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 March 31, 2023 2022 SALES ( NOTE 3 ) $ 179,082 $ 222,041 Costs and Expenses Cost of sales ( 149,166 ) ( 160,979 ) Selling and general expenses ( 16,778 ) ( 14,760 ) Other operating expense, net ( Note 14 ) ( 2,516 ) ( 984 ) ( 168,460 ) ( 176,723 ) OPERATING INCOME 10,622 45,318 Interest expense ( 11,700 ) ( 8,337 ) Interest and other miscellaneous income (expense), net 9,554 ( 468 ) INCOME BEFORE INCOME TAXES 8,476 36,513 Income tax expense ( Note 16 ) ( 1,039 ) ( 5,515 ) NET INCOME 7,437 30,998 Less: Net income attributable to noncontrolling interests in the operating partnership ( 174 ) ( 669 ) Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) NET INCOME ATTRIBUTABLE TO RAYONIER INC. 8,300 29,317 OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustment, net of income tax effect of $ 0 and $ 0 ( 3,733 ) 6,458 Cash flow hedges, net of income tax effect of $ 312 and $ 1,022 ( 12,319 ) 40,427 Amortization of pension and postretirement plans, net of income tax expense of $ 0 and $ 0 1 188 Total other comprehensive (loss) income ( 16,051 ) 47,073 COMPREHENSIVE (LOSS) INCOME ( 8,614 ) 78,071 Less: Comprehensive loss (income) attributable to noncontrolling interests in the operating partnership 156 ( 1,686 ) Less: Comprehensive loss (income) attributable to noncontrolling interests in consolidated affiliates 1,032 ( 2,408 ) COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RAYONIER INC. ($ 7,426 ) $ 73,977 EARNINGS PER COMMON SHARE ( NOTE 5 ) Basic earnings per share attributable to Rayonier Inc. $ 0.06 $ 0.20 Diluted earnings per share attributable to Rayonier Inc. $ 0.06 $ 0.20 See Notes to Consolidated Financial Statements. 1 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) March 31, 2023 December 31, 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 98,774 $ 114,255 Accounts receivable, less allowance for doubtful accounts of $ 73 and $ 74 35,430 42,538 Inventory ( Note 13 ) 30,297 23,729 Prepaid expenses 20,856 20,573 Assets held for sale ( Note 19 ) 1,154 713 Other current assets 837 573 Total current assets 187,348 202,381 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,209,988 3,230,904 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 12 ) 119,701 115,097 PROPERTY, PLANT AND EQUIPMENT Land 6,453 6,453 Buildings 30,805 31,020 Machinery and equipment 6,565 6,568 Construction in progress 881 653 Total property, plant and equipment, gross 44,704 44,694 Less — accumulated depreciation ( 17,981 ) ( 17,505 ) Total property, plant and equipment, net 26,723 27,189 RESTRICTED CASH ( NOTE 18 ) 4,962 1,152 RIGHT-OF-USE ASSETS 98,301 97,167 OTHER ASSETS 100,150 115,481 TOTAL ASSETS $ 3,747,173 $ 3,789,371 LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 32,172 $ 22,100 Accrued taxes 4,899 3,734 Accrued payroll and benefits 6,430 12,564 Accrued interest 10,175 5,920 Deferred revenue 19,095 22,762 Other current liabilities 23,988 28,247 Total current liabilities 96,759 95,327 LONG-TERM DEBT, NET ( NOTE 6 ) 1,514,127 1,514,721 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 15 ) 8,460 8,510 LONG-TERM LEASE LIABILITY 89,911 88,756 LONG-TERM DEFERRED REVENUE 11,337 6,895 OTHER NON-CURRENT LIABILITIES 89,303 88,687 CONTINGENCIES ( NOTE 9 ) NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP ( NOTE 4 ) 82,461 105,763 SHAREHOLDERS’ EQUITY Common Shares, 480,000,000 shares authorized, 148,012,979 and 147,282,631 shares issued and outstanding 1,489,274 1,462,945 Retained earnings 330,389 366,637 Accumulated other comprehensive income ( Note 17 ) 20,868 35,813 TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY 1,840,531 1,865,395 Noncontrolling interests in consolidated affiliates ( Note 4 ) 14,284 15,317 TOTAL SHAREHOLDERS’ EQUITY 1,854,815 1,880,712 TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY $ 3,747,173 $ 3,789,371 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 Noncontrolling Interests in Consolidated Affiliates Shareholders’ Equity Shares Amount Balance, January 1, 2023 147,282,631 $ 1,462,945 $ 366,637 $ 35,813 $ 15,317 $ 1,880,712 Net income (loss) — — 8,474 — ( 1,037 ) 7,437 Net income attributable to noncontrolling interests in the operating partnership — — ( 174 ) — — ( 174 ) Dividends ($ 0.285 per share) (a) — — ( 42,172 ) — — ( 42,172 ) Issuance of shares under the “at-the-market” equity offering, net of commissions and offering costs of $ 24 400 ( 10 ) — — — ( 10 ) Issuance of shares under incentive stock plans 1,564 — — — — — Stock-based compensation — 2,499 — — — 2,499 Repurchase of common shares ( 1,167 ) ( 41 ) — — — ( 41 ) Adjustment of noncontrolling interests in the operating partnership — — ( 2,376 ) — — ( 2,376 ) Conversion of units into common shares 729,551 23,881 — — — 23,881 Amortization of pension and postretirement plan liabilities — — — 1 — 1 Foreign currency translation adjustment — — — ( 3,552 ) ( 181 ) ( 3,733 ) Cash flow hedges — — — ( 12,504 ) 185 ( 12,319 ) Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — 1,110 — 1,110 Balance, March 31, 2023 148,012,979 $ 1,489,274 $ 330,389 $ 20,868 $ 14,284 $ 1,854,815 (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 . 3 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 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 (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. 4 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 2022 OPERATING ACTIVITIES Net income $ 7,437 $ 30,998 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 37,599 47,419 Non-cash cost of land and improved development 4,208 5,359 Stock-based incentive compensation expense 2,499 2,797 Deferred income taxes ( 1,155 ) ( 8,014 ) Amortization of losses from pension and postretirement plans 1 188 Timber write-offs due to casualty event 2,302 — Other 578 ( 2,244 ) Changes in operating assets and liabilities: Receivables 3,730 ( 27,837 ) Inventories ( 4,098 ) ( 4,875 ) Accounts payable 8,913 7,376 All other operating activities 1,937 ( 1,500 ) CASH PROVIDED BY OPERATING ACTIVITIES 63,951 49,667 INVESTING ACTIVITIES Capital expenditures ( 18,746 ) ( 15,597 ) Real estate development investments ( 7,753 ) ( 3,137 ) Purchase of timberlands ( 8,729 ) ( 2,830 ) Other 3,029 2,619 CASH USED FOR INVESTING ACTIVITIES ( 32,199 ) ( 18,945 ) FINANCING ACTIVITIES Issuance of debt — 404,018 Repayment of debt — ( 526,948 ) Dividends paid on common shares ( 42,149 ) ( 39,444 ) Distributions to noncontrolling interests in the operating partnership ( 861 ) ( 895 ) Proceeds from the issuance of common shares under incentive stock plan — 579 Proceeds from the issuance of common shares under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs ( 10 ) 30,918 Repurchase of common shares to pay withholding taxes on vested incentive stock awards ( 41 ) ( 214 ) Distributions to noncontrolling interests in consolidated affiliates — ( 2,684 ) CASH USED FOR FINANCING ACTIVITIES ( 43,061 ) ( 134,670 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 362 ) 620 CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 11,671 ) ( 103,328 ) Balance, beginning of year 115,407 369,139 Balance, end of period $ 103,736 $ 265,811 Three Months Ended March 31, 2023 2022 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 3,802 $ 3,935 Income taxes (b) 2,203 14,042 Non-cash investing activity: Capital assets purchased on account 5,689 4,511 (a) Interest paid is presented net of patronage paymen ts receive d of $ 6.1 million a n d $ 5.5 million for the three months ended March 31, 2023 and March 31, 2022, respectively. For additional information on patronage payments, see Note 7 — Debt in the 2022 Form 10-K. (b) Income taxes paid in 2022 were elevated due to timing of required tax payments for the New Zealand subsidiary following a full utilization of its net operating losses. See Notes to Consolidated Financial Statements. 5 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 March 31, 2023 2022 SALES ( NOTE 3 ) $ 179,082 $ 222,041 Costs and Expenses Cost of sales ( 149,166 ) ( 160,979 ) Selling and general expenses ( 16,778 ) ( 14,760 ) Other operating expense, net ( Note 14 ) ( 2,516 ) ( 984 ) ( 168,460 ) ( 176,723 ) OPERATING INCOME 10,622 45,318 Interest expense ( 11,700 ) ( 8,337 ) Interest and other miscellaneous income (expense), net 9,554 ( 468 ) INCOME BEFORE INCOME TAXES 8,476 36,513 Income tax expense ( Note 16 ) ( 1,039 ) ( 5,515 ) NET INCOME 7,437 30,998 Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS 8,474 29,986 NET INCOME ATTRIBUTABLE TO UNITHOLDERS ATTRIBUTABLE TO: Limited Partners 8,389 29,686 General Partners 85 300 Net income attributable to unitholders 8,474 29,986 OTHER COMPREHENSIVE (LOSS) INCOME Foreign currency translation adjustment, net of income tax effect of $ 0 and $ 0 ( 3,733 ) 6,458 Cash flow hedges, net of income tax effect of $ 312 and $ 1,022 ( 12,319 ) 40,427 Amortization of pension and postretirement plans, net of income tax expense of $ 0 and $ 0 1 188 Total other comprehensive (loss) income ( 16,051 ) 47,073 COMPREHENSIVE (LOSS) INCOME ( 8,614 ) 78,071 Less: Comprehensive loss (income) attributable to noncontrolling interests in consolidated affiliates 1,032 ( 2,408 ) COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS ($ 7,582 ) $ 75,663 EARNINGS PER UNIT ( NOTE 5 ) Basic earnings per unit attributable to Rayonier, L.P. $ 0.06 $ 0.20 Diluted earnings per unit attributable to Rayonier, L.P. $ 0.06 $ 0.20 See Notes to Consolidated Financial Statements. 6 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) March 31, 2023 December 31, 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 98,774 $ 114,255 Accounts receivable, less allowance for doubtful accounts of $ 73 and $ 74 35,430 42,538 Inventory ( Note 13 ) 30,297 23,729 Prepaid expenses 20,856 20,573 Assets held for sale ( Note 19 ) 1,154 713 Other current assets 837 573 Total current assets 187,348 202,381 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,209,988 3,230,904 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 12 ) 119,701 115,097 PROPERTY, PLANT AND EQUIPMENT Land 6,453 6,453 Buildings 30,805 31,020 Machinery and equipment 6,565 6,568 Construction in progress 881 653 Total property, plant and equipment, gross 44,704 44,694 Less — accumulated depreciation ( 17,981 ) ( 17,505 ) Total property, plant and equipment, net 26,723 27,189 RESTRICTED CASH ( NOTE 18 ) 4,962 1,152 RIGHT-OF-USE ASSETS 98,301 97,167 OTHER ASSETS 100,150 115,481 TOTAL ASSETS $ 3,747,173 $ 3,789,371 LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL CURRENT LIABILITIES Accounts payable $ 32,172 $ 22,100 Accrued taxes 4,899 3,734 Accrued payroll and benefits 6,430 12,564 Accrued interest 10,175 5,920 Deferred revenue 19,095 22,762 Other current liabilities 23,988 28,247 Total current liabilities 96,759 95,327 LONG-TERM DEBT, NET ( NOTE 6 ) 1,514,127 1,514,721 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 15 ) 8,460 8,510 LONG-TERM LEASE LIABILITY 89,911 88,756 LONG-TERM DEFERRED REVENUE 11,337 6,895 OTHER NON-CURRENT LIABILITIES 89,303 88,687 CONTINGENCIES ( NOTE 9 ) REDEEMABLE OPERATING PARTNERSHIP UNITS ( NOTE 4 ) 2,479,276 and 3,208,827 Units outstanding, respectively 82,461 105,763 CAPITAL General partners’ capital 18,163 18,251 Limited partners’ capital 1,798,174 1,806,895 Accumulated other comprehensive income ( Note 17 ) 24,194 40,249 TOTAL CONTROLLING INTEREST CAPITAL 1,840,531 1,865,395 Noncontrolling interests in consolidated affiliates ( Note 4 ) 14,284 15,317 TOTAL CAPITAL 1,854,815 1,880,712 TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL $ 3,747,173 $ 3,789,371 See Notes to Consolidated Financial Statements. 7 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 Noncontrolling Interests in Consolidated Affiliates Total Capital General Partners’ Capital Limited Partners’ Capital Balance, January 1, 2023 $ 18,251 $ 1,806,895 $ 40,249 $ 15,317 $ 1,880,712 Net income (loss) 85 8,389 — ( 1,037 ) 7,437 Distributions on units ($ 0.285 per unit) ( 431 ) ( 42,602 ) — — ( 43,033 ) Issuance of units under the “at-the-market” equity offering, net of commissions and offering costs of $ 24 — ( 10 ) — — ( 10 ) Stock-based compensation 25 2,474 — — 2,499 Repurchase of units — ( 41 ) — — ( 41 ) Adjustment of Redeemable Operating Partnership Units ( 6 ) ( 573 ) — — ( 579 ) Conversion of units into common shares 239 23,642 — — 23,881 Amortization of pension and postretirement plan liabilities — — 1 — 1 Foreign currency translation adjustment — — ( 3,552 ) ( 181 ) ( 3,733 ) Cash flow hedges — — ( 12,504 ) 185 ( 12,319 ) Balance, March 31, 2023 $ 18,163 $ 1,798,174 $ 24,194 $ 14,284 $ 1,854,815 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 See Notes to Consolidated Financial Statements. 8 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Three Months Ended March 31, 2023 2022 OPERATING ACTIVITIES Net income $ 7,437 $ 30,998 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 37,599 47,419 Non-cash cost of land and improved development 4,208 5,359 Stock-based incentive compensation expense 2,499 2,797 Deferred income taxes ( 1,155 ) ( 8,014 ) Amortization of losses from pension and postretirement plans 1 188 Timber write-offs due to casualty events 2,302 — Other 578 ( 2,244 ) Changes in operating assets and liabilities: Receivables 3,730 ( 27,837 ) Inventories ( 4,098 ) ( 4,875 ) Accounts payable 8,913 7,376 All other operating activities 1,937 ( 1,500 ) CASH PROVIDED BY OPERATING ACTIVITIES 63,951 49,667 INVESTING ACTIVITIES Capital expenditures ( 18,746 ) ( 15,597 ) Real estate development investments ( 7,753 ) ( 3,137 ) Purchase of timberlands ( 8,729 ) ( 2,830 ) Other 3,029 2,619 CASH USED FOR INVESTING ACTIVITIES ( 32,199 ) ( 18,945 ) FINANCING ACTIVITIES Issuance of debt — 404,018 Repayment of debt — ( 526,948 ) Distributions on units ( 43,010 ) ( 40,339 ) Proceeds from the issuance of units under incentive stock plan — 579 Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs ( 10 ) 30,918 Repurchase of units to pay withholding taxes on vested incentive stock awards ( 41 ) ( 214 ) Distributions to noncontrolling interests in consolidated affiliates — ( 2,684 ) CASH USED FOR FINANCING ACTIVITIES ( 43,061 ) ( 134,670 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 362 ) 620 CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 11,671 ) ( 103,328 ) Balance, beginning of year 115,407 369,139 Balance, end of period $ 103,736 $ 265,811 Three Months Ended March 31, 2023 2022 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 3,802 $ 3,935 Income taxes (b) 2,203 14,042 Non-cash investing activity: Capital assets purchased on account 5,689 4,511 (a) Interest paid is presented net of patronage paymen ts received of $ 6.1 million an d $ 5.5 million for the three months ended March 31, 2023 and March 31, 2022, respectively. For additional information on patronage payments, see Note 7 — Debt in the 2022 Form 10-K. (b) Income taxes paid in 2022 were elevated due to timing of required tax payments for the New Zealand subsidiary following a full utilization of its net operating losses. See Notes to Consolidated Financial Statements. 9 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, 2022, as filed with the SEC (the “2022 Form 10-K”). As of March 31, 2023, the Company owned a 98.4 % interest in the Operating Partnership, with the remaining 1.6 % 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 2022 Form 10-K. REVENUE RECOGNITION NON-TIMBER SALES Carbon Capture and Storage Sales Carbon capture and storage (CCS) sales are primarily comprised of revenue generated from granting land access and the right to inject, sequester and permanently store carbon dioxide in a subsurface area. CCS contracts contain variable consideration arrangements, which may include variable durations, rates, access acres and carbon volumes. The determination of the transaction price and the allocation of the transaction price to the performance obligations may require significant judgment and is based on management’s estimate of the mostly likely amount of consideration we expect to receive as of the reporting date. Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimation of variable consideration requires us to make certain judgments and assumptions regarding the amount and timing of future payments, which may be impacted by factors such as changes in market conditions, competition or other factors beyond our control. As a result, actual amounts of variable consideration could differ from our estimates. We regularly review our estimates of variable consideration and, if necessary, adjust the transaction price and related revenue recognition accordingly. Any such adjustments are recorded in the period in which the estimate is revised. NEW ACCOUNTING STANDARDS There have been no recently adopted or pending accounting pronouncements which are applicable or are expected to have a material impact on our consolidated financial condition, results of operations, or cash flows. SUBSEQUENT EVENTS We have evaluated events occurring from March 31, 2023 to the date of issuance of these Consolidated Financial Statements for potential recognition or disclosure in the consolidated financial statements. No events were identified that warranted recognition or disclosure. 10 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) 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 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 months ended March 31, 2023 and 2022: Three Months Ended March 31, SALES 2023 2022 Southern Timber $ 71,842 $ 76,763 Pacific Northwest Timber 34,419 46,281 New Zealand Timber 44,105 51,389 Real Estate 16,276 34,195 Trading 12,569 13,461 Intersegment Eliminations (a) ( 129 ) ( 48 ) Total $ 179,082 $ 222,041 (a) Primarily consists of log marketing fees paid to our Trading segment from our Southern Timber and Pacific Northwest Timber segments for marketing log export sales. Three Months Ended March 31, OPERATING INCOME 2023 2022 Southern Timber $ 22,223 $ 30,342 Pacific Northwest Timber ( 3,543 ) 6,606 New Zealand Timber (a) ( 663 ) 5,392 Real Estate 883 10,181 Trading 341 351 Corporate and Other ( 8,619 ) ( 7,554 ) Total Operating Income 10,622 45,318 Unallocated interest expense and other (b) ( 2,146 ) ( 8,805 ) Total Income before Income Taxes $ 8,476 $ 36,513 (a) The three months ended March 31, 2023 includes a $ 2.3 million timber write-off resulting from a casualty event. Timber write-offs resulting from a casualty event are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of Sales”. (b) The three months ended March 31, 2023 includes a $ 9.1 million net recovery associated with a legal settlement. 11 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 March 31, DEPRECIATION, DEPLETION AND AMORTIZATION 2023 2022 Southern Timber $ 20,610 $ 18,059 Pacific Northwest Timber 10,650 14,916 New Zealand Timber 4,455 4,989 Real Estate 1,503 9,145 Corporate and Other 381 310 Total $ 37,599 $ 47,419 Three Months Ended March 31, NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT 2023 2022 Real Estate $ 4,208 $ 5,359 Total $ 4,208 $ 5,359 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 March 31, 2023 are primarily due to advances on stumpage contracts, unearned license revenue, unearned carbon capture and storage 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 months ended March 31, 2023 and 2022 that was included in the contract liability balance at the beginning of each year: Three Months Ended March 31, 2023 2022 Revenue recognized from contract liability balance at the beginning of the year (a) $ 11,400 $ 7,533 (a) Revenue recognized was primarily from hunting licenses, the use of advances on pay-as-cut timber sales and the satisfaction of post-closing obligations on real estate sales. 12 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 months ended March 31, 2023 and 2022: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Elim. Total March 31, 2023 Pulpwood $ 26,783 $ 3,715 $ 6,081 — $ 1,439 — $ 38,018 Sawtimber 34,543 29,781 37,683 — 10,667 — 112,674 Hardwood 1,120 — — — — — 1,120 Total Timber Sales 62,446 33,496 43,764 — 12,106 — 151,812 License Revenue, Primarily from Hunting 5,268 136 55 — — — 5,459 Other Non-Timber/Carbon Revenue (a) 4,128 787 286 — — — 5,201 Agency Fee Income — — — — 334 — 334 Total Non-Timber Sales 9,396 923 341 — 334 — 10,994 Improved Development — — — 4,802 — — 4,802 Rural — — — 6,499 — — 6,499 Timberland & Non-Strategic — — — 1,637 — — 1,637 Deferred Revenue/Other (b) — — — 3,093 — — 3,093 Total Real Estate Sales — — — 16,031 — — 16,031 Revenue from Contracts with Customers 71,842 34,419 44,105 16,031 12,440 — 178,837 Lease Revenue — — — 245 — — 245 Intersegment — — — — 129 ( 129 ) — Total Revenue $ 71,842 $ 34,419 $ 44,105 $ 16,276 $ 12,569 ($ 129 ) $ 179,082 Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Elim. Total March 31, 2022 Pulpwood $ 37,611 $ 2,918 $ 7,595 — $ 1,525 — $ 49,649 Sawtimber 27,516 42,215 42,100 — 11,538 — 123,369 Hardwood 5,849 — — — — — 5,849 Total Timber Sales 70,976 45,133 49,695 — 13,063 — 178,867 License Revenue, Primarily from Hunting 4,688 116 62 — — — 4,866 Other Non-Timber/Carbon Revenue 1,099 1,032 1,632 — — — 3,763 Agency Fee Income — — — — 350 — 350 Total Non-Timber Sales 5,787 1,148 1,694 — 350 — 8,979 Improved Development — — — 4,966 — — 4,966 Rural — — — 16,950 — — 16,950 Timberland & Non-Strategic — — — 11,400 — — 11,400 Deferred Revenue/Other (b) — — — 636 — — 636 Total Real Estate Sales — — — 33,952 — — 33,952 Revenue from Contracts with Customers 76,763 46,281 51,389 33,952 13,413 — 221,798 Lease Revenue — — — 243 — — 243 Intersegment — — — — 48 ( 48 ) — Total Revenue $ 76,763 $ 46,281 $ 51,389 $ 34,195 $ 13,461 ($ 48 ) $ 222,041 (a) Includes $ 0.6 million of CCS revenue. (b) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales. 13 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 months ended March 31, 2023 and 2022: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Trading Total March 31, 2023 Stumpage Pay-as-Cut $ 30,477 — — — $ 30,477 Stumpage Lump Sum 105 624 — — 729 Total Stumpage 30,582 624 — — 31,206 Delivered Wood (Domestic) 29,413 29,168 11,595 403 70,579 Delivered Wood (Export) 2,451 3,704 32,169 11,703 50,027 Total Delivered 31,864 32,872 43,764 12,106 120,606 Total Timber Sales $ 62,446 $ 33,496 $ 43,764 $ 12,106 $ 151,812 March 31, 2022 Stumpage Pay-as-Cut $ 36,206 — — — $ 36,206 Stumpage Lump Sum — 5,388 — — 5,388 Total Stumpage 36,206 5,388 — — 41,594 Delivered Wood (Domestic) 32,128 39,446 13,481 625 85,680 Delivered Wood (Export) 2,642 299 36,214 12,438 51,593 Total Delivered 34,770 39,745 49,695 13,063 137,273 Total Timber Sales $ 70,976 $ 45,133 $ 49,695 $ 13,063 $ 178,867 14 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 419,000 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. 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 March 31, 2023 2022 Beginning noncontrolling interests in the operating partnership $ 105,763 $ 133,823 Adjustment of noncontrolling interests in the operating partnership 2,376 2,645 Conversions of Redeemable Operating Partnership Units to Common Shares ( 23,881 ) ( 104 ) Net Income attributable to noncontrolling interests in the operating partnership 174 669 Other Comprehensive (Loss) Income attributable to noncontrolling interests in the operating partnership ( 1,110 ) 101 Distributions to noncontrolling interests in the operating partnership ( 861 ) ( 895 ) Total noncontrolling interests in the operating partnership $ 82,461 $ 136,239 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) 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 March 31, 2023 2022 Earnings per common share - basic Numerator: Net Income $ 7,437 $ 30,998 Less: Net income attributable to noncontrolling interests in the operating partnership ( 174 ) ( 669 ) Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) Net income attributable to Rayonier Inc. $ 8,300 $ 29,317 Denominator: Denominator for basic earnings per common share - weighted average shares 147,377,448 145,430,171 Basic earnings per common share attributable to Rayonier Inc.: $ 0.06 $ 0.20 Earnings per common share - diluted Numerator: Net Income $ 7,437 $ 30,998 Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the operating partnership $ 8,474 $ 29,986 Denominator: Denominator for basic earnings per common share - weighted average shares 147,377,448 145,430,171 Add: Dilutive effect of: Stock options 1,886 7,229 Performance shares, restricted shares and restricted stock units 612,412 794,892 Noncontrolling interests in operating partnership units 3,087,383 3,314,784 Denominator for diluted earnings per common share - adjusted weighted average shares 151,079,129 149,547,076 Diluted earnings per common share attributable to Rayonier Inc.: $ 0.06 $ 0.20 Three Months Ended March 31, 2023 2022 Anti-dilutive shares excluded from the computations of diluted earnings per common share: Stock options, performance shares, restricted shares and restricted stock units 64,667 254 Total 64,667 254 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) The following table provides details of the calculations of basic and diluted earnings per unit of the Operating Partnership: Three Months Ended March 31, 2023 2022 Earnings per unit - basic Numerator: Net Income $ 7,437 $ 30,998 Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) Net income available to unitholders $ 8,474 $ 29,986 Denominator: Denominator for basic earnings per unit - weighted average units 150,464,831 148,744,955 Basic earnings per unit attributable to Rayonier, L.P.: $ 0.06 $ 0.20 Earnings per unit - diluted Numerator: Net Income $ 7,437 $ 30,998 Less: Net loss (income) attributable to noncontrolling interests in consolidated affiliates 1,037 ( 1,012 ) Net income available to unitholders $ 8,474 $ 29,986 Denominator: Denominator for basic earnings per unit - weighted average units 150,464,831 148,744,955 Add: Dilutive effect of unit equivalents: Stock options 1,886 7,229 Performance shares, restricted shares and restricted stock units 612,412 794,892 Denominator for diluted earnings per unit - adjusted weighted average units 151,079,129 149,547,076 Diluted earnings per unit attributable to Rayonier, L.P.: $ 0.06 $ 0.20 Three Months Ended March 31, 2023 2022 Anti-dilutive unit equivalents excluded from the computations of diluted earnings per unit: Stock options, performance shares, restricted shares and restricted stock units 64,667 254 Total 64,667 254 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) 6. DEBT Our debt consisted of the following at March 31, 2023: March 31, 2023 Debt Senior Notes due 2031 at a fixed interest rate of 2.75 % $ 450,000 2015 Term Loan borrowings due 2028 at a variable interest rate of 6.34 % at March 31, 2023 350,000 2022 Incremental Term Loan borrowings due 2027 at a variable interest rate of 6.34 % at March 31, 2023 250,000 2016 Incremental Term Loan borrowings due 2026 at a variable interest rate of 6.39 % at March 31, 2023 200,000 2021 Incremental Term Loan borrowings due 2029 at a variable interest rate of 6.29 % at March 31, 2023 200,000 New Zealand subsidiary noncontrolling interests shareholder loan due 2026 at a fixed interest rate of 3.64 % (a) 25,280 New Zealand subsidiary noncontrolling interests shareholder loan due 2027 at a fixed interest rate of 6.48 % (a) 25,280 New Zealand subsidiary noncontrolling interests shareholder loan due 2025 at a fixed interest rate of 2.95 % (a) 21,669 Total principal debt 1,522,229 Less: Unamortized discounts ( 3,022 ) Less: Deferred financing costs ( 5,080 ) Total long-term debt $ 1,514,127 (a) 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. The following table contains information on the outstanding variable rate debt as of March 31, 2023: Debt Periodic Interest Rate (a) Effective Fixed Interest Rate (b) 2015 Term Loan Daily Simple SOFR + 1.70 % 3.03 % 2022 Incremental Term Loan Daily Simple SOFR + 1.70 % 5.13 % 2016 Incremental Term Loan Daily Simple SOFR + 1.75 % 2.40 % 2021 Incremental Term Loan Daily Simple SOFR + 1.65 % 1.46 % (a) Includes credit spread adjustment of 0.1 %. (b) Effective interest rate is after consideration of interest rate swaps and estimated patronage refunds. Principal payments due during the next five years and thereafter are as follows: Total 2023 — 2024 — 2025 21,669 2026 225,280 2027 275,280 Thereafter 1,000,000 Total Debt $ 1,522,229 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) 2023 DEBT ACTIVITY U.S. Debt During the three months ended March 31, 2023, we made no borrowings or repayments on our Revolving Credit Facility. At March 31, 2023, we had available borrowings of $ 296.2 million under the Revolving Credit Facility, net of $ 3.8 million to secure our outstanding letters of credit. New Zealand Debt During the three months ended March 31, 2023, the New Zealand subsidiary made no borrowings and repayments on its working capital facility (the “New Zealand Working Capital Facility”). At March 31, 2023, the New Zealand subsidiary had NZ$ 20.0 million of available borrowings under its working capital facility. DEBT COVENANTS In connection with our 2015 Term Loan Facility, 2016 Incremental Term Loan Facility, 2021 Incremental Term Loan Agreement, 2022 Incremental Term Loan Agreement and 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 March 31, 2023, 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 8.1 to 1 5.6 Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 45 % 20 % In addition to these financial covenants listed above, the Senior Notes due 2031, 2015 Term Loan Facility, 2016 Incremental Term Loan Facility, 2021 Incremental Term Loan Facility, 2022 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 March 31, 2023, we were in compliance with all applicable covenants. 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 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) 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 March 31, 2023, foreign currency exchange contracts and foreign currency option contracts had maturity dates through February 2026 and October 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 AOCI for de-designated hedges remains in AOCI until the forecasted transaction affects earnings. Changes in the value of derivative instruments after de-designation are recorded in earnings. 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 March 31, 2023: Outstanding Interest Rate Swaps (a) Date Entered Into Term Notional Amount Related Debt Facility Fixed Rate of Swap Bank Margin on Debt (b) Total Effective Interest Rate (c) August 2015 9 years $ 170,000 Term Credit Agreement 2.10 % 1.70 % 3.80 % August 2015 9 years 180,000 Term Credit Agreement 2.26 % 1.70 % 3.96 % April 2016 10 years 100,000 Incremental Term Loan 1.50 % 1.75 % 3.25 % April 2016 10 years 100,000 Incremental Term Loan 1.51 % 1.75 % 3.26 % May 2021 7 years 200,000 2021 Incremental Term Loan Facility 0.67 % 1.65 % 2.32 % December 2022 5 years 100,000 2022 Incremental Term Loan Facility 3.72 % 1.70 % 5.42 % (a) All interest rate swaps have been designated as interest rate cash flow hedges and qualify for hedge accounting. (b) Includes the SOFR Credit Spread Adjustment component of 0.1 %. (c) Rate is before estimated patronage payments. 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) FORWARD-STARTING INTEREST RATE SWAPS In March 2023, we modified our benchmark rates from LIBOR to Daily Simple SOFR for our forward-starting interest rates swaps, resulting in slightly favorable fixed rates. The following table contains information on the outstanding forward-starting interest rate swaps as of March 31, 2023: 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 0.78 % Term Credit Agreement August 2024 N/A May 2020 4 years 50,000 0.64 % 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. The following tables demonstrate the impact, gross of tax, of our derivatives on the Consolidated Statements of Income and Comprehensive Income for the three months ended March 31, 2023 and 2022: Three Months Ended March 31, Income Statement Location 2023 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other comprehensive (loss) income $ 3,813 $ 3,417 Other operating expense, net ( 2,429 ) 97 Foreign currency option contracts Other comprehensive (loss) income ( 270 ) 136 Interest rate products Other comprehensive (loss) income ( 9,660 ) 35,129 Interest expense, net ( 3,463 ) 2,670 During the next 12 months, the amount of the March 31, 2023 AOCI balance, net of tax, expected to be reclassified into earnings is a gain of approximately $ 19.3 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 ($ 2,930 ) Foreign currency option contracts ( 257 ) Interest rate products (a) 22,498 Total estimated gain on derivatives contracts $ 19,311 (a) These reclassified amounts are expected to fully offset variable interest rate payments made to debt holders, resulting in no net impact on our earnings or cash flows. 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 table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets: Notional Amount March 31, 2023 December 31, 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts $ 128,750 $ 138,250 Foreign currency option contracts 78,000 78,000 Interest rate swaps 850,000 850,000 Forward-starting interest rate swaps 150,000 150,000 The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets at March 31, 2023 and December 31, 2022. 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) March 31, 2023 December 31, 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other current assets $ 63 $ 25 Other assets 1,063 1,303 Other current liabilities ( 4,133 ) ( 5,457 ) Other non-current liabilities ( 146 ) ( 410 ) Foreign currency option contracts Other current assets 83 66 Other assets 1,734 2,131 Other current liabilities ( 440 ) ( 347 ) Other non-current liabilities ( 1,079 ) ( 1,281 ) Interest rate swaps Other assets 50,525 60,843 Other non-current liabilities ( 1,549 ) ( 51 ) Forward-starting interest rate swaps Other assets 10,456 11,939 Total derivative contracts: Other current assets $ 146 $ 91 Other assets 63,778 76,216 Total derivative assets $ 63,924 $ 76,307 Other current liabilities ( 4,573 ) ( 5,804 ) Other non-current liabilities ( 2,774 ) ( 1,742 ) Total derivative liabilities ($ 7,347 ) ($ 7,546 ) (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. 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) 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 March 31, 2023 and December 31, 2022, using market information and what we believe to be appropriate valuation methodologies under GAAP: March 31, 2023 December 31, 2022 Asset (Liability) (a) Carrying Amount Fair Value Carrying Amount Fair Value Level 1 Level 2 Level 1 Level 2 Cash and cash equivalents $ 98,774 $ 98,774 — $ 114,255 $ 114,255 — Restricted cash (b) 4,962 4,962 — 1,152 1,152 — Long-term debt (c) ( 1,514,127 ) — ( 1,441,247 ) ( 1,514,721 ) — ( 1,438,736 ) Interest rate swaps (d) 48,976 — 48,976 60,792 — 60,792 Forward-starting interest rate swaps (d) 10,456 — 10,456 11,939 — 11,939 Foreign currency exchange contracts (d) ( 3,153 ) — ( 3,153 ) ( 4,539 ) — ( 4,539 ) Foreign currency option contracts (d) 298 — 298 569 — 569 Noncontrolling interests in the operating partnership (e) 82,461 — 82,461 105,763 — 105,763 (a) We did not have Level 3 assets or liabilities at March 31, 2023 and December 31, 2022. (b) Restricted cash represents proceeds from like-kind exchange sales deposited with a third-party intermediary and cash held in escrow. See Note 18 — Restricted Cash for additional information. (c) 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. (d) See Note 7 — Derivative Financial Instruments and Hedging Activities for information regarding the Consolidated Balance Sheets classification of our derivative financial instruments. (e) 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. 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. 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) 9. 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. 10. 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, 2022 to March 31, 2023 are shown below: Port Gamble, WA Non-current portion at December 31, 2022 $ 14,418 Plus: Current portion 1,175 Total Balance at December 31, 2022 15,593 Expenditures charged to liabilities ( 110 ) Total Balance at March 31, 2023 15,483 Less: Current portion ( 1,175 ) Non-current portion at March 31, 2023 $ 14,308 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 15 to 20 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 10 - Commitments in our 2022 Form 10-K. We do not currently anticipate any material loss in excess of the amounts accrued; however we are not able to estimate a possible loss or range of loss, if any, in excess of the established liabilities. Our future remediation expenses may be affected by a number of uncertainties including, but not limited to, the difficulty in estimating the extent and method of remediation, the evolving nature of environmental regulations, and the availability and application of technology. We do not expect the resolution of such uncertainties to have a material adverse effect on our consolidated financial position or liquidity. 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) 11. GUARANTEES We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies. As of March 31, 2023, the following financial guarantees were outstanding: Financial Commitments (a) Maximum Potential Payment Standby letters of credit (b) $ 3,779 Surety bonds (c) 23,204 Total financial commitments $ 26,983 (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) Approximately $ 2.9 million of the standby letters of credit serve as credit support for real estate construction in our Wildlight development project. The remaining letters of credit support various insurance related agreements, primarily workers’ compensation. These letters of credit will expire at various dates during 2023 and will be renewed as required. (c) 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 our Heartwood development project in Richmond Hill, Georgia. These surety bonds expire at various dates during 2023, 2024 and 2025 and are expected to be renewed as required. 12. 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. 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) Changes in higher and better use timberlands and real estate development investments from December 31, 2022 to March 31, 2023 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, 2022 $ 91,374 $ 23,723 $ 115,097 Plus: Current portion (a) 408 17,501 17,909 Total Balance at December 31, 2022 91,782 41,224 133,006 Non-cash cost of land and improved development ( 457 ) ( 2,943 ) ( 3,400 ) Amortization of parcel real estate development investments — ( 2,127 ) ( 2,127 ) Timber depletion from harvesting activities and basis of timber sold in real estate sales ( 345 ) — ( 345 ) Capitalized real estate development investments (b) — 10,913 10,913 Capital expenditures (silviculture) 89 — 89 Total Balance at March 31, 2023 91,069 47,067 138,136 Less: Current portion (a) ( 579 ) ( 17,856 ) ( 18,435 ) Non-current portion at March 31, 2023 $ 90,490 $ 29,211 $ 119,701 (a) The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 13 — Inventory for additional information. (b) Capitalized real estate development investments include $ 0.2 million of capitalized interest and $ 3.2 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. 13. INVENTORY As of March 31, 2023 and December 31, 2022, our inventory consisted entirely of finished goods, as follows: March 31, 2023 December 31, 2022 Finished goods inventory Real estate inventory (a) $ 18,435 $ 17,909 Log inventory 11,394 5,347 Carbon unit inventory (b) 468 473 Total inventory $ 30,297 $ 23,729 (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 12 — Higher And Better Use Timberlands and Real Estate Development Investments for additional information. (b) Represents the basis in New Zealand carbon units intended to be sold in the next 12 months. 14. OTHER OPERATING EXPENSE, NET Other operating expense, net consisted of the following: Three Months Ended March 31, 2023 2022 Loss on foreign currency remeasurement, net of cash flow hedges ($ 2,484 ) ($ 571 ) Gain on sale or disposal of property and equipment 2 25 Equity loss related to Bainbridge Landing LLC joint venture — ( 227 ) Miscellaneous expense, net ( 34 ) ( 211 ) Total ($ 2,516 ) ($ 984 ) 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) 15. 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. In December 2022, the Rayonier Board of Directors approved the resolution to terminate the Defined Benefit Plan and notified impacted parties of the termination and alternative distribution options. The Defined Benefit Plan was terminated on February 28, 2023. In conjunction with the termination of the Defined Benefit Plan, we also plan to terminate the unfunded plan and distribute all benefits in accordance with Section 409A of the Internal Revenue Code. We expect to recognize pre-tax non-cash pension settlement charges related to the actuarial losses currently in AOCI upon settlement of the obligations of the Defined Benefit and Excess Benefit Plans. These charges are currently expected to occur in 2023 and 2024, with the specific timing and final amounts dependent upon several factors. We expect to make cash contributions of approximately $ 7.6 million during the settlement process in order to fund the Defined Benefit Plan on a plan termination basis. The Defined Benefit Plan will be settled upon completion of lump sum distributions and purchase of annuity contracts. The settlement is expected to be completed by the end of Q1 2024. The Excess Benefit Plan will be settled entirely with lump sum payments upon termination with expected cash contributions in 2024 of approximately $ 1.3 million. Projected cash contributions are an estimate, as actual amounts will be dependent upon the nature and timing of participant settlements and interest rates, as well as prevailing market conditions. 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 March 31, Three Months Ended March 31, 2023 2022 2023 2022 Service cost Selling and general expenses — — $ 1 $ 2 Interest cost Interest and other miscellaneous income (expense), net 844 609 17 13 Expected return on plan assets (a) Interest and other miscellaneous income (expense), net ( 887 ) ( 872 ) — — Amortization of losses Interest and other miscellaneous income (expense), net 1 184 — 4 Net periodic benefit (credit) cost ($ 42 ) ($ 79 ) $ 18 $ 19 (a) The weighted-average expected long-term rate of return on plan assets used in computing 2023 net periodic benefit cost for pension benefit s is 5.0 %. 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) 16. 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 March 31, 2023, Rayonier owns a 98.4 % 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 March 31, 2023 2022 Income tax expense ($ 1,039 ) ($ 5,515 ) 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: Three Months Ended March 31, 2023 2022 Annualized effective tax rate after discrete items 7.9 % 10.5 % 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) 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in AOCI by component for the three months ended March 31, 2023 and the year ended December 31, 2022. 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, 2021 $ 4,215 $ 1,321 ($ 9,163 ) ($ 11,836 ) ($ 15,463 ) ($ 4,141 ) ($ 19,604 ) Other comprehensive income (loss) before reclassifications ( 22,282 ) — 78,166 (a) 874 56,758 ( 1,323 ) 55,435 Amounts reclassified from accumulated other comprehensive income (loss) — — ( 1,799 ) 753 (b) ( 1,046 ) 1,028 ( 18 ) Net other comprehensive income (loss) ( 22,282 ) — 76,367 1,627 55,712 ( 295 ) 55,417 Balance as of December 31, 2022 ($ 18,067 ) $ 1,321 $ 67,204 ($ 10,209 ) $ 40,249 ($ 4,436 ) $ 35,813 Other comprehensive (loss) income before reclassifications ( 3,552 ) — ( 7,696 ) (a) — ( 11,248 ) 231 ( 11,017 ) Amounts reclassified from accumulated other comprehensive income — — ( 4,808 ) 1 (b) ( 4,807 ) 879 ( 3,928 ) Net other comprehensive income (loss) ( 3,552 ) — ( 12,504 ) 1 ( 16,055 ) 1,110 ( 14,945 ) Balance as of March 31, 2023 ($ 21,619 ) $ 1,321 $ 54,700 ($ 10,208 ) $ 24,194 ($ 3,326 ) $ 20,868 (a) The three months ended March 31, 2023 includes $ 9.6 million of other comprehensive loss related to interest rate products. The three months ended December 31, 2022 included $ 75.0 million 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 is included in the computation of net periodic pension and post-retirement costs. See Note 15 — Employee Benefit Plans for additional information. The following table presents details of the amounts reclassified in their entirety from AOCI to net income for the three months ended March 31, 2023 and March 31, 2022: Details about accumulated other comprehensive income (loss) components Amount reclassified from accumulated other comprehensive income (loss) Affected line item in the Income Statement March 31, 2023 March 31, 2022 Realized (gain) loss on foreign currency exchange contracts ($ 2,429 ) $ 9 Other operating expense, net Noncontrolling interests 559 ( 2 ) Comprehensive loss (income) attributable to noncontrolling interests Realized (gain) loss on interest rate contracts ( 3,463 ) 2,670 Interest expense Income tax effect from net gain (loss) on foreign currency contracts 525 ( 2 ) Income tax expense Net (gain) loss on cash flow hedges reclassified from accumulated other comprehensive income ($ 4,808 ) $ 2,675 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) 18. RESTRICTED CASH 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. Restricted cash, Timber Funds includes the portion of proceeds from Fund II Timberland Dispositions required to be distributed to noncontrolling interests. 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 three months ended March 31, 2023 and 2022: Three Months Ended March 31, 2023 2022 Restricted cash, excluding Timber Funds: Restricted cash deposited with LKE intermediary $ 1,646 — Restricted cash held in escrow 3,316 625 Total restricted cash, excluding Timber Funds 4,962 625 Restricted cash, Timber Funds — 5,464 Cash and cash equivalents 98,774 259,722 Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 103,736 $ 265,811 19. 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 March 31, 2023 and December 31, 2022, the basis in properties meeting this classification was $ 1.2 million and $ 0.7 million, respectively. Since the basis in these properties was less than the fair value, including costs to sell, no impairment was recognized. 30 Table of Contents