RAYONIER INC 10-Q

Item 1. Financial Statements RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 SALES ( NOTE 3 ) $ 195,287 $ 364,726 $ 663,674 $ 847,604 Costs and Expenses Cost of sales ( 152,079 ) ( 233,308 ) ( 507,381 ) ( 578,937 ) Selling and general expenses ( 16,886 ) ( 13,174 ) ( 49,002 ) ( 41,899 ) Other operating income, net ( Note 15 ) 14,581 5,070 14,398 9,474 ( 154,384 ) ( 241,412 ) ( 541,985 ) ( 611,362 ) OPERATING INCOME 40,903 123,314 121,689 236,242 Interest expense ( 9,056 ) ( 11,265 ) ( 26,476 ) ( 34,292 ) Interest and other miscellaneous income, net 1,252 1,274 990 127 INCOME BEFORE INCOME TAXES 33,099 113,323 96,203 202,077 Income tax expense ( Note 17 ) ( 1,238 ) ( 2,811 ) ( 8,056 ) ( 13,114 ) NET INCOME 31,861 110,512 88,147 188,963 Less: Net income attributable to noncontrolling interests in the operating partnership ( 455 ) ( 2,210 ) ( 1,670 ) ( 4,303 ) Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) NET INCOME ATTRIBUTABLE TO RAYONIER INC. 20,578 75,831 73,999 143,885 OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 , $ 0 and $ 0 ( 25,392 ) ( 6,622 ) ( 55,220 ) ( 19,670 ) Cash flow hedges, net of income tax effect of $ 2,488 , $ 833 , $ 5,677 and $ 2,207 20,147 1,711 66,329 52,693 Amortization of pension and postretirement plans, net of income tax expense of $ 0 , $ 0 , $ 0 and $ 0 188 294 564 881 Total other comprehensive (loss) income ( 5,057 ) ( 4,617 ) 11,673 33,904 COMPREHENSIVE INCOME 26,804 105,895 99,820 222,867 Less: Comprehensive income attributable to noncontrolling interests in the operating partnership ( 490 ) ( 2,118 ) ( 2,147 ) ( 5,490 ) Less: Comprehensive income attributable to noncontrolling interests in consolidated affiliates ( 8,029 ) ( 31,099 ) ( 6,670 ) ( 36,168 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC. $ 18,285 $ 72,678 $ 91,003 $ 181,209 EARNINGS PER COMMON SHARE ( NOTE 5 ) Basic earnings per share attributable to Rayonier Inc. $ 0.14 $ 0.53 $ 0.51 $ 1.03 Diluted earnings per share attributable to Rayonier Inc. $ 0.14 $ 0.53 $ 0.50 $ 1.03 See Notes to Consolidated Financial Statements. 1 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) September 30, 2022 December 31, 2021 ASSETS CURRENT ASSETS Cash and cash equivalents, excluding Timber Funds $ 260,931 $ 358,680 Cash and cash equivalents, Timber Funds 873 3,493 Total cash and cash equivalents 261,804 362,173 Restricted cash, Timber Funds ( Note 19 ) 1,464 6,341 Accounts receivable, less allowance for doubtful accounts of $ 51 and $ 59 37,468 30,018 Inventory ( Note 14 ) 31,254 28,523 Prepaid expenses 20,341 18,528 Assets held for sale ( Note 20 ) 2,357 5,099 Other current assets 437 749 Total current assets 355,125 451,431 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 2,750,541 2,894,996 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 13 ) 115,984 106,878 PROPERTY, PLANT AND EQUIPMENT Land 6,452 6,401 Buildings 30,863 31,168 Machinery and equipment 6,548 6,494 Construction in progress 597 460 Total property, plant and equipment, gross 44,460 44,523 Less — accumulated depreciation ( 16,707 ) ( 14,900 ) Total property, plant and equipment, net 27,753 29,623 RESTRICTED CASH, EXCLUDING TIMBER FUNDS ( NOTE 19 ) 16,252 625 RIGHT-OF-USE ASSETS 95,650 101,837 OTHER ASSETS 111,051 50,966 TOTAL ASSETS $ 3,472,356 $ 3,636,356 LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 27,061 $ 23,447 Current maturities of long-term debt, net ( Note 6 ) — 124,965 Accrued taxes 8,820 12,446 Accrued payroll and benefits 10,942 14,514 Accrued interest 7,178 6,343 Deferred revenue 22,586 17,802 Distribution payable, Timber Funds 1,576 6,341 Other current liabilities 34,249 25,863 Total current liabilities 112,412 231,721 LONG-TERM DEBT, NET ( NOTE 6 ) 1,257,756 1,242,819 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 16 ) 9,656 10,478 LONG-TERM LEASE LIABILITY 87,639 93,416 OTHER NON-CURRENT LIABILITIES 83,987 108,521 COMMITMENTS AND CONTINGENCIES ( NOTES 9 and 10 ) NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP ( NOTE 4 ) 96,243 133,823 SHAREHOLDERS’ EQUITY Common Shares, 480,000,000 shares authorized, 146,422,825 and 145,372,961 shares issued and outstanding 1,430,622 1,389,073 Retained earnings 384,384 402,307 Accumulated other comprehensive loss ( Note 18 ) ( 1,599 ) ( 19,604 ) TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY 1,813,407 1,771,776 Noncontrolling interests in consolidated affiliates ( Note 4 ) 11,256 43,802 TOTAL SHAREHOLDERS’ EQUITY 1,824,663 1,815,578 TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY $ 3,472,356 $ 3,636,356 See Notes to Consolidated Financial Statements. 2 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited) (Dollars in thousands, except share data) Common Shares Retained Earnings Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests in Consolidated Affiliates Shareholders’ Equity Shares Amount Balance, January 1, 2022 145,372,961 $ 1,389,073 $ 402,307 ($ 19,604 ) $ 43,802 $ 1,815,578 Net income — — 29,986 — 1,012 30,998 Net income attributable to noncontrolling interests in the operating partnership — — ( 669 ) — — ( 669 ) Dividends ($ 0.27 per share) (a) — — ( 39,902 ) — — ( 39,902 ) Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 339 726,248 29,771 — — — 29,771 Issuance of shares under incentive stock plans 11,364 415 — — — 415 Stock-based compensation — 2,797 — — — 2,797 Repurchase of common shares ( 5,420 ) ( 214 ) — — — ( 214 ) Adjustment of noncontrolling interests in the operating partnership — — ( 2,645 ) — — ( 2,645 ) Conversion of units into common shares 2,535 104 — — — 104 Amortization of pension and postretirement plan liabilities — — — 188 — 188 Foreign currency translation adjustment — — — 5,668 790 6,458 Cash flow hedges — — — 39,822 605 40,427 Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — ( 101 ) — ( 101 ) Distributions to noncontrolling interests in consolidated affiliates — — — — ( 1,566 ) ( 1,566 ) Balance, March 31, 2022 146,107,688 $ 1,421,946 $ 389,077 $ 25,973 $ 44,643 $ 1,881,639 Net income — — 24,650 — 637 25,287 Net income attributable to noncontrolling interests in the operating partnership — — ( 546 ) — — ( 546 ) Dividends ($ 0.285 per share) (a) — — ( 42,098 ) — — ( 42,098 ) Costs associated with the “at-the-market” (ATM) equity offering program — ( 63 ) — — — ( 63 ) Issuance of shares under incentive stock plans 304,887 1,983 — — — 1,983 Stock-based compensation — 4,412 — — — 4,412 Repurchase of common shares ( 91,820 ) ( 3,991 ) — — — ( 3,991 ) Adjustment of noncontrolling interests in the operating partnership — — 11,412 — — 11,412 Conversion of units into common shares 977 42 — — — 42 Amortization of pension and postretirement plan liabilities — — — 188 — 188 Foreign currency translation adjustment — — — ( 34,373 ) ( 1,912 ) ( 36,285 ) Cash flow hedges — — — 8,247 ( 2,492 ) 5,755 Allocation of other comprehensive loss to noncontrolling interests in the operating partnership — — — 575 — 575 Noncontrolling interests in consolidated affiliates redemption of shares — — — — ( 27,860 ) ( 27,860 ) Balance, June 30, 2022 146,321,732 $ 1,424,329 $ 382,495 $ 610 $ 13,016 $ 1,820,450 3 Table of Contents Balance, June 30, 2022 146,321,732 $ 1,424,329 $ 382,495 $ 610 $ 13,016 $ 1,820,450 Net income — — 21,033 — 10,828 31,861 Net income attributable to noncontrolling interests in the operating partnership — — ( 455 ) — — ( 455 ) Dividends ($ 0.285 per share) (a) — — ( 42,052 ) — — ( 42,052 ) Costs associated with the “at-the-market” (ATM) equity offering program — ( 38 ) — — — ( 38 ) Issuance of shares under incentive stock plans 760 19 — — — 19 Stock-based compensation — 2,636 — — — 2,636 Repurchase of common shares ( 569 ) ( 20 ) — — — ( 20 ) Adjustment of noncontrolling interests in the operating partnership — — 23,363 — — 23,363 Conversion of common units to common shares 100,902 3,696 — — — 3,696 Amortization of pension and postretirement plan liabilities — — — 188 — 188 Foreign currency translation adjustment — — — ( 24,065 ) ( 1,327 ) ( 25,392 ) Cash flow hedges — — — 21,619 ( 1,472 ) 20,147 Allocation of other comprehensive loss to noncontrolling interests in the operating partnership — — — 49 — 49 Distributions to noncontrolling interests in consolidated affiliates — — — — ( 9,789 ) ( 9,789 ) Balance, September 30, 2022 146,422,825 $ 1,430,622 $ 384,384 ($ 1,599 ) $ 11,256 $ 1,824,663 (a) For information regarding distributions to noncontrolling interests in the operating partnership, see the Rayonier Inc. Consolidated Statements of Cash Flows and Note 4 — Noncontrolling Interests . 4 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED) (Unaudited) (Dollars in thousands, except share data) Common Shares Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interests in Consolidated Affiliates Shareholders’ Equity Shares Amount Balance, January 1, 2021 137,678,822 $ 1,101,675 $ 446,267 ($ 73,885 ) $ 388,588 $ 1,862,645 Net income — — 11,189 — 3,843 15,032 Net income attributable to noncontrolling interests in the operating partnership — — ( 341 ) — — ( 341 ) Dividends ($ 0.27 per share) (a) — — ( 37,532 ) — — ( 37,532 ) Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 197 1,107,814 36,708 — — — 36,708 Issuance of shares under incentive stock plans 39,140 1,166 — — — 1,166 Stock-based compensation — 2,156 — — — 2,156 Repurchase of common shares ( 5,020 ) ( 155 ) — — — ( 155 ) Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — — 655 655 Adjustment of noncontrolling interests in the operating partnership — — ( 11,867 ) — — ( 11,867 ) Conversion of units into common shares 150,134 4,715 — — — 4,715 Amortization of pension and postretirement plan liabilities — — — 294 — 294 Foreign currency translation adjustment — — — ( 11,652 ) ( 2,636 ) ( 14,288 ) Cash flow hedges — — — 61,628 ( 627 ) 61,001 Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — ( 1,531 ) — ( 1,531 ) Distributions to noncontrolling interests in consolidated affiliates — — — — ( 8,737 ) ( 8,737 ) Balance, March 31, 2021 138,970,890 $ 1,146,265 $ 407,716 ($ 25,146 ) $ 381,086 $ 1,909,921 Net income — — 58,959 — 4,461 63,420 Net income attributable to noncontrolling interests in the operating partnership — — ( 1,753 ) — — ( 1,753 ) Dividends ($ 0.27 per share) (a) — — ( 37,981 ) — — ( 37,981 ) Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 927 2,199,459 79,994 — — — 79,994 Issuance of shares under incentive stock plans 185,544 3,325 — — — 3,325 Stock-based compensation — 2,852 — — — 2,852 Repurchase of common shares ( 42,425 ) ( 1,453 ) — — — ( 1,453 ) Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — — 9,034 9,034 Adjustment of noncontrolling interests in the operating partnership — — ( 15,410 ) — — ( 15,410 ) Conversion of units into common shares 6,439 241 — — — 241 Amortization of pension and postretirement plan liabilities — — — 294 — 294 Foreign currency translation adjustment — — — 1,025 214 1,239 Cash flow hedges — — — ( 9,833 ) ( 186 ) ( 10,019 ) Allocation of other comprehensive loss to noncontrolling interests in the operating partnership — — — 253 — 253 Distributions to noncontrolling interests in consolidated affiliates — — — — ( 6,474 ) ( 6,474 ) Balance, June 30, 2021 141,319,907 $ 1,231,224 $ 411,531 ($ 33,407 ) $ 388,135 $ 1,997,483 5 Table of Contents Balance, June 30, 2021 141,319,907 $ 1,231,224 $ 411,531 ($ 33,407 ) $ 388,135 $ 1,997,483 Net income — — 78,041 — 32,471 110,512 Net income attributable to noncontrolling interests in the operating partnership — — ( 2,210 ) — — ( 2,210 ) Dividends ($ 0.27 per share) (a) — — ( 39,032 ) — — ( 39,032 ) Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 691 1,390,968 51,132 — — — 51,132 Issuance of shares under incentive stock plans 5,740 183 — — — 183 Stock-based compensation — 2,086 — — — 2,086 Repurchase of common shares ( 175 ) ( 6 ) — — — ( 6 ) Disposition of noncontrolling interests in consolidated affiliates — — — — ( 255,486 ) ( 255,486 ) Adjustment of noncontrolling interests in the operating partnership — — 1,746 — — 1,746 Conversion of common units to common shares 333,018 12,258 — — — 12,258 Amortization of pension and postretirement plan liabilities — — — 294 — 294 Foreign currency translation adjustment — — — ( 5,743 ) ( 879 ) ( 6,622 ) Cash flow hedges — — — 2,204 ( 493 ) 1,711 Allocation of other comprehensive loss to noncontrolling interests in the operating partnership — — — 92 — 92 Distributions to noncontrolling interests in consolidated affiliates — — — — ( 53,562 ) ( 53,562 ) Noncontrolling interests in consolidated affiliates redemption of shares — — — — ( 28,119 ) ( 28,119 ) Balance, September 30, 2021 143,049,458 $ 1,296,877 $ 450,076 ($ 36,560 ) $ 82,067 $ 1,792,460 (a) For information regarding distributions to noncontrolling interests in the operating partnership, see the Rayonier Inc. Consolidated Statements of Cash Flows and Note 4 — Noncontrolling Interests . See Notes to Consolidated Financial Statements. 6 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 OPERATING ACTIVITIES Net income $ 88,147 $ 188,963 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 114,221 121,234 Non-cash cost of land and improved development 20,289 22,818 Stock-based incentive compensation expense 9,844 7,094 Deferred income taxes ( 6,678 ) 7,618 Amortization of losses from pension and postretirement plans 564 881 Gain on sale of large disposition of timberlands — ( 44,800 ) Gain on sale of Timber Funds III & IV — ( 3,729 ) Gain on Fund II timberland dispositions — ( 35,951 ) Other ( 1,766 ) 12,161 Changes in operating assets and liabilities: Receivables ( 12,845 ) 3,192 Inventories ( 6,238 ) ( 1,081 ) Accounts payable 6,833 3,350 All other operating activities ( 2,482 ) ( 4,306 ) CASH PROVIDED BY OPERATING ACTIVITIES 209,889 277,444 INVESTING ACTIVITIES Capital expenditures ( 48,211 ) ( 47,497 ) Real estate development investments ( 10,935 ) ( 9,165 ) Purchase of timberlands ( 3,242 ) ( 51,921 ) Net proceeds from large disposition of timberlands — 54,698 Net proceeds from sale of Timber Funds III & IV — 31,068 Net proceeds from Fund II timberland dispositions — 85,199 Other 6,531 6,952 CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES ( 55,857 ) 69,334 FINANCING ACTIVITIES Issuance of debt 406,842 446,378 Repayment of debt ( 531,842 ) ( 420,000 ) Dividends paid on common shares ( 123,619 ) ( 114,261 ) Distributions to noncontrolling interests in the operating partnership ( 2,754 ) ( 3,373 ) Proceeds from the issuance of common shares under incentive stock plan 2,580 4,674 Proceeds from the issuance of common shares under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs 31,877 166,549 Repurchase of common shares to pay withholding taxes on vested incentive stock awards ( 4,225 ) ( 1,614 ) Debt issuance costs — ( 4,829 ) Distributions to noncontrolling interests in consolidated affiliates ( 16,472 ) ( 19,564 ) Make-whole fee on NWFCS debt prepayment — ( 6,234 ) CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ( 237,613 ) 47,726 EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 6,038 ) ( 346 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 89,619 ) 394,158 Balance, beginning of year 369,139 87,482 Balance, end of period $ 279,520 $ 481,640 7 Table of Contents Nine Months Ended September 30, 2022 2021 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 24,161 $ 24,680 Income taxes 14,627 7,306 Non-cash investing activity: Capital assets purchased on account 4,882 4,726 Non-cash financing activity: Distributions to noncontrolling interests in consolidated affiliates 645 — Non-cash financing activity: Noncontrolling interests in consolidated affiliates redemption of shares (b) 27,860 28,119 (a) Interest paid is presented net of patronage paymen ts receive d of $ 6.0 million a n d $ 6.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. For additional information on patronage payments, see Note 10 — Debt in the 2021 Form 10-K. (b) T he 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 $ 27.9 million and $ 28.1 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. See Note 6 - Debt for further information. See Notes to Consolidated Financial Statements. 8 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited) (Dollars in thousands, except per unit amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 SALES ( NOTE 3 ) $ 195,287 $ 364,726 $ 663,674 $ 847,604 Costs and Expenses Cost of sales ( 152,079 ) ( 233,308 ) ( 507,381 ) ( 578,937 ) Selling and general expenses ( 16,886 ) ( 13,174 ) ( 49,002 ) ( 41,899 ) Other operating income, net ( Note 15 ) 14,581 5,070 14,398 9,474 ( 154,384 ) ( 241,412 ) ( 541,985 ) ( 611,362 ) OPERATING INCOME 40,903 123,314 121,689 236,242 Interest expense ( 9,056 ) ( 11,265 ) ( 26,476 ) ( 34,292 ) Interest and other miscellaneous income, net 1,252 1,274 990 127 INCOME BEFORE INCOME TAXES 33,099 113,323 96,203 202,077 Income tax expense ( Note 17 ) ( 1,238 ) ( 2,811 ) ( 8,056 ) ( 13,114 ) NET INCOME 31,861 110,512 88,147 188,963 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS 21,033 78,041 75,669 148,188 OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 , $ 0 , and $ 0 ( 25,392 ) ( 6,622 ) ( 55,220 ) ( 19,670 ) Cash flow hedges, net of income tax effect of $ 2,488 , $ 833 , $ 5,677 , and $ 2,207 20,147 1,711 66,329 52,693 Amortization of pension and postretirement plans, net of income tax expense of $ 0 , $ 0 , $ 0 , and $ 0 188 294 564 881 Total other comprehensive (loss) income ( 5,057 ) ( 4,617 ) 11,673 33,904 COMPREHENSIVE INCOME 26,804 105,895 99,820 222,867 Less: Comprehensive income attributable to noncontrolling interests in consolidated affiliates ( 8,029 ) ( 31,099 ) ( 6,670 ) ( 36,168 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS $ 18,775 $ 74,796 $ 93,150 $ 186,699 EARNINGS PER UNIT ( NOTE 5 ) Basic earnings per unit attributable to Rayonier, L.P. $ 0.14 $ 0.53 $ 0.51 $ 1.03 Diluted earnings per unit attributable to Rayonier, L.P. $ 0.14 $ 0.53 $ 0.50 $ 1.03 See Notes to Consolidated Financial Statements. 9 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) September 30, 2022 December 31, 2021 ASSETS CURRENT ASSETS Cash and cash equivalents, excluding Timber Funds $ 260,931 $ 358,680 Cash and cash equivalents, Timber Funds 873 3,493 Total cash and cash equivalents 261,804 362,173 Restricted cash, Timber Funds ( Note 19 ) 1,464 6,341 Accounts receivable, less allowance for doubtful accounts of $ 51 and $ 59 37,468 30,018 Inventory ( Note 14 ) 31,254 28,523 Prepaid expenses 20,341 18,528 Assets held for sale ( Note 20 ) 2,357 5,099 Other current assets 437 749 Total current assets 355,125 451,431 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 2,750,541 2,894,996 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 13 ) 115,984 106,878 PROPERTY, PLANT AND EQUIPMENT Land 6,452 6,401 Buildings 30,863 31,168 Machinery and equipment 6,548 6,494 Construction in progress 597 460 Total property, plant and equipment, gross 44,460 44,523 Less — accumulated depreciation ( 16,707 ) ( 14,900 ) Total property, plant and equipment, net 27,753 29,623 RESTRICTED CASH, EXCLUDING TIMBER FUNDS ( NOTE 19 ) 16,252 625 RIGHT-OF-USE ASSETS 95,650 101,837 OTHER ASSETS 111,051 50,966 TOTAL ASSETS $ 3,472,356 $ 3,636,356 LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL CURRENT LIABILITIES Accounts payable $ 27,061 $ 23,447 Current maturities of long-term debt, net ( Note 6 ) — 124,965 Accrued taxes 8,820 12,446 Accrued payroll and benefits 10,942 14,514 Accrued interest 7,178 6,343 Deferred revenue 22,586 17,802 Distribution payable, Timber Funds 1,576 6,341 Other current liabilities 34,249 25,863 Total current liabilities 112,412 231,721 LONG-TERM DEBT, NET ( NOTE 6 ) 1,257,756 1,242,819 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 16 ) 9,656 10,478 LONG-TERM LEASE LIABILITY 87,639 93,416 OTHER NON-CURRENT LIABILITIES 83,987 108,521 COMMITMENTS AND CONTINGENCIES ( NOTES 9 and 10 ) REDEEMABLE OPERATING PARTNERSHIP UNITS ( NOTE 4 ) 3,211,327 and 3,315,741 Units outstanding, respectively 96,243 133,823 CAPITAL General partners’ capital 18,113 17,872 Limited partners’ capital 1,793,275 1,769,367 Accumulated other comprehensive income (loss) ( Note 18 ) 2,019 ( 15,463 ) TOTAL CONTROLLING INTEREST CAPITAL 1,813,407 1,771,776 Noncontrolling interests in consolidated affiliates ( Note 4 ) 11,256 43,802 TOTAL CAPITAL 1,824,663 1,815,578 TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL $ 3,472,356 $ 3,636,356 See Notes to Consolidated Financial Statements. 10 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN CAPITAL (Unaudited) (Dollars in thousands, except share data) Units Accumulated Other Comprehensive Income (Loss) Noncontrolling Interests in Consolidated Affiliates Total Capital General Partners’ Capital Limited Partners’ Capital Balance, January 1, 2022 $ 17,872 $ 1,769,367 ($ 15,463 ) $ 43,802 $ 1,815,578 Net income 300 29,686 — 1,012 30,998 Distributions on units ($ 0.27 per unit) ( 408 ) ( 40,388 ) — — ( 40,796 ) Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 339 298 29,473 — — 29,771 Issuance of units under incentive stock plans 4 411 — — 415 Stock-based compensation 28 2,769 — — 2,797 Repurchase of units ( 2 ) ( 212 ) — — ( 214 ) Adjustment of Redeemable Operating Partnership Units ( 25 ) ( 2,496 ) — — ( 2,521 ) Conversion of units into common shares 1 103 — — 104 Amortization of pension and postretirement plan liabilities — — 188 — 188 Foreign currency translation adjustment — — 5,668 790 6,458 Cash flow hedges — — 39,822 605 40,427 Distributions to noncontrolling interests in consolidated affiliates — — — ( 1,566 ) ( 1,566 ) Balance, March 31, 2022 $ 18,068 $ 1,788,713 $ 30,215 $ 44,643 $ 1,881,639 Net income 246 24,404 — 637 25,287 Distributions on units ($ 0.285 per unit) ( 430 ) ( 42,612 ) — — ( 43,042 ) Costs associated with the “at-the-market” (ATM) equity offering program ( 1 ) ( 62 ) — — ( 63 ) Issuance of units under incentive stock plans 20 1,963 — — 1,983 Stock-based compensation 44 4,368 — — 4,412 Repurchase of units ( 40 ) ( 3,951 ) — — ( 3,991 ) Adjustment of Redeemable Operating Partnership Units 124 12,261 — — 12,385 Conversion of units into common shares — 42 — — 42 Amortization of pension and postretirement plan liabilities — — 188 — 188 Foreign currency translation adjustment — — ( 34,373 ) ( 1,912 ) ( 36,285 ) Cash flow hedges — — 8,247 ( 2,492 ) 5,755 Noncontrolling interests in consolidated affiliates redemption of shares — — — ( 27,860 ) ( 27,860 ) Balance, June 30, 2022 $ 18,031 $ 1,785,126 $ 4,277 $ 13,016 $ 1,820,450 Net income 210 20,823 — 10,828 31,861 Distributions on units ($ 0.285 per unit) ( 430 ) ( 42,537 ) — — ( 42,967 ) Costs associated with the “at-the-market” (ATM) equity offering program ( 1 ) ( 37 ) — — ( 38 ) Issuance of units under incentive stock plans — 19 — — 19 Stock-based compensation 27 2,609 — — 2,636 Repurchase of units — ( 20 ) — — ( 20 ) Adjustment of Redeemable Operating Partnership Units 239 23,633 — — 23,872 Conversion of units into common shares 37 3,659 — — 3,696 Amortization of pension and postretirement plan liabilities — — 188 — 188 Foreign currency translation adjustment — — ( 24,065 ) ( 1,327 ) ( 25,392 ) Cash flow hedges — — 21,619 ( 1,472 ) 20,147 Distributions to noncontrolling interests in consolidated affiliates — — — ( 9,789 ) ( 9,789 ) Balance, September 30, 2022 $ 18,113 $ 1,793,275 $ 2,019 $ 11,256 $ 1,824,663 11 Table of Contents Units Accumulated Other Comprehensive Loss Noncontrolling Interests in Consolidated Affiliates Total Capital General Partners’ Capital Limited Partners’ Capital Balance, January 1, 2021 $ 15,454 $ 1,529,948 ($ 71,345 ) $ 388,588 $ 1,862,645 Net income 112 11,077 — 3,843 15,032 Distributions on units ($ 0.27 per unit) ( 387 ) ( 38,300 ) — — ( 38,687 ) Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 197 367 36,341 — — 36,708 Issuance of units under incentive stock plans 12 1,154 — — 1,166 Stock-based compensation 22 2,134 — — 2,156 Repurchase of units ( 2 ) ( 153 ) — — ( 155 ) Adjustment of Redeemable Operating Partnership Units ( 126 ) ( 12,458 ) — — ( 12,584 ) Conversion of units into common shares 47 4,668 — — 4,715 Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — 655 655 Amortization of pension and postretirement plan liabilities — — 294 — 294 Foreign currency translation adjustment — — ( 11,652 ) ( 2,636 ) ( 14,288 ) Cash flow hedges — — 61,628 ( 627 ) 61,001 Distributions to noncontrolling interests in consolidated affiliates — — — ( 8,737 ) ( 8,737 ) Balance, March 31, 2021 $ 15,499 $ 1,534,411 ($ 21,075 ) $ 381,086 $ 1,909,921 Net income 590 58,369 — 4,461 63,420 Distributions on units ($ 0.27 per unit) ( 391 ) ( 38,744 ) — — ( 39,135 ) Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 927 800 79,194 — — 79,994 Issuance of units under incentive stock plans 33 3,292 — — 3,325 Stock-based compensation 29 2,823 — — 2,852 Repurchase of units ( 15 ) ( 1,438 ) — — ( 1,453 ) Adjustment of Redeemable Operating Partnership Units ( 158 ) ( 15,598 ) — — ( 15,756 ) Conversion of units into common shares 2 239 — — 241 Measurement period adjustment of noncontrolling interests in consolidated affiliates — — — 9,034 9,034 Amortization of pension and postretirement plan liabilities — — 294 — 294 Foreign currency translation adjustment — — 1,025 214 1,239 Cash flow hedges — — ( 9,833 ) ( 186 ) ( 10,019 ) Distribution to noncontrolling interests in consolidated affiliates — — — ( 6,474 ) ( 6,474 ) Balance, June 30, 2021 $ 16,389 $ 1,622,548 ($ 29,589 ) $ 388,135 $ 1,997,483 12 Table of Contents Balance, June 30, 2021 $ 16,389 $ 1,622,548 ($ 29,589 ) $ 388,135 $ 1,997,483 Net income 780 77,261 — 32,471 110,512 Distributions on units ($ 0.27 per unit) ( 401 ) ( 39,695 ) — — ( 40,096 ) Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 691 511 50,621 — — 51,132 Issuance of units under incentive stock plans 2 181 — — 183 Stock-based compensation 21 2,065 — — 2,086 Repurchase of units — ( 6 ) — — ( 6 ) Adjustment of Redeemable Operating Partnership Units 7 685 — — 692 Conversion of units into common shares 123 12,135 — — 12,258 Disposition of noncontrolling interests in consolidated affiliates — — — ( 255,486 ) ( 255,486 ) Amortization of pension and postretirement plan liabilities — — 294 — 294 Foreign currency translation adjustment — — ( 5,743 ) ( 879 ) ( 6,622 ) Cash flow hedges — — 2,204 ( 493 ) 1,711 Distributions to noncontrolling interests in consolidated affiliates — — — ( 53,562 ) ( 53,562 ) Noncontrolling interests in consolidated affiliates redemption of unit equivalents — — — ( 28,119 ) ( 28,119 ) Balance, September 30, 2021 $ 17,432 $ 1,725,795 ($ 32,834 ) $ 82,067 $ 1,792,460 See Notes to Consolidated Financial Statements. 13 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended September 30, 2022 2021 OPERATING ACTIVITIES Net income $ 88,147 $ 188,963 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 114,221 121,234 Non-cash cost of land and improved development 20,289 22,818 Stock-based incentive compensation expense 9,844 7,094 Deferred income taxes ( 6,678 ) 7,618 Amortization of losses from pension and postretirement plans 564 881 Gain on sale of large disposition of timberlands — ( 44,800 ) Gain on sale of Timber Funds III & IV — ( 3,729 ) Gain on Fund II timberland dispositions — ( 35,951 ) Other ( 1,766 ) 12,161 Changes in operating assets and liabilities: Receivables ( 12,845 ) 3,192 Inventories ( 6,238 ) ( 1,081 ) Accounts payable 6,833 3,350 All other operating activities ( 2,482 ) ( 4,306 ) CASH PROVIDED BY OPERATING ACTIVITIES 209,889 277,444 INVESTING ACTIVITIES Capital expenditures ( 48,211 ) ( 47,497 ) Real estate development investments ( 10,935 ) ( 9,165 ) Purchase of timberlands ( 3,242 ) ( 51,921 ) Net proceeds from large disposition of timberlands — 54,698 Net proceeds from sale of Timber Funds III & IV — 31,068 Net proceeds from Fund II timberland dispositions — 85,199 Other 6,531 6,952 CASH (USED FOR) PROVIDED BY INVESTING ACTIVITIES ( 55,857 ) 69,334 FINANCING ACTIVITIES Issuance of debt 406,842 446,378 Repayment of debt ( 531,842 ) ( 420,000 ) Distributions on units ( 126,373 ) ( 117,634 ) Proceeds from the issuance of units under incentive stock plan 2,580 4,674 Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs 31,877 166,548 Repurchase of units to pay withholding taxes on vested incentive stock awards ( 4,225 ) ( 1,614 ) Debt issuance costs — ( 4,829 ) Distributions to noncontrolling interests in consolidated affiliates ( 16,472 ) ( 19,564 ) Make-whole fee on NWFCS debt prepayment — ( 6,234 ) CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES ( 237,613 ) 47,726 EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 6,038 ) ( 346 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 89,619 ) 394,158 Balance, beginning of year 369,139 87,482 Balance, end of period $ 279,520 $ 481,640 14 Table of Contents Nine Months Ended September 30, 2022 2021 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 24,161 $ 24,680 Income taxes 14,627 7,306 Non-cash investing activity: Capital assets purchased on account 4,882 4,726 Non-cash financing activity: Noncontrolling interests in consolidated affiliates redemption of shares (b) 27,860 28,119 (a) Interest paid is presented net of patronage paymen ts received o f $ 6.0 million an d $ 6.8 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. For additional information on patronage payments, see Note 10 — Debt in the 2021 Form 10-K. (b) T he 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 $ 27.9 million and $ 28.1 million for the nine months ended September 30, 2022 and September 30, 2021, respectively. See Note 6 - Debt for further information. See Notes to Consolidated Financial Statements. 15 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements and notes thereto of Rayonier Inc. and its subsidiaries and Rayonier, L.P. have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Rayonier Inc. and Rayonier, L.P. year-end balance sheet information was derived from audited financial statements not included herein. In the opinion of management, these financial statements and notes reflect any adjustments (all of which are normal recurring adjustments) necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. These statements and notes should be read in conjunction with the financial statements and supplementary data included in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC (the “2021 Form 10-K”). As of September 30, 2022, the Company owned a 97.9 % interest in the Operating Partnership, with the remaining 2.1 % interest owned by limited partners of the Operating Partnership. As the sole general partner of the Operating Partnership, Rayonier Inc. has exclusive control of the day-to-day management of the Operating Partnership. SUMMARY OF UPDATES TO SIGNIFICANT ACCOUNTING POLICIES For a full description of our other significant accounting policies, see Note 1 — Summary of Significant Accounting Policies in our 2021 Form 10-K. NEW ACCOUNTING STANDARDS In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2020-04, Reference Rate Reform (Topic 848) , which provides optional guidance to ease the potential burden in accounting due to reference rate reform. 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. We have 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. 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 interests as permanent equity in the accompanying balance sheets of Rayonier, Inc. However, the corresponding SEC guidance on equity classification has remained unchanged. We will continue to monitor any developments in this area and may reclassify the temporary partners’ capital and noncontrolling interests to permanent upon agreement in guidance. Recent accounting pronouncements adopted or pending adoption not discussed above are either not applicable or are not expected to have a material impact on our consolidated financial condition, results of operations, or cash flows. 16 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) SUBSEQUENT EVENTS Agreement to acquire 172,400 acres in the U.S. South On November 2, 2022, Rayonier Inc., entered into agreements to acquire approximately 172,400 acres of timberlands in Texas, Georgia, Alabama, and Louisiana. The final aggregate purchase price of these transactions is approximately $ 474 million. The acquisitions are subject to customary title and other closing conditions and expected to close in the fourth quarter of 2022. We expect to finance the acquisitions with cash on hand and the proceeds from incremental borrowings through the Farm Credit System. 2. SEGMENT AND GEOGRAPHICAL INFORMATION 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 and Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“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.” The following tables summarize the segment information for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Nine Months Ended September 30, SALES 2022 2021 2022 2021 Southern Timber $ 64,549 $ 44,818 $ 207,584 $ 145,789 Pacific Northwest Timber 34,397 31,513 119,834 108,357 New Zealand Timber 72,452 75,558 202,723 213,696 Timber Funds (a) — 94,469 — 128,054 Real Estate (b) 12,435 93,375 81,032 178,409 Trading 11,582 25,583 52,727 76,795 Intersegment Eliminations (c) ( 128 ) ( 590 ) ( 226 ) ( 3,496 ) Total $ 195,287 $ 364,726 $ 663,674 $ 847,604 (a) The three and nine months ended September 30, 2021 include $ 75.4 million and $ 102.1 million, respectively, of sales attributable to noncontrolling interests in Timber Funds. Included in sales attributable to noncontrolling interests in Timber Funds for the three and nine months ended September 30, 2021 is $ 69.7 million from Fund II Timberland Dispositions attributable to noncontrolling interests in Timber Funds. The three and nine months ended September 30, 2021 also include $ 17.4 million from Fund II Timberland Dispositions attributable to Rayonier. (b) The three and nine months ended September 30, 2021 include $ 20.0 million and $ 56.0 million, respectively, from Large Dispositions. Large Dispositions are defined as transactions involving the sale of timberland that exceed $ 20 million in size and do not have a demonstrable premium relative to timberland value. (c) The three and nine months ended September 30, 2022 and 2021 includes log marketing fees paid to our Trading segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales.The three and nine months ended September 30, 2021, primarily consists of the elimination of timberland investment management fees paid to us by the timber funds, which were initially recognized as sales and cost of sales within the Timber Funds segment. 17 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) Three Months Ended September 30, Nine Months Ended September 30, OPERATING INCOME 2022 2021 2022 2021 Southern Timber $ 22,474 $ 12,778 $ 76,883 $ 47,105 Pacific Northwest Timber (a) 2,179 2,071 11,729 5,293 New Zealand Timber 9,280 13,302 22,653 47,959 Timber Funds (b) — 41,285 — 44,778 Real Estate (c) 15,749 60,617 36,953 112,816 Trading 177 ( 33 ) 84 628 Corporate and Other ( 8,956 ) ( 6,706 ) ( 26,613 ) ( 22,337 ) Total Operating Income 40,903 123,314 121,689 236,242 Unallocated interest expense and other ( 7,804 ) ( 9,991 ) ( 25,486 ) ( 34,165 ) Total Income before Income Taxes $ 33,099 $ 113,323 $ 96,203 $ 202,077 (a) The three and nine months ended September 30, 2022 include $ 1.1 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 three and nine months ended September 30, 2021 include $ 30.5 million and $ 33.3 million, respectively, of operating income attributable to noncontrolling interests in Timber Funds. Included in operating income attributable to noncontrolling interests in Timber Funds for the three and nine months ended September 30, 2021 is a $ 28.8 million gain on Fund II Timberland Dispositions attributable to noncontrolling interests in Timber Funds. The three and nine months ended September 30, 2021 also include a $ 7.2 million gain on Fund II Timberland Dispositions attributable to Rayonier and a $ 3.7 million gain on investment in Timber Funds. (c) The three and nine months ended September 30, 2022 include a $ 11.5 million gain associated with the multi-family apartment complex sale attributable to noncontrolling interests. The gain associated with the multi-family apartment complex sale attributable to noncontrolling interests are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Other operating income, net”. The three and nine months ended September 30, 2021 include $ 14.5 million and $ 44.8 million from Large Dispositions. Three Months Ended September 30, Nine Months Ended September 30, DEPRECIATION, DEPLETION AND AMORTIZATION 2022 2021 2022 2021 Southern Timber $ 14,116 $ 11,604 $ 46,832 $ 39,539 Pacific Northwest Timber 9,356 10,479 35,587 38,795 New Zealand Timber 6,302 6,555 18,192 20,757 Timber Funds (a) — 43,158 — 54,780 Real Estate (b) 961 6,797 12,671 16,889 Corporate and Other 316 316 939 892 Total $ 31,051 $ 78,909 $ 114,221 $ 171,652 (a) The three and nine months ended September 30, 2021 include $ 34.4 million and $ 44.4 million, respectively, 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 three and nine months ended September 30, 2021 is $ 32.5 million related to Fund II Timberland Dispositions attributable to noncontrolling interests in Timber Funds. The three and nine months ended September 30, 2021 also include $ 8.1 million related to Fund II Timberland Dispositions attributable to Rayonier. (b) The three and nine months ended September 30, 2021 include $ 5.0 million and $ 9.8 million, respectively, from Large Dispositions. 18 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) Three Months Ended September 30, Nine Months Ended September 30, NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT 2022 2021 2022 2021 Timber Funds (a) — $ 8,635 — $ 8,635 Real Estate (b) 3,149 15,845 20,289 22,913 Total $ 3,149 $ 24,480 $ 20,289 $ 31,548 (a) The three and nine months ended September 30, 2021 include $ 8.6 million of non-cash cost of land and improved development from Fund II Timberland Dispositions, of which $ 6.9 million was attributable to noncontrolling interests in Timber Funds and $ 1.7 million was attributable to Rayonier. (b) The nine months ended September 30, 2021 includes $ 0.1 million from Large Dispositions. 3. REVENUE PERFORMANCE OBLIGATIONS We recognize revenue when control of promised goods or services (“performance obligations”) is transferred to customers, in an amount that reflects the consideration expected in exchange for those goods or services (“transaction price”). 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 September 30, 2022 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 . We generally collect payment within a year of satisfying performance obligations and therefore have elected not to adjust revenues for a financing component. CONTRACT BALANCES The timing of revenue recognition, invoicing and cash collections results in accounts receivable and deferred revenue (contract liabilities) on the Consolidated Balance Sheets. Accounts receivable are recorded when we have an unconditional right to consideration for completed performance under the contract. Contract liabilities relate to payments received in advance of performance under the contract. Contract liabilities are recognized as revenue as (or when) we perform under the contract. The following table summarizes revenue recognized during the three and nine months ended September 30, 2022 and 2021 that was included in the contract liability balance at the beginning of each year: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue recognized from contract liability balance at the beginning of the year (a) $ 1,957 $ 235 $ 14,458 $ 10,204 (a) Revenue recognized was from hunting licenses and the use of advances on pay-as-cut timber sales. 19 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following tables present our revenue from contracts with customers disaggregated by product type for the three and nine months ended September 30, 2022 and 2021: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total September 30, 2022 Pulpwood $ 32,564 $ 2,989 $ 7,645 — — $ 1,112 — $ 44,310 Sawtimber 20,943 29,630 58,412 — — 10,053 — 119,038 Hardwood 4,221 — — — — — — 4,221 Total Timber Sales 57,728 32,619 66,057 — — 11,165 — 167,569 License Revenue, Primarily from Hunting 5,141 326 118 — — — — 5,585 Other Non-Timber/Carbon Revenue 1,680 1,452 6,277 — — — — 9,409 Agency Fee Income — — — — — 289 — 289 Total Non-Timber Sales 6,821 1,778 6,395 — — 289 — 15,283 Improved Development — — — — 2,296 — — 2,296 Rural — — — — 6,964 — — 6,964 Deferred Revenue/Other (a) — — — — 2,769 — — 2,769 Total Real Estate Sales — — — — 12,029 — — 12,029 Revenue from Contracts with Customers 64,549 34,397 72,452 — 12,029 11,454 — 194,881 Lease Revenue — — — — 406 — — 406 Intersegment — — — — — 128 ( 128 ) — Total Revenue $ 64,549 $ 34,397 $ 72,452 — $ 12,435 $ 11,582 ($ 128 ) $ 195,287 Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total September 30, 2021 Pulpwood $ 21,358 $ 2,116 $ 10,746 $ 127 — $ 3,861 — $ 38,208 Sawtimber 17,680 28,134 64,562 6,707 — 21,281 — 138,364 Hardwood 247 — — — — — — 247 Total Timber Sales 39,285 30,250 75,308 6,834 — 25,142 — 176,819 License Revenue, Primarily from Hunting 4,588 298 161 11 — — — 5,058 Other Non-Timber/Carbon Revenue 945 965 89 25 — — — 2,024 Agency Fee Income — — — — — 350 — 350 Fund II Timberland Dispositions — — — 87,100 — — — 87,100 Total Non-Timber Sales 5,533 1,263 250 87,136 — 350 — 94,532 Improved Development — — — — 27,774 — — 27,774 Unimproved Development — — — — 37,500 — — 37,500 Rural — — — — 6,937 — — 6,937 Timberland & Non-Strategic — — — — 44 — — 44 Deferred Revenue/Other (a) — — — — 728 — — 728 Large Dispositions — — — — 20,048 — — 20,048 Total Real Estate Sales — — — — 93,031 — — 93,031 Revenue from Contracts with Customers 44,818 31,513 75,558 93,970 93,031 25,492 — 364,382 Lease Revenue — — — — 344 — — 344 Intersegment — — — 499 — 91 ( 590 ) — Total Revenue $ 44,818 $ 31,513 $ 75,558 $ 94,469 $ 93,375 $ 25,583 ($ 590 ) $ 364,726 20 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total September 30, 2022 Pulpwood $ 100,945 $ 9,478 $ 26,091 — — $ 5,636 — $ 142,150 Sawtimber 70,203 106,155 164,759 — — 45,910 — 387,027 Hardwood 15,776 — — — — — — 15,776 Total Timber Sales 186,924 115,633 190,850 — — 51,546 — 544,953 License Revenue, Primarily From Hunting 16,322 571 266 — — — — 17,159 Other Non-Timber/Carbon Revenue 4,338 3,630 11,607 — — — — 19,575 Agency Fee Income — — — — — 955 — 955 Total Non-Timber Sales 20,660 4,201 11,873 — — 955 — 37,689 Improved Development — — — — 18,828 — — 18,828 Rural — — — — 47,333 — — 47,333 Timberland & Non-Strategic — — — — 11,400 — — 11,400 Deferred Revenue/Other (a) — — — — 2,498 — — 2,498 Total Real Estate Sales — — — — 80,059 — — 80,059 Revenue from Contracts with Customers 207,584 119,834 202,723 — 80,059 52,501 — 662,701 Lease Revenue — — — — 973 — — 973 Intersegment — — — — — 226 ( 226 ) — Total Revenue $ 207,584 $ 119,834 $ 202,723 — $ 81,032 $ 52,727 ($ 226 ) $ 663,674 Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Real Estate Trading Elim. Total September 30, 2021 Pulpwood $ 66,941 $ 6,689 $ 32,555 $ 783 — $ 9,372 — $ 116,340 Sawtimber 58,335 97,647 180,339 36,433 — 66,146 — 438,900 Hardwood 1,920 — — — — — — 1,920 Total Timber Sales 127,196 104,336 212,894 37,216 — 75,518 — 557,160 License Revenue, Primarily from Hunting 13,501 505 300 41 — — — 14,347 Other Non-Timber/Carbon Revenue 5,092 3,516 502 438 — — — 9,548 Agency Fee Income — — — — — 1,040 — 1,040 Fund II Timberland Dispositions — — — 87,100 — — — 87,100 Total Non-Timber Sales 18,593 4,021 802 87,579 — 1,040 — 112,035 Improved Development — — — — 47,366 — — 47,366 Unimproved Development — — — — 37,500 — — 37,500 Rural — — — — 36,999 — — 36,999 Timberland & Non-Strategic — — — — 44 — — 44 Conservation Easement — — — — 3,855 — — 3,855 Deferred Revenue/Other (a) — — — — ( 4,260 ) — — ( 4,260 ) Large Dispositions — — — — 56,048 — — 56,048 Total Real Estate Sales — — — — 177,552 — — 177,552 Revenue from Contracts with Customers 145,789 108,357 213,696 124,795 177,552 76,558 — 846,747 Lease Revenue — — — — 857 — — 857 Intersegment — — — 3,259 — 237 ( 3,496 ) — Total Revenue $ 145,789 $ 108,357 $ 213,696 $ 128,054 $ 178,409 $ 76,795 ($ 3,496 ) $ 847,604 (a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales. 21 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following tables present our timber sales disaggregated by contract type for the three and nine months ended September 30, 2022 and 2021: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Trading Total September 30, 2022 Stumpage Pay-as-Cut $ 21,111 — — — — $ 21,111 Stumpage Lump Sum 288 121 — — — 409 Total Stumpage 21,399 121 — — — 21,520 Delivered Wood (Domestic) 33,010 30,837 18,825 — 260 82,932 Delivered Wood (Export) 3,319 1,661 47,232 — 10,905 63,117 Total Delivered 36,329 32,498 66,057 — 11,165 146,049 Total Timber Sales $ 57,728 $ 32,619 $ 66,057 — $ 11,165 $ 167,569 September 30, 2021 Stumpage Pay-as-Cut $ 12,335 — — $ 131 — $ 12,466 Stumpage Lump Sum 392 1,846 — — — 2,238 Total Stumpage 12,727 1,846 — 131 — 14,704 Delivered Wood (Domestic) 19,515 28,404 20,614 6,703 817 76,053 Delivered Wood (Export) 7,043 — 54,694 — 24,325 86,062 Total Delivered 26,558 28,404 75,308 6,703 25,142 162,115 Total Timber Sales $ 39,285 $ 30,250 $ 75,308 $ 6,834 $ 25,142 $ 176,819 22 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Timber Funds Trading Total September 30, 2022 Stumpage Pay-as-Cut $ 78,643 — — — — $ 78,643 Stumpage Lump Sum 378 5,593 — — — 5,971 Total Stumpage 79,021 5,593 — — — 84,614 Delivered Wood (Domestic) 98,386 104,239 50,358 — 1,989 254,972 Delivered Wood (Export) 9,517 5,801 140,492 — 49,557 205,367 Total Delivered 107,903 110,040 190,850 — 51,546 460,339 Total Timber Sales $ 186,924 $ 115,633 $ 190,850 — $ 51,546 $ 544,953 September 30, 2021 Stumpage Pay-as-Cut $ 48,775 — — $ 328 — $ 49,103 Stumpage Lump Sum 5,040 8,909 — — — 13,949 Total Stumpage 53,815 8,909 — 328 — 63,052 Delivered Wood (Domestic) 57,528 95,427 56,970 36,888 3,144 249,957 Delivered Wood (Export) 15,853 — 155,924 — 72,374 244,151 Total Delivered 73,381 95,427 212,894 36,888 75,518 494,108 Total Timber Sales $ 127,196 $ 104,336 $ 212,894 $ 37,216 $ 75,518 $ 557,160 23 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 4. NONCONTROLLING INTERESTS NONCONTROLLING INTERESTS IN CONSOLIDATED AFFILIATES Matariki Forestry Group We maintain a 77 % controlling financial interest in Matariki Forestry Group (the “New Zealand subsidiary”), a joint venture that owns or leases approximately 417,000 legal acres of New Zealand timberland. Accordingly, we consolidate the New Zealand subsidiary’s balance sheet and results of operations. Income attributable to the New Zealand subsidiary’s 23 % noncontrolling interests is reflected as an adjustment to income in our Consolidated Statements of Income and Comprehensive Income under the caption “Net 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. Ferncliff 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, to develop 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. In the third quarter of 2022 Bainbridge Landing, LLC completed the planned sale of its multi-family apartment complex in Bainbridge Island, Washington for a purchase price of $ 65.5 million. The equity income related to the apartment complex sale was $ 16.0 million, of which $ 4.5 million was attributable to Rayonier. We recognized the gain on the sale in our Consolidated Statements of Income and Comprehensive Income under the caption “Other operating income, net”. NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP Noncontrolling interests in the operating partnership relate to the third-party ownership of Redeemable Operating Partnership Units. Net income attributable to the noncontrolling interests in the operating partnership is computed by applying the weighted average Redeemable Operating Partnership Units outstanding during the period as a percentage of the weighted average total units outstanding to the Operating Partnership’s net income for the period. If a noncontrolling unitholder redeems a unit for a registered common share of Rayonier or cash, the noncontrolling interests in the operating partnership will be reduced and the Company’s share in the Operating Partnership will be increased by the fair value of each security at the time of redemption. The following table sets forth the Company’s noncontrolling interests in the operating partnership: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Beginning noncontrolling interests in the operating partnership $ 123,811 $ 153,505 $ 133,823 $ 130,121 Adjustment of noncontrolling interests in the operating partnership ( 23,363 ) ( 1,746 ) ( 32,131 ) 25,531 Conversions of Redeemable Operating Partnership Units to Common Shares ( 3,696 ) ( 12,258 ) ( 3,842 ) ( 17,214 ) Net Income attributable to noncontrolling interests in the operating partnership 455 2,210 1,670 4,303 Other Comprehensive (Loss) Income attributable to noncontrolling interests in the operating partnership ( 49 ) ( 92 ) ( 523 ) 1,187 Distributions to noncontrolling interests in the operating partnership ( 915 ) ( 1,064 ) ( 2,754 ) ( 3,373 ) Total noncontrolling interests in the operating partnership $ 96,243 $ 140,555 $ 96,243 $ 140,555 24 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 5. EARNINGS PER SHARE AND PER UNIT The following table provides details of the calculations of basic and diluted earnings per common share of the Company: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Earnings per common share - basic Numerator: Net Income $ 31,861 $ 110,512 $ 88,147 $ 188,963 Less: Net income attributable to noncontrolling interests in the operating partnership ( 455 ) ( 2,210 ) ( 1,670 ) ( 4,303 ) Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) Net income attributable to Rayonier Inc. $ 20,578 $ 75,831 $ 73,999 $ 143,885 Denominator: Denominator for basic earnings per common share - weighted average shares 146,370,340 141,777,574 146,022,718 139,749,358 Basic earnings per common share attributable to Rayonier Inc.: $ 0.14 $ 0.53 $ 0.51 $ 1.03 Earnings per common share - diluted Numerator: Net Income $ 31,861 $ 110,512 $ 88,147 $ 188,963 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the operating partnership $ 21,033 $ 78,041 $ 75,669 $ 148,188 Denominator: Denominator for basic earnings per common share - weighted average shares 146,370,340 141,777,574 146,022,718 139,749,358 Add: Dilutive effect of: Stock options 3,271 9,803 6,200 8,833 Performance shares, restricted shares and restricted stock units 620,316 520,737 693,954 361,596 Noncontrolling interests in operating partnership units 3,238,962 4,131,454 3,288,409 4,245,323 Denominator for diluted earnings per common share - adjusted weighted average shares 150,232,889 146,439,568 150,011,281 144,365,110 Diluted earnings per common share attributable to Rayonier Inc.: $ 0.14 $ 0.53 $ 0.50 $ 1.03 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Anti-dilutive shares excluded from the computations of diluted earnings per common share: Stock options, performance shares, restricted shares and restricted stock units 126,132 100,135 78,634 167,668 Total 126,132 100,135 78,634 167,668 25 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following table provides details of the calculations of basic and diluted earnings per unit of the Operating Partnership: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Earnings per unit - basic Numerator: Net Income $ 31,861 $ 110,512 $ 88,147 $ 188,963 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) Net income available to unitholders $ 21,033 $ 78,041 $ 75,669 $ 148,188 Denominator: Denominator for basic earnings per unit - weighted average units 149,609,302 145,909,028 149,311,127 143,994,681 Basic earnings per unit attributable to Rayonier, L.P.: $ 0.14 $ 0.53 $ 0.51 $ 1.03 Earnings per unit - diluted Numerator: Net Income $ 31,861 $ 110,512 $ 88,147 $ 188,963 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 10,828 ) ( 32,471 ) ( 12,478 ) ( 40,775 ) Net income available to unitholders $ 21,033 $ 78,041 $ 75,669 $ 148,188 Denominator: Denominator for basic earnings per unit - weighted average units 149,609,302 145,909,028 149,311,127 143,994,681 Add: Dilutive effect of unit equivalents: Stock options 3,271 9,803 6,200 8,833 Performance shares, restricted shares and restricted stock units 620,316 520,737 693,954 361,596 Denominator for diluted earnings per unit - adjusted weighted average units 150,232,889 146,439,568 150,011,281 144,365,110 Diluted earnings per unit attributable to Rayonier, L.P.: $ 0.14 $ 0.53 $ 0.50 $ 1.03 Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Anti-dilutive unit equivalents excluded from the computations of diluted earnings per unit: Stock options, performance shares, restricted shares and restricted stock units 126,132 100,135 78,634 167,668 Total 126,132 100,135 78,634 167,668 26 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 6. DEBT Our debt consisted of the following at September 30, 2022: September 30, 2022 Debt Term Credit Agreement borrowings due 2028 at a variable interest rate of 4.2 % at September 30, 2022 (a) $ 350,000 Senior Notes due 2031 at a fixed interest rate of 2.75 % 450,000 Incremental Term Loan Agreement borrowings due 2026 at a variable interest rate of 4.2 % at September 30, 2022 (b) 200,000 2021 Incremental Term Loan Facility Borrowings due 2029 at a variable interest rate of 4.1 % at September 30, 2022 (c) 200,000 New Zealand subsidiary noncontrolling interests shareholder loan due 2025 at a fixed interest rate of 2.95 % (d) 19,691 New Zealand subsidiary noncontrolling interests shareholder loan due 2026 at a fixed interest rate of 3.64 % (d) 22,973 New Zealand subsidiary noncontrolling interests shareholder loan due 2027 at a fixed interest rate of 6.48 % (d) 22,973 Total principal debt 1,265,637 Less: Unamortized discounts ( 3,186 ) Less: Deferred financing costs ( 4,695 ) Total long-term debt $ 1,257,756 (a) As of September 30, 2022, the periodic interest rate on the term credit agreement (the “Term Credit Agreement”) was LIBOR plus 1.600 %. We estimate the effective fixed interest rate on the term loan facility to be approximately 3.0 % after consideration of interest rate swaps and estimated patronage refunds. (b) As of September 30, 2022, the periodic interest rate on the incremental term loan (the “Incremental Term Loan Agreement”) was LIBOR plus 1.650 %. We estimate the effective fixed interest rate on the incremental term loan facility to be approximately 2.4 % after consideration of interest rate swaps and estimated patronage refunds. (c) As of September 30, 2022, the periodic interest rate on the 2021 incremental term loan (the “2021 Incremental Term Loan Facility”) was LIBOR plus 1.550 %. We estimate the effective fixed interest rate on the incremental term loan facility to be approximately 1.5 % after consideration of interest rate swaps and estimated patronage refunds. (d) Except for changes in the New Zealand foreign exchange rate, there have been no adjustments to the carrying value of the shareholder loans since inception. Principal payments due during the next five years and thereafter are as follows: Total 2022 — 2023 — 2024 — 2025 19,691 2026 222,973 Thereafter 1,022,973 Total Debt $ 1,265,637 27 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 2022 DEBT ACTIVITY U.S. Debt 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 September 30, 2022, the periodic interest rate on the 2021 Incremental Term Loan is LIBOR plus 1.55 %. Monthly payments of interest only are due on this loan through maturity. 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. At September 30, 2022, 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 Debt In June 2022, the New Zealand subsidiary renewed its NZ$ 20 million working capital facility for an additional 12 -month term. During the nine months ended September 30, 2022, the New Zealand subsidiary made borrowings and repayments of $ 7.1 million, net of changes in exchange rates, on its working capital facility (the “New Zealand Working Capital Facility”). At September 30, 2022, the New Zealand subsidiary had NZ$ 20.0 million of available borrowings under its working capital facility. In April 2022, 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 $ 27.9 million due in 2027 at a fixed interest rate of 6.48 %. As of September 30, 2022, the outstanding balance on the shareholder loan due 2027 is $ 23.0 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 4 — Noncontrolling Interests for more information regarding the New Zealand subsidiary. DEBT COVENANTS In connection with our $ 350 million Term Credit Agreement, $ 200 million Incremental Term Loan Agreement, $ 200 million 2021 Incremental Term Loan Facility and $ 300 million Revolving Credit Facility, customary covenants must be met, the most significant of which include interest coverage and leverage ratios. The covenants listed below, which are the most significant financial covenants in effect as of September 30, 2022, are calculated on a trailing 12-month basis: Covenant Requirement Actual Ratio Favorable Covenant EBITDA to consolidated interest expense should not be less than 2.5 to 1 10.3 to 1 7.8 Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 41 % 24 % In addition to these financial covenants listed above, the 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 September 30, 2022, we were in compliance with all applicable covenants. 28 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 7. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES We are exposed to market risk related to potential fluctuations in foreign currency exchange rates and interest rates. We use derivative financial instruments to mitigate the financial impact of exposure to these risks. Accounting for derivative financial instruments is governed by ASC Topic 815, Derivatives and Hedging , (“ASC 815”). In accordance with ASC 815, we record our derivative instruments at fair value as either assets or liabilities in the Consolidated Balance Sheets. Changes in the instruments’ fair value are accounted for based on their intended use. Gains and losses on derivatives that are designated and qualify for cash flow hedge accounting are recorded as a component of accumulated other comprehensive income (“AOCI”) and reclassified into earnings when the hedged transaction materializes. Gains and losses on derivatives that are designated and qualify for net investment hedge accounting are recorded as a component of AOCI and will not be reclassified into earnings until the investment is partially or completely liquidated. The changes in the fair value of derivatives not designated as hedging instruments and those which are no longer effective as hedging instruments, are recognized immediately in earnings. FOREIGN CURRENCY EXCHANGE AND OPTION CONTRACTS Our New Zealand subsidiary’s domestic sales and operating expenses are predominately denominated in New Zealand dollars, while its export sales, shareholder distributions and ocean freight payments are predominately denominated in U.S. dollars. To the extent New Zealand dollar costs exceed New Zealand dollar revenues (the “foreign exchange exposure”), the New Zealand subsidiary manages the foreign exchange exposure through the use of derivative financial instruments. It typically hedges a portion of export sales receipts to cover 50 % to 90 % of the projected foreign exchange exposure for the following 12 months, up to 75 % for the forward 12 to 18 months and up to 50 % for the forward 18 to 24 months. Additionally, it will occasionally hedge export sales receipts to cover up to 50 % of the foreign exchange exposure for the forward 24 to 48 months when the New Zealand dollar is at a cyclical low versus the U.S. dollar. The New Zealand subsidiary’s trading operations typically hedge a portion of export sales receipts to cover the projected foreign exchange exposure for the following three months. As of September 30, 2022, foreign currency exchange contracts and foreign currency option contracts had maturity dates through October 2024 and July 2025, respectively. Foreign currency exchange and option contracts hedging foreign currency risk qualify for cash flow hedge accounting. We may de-designate these cash flow hedge relationships in advance or at the occurrence of the forecasted transaction. The portion of gains or losses on the derivative instrument previously accumulated in other comprehensive income for de-designated hedges remains in accumulated other comprehensive income until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings. 29 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 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 The following table contains information on the outstanding interest rate swaps as of September 30, 2022: Outstanding Interest Rate Swaps (a) Date Entered Into Term Notional Amount Related Debt Facility Fixed Rate of Swap Bank Margin on Debt Total Effective Interest Rate (b) August 2015 9 years $ 170,000 Term Credit Agreement 2.20 % 1.60 % 3.80 % August 2015 9 years 180,000 Term Credit Agreement 2.35 % 1.60 % 3.95 % April 2016 10 years 100,000 Incremental Term Loan 1.60 % 1.65 % 3.25 % April 2016 10 years 100,000 Incremental Term Loan 1.60 % 1.65 % 3.25 % May 2021 (c) 7 years 200,000 2021 Incremental Term Loan Facility 0.77 % 1.55 % 2.32 % (a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting. (b) Rate is before estimated patronage payments. (c) On February 1, 2022, our $ 200.0 million notional forward-starting interest rate swap matured into an active interest rate swap. See Note 6 - Debt for additional information. FORWARD-STARTING INTEREST RATE SWAPS The following table contains information on the outstanding forward-starting interest rate swaps as of September 30, 2022: Outstanding Forward-Starting Interest Rate Swaps (a) Date Entered Into Term Notional Amount Fixed Rate of Swap Related Debt Facility Forward Date Maximum Period Ending for Forecasted Issuance Date 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 (a) All forward-starting interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting. 30 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following tables demonstrate the impact, gross of tax, of our derivatives on the Consolidated Statements of Income and Comprehensive Income for the three and nine months ended September 30, 2022 and 2021: Three Months Ended September 30, Income Statement Location 2022 2021 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other comprehensive loss ($ 4,464 ) ($ 3,215 ) Other operating income, net ( 2,669 ) 597 Foreign currency option contracts Other comprehensive loss ( 1,754 ) ( 705 ) Other operating income, net — 349 Interest rate products Other comprehensive income 26,607 1,288 Interest expense, net ( 62 ) 2,564 Nine Months Ended September 30, Income Statement Location 2022 2021 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other comprehensive loss ($ 15,373 ) ($ 8,688 ) Other operating income, net ( 2,598 ) 2,322 Foreign currency option contracts Other comprehensive loss ( 2,304 ) ( 2,691 ) Other operating income, net — 1,177 Interest rate products Other comprehensive income 76,372 46,433 Interest expense 4,555 11,935 During the next 12 months, the amount of the September 30, 2022 AOCI balance, net of tax, expected to be reclassified into earnings is a gain of approximately $ 7.7 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 ($ 10,809 ) Foreign currency option contracts ( 364 ) Interest rate products 18,860 Total estimated gain on derivatives contracts $ 7,687 The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets: Notional Amount September 30, 2022 December 31, 2021 Derivatives designated as cash flow hedges: Foreign currency exchange contracts $ 145,000 $ 149,250 Foreign currency option contracts 66,000 14,000 Interest rate swaps 750,000 550,000 Forward-starting interest rate swaps 150,000 350,000 31 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets at September 30, 2022 and December 31, 2021. Changes in balances of derivative financial instruments are recorded as operating activities in the Consolidated Statements of Cash Flows: Location on Balance Sheet Fair Value Assets / (Liabilities) (a) September 30, 2022 December 31, 2021 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other current assets — $ 721 Other assets 15 86 Other current liabilities ( 15,015 ) ( 2,061 ) Other non-current liabilities ( 4,921 ) ( 694 ) Foreign currency option contracts Other current assets 9 — Other assets 854 228 Other current liabilities ( 514 ) — Other non-current liabilities ( 2,695 ) ( 270 ) Interest rate swaps Other assets 63,538 — Other non-current liabilities — ( 15,582 ) Forward-starting interest rate swaps Other assets 12,839 11,482 Total derivative contracts: Other current assets $ 9 $ 721 Other assets 77,246 11,796 Total derivative assets $ 77,255 $ 12,517 Other current liabilities ($ 15,529 ) ($ 2,061 ) Other non-current liabilities ( 7,616 ) ( 16,546 ) Total derivative liabilities ($ 23,145 ) ($ 18,607 ) (a) See Note 8 — Fair Value Measurements for further information on the fair value of our derivatives including their classification within the fair value hierarchy. OFFSETTING DERIVATIVES Derivative financial instruments are presented at their gross fair values in the Consolidated Balance Sheets. Our derivative financial instruments are not subject to master netting arrangements, which would allow the right of offset. 32 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 8. FAIR VALUE MEASUREMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS A three-level hierarchy that prioritizes the inputs used to measure fair value was established in the Accounting Standards Codification as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following table presents the carrying amount and estimated fair values of our financial instruments as of September 30, 2022 and December 31, 2021, using market information and what we believe to be appropriate valuation methodologies under GAAP: September 30, 2022 December 31, 2021 Asset (Liability) (a) Carrying Amount Fair Value Carrying Amount Fair Value Level 1 Level 2 Level 1 Level 2 Cash and cash equivalents, excluding Timber Funds $ 260,931 $ 260,931 — $ 358,680 $ 358,680 — Cash and cash equivalents, Timber Funds 873 873 — 3,493 3,493 — Restricted cash, Timber Funds (b) 1,464 1,464 — 6,341 6,341 — Restricted cash, excluding Timber Funds (c) 16,252 16,252 — 625 625 — Current maturities of long-term debt (d) — — — ( 124,965 ) — ( 125,288 ) Long-term debt (d) ( 1,257,756 ) — ( 1,177,851 ) ( 1,242,819 ) — ( 1,245,148 ) Interest rate swaps (e) 63,538 — 63,538 ( 15,582 ) — ( 15,582 ) Forward-starting interest rate swaps (e) 12,839 — 12,839 11,482 — 11,482 Foreign currency exchange contracts (e) ( 19,921 ) — ( 19,921 ) ( 1,948 ) — ( 1,948 ) Foreign currency option contracts (e) ( 2,346 ) — ( 2,346 ) ( 42 ) — ( 42 ) Noncontrolling interests in the operating partnership (f) 96,243 96,243 — 133,823 133,823 — (a) We did not have Level 3 assets or liabilities at September 30, 2022 and December 31, 2021. (b) Restricted cash, Timber Funds represents the portion of proceeds from Fund II Timberland Dispositions required to be distributed to noncontrolling interests. See Note 19 — Restricted Cash for additional information. (c) Restricted cash, excluding Timber Funds represents proceeds from like-kind exchange sales deposited with a third-party intermediary and cash held in escrow. See Note 19 — Restricted Cash for additional information. (d) The carrying amount of long-term debt is presented net of deferred financing costs and unamortized discounts on non-revolving debt. See Note 6 — Debt for additional information. (e) See Note 7 — Derivative Financial Instruments and Hedging Activities for information regarding the Consolidated Balance Sheets 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. This relates to the ownership of Rayonier, L.P. units by various individuals and entities other than the Company. See Note 4 — Noncontrolling Interests for additional information. 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. Debt — The fair value of fixed rate debt is based upon quoted market prices for debt with similar terms and maturities. The variable rate debt adjusts with changes in the market rate, therefore the carrying value approximates fair value. Interest rate swap agreements — The fair value of interest rate contracts is determined by discounting the expected future cash flows, for each instrument, at prevailing interest rates. 33 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) Foreign currency exchange contracts — The fair value of foreign currency exchange contracts is determined by a mark-to-market valuation, which estimates fair value by discounting the difference between the contracted forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate. Foreign currency option contracts — The fair value of foreign currency option contracts is based on a mark-to-market calculation using the Black-Scholes option pricing model. 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. 9. COMMITMENTS At September 30, 2022, the future minimum payments under non-cancellable commitments were as follows: Environmental Remediation (a) Development Projects (b) Commitments (c) Total Remaining 2022 $ 517 $ 18,275 $ 4,748 $ 23,540 2023 3,844 6,397 13,358 23,599 2024 3,771 554 3,392 7,717 2025 1,008 267 111 1,386 2026 450 267 — 717 Thereafter 1,356 4,062 — 5,418 $ 10,946 $ 29,822 $ 21,609 $ 62,377 (a) Environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages (NRD) in Port Gamble, Washington. See Note 11 - Environmental and Natural Resource Damage Liabilities for additional information. (b) Primarily consisting of payments expected to be made on our Wildlight and Heartwood development projects. (c) Commitments include payments expected to be made on financial instruments (foreign exchange contracts) and other purchase obligations. 10. 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. 34 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 11. 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 or from the owner’s property, regardless of culpability for the release. Changes in environmental and NRD liabilities from December 31, 2021 to September 30, 2022 are shown below: Port Gamble, WA Non-current portion at December 31, 2021 $ 10,110 Plus: Current portion 695 Total Balance at December 31, 2021 10,805 Expenditures charged to liabilities ( 557 ) Increase to liabilities 698 Total Balance at September 30, 2022 10,946 Less: Current portion ( 623 ) Non-current portion at September 30, 2022 $ 10,323 It is expected that the upland mill site cleanup and NRD restoration will occur over the next one to two years , while the monitoring of Port Gamble Bay, mill site 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. 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 9 - Commitments . 12. GUARANTEES We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies. As of September 30, 2022, the following financial guarantees were outstanding: Financial Commitments (a) Maximum Potential Payment Standby letters of credit $ 885 Surety bonds (b) 19,121 Total financial commitments $ 20,006 (a) We have not recorded any liabilities for these financial commitments in our 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 completed sales from the Harbor Hill project in Gig Harbor, Washington. These surety bonds expire at various dates during 2022, 2023, 2024 and 2025 and are expected to be renewed as required. 35 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 13. HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS We routinely 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 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. Changes in higher and better use timberlands and real estate development investments from December 31, 2021 to September 30, 2022 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, 2021 $ 87,910 $ 18,968 $ 106,878 Plus: Current portion (a) 718 24,022 24,740 Total Balance at December 31, 2021 88,628 42,990 131,618 Non-cash cost of land and improved development ( 712 ) ( 10,989 ) ( 11,701 ) Amortization of parcel real estate development investments — ( 4,110 ) ( 4,110 ) Timber depletion from harvesting activities and basis of timber sold in real estate sales ( 874 ) — ( 874 ) Capitalized real estate development investments (b) — 15,513 15,513 Capital expenditures (silviculture) 165 — 165 Intersegment transfers 5,717 — 5,717 Total Balance at September 30, 2022 92,924 43,404 136,328 Less: Current portion (a) ( 1,726 ) ( 18,618 ) ( 20,344 ) Non-current portion at September 30, 2022 $ 91,198 $ 24,786 $ 115,984 (a) The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 14 — Inventory for additional information. (b) Capitalized real estate development investments include $ 0.6 million of capitalized interest and $ 4.6 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. 14. INVENTORY As of September 30, 2022 and December 31, 2021, our inventory consisted entirely of finished goods, as follows: September 30, 2022 December 31, 2021 Finished goods inventory Real estate inventory (a) $ 20,344 $ 24,740 Log inventory 10,910 3,783 Total inventory $ 31,254 $ 28,523 (a) Represents the cost of HBU real estate (including capitalized development investments) under contract to be sold as well as the cost of HBU real estate deferred until post-closing obligations are satisfied. See Note 13 — Higher And Better Use Timberlands and Real Estate Development Investments for additional information. 36 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 15. OTHER OPERATING INCOME, NET Other operating income, net consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (Loss) gain on foreign currency remeasurement, net of cash flow hedges ($ 1,158 ) $ 1,379 ($ 481 ) $ 5,730 Gain on sale or disposal of property and equipment 9 — 40 93 Gain on investment in Timber Funds (a) — 3,729 — 3,729 Log trading marketing fees — — — 6 Equity income related to Bainbridge Landing LLC joint venture (b) 15,848 36 15,477 241 Miscellaneous expense, net ( 118 ) ( 74 ) ( 638 ) ( 325 ) Total $ 14,581 $ 5,070 $ 14,398 $ 9,474 (a) Gain on investment in Timber Funds represents the gain recognized on the sale of rights to manage two timber funds (Funds III and IV) previously managed by the Company’s Olympic Resources Management (ORM) subsidiary, as well as its co-investment stake in both funds. (b) The three and nine months ended September 30, 2022 include $ 16.0 million equity income from the sale of a multi-family apartment complex in Bainbridge Island, Washington. As the equity investment was co-owned with outside investors, $ 4.5 million of the equity income was attributable to Rayonier. See N ote 4 - Noncont rolling Inte re sts for additional information. 16. EMPLOYEE BENEFIT PLANS We have one qualified non-contributory defined benefit pension plan covering a portion of our employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. We closed enrollment in the pension plans to salaried employees hired after December 31, 2005. Effective December 31, 2016, we froze benefits for all employees participating in the pension plan. In lieu of the pension plan, we provide those employees with an enhanced 401(k) plan match similar to what is currently provided to employees hired after December 31, 2005. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change. We are not required to make mandatory 2022 pension contributions due to our plan’s improved funded status and have made no pension contribution payments during the nine months ended September 30, 2022. 37 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The net pension and postretirement benefit (credits) costs that have been recorded are shown in the following table: Components of Net Periodic Benefit (Credit) Cost Income Statement Location Pension Postretirement Three Months Ended September 30, Three Months Ended September 30, 2022 2021 2022 2021 Service cost Selling and general expenses — — $ 2 $ 2 Interest cost Interest and other miscellaneous income, net 609 557 13 11 Expected return on plan assets (a) Interest and other miscellaneous income, net ( 872 ) ( 936 ) — — Amortization of losses Interest and other miscellaneous income, net 184 288 4 5 Net periodic benefit (credit) cost ($ 79 ) ($ 91 ) $ 19 $ 18 Components of Net Periodic Benefit (Credit) Cost Income Statement Location Pension Postretirement Nine Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Service cost Selling and general expenses — — $ 5 $ 6 Interest cost Interest and other miscellaneous income, net 1,826 1,671 39 34 Expected return on plan assets (a) Interest and other miscellaneous income, net ( 2,615 ) ( 2,809 ) — — Amortization of losses Interest and other miscellaneous income, net 553 865 11 15 Net periodic benefit (credit) cost ($ 236 ) ($ 273 ) $ 55 $ 55 (a) The weighted-average expected long-term rate of return on plan assets used in computing 2022 net periodic benefit cost for pension benefit s is 5.0 %. 17. INCOME TAXES Rayonier is a REIT under the Internal Revenue Code and therefore generally does not pay U.S. federal or state income tax. As of September 30, 2022, Rayonier owns a 97.9 % inter est 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 The Company’s tax expense is principally related to corporate-level tax in New Zealand and non-resident withholding tax on repatriation of earnings from New Zealand. The following table contains the income tax expense recognized on the Consolidated Statements of Income and Comprehensive Income: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Income tax expense ($ 1,238 ) ($ 2,811 ) ($ 8,056 ) ($ 13,114 ) 38 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) ANNUAL EFFECTIVE TAX RATE The Company’s effective tax rate after discrete items is below the 21.0% U.S. statutory rate due to tax benefits associated with being a REIT. The following table contains the Company’s annualized effective tax rate after discrete items: Nine Months Ended September 30, 2022 2021 Annualized effective tax rate after discrete items 7.9 % 6.4 % 18. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in AOCI by component for the nine months ended September 30, 2022 and the year ended December 31, 2021. All amounts are presented net of tax and exclude portions attributable to noncontrolling interests. Foreign currency translation (loss) gains Net investment hedges of New Zealand subsidiary Cash flow hedges Employee benefit plans Total Rayonier, L.P. Allocation to Operating Partnership Total Rayonier Inc. Balance as of December 31, 2020 $ 22,702 $ 1,321 ($ 71,056 ) ($ 24,312 ) ($ 71,345 ) ($ 2,540 ) ($ 73,885 ) Other comprehensive income (loss) before reclassifications ( 18,487 ) — 44,899 (a) 11,302 37,714 ( 1,080 ) 36,634 Amounts reclassified from accumulated other comprehensive income (loss) — — 16,994 1,174 (b) 18,168 ( 521 ) 17,647 Net other comprehensive income (loss) ( 18,487 ) — 61,893 12,476 55,882 ( 1,601 ) 54,281 Balance as of December 31, 2021 $ 4,215 $ 1,321 ($ 9,163 ) ($ 11,836 ) ($ 15,463 ) ($ 4,141 ) ($ 19,604 ) Other comprehensive (loss) income before reclassifications ( 52,770 ) — 66,573 (a) — 13,803 ( 378 ) 13,425 Amounts reclassified from accumulated other comprehensive income — — 3,115 564 (b) 3,679 901 4,580 Net other comprehensive income (loss) ( 52,770 ) — 69,688 564 17,482 523 18,005 Balance as of September 30, 2022 ($ 48,555 ) $ 1,321 $ 60,525 ($ 11,272 ) $ 2,019 ($ 3,618 ) ($ 1,599 ) (a) The nine months ended September 30, 2022 and the year ended December 31, 2021 include $ 76.4 million and $ 52.5 million, respectively, of other comprehensive income related to interest rate products. See Note 7 — Derivative Financial Instruments and Hedging Activities for additional information. (b) This component of other comprehensive income (loss) is included in the computation of net periodic pension and post-retirement costs. See Note 16 — Employee Benefit Plans for additional information. 39 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) The following table presents details of the amounts reclassified in their entirety from AOCI to net income for the nine months ended September 30, 2022 and September 30, 2021: Details about accumulated other comprehensive income (loss) components Amount reclassified from accumulated other comprehensive income (loss) Affected line item in the Income Statement September 30, 2022 September 30, 2021 Realized (gain) loss on foreign currency exchange contracts ($ 2,598 ) $ 2,322 Other operating income, net Realized loss on foreign currency option contracts — 1,177 Other operating income, net Noncontrolling interests 598 ( 805 ) Comprehensive income attributable to noncontrolling interests Realized loss on interest rate contracts 4,555 11,935 Interest expense Income tax effect from net gain (loss) on foreign currency contracts 560 ( 755 ) Income tax expense Net loss on cash flow hedges reclassified from accumulated other comprehensive income $ 3,115 $ 13,874 19. 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 deposited with a like-kind exchange (“LKE”) intermediary. In order to qualify for 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 LKE purchases are not completed, the proceeds are returned to the Company after 180 days and reclassified as available cash. Additionally, restricted cash, excluding Timber Funds, includes cash balances held in escrow as collateral for certain contractual obligations related to our Heartwood 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 nine months ended September 30, 2022 and 2021: Nine Months Ended September 30, 2022 2021 Restricted cash, excluding Timber Funds: Restricted cash deposited with LKE intermediary $ 15,627 — Restricted cash held in escrow 625 625 Total restricted cash shown in the Consolidated Balance Sheets, excluding Timber Funds 16,252 625 Restricted cash shown in the Consolidated Balance Sheets, Timber Funds 1,464 49,209 Cash and cash equivalents 261,804 431,806 Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 279,520 $ 481,640 40 Table of Contents RAYONIER INC. AND SUBSIDIARIES RAYONIER, L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Dollar amounts in thousands unless otherwise stated) 20. ASSETS HELD FOR SALE Assets held for sale is composed of properties under contract and expected to be sold within 12 months that also meet the other relevant held-for-sale criteria in accordance with ASC 360-10-45-9. As of September 30, 2022 and December 31, 2021, the basis in properties meeting this classification was $ 2.4 million and $ 5.1 million, respectively. Since the basis in these properties was less than the fair value, including costs to sell, no impairment was recognized. 21. 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”). In May 2021, we entered into an amendment to the original agreement for the sale of 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. As of September 30, 2022, all lots under contract have been sold to Mattamy, with only marketing fees remaining to be collected from third party homebuyers. In September 2020, Keith Bass, a member of our Board of Directors, was named the Chief Executive Officer of Mattamy Homes US. Following this development, the Mattamy Contract and the ongoing obligations therein, were reviewed by the Nominating and Corporate Governance Committee in accordance with established policies and procedures regarding the authorization and approval of transactions with related parties. The following table demonstrates the impact, gross of tax, of our related party transactions on the Consolidated Statements of Income and Comprehensive Income for the three and nine months ended: Three Months Ended September 30, Nine Months Ended September 30, Related Party Transaction Location on Statement of Income and Comprehensive Income 2022 2021 2022 2021 Mattamy Contract Sales (a) $ 281 1,022 $ 794 2,510 (a) The three and nine months ended September 30, 2021 exclude approximately $ 0.2 million and $ 0.4 million, respectively, of cash received from Mattamy Jacksonville LLC under this agreement for the reimbursement of local impact fees. 41 Table of Contents