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, 2023 2022 2023 2022 SALES ( NOTE 3 ) $ 201,579 $ 195,287 $ 589,526 $ 663,674 Costs and Expenses Cost of sales ( 145,622 ) ( 152,079 ) ( 463,197 ) ( 507,381 ) Selling and general expenses ( 18,947 ) ( 16,886 ) ( 54,677 ) ( 49,002 ) Other operating (expense) income, net ( Note 14 ) ( 1,654 ) 14,581 ( 5,571 ) 14,398 ( 166,223 ) ( 154,384 ) ( 523,445 ) ( 541,985 ) OPERATING INCOME 35,356 40,903 66,081 121,689 Interest expense, net ( 12,598 ) ( 9,056 ) ( 36,755 ) ( 26,476 ) Interest and other miscellaneous income, net 529 1,252 21,725 990 INCOME BEFORE INCOME TAXES 23,287 33,099 51,051 96,203 Income tax expense ( Note 16 ) ( 547 ) ( 1,238 ) ( 1,777 ) ( 8,056 ) NET INCOME 22,740 31,861 49,274 88,147 Less: Net income attributable to noncontrolling interests in the operating partnership ( 320 ) ( 455 ) ( 811 ) ( 1,670 ) Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) NET INCOME ATTRIBUTABLE TO RAYONIER INC. 19,237 20,578 46,561 73,999 OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 , $ 0 and $ 0 ( 4,413 ) ( 25,392 ) ( 17,350 ) ( 55,220 ) Cash flow hedges, net of income tax effect of $ 75 , $ 2,488 , $ 322 and $ 5,677 7,379 20,147 7,002 66,329 Amortization of pension and postretirement plans, net of income tax expense of $ 0 , $ 0 , $ 0 and $ 0 2 188 4 564 Total other comprehensive income (loss) 2,968 ( 5,057 ) ( 10,344 ) 11,673 COMPREHENSIVE INCOME 25,708 26,804 38,930 99,820 Less: Comprehensive income attributable to noncontrolling interests in the operating partnership ( 373 ) ( 490 ) ( 592 ) ( 2,147 ) Less: Comprehensive income attributable to noncontrolling interests in consolidated affiliates ( 2,906 ) ( 8,029 ) ( 884 ) ( 6,670 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER INC. $ 22,429 $ 18,285 $ 37,454 $ 91,003 EARNINGS PER COMMON SHARE ( NOTE 5 ) Basic earnings per share attributable to Rayonier Inc. $ 0.13 $ 0.14 $ 0.31 $ 0.51 Diluted earnings per share attributable to Rayonier Inc. $ 0.13 $ 0.14 $ 0.31 $ 0.50 See Notes to Consolidated Financial Statements. 1 Table of Contents RAYONIER INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) September 30, 2023 December 31, 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 107,784 $ 114,255 Trade receivables, less allowance for doubtful accounts of $ 217 and $ 74 31,447 27,837 Other receivables 9,894 14,701 Inventory ( Note 13 ) 33,139 23,729 Prepaid expenses 20,415 20,573 Assets held for sale ( Note 19 ) 18,320 713 Other current assets 1,929 573 Total current assets 222,928 202,381 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,138,136 3,230,904 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 12 ) 106,657 115,097 PROPERTY, PLANT AND EQUIPMENT Land 6,453 6,453 Buildings 30,121 31,020 Machinery and equipment 6,581 6,568 Construction in progress 1,331 653 Total property, plant and equipment, gross 44,486 44,694 Less — accumulated depreciation ( 18,478 ) ( 17,505 ) Total property, plant and equipment, net 26,008 27,189 RESTRICTED CASH ( NOTE 18 ) 1,804 1,152 RIGHT-OF-USE ASSETS 92,736 97,167 OTHER ASSETS 119,480 115,481 TOTAL ASSETS $ 3,707,749 $ 3,789,371 LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES Accounts payable $ 25,960 $ 22,100 Accrued taxes 8,920 3,734 Accrued payroll and benefits 10,443 12,564 Accrued interest 10,605 5,920 Deferred revenue 23,835 22,762 Other current liabilities 30,856 28,247 Total current liabilities 110,619 95,327 LONG-TERM DEBT, NET ( NOTE 6 ) 1,511,470 1,514,721 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 15 ) 8,356 8,510 LONG-TERM LEASE LIABILITY 85,111 88,756 LONG-TERM DEFERRED REVENUE 11,317 6,895 OTHER NON-CURRENT LIABILITIES 78,744 88,687 CONTINGENCIES ( NOTE 9 ) NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP ( NOTE 4 ) 69,820 105,763 SHAREHOLDERS’ EQUITY Common Shares, 480,000,000 shares authorized, 148,287,338 and 147,282,631 shares issued and outstanding 1,493,511 1,462,945 Retained earnings 295,096 366,637 Accumulated other comprehensive income ( Note 17 ) 27,504 35,813 TOTAL RAYONIER INC. SHAREHOLDERS’ EQUITY 1,816,111 1,865,395 Noncontrolling interests in consolidated affiliates ( Note 4 ) 16,201 15,317 TOTAL SHAREHOLDERS’ EQUITY 1,832,312 1,880,712 TOTAL LIABILITIES, NONCONTROLLING INTERESTS IN THE OPERATING PARTNERSHIP AND SHAREHOLDERS’ EQUITY $ 3,707,749 $ 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 loss 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 Net income — — 19,341 — ( 245 ) 19,096 Net income attributable to noncontrolling interests in the operating partnership — — ( 318 ) — — ( 318 ) Dividends ($ 0.285 per share) (a) — — ( 42,279 ) — — ( 42,279 ) Costs associated with the “at-the-market” (ATM) equity offering program — ( 71 ) — — — ( 71 ) Issuance of shares under incentive stock plans 372,149 — — — — — Stock-based compensation — 4,336 — — — 4,336 Repurchase of common shares ( 126,788 ) ( 4,147 ) — — — ( 4,147 ) Adjustment of noncontrolling interests in the operating partnership — — 4,296 — — 4,296 Conversion of units into common shares 10,103 304 — — — 304 Amortization of pension and postretirement plan liabilities — — — 2 — 2 Foreign currency translation adjustment — — — ( 8,790 ) ( 413 ) ( 9,203 ) Cash flow hedges — — — 12,273 ( 331 ) 11,942 Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — ( 58 ) — ( 58 ) Balance, June 30, 2023 148,268,443 $ 1,489,696 $ 311,429 $ 24,295 $ 13,295 $ 1,838,715 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 Noncontrolling Interests in Consolidated Affiliates Shareholders’ Equity Shares Amount Balance, June 30, 2023 148,268,443 $ 1,489,696 $ 311,429 $ 24,295 $ 13,295 $ 1,838,715 Net income — — 19,557 — 3,183 22,740 Net income attributable to noncontrolling interests in the operating partnership — — ( 320 ) — — ( 320 ) Dividends ($ 0.285 per share) (a) — — ( 42,460 ) — — ( 42,460 ) Issuance of shares under incentive stock plans 3,959 — — — — — Stock-based compensation — 3,365 — — — 3,365 Repurchase of common shares ( 968 ) ( 29 ) — — — ( 29 ) Adjustment of noncontrolling interests in the operating partnership — — 6,890 — — 6,890 Conversion of common units to common shares 15,904 479 — — — 479 Amortization of pension and postretirement plan liabilities — — — 2 — 2 Foreign currency translation adjustment — — — ( 4,180 ) ( 233 ) ( 4,413 ) Cash flow hedges — — — 7,423 ( 44 ) 7,379 Allocation of other comprehensive income to noncontrolling interests in the operating partnership — — — ( 36 ) — ( 36 ) Balance, September 30, 2023 148,287,338 $ 1,493,511 $ 295,096 $ 27,504 $ 16,201 $ 1,832,312 (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 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 5 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, 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 . 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, 2023 2022 OPERATING ACTIVITIES Net income $ 49,274 $ 88,147 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 114,281 114,221 Non-cash cost of land and improved development 20,189 20,289 Stock-based incentive compensation expense 10,201 9,844 Deferred income taxes ( 2,855 ) ( 6,678 ) Amortization of losses from pension and postretirement plans 4 564 Timber write-offs resulting from casualty events 2,302 1,088 Other 7,822 ( 2,854 ) Changes in operating assets and liabilities: Receivables 251 ( 12,845 ) Inventories ( 1,190 ) ( 6,238 ) Accounts payable 3,630 6,833 All other operating activities 5,027 ( 2,482 ) CASH PROVIDED BY OPERATING ACTIVITIES 208,936 209,889 INVESTING ACTIVITIES Capital expenditures ( 53,128 ) ( 48,211 ) Real estate development investments ( 18,757 ) ( 10,935 ) Purchase of timberlands ( 13,988 ) ( 3,242 ) Other 6,197 6,531 CASH USED FOR INVESTING ACTIVITIES ( 79,676 ) ( 55,857 ) FINANCING ACTIVITIES Issuance of debt — 406,842 Repayment of debt — ( 531,842 ) Dividends paid on common shares ( 127,587 ) ( 123,619 ) Distributions to noncontrolling interests in the operating partnership ( 2,265 ) ( 2,754 ) Proceeds from the issuance of common shares under incentive stock plan — 2,580 Proceeds from the issuance of common shares under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs ( 82 ) 31,877 Repurchase of common shares to pay withholding taxes on vested incentive stock awards ( 4,217 ) ( 4,225 ) Distributions to noncontrolling interests in consolidated affiliates — ( 16,472 ) CASH USED FOR FINANCING ACTIVITIES ( 134,151 ) ( 237,613 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 928 ) ( 6,038 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 5,819 ) ( 89,619 ) Balance, beginning of year 115,407 369,139 Balance, end of period $ 109,588 $ 279,520 Nine Months Ended September 30, 2023 2022 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 31,556 $ 24,161 Income taxes (b) 4,651 14,627 Non-cash investing activity: Capital assets purchased on account 5,161 4,882 Non-cash financing activity: Noncontrolling interests in consolidated affiliates redemption of shares (c) — 27,860 (a) Interest paid is presented net of patronage paymen ts receive d of $ 6.2 million a n d $ 6.0 million for the nine months ended September 30, 2023 and September 30, 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. (c) In the second quarter of 2022, the New Zealand subsidiary made a capital distribution in order to redeem certain equity interests, resulting in the recording of a loan payable by the New Zealand subsidiary in the amount of $ 27.9 million. See Notes to Consolidated Financial Statements. 7 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, 2023 2022 2023 2022 SALES ( NOTE 3 ) $ 201,579 $ 195,287 $ 589,526 $ 663,674 Costs and Expenses Cost of sales ( 145,622 ) ( 152,079 ) ( 463,197 ) ( 507,381 ) Selling and general expenses ( 18,947 ) ( 16,886 ) ( 54,677 ) ( 49,002 ) Other operating (expense) income, net ( Note 14 ) ( 1,654 ) 14,581 ( 5,571 ) 14,398 ( 166,223 ) ( 154,384 ) ( 523,445 ) ( 541,985 ) OPERATING INCOME 35,356 40,903 66,081 121,689 Interest expense, net ( 12,598 ) ( 9,056 ) ( 36,755 ) ( 26,476 ) Interest and other miscellaneous income, net 529 1,252 21,725 990 INCOME BEFORE INCOME TAXES 23,287 33,099 51,051 96,203 Income tax expense ( Note 16 ) ( 547 ) ( 1,238 ) ( 1,777 ) ( 8,056 ) NET INCOME 22,740 31,861 49,274 88,147 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) NET INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS 19,557 21,033 47,372 75,669 NET INCOME ATTRIBUTABLE TO UNITHOLDERS ATTRIBUTABLE TO: Limited Partners 19,361 20,823 46,898 74,912 General Partners 196 210 474 757 Net income attributable to unitholders 19,557 21,033 47,372 75,669 OTHER COMPREHENSIVE INCOME (LOSS) Foreign currency translation adjustment, net of income tax effect of $ 0 , $ 0 , $ 0 and $ 0 ( 4,413 ) ( 25,392 ) ( 17,350 ) ( 55,220 ) Cash flow hedges, net of income tax effect of $ 75 , $ 2,488 , $ 322 and $ 5,677 7,379 20,147 7,002 66,329 Amortization of pension and postretirement plans, net of income tax expense of $ 0 , $ 0 , $ 0 and $ 0 2 188 4 564 Total other comprehensive income (loss) 2,968 ( 5,057 ) ( 10,344 ) 11,673 COMPREHENSIVE INCOME 25,708 26,804 38,930 99,820 Less: Comprehensive income attributable to noncontrolling interests in consolidated affiliates ( 2,906 ) ( 8,029 ) ( 884 ) ( 6,670 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO RAYONIER, L.P. UNITHOLDERS $ 22,802 $ 18,775 $ 38,046 $ 93,150 EARNINGS PER UNIT ( NOTE 5 ) Basic earnings per unit attributable to Rayonier, L.P. $ 0.13 $ 0.14 $ 0.31 $ 0.51 Diluted earnings per unit attributable to Rayonier, L.P. $ 0.13 $ 0.14 $ 0.31 $ 0.50 See Notes to Consolidated Financial Statements. 8 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands) September 30, 2023 December 31, 2022 ASSETS CURRENT ASSETS Cash and cash equivalents $ 107,784 $ 114,255 Trade receivables, less allowance for doubtful accounts of $ 217 and $ 74 31,447 27,837 Other receivables 9,894 14,701 Inventory ( Note 13 ) 33,139 23,729 Prepaid expenses 20,415 20,573 Assets held for sale ( Note 19 ) 18,320 713 Other current assets 1,929 573 Total current assets 222,928 202,381 TIMBER AND TIMBERLANDS, NET OF DEPLETION AND AMORTIZATION 3,138,136 3,230,904 HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS ( NOTE 12 ) 106,657 115,097 PROPERTY, PLANT AND EQUIPMENT Land 6,453 6,453 Buildings 30,121 31,020 Machinery and equipment 6,581 6,568 Construction in progress 1,331 653 Total property, plant and equipment, gross 44,486 44,694 Less — accumulated depreciation ( 18,478 ) ( 17,505 ) Total property, plant and equipment, net 26,008 27,189 RESTRICTED CASH ( NOTE 18 ) 1,804 1,152 RIGHT-OF-USE ASSETS 92,736 97,167 OTHER ASSETS 119,480 115,481 TOTAL ASSETS $ 3,707,749 $ 3,789,371 LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL CURRENT LIABILITIES Accounts payable $ 25,960 $ 22,100 Accrued taxes 8,920 3,734 Accrued payroll and benefits 10,443 12,564 Accrued interest 10,605 5,920 Deferred revenue 23,835 22,762 Other current liabilities 30,856 28,247 Total current liabilities 110,619 95,327 LONG-TERM DEBT, NET ( NOTE 6 ) 1,511,470 1,514,721 PENSION AND OTHER POSTRETIREMENT BENEFITS ( NOTE 15 ) 8,356 8,510 LONG-TERM LEASE LIABILITY 85,111 88,756 LONG-TERM DEFERRED REVENUE 11,317 6,895 OTHER NON-CURRENT LIABILITIES 78,744 88,687 CONTINGENCIES ( NOTE 9 ) REDEEMABLE OPERATING PARTNERSHIP UNITS ( NOTE 4 ) 2,453,269 and 3,208,827 Units outstanding, respectively 69,820 105,763 CAPITAL General partners’ capital 17,852 18,251 Limited partners’ capital 1,767,335 1,806,895 Accumulated other comprehensive income ( Note 17 ) 30,924 40,249 TOTAL CONTROLLING INTEREST CAPITAL 1,816,111 1,865,395 Noncontrolling interests in consolidated affiliates ( Note 4 ) 16,201 15,317 TOTAL CAPITAL 1,832,312 1,880,712 TOTAL LIABILITIES, REDEEMABLE OPERATING PARTNERSHIP UNITS AND CAPITAL $ 3,707,749 $ 3,789,371 See Notes to Consolidated Financial Statements. 9 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 Net income 193 19,148 — ( 245 ) 19,096 Distributions on units ($ 0.285 per unit) ( 429 ) ( 42,555 ) — — ( 42,984 ) Costs associated with the “at-the-market” (ATM) equity offering program ( 1 ) ( 70 ) — — ( 71 ) Stock-based compensation 43 4,293 — — 4,336 Repurchase of units ( 41 ) ( 4,106 ) — — ( 4,147 ) Adjustment of Redeemable Operating Partnership Units 46 4,579 — — 4,625 Conversion of units into common shares 3 301 — — 304 Amortization of pension and postretirement plan liabilities — — 2 — 2 Foreign currency translation adjustment — — ( 8,790 ) ( 413 ) ( 9,203 ) Cash flow hedges — — 12,273 ( 331 ) 11,942 Balance, June 30, 2023 $ 17,977 $ 1,779,764 $ 27,679 $ 13,295 $ 1,838,715 Net income 196 19,361 — 3,183 22,740 Distributions on units ($ 0.285 per unit) ( 432 ) ( 42,727 ) — — ( 43,159 ) Stock-based compensation 34 3,331 — — 3,365 Repurchase of units — ( 29 ) — — ( 29 ) Adjustment of Redeemable Operating Partnership Units 72 7,161 — — 7,233 Conversion of units into common shares 5 474 — — 479 Amortization of pension and postretirement plan liabilities — — 2 — 2 Foreign currency translation adjustment — — ( 4,180 ) ( 233 ) ( 4,413 ) Cash flow hedges — — 7,423 ( 44 ) 7,379 Balance, September 30, 2023 $ 17,852 $ 1,767,335 $ 30,924 $ 16,201 $ 1,832,312 10 Table of Contents 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 See Notes to Consolidated Financial Statements. 11 Table of Contents RAYONIER, L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Nine Months Ended September 30, 2023 2022 OPERATING ACTIVITIES Net income $ 49,274 $ 88,147 Adjustments to reconcile net income to cash provided by operating activities: Depreciation, depletion and amortization 114,281 114,221 Non-cash cost of land and improved development 20,189 20,289 Stock-based incentive compensation expense 10,201 9,844 Deferred income taxes ( 2,855 ) ( 6,678 ) Amortization of losses from pension and postretirement plans 4 564 Timber write-offs resulting from casualty events 2,302 1,088 Other 7,822 ( 2,854 ) Changes in operating assets and liabilities: Receivables 251 ( 12,845 ) Inventories ( 1,190 ) ( 6,238 ) Accounts payable 3,630 6,833 All other operating activities 5,027 ( 2,482 ) CASH PROVIDED BY OPERATING ACTIVITIES 208,936 209,889 INVESTING ACTIVITIES Capital expenditures ( 53,128 ) ( 48,211 ) Real estate development investments ( 18,757 ) ( 10,935 ) Purchase of timberlands ( 13,988 ) ( 3,242 ) Other 6,197 6,531 CASH USED FOR INVESTING ACTIVITIES ( 79,676 ) ( 55,857 ) FINANCING ACTIVITIES Issuance of debt — 406,842 Repayment of debt — ( 531,842 ) Distributions on units ( 129,852 ) ( 126,373 ) Proceeds from the issuance of units under incentive stock plan — 2,580 Proceeds from the issuance of units under the “at-the-market” (ATM) equity offering program, net of commissions and offering costs ( 82 ) 31,877 Repurchase of units to pay withholding taxes on vested incentive stock awards ( 4,217 ) ( 4,225 ) Distributions to noncontrolling interests in consolidated affiliates — ( 16,472 ) CASH USED FOR FINANCING ACTIVITIES ( 134,151 ) ( 237,613 ) EFFECT OF EXCHANGE RATE CHANGES ON CASH ( 928 ) ( 6,038 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH Change in cash, cash equivalents and restricted cash ( 5,819 ) ( 89,619 ) Balance, beginning of year 115,407 369,139 Balance, end of period $ 109,588 $ 279,520 Nine Months Ended September 30, 2023 2022 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period: Interest (a) $ 31,556 $ 24,161 Income taxes (b) 4,651 14,627 Non-cash investing activity: Capital assets purchased on account 5,161 4,882 Non-cash financing activity: Noncontrolling interests in consolidated affiliates redemption of shares (c) — 27,860 (a) Interest paid is presented net of patronage paymen ts received of $ 6.2 million an d $ 6.0 million for the nine months ended September 30, 2023 and September 30, 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. (c) In the second quarter of 2022, the New Zealand subsidiary made a capital distribution in order to redeem certain equity interests, resulting in the recording of a loan payable by the New Zealand subsidiary in the amount of $ 27.9 million. See Notes to Consolidated Financial Statements. 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) 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 September 30, 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 most 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. 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) SUBSEQUENT EVENTS Announcement of Oregon Disposition As disclosed in our Current Report on Form 8-K filed with the SEC on November 2, 2023, we entered into an agreement for the sale of approximately 55,000 acres of timberland in Oregon to Manulife Investment Management on behalf of clients for $ 242 million (~$ 4,400 per acre). The transaction is expected to close in the fourth quarter of 2023, and $ 150 million of the proceeds are expected to be used to repay the unhedged portion of our 2022 Incremental Term Loan borrowings. See Note 6 – Debt for additional information. Defined Benefit Pension Plan Distributions In connection with the termination of the Company’s Defined Benefit Plan (“the Plan”), payments were disbursed to plan participants who chose the lump sum distribution option on October 31, 2023. The lump sum disbursements were sourced from Plan assets. We expect to make cash contributions to fund the Defined Benefit Plan on a plan termination basis in 2024. See Note 15 – Employee Benefit Plans for additional information. 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 benefit (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, 2023 and 2022: Three Months Ended September 30, Nine Months Ended September 30, SALES 2023 2022 2023 2022 Southern Timber $ 63,973 $ 64,549 $ 204,125 $ 207,584 Pacific Northwest Timber 29,325 34,397 96,061 119,834 New Zealand Timber 70,435 72,452 175,438 202,723 Real Estate 31,175 12,435 79,492 81,032 Trading 6,782 11,582 34,767 52,727 Intersegment Eliminations (a) ( 111 ) ( 128 ) ( 357 ) ( 226 ) Total $ 201,579 $ 195,287 $ 589,526 $ 663,674 (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. 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) Three Months Ended September 30, Nine Months Ended September 30, OPERATING INCOME 2023 2022 2023 2022 Southern Timber $ 18,634 $ 22,474 $ 62,565 $ 76,883 Pacific Northwest Timber (a) ( 557 ) 2,179 ( 6,475 ) 11,729 New Zealand Timber (b) 17,555 9,280 19,265 22,653 Real Estate (c) 9,187 15,749 18,720 36,953 Trading ( 52 ) 177 356 84 Corporate and Other ( 9,411 ) ( 8,956 ) ( 28,350 ) ( 26,613 ) Total Operating Income 35,356 40,903 66,081 121,689 Unallocated interest expense and other (d) ( 12,069 ) ( 7,804 ) ( 15,030 ) ( 25,486 ) Total Income before Income Taxes $ 23,287 $ 33,099 $ 51,051 $ 96,203 (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 nine months ended September 30, 2023 includes a $ 2.3 million timber write-off resulting from a casualty event. Timber write-offs resulting from casualty events are recorded within the Consolidated Statements of Income and Comprehensive Income under the caption “Cost of Sales.” (c) The three and nine months ended September 30, 2022 include an $ 11.5 million gain associated with the multi-family apartment complex sale attributable to noncontrolling interests (“NCI”). 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 (expense) income, net.” (d) The nine months ended September 30, 2023 includes $ 20.5 million of net recoveries associated with legal settlements. Three Months Ended September 30, Nine Months Ended September 30, DEPRECIATION, DEPLETION AND AMORTIZATION 2023 2022 2023 2022 Southern Timber $ 19,153 $ 14,116 $ 61,631 $ 46,832 Pacific Northwest Timber 8,330 9,356 28,221 35,587 New Zealand Timber 5,952 6,302 16,335 18,192 Real Estate 3,088 961 6,826 12,671 Corporate and Other 444 316 1,268 939 Total $ 36,967 $ 31,051 $ 114,281 $ 114,221 Three Months Ended September 30, Nine Months Ended September 30, NON-CASH COST OF LAND AND IMPROVED DEVELOPMENT 2023 2022 2023 2022 Real Estate $ 6,586 $ 3,149 $ 20,189 $ 20,289 Total $ 6,586 $ 3,149 $ 20,189 $ 20,289 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”). Unsatisfied performance obligations as of September 30, 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. Of these performance obligations, $ 23.8 million is expected to be recognized within the next twelve months , with the remaining $ 11.3 million expected to be recognized thereafter as we satisfy our 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) performance obligations. 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 trade receivables and deferred revenue (contract liabilities) on the Consolidated Balance Sheets. Trade receivables 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 contains contract balances recorded in the Consolidated Balance Sheets at September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Balance Sheet Location Contract assets Trade receivables, net (a) $ 31,447 $ 27,837 Trade receivables Contract liabilities Deferred revenue, current (b) 23,835 22,762 Deferred revenue Deferred revenue, non-current (c) 11,317 6,895 Long-term deferred revenue (a) The increase in trade receivables was primarily driven by timing of sales in our timber segments. (b) The increase in deferred revenue, current is driven by the timing of renewals of hunting contracts and the current portion of a carbon capture and storage contract entered into in the first quarter of 2023, partially offset by the satisfaction of post-closing obligations on real estate sales and stumpage contracts. (c) The increase in deferred revenue, non-current is primarily driven by a carbon capture and storage contract entered into in the first quarter of 2023. The following table summarizes revenue recognized during the three and nine months ended September 30, 2023 and 2022 that was included in the contract liability balance at the beginning of each year: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Revenue recognized from contract liability balance at the beginning of the year (a) $ 2,216 $ 1,957 $ 19,950 $ 14,458 (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. 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 tables present our revenue from contracts with customers disaggregated by product type for the three and nine months ended September 30, 2023 and 2022: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Elim. Total September 30, 2023 Pulpwood $ 25,514 $ 1,440 $ 6,507 — $ 447 — $ 33,908 Sawtimber 27,274 26,401 48,356 — 5,954 — 107,985 Hardwood 1,343 — — — — — 1,343 Total Timber Sales 54,131 27,841 54,863 — 6,401 — 143,236 License Revenue, Primarily from Hunting 7,178 439 90 — — — 7,707 Other Non-Timber/Carbon Revenue 2,664 1,045 15,482 — — — 19,191 Agency Fee Income — — — — 270 — 270 Total Non-Timber Sales 9,842 1,484 15,572 — 270 — 27,168 Improved Development — — — 3,120 — — 3,120 Unimproved Development — — — 114 — — 114 Rural — — — 20,461 — — 20,461 Timberland & Non-Strategic — — — 1,055 — — 1,055 Deferred Revenue/Other (a) — — — 5,981 — — 5,981 Total Real Estate Sales — — — 30,731 — — 30,731 Revenue from Contracts with Customers 63,973 29,325 70,435 30,731 6,671 — 201,135 Lease Revenue — — — 444 — — 444 Intersegment — — — — 111 ( 111 ) — Total Revenue $ 63,973 $ 29,325 $ 70,435 $ 31,175 $ 6,782 ($ 111 ) $ 201,579 Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber 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 (a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales. 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) Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Elim. Total September 30, 2023 Pulpwood $ 76,152 $ 7,358 $ 20,953 — $ 3,328 — $ 107,791 Sawtimber 95,663 83,963 137,868 — 30,130 — 347,624 Hardwood 3,169 — — — — — 3,169 Total Timber Sales 174,984 91,321 158,821 — 33,458 — 458,584 License Revenue, Primarily From Hunting 17,632 780 212 — — — 18,624 Other Non-Timber/Carbon Revenue 11,509 3,960 16,405 — — — 31,874 Agency Fee Income — — — — 952 — 952 Total Non-Timber Sales 29,141 4,740 16,617 — 952 — 51,450 Improved Development — — — 20,155 — — 20,155 Unimproved Development — — — 114 — — 114 Rural — — — 42,587 — — 42,587 Timberland & Non-Strategic — — — 2,947 — — 2,947 Deferred Revenue/Other (a) — — — 12,642 — — 12,642 Total Real Estate Sales — — — 78,445 — — 78,445 Revenue from Contracts with Customers 204,125 96,061 175,438 78,445 34,410 — 588,479 Lease Revenue — — — 1,047 — — 1,047 Intersegment — — — — 357 ( 357 ) — Total Revenue $ 204,125 $ 96,061 $ 175,438 $ 79,492 $ 34,767 ($ 357 ) $ 589,526 Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber 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 (a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales. 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) The following tables present our timber sales disaggregated by contract type for the three and nine months ended September 30, 2023 and 2022: Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Trading Total September 30, 2023 Stumpage Pay-as-Cut $ 25,454 — — — $ 25,454 Stumpage Lump Sum — 969 — — 969 Total Stumpage 25,454 969 — — 26,423 Delivered Wood (Domestic) 26,907 24,085 15,265 10 66,267 Delivered Wood (Export) 1,770 2,787 39,598 6,391 50,546 Total Delivered 28,677 26,872 54,863 6,401 116,813 Total Timber Sales $ 54,131 $ 27,841 $ 54,863 $ 6,401 $ 143,236 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 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) Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Trading Total September 30, 2023 Stumpage Pay-as-Cut $ 86,424 — — — $ 86,424 Stumpage Lump Sum 387 1,592 — — 1,979 Total Stumpage 86,811 1,592 — — 88,403 Delivered Wood (Domestic) 81,757 80,249 39,419 501 201,926 Delivered Wood (Export) 6,416 9,480 119,402 32,957 168,255 Total Delivered 88,173 89,729 158,821 33,458 370,181 Total Timber Sales $ 174,984 $ 91,321 $ 158,821 $ 33,458 $ 458,584 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 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) 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Beginning noncontrolling interests in the operating partnership $ 77,532 $ 123,811 $ 105,763 $ 133,823 Adjustment of noncontrolling interests in the operating partnership ( 6,890 ) ( 23,363 ) ( 8,810 ) ( 32,131 ) Conversions of Redeemable Operating Partnership Units to Common Shares ( 479 ) ( 3,696 ) ( 24,663 ) ( 3,842 ) Net Income attributable to noncontrolling interests in the operating partnership 320 455 811 1,670 Other Comprehensive Income (Loss) attributable to noncontrolling interests in the operating partnership 36 ( 49 ) ( 1,016 ) ( 523 ) Distributions to noncontrolling interests in the operating partnership ( 699 ) ( 915 ) ( 2,265 ) ( 2,754 ) Total noncontrolling interests in the operating partnership $ 69,820 $ 96,243 $ 69,820 $ 96,243 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) 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, 2023 2022 2023 2022 Earnings per common share - basic Numerator: Net Income $ 22,740 $ 31,861 $ 49,274 $ 88,147 Less: Net income attributable to noncontrolling interests in the operating partnership ( 320 ) ( 455 ) ( 811 ) ( 1,670 ) Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) Net income attributable to Rayonier Inc. $ 19,237 $ 20,578 $ 46,561 $ 73,999 Denominator: Denominator for basic earnings per common share - weighted average shares 148,274,209 146,370,340 147,959,983 146,022,718 Basic earnings per common share attributable to Rayonier Inc.: $ 0.13 $ 0.14 $ 0.31 $ 0.51 Earnings per common share - diluted Numerator: Net Income $ 22,740 $ 31,861 $ 49,274 $ 88,147 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) Net income attributable to Rayonier Inc., before net income attributable to noncontrolling interests in the operating partnership $ 19,557 $ 21,033 $ 47,372 $ 75,669 Denominator: Denominator for basic earnings per common share - weighted average shares 148,274,209 146,370,340 147,959,983 146,022,718 Add: Dilutive effect of: Stock options — 3,271 629 6,200 Performance shares, restricted shares and restricted stock units 299,613 620,316 394,006 693,954 Noncontrolling interests in operating partnership units 2,462,431 3,238,962 2,676,911 3,288,409 Denominator for diluted earnings per common share - adjusted weighted average shares 151,036,253 150,232,889 151,031,529 150,011,281 Diluted earnings per common share attributable to Rayonier Inc.: $ 0.13 $ 0.14 $ 0.31 $ 0.50 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 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 164,521 126,132 156,835 78,634 Total 164,521 126,132 156,835 78,634 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) 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, 2023 2022 2023 2022 Earnings per unit - basic Numerator: Net Income $ 22,740 $ 31,861 $ 49,274 $ 88,147 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) Net income available to unitholders $ 19,557 $ 21,033 $ 47,372 $ 75,669 Denominator: Denominator for basic earnings per unit - weighted average units 150,736,640 149,609,302 150,636,894 149,311,127 Basic earnings per unit attributable to Rayonier, L.P.: $ 0.13 $ 0.14 $ 0.31 $ 0.51 Earnings per unit - diluted Numerator: Net Income $ 22,740 $ 31,861 $ 49,274 $ 88,147 Less: Net income attributable to noncontrolling interests in consolidated affiliates ( 3,183 ) ( 10,828 ) ( 1,902 ) ( 12,478 ) Net income available to unitholders $ 19,557 $ 21,033 $ 47,372 $ 75,669 Denominator: Denominator for basic earnings per unit - weighted average units 150,736,640 149,609,302 150,636,894 149,311,127 Add: Dilutive effect of unit equivalents: Stock options — 3,271 629 6,200 Performance shares, restricted shares and restricted stock units 299,613 620,316 394,006 693,954 Denominator for diluted earnings per unit - adjusted weighted average units 151,036,253 150,232,889 151,031,529 150,011,281 Diluted earnings per unit attributable to Rayonier, L.P.: $ 0.13 $ 0.14 $ 0.31 $ 0.50 Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 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 164,521 126,132 156,835 78,634 Total 164,521 126,132 156,835 78,634 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) 6. DEBT Our debt consisted of the following at September 30, 2023: September 30, 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 7.00 % 350,000 2022 Incremental Term Loan borrowings due 2027 at a variable interest rate of 7.00 % 250,000 2016 Incremental Term Loan borrowings due 2026 at a variable interest rate of 7.05 % 200,000 2021 Incremental Term Loan borrowings due 2029 at a variable interest rate of 6.95 % 200,000 New Zealand subsidiary noncontrolling interests shareholder loan due 2026 at a fixed interest rate of 3.64 % (a) 24,161 New Zealand subsidiary noncontrolling interests shareholder loan due 2027 at a fixed interest rate of 6.48 % (a) 24,161 New Zealand subsidiary noncontrolling interests shareholder loan due 2025 at a fixed interest rate of 2.95 % (a) 20,709 Total principal debt 1,519,031 Less: Unamortized discounts ( 2,857 ) Less: Deferred financing costs ( 4,704 ) Total long-term debt $ 1,511,470 (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 September 30, 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 % 5.53 % 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 20,709 2026 224,161 2027 274,161 Thereafter 1,000,000 Total Debt $ 1,519,031 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) 2023 DEBT ACTIVITY U.S. Debt During the nine months ended September 30, 2023, we made no borrowings or repayments on our Revolving Credit Facility. At September 30, 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. See Note 1 - Basis of Presentation for information regarding subsequent events related to our 2022 Incremental Term Loan borrowings. New Zealand Debt In July 2023, the New Zealand subsidiary renewed its NZ$ 20 million working capital facility, extending its maturity date to June 30, 2024. During the nine months ended September 30, 2023, the New Zealand subsidiary made no borrowings or repayments on its working capital facility (the “New Zealand Working Capital Facility”). At September 30, 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 September 30, 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 6.9 to 1 4.4 Covenant debt to covenant net worth plus covenant debt shall not exceed 65 % 46 % 19 % In addition to the financial covenants listed above, the Senior Notes due 2031, 2015 Term Loan Facility, 2016 Incremental Term Loan Facility, 2021 Incremental Term Loan Agreement, 2022 Incremental Term Loan Agreement, and Revolving Credit Facility include customary covenants that limit the incurrence of debt and the disposition of assets, among others. At September 30, 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 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) “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 36 months and up to 25 % of the foreign exchange exposure for the forward 36 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, 2023, foreign currency exchange contracts and foreign currency option contracts had maturity dates through September 2026 and July 2026, 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 in 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 September 30, 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. 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. In May 2023, we entered into a new $ 50 million forward-starting interest rate swap, benchmarked to Daily Simple SOFR. 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) The following table contains information on the outstanding forward-starting interest rate swaps as of September 30, 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 May 2023 4 years 50,000 3.29 % 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 and nine months ended September 30, 2023 and 2022: Three Months Ended September 30, Income Statement Location 2023 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other comprehensive income (loss) $ 1,752 ($ 4,464 ) Other operating (expense) income, net ( 1,796 ) ( 2,669 ) Foreign currency option contracts Other comprehensive income (loss) ( 26 ) ( 1,754 ) Other operating (expense) income, net ( 196 ) — Interest rate products Other comprehensive income (loss) 12,381 26,607 Interest expense, net ( 4,810 ) ( 62 ) Nine Months Ended September 30, Income Statement Location 2023 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other comprehensive income (loss) $ 5,753 ($ 15,373 ) Other operating (expense) income, net ( 5,801 ) ( 2,598 ) Foreign currency option contracts Other comprehensive income (loss) ( 858 ) ( 2,304 ) Other operating (expense) income, net ( 244 ) — Interest rate products Other comprehensive income (loss) 20,416 76,372 Interest expense, net ( 12,587 ) 4,555 During the next 12 months, the amount of the September 30, 2023 AOCI balance, net of tax, expected to be reclassified into earnings is a gain of approximate ly $ 24.7 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 ($ 2,763 ) Foreign currency option contracts ( 279 ) Interest rate products (a) 27,734 Total estimated gain on derivatives contracts $ 24,692 (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. 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) The following table contains the notional amounts of the derivative financial instruments recorded in the Consolidated Balance Sheets: Notional Amount September 30, 2023 December 31, 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts $ 127,200 $ 138,250 Foreign currency option contracts 86,000 78,000 Interest rate swaps 850,000 850,000 Forward-starting interest rate swaps 200,000 150,000 The following table contains the fair values of the derivative financial instruments recorded in the Consolidated Balance Sheets at September 30, 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) September 30, 2023 December 31, 2022 Derivatives designated as cash flow hedges: Foreign currency exchange contracts Other current assets $ 63 $ 25 Other assets 391 1,303 Other current liabilities ( 3,900 ) ( 5,457 ) Other non-current liabilities ( 1,139 ) ( 410 ) Foreign currency option contracts Other current assets 77 66 Other assets 1,032 2,131 Other current liabilities ( 464 ) ( 347 ) Other non-current liabilities ( 1,179 ) ( 1,281 ) Interest rate swaps Other assets 62,520 60,843 Other non-current liabilities — ( 51 ) Forward-starting interest rate swaps Other assets 17,501 11,939 Total derivative contracts: Other current assets $ 140 $ 91 Other assets 81,444 76,216 Total derivative assets $ 81,584 $ 76,307 Other current liabilities ( 4,364 ) ( 5,804 ) Other non-current liabilities ( 2,318 ) ( 1,742 ) Total derivative liabilities ($ 6,682 ) ($ 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. 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) 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, 2023 and December 31, 2022, using market information and what we believe to be appropriate valuation methodologies under GAAP: September 30, 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 $ 107,784 $ 107,784 — $ 114,255 $ 114,255 — Restricted cash (b) 1,804 1,804 — 1,152 1,152 — Long-term debt (c) ( 1,511,470 ) — ( 1,422,224 ) ( 1,514,721 ) — ( 1,438,736 ) Interest rate swaps (d) 62,520 — 62,520 60,792 — 60,792 Forward-starting interest rate swaps (d) 17,501 — 17,501 11,939 — 11,939 Foreign currency exchange contracts (d) ( 4,585 ) — ( 4,585 ) ( 4,539 ) — ( 4,539 ) Foreign currency option contracts (d) ( 534 ) — ( 534 ) 569 — 569 Noncontrolling interests in the operating partnership (e) 69,820 — 69,820 105,763 — 105,763 (a) We did not have Level 3 assets or liabilities at September 30, 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. 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) 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 September 30, 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 ( 304 ) Increase to liabilities (a) 411 Total Balance at September 30, 2023 15,700 Less: Current portion ( 6,689 ) Non-current portion at September 30, 2023 $ 9,011 (a) Reflects revised environmental and NRD cost estimates recorded during the nine months ended September 30, 2023. 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. 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) 11. GUARANTEES We provide financial guarantees as required by creditors, insurance programs, and various governmental agencies. As of September 30, 2023, the following financial guarantees were outstanding: Financial Commitments (a) Maximum Potential Payment Standby letters of credit (b) $ 3,779 Surety bonds (c) 23,605 Total financial commitments $ 27,384 (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 2024 and will be renewed as required. (c) Surety bonds are issued primarily to secure performance obligations related to various operational activities and 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. 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) Changes in higher and better use timberlands and real estate development investments from December 31, 2022 to September 30, 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 ( 1,998 ) ( 13,711 ) ( 15,709 ) Amortization of parcel real estate development investments — ( 7,689 ) ( 7,689 ) Timber depletion from harvesting activities and basis of timber sold in real estate sales ( 1,556 ) — ( 1,556 ) Capitalized real estate development investments (b) — 24,038 24,038 Capital expenditures (silviculture) 23 — 23 Intersegment transfers 554 — 554 Total Balance at September 30, 2023 88,805 43,862 132,667 Less: Current portion (a) ( 1,601 ) ( 24,409 ) ( 26,010 ) Non-current portion at September 30, 2023 $ 87,204 $ 19,453 $ 106,657 (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 $ 0.6 million of capitalized interest and $ 5.3 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 September 30, 2023 and December 31, 2022, our inventory consisted entirely of finished goods, as follows: September 30, 2023 December 31, 2022 Finished goods inventory Real estate inventory (a) $ 26,010 $ 17,909 Log inventory 6,831 5,347 Carbon unit inventory (b) 298 473 Total inventory $ 33,139 $ 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. 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) 14. OTHER OPERATING (EXPENSE) INCOME, NET Other operating (expense) income, net consisted of the following: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Loss on foreign currency remeasurement, net of cash flow hedges ($ 1,555 ) ($ 1,158 ) ($ 5,713 ) ($ 481 ) Gain on sale or disposal of property and equipment — 9 37 40 Equity income related to Bainbridge Landing LLC joint venture (a) — 15,848 — 15,477 Miscellaneous (expense) income, net ( 99 ) ( 118 ) 105 ( 638 ) Total ($ 1,654 ) $ 14,581 ($ 5,571 ) $ 14,398 (a) The three and nine months ended September 30, 2022 include $ 16.0 million of 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. 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) 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. On July 20, 2023, the Rayonier Board of Directors approved the resolution to terminate the unfunded plan and will distribute all benefits in accordance with Section 409A of the Internal Revenue Code. The unfunded plan was terminated on July 31, 2023. 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 Q2 2024. The Excess Benefit Plan will be settled entirely with lump sum payments 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. See Note 1 – Basis of Presentation for information regarding subsequent events related to the Defined Benefit Pension Plan. 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, 2023 2022 2023 2022 Service cost Selling and general expenses — — $ 1 $ 2 Interest cost Interest and other miscellaneous income, net 844 609 17 13 Expected return on plan assets (a) Interest and other miscellaneous income, net ( 887 ) ( 872 ) — — Amortization of losses Interest and other miscellaneous income, net 1 184 — 4 Net periodic benefit (credit) cost ($ 42 ) ($ 79 ) $ 18 $ 19 Components of Net Periodic Benefit (Credit) Cost Income Statement Location Pension Postretirement Nine Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Service cost Selling and general expenses — — $ 3 $ 5 Interest cost Interest and other miscellaneous income, net 2,533 1,826 52 39 Expected return on plan assets (a) Interest and other miscellaneous income, net ( 2,663 ) ( 2,615 ) — — Amortization of losses Interest and other miscellaneous income, net 4 553 — 11 Net periodic benefit (credit) cost ($ 126 ) ($ 236 ) $ 55 $ 55 (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 %. 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) 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 September 30, 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 September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Income tax expense ($ 547 ) ($ 1,238 ) ($ 1,777 ) ($ 8,056 ) 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, 2023 2022 Annualized effective tax rate after discrete items 3.1 % 7.9 % 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) 17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table summarizes the changes in AOCI by component for the nine months ended September 30, 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 income (loss) before reclassifications ( 16,522 ) — 23,131 (a) — 6,609 ( 62 ) 6,547 Amounts reclassified from accumulated other comprehensive income — — ( 15,938 ) 4 (b) ( 15,934 ) 1,078 ( 14,856 ) Net other comprehensive income (loss) ( 16,522 ) — 7,193 4 ( 9,325 ) 1,016 ( 8,309 ) Balance as of September 30, 2023 ($ 34,589 ) $ 1,321 $ 74,397 ($ 10,205 ) $ 30,924 ($ 3,420 ) $ 27,504 (a) The nine months ended September 30, 2023 includes $ 20.4 million of other comprehensive income related to interest rate products. The year ended December 31, 2022 included $ 75.0 million of other comprehensive income re lated 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 nine months ended September 30, 2023 and September 30, 2022: 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, 2023 September 30, 2022 Realized gain on foreign currency exchange contracts ($ 5,801 ) ($ 2,598 ) Other operating expense (income), net Realized gain on foreign currency option contracts ( 244 ) — Other operating expense (income), net Noncontrolling interests 1,391 598 Comprehensive income attributable to noncontrolling interests Realized (gain) loss on interest rate contracts ( 12,587 ) 4,555 Interest expense, net Income tax effect from net gain on foreign currency contracts 1,303 560 Income tax expense Net (gain) loss on cash flow hedges reclassified from accumulated other comprehensive income ($ 15,938 ) $ 3,115 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) 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 nine months ended September 30, 2023 and 2022: Nine Months Ended September 30, 2023 2022 Restricted cash, excluding Timber Funds: Restricted cash deposited with LKE intermediary $ 2 $ 15,627 Restricted cash held in escrow 1,802 625 Total restricted cash, excluding Timber Funds 1,804 16,252 Restricted cash, Timber Funds — 1,464 Cash and cash equivalents 107,784 261,804 Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows $ 109,588 $ 279,520 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 September 30, 2023 and December 31, 2022, the basis in properties meeting this classification was $ 18.3 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. 37 Table of Contents