subsidiary’s balance sheet and results of operations.

The portions of the consolidated financial position and results of operations attributable to the New Zealand subsidiary’s 23 % noncontrolling interest are reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net loss (income) attributable to noncontrolling interests in consolidated affiliates.” Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary, serves as the manager of the New Zealand subsidiary.

In September 2020, the New Zealand subsidiary made a capital distribution to its partners on a pro rata basis in order to redeem certain equity interests.

A portion of this capital distribution was reinvested by the partners in shareholder loans to the New Zealand subsidiary.

Our capital distribution and portion of the shareholder loan are eliminated in consolidation.

The capital distribution to the minority shareholder and its reinvestment in the shareholder loan resulted in the recording of a noncontrolling interest share redemption of $ 5.1 million and a loan payable by the New Zealand subsidiary in the amount of $ 23.3 million due in 2025 at a fixed interest rate of 2.95 %.

As of December 31, 2020, the outstanding balance on the shareholder loan is $ 24.9 million.

Except for changes in the New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loan since its inception.

See Note 8 - Debt for further information.

The portions of the consolidated financial position and results of operations attributable to the New Zealand subsidiary’s 23 % noncontrolling interest are reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net (income) loss attributable to noncontrolling interests in consolidated affiliates.” Rayonier New Zealand Limited (“RNZ”), a wholly-owned subsidiary, serves as the manager of the New Zealand subsidiary.

The following table sets forth the income attributable to the New Zealand subsidiary’s noncontrolling interests:

Net income attributable to noncontrolling interest in the New Zealand subsidiary $ 4,920 $ 8,573

2021 2020 2019

Net income attributable to noncontrolling interests in the New Zealand subsidiary $ 7,696 $ 4,920 $ 8,573

ORM Timber Fund II, Inc.

1 unchanged sentence

(Fund IV) (Collectively, the “Funds”)

Upon completion of the Mergers, we became manager of three private equity timber funds, Fund II, Fund III, and Fund IV, and obtained ownership interests in the Funds of 20 %, 5 %, and 15 %, respectively.

We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the Funds’ economic success.

Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate the Funds.

Loss attributed to third-party investors is reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net loss (income) attributable to noncontrolling interests in consolidated affiliates.”

The following table sets forth the (loss) attributable to the Funds’ noncontrolling interests:

Net loss attributable to noncontrolling interest in the Funds:

($ 12,221 ) —

Prior to the Mergers, the Funds were formed by ORM LLC for the purpose of generating a return on investment through the acquisition, management, value enhancement and sale of timberland properties.

Each Fund is organized to operate for a specified term from the end of its respective investment period:

10 years for each of Fund

Upon completion of the Pope Resources merger, we became the manager of three private equity timber funds, Fund II, Fund III, and Fund IV, consisting of 141,000 acres in the Pacific Northwest, and obtained ownership interests in the Funds of 20 %, 5 %, and 15 %, respectively.

Prior to the merger with Pope Resources, the Funds were formed by ORM LLC for the purpose of generating a return on investment through the acquisition, management, value enhancement and sale of timberland properties.

Based upon an analysis under the variable interest entity guidance, we determined that we had the power to direct the activities that most significantly impacted the Funds’ economic success.

Therefore, we were considered the primary beneficiary and were required under ASC 810 — Consolidation to consolidate the Funds.

Income attributed to third-party investors is reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net (income) loss attributable to noncontrolling interests in consolidated affiliates.”

On July 21, 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds to BTG Pactual’s Timberland Investment Group (TIG) for an aggregate sales price of $ 35.9 million and recognized in our Consolidated Statements of Income and Comprehensive Income a gain on the sale of $ 3.7 million under the caption of other operating income (expense), net.

As a result, Timber Fund III and IV balance sheets and results of operations are only included in our consolidated financial statements through the date of the sale.

In addition, we completed the liquidation of Fund II timberland assets through three separate transactions during the third and fourth quarters of 2021 for an aggregate sales price of $ 156.8 million and recognized in our Consolidated Statements of Income and Comprehensive Income an aggregate gain on the sales of $ 51.5 million, of which $ 10.3 million was attributable to Rayonier.

This consisted of a 13,000 acre sale in Washington on September 30, 2021 for a sales price and gai n of $ 87.1 million and $ 35.9 million, respectively, a 5,000 acre sale in Oregon on October 5, 2021 for a sales price and gain of $ 37.2 million and $ 11.0 million, respectively, and a 13,000 acre sale in Oregon on November 1, 2021 for a sales price and gain of $ 32.5 million and $ 4.6 million, respectively.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

II and Fund III, and 15 years for Fund IV.

Fund II is scheduled to terminate in March 2023, Fund III is scheduled to terminate in December 2025 and Fund IV is scheduled to terminate in January 2035.

The obligations of each of the Funds do not have any recourse to the Company or the Operating Partnership.

As of December 31, 2021, we continue to manage and maintain a 20 % ownership interest in Fund II, which is scheduled to terminate in March 2023.

Prior to the termination of Fund II, the remaining capital will be distributed to Fund II investors.

We continue to have the power to direct the activities that most significantly impact Fund II’s economic success.

Therefore, we are considered the primary beneficiary and consolidate Fund II under ASC 810 — Consolidation .

The obligations of Fund II do not have any recourse to the Company or the Operating Partnership and the assets of Fund II are not available to satisfy the Company or the Operating Partnership’s liabilities.

Due to Timber Fund II distribution requirements, we classified the portion of proceeds from Fund II Timberland Dispositions attributable to noncontrolling interests as a current asset under the caption “Restricted Cash, Timber Funds” on our Consolidated Balance Sheets.

Additionally, we recognized a current liability under the caption “Distribution payable, Timber Funds” and a corresponding decrease in “Noncontrolling Interests in Consolidated Affiliates” on our Consolidated Balance Sheets.

See Note 1 — Summary of Significant Accounting Policies , Note 8 — Variable Interest Entities and Note 2 4 — Restricted Cash for additional information.

The following table sets forth the income (loss) attributable to the Funds’ noncontrolling interests:

2021 2020 2019

Net income (loss) attributable to noncontrolling interests in the Funds:

$ 45,124 ($ 12,221 ) —

Timber Fund II Carried Interest Incentive Fees

As a performance incentive to us as the manager and general partner of Timber Fund II, the Fund agreement provides for a “carried interest,” permitting us to receive a greater allocable share of the Fund’s earnings from investments relative to our capital contributions and correspondingly reducing the noncontrolling interests’ share of those earnings.

After distributions sufficient for the Fund to pay each stockholder a return of 8 % on its average investment and reduce its invested capital balance to zero , we are entitled to receive a 20 % carried interest of any further distributions.

Carried interest is earned to the extent that cumulative investment returns are positive and preferred dividend payment thresholds have been met.

Carried interest is recognized in our Consolidated Statements of Income and Comprehensive Income based on the contractual conditions set forth in the agreements governing the Fund as if the Fund were terminated and liquidated at the reporting date.

In the year ended December 31, 2021, we recognized a gain on Fund II carried interest incentive fees of $ 3.8 million in our Consolidated Statements of Income and Comprehensive Income under the caption of other operating income (expense), net.

Ferncliff Investors

We also acquired in the Mergers an ownership interest in a real estate joint venture entity.

In 2017, Ferncliff Management and Ferncliff Investors were formed for the purpose of raising capital from third parties to invest in an unconsolidated real estate joint venture entity (“joint venture investment”), Bainbridge Landing LLC, to develop a five -acre parcel on Bainbridge Island, Washington into a multi-family community containing apartments and townhomes.

Ferncliff Management, a wholly-owned subsidiary, serves as manager of Ferncliff Investors and holds a 33.33 % equity interest with the remaining ownership interest being held by third-party investors.

We maintain an ownership interest in Ferncliff Investors, a real estate joint venture entity.

In 2017, Ferncliff Management and Ferncliff Investors were formed for the purpose of raising capital from third parties to invest in an unconsolidated real estate joint venture entity, Bainbridge Landing LLC, which is developing a five -acre parcel on Bainbridge Island, Washington into a multi-family community containing apartments and townhomes.

Ferncliff Management is the manager and 33.33 % owner of Ferncliff Investors, with the remaining ownership interest in Ferncliff Investors held by third-party investors.

Ferncliff Investors holds a 50 % interest in Bainbridge Landing LLC, the joint venture entity that owns and is developing the property.

We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact Ferncliff Investors economic success.

Based upon an analysis under the variable interest entity guidance, we have the power to direct the activities that most significantly impact Ferncliff Investor’s economic success.

Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate Ferncliff Investors.

2 unchanged sentences

Ferncliff Investors accounts for its interest in the joint venture entity under the equity method because neither it nor the other member can exercise control over Bainbridge Landing LLC.

Under the equity method, Ferncliff Investors records its share of the net income or loss of Bainbridge Landing LLC.

To date, this activity has been a loss primarily due to depreciation and is included in Other operating expense, net in the Real Estate segment.

The portion of Ferncliff Investors’ loss attributed to third-party investors is shown within the Consolidated Statements of Income and Comprehensive Income under the caption “Net loss (income) attributable to noncontrolling interests in consolidated affiliates.”

The following table sets forth the (loss) attributable to Ferncliff Investors’ noncontrolling interests:

Net (loss) attributable to noncontrolling interest in the Ferncliff Investors:

The Ferncliff Investors joint venture agreement provides for liquidation rights and distribution priorities that are disproportionate to each member’s ownership interest.

Due to the complex nature of cash distributions to members, net income of the joint venture is allocated to members, including us, using the Hypothetical Liquidation at Book Value (HLBV) method.

Under the HLBV method, Ferncliff Investors income or loss is allocated to the members based on the period change in each member’s claim on the book value of net assets, excluding capital contributions and distributions made during the period.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

The following table sets forth the income (loss) attributable to Ferncliff Investors’ noncontrolling interests:

2021 2020 2019

Net income (loss) attributable to noncontrolling interests in Ferncliff Investors:

$ 601 ($ 526 ) —

NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP

7 unchanged sentences

Conversions of redeemable operating partnership units to common shares

Net (Loss) Income attributable to noncontrolling interests in the Operating Partnership 528

( 40,676 ) ( 496 )

Net income attributable to noncontrolling interests in the operating partnership 4,516 528

Other comprehensive income attributable to noncontrolling interests in the operating partnership 1,601 2,540

7 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

SEGMENT AND GEOGRAPHICAL INFORMATION

As a result of the merger with Pope Resources, we have revised our reportable business segments, adding one additional segment, Timber Funds.

The Timber Funds segment represents operations of the three private equity timber funds included in the transaction – Fund II, Fund III and Fund IV (collectively, the “Funds”).

Rayonier owns 20 % of Fund II, 5 % of Fund III, and 15 % of Fund IV and is also the managing member of the Funds.

As discussed in Note 6 - Noncontrolling Interests , the Funds are consolidated into our financial statements.

The Timber Funds segment also includes fee revenue paid to us for managing the Funds, which consists of both fixed components based on invested capital and acres under management as well as variable components related to the harvest volumes of the Funds.

These fees, which also represent an expense in the Timber Funds segment, are eliminated in consolidation.

We now operate in six reportable segments:

Southern Timber, Pacific Northwest Timber, New Zealand Timber, Timber Funds, Real Estate, and Trading.

Sales between operating segments are made based on estimated fair market value, and intercompany sales, purchases and profits (losses) are eliminated in consolidation.

We evaluate financial performance based on segment operating income (loss) and Adjusted EBITDA.

Asset information is not reported by segment, as we do not produce asset information by segment internally.

Operating income as presented in the Consolidated Statements of Income and Comprehensive Income is equal to segment income.

Certain income (loss) items in the Consolidated Statements of Income and Comprehensive Income are not allocated to segments.

Segment information for each of the three years ended December 31 follows:

Sales by Product Line

2020 2019 2018

Southern Timber $ 191,831 $ 194,111 $ 169,995

Pacific Northwest Timber 120,809 85,414 109,832

New Zealand Timber 202,315 241,861 249,014

Timber Funds (a) 29,557 — —

Improved Development 14,498 5,882 8,336

Unimproved Development 8,426 19,476 8,621

Rural (b) 67,152 47,647 46,280

Timberland & Non-Strategic (b) 19,255 1,338 75,281

Conservation Easement 3,099 — —

Deferred Revenue/Other 888 544 57

Large Dispositions 116,027 — —

Total Real Estate 229,345 74,887 138,575

Trading 88,973 115,438 148,814

Intersegment eliminations (c) ( 3,676 ) ( 155 ) ( 92 )

Total Sales $ 859,154 $ 711,556 $ 816,138

(a) The year ended December 31, 2020 includes $ 22.7 million of sales attributable to noncontrolling interest in Timber Funds.

(b) The years ended December 31, 2019 and 2018 reflect the reclassification of certain real estate sales between the Rural and Timberland & Non-Strategic sales categories to better align with the way management internally evaluates real estate sales.

(c) Primarily consists of the elimination of timberland investment management fees paid to us by the timber funds which are initially recognized as sales and cost of sales within the Timber Funds segment, as well as log marketing fees paid to our New Zealand Timber segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales.

VARIABLE INTEREST ENTITIES

ORM Timber Fund II, Inc.

(Fund II), ORM Timber Fund III LLC (Fund III), and ORM Timber Fund IV LLC.

(Fund IV) (Collectively, the “Funds”)

As mentioned in Note 1 — Summary of Significa nt Accounting Policies and Note 7 — Noncontrolling Interests , we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds in July 2021.

As a result, Timber Fund III and IV balance sheets and results of operations are only included in our consolidated financial statements through the date of the sale.

In addition, we completed the liquidation of Fund II timberland assets through three separate transactions during the third and fourth quarters of 2021.

As of December 31, 2021, we continue to maintain a 20 % ownership interest in Fund II, which is scheduled to terminate in March 2023.

Prior to the termination of Fund II, the remaining capital will be distributed to Fund II investors.

We continue to have the power to direct the activities that most significantly impact Fund II’s economic success.

Therefore, we are considered the primary beneficiary and consolidate Fund II under ASC 810 — Consolidation .

For further information on the Funds, see Note 7 — Noncontrolling Interests .

The assets, liabilities and equity of Fund II as of December 31, 2021, were as follows:

Timber Funds 2021

Cash and cash equivalents $ 3,493

Restricted cash, Timber Funds ( Note 24 )

Accounts receivable 9

Intercompany receivable (a) 41

Other current assets 26

Total current assets 9,910

Total assets $ 9,910

Liabilities and Equity:

Accounts payable $ 22

Accrued taxes 32

Distributions payable, Timber Funds (b) 6,341

Other current liabilities (c) 3,546

Total current liabilities 9,941

Funds’ equity ( 31 )

Total liabilities and equity $ 9,910

(a) Includes amounts due from other consolidated entities.

These amounts are eliminated in the Consolidated Balance Sheets.

(b) Represents the portion of proceeds from Fund II Timberland Dispositions required to be distributed to noncontrolling interests.

(c) Includes $ 3.5 million of proceeds from Fund II Timberland Dispositions required to be distributed to other consolidated entities.

These amounts are eliminated in the Consolidated Balance Sheets.

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

Operating Income (Loss)

Ferncliff Investors

We maintain an ownership interest in Ferncliff Investors, a real estate joint venture entity.

Based upon an analysis under the variable interest entity guidance, we have the power to direct the activities that most significantly impact the joint venture’s economic success.

Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate Ferncliff Investors.

For further information on Ferncliff Investors, see Note 7 — Noncontrolling Interests .

The assets, liabilities and equity of Ferncliff Investors as of December 31, 2021, were as follows:

Ferncliff Investors 2021

Cash and cash equivalents $ 1,508

Total current assets 1,508

Total assets $ 1,508

Liabilities and equity:

Total current liabilities $ 472

Total non-current liabilities 2,170

Total liabilities $ 2,642

Ferncliff Investors’ equity ( 1,134 )

Total liabilities and equity $ 1,508

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

EARNINGS PER SHARE AND PER UNIT

Basic earnings per common share (“EPS”) is calculated by dividing net income attributable to Rayonier Inc.

by the weighted average number of common shares outstanding during the year.

Diluted EPS is calculated by dividing net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the operating partnership by the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options, performance shares, restricted shares, restricted stock units and noncontrolling interests in operating partnership units.

The following table provides details of the calculations of basic and diluted earnings per common share of the Company for the three years ended December 31:

2021 2020 2019

Southern Timber (a) $ 41,247 $ 57,804 $ 44,245

Pacific Northwest Timber ( 9,979 ) ( 12,427 ) 8,137

New Zealand Timber 29,984 48,035 62,754

Timber Funds (b) ( 13,195 ) — —

Real Estate (c) 71,951 38,665 76,240

Trading ( 462 ) 8 953

Corporate and other (d) ( 45,158 ) ( 25,058 ) ( 22,261 )

Total Operating Income 74,388 107,027 170,068

Unallocated interest expense and other ( 37,595 ) ( 26,409 ) ( 27,502 )

Total Income before Income Taxes $ 36,793 $ 80,618 $ 142,566

(a) The year ended December 31, 2020 includes $ 6.0 million of timber write-offs resulting from casualty events.

Timber write-offs resulting from casualty events are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of sales.”

(b) The year ended December 31, 2020 includes $ 11.6 million of operating loss attributable to noncontrolling interest in Timber Funds.

Included in operating loss attributable to noncontrolling interest in Timber Funds for the year ended December 31, 2020 is $ 7.3 million related to timber write-offs resulting from casualty events attributable to noncontrolling interest in Timber Funds.

The year ended December 31, 2020 also includes $ 1.8 million of timber write-offs resulting from casualty events attributable to Rayonier.

Timber write-offs resulting from casualty events are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of sales.”

(d) The year ended December 31, 2020 includes $ 17.2 million of integration and restructuring costs related to the merger with Pope Resources.

See Note 21 — Charges for Integration and Restructuring for additional details.

Gross Capital Expenditures

Earnings per common share - basic

Net Income $ 210,487 $ 29,784 $ 67,678

Net income attributable to noncontrolling interests in the operating partnership ( 4,516 ) ( 528 ) —

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

Net income attributable to Rayonier Inc.

$ 152,550 $ 37,084 $ 59,105

Capital Expenditures (a)

Southern Timber $ 35,505 $ 34,574 $ 35,388

Pacific Northwest Timber 11,367 11,220 9,311

New Zealand Timber 16,595 17,357 17,318

Timber Funds (b) 2,606 — —

Real Estate 428 204 284

Corporate and other — 641 24

Total capital expenditures $ 66,500 $ 63,996 $ 62,325

Timberland Acquisitions (c)

Southern Timber $ 24,241 $ 98,927 $ 45,943

Pacific Northwest Timber — 7,340 —

New Zealand Timber 454 36,020 11,665

Total timberland acquisitions $ 24,695 $ 142,287 $ 57,608

Total Gross Capital Expenditures $ 91,195 $ 206,283 $ 119,933

(a) Excludes timberland acquisitions presented separately in addition to real estate development investments of $ 6.5 million, $ 6.8 million and $ 9.5 million in the years 2020, 2019 and 2018, respectively.

(b) The year ended December 31, 2020 includes $ 2.3 million of capital expenditures attributable to noncontrolling interest in Timber Funds.

For additional information, see Note 2 - Merger with Pope Resources .

Denominator for basic earnings per common share - weighted average shares 140,812,882 133,865,867 129,257,202

Basic earnings per common share attributable to Rayonier Inc.:

$ 1.08 $ 0.28 $ 0.46

Earnings per common share - diluted

Net Income $ 210,487 $ 29,784 $ 67,678

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the operating partnership $ 157,066 $ 37,612 $ 59,105

Denominator for basic earnings per common share - weighted average shares 140,812,882 133,865,867 129,257,202

Dilutive effect of:

Stock options 8,727 633 12,209

Performance shares, restricted shares and restricted stock units 416,527 198,955 328,977

Noncontrolling interests in operating partnership units 4,062,725 2,877,447 —

Denominator for diluted earnings per common share - adjusted weighted average shares 145,300,861 136,942,902 129,598,388

Diluted earnings per common share attributable to Rayonier Inc.:

$ 1.08 $ 0.27 $ 0.46

2021 2020 2019

Anti-dilutive shares excluded from computations of diluted earnings per share:

Stock options, performance shares, restricted shares and restricted stock units 149,705 450,551 450,681

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

Depreciation,

Depletion and Amortization

Basic earnings per unit (“EPU”) is calculated by dividing net income available to unitholders of Rayonier, L.P.

by the weighted average number of units outstanding during the year.

Diluted EPU is calculated by dividing net income available to unitholders of Rayonier, L.P.

by the weighted average number of units outstanding adjusted to include the potentially dilutive effect of outstanding unit equivalents, including stock options, performance shares, restricted shares and restricted stock units.

The following table provides details of the calculations of basic and diluted earnings per unit of the Operating Partnership for the three years ended December 31:

2021 2020 2019

Southern Timber $ 61,827 $ 61,923 $ 58,609

Pacific Northwest Timber 47,107 29,165 32,779

New Zealand Timber 25,030 27,761 28,007

Timber Funds (a) 11,884 — —

Real Estate (b) 53,093 8,229 23,566

Corporate and other 1,427 1,157 1,160

Total $ 200,368 $ 128,235 $ 144,121

(a) The year ended December 31, 2020 includes $ 10.3 million of depreciation, depletion and amortization attributable to noncontrolling interest in Timber Funds.

(b) The year ended December 31, 2020 includes $ 35.4 million from a Large Disposition.

Non-Cash Cost of Land and Improved Development

Earnings per unit - basic

Net Income $ 210,487 $ 29,784 $ 67,678

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

Net income available to unitholders $ 157,066 $ 37,612 $ 59,105

Denominator for basic earnings per unit - weighted average units 144,875,607 136,743,314 129,257,202

Basic earnings per unit attributable to Rayonier, L.P.:

$ 1.08 $ 0.28 $ 0.46

Real Estate (a) $ 82,008 $ 12,565 $ 23,553

(a) The ended December 31, 2020 includes $ 51.6 million from a Large Disposition.

Geographical Operating Information

Sales Operating Income Identifiable Assets

Earnings per unit - diluted

Net Income $ 210,487 $ 29,784 $ 67,678

Net (income) loss attributable to noncontrolling interests in consolidated affiliates ( 53,421 ) 7,828 ( 8,573 )

Net income available to unitholders $ 157,066 $ 37,612 $ 59,105

Denominator for basic earnings per unit - weighted average units 144,875,607 136,743,314 129,257,202

Dilutive effect of unit equivalents:

Stock options 8,727 633 12,209

Performance shares, restricted shares and restricted stock units 416,527 198,955 328,977

Denominator for diluted earnings per unit - adjusted weighted average units 145,300,861 136,942,902 129,598,388

Diluted earnings per unit attributable to Rayonier, L.P.

$ 1.08 $ 0.27 $ 0.46

United States $ 567,998 $ 354,395 $ 390,396 $ 44,877 $ 58,945 $ 83,357 $ 3,104,916 $ 2,288,642

New Zealand 291,156 357,161 425,742 29,511 48,082 86,711 623,817 572,354

Total $ 859,154 $ 711,556 $ 816,138 $ 74,388 $ 107,027 $ 170,068 $ 3,728,733 $ 2,860,996

2021 2020 2019

Anti-dilutive unit equivalents excluded from computations of diluted earnings per unit:

Stock options, performance shares, restricted shares and restricted stock units 149,705 450,551 450,681

RAYONIER INC.

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325,000 325,000

Senior Notes due 2031 at a fixed interest rate of 2.75 %

Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of 1.75 % at December 31, 2021

1 unchanged sentence

2020 Incremental Term Loan Facility borrowings due 2025 at a variable interest rate of 2.0 % at December 31, 2020

Revolving Credit Facility borrowings due 2025 at an average variable interest rate of 1.7 % at December 31, 2020

New Zealand subsidiary noncontrolling interest shareholder loan due 2025 at a fixed interest rate of 2.95 %

Northwest Farm Credit Services Credit Facility with quarterly interest-only payments, collateralized by Core Timberlands, with the following tranches (a)

23,588 24,903

New Zealand subsidiary noncontrolling interest shareholder loan due 2026 at a fixed interest rate of 3.64 %

Northwest Farm Credit Services Credit Facility with quarterly interest-only payments, collateralized by Core Timberlands, with the following tranches:

Due 2025 at a fixed interest rate of 6.1 %

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Due 2036 at a fixed interest rate of 5.4 %

Total debt, excluding Timber Funds 1,302,820 1,057,000

Current maturities of long-term debt — ( 82,000 )

Total principal debt, excluding Timber Funds 1,376,107 1,294,903

Fair value adjustments, excluding Timber Funds — 7,917

Unamortized discounts, excluding Timber Funds ( 3,426 ) —

Current maturities of long-term debt, excluding Timber Funds ( 124,965 ) —

Deferred financing costs, excluding Timber Funds ( 4,897 ) ( 2,484 )

Long-term debt, net of deferred financing costs, excluding Timber Funds 1,300,336 973,129

Total long-term debt, excluding Timber Funds 1,242,819 1,300,336

Debt, Timber Funds:

4 unchanged sentences

Fund III Mortgages Payable, collateralized by Fund III timberlands with quarterly interest

payments, as follows (a):

payments, as follows:

Due 2023 at a fixed interest rate of 5.1 %

Due 2024 at a fixed interest rate of 4.5 %

Total debt, Timber Funds 60,189 —

Total principal debt, Timber Funds — 57,380

Fair value adjustments, Timber Funds — 2,809

Deferred financing costs, Timber Funds — ( 10 )

Long-term debt, net of deferred financing costs, Timber Funds 60,179 —

Long-term debt, net of deferred financing costs $ 1,360,515 $ 973,129

Total long-term debt, Timber Funds — 60,179

Total long-term debt $ 1,242,819 $ 1,360,515

(a) See the section below labeled “Long-Term Debt Assumed in the Pope Resources Merger” for additional details.

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Principal payments due during the next five years and thereafter are as follows:

Excluding Timber Funds Timber Funds Total

2022 $ 325,000

2023 — 17,980 17,980

2024 — 14,400 14,400

2025 284,903 — 284,903

Thereafter 800,000

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In April 2020, the maturity date of the Term Credit Agreement was extended from August 5, 2024 to April 1, 2028.

In connection herewith, we recorded deferred financing costs in the amount of $ 0.5 million which are being amortized over the term of the Term Credit Agreement.

In connection therewith, we recorded deferred financing costs in the amount of $ 0.5 million, which are being amortized over the term of the Term Credit Agreement.

The periodic interest rate on the term loan facility is subject to a pricing grid based on our leverage ratio, as defined in the credit agreement.

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We estimate the effective interest rate on the term loan facility to be approximately 3.0 % after consideration of the interest rate swaps and estimated patronage refunds.

For additional information on the our interest rate swaps see Note 16 — Derivative Financial Instruments and Hedging Activities .

For additional information on our interest rate swaps see Note 11 — Derivative Financial Instruments and Hedging Activities .

3.75 % SENIOR NOTES ISSUED MARCH 2012

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Semi-annual payments of interest only are due on these notes through maturity.

See the subsequent events section of Note 1 - Summary of Significant Accounting Policies for information about the repayment of our Senior Notes due 2022.

2.75 % SENIOR NOTES ISSUED MAY 2021

In May 2021, Rayonier, L.P.

issued $ 450 million of 2.75 % Senior Notes due 2031, guaranteed by certain subsidiaries.

Semi-annual payments of interest only are due on these notes through maturity.

The Senior Notes due 2031 were sold at an issue price of 99.195 % of their face value, before underwriters discount.

Our net proceeds after deducting approximately $ 3.9 million of underwriting discounts and expenses, were approximately $ 442.5 million.

The discount and debt issuance costs will be amortized to interest expense over the term of the notes using the effective interest method.

A portion of the proceeds were used to repay $ 250 million outstanding under our 2020 Incremental Term Loan Agreement.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

INCREMENTAL TERM LOAN AGREEMENT

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The periodic interest rate on the incremental term loan agreement is subject to a pricing grid based on our leverage ratio, as defined in the credit agreement.

As of December 31, 2020, the periodic interest rate on the incremental term loan was LIBOR plus 1.900 %.

In June 2021, we entered into a Fourth Amendment to the Credit Agreement which decreased the applicable margin from LIBOR plus 1.900 % to LIBOR plus 1.6500 %.

As a result of the debt modification, approximately $ 0.3 million in third-party expenses have been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous income, net.” In June 2021, we prepaid $ 100 million on the $ 300 million Incremental Term Loan Agreement.

In connection with the partial prepayment, we recognized a loss on early extinguishment of debt of $ 0.1 million, representing the write-off of one-third of the unamortized deferred financing costs.

The loss on early extinguishment of debt has been recorded in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous income, net.” As of December 31, 2021, the periodic interest rate on the incremental term loan was LIBOR plus 1.650 %.

Monthly payments of interest only are due on this loan through maturity.

2 unchanged sentences

For additional information on our interest rate swaps see Note 11 — Derivative Financial Instruments and Hedging Activities .

2020 INCREMENTAL TERM LOAN AGREEMENT

In April 2020, we entered into an Incremental Term Loan Agreement, which provided for the advancement of a five-year $ 250 million senior unsecured incremental term loan facility.

Proceeds from the 2020 Incremental Term Loan Facility were used to fund our acquisition of Pope Resources.

In May 2021, the Incremental Term Loan Agreement was fully repaid.

We recognized a loss on early extinguishment of debt of $ 0.6 million, representing the write-off of unamortized deferred financing costs.

The loss on early extinguishment of debt has been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous income, net.”

2021 INCREMENTAL TERM LOAN AGREEMENT

In June 2021, we entered into an Incremental Term Loan Agreement, which provides us the ability to make an advance of $ 200 million on or before June 1, 2022.

As of December 31, 2021, no advance had been made under this facility.

We will use a future advance of $ 200 million under the 2021 Incremental Term Loan Facility to refinance a portion of the 3.750 % Senior Notes due 2022 on a long-term basis, and as such, have excluded $ 200 million of principal from current maturities of long-term debt, net, in our Consolidated Balance Sheets.

We deferred $ 0.3 million of commitment fees, which are being amortized to interest expense over the term of the access period, through June 1, 2022.

Additionally, we deferred $ 0.2 million in debt issuance costs, which will be amortized to interest expense over the term of the facility, once any future advance is made.

See the subsequent events section of Note 1 - S ummary of Signif icant Accounting Policies information about activity on the 2021 Incremental Term Loan subsequent to December 31, 2021.

REVOLVING CREDIT FACILITY

In June 2021, we amended our Revolving Credit Facility, originally entered into in 2015, with one amendment to the credit agreement:

the amendment decreased the applicable margin from LIBOR plus 1.500 % to LIBOR plus 1.2500 % and extended its maturity date from April 1, 2025 to June 1, 2026.

As a result of the revolver modification, approximately $ 0.3 million in lender fees have been deferred and are being amortized to interest expense over the remaining term of the revolver.

In April 2020, we previously amended our Revolving Credit Facility, with two amendments to the credit agreement:

the first amendment increased the limit on the Revolving Credit Facility from $ 200 million to $ 250 million and extended its maturity date from August 5, 2020 to April 1, 2025, and the second amendment further increased the limit to $ 300 million.

In connection therewith, we recorded deferred financing costs in the amount of $ 1.2 million, which are being amortized over the term of the Revolving Credit Facility.

See Note 25 - Other Assets for additional information about deferred financing costs related to revolving debt.

The periodic interest rate on the revolving credit facility is subject to a pricing grid based on our leverage ratio, as defined in the credit agreement.

As of December 31, 2021, the periodic interest rate on the revolving credit facility was LIBOR plus

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

2020 INCREMENTAL TERM LOAN AGREEMENT

In April 2020, we entered into an Incremental Term Loan Agreement, which provided for the advancement of a five-year $ 250 million senior unsecured incremental term loan facility.

In connection herewith, we recorded deferred financing costs in the amount of $ 0.8 million which are being amortized over the term of the 2020 Incremental Term Loan Facility.

The proceeds from the 2020 Incremental Term Loan Facility were used to fund our acquisition of Pope Resources.

As of December 31, 2020, the periodic interest rate on the incremental term loan was LIBOR plus 1.850 %.

Monthly payments of interest only are due on this loan through maturity.

Following the closing of the incremental term loan, we entered into an interest rate swap transaction to fix the cost of the facility over its 5-year term.

We estimate the effective interest rate on the incremental term loan facility to be approximately 2.3 % after consideration of the interest rate swap and estimated patronage payments.

For additional information on our interest rate swaps see Note 16 — Derivative Financial Instruments and Hedging Activities .

REVOLVING CREDIT FACILITY

In April 2020, we amended our Revolving Credit Facility, originally entered into in 2015, with two amendments to the credit agreement:

In connection herewith, we recorded deferred financing costs in the amount of $ 1.2 million which are being amortized over the term of the Revolving Credit Facility.

The periodic interest rate on the revolving credit facility is subject to a pricing grid based on our leverage ratio, as defined in the credit agreement.

As of December 31, 2020, the periodic interest rate on the revolving credit facility was LIBOR plus 1.500 %, with an unused commitment fee of 0.175 %.

1.250 %, with an unused commitment fee of 0.175 %.

Monthly payments of interest only are due on this loan through maturity.

During the year ended December 31, 2020, we made borrowings of $ 70.0 million and repayments of $ 152.0 million on our Revolving Credit Facility .

During the year ended December 31, 2021, we made no borrowings or repayments on our Revolving Credit Facility .

At December 31, 2021, we had available borrowings of $ 299.1 million under the Revolving Credit Facility, net of $ 0.9 million to secure our outstanding letters of credit.

NEW ZEALAND SUBSIDIARY DEBT

In April 2013, we acquired an additional 39 % interest in our New Zealand subsidiary, bringing our total ownership to 65 %, and as a result, the New Zealand subsidiary’s debt was consolidated effective on that date.

On March 3, 2016, as a result of a capital contribution, our ownership interest in the New Zealand subsidiary increased to 77 %.

See Note 6 - Noncontrolling Interests for further information.

WORKING CAPITAL FACILITY

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The margins are set for the term of the facility.

During the year ended December 31, 2020, the New Zealand subsidiary made no borrowings and repayments on its working capital facility.

During the year ended December 31, 2021, the New Zealand subsidiary made no borrowings or repayments on its working capital facility.

At December 31, 2021, there was no outstanding balance on the working capital facility.

SHAREHOLDER LOAN

SHAREHOLDER LOAN DUE 2025

In September 2020, the New Zealand subsidiary made a capital distribution to its partners on a pro rata basis in order to redeem certain equity interests.

4 unchanged sentences

Except for changes in the New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loan since its inception.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

SHAREHOLDER LOAN DUE 2026

In July 2021, the New Zealand subsidiary made a capital distribution to its partners on a pro rata basis in order to redeem certain equity interests, which was reinvested by the partners in shareholder loans to the New Zealand subsidiary.

Our capital distribution and portion of the shareholder loan are eliminated in consolidation.

The capital distribution to the minority shareholder and its reinvestment in the shareholder loan resulted in the recording of a loan payable by the New Zealand subsidiary in the amount of $ 28.1 million due in 2026 at a fixed interest rate of 3.64 %.

As of December 31, 2021, the outstanding balance on the shareholder loan due 2026 is $ 27.5 million.

Except for changes in the New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loan since its inception.

See Note 7 - Noncontrolling Interests for more information regarding the New Zealand subsidiary.

LONG-TERM DEBT ASSUMED IN THE POPE RESOURCES MERGER

1 unchanged sentence

We assumed five tranches of a credit facility payable to Northwest Farm Credit Services (the “NWFCS Credit Facility”) totaling $ 45.0 million.

Quarterly payments of interest only are due on the NWFCS Credit Facility through the respective maturity of each tranche.

The NWFCS Credit Facility is collateralized by a portion of the Pacific Northwest timberlands acquired in the merger with Pope Resources.

The NWFCS Credit Facility allows us to receive annual patronage payments, which are profit distributions made by a cooperative to its member-users based on the quantity or value of business done with the member-user.

The pertinent details of each tranche of the NWFCS Credit Facility we assumed are as follows:

Tranche Stated Fixed Interest Rate Effective Fixed Interest Rate (a) Stated Principal Amount Est.

Fair Value at Merger Date (b)

Tranche 2 (Due 2025) 6.1 % 4.8 % $ 10,000 $ 11,838

Tranche 4 (Due 2028) 4.1 % 3.1 % 11,000 12,108

Tranches 6 & 7 (Due 2033) 5.3 % 4.2 % 16,000 19,609

Tranche 8 (Due 2036) 5.4 % 4.3 % 8,000 9,947

Total NWFCS Credit Facility assumed $ 45,000 $ 53,502

(a) Estimated effective fixed interest rates as of December 31, 2020 after consideration of estimated patronage refunds.

(b) The fair market value premium will be amortized as a benefit to interest expense over the maturity term of each tranche.

Fund II Mortgage Payable

We assumed Fund II's two mortgages payable (the “Fund II Mortgages Payable”) to MetLife totaling $ 25.0 million.

Quarterly payments of interest only are due on the Fund II Mortgages Payable through their respective maturities.

The Fund II Mortgages Payable are collateralized by Fund II Timberlands and do not have any recourse to the Company or the Operating Partnership.

On September 1, 2020, we entered into an agreement to extend the maturity date of the Fund II Mortgages Payable from September 2020 to September 2022.

Additionally, the fixed interest rates on both the $ 11 million tranche and the $ 14 million tranche were changed to 2.0 %, from 4.9 % and 3.8 %, respectively.

Beginning January 1, 2021, this fixed rate will transition to a variable rate of 3-month LIBOR plus 1.700 %.

The pertinent details of the Fund II Mortgages Payable are as follows:

Maturity Date Stated Fixed Interest Rate (a) Stated Principal Amount Est.

Fair Value at Merger Date (b)

September 2022 2.0 % $ 11,000 $ 11,061

September 2022 2.0 % 14,000 14,023

$ 25,000 $ 25,084

(a) Beginning January 1, 2021, this will transition from a fixed to a variable interest rate of 3-month LIBOR plus 1.700 %.

(b) The fair market value premium has been amortized as a benefit to interest expense over the original maturity term of each mortgage.

Fund III Mortgage Payable

We assumed Fund III’s two mortgages payable (the “Fund III Mortgages Payable”) to NWFCS totaling $ 32.4 million.

Quarterly payments of interest only are due on the Fund III Mortgages Payable through their respective maturities.

The Fund III Mortgages Payable are collateralized by Fund III Timberlands and do not have any recourse to the Company or the Operating Partnership.

In September 2021, we repaid the $ 45 million outstanding under our credit facility with Northwest Farm Credit Services (NWFCS).

We recognized a gain on early extinguishment of debt of $ 7.2 million, representing the net write-off of unamortized deferred financing costs and fair market value adjustments, partially offset by a $ 6.2 million loss related to a make-whole fee due to debt prepayment.

The net gain on early extinguishment of debt of approximately $ 0.9 million has been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous income, net.”

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

The pertinent details of the Fund III Mortgages Payable are as follows:

Maturity Date Stated Fixed Interest Rate Effective Fixed Interest Rate (a) Stated Principal Amount Est.

Fair Value at Merger Date (b)

December 2023 5.1 % 3.9 % $ 17,980 $ 19,915

October 2024 4.5 % 3.2 % 14,400 15,844

$ 32,380 $ 35,759

(a) Estimated effective fixed interest rates as of December 31, 2020 after consideration of estimated patronage refunds.

(b) The fair market value premium will be amortized as a benefit to interest expense over the maturity term of each mortgage.

Fund II Mortgages Payable

We assumed Fund II’s two mortgages payable (the “Fund II Mortgages Payable”) to MetLife totaling $ 25.0 million.

In September 2021, we repaid the $ 25.0 million outstanding under the Fund II Mortgages payable to MetLife.

We recognized a loss on early extinguishment of debt of $ 6 thousand, representing the write-off of unamortized deferred financing costs.

The loss on early extinguishment of debt has been recognized in the Consolidated Statements of Income and Comprehensive Income under the caption “Interest and other miscellaneous income, net.”

Fund III Mortgages Payable

We assumed Fund III’s two mortgages payable (the “Fund III Mortgages Payable”) to NWFCS totaling $ 32.4 million.

In July 2021, we sold the rights to manage Fund III and Fund IV, as well as our ownership interests in both funds.

Following the sale, Fund III’s two mortgages payable to NWFCS are no longer recognized in our Consolidated Balance Sheets as of December 31, 2021.

See Note 7 - Noncontrolling Interests for additional information.

DEBT COVENANTS — EXCLUDING TIMBER FUNDS

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Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 43 % 22 %

In connection with our $ 45 million NWFCS Credit Facility, customary covenants must be met, the most significant of which include interest coverage and debt-to-capitalization ratios.

The covenants listed below, which are the most significant financial covenants in effect as of December 31, 2020, are calculated on a trailing 12-month basis:

Covenant Requirement Actual Ratio Favorable

Covenant loan-to-appraised value shall not exceed 50 % 12 % 38 %

Covenant EBITDA to consolidated interest expense should not be less than 2.5 to 1

Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 47 % 18 %

In addition to these financial covenants listed above, the 2022 Notes, Term Credit Agreement, Incremental Term Loan Agreement, 2020 Incremental Term Loan Facility, Revolving Credit Facility, and NWFCS Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others.

In addition to these financial covenants listed above, the Senior Notes due 2022, Senior Notes due 2031, Term Credit Agreement, Incremental Term Loan Agreement, 2021 Incremental Term Loan Facility, and Revolving Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others.

At December 31, 2021, we were in compliance with all applicable covenants.

DEBT COVENANTS — TIMBER FUNDS

The Fund II Mortgages Payable to MetLife contains a requirement to maintain a loan-to-value ratio of less than 50 %, with the denominator defined as fair market value of the timberland pledged as collateral.

The Fund III Mortgages Payable to NWFCS contain a requirement to maintain a minimum interest coverage ratio of 1.5 :1, minimum working capital of $ 500,000 , and a loan-to-value ratio of less than 50 %, with the denominator defined as fair market value.

Both Timber Funds are in compliance with their respective debt covenants as of December 31, 2020.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

We continuously assess potential alternative uses of our timberlands, as some properties may become more valuable for development, residential, recreation or other purposes.

We periodically transfer, via a sale or contribution from the real estate investment trust (“REIT”) entities to taxable REIT subsidiaries (“TRS”), higher and better use (“HBU”) timberlands to enable land-use entitlement, development or marketing activities.

We also periodically acquire HBU properties in connection with timberland acquisitions.

These properties are managed as timberlands until sold or developed.

While the majority of HBU sales involve rural and recreational land, we also selectively pursue various land-use entitlements on certain properties for residential, commercial and industrial development in order to enhance the long-term value of such properties.

For selected development properties, we also invest in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and improve the value of such properties.

In the merger with Pope Resources, we acquired HBU properties with an estimated fair value of $ 26.5 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.

An analysis of higher and better use timberlands and real estate development investments from December 31, 2019 to December 31, 2020 is shown below:

Higher and Better Use Timberlands and Real Estate Development Investments

Land and Timber Development Investments Total

Non-current portion at December 31, 2019 $ 58,091 $ 23,700 $ 81,791

Current portion (a) 274 12,389 12,663

Total Balance at December 31, 2019 58,365 36,089 94,454

Non-cash cost of land and improved development ( 1,834 ) ( 7,390 ) ( 9,224 )

Timber depletion from harvesting activities and basis of timber sold in real estate sales ( 725 ) — ( 725 )

Capitalized real estate development investments (b) — 6,462 6,462

HBU properties acquired in merger with Pope Resources (c) 26,510 — 26,510

Capital expenditures (silviculture) 427 — 427

Intersegment transfers ( 2,630 ) — ( 2,630 )

Total Balance at December 31, 2020 80,113 35,161 115,274

Current portion (a) ( 212 ) ( 6,544 ) ( 6,756 )

Non-current portion at December 31, 2020 $ 79,901 $ 28,617 $ 108,518

(a) The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory.

See Note 22 — Inventory for additional information.

(b) Capitalized real estate development investments includes $ 0.4 million of capitalized interest.

See Note 2 - Merger with Pope Resources for additional information.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

At December 31, 2020, the future minimum payments under non-cancellable commitments were as follows:

Environmental Remediation (a) Development Projects (b) Commitments (c) Total

2021 $ 1,026 $ 10,723 $ 14,341 $ 26,090

2022 1,864 267 17,232 19,363

2023 1,853 267 17,996 20,116

2024 1,853 267 15,228 17,348

2025 2,338 267 10,303 12,908

Thereafter 2,706 3,899 29,171 35,776

$ 11,640 $ 15,690 $ 104,271 $ 131,601

(a) Environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages (NRD) in Port Gamble, Washington.

See Note 13 - Environmental and Natural Resource Damage Liabilities for additional information.

(b) Primarily consisting of payments expected to be made on our Wildlight, Richmond Hill and West Puget Sound development projects.

(c) Commitments include payments expected to be made on derivative financial instruments (interest rate swaps and forward-starting interest rate swaps), timberland deeds and other purchase obligations.

Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S.

federal or state income tax.

Through the Mergers, Rayonier transferred all of its assets to the Operating Partnership on May 8, 2020.

See Note 1 - Summary of Significant Accounting Policies for more information.

As a result, Rayonier owns a 96.9 % interest in the Operating Partnership and conducts substantially all of its timberland operations through the Operating Partnership.

The taxable income or loss generated by the Operating Partnership is passed through and reported to its unit holders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return.

Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through our TRS.

The TRS subsidiaries are subject to United States federal and state corporate income tax.

The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and is treated as a partnership for U.S.

income tax purposes.

PROVISION FOR INCOME TAXES FROM CONTINUING OPERATIONS

The provision for income taxes for each of the three years ended December 31 follows:

2020 2019 2018

($ 237 ) $ 2 $ 2

( 339 ) ( 122 ) 37

( 5,391 ) ( 1,542 ) ( 1,914 )

( 5,967 ) ( 1,662 ) ( 1,875 )

8,355 465 3,803

( 3,027 ) ( 11,278 ) ( 23,360 )

5,653 ( 10,796 ) ( 19,411 )

Changes in valuation allowance

( 6,695 ) ( 482 ) ( 3,950 )

($ 7,009 ) ($ 12,940 ) ($ 25,236 )

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

A reconciliation of the U.S.

federal statutory income tax rate to the actual income tax rate for each of the three years ended December 31 follows:

2020 2019 2018

federal statutory income tax rate ($ 7,726 ) ( 21.0 ) % ($ 16,930 ) ( 21.0 ) % ($ 29,939 ) ( 21.0 ) %

and foreign REIT income 16,569 45.0 19,902 24.7 32,949 23.1

Matariki Group and Rayonier New Zealand Ltd ( 7,698 ) ( 20.8 ) ( 11,181 ) ( 13.9 ) ( 23,166 ) ( 16.2 )

Change in valuation allowance ( 6,695 ) ( 18.2 ) ( 482 ) ( 0.6 ) ( 3,950 ) ( 2.8 )

State Net Operating Loss 1,118 3.0 — — — —

Prepaid land sales ( 1,084 ) ( 2.9 ) — — — —

Internal transfer of assets deferred — — ( 1,815 ) ( 2.3 ) — —

Foreign income tax withholding ( 721 ) ( 2.0 ) ( 1,535 ) ( 1.9 ) ( 1,848 ) ( 1.3 )

Other ( 772 ) ( 2.1 ) ( 899 ) ( 1.1 ) 718 0.5

Income tax expense as reported for net income ($ 7,009 ) ( 19.0 ) % ($ 12,940 ) ( 16.1 ) % ($ 25,236 ) ( 17.7 ) %

The Company’s effective tax rate is below the 21 percent U.S.

statutory rate primarily due to tax benefits associated with being a REIT.

DEFERRED TAXES

Deferred income taxes result from differences between the timing of recognizing revenues and expenses for financial book purposes versus income tax purposes.

The nature of the temporary differences and the resulting net deferred tax asset/liability for the two years ended December 31 follows:

Gross deferred tax assets:

Pension, postretirement and other employee benefits $ 1,403 $ 1,512

New Zealand subsidiary 23,461 23,211

CBPC tax credit carry forwards 14,555 14,555

Capitalized real estate costs 1,459 6,635

TRS net operating loss 18,363 5,410

Land basis difference 9,468 10,626

Other 5,502 4,356

Total gross deferred tax assets 74,211 66,305

Valuation allowance ( 46,015 ) ( 39,320 )

Total deferred tax assets after valuation allowance $ 28,196 $ 26,985

Gross deferred tax liabilities:

Accelerated depreciation ( 38 ) ( 23 )

New Zealand subsidiary ( 98,245 ) ( 87,548 )

Other ( 4,884 ) ( 3,938 )

Total gross deferred tax liabilities ( 103,167 ) ( 91,509 )

Net deferred tax liability reported as noncurrent ($ 74,971 ) ($ 64,524 )

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Net operating loss (“NOL”) and tax credit carryforwards as of the two years ended December 31 follows:

Tax Effected Balance Expiration

Federal NOL Carryforwards- Pre TCJA (a) $ 2,363 2036

Federal NOL Carryforwards- Post TCJA (a) 13,017 None

U.S State NOL Carryforwards (b) 2,983 2031

Cellulosic Biofuel Producer Credit (c) 14,555 2023

New Zealand subsidiary NOL carryforwards $ 3,262 None

Federal NOL Carryforwards- Pre TCJA (a) 2,363 2036

Federal NOL Carryforwards- Post TCJA (a) 1,872 None

U.S State NOL Carryforwards (b) 1,175 2031

Cellulosic Biofuel Producer Credit (c) 14,555 2023

(a) The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017.

The TCJA lifted the 20-year federal NOL Carryforward period.

Net operating losses generated after 12/31/2017 have an indefinite carryforward period.

state NOL is made up of several jurisdictions that expire in various future years.

No State NOL is set to expire before 12/31/2031.

The Further Consolidated Appropriations Act, 2020 included the Taxpayer Certainty and Disaster Relief Act of 2019 (Tax Extenders Act), which temporarily renewed approximately two dozen credits that previously expired or were set to expire at the end of 2019.

The Cellulosic Biofuel Producer Credit was one of the credits extended under this act.

Valuation allowances are provided when it is considered more likely than not that the deferred tax assets will not be recorded.

Since 2015, we have had a 100 % valuation allowance against the U.S.

taxable REIT subsidiary's deferred tax assets, net of deferred tax liabilities.

During 2020, the net deferred tax assets increased by $ 6.7 million, and thus the valuation allowance was adjusted accordingly.

We recorded a change in the valuation allowance of $ 6.7 million related to the U.S.

TRS's deferred tax assets, net of liabilities.

The following table provides detail of the tax years that remain open to examination by the IRS and other significant taxing jurisdictions:

Taxing Jurisdiction Open Tax Years

Internal Revenue Service 2017 - 2019

New Zealand Inland Revenue 2015 - 2019

TAX CHARACTERISTICS OF DIVIDEND DISTRIBUTIONS

The taxable nature of the dividend distributions paid for each of the three years ended December 31 follows:

2020 2019 2018

Total dividends/distributions paid per common share/unit

$ 1.08 $ 1.08 $ 1.06

Tax characteristics:

Capital gain 100 % 100 % 100 %

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

CONTINGENCIES

We have been named as a defendant in various lawsuits and claims arising in the normal course of business.

While we have procured reasonable and customary insurance covering risks normally occurring in connection with our businesses, we have in certain cases retained some risk through the operation of large deductible insurance plans, primarily in the areas of executive risk, property, automobile and general liability.

These pending lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on our financial position, results of operations, or cash flow.

ENVIRONMENTAL AND NATURAL RESOURCE DAMAGE LIABILITIES

Various federal and state environmental laws in the states in which we operate place cleanup or restoration liability on the current and former owners of affected real estate.

These laws are often a source of “strict liability,” meaning that an owner or operator need not necessarily have caused, or even been aware of, the release of contaminated materials.

Similarly, there are certain environmental laws that allow state, federal, and tribal trustees (collectively, the “Trustees”) to bring suit against property owners to recover damage for injuries to natural resources.

Like the liability that attaches to current property owners in the cleanup context, liability for natural resource damages (“NRD”) can attach to a property simply because an injury to natural resources resulted from releases of contaminated materials on the owner’s property, regardless of culpability for the release.

In connection to the merger with Pope Resources, we assumed ownership of certain real estate in Port Gamble, Washington, which requires environmental remediation under these laws.

An analysis of environmental and NRD liabilities from December 31, 2019 to December 31, 2020 is shown below:

Port Gamble, WA (a)

Total Balance at December 31, 2019

Liabilities assumed in merger with Pope Resources 13,003

Expenditures ( 1,362 )

Total Balance at December 31, 2020

Current portion 1,026

Non-current portion at December 31, 2020

(a) Represents environmental and NRD liabilities assumed in the merger with Pope Resources.

Pope & Talbot Inc.

operated a sawmill from 1853 to 1995 and conducted shipping, log storage, and log transfer operations in the Port Gamble Bay area from 1974 to 2004.

P&T’s operations resulted in the release of contaminated materials to the townsite, millsite, and adjacent bay.

Prior to the merger, the in-water portion of the clean up was completed.

In November 2020, a consent decree, which includes a cleanup action plan, was entered in Kitsap County Superior Court.

Negotiations with the Trustees relating to NRD liabilities are currently ongoing and will ultimately result in agreement as to requested mitigation activities.

These estimates were based on assumptions that we believe to be reasonable;

however, actual results may differ from these estimates.

See Note 2 - Merger with Pope Resources for information regarding our preliminary estimates of fair value.

It is expected that the millsite cleanup and NRD restoration will occur over the nex t two to three years , while the monitoring of the Port Gamble Bay, millsite and landfills will continue for an additional 10 to 15 years.

The NRD costs are subject to change as the scope of the restoration projects become more clearly defined.

It is reasonably possible that these components of the liability may increase as the project progresses.

Management continues to monitor the Port Gamble cleanup process and will make adjustments as needed.

Should any future circumstances result in a change to the estimated cost of the project, we will record an appropriate adjustment to the liability in the period it becomes known and when we can reasonably estimate the amount.

For further information on the timing and amount of future payments related to our environmental remediation liabilities, see Note 10 - Commitments .

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies.

As of December 31, 2020, the following financial guarantees were outstanding:

Financial Commitments (a) Maximum Potential

Standby letters of credit $ 885

Surety bonds (b) 7,284

Total financial commitments $ 8,169

(a) We have not recorded any liabilities for these financial commitments in the Consolidated Balance Sheets.

The guarantees are not subject to measurement, as the guarantees are dependent on our own performance.

(b) Surety bonds are issued primarily to secure performance obligations related to various operational activities, to provide collateral for our Wildlight development project in Nassau County, Florida and in connection with pending and completed sales from the Harbor Hill project in Gig Harbor, Washington.

These surety bonds expire at various dates during 2021, 2022 and 2023 and are expected to be renewed as required.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

EARNINGS PER SHARE AND PER UNIT

Basic earnings per common share (“EPS”) is calculated by dividing net income attributable to Rayonier Inc.

by the weighted average number of common shares outstanding during the year.

Diluted EPS is calculated by dividing net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the Operating Partnership by the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options, performance shares, restricted shares, restricted stock units and noncontrolling interests in Operating Partnership units.

The following table provides details of the calculations of basic and diluted earnings per common share of the Company for the three years ended December 31:

2020 2019 2018

Earnings per common share - basic

Net Income $ 29,784 $ 67,678 $ 117,330

Net (income) attributable to noncontrolling interest in the Operating Partnership ( 528 ) — —

Net loss (income) attributable to noncontrolling interests in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net income attributable to Rayonier Inc.

$ 37,084 $ 59,105 $ 102,216

Denominator for basic earnings per common share - weighted average shares 133,865,867 129,257,202 129,043,627

Basic earnings per common share attributable to Rayonier Inc.:

$ 0.28 $ 0.46 $ 0.79

Earnings per common share - diluted

Net Income $ 29,784 $ 67,678 $ 117,330

Net loss (income) attributable to noncontrolling interest in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the Operating Partnership $ 37,612 $ 59,105 $ 102,216

Denominator for basic earnings per common share - weighted average shares 133,865,867 129,257,202 129,043,627

Dilutive effect of:

Stock options 633 12,209 71,276

Performance shares, restricted shares and restricted stock units 198,955 328,977 575,328

Noncontrolling interests in Operating Partnership units 2,877,447 — —

Denominator for diluted earnings per common share - adjusted weighted average shares 136,942,902 129,598,388 129,690,231

Diluted earnings per common share attributable to Rayonier Inc.:

$ 0.27 $ 0.46 $ 0.79

2020 2019 2018

Anti-dilutive shares excluded from computations of diluted earnings per share:

Stock options, performance shares, restricted shares and restricted stock units 450,551 450,681 254,282

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Basic earnings per unit (“EPU”) is calculated by dividing net income available to unitholders of Rayonier, L.P.

by the weighted average number of units outstanding during the year.

Diluted EPU is calculated by dividing net income available to unitholders of Rayonier, L.P.

The following table provides details of the calculations of basic and diluted earnings per unit of the Operating Partnership for the three years ended December 31:

2020 2019 2018

Earnings per unit - basic

Net Income $ 29,784 $ 67,678 $ 117,330

Net loss (income) attributable to noncontrolling interests in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net income available to unitholders $ 37,612 $ 59,105 $ 102,216

Denominator for basic earnings per unit - weighted average units 136,743,314 129,257,202 129,043,627

Basic earnings per unit attributable to Rayonier, L.P.:

$ 0.28 $ 0.46 $ 0.79

Earnings per unit - diluted

Net Income $ 29,784 $ 67,678 $ 117,330

Net loss (income) attributable to noncontrolling interest in consolidated affiliates 7,828 ( 8,573 ) ( 15,114 )

Net income available to unitholders $ 37,612 $ 59,105 $ 102,216

Denominator for basic earnings per unit - weighted average units 136,743,314 129,257,202 129,043,627

Dilutive effect of unit equivalents:

Stock options 633 12,209 71,276

Performance shares, restricted shares and restricted stock units 198,955 328,977 575,328

Denominator for diluted earnings per unit - adjusted weighted average units 136,942,902 129,598,388 129,690,231

Diluted earnings per unit attributable to Rayonier, L.P.

$ 0.27 $ 0.46 $ 0.79

2020 2019 2018

Anti-dilutive unit equivalents excluded from computations of diluted earnings per unit:

Stock options, performance shares, restricted shares and restricted stock units 450,551 450,681 254,282

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

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FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS

The functional currency of Rayonier New Zealand Limited, and the New Zealand subsidiary is the New Zealand dollar.

The New Zealand subsidiary is exposed to foreign currency risk on export sales and ocean freight payments, which are mainly denominated in U.S.

The New Zealand subsidiary’s export sales are predominantly denominated in U.S.

dollars, and therefore its cash flows are affected by fluctuations in the exchange rate between the New Zealand dollar and the U.S.

This exposure is partially managed by a natural currency hedge, as ocean freight payments and shareholder distributions are also paid in U.S.

We manage any excess foreign exchange exposure through the use of derivative financial instruments.

The New Zealand subsidiary typically hedges 50 % to 90 % of its estimated foreign currency exposure with respect to the following twelve months forecasted sales and purchases less distributions and up to 75 % of the forward 12 to 18 months.

Additionally, the New Zealand subsidiary will occasionally hedge up to 50 % of its estimated foreign currency exposure with respect to the following 18 to 48 months forecasted sales and purchases, less distributions, when New Zealand dollar is at a cyclical low versus the U.S.

Additionally, the New Zealand subsidiary will occasionally hedge up to 50 % of its estimated foreign currency exposure with respect to the following 18 to 48 months forecasted sales and purchases, less distributions, when the New Zealand dollar is at a cyclical low versus the U.S.

Foreign currency exposure from the New Zealand subsidiary’s trading operations is typically hedged based on the following three months forecasted sales and purchases.

As of December 31, 2020, foreign currency exchange contracts and foreign currency option contracts had maturity dates through April 2022 and August 2021, respectively.

As of December 31, 2021, foreign currency exchange contracts and foreign currency option contracts had maturity dates through December 2023.

Foreign currency exchange and option contracts hedging foreign currency risk on export sales and ocean freight payments qualify for cash flow hedge accounting.

2 unchanged sentences

Changes in the value of derivative instruments after de-designation are recorded in earnings.

INTEREST RATE SWAPS

We are exposed to cash flow interest rate risk on our variable-rate Term Credit Agreement, Incremental Term Loan Agreement and 2020 Incremental Term Loan Facility, and use variable-to-fixed interest rate swaps to hedge this exposure.

INTEREST RATE PRODUCTS

We are exposed to cash flow interest rate risk on our variable-rate debt and on anticipated debt issuances.

We use variable-to-fixed interest rate swaps and forward-starting interest rate swap agreements to hedge this exposure.

For these derivative instruments, we report the gains/losses from the fluctuations in the fair market value of the hedges in AOCI and reclassify them to earnings as interest expense in the same period in which the hedged interest payments affect earnings.

To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge at the time of de-designation remains in AOCI and is amortized using the straight-line method through interest expense over the remaining life of the hedged item.

To the extent the associated hedged item is no longer effective, the gain or loss is reclassified out of AOCI to earnings immediately.

INTEREST RATE SWAPS

During the second quarter of 2021, we terminated and cash settled $ 250 million in notional value of our interest rate swaps, maturing in 2030, in connection with the repayment of $ 250 million outstanding under the 2020 Incremental Term Loan.

Upon termination of the swap, we received $ 6.8 million from our counterparty.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

December 31, 2021, there was a $ 15.9 million gain recorded in accumulated other comprehensive loss in connection with the terminated interest rate swap, which will be reclassified to earnings through interest expense over the remaining life of the hedged items, as the originally hedged cash flows remain probable.

During the second quarter of 2021, we terminated and cash settled $ 100 million in notional value of our interest rate swaps, maturing in 2026, in connection with the prepayment of $ 100 million on the 2026 Incremental Term Loan.

Upon termination of the swap, we paid $ 2.2 million to our counterparty that was recognized immediately into earnings as interest expense, as the forecasted cash flows will no longer occur.

See Note 10 — Debt for additional information.

The following table contains information on the outstanding interest rate swaps as of December 31, 2021:

Outstanding Interest Rate Swaps (a)

Date Entered Into Term Notional Amount Related Debt Facility Fixed Rate of Swap (b) Bank Margin

on Debt Total Effective Interest Rate (c)

Date Entered Into Term Notional Amount Related Debt Facility Fixed Rate of Swap Bank Margin on Debt Total Effective Interest Rate (b)

August 2015 9 years $ 170,000 Term Credit Agreement 2.20 % 1.60 % 3.80 %

2 unchanged sentences

April 2016 10 years 100,000 Incremental Term Loan 1.60 % 1.65 % 3.25 %

July 2016 10 years 100,000 Incremental Term Loan 1.26 % 1.90 % 3.16 %

June 2020 10 years 250,000 2020 Incremental Term Loan 1.10 % 1.85 % 2.95 %

(a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

(b) The interest rate swap entered in June 2020, was an off-market derivative, meaning it contained an embedded financing element, which the counterparties recovered through an incremental change in the fixed rate over what would have been charged for an at-market swap.

(b) Rate is before estimated patronage payments.

TREASURY LOCKS

During the first quarter of 2020, we entered into treasury lock agreements, which were designated and qualified as cash flow hedges.

These derivative instruments hedged the impact of changes in the benchmark interest rate to future interest payments associated with anticipated debt issuances.

During the first quarter of 2020, we entered into three treasury lock agreements, which were designated and qualified as cash flow hedges.

Prior to expiration, we de-designated and settled the treasury locks by converting them into interest rate swap lock agreements (discussed below).

Amounts recorded in AOCI in connection with the settled treasury locks were ($ 20.8 ) million which will be reclassified to earnings through interest expense over the life of the 2020 Incremental Term Loan Facility.

The following table contains information on the expired treasury lock agreements entered into during the twelve months ended December 31, 2020:

Converted Treasury Rate Locks (a)

Date Entered Into Term Notional Amount Rate Related Debt Facility (b) Expiration Date

January 2020 10 years $ 100,000 1.53 % 2020 Incremental Term Loan Facility March 30, 2020

January 2020 10 years 100,000 1.53 % 2020 Incremental Term Loan Facility March 31, 2020

February 2020 10 years 50,000 1.35 % 2020 Incremental Term Loan Facility March 31, 2020

(a) At inception, all treasury locks were designated as interest rate cash flow hedges and qualified for hedge accounting.

(b) See Note 8 — Debt for more information.

We anticipate extending the term of the 2020 Incremental Term Loan facility for an additional five-year term upon maturity.

As of December 31, 2021, there was a $ 17.3 million loss recorded in accumulated other comprehensive loss in connection with the settled treasury locks, which will be reclassified to earnings as interest expense over the life of the hedged item.

INTEREST RATE SWAP LOCKS

Upon de-designation, we converted the above treasury lock agreements to interest rate swap lock agreements to hedge the risk of changes in the interest payments attributable to changes in the benchmark LIBOR interest rate associated with anticipated issuances of debt.

The interest rate swap locks were designated and qualified as cash flow hedges.

Prior to expiration, we de-designated and partially cash settled $ 11.1 million of the interest rate swap locks and converted them into interest rate swap agreements.

To the extent we de-designate or terminate a cash flow hedging relationship and the associated hedged item continues to exist, any unrealized gain or loss of the cash flow hedge

Upon de-designation, we converted the above treasury lock agreements to interest rate swap lock agreements, which were designated and qualified as cash flow hedges.

During the second quarter of 2020, we de-designated and partially cash settled $ 11.1 million of the interest rate swap locks and converted them into an interest rate swap agreement.

As of December 31, 2021, there was a $ 1.2 million loss recorded in accumulated other comprehensive loss in connection with settled interest rate swap locks, which will be reclassified to earnings as interest expense over the life of the hedged item.

FORWARD-STARTING INTEREST RATE SWAPS

During the second quarter of 2021, we de-designated and settled $ 325 million in notional value of our forward-starting interest rate swap, maturing in 2032, by converting it into a new forward-starting interest rate swap agreement.

As of December 31, 2021, there was a $ 9.7 million gain recorded in accumulated other comprehensive loss in connection with the converted forward-starting interest rate swap, which will be reclassified to earnings through interest expense over the remaining life of the hedged item.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

at the time of de-designation remains in accumulated other comprehensive loss and is amortized using the straight-line method through interest expense over the remaining life of the hedged item.

Incremental a mounts recorded in accumulated other comprehensive loss in connection with the settled interest rate swap locks were ($ 1.4 ) million, which will be reclassified to earnings through interest expense over the life of the 2020 Incremental Term Loan Facility.

The following table contains information on the terminated interest rate swap lock agreements as of December 31, 2020:

Converted Interest Rate Swap Locks (a)

Date Entered Into Term Notional Amount Fixed Rate of Swap Lock (b) Related Debt Facility (c) Termination Date

March 2020 10 years $ 100,000 1.56 % 2020 Incremental Term Loan Facility June 30, 2020

March 2020 10 years 100,000 1.59 % 2020 Incremental Term Loan Facility June 30, 2020

March 2020 10 years 50,000 1.41 % 2020 Incremental Term Loan Facility June 30, 2020

(a) All interest rate swap locks have been designated as interest rate cash flow hedges and qualify for hedge accounting.

(b) These interest rate swap locks were off-market derivatives, meaning they contained an embedded financing element, which the counterparties recovered through an incremental charge in the fixed rate over what would have been charged for an at-market swap lock.

We anticipate extending the term of the 2020 Incremental Term Loan facility for an additional five-year term upon maturity.

FORWARD-STARTING INTEREST RATE SWAPS

We are exposed to cash flow interest rate risk on anticipated debt issuances and use forward-starting interest rate swap agreements to hedge against changes in future cash flows resulting from changes in interest rates from the trade date through the anticipated issuance date.

The following table contains information on the outstanding forward-starting interest rate swaps as of December 31, 2021:

1 unchanged sentence

Date Entered Into Term Notional Amount Fixed Rate of Swap Related Debt Facility Forward Date Maximum Period Ending for Forecasted Issuance Date

February 2020 10 years $ 325,000 1.40 % Anticipated refinancing of Senior Notes due 2022 April 2022 April 2022

March 2020 4 years 100,000 0.88 % Term Credit Agreement August 2024 N/A

April 2020 4 years $ 100,000 0.88 % Term Credit Agreement August 2024 N/A

May 2020 4 years 50,000 0.74 % Term Credit Agreement August 2024 N/A

May 2021 (b) 7 years 200,000 0.77 % Future Issuance February 2022 N/A

(a) All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting.

(b) The forward-starting interest rate swap entered into in May 2021 contained an embedded mark-to-market gain, which we recovered through a reduced charge in the fixed rate over what would have been charged for an at-market swap.

See the subsequent events section of Note 1 - Summary of Significant Accounting Policies for additional information regarding the maturation of this forward-starting interest rate swap.

CARBON OPTIONS

The New Zealand subsidiary enters into carbon options from time to time to sell carbon assets at certain prices.

The New Zealand subsidiary enters into carbon options from time to time to sell carbon assets.

Changes in fair value of the carbon option contracts are recorded in “Interest and other miscellaneous income, net” as the contracts do not qualify for hedge accounting treatment.

As of December 31, 2021, all existing carbon option contracts have expired.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

The following table demonstrates the impact, gross of tax, of our derivatives on the Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 2021, 2020 and 2019.

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Derivatives designated as cash flow hedges:

Foreign currency exchange contracts Other comprehensive (loss) income $ 5,376 $ 2,211 ($ 4,357 )

Foreign currency option contracts Other comprehensive (loss) income 1,211 159 ( 180 )

Interest rate swaps Other comprehensive (loss) income ( 76,567 ) ( 29,893 ) 8,745

Foreign currency exchange contracts Other comprehensive income (loss) ($ 7,965 ) $ 5,376 $ 2,211

Foreign currency option contracts Other comprehensive income (loss) ( 1,556 ) 1,211 159

Interest rate products Other comprehensive income (loss) 52,478 ( 76,567 ) ( 29,893 )

Interest rate products Interest Expense 14,694 10,769 ( 2,296 )

Derivatives designated as a net investment hedge:

Foreign currency exchange contract Other comprehensive (loss) income — — ( 344 )

Derivatives not designated as hedging instruments:

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Carbon options Interest and other miscellaneous income, net — 563 ( 105 )

During the next 12 months, the amount of the December 31, 2020 AOCI balance, net of tax, expected to be reclassified into earnings as a result of the maturation of our derivative instruments is a gain of approximately $ 4.7 million.

The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets at December 31, 2020 and 2019:

Notional Amount

During the next 12 months, the amount of the December 31, 2021 AOCI balance, net of tax, expected to be reclassified into earnings is a loss of approximately $ 10.8 million.

The following table contains details of the expected reclassified amounts into earnings:

Amount expected to be reclassified into earnings in next 12 months

Derivatives designated as cash flow hedges:

Foreign currency exchange contracts ($ 965 )

Foreign currency option contracts 28,000 22,000

Interest rate swaps 900,000 650,000

Forward-starting interest rate swaps 475,000 —

Derivatives not designated as hedging instruments:

Carbon options (a) — 9,592

(a) Notional amount for carbon options is calculated as the number of units outstanding multiplied by the spot price as of the end of the period.

Interest rate products ( 9,882 )

Total estimated loss on derivatives contracts ($ 10,847 )

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets at December 31, 2021 and 2020:

Notional Amount

Derivatives designated as cash flow hedges:

Foreign currency exchange contracts $ 149,250 $ 49,000

Foreign currency option contracts 14,000 28,000

Interest rate swaps 550,000 900,000

Forward-starting interest rate swaps 350,000 475,000

The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets at December 31, 2021 and 2020.

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Other current liabilities ( 2,061 ) —

Other non-current liabilities ( 694 ) —

Foreign currency option contracts Other current assets — 1,526

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Other non-current liabilities ( 270 ) —

Interest rate swaps Other assets — 2,614

Other non-current liabilities ( 51,580 ) ( 11,068 )

Interest rate swaps Other non-current liabilities ( 15,582 ) ( 51,580 )

Forward-starting interest rate swaps Other assets 11,482 513

Other non-current liabilities — ( 13,042 )

Derivatives not designated as hedging instruments:

Carbon options (a) Other current liabilities — ( 607 )

Total derivative contracts:

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December 31, 2021 December 31, 2020

Asset (liability) (a) Carrying

Amount Fair Value Carrying

Amount Fair Value

Level 1 Level 2 Level 1 Level 2

Asset (Liability) (a) Level 1 Level 2 Level 1 Level 2

Cash and cash equivalents, excluding Timber Funds $ 358,680 $ 358,680 — $ 80,454 $ 80,454 —

Cash and cash equivalents, Timber Funds 3,493 3,493 — 4,053 4,053 —

Restricted cash (b) 2,975 2,975 — 1,233 1,233 —

Current maturities of long-term debt, excluding Timber Funds — — — ( 82,000 ) — ( 82,000 )

Long-term debt, excluding Timber Funds (c) ( 1,300,336 ) — ( 1,313,631 ) ( 973,129 ) — ( 981,500 )

Long-term debt, Timber Funds (c) ( 60,179 ) — ( 60,474 ) — — —

Interest rate swaps (d) ( 51,580 ) — ( 51,580 ) ( 8,454 ) — ( 8,454 )

Forward-starting interest rate swaps (d) ( 12,529 ) — ( 12,529 ) — — —

Foreign currency exchange contracts (d) 6,018 — 6,018 642 — 642

Foreign currency option contracts (d) 1,515 — 1,515 303 — 303

Carbon options contracts (d) — — — ( 607 ) — ( 607 )

Marketable equity securities (e) — — — 10,582 10,582 —

Restricted cash, Timber Funds (b) 6,341 6,341 — — — —

Restricted cash, excluding Timber Funds (c) 625 625 — 2,975 2,975 —

Current maturities of long-term debt, excluding Timber Funds (d) ( 124,965 ) — ( 125,288 ) — — —

Long-term debt, excluding Timber Funds (d) ( 1,242,819 ) — ( 1,245,148 ) ( 1,300,336 ) — ( 1,313,631 )

Long-term debt, Timber Funds (d) — — — ( 60,179 ) — ( 60,474 )

Interest rate swaps (e) ( 15,582 ) — ( 15,582 ) ( 51,580 ) — ( 51,580 )

Forward-starting interest rate swaps (e) 11,482 — 11,482 ( 12,529 ) — ( 12,529 )

Foreign currency exchange contracts (e) ( 1,948 ) — ( 1,948 ) 6,018 — 6,018

Foreign currency option contracts (e) ( 42 ) — ( 42 ) 1,515 — 1,515

Noncontrolling interests in the operating partnership (f) 133,823 133,823 — 130,121 130,121 —

(a) We did not have Level 3 assets or liabilities at December 31, 2021 and 2020.

(b) Restricted cash represents the proceeds from like-kind exchange sales deposited with a third-party intermediary and cash held in escrow for real estate development obligations.

(b) Restricted cash, Timber Funds represents the portion of proceeds from Fund II Timberland Dispositions required to be distributed to noncontrolling interests.

See Note 24 - Restricted Cash for additional information.

(d) The carrying amount of long-term debt is presented net of deferred financing costs, unamortized discounts and fair value adjustments on non-revolving debt..

See Note 10 — Debt for additional information.

(d) See Note 16 — Derivative Financial Instruments and Hedging Activities for information regarding the Balance Sheet classification of our derivative financial instruments.

(e) Investments in marketable securities are classified in “Other Assets” based on the nature of the securities and their availability for use in current operations.

See Note 24 - Other Assets for additional information.

(e) See Note 11 — Derivative Financial Instruments and Hedging Activities for information regarding the Balance Sheet classification of our derivative financial instruments.

(f) Noncontrolling interests in the operating partnership is neither an asset nor liability and is classified as temporary equity in the Company’s Consolidated Balance Sheets.

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(Dollar amounts in thousands unless otherwise stated)

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

We use the following methods and assumptions in estimating the fair value of our financial instruments:

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

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Foreign currency option contracts — The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model.

Carbon option contracts — The fair value of carbon option contracts is determined by a mark-to-market valuation using the Black-Scholes option pricing model, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

Marketable equity securities — The fair value of marketable equity securities is determined by quoted prices in their active market.

Noncontrolling interests in the operating partnership — The fair value of noncontrolling interests in the operating partnership is determined based on the period-end closing price of Rayonier Inc.

common shares.

The following table presents marketable equity securities that have been in a continuous unrealized gain position for less than 12 months and for 12 months or greater at December 31, 2020 and December 31, 2019:

December 31, 2020 December 31, 2019

Carrying Amount Less than 12 Months 12 Months or Greater Total Carrying Amount Less than 12 Months 12 Months or Greater Total

Fair value of marketable equity securities — — — — $ 10,582 $ 10,582 — $ 10,582

Unrealized gains — — — — — 3,043 — 3,043

At December 31, 2021, the future minimum payments under non-cancellable commitments were as follows:

Environmental Remediation (a) Development Projects (b) Commitments (c) Total

2022 $ 695 $ 14,316 $ 14,722 $ 29,733

2023 3,838 267 12,996 17,101

2024 3,838 267 9,347 13,452

2025 995 267 5,542 6,804

2026 426 267 3,430 4,123

Thereafter 1,013 3,899 4,589 9,501

$ 10,805 $ 19,283 $ 50,626 $ 80,714

(a) Environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages (NRD) in Port Gamble, Washington.

See Note 15 - Environmental and Natural Resource Damage Liabilities for additional information.

(b) Primarily consisting of payments expected to be made on our Wildlight and Richmond Hill development projects.

(c) Commitments include payments expected to be made on derivative financial instruments (foreign exchange contracts, interest rate swaps and forward-starting interest rate swaps) and other purchase obligations.

CONTINGENCIES

We have been named as a defendant in various lawsuits and claims arising in the normal course of business.

These pending lawsuits and claims, either individually or in the aggregate, are not expected to have a material adverse effect on our financial position, results of operations, or cash flow.

ENVIRONMENTAL AND NATURAL RESOURCE DAMAGE LIABILITIES

Various federal and state environmental laws in the states in which we operate place cleanup or restoration liability on the current and former owners of affected real estate.

These laws are often a source of “strict liability,” meaning that an owner or operator need not necessarily have caused, or even been aware of, the release of contaminated materials.

Like the liability that attaches to current property owners in the cleanup context, liability for natural

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

resource damages (“NRD”) can attach to a property simply because an injury to natural resources resulted from releases of contaminated materials on the owner’s property, regardless of culpability for the release.

In connection to the merger with Pope Resources, we assumed ownership of certain real estate in Port Gamble, Washington, which requires environmental remediation under these laws.

An analysis of environmental and NRD liabilities from December 31, 2020 to December 31, 2021 is shown below:

Port Gamble, WA

Non-current portion at December 31, 2020

Current portion 1,026

Total Balance at December 31, 2020

Expenditures charged to liabilities ( 941 )

Increase in liabilities 105

Total Balance at December 31, 2021

Current portion ( 695 )

Non-current portion at December 31, 2021

These estimates were based on assumptions that we believe to be reasonable;

however, actual results may differ from these estimates.

See Note 2 - Merger with Pope Resources for information regarding the final allocation of fair value to environmental and NRD liabilities assumed in the merger with Pope Resources.

It is expected that the millsite cleanup and NRD restoration will occur over the nex t one to three years , while the monitoring of the Port Gamble Bay, millsite and landfills will continue for an additional 10 to 15 years.

NRD costs are subject to change as the scope of the restoration projects become more clearly defined.

It is reasonably possible that these components of the liability may increase as the project progresses.

Management continues to monitor the Port Gamble cleanup process and will make adjustments as needed.

For further information on the timing and amount of future payments related to our environmental remediation liabilities, see Note 13 - Commitments .

We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies.

As of December 31, 2021, the following financial guarantees were outstanding:

Financial Commitments (a) Maximum Potential

Standby letters of credit $ 885

Surety bonds (b) 12,238

Total financial commitments $ 13,123

(a) We have not recorded any liabilities for these financial commitments in the Consolidated Balance Sheets.

The guarantees are not subject to measurement, as the guarantees are dependent on our own performance.

These surety bonds expire at various dates during 2022, 2023 and 2024 and are expected to be renewed as required.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

We continuously assess potential alternative uses of our timberlands, as some properties may become more valuable for development, residential, recreation or other purposes.

We also acquire HBU properties in connection with timberland acquisitions.

These properties are managed as timberlands until sold or developed.

For selected development properties, we also invest in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and improve the value of such properties.

Changes in higher and better use timberlands and real estate development investments from December 31, 2020 to December 31, 2021 are shown below:

Higher and Better Use Timberlands and Real Estate Development Investments

Land and Timber Development Investments Total

Non-current portion at December 31, 2020

$ 79,901 $ 28,617 $ 108,518

Current portion (a) 212 6,544 6,756

Total Balance at December 31, 2020

80,113 35,161 115,274

Non-cash cost of land and improved development ( 11,894 ) ( 8,211 ) ( 20,105 )

Amortization of parcel real estate development investments — ( 5,923 ) ( 5,923 )

Timber depletion from harvesting activities and basis of timber sold in real estate sales ( 1,301 ) — ( 1,301 )

Capitalized real estate development investments (b) — 21,963 21,963

Capital expenditures (silviculture) 191 — 191

Intersegment transfers 13,281 — 13,281

Purchase price allocation adjustment (c) 8,238 — 8,238

Total Balance at December 31, 2021

88,628 42,990 131,618

Current portion (a) ( 718 ) ( 24,022 ) ( 24,740 )

Non-current portion at December 31, 2021

$ 87,910 $ 18,968 $ 106,878

(a) The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory.

See Note 18 — Inventory for additional information.

(b) Capitalized real estate development investments includes $ 0.6 million of capitalized interest and $ 9.4 million of parcel real estate development investments.

Parcel real estate development investments represent investments made for specific lots and/or commercial parcels that are currently under contract or expected to be ready for market within a year.

The final allocation of fair value to HBU properties acquired in the merger is approximately $ 34.7 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.

See Note 2 - Merger with Pope Resources for additional information.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

As of December 31, 2021 and 2020, our inventory was solely comprised of finished goods, as follows:

Real estate inventory (a) $ 24,740 $ 6,756

Log inventory 3,783 3,838

Total inventory $ 28,523 $ 10,594

(a) Represents the cost of HBU real estate (including capitalized development investments) under contract to be sold.

See Note 17 — Higher and Better Use Timberlands and Real Estate Development Investments for additional information.

OTHER OPERATING INCOME (EXPENSE), NET

The following table provides the composition of Other operating income (expense), net for the three years ended December 31:

2021 2020 2019

Gain (loss) on foreign currency remeasurement, net of cash flow hedges $ 6,823 ($ 3,503 ) ($ 3,077 )

Gain on sale or disposal of property plant & equipment 75 121 56

Gain on investment in Timber Funds (a) 7,482 — —

Log trading marketing fees 6 56 314

Cost related to the merger with Pope Resources (b) — ( 17,166 ) —

Equity income (loss) related to Bainbridge Landing LLC joint venture (c) 102 ( 721 ) —

Miscellaneous expense, net ( 404 ) ( 472 ) ( 1,826 )

$ 14,084 ($ 21,685 ) ($ 4,533 )

(a) See Note 7 - Noncontrolling Interests and Note 8 - Variable Interest Entities for additional information on Timber Funds.

(b) Includes legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

See Note 2 - Merger with Pope Resources and Note 27 - Charges for Integration and Restructuring for additional information.

(c) See Note 7 - Noncontrolling Interests and Note 8 - Variable Interest Entities for additional information on Ferncliff Investors.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLANS

We have one qualified non-contributory defined benefit pension plan covering a portion of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans.

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Benefits paid ( 3,519 ) ( 3,413 ) ( 14 ) ( 14 )

Expenses paid ( 267 ) ( 498 ) — —

Projected benefit obligation at end of year $ 93,799 $ 100,469 $ 1,890 $ 1,886

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(Dollar amounts in thousands unless otherwise stated)

For pension and postretirement plans with accumulated benefit obligations in excess of plan assets, the following table sets forth the projected and accumulated benefit obligations and the fair value of plan assets for the two years ended December 31:

Projected benefit obligation $ 93,799 $ 100,469

Accumulated benefit obligation 93,799 100,469

Accumulated postretirement benefit obligation 1,890 1,886

Fair value of plan assets 85,079 78,883

ACTUARIAL (GAIN) LOSS

Key components of the actuarial gains and losses contributing to the period change in the benefit obligation are as follows:

• Changes in participant demographics resulted in an actuarial gain of approximately $ 0.5 million, which is primarily due to high mortality among participants.

• Changes in mortality assumptions resulted in an actuarial loss of approximately $ 0.3 million.

• Changes in the discount rate from 2.26 % to 2.65 % resulted in an actuarial gain of approximately $ 5.1 million.

POSTRETIREMENT

Key components of the actuarial gains and losses contributing to the period change in the benefit obligation are as follows:

• Re-measurement of current census data resulted in a demographic loss of $ 0.1 million.

• Changes in the discount rate from 2.42 % to 2.75 % resulted in an actuarial gain of approximately $ 0.1 million.

OTHER COMPREHENSIVE INCOME

Net gains or losses recognized in other comprehensive (loss) income for the three years ended December 31 are as follows:

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2021 2020 2019 2021 2020 2019

Net (losses) gains ($ 1,587 ) ($ 1,514 ) ($ 1,743 ) ($ 207 ) ($ 285 ) $ 149

In 2020, net losses recognized in other comprehensive income for our pension plan was primarily due to an approximate 80 bps decline in the discount rate ($ 11.2 million) and unfavorable demographic experience ($ 0.4 million), partially offset by higher than expected return on plan assets ($ 9.3 million) and updates to mortality rates ($ 0.7 million).

Net losses recognized in other comprehensive income for our postretirement plan was primarily due to an approximate 74 bps decline in the discount rate ($ 0.2 million).

Net gains (losses) $ 11,262 ($ 1,587 ) ($ 1,514 ) $ 40 ($ 207 ) ($ 285 )

Net gains or losses reclassified from other comprehensive income and recognized as a component of pension and postretirement expense for the three years ended December 31 are as follows:

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Amortization of losses (gains) $ 1,154 $ 861 $ 449 $ 20 $ 8 —

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

ACCUMULATED OTHER COMPREHENSIVE INCOME (AOCI)

Net losses that have not yet been included in pension and postretirement expense for the two years ended December 31, but have been recognized as a component of AOCI are as follows:

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AOCI ($ 11,411 ) ($ 23,827 ) ($ 425 ) ($ 485 )

Projected benefit obligation $ 100,469 $ 90,261

Accumulated benefit obligation 100,469 90,261

Fair value of plan assets 78,883 66,460

The following tables set forth the components of net pension and postretirement benefit cost (credit) that have been recognized during the three years ended December 31:

NET PENSION AND POSTRETIREMENT BENEFIT (CREDIT) COST

The following tables set forth the components of net pension and postretirement benefit (credit) cost that have been recognized during the three years ended December 31:

Pension Postretirement

2021 2020 2019 2021 2020 2019

Components of Net Periodic Benefit Cost (Credit)

Components of Net Periodic Benefit (Credit) Cost

Service cost — — — $ 8 $ 6 $ 6

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Amortization of losses (gains) 1,154 861 449 20 8 —

Net periodic benefit cost (credit) $ 63 $ 539 ($ 240 ) $ 65 $ 60 $ 47

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Net periodic benefit (credit) cost ($ 364 ) $ 63 $ 539 $ 73 $ 65 $ 60

The service cost component of our benefit expense is recorded within the operating expense line item “Selling and general expenses” within the Consolidated Statements of Income.

All other components of the benefit costs expense are included within the “Interest and miscellaneous income, net” line item of the Consolidated Statements of Income.

VALUATION ASSUMPTIONS

The following table sets forth the principal assumptions inherent in the determination of benefit obligations and net periodic benefit cost of the pension and postretirement benefit plans as of December 31:

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Expected long-term return on plan assets 5.72 % 5.72 % 5.72 % — — —

At December 31, 2020, the pension plan’s discount rate was 2.3 %, which closely approximates interest rates on high quality, long-term obligations.

In 2020, the expected return on plan assets remained flat at 5.7 %, which is based on historical and expected long-term rates of return on broad equity and bond indices and consideration of the actual annualized rate of return.

We utilize this information in developing assumptions for returns, risks and correlations of asset classes, which are then used to establish the asset allocation ranges.

DISCOUNT RATE

At December 31, 2021, the pension plan’s discount rate was 2.7 %.

The discount rate is derived from the Financial Times Stock Exchange (FTSE) Pension Discount Curve (f/k/a Citigroup).

The Pension Discount Curve (PDC) is a set of yields on hypothetical AA, zero coupon bonds whose maturities range from 6 months up to 30 years.

The yields of the PDC are used to discount pension liabilities.

The PDC is calculated based on a universe of AA rated corporate bonds from the FTSE US Broad Investment-Grade Bond Index and the yields of the FTSE Treasury model curve.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

The pension plan's future expected cash flows are then matched to the spot rates on the yield curve and a single equivalent discount rate is determined, which produces the same present value as the spot rates.

EXPECTED LONG-TERM RETURN ON PLAN ASSETS

In 2021, the expected return on plan assets remained at 5.7 %, which is based on historical returns on current asset allocations and expected returns using the Black-Litterman method.

INVESTMENT OF PLAN ASSETS

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Total 100 % 100 %

Investments within the equity categories may include large capitalization, small capitalization and emerging market securities, while the international fixed income portfolio may include emerging markets debt.

Investments within the equity categories may include large capitalization, small capitalization and emerging market securities.

Pension assets did not include a direct investment in Rayonier common shares during the years ended December 31, 2021 and 2020.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

NET ASSET VALUE MEASUREMENTS

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Total Investments at Net Asset Value $ 85,079 $ 78,883

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Our expected benefit payments to be made for the next 10 years are as follows:

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2027-2031 23,525 359

We have no pension contribution requirements in 2021.

We have no mandatory pension contribution requirements in 2022.

DEFINED CONTRIBUTION PLANS

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(b) Represents expense associated with the acceleration of share-based compensation on Pope replacement awards related to qualifying terminations.

See Note 21 - C harges f or Integration and Restructuring for additional details.

See Note 27 - Charges for Integration and Restructuring for additional details.

(c) A valuation allowance is recorded against the tax benefit recognized as we do not expect to be able to realize the benefit in the future.

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Restricted stock granted to members of the board of directors generally vests immediately upon issuance and is subject to certain holding requirements.

The fair value of each share granted is equal to the share price of the the Company’s stock on the date of grant.

The fair value of each share granted is equal to the share price of the Company’s stock on the date of grant.

We have elected to value each grant in total and recognize the expense on a straight-line basis from the grant date of the award to the latest vesting date.

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Accordingly, unexpected forfeitures will lower stock-based compensation during the period in which they occur.

REPLACEMENT RESTRICTED STOCK AWARDS FROM THE MERGERS

As a result of the Mergers, Rayonier issued 69,176 shares of restricted stock awards (“replacement awards”) in connection with unvested Pope Resources restricted units.

REPLACEMENT RESTRICTED STOCK AWARDS FROM THE MERGER WITH POPE RESOURCES

As a result of the merger with Pope Resources, Rayonier issued 69,176 shares of restricted stock awards (“replacement awards”) in connection with unvested Pope Resources restricted units.

Eligible outstanding Pope Resources restricted units were canceled and exchanged for replacement awards, pursuant to an exchange ratio in the merger agreement designed to maintain the intrinsic value of the awards immediately prior to the exchange.

In accordance with ASC 805, these awards are considered to be replacement awards.

Exchanges of share-based payment awards in conjunction with a business combination are modifications in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”).

As a result, the portion of the fair-value of replacement awards attributable to pre-merger services were included in measuring the consideration transferred in the business combination.

The fair value of the replacement awards was estimated to be approximately $ 1.7 million of which

The replacement awards issued have similar vesting provisions as the terms of existing Rayonier restricted stock.

Expense for the replacement awards that were not fully vested prior to the date of the merger is expected to be recognized over a weighted average remaining service period of approximately 16 months unless a qualifying termination occurs.

A qualifying termination of an awardee will result in the acceleration of vesting and expense recognition in the period that the qualifying termination occurs.

Qualifying terminations during the years ended December 31, 2021 and 2020 resulted in the accelerated vesting of 1,430 and 15,049 of the replacement awards and recognition of approximately $ 0.1 million and $ 0.3 million of expense, respectively.

RAYONIER INC.

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(Dollar amounts in thousands unless otherwise stated)

$ 0.2 million was attributable to pre-merger services.

See Note 2 — Merger with Pope Resources for additional information.

REPLACEMENT AWARD EXPENSE

The replacement awards issued have similar vesting provisions as the terms of existing Rayonier restricted stock.

Expense for the replacement awards that were not fully vested prior to the date of the merger will continue to be recognized over a weighted average remaining service period of approximately 21 months unless a qualifying termination occurs.

A qualifying termination of an awardee will result in the acceleration of vesting and expense recognition in the period that the qualifying termination occurs.

Qualifying terminations during the year ended December 31, 2020 resulted in the accelerated vesting of 15,049 of the replacement awards and recognition of approximately $ 0.3 million of expense.

This accelerated vesting expense is included in merger-related integration costs as described in Note 21 — Charges for Integration and Restructuring .

As of December 31, 2021, there was $ 0.7 million of unrecognized compensation cost attributable to our restricted stock.

We expect to recognize this cost over a weighted average period of 1.7 years.

We expect to recognize this cost over a weighted average period of 1 year.

A summary of our restricted stock is presented below:

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Non-vested Restricted Shares at January 1, 158,820 $ 28.47

Granted (a) 100,452 23.15

Vested (b) ( 109,764 ) 25.10

Granted 22,140 37.36

Vested (a) ( 104,917 ) 29.74

Cancelled ( 181 ) 34.71

Non-vested Restricted Shares at December 31, 75,862 $ 29.29

(a) The year ended December 31, 2020 includes 69,176 replacement awards issued as a result of the merger with Pope Resources.

(b) The year ended December 31, 2020 includes 15,049 replacement awards vested as a result of acceleration due to qualifying terminations.

(a) The year ended December 31, 2021 includes 1,430 replacement awards vested as a result of acceleration due to qualifying terminations.

RESTRICTED STOCK UNITS

In April 2019, we began granting restricted stock units instead of restricted stock to employees.

All attributes of our restricted stock described herein, including vesting characteristics, dividend payments, fair value measurement and expense recognition, apply equally to restricted stock units granted under the Stock Plan.

Most attributes of our restricted stock described herein, including dividend payments, fair value measurement and expense recognition, apply equally to restricted stock units granted under the Stock Plan.

However, beginning with the restricted stock units granted in 2021, there is no distinction between the vesting characteristics of restricted stock units granted to senior management and those granted to all other employees.

Restricted stock units generally vest in fourths on the first, second, third and fourth anniversary of the grant date.

As of December 31, 2021, there was $ 7.1 million of unrecognized compensation cost attributable to our restricted stock units.

We expect to recognize this cost over a weighted average period of 2.9 years.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

A summary of our restricted stock units is presented below:

6 unchanged sentences

(a) Intrinsic value of restricted stock units outstanding is based on the market price of the Company’s stock at December 31, 2021.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

Shares Weighted

24 unchanged sentences

(a) Intrinsic value of outstanding performance share units is based on the market price of the Company's stock at December 31, 2021.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

of Units Weighted

4 unchanged sentences

Units Distributed ( 102,505 ) 40.27

Other Cancellations/Adjustments ( 1,244 ) 38.04

Outstanding Performance Share units at December 31, 405,361 $ 33.16

7 unchanged sentences

Risk-free rate 0.4 % 0.3 % 2.3 %

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

NON-QUALIFIED EMPLOYEE STOCK OPTIONS

24 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

OTHER OPERATING (EXPENSE) INCOME, NET

The following table provides the composition of Other operating (expense) income, net for the three years ended December 31:

Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S.

federal or state income tax.

As of December 31, 2021, Rayonier owns a 97.8 % interest in the Operating Partnership and conducts substantially all of its timberland operations through the Operating Partnership.

The taxable income or loss generated by the Operating Partnership is passed through and reported to its unitholders (including the Company) on a Schedule K-1 for inclusion in each unitholder’s income tax return.

Certain operations, including log trading and certain real estate activities, such as the entitlement, development and sale of HBU properties, are conducted through our TRS.

The TRS subsidiaries are subject to U.S.

federal and state corporate income tax.

The New Zealand timber operations are conducted by the New Zealand subsidiary, which is subject to corporate-level tax at 28% in New Zealand and is treated as a partnership for U.S.

income tax purposes.

PROVISION FOR INCOME TAXES FROM CONTINUING OPERATIONS

The provision for income taxes for each of the three years ended December 31 follows:

2021 2020 2019

(Loss) gain on foreign currency remeasurement, net of cash flow hedges ($ 3,503 ) ($ 3,077 ) $ 370

Gain on sale or disposal of property plant & equipment 121 56 7

Income from sale of unused Internet Protocol addresses — — 646

Log trading marketing fees 56 314 286

Cost related to the merger with Pope Resources (a) ( 17,166 ) — —

Equity loss related to Ferncliff Investors joint venture (b) ( 721 ) — —

Miscellaneous expense, net ( 472 ) ( 1,826 ) ( 169 )

($ 1,893 ) ($ 237 ) $ 2

(a) Includes legal, accounting, due diligence, consulting and other costs related to the merger with Pope Resources.

See Note 2 - Merger with Pope Resources and Note 21 - Charges for Integration and Restructuring for additional information.

(b) See N ote 6 - Noncontrolling Interests and Note 27 - Variable Interest E ntities for additional information on Ferncliff Investors.

CHARGES FOR INTEGRATION AND RESTRUCTURING

During 2020, we have incurred and accrued for termination benefits (primarily severance) and accelerated share-based payment costs based upon actual and expected qualifying terminations of certain employees as a result of restructuring decisions made concurrent with and subsequent to the Mergers.

We have also incurred non-recurring professional services costs for investment banking, legal, consulting, accounting and certain other fees directly attributable to the Mergers.

A summary of the charges for integration and restructuring related to the Mergers is presented below:

Termination benefits $ 625

Acceleration of share-based compensation related to qualifying terminations ( Note 19 )

Professional services 14,314

Other integration and restructuring costs 1,903

Total integration and restructuring charges related to the Mergers $ 17,166

Changes in accrued severance related to restructuring during 2020 were as follows:

Accrued severance as of January 1, 2020 —

Payments ( 513 )

Accrued severance as of December 31, 2020 $ 112

Accrued severance is recorded within “Accrued Payroll and Benefits” in our Consolidated Balance Sheets.

The accrued severance balance as of December 31, 2020 is expected to be paid within one year.

( 536 ) ( 339 ) ( 122 )

( 11,425 ) ( 5,391 ) ( 1,542 )

( 13,854 ) ( 5,967 ) ( 1,662 )

( 6,288 ) 8,355 465

( 1,623 ) 325 17

( 2,007 ) ( 3,027 ) ( 11,278 )

( 9,918 ) 5,653 ( 10,796 )

Changes in valuation allowance

9,111 ( 6,695 ) ( 482 )

($ 14,661 ) ($ 7,009 ) ($ 12,940 )

A reconciliation of the U.S.

federal statutory income tax rate to the actual income tax rate for each of the three years ended December 31 follows:

2021 2020 2019

federal statutory income tax rate ($ 47,280 ) ( 21.0 ) % ($ 7,726 ) ( 21.0 ) % ($ 16,930 ) ( 21.0 ) %

and foreign REIT income 44,316 19.7 16,569 45.0 19,902 24.7

Matariki Group and Rayonier New Zealand Ltd ( 12,927 ) ( 5.7 ) ( 7,698 ) ( 20.8 ) ( 11,181 ) ( 13.9 )

Change in valuation allowance 9,111 4.0 ( 6,695 ) ( 18.2 ) ( 482 ) ( 0.6 )

REIT Built-in Gain ( 2,215 ) ( 1.0 ) — — — —

State Net Operating Loss — — 1,118 3.0 — —

Prepaid land sales — — ( 1,084 ) ( 2.9 ) — —

Internal transfer of assets deferred — — — — ( 1,815 ) ( 2.3 )

Foreign income tax withholding ( 505 ) ( 0.2 ) ( 721 ) ( 2.0 ) ( 1,535 ) ( 1.9 )

Sale of Timber Funds ( 2,399 ) ( 1.1 ) — — — —

Other ( 2,762 ) ( 1.2 ) ( 772 ) ( 2.1 ) ( 899 ) ( 1.1 )

Income tax expense as reported for net income ($ 14,661 ) ( 6.5 ) % ($ 7,009 ) ( 19.0 ) % ($ 12,940 ) ( 16.1 ) %

The Company’s effective tax rate is below the 21 percent U.S.

statutory rate primarily due to tax benefits associated with being a REIT.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

As of December 31, 2020 and 2019, our inventory was solely comprised of finished goods, as follows:

Finished goods inventory

Real estate inventory (a) $ 6,756 $ 12,663

Log inventory 3,838 1,855

Total inventory $ 10,594 $ 14,518

(a) Represents the cost of HBU real estate (including capitalized development investments) under contract to be sold.

See Note 9 — Higher and Better Use Timberlands and Real Estate Development Investments for additional information.

RESTRICTED CASH

In order to qualify for like-kind exchange (“LKE”) treatment, the proceeds from real estate sales must be deposited with a third-party intermediary.

These proceeds are accounted for as restricted cash until a suitable replacement property is acquired.

In the event that the LKE purchases are not completed, the proceeds are returned to us after 180 days and reclassified as available cash.

As of December 31, 2020 and 2019, we had $ 3.0 million and $ 1.2 million, respectively, of proceeds from real estate sales classified as restricted cash which were deposited with an LKE intermediary as well as cash held in escrow for real estate development obligations.

The following table contains the amount of restricted cash recorded in the Consolidated Balance Sheets and Consolidated Statements of Cash Flows for the years ended December 31:

Restricted cash deposited with LKE intermediary — $ 758

Restricted cash held in escrow 2,975 475

Total restricted cash shown in the Consolidated Balance Sheets 2,975 1,233

Cash and cash equivalents 84,507 68,735

Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 87,482 $ 69,968

DEFERRED TAXES

Deferred income taxes result from differences between the timing of recognizing revenues and expenses for financial book purposes versus income tax purposes.

The nature of the temporary differences and the resulting net deferred tax asset/liability for the two years ended December 31 follows:

Gross deferred tax assets:

Pension, postretirement and other employee benefits $ 597 $ 1,403

New Zealand subsidiary 21,790 23,461

CBPC tax credit carry forwards 13,701 14,555

Capitalized real estate costs 1,656 1,459

TRS net operating loss 12,489 18,363

Land basis difference 9,061 9,468

Other 5,367 5,502

Total gross deferred tax assets 64,661 74,211

Valuation allowance ( 36,904 ) ( 46,015 )

Total deferred tax assets after valuation allowance $ 27,757 $ 28,196

Gross deferred tax liabilities:

Accelerated depreciation ( 46 ) ( 38 )

New Zealand subsidiary ( 91,388 ) ( 98,245 )

Other ( 6,059 ) ( 4,884 )

Total gross deferred tax liabilities ( 97,493 ) ( 103,167 )

Net deferred tax liability reported as noncurrent ($ 69,736 ) ($ 74,971 )

Net operating loss (“NOL”) and tax credit carryforwards as of the two years ended December 31 follows:

Tax Effected Balance Expiration

Federal NOL Carryforwards- Post TCJA (a) $ 10,687 None

U.S State NOL Carryforwards (b) 1,802 2033

Cellulosic Biofuel Producer Credit (c) 13,701 2023

Federal NOL Carryforwards- Pre TCJA (a) $ 2,363 2036

Federal NOL Carryforwards- Post TCJA (a) 13,017 None

U.S State NOL Carryforwards (b) 2,983 2031

Cellulosic Biofuel Producer Credit (c) 14,555 2023

(a) The Tax Cuts and Jobs Act (TCJA) was signed into law on December 22, 2017.

The TCJA lifted the 20-year federal NOL Carryforward period.

Net operating losses generated after December 31, 2017 have an indefinite carryforward period.

state NOL is made up of several jurisdictions that expire in various future years.

As of December 31, 2021, no state NOL is set to expire before December 31, 2033.

As of December 31, 2020, no state NOL was set to expire before December 31, 2031.

The Cellulosic Biofuel Producer Credit was one of the credits extended under this act.

We record a valuation allowance to reduce the carrying amounts of deferred tax assets if it is more likely than not that such deferred tax assets will not be realized.

Since 2015, we have had a 100 % valuation allowance against the U.S.

taxable REIT subsidiary's deferred tax assets, net of deferred tax liabilities.

During 2021, the net deferred tax assets decreased by $ 9.1 million.

As a result, we recorded a change in the valuation allowance of $ 9.1 million related to the U.S.

TRS's deferred tax assets, net of liabilities.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

Included in Other Assets are derivatives, goodwill in the New Zealand subsidiary, long-term prepaid roads, patronage equity, marketable equity securities and other deferred expenses including deferred financing costs related to revolving debt and capitalized software costs.

See Note 16 — Derivative Financial Instruments and Hedging Activities for further information on derivatives including their classification on the Consolidated Balance Sheets.

Changes in goodwill for the years ended December 31, 2020 and 2019 were:

Balance, January 1 (net of $ 0 of accumulated impairment)

The following table provides detail of the tax years that remain open to examination by the IRS and other significant taxing jurisdictions:

Taxing Jurisdiction Open Tax Years

Internal Revenue Service 2018 - 2020

New Zealand Inland Revenue 2016 - 2020

TAX CHARACTERISTICS OF DIVIDEND DISTRIBUTIONS

The taxable nature of the dividend distributions paid for each of the three years ended December 31 follows:

2021 2020 2019

Changes to carrying amount

Acquisitions — —

Impairment — —

Foreign currency adjustment 332 304

Balance, December 31 (net of $ 0 of accumulated impairment)

Total dividends/distributions paid per common share/unit

$ 1.08 $ 1.08 $ 1.08

See Note 1 — Summary of Significant Accounting Policies for additional information on goodwill.

As of December 31, 2020 and 2019, Rayonier’s prepaid logging and secondary roads follows:

Long-term and prepaid and secondary roads

Pacific Northwest long-term prepaid roads $ 4,087 $ 4,198

New Zealand long-term secondary roads 5,767 4,265

Total long-term prepaid and secondary roads $ 9,854 $ 8,463

See Note 1 — Summary of Significant Accounting Policies for additional information on prepaid logging roads.

As of December 31, 2020 and 2019, Rayonier’s patronage equity follows:

Patronage Equity $ 6,685 $ 5,217

See Note 1 — Summary of Significant Accounting Policies for additional information on patronage equity.

As of December 31, 2020 and 2019, Rayonier’s deferred financing costs related to revolving debt follows:

Deferred financing costs related to revolving debt $ 1,040 $ 102

See Note 1 — Summary of Significant Accounting Policies for additional information on deferred financing costs related to revolving debt.

As of December 31, 2020 and 2019, Rayonier’s capitalized software costs follows:

Capitalized software costs $ 3,651 $ 3,605

See Note 1 — Summary of Significant Accounting Policies for additional information on capitalized software costs.

Tax characteristics:

Capital gain 100 % 100 % 100 %

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

As of December 31, 2020 and 2019, Rayonier’s investments in marketable equity securities follows:

Investments in marketable equity securities — $ 10,582

See Note 1 — Summary of Significant Accounting Policies for additional information on investments in marketable equity securities.

As of December 31, 2019, our investments in marketable equity securities consisted entirely of 114,400 limited partnership units of Pope Resources, originally purchased in an open-market transaction at $ 65.90 per unit.

These units were included as consideration transferred in the merger with Pope Resources.

See Note 2 — Merger with Pope Resources for additional information.

ASSETS HELD FOR SALE

Assets held for sale is composed of properties not included in inventory under contract and expected to be sold within the next 12 months that also meet the other relevant held-for-sale criteria in accordance with ASC 360-10-45-9.

As of December 31, 2020, the basis in properties meeting this classification was $ 3.4 million.

Since the basis in these properties was less than the fair value, including costs to sell, no impairment was recognized.

As of December 31, 2019, there were no properties classified as assets held for sale.

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table summarizes the changes in AOCI by component for the years ended December 31, 2021 and 2020.

15 unchanged sentences

Balance as of December 31, 2021 $ 4,215 $ 1,321 ($ 9,163 ) ($ 11,836 ) ($ 15,463 ) ($ 4,141 ) ($ 19,604 )

(a) Includes $ 76.6 million of other comprehensive loss related to interest rate swaps.

(a) Includes $ 52.5 million of other comprehensive gain related to interest rate swaps.

See Note 11 — Derivative Financial Instruments and Hedging Activities for additional information.

1 unchanged sentence

See Note 20 — Employee Benefit Plans for additional information.

The following table presents details of the amounts reclassified in their entirety from AOCI for the years ended December 31, 2021 and 2020:

Details about accumulated other comprehensive loss components Amount reclassified from accumulated other comprehensive loss Affected line item in the income statement

Realized loss (gain) on foreign currency exchange contracts $ 2,974 ($ 2,324 ) Other operating income (expense), net

Realized loss on foreign currency option contracts 1,177 30 Other operating income (expense), net

Noncontrolling interest ( 955 ) 528 Comprehensive (income) loss attributable to noncontrolling interests

Realized loss on interest rate contracts 14,694 10,769 Interest expense

Income tax (benefit) expense from foreign currency contracts ( 896 ) 495 Income tax expense (Note 22)

Net loss on cash flow hedges reclassified from accumulated other comprehensive income $ 16,994 $ 9,498

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

The following table presents details of the amounts reclassified in their entirety from AOCI for the years ended December 31, 2020 and 2019:

Details about accumulated other comprehensive (loss) income components Amount reclassified from accumulated other comprehensive (loss) income Affected line item in the income statement

Realized (gain) loss on foreign currency exchange contracts ($ 2,324 ) $ 1,246 Other operating income, net

Realized (gain) loss on foreign currency option contracts 30 ( 33 ) Other operating income, net

Noncontrolling interest 528 ( 279 ) Comprehensive income (loss) attributable to noncontrolling interest

Realized loss (gain) on interest rate contracts 10,769 ( 2,296 ) Interest expense

Income tax expense (benefit) from foreign currency contracts 495 ( 262 ) Income tax expense (Note 11)

Net loss (gain) on cash flow hedges reclassified from accumulated other comprehensive income $ 9,498 ($ 1,624 )

RESTRICTED CASH

Restricted cash, Timber Funds includes the portion of proceeds from Fund II Timberland Dispositions required to be distributed to noncontrolling interests.

Restricted cash, excluding Timber Funds includes cash balances held in escrow as collateral for certain contractual obligations related to our Richmond Hill development project as well as cash held in escrow for real estate sales.

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Consolidated Balance Sheets that sum to the total of the same such amounts in the Consolidated Statements of Cash Flows for the years ended December 31:

Cash and cash equivalents $ 362,173 $ 84,507

Restricted cash, Timber Funds 6,341 —

Restricted cash, excluding Timber Funds (Held in escrow) 625 2,975

Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 369,139 $ 87,482

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

VARIABLE INTEREST ENTITIES

ORM Timber Fund II, Inc.

(Fund II), ORM Timber Fund III LLC (Fund III), and ORM Timber Fund IV LLC.

(Fund IV) (Collectively, the “Funds”)

In the Mergers, we became manager of three private equity timber funds, Fund II, Fund III, and Fund IV, and obtained ownership interests in the Funds of 20 %, 5 %, and 15 %, respectively.

We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the Funds’ economic success.

Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate the Funds.

For further information on the Funds, see Note 6 — Noncontrolling Interests .

The assets, liabilities and equity of the Funds as of December 31, 2020, were as follows:

Timber Funds 2020

Cash and cash equivalents $ 4,053

Accounts receivable 3,620

Prepaid expenses 132

Other current assets 41

Total current assets 7,846

Timber and timberlands, net of depletion and amortization 410,884

Total assets $ 418,730

Liabilities and Equity:

Accounts payable $ 939

Intercompany payable (a) 1,319

Accrued taxes 314

Accrued interest 513

Deferred revenue 323

Other current liabilities 732

Total current liabilities 4,140

Long-term debt, net of deferred financing costs 60,179

Funds’ equity 354,411

Total liabilities and equity $ 418,730

(a) Includes management fees and other expenses payable to the Operating Partnership.

These amounts are eliminated in the Consolidated Balance Sheets.

Included in Other Assets are derivatives, long-term prepaid roads, goodwill in the New Zealand subsidiary, patronage equity, capitalized software costs, carbon credits, long-term prepaid stumpage and other deferred expenses including deferred financing costs related to revolving debt.

As of December 31, 2021 and 2020, our long-term derivative contracts follows:

Long-term derivative contracts $ 11,796 $ 1,563

See Note 1 — Summary of Significant Accounting Policies and Note 11 — Derivative Financial Instruments and Hedging Activities for further information on derivatives including their classification on the Consolidated Balance Sheets.

As of December 31, 2021 and 2020, our prepaid logging and secondary roads follows:

Long-term and prepaid and secondary roads

Pacific Northwest long-term prepaid roads $ 4,131 $ 4,087

New Zealand long-term secondary roads 6,730 5,767

Total long-term prepaid and secondary roads $ 10,861 $ 9,854

See Note 1 — Summary of Significant Accounting Policies for additional information on prepaid logging roads.

Changes in goodwill for the years ended December 31, 2021 and 2020 were:

Balance, January 1 (net of $ 0 of accumulated impairment)

$ 8,943 $ 8,611

Changes to carrying amount

Acquisitions — —

Impairment — —

Foreign currency adjustment ( 486 ) 332

Balance, December 31 (net of $ 0 of accumulated impairment)

$ 8,457 $ 8,943

See Note 1 — Summary of Significant Accounting Policies for additional information on goodwill.

As of December 31, 2021 and 2020, Rayonier’s patronage equity follows:

Patronage Equity $ 7,322 $ 6,685

See Note 1 — Summary of Significant Accounting Policies for additional information on patronage equity.

As of December 31, 2021 and 2020, our capitalized software costs follows:

Capitalized software costs $ 3,117 $ 3,651

See Note 1 — Summary of Significant Accounting Policies for additional information on capitalized software costs.

RAYONIER INC.

4 unchanged sentences

(Dollar amounts in thousands unless otherwise stated)

Ferncliff Investors

We also acquired in the Mergers an ownership interest in a real estate joint venture entity.

We determined, based upon an analysis under the variable interest entity guidance, that we have the power to direct the activities that most significantly impact the joint venture investment’s economic success.

Therefore, we are considered the primary beneficiary and are required under ASC 810 — Consolidation to consolidate Ferncliff Investors.

For further information on Ferncliff Investors, see Note 6 — Noncontrolling Interests .

The assets, liabilities and equity of Ferncliff Investors as of December 31, 2020, were as follows:

Ferncliff Investors 2020

Cash and cash equivalents $ 4,503

Intercompany receivable 111

Total current assets 4,614

Investment in real estate joint venture entity 2,112

Advances to real estate joint venture entity 1,000

Total assets $ 7,726

Liabilities and equity:

Other accrued and deferred liabilities $ 3,447

Total current liabilities 3,447

Ferncliff Investors’ equity 4,279

Total liabilities and equity $ 7,726

Changes in the basis of carbon credits for the years ended December 31, 2021 and 2020 were:

Balance, January 1 $ 1,346 $ 1,544

Changes to carrying amount

Acquisitions 698 —

Sales — ( 286 )

Foreign currency adjustment ( 88 ) 88

Balance, December 31 (net of $ 0 of accumulated impairment)

$ 1,956 $ 1,346

See Note 1 — Summary of Significant Accounting Policies for additional information on carbon credits.

As of December 31, 2021 and 2020, our prepaid stumpage follows:

Long-term prepaid stumpage $ 1,461 $ 3,137

See Note 1 — Summary of Significant Accounting Policies for additional information on prepaid stumpage.

As of December 31, 2021 and 2020, our deferred financing costs related to revolving debt follows:

Deferred financing costs related to revolving debt $ 1,104 $ 1,040

See Note 1 — Summary of Significant Accounting Policies for additional information on deferred financing costs related to revolving debt.

ASSETS HELD FOR SALE

Assets held for sale is composed of properties not included in inventory which are under contract and expected to be sold within the next 12 months that also meet the other relevant held-for-sale criteria in accordance with ASC 360-10-45-9.

As of December 31, 2021 and December 31, 2020, the basis in properties meeting this classification was $ 5.1 million and $ 3.4 million, respectively.

Since the basis in these properties was less than the fair value, including costs to sell, no impairment was recognized.

CHARGES FOR INTEGRATION AND RESTRUCTURING

During 2020, we incurred and accrued for termination benefits (primarily severance) and accelerated share-based payment costs based upon actual and expected qualifying terminations of certain employees as a result of restructuring decisions made concurrent with and subsequent to the merger with Pope Resources.

We also incurred non-recurring professional services costs for investment banking, legal, consulting, accounting and certain other fees directly attributable to the merger with Pope Resources.

A summary of the charges for integration and restructuring related to the merger with Pope Resources is presented below:

Termination benefits $ 625

Acceleration of share-based compensation related to qualifying terminations ( Note 21 )

Professional services 14,314

Other integration and restructuring costs 1,903

Total integration and restructuring charges related to the merger with Pope Resources $ 17,166

During the year ended December 31, 2020, we incurred $ 0.6 million in severance benefits related to restructuring associated with the Pope Resources merger.

As of December 31, 2020, there was $ 0.1 million of accrued severance recorded within “Accrued Payroll and Benefits” in our Consolidated Balance Sheets.

As of December 31, 2021, all severance associated with the merger with Pope Resources has been paid.

RAYONIER INC.

AND SUBSIDIARIES

RAYONIER, L.P.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollar amounts in thousands unless otherwise stated)

RELATED PARTY

In January 2020, we entered into an agreement to sell developed lots to Mattamy Jacksonville LLC, a wholly owned subsidiary of Mattamy Homes, for an aggregate base purchase price of $ 4.45 million (subject to multiple takedowns over a 2 year period), plus additional consideration as to each lot to the extent the ultimate sales price of each finished home exceeds agreed price thresholds (the “Mattamy Contract”).

The Mattamy contract also includes marketing fee revenue based on 1.25 % of the sales price of each finished home.

In May 2021, we entered into an amendment to the original agreement, which sells additional lots to Mattamy for an aggregate base purchase price of $ 1.0 million.

The Mattamy contract also includes marketing fee revenue based on a percentage of the sales price of each finished home.

In September 2020, Keith Bass, a member of our Board of Directors, was named the Chief Executive Officer of Mattamy Homes US.

2 unchanged sentences

Related Party Transaction Location on Statement of Income and Comprehensive Income 2021 2020 2019

Mattamy Contract Sales $ 1,354 — —

Mattamy Contract Sales (a) $ 2,656 $ 1,354 —

(a) The years ended December 31, 2021 and December 31, 2020 exclude approximately $ 0.3 million and $ 0.1 million, respectively, of cash received from Mattamy Jacksonville LLC under this agreement for the reimbursement of local impact fees.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data