RAYONIER INC 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”) When we refer to “Rayonier” or “the Company” we mean Rayonier Inc. and its consolidated subsidiaries. References to the “Operating Partnership” mean Rayonier, L.P. and its consolidated subsidiaries. References to “we,” “us,” or “our,” mean collectively Rayonier Inc., the Operating Partnership and entities/subsidiaries owned or controlled by Rayonier Inc. and/or the Operating Partnership. References herein to “Notes to Financial Statements” refer to the Notes to Consolidated Financial Statements of Rayonier Inc. and Rayonier, L.P. included in Item 1 of this report. This MD&A is intended to provide a reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity, and certain other factors which may affect future results. Our MD&A should be read in conjunction with our Consolidated Financial Statements included in Item 1 of this report, our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Form 10-K”) and information contained in our subsequent reports filed with the Securities and Exchange Commission (the “SEC”). FORWARD-LOOKING STATEMENTS Certain statements in this document regarding anticipated financial outcomes, including our earnings guidance, if any, business and market conditions, outlook, expected dividend rate, our business strategies, expected harvest schedules, timberland acquisitions and dispositions, the anticipated benefits of our business strategies, and other similar statements relating to our future events, developments, or financial or operational performance or results, are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements are identified by the use of words such as “may,” “will,” “should,” “expect,” “estimate,” “believe,” “intend,” “project,” “anticipate” and other similar language. However, the absence of these or similar words or expressions does not mean that a statement is not forward-looking. While management believes that these forward-looking statements are reasonable when made, forward-looking statements are not guarantees of future performance or events and undue reliance should not be placed on these statements. The risk factors contained in Item 1A — Risk Factors in our 2022 Form 10-K, and similar discussions included in other reports that we subsequently file with the SEC, among others, could cause actual results or events to differ materially from our historical experience and those expressed in forward-looking statements made in this document. Forward-looking statements are only as of the date they are made, and we undertake no duty to update our forward-looking statements except as required by law. You are advised, however, to review any subsequent disclosures we make on related subjects in subsequent reports filed with the SEC. NON-GAAP MEASURES To supplement our financial statements presented in accordance with generally accepted accounting principles in the United States (“GAAP”), we use certain non-GAAP measures, including “Cash Available for Distribution,” and “Adjusted EBITDA,” which are defined and further explained in Performance and Liquidity Indicators below. Reconciliation of such measures to the nearest GAAP measures can also be found in Performance and Liquidity Indicators below. Our definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. OBJECTIVE The objective of the Management’s Discussion and Analysis is to detail material information, events, uncertainties and other factors impacting the Company and the Operating Partnership and to provide investors an understanding of “Management’s perspective.” Item 2, Management’s Discussion and Analysis highlights the critical areas for evaluating our performance which includes a discussion on the reportable segments, liquidity and capital, and critical accounting estimates. The MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and notes. 38 Table of Contents OUR COMPANY We are a leading timberland real estate investment trust (“REIT”) with assets located in some of the most productive softwood timber growing regions in the United States and New Zealand. We invest in timberlands and actively manage them to provide current income and attractive long-term returns to our shareholders. We conduct our business through an umbrella partnership real estate investment trust (“UPREIT”) structure in which our assets are owned by our Operating Partnership and its subsidiaries. Rayonier manages the Operating Partnership as its sole general partner. Our revenues, operating income and cash flows are primarily derived from the following core business segments: Southern Timber, Pacific Northwest Timber, New Zealand Timber, Real Estate, and Trading. As of September 30, 2023, we owned or leased under long-term agreements approximately 2.8 million acres of timberlands located in the U.S. South (1.90 million acres), U.S. Pacific Northwest (474,000 acres) and New Zealand (419,000 gross acres or 298,000 net plantable acres). SEGMENT INFORMATION The Southern Timber, Pacific Northwest Timber and New Zealand Timber segments include all activities related to the harvesting of timber and other non-timber income activities, such as the licensing of properties for hunting, granting land access for carbon capture and storage, the leasing of properties for mineral extraction and cell towers, and carbon credit sales. Our New Zealand operations are conducted by Matariki Forestry Group, a joint venture (the “New Zealand subsidiary”), in which we maintain a 77% ownership interest. See Note 4 - Noncontrolling Interests for additional information regarding our noncontrolling interests in the New Zealand Timber segment. The Real Estate segment includes all U.S. and New Zealand land or leasehold sales disaggregated into six sales categories: Improved Development, Unimproved Development, Rural, Timberland & Non-Strategic, Conservation Easements and Large Dispositions. It also includes residential and commercial lease activity, primarily in the town of Port Gamble, Washington. The Trading segment primarily reflects log trading activities in New Zealand and Australia conducted by our New Zealand subsidiary. It also includes log trading activities conducted from the U.S. South and Pacific Northwest. Our Trading segment activities include an export services joint venture with a third-party forest manager in which Matariki Forests Trading Ltd maintains a 50% ownership interest. The Trading segment complements the New Zealand Timber segment by providing added market intelligence, increasing the scale of export operations and achieving cost savings that directly benefit the New Zealand Timber segment. This additional market intelligence also benefits our Southern and Pacific Northwest export log marketing. ENVIRONMENTAL MATTERS For a full description of our environmental matters, see Item 1 - “Business” in our Annual Report on Form 10-K for the year ended December 31, 2022 and our sustainability report located at our Responsible Stewardship webpage. 39 Table of Contents INDUSTRY AND MARKET CONDITIONS The demand for timber is directly related to the underlying demand for pulp, paper, packaging, lumber and other wood products. The significant majority of timber sold in our Southern Timber segment is consumed domestically. With a higher proportion of pulpwood, our Southern Timber segment relies heavily on downstream markets for pulp and paper, and to a lesser extent wood pellet markets. Our Pacific Northwest Timber segment relies primarily on domestic customers but also exports a significant volume of timber, particularly to Japan and China. The Southern Timber and Pacific Northwest Timber segments rely on the strength of U.S. lumber markets as well as underlying housing starts. Our New Zealand Timber segment sells timber to domestic New Zealand wood products mills and also exports a significant portion of its volume to Asian markets, particularly in China and South Korea. In addition to market dynamics in the Pacific Rim, the New Zealand Timber segment is subject to foreign exchange fluctuations, which can impact the operating results of the segment in U.S. dollar terms. During 2023, each of our timber segments have experienced challenging market conditions due to ongoing market headwinds and weaker end-market demand relative to the prior year. In our Southern Timber segment, weaker demand for pulp and lumber coupled with drier weather conditions has resulted in lower net stumpage prices. In our Pacific Northwest Timber segment, softer domestic lumber demand and decreased competition from export markets has negatively impacted sawtimber prices. In our New Zealand Timber segment, weaker demand in China has driven lower export and domestic sawtimber prices. We are also subject to the risk of price fluctuations in certain of our cost components, primarily logging and transportation (cut and haul), ocean freight and demurrage costs. Other major components of our cost of sales are the cost basis of timber sold (depletion) and the cost basis of real estate sold. Depletion includes the amortization of capitalized site preparation, planting and fertilization, real estate taxes, timberland lease payments and certain payroll costs. The cost basis of real estate sold includes the cost basis in land and costs directly associated with the development and construction of identified real estate projects, such as infrastructure, roadways, utilities, amenities and/or other improvements. Other costs include amortization of capitalized costs related to road and bridge construction and software, depreciation of fixed assets and equipment, road maintenance, severance and excise taxes, fire prevention and real estate commissions and closing costs. Our Real Estate segment is exposed to changes in interest and mortgage rates as higher rates could negatively impact buyer demand for the properties we sell. However, current demand for our rural and development real estate properties has not yet been significantly impacted by the higher interest rate environment. For additional information on market conditions impacting our business, see Results of Operations . CRITICAL ACCOUNTING ESTIMATES The preparation of financial statements requires us to make estimates, assumptions and judgments that affect our assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. We base these estimates and assumptions on historical data and trends, current fact patterns, expectations and other sources of information we believe are reasonable. Actual results may differ from these estimates. For a full description of our critical accounting policies, see Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Form 10-K. REVENUE RECOGNITION See Note 1 – Basis of Presentation . 40 DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD See Item 1 — Business — Discussion of Timber Inventory and Sustainable Yield in our 2022 Form 10-K. OUR TIMBERLANDS Our timber operations are disaggregated into three geographically distinct segments: Southern Timber, Pacific Northwest Timber and New Zealand Timber. The following tables provide a breakdown of our timberland holdings as of September 30, 2023 and December 31, 2022: (acres in 000s) As of September 30, 2023 As of December 31, 2022 Owned Leased Total Owned Leased Total Southern Alabama 256 5 261 258 14 272 Arkansas — 2 2 — 2 2 Florida 362 50 412 347 47 394 Georgia 623 65 688 647 64 711 Louisiana 147 — 147 148 — 148 Oklahoma 91 — 91 91 — 91 South Carolina 16 — 16 16 — 16 Texas 282 — 282 285 — 285 1,777 122 1,899 1,792 127 1,919 Pacific Northwest Oregon 61 — 61 61 — 61 Washington 410 3 413 410 3 413 471 3 474 471 3 474 New Zealand (a) 188 231 419 188 229 417 Total 2,436 356 2,792 2,451 359 2,810 (a) Represents legal acres owned and leased by the New Zealand subsidiary, in which we own a 77% interest. As of September 30, 2023, legal acres in New Zealand consisted of 298,000 plantable acres and 121,000 non-productive acres. 41 The following tables detail activity for owned and leased acres in our timberland holdings by state from December 31, 2022 to September 30, 2023: (acres in 000s) Acres Owned December 31, 2022 Acquisitions Sales Other (a) September 30, 2023 Southern Alabama 258 — (1) (1) 256 Florida 347 2 (2) 15 362 Georgia 647 — (1) (23) 623 Louisiana 148 — (1) — 147 Oklahoma 91 — — — 91 South Carolina 16 — — — 16 Texas 285 1 (5) 1 282 1,792 3 (10) (8) 1,777 Pacific Northwest Oregon 61 — — — 61 Washington 410 — — — 410 471 — — — 471 New Zealand (b) 188 — — — 188 Total 2,451 3 (10) (8) 2,436 (a) Includes adjustments for land mapping reviews. (b) Represents legal acres owned by the New Zealand subsidiary, in which we have a 77% interest. (acres in 000s) Acres Leased December 31, 2022 New Leases Sold/Expired Leases (a) Other (b) September 30, 2023 Southern Alabama 14 — (9) — 5 Arkansas 2 — — — 2 Florida 47 — — 3 50 Georgia 64 — — 1 65 127 — (9) 4 122 Pacific Northwest Washington (c) 3 — — — 3 New Zealand (d) 229 — — 2 231 Total 359 — (9) 6 356 (a) Includes acres previously under lease that have been harvested and activity for the relinquishment of leased acres. (b) Includes adjustments for land mapping reviews. (c) Primarily timber reservations acquired in the merger with Pope Resources. (d) Represents legal acres leased by the New Zealand subsidiary, in which we have a 77% interest. 42 RESULTS OF OPERATIONS CONSOLIDATED RESULTS The following table provides key financial information by segment and on a consolidated basis: Three Months Ended September 30, Nine Months Ended September 30, Financial Information (in millions) 2023 2022 2023 2022 Sales Southern Timber $64.0 $64.5 $204.1 $207.6 Pacific Northwest Timber 29.3 34.4 96.1 119.8 New Zealand Timber 70.4 72.5 175.4 202.7 Real Estate Improved Development 3.1 2.3 20.2 18.8 Unimproved Development 0.1 — 0.1 — Rural 20.5 7.0 42.6 47.3 Timberland & Non-Strategic 1.1 — 2.9 11.4 Deferred Revenue/Other (a) 6.4 3.2 13.7 3.5 Total Real Estate 31.2 12.4 79.5 81.0 Trading 6.8 11.6 34.8 52.7 Intersegment Eliminations (0.1) (0.1) (0.4) (0.2) Total Sales $201.6 $195.3 $589.5 $663.7 Operating Income (Loss) Southern Timber $18.6 $22.5 $62.6 $76.9 Pacific Northwest Timber (b) (0.6) 2.2 (6.5) 11.7 New Zealand Timber (c) 17.6 9.3 19.3 22.7 Real Estate (a)(d) 9.2 15.7 18.7 37.0 Trading (0.1) 0.2 0.4 0.1 Corporate and Other (9.4) (9.0) (28.3) (26.6) Operating Income 35.4 40.9 66.1 121.7 Interest expense, interest income and other (e) (12.1) (7.8) (15.0) (25.5) Income tax expense (0.6) (1.2) (1.8) (8.1) Net Income 22.7 31.9 49.3 88.1 Less: Net income attributable to noncontrolling interests in consolidated affiliates (3.2) (10.8) (1.9) (12.4) Net Income Attributable to Rayonier, L.P. $19.5 $21.1 $47.4 $75.7 Less: Net income attributable to noncontrolling interests in the operating partnership (0.3) (0.5) (0.8) (1.7) Net Income Attributable to Rayonier Inc. $19.2 $20.6 $46.6 $74.0 Adjusted EBITDA (f) Southern Timber $37.8 $36.6 $124.2 $123.7 Pacific Northwest Timber 7.8 12.6 21.7 48.4 New Zealand Timber 23.5 15.6 37.9 40.8 Real Estate 18.9 8.4 45.8 58.4 Trading (0.1) 0.2 0.4 0.1 Corporate and Other (9.0) (8.6) (27.1) (25.7) Total Adjusted EBITDA $78.9 $64.7 $202.9 $245.8 (a) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. (b) The three and nine months ended September 30, 2022 includes a $1.1 million timber write-off resulting from a casualty event. (c) The nine months ended September 30, 2023 includes a $2.3 million timber write-off resulting from a casualty event. (d) The three and nine months ended September 30, 2022 includes $16.0 million of equity income related to the multi-family apartment complex sale in Bainbridge Island, Washington. (e) The nine months ended September 30, 2023 includes $20.5 million of net recoveries associated with legal settlements. (f) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 43 Three Months Ended September 30, Nine Months Ended September 30, Southern Timber Overview 2023 2022 2023 2022 Sales Volume (in thousands of tons) Pine Pulpwood 995 965 3,010 3,098 Pine Sawtimber 745 449 2,563 1,529 Total Pine Volume 1,740 1,414 5,574 4,627 Hardwood 69 85 138 291 Total Volume 1,809 1,499 5,712 4,918 % Delivered Volume (vs. Total Volume) 35 % 47 % 34 % 43 % % Pine Sawtimber Volume (vs. Total Pine Volume) 43 % 32 % 46 % 33 % % Export Volume (vs. Total Volume) (a) 1 % 2 % 1 % 2 % Net Stumpage Pricing (dollars per ton) Pine Pulpwood $16.54 $22.77 $16.53 $22.88 Pine Sawtimber 28.85 33.31 29.87 34.40 Weighted Average Pine $21.81 $26.12 $22.67 $26.69 Hardwood 13.16 20.59 13.98 24.33 Weighted Average Total $21.48 $25.80 $22.46 $26.55 Summary Financial Data (in millions of dollars) Timber Sales $54.1 $57.7 $175.0 $186.9 Less: Cut and Haul (14.4) (17.3) (43.4) (50.5) Less: Port and Freight (0.9) (1.6) (3.6) (5.7) Net Stumpage Sales $38.8 $38.8 $128.0 $130.7 Non-Timber Sales 9.8 6.8 29.1 20.7 Total Sales $64.0 $64.5 $204.1 $207.6 Operating Income $18.6 $22.5 $62.6 $76.9 (+) Depreciation, depletion and amortization 19.2 14.1 61.6 46.8 Adjusted EBITDA (b) $37.8 $36.6 $124.2 $123.7 Other Data Period-End Acres (in thousands) 1,899 1,789 1,899 1,789 (a) Estimated percentage of export volume, which includes volumes sold to third-party exporters in addition to direct exports through our log export program. (b) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 44 Three Months Ended September 30, Nine Months Ended September 30, Pacific Northwest Timber Overview 2023 2022 2023 2022 Sales Volume (in thousands of tons) Pulpwood 43 59 181 214 Domestic Sawtimber (a) 226 230 760 911 Export Sawtimber 21 18 65 63 Total Volume 290 307 1,006 1,188 % Delivered Volume (vs. Total Volume) 94 % 100 % 97 % 90 % % Sawtimber Volume (vs. Total Volume) 85 % 81 % 82 % 82 % % Export Volume (vs. Total Volume) (b) 11 % 12 % 11 % 10 % Delivered Log Pricing (in dollars per ton) Pulpwood $33.09 $50.74 $40.67 $44.44 Domestic Sawtimber 108.20 120.08 98.89 114.20 Export Sawtimber (c) 131.15 90.23 146.58 92.15 Weighted Average Log Price $98.79 $104.97 $91.44 $100.18 Summary Financial Data (in millions of dollars) Timber Sales $27.8 $32.6 $91.3 $115.6 Less: Cut and Haul (12.1) (13.9) (44.8) (46.7) Less: Port and Freight (1.1) (0.2) (3.8) (0.7) Net Stumpage Sales $14.7 $18.5 $42.7 $68.3 Non-Timber Sales 1.5 1.8 4.7 4.2 Total Sales $29.3 $34.4 $96.1 $119.8 Operating (Loss) Income ($0.6) $2.2 ($6.5) $11.7 (+) Timber write-offs resulting from a casualty event (d) — 1.1 — 1.1 (+) Depreciation, depletion and amortization 8.3 9.4 28.2 35.6 Adjusted EBITDA (e) $7.8 $12.6 $21.7 $48.4 Other Data Period-End Acres (in thousands) 474 486 474 486 Sawtimber (in dollars per MBF) (f) $726 $860 $722 $866 (a) Includes volumes sold to third-party exporters. (b) Estimated percentage of export volume, which includes volumes sold to third-party exporters in addition to direct exports through our log export program. (c) Prior to Q4 2022, pricing reflects the transfer of logs on an FOB basis. Beginning in Q4 2022, pricing is reported on a CFR basis (i.e., inclusive of export costs and freight). (d) Timber write-offs resulting from a casualty event include the write-off of merchantable and pre-merchantable timber volume damaged by casualty events which cannot be salvaged. (e) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . (f) Delivered Sawtimber excluding chip-n-saw. 45 Three Months Ended September 30, Nine Months Ended September 30, New Zealand Timber Overview 2023 2022 2023 2022 Sales Volume (in thousands of tons) Domestic Pulpwood (Delivered) 58 103 163 302 Domestic Sawtimber (Delivered) 211 221 502 544 Export Pulpwood (Delivered) 55 38 167 129 Export Sawtimber (Delivered) 367 349 1,012 954 Total Volume 690 712 1,844 1,929 % Delivered Volume (vs. Total Volume) 100 % 100 % 100 % 100 % % Sawtimber Volume (vs. Total Volume) 84 % 80 % 82 % 78 % % Export Volume (vs. Total Volume) (a) 61 % 54 % 64 % 56 % Delivered Log Pricing (in dollars per ton) Domestic Pulpwood $32.92 $33.13 $34.60 $34.20 Domestic Sawtimber 63.45 69.69 67.46 73.72 Export Sawtimber 95.23 123.07 102.93 130.71 Weighted Average Log Price $79.47 $92.76 $86.15 $98.92 Summary Financial Data (in millions of dollars) Timber Sales $54.9 $66.1 $158.8 $190.9 Less: Cut and Haul (22.8) (25.8) (64.5) (71.6) Less: Port and Freight (15.9) (23.1) (47.5) (69.8) Net Stumpage Sales $16.2 $17.2 $46.8 $49.4 Non-Timber Sales / Carbon Credits 15.6 6.4 16.6 11.9 Total Sales $70.4 $72.5 $175.4 $202.7 Operating Income $17.6 $9.3 $19.3 $22.7 (+) Timber write-off resulting from a casualty event (b) — — 2.3 — (+) Depreciation, depletion and amortization 6.0 6.3 16.3 18.2 Adjusted EBITDA (c) $23.5 $15.6 $37.9 $40.8 Other Data New Zealand Dollar to U.S. Dollar Exchange Rate (d) 0.6084 0.6223 0.6166 0.6479 Net Plantable Period-End Acres (in thousands) 298 297 298 297 Export Sawtimber (in dollars per JAS m 3 ) $110.72 $143.09 $119.68 $151.98 Domestic Sawtimber (in $NZD per tonne) $114.72 $123.19 $120.34 $125.16 (a) Percentage of export volume reflects direct exports through our log export program. (b) Timber write-off resulting from a casualty event includes the write-off of merchantable and pre-merchantable timber volume damaged by a casualty event which cannot be salvaged. (c) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . (d) Represents the period-average rate. 46 Three Months Ended September 30, Nine Months Ended September 30, Real Estate Overview 2023 2022 2023 2022 Sales (in millions of dollars) Improved Development (a) $3.1 $2.3 $20.2 $18.8 Unimproved Development 0.1 — 0.1 — Rural 20.5 7.0 42.6 47.3 Timberland & Non-Strategic 1.1 — 2.9 11.4 Deferred Revenue/Other (b) 6.4 3.2 13.7 3.5 Total Sales $31.2 $12.4 $79.5 $81.0 Acres Sold Improved Development (a) 6.9 19.0 302.2 95.9 Unimproved Development 10 — 10 — Rural 3,799 1,809 8,740 11,194 Timberland & Non-Strategic 466 — 1,070 3,966 Total Acres Sold 4,281 1,828 10,122 15,256 Gross Price per Acre (dollars per acre) Improved Development (a) $454,810 $121,106 $66,694 $196,311 Unimproved Development 11,250 — 11,250 — Rural 5,386 3,848 4,872 4,228 Timberland & Non-Strategic 2,266 — 2,755 2,874 Weighted Average (Total) $5,781 $5,064 $6,501 $5,084 Weighted Average (Adjusted) (c) $5,060 $3,848 $4,648 $3,874 Operating Income $9.2 $15.7 $18.7 $37.0 (+) Depreciation, depletion and amortization 3.1 1.0 6.8 12.7 (+) Non-cash cost of land and improved development 6.6 3.1 20.2 20.3 (–) Gain associated with the multi-family apartment complex sale attributable to NCI (d) — (11.5) — (11.5) Adjusted EBITDA (e) $18.9 $8.4 $45.8 $58.4 (a) Reflects land with capital invested in infrastructure improvements. (b) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. (c) Excludes Improved Development. (d) Gain associated with the multi-family apartment complex sale attributable to NCI represents the gain recognized in connection with the sale of property by the Bainbridge Landing joint venture attributable to noncontrolling interests. (e) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 47 Three Months Ended September 30, Nine Months Ended September 30, Trading Overview 2023 2022 2023 2022 Sales Volume (in thousands of tons) U.S. 19 11 49 54 NZ 42 84 252 361 Total Volume 61 95 301 415 Summary Financial Data (in millions of dollars) Trading Sales $6.4 $11.2 $33.5 $51.5 Non-Timber Sales 0.4 0.4 1.3 1.2 Total Sales $6.8 $11.6 $34.8 $52.7 Operating (Loss) Income ($0.1) $0.2 $0.4 $0.1 Adjusted EBITDA (a) ($0.1) $0.2 $0.4 $0.1 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators . 48 Three Months Ended September 30, Nine Months Ended September 30, Capital Expenditures By Segment (in millions of dollars) 2023 2022 2023 2022 Timber Capital Expenditures Southern Timber Reforestation, silviculture and other capital expenditures $4.0 $5.4 $17.6 $11.5 Property taxes 2.0 1.9 6.0 5.6 Lease payments 0.1 0.1 0.7 1.0 Allocated overhead 1.5 1.2 4.2 3.6 Subtotal Southern Timber $7.5 $8.6 $28.4 $21.7 Pacific Northwest Timber Reforestation, silviculture and other capital expenditures 1.6 2.3 6.6 7.5 Property taxes 0.3 0.3 0.8 0.8 Allocated overhead 1.5 1.3 4.1 4.0 Subtotal Pacific Northwest Timber $3.3 $3.9 $11.5 $12.3 New Zealand Timber Reforestation, silviculture and other capital expenditures 3.1 3.2 7.6 8.7 Property taxes 0.2 0.2 0.6 0.6 Lease payments 1.3 1.4 2.6 2.8 Allocated overhead 0.6 0.6 2.0 2.0 Subtotal New Zealand Timber $5.2 $5.4 $12.9 $14.0 Total Timber Segments Capital Expenditures $16.1 $17.8 $52.8 $48.0 Real Estate — 0.1 0.2 0.2 Corporate 0.2 — 0.2 — Total Capital Expenditures $16.3 $17.9 $53.1 $48.2 Timberland Acquisitions Southern Timber $4.7 — $10.4 $3.2 Pacific Northwest Timber — — 3.6 — Timberland Acquisitions $4.7 — $14.0 $3.2 Real Estate Development Investments (a) $4.0 $4.9 $18.8 $10.9 (a) Represents investments in master infrastructure or entitlements in our real estate development projects. Real Estate Development Investments are amortized as the underlying properties are sold and included in Non-Cash Cost of Land and Improved Development. 49 The following tables summarize sales, operating income (loss) and Adjusted EBITDA variances for September 30, 2023 versus September 30, 2022 (millions of dollars): Sales Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Intersegment Eliminations Total Three Months Ended September 30, 2022 $64.5 $34.4 $72.5 $12.4 $11.6 ($0.1) $195.3 Volume 8.0 (1.0) (2.0) 11.9 (3.9) — 13.0 Price (7.8) (2.4) (0.7) 3.1 (0.8) — (8.6) Non-timber sales 3.0 (0.3) 9.3 — — — 12.0 Foreign exchange (a) — — (0.6) — — — (0.6) Other (3.7) (b) (1.4) (b) (8.1) (c) 3.8 (d) (0.1) — (9.5) Three Months Ended September 30, 2023 $64.0 $29.3 $70.4 $31.2 $6.8 ($0.1) $201.6 (a) Net of currency hedging impact. (b) Includes variance due to stumpage versus delivered sales. (c) Includes variance due to domestic versus export sales. (d) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. Sales Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Intersegment Eliminations Total Nine Months Ended September 30, 2022 $207.6 $119.8 $202.7 $81.0 $52.7 ($0.2) $663.7 Volume 21.1 (10.4) (8.3) (25.0) (14.2) — (36.8) Price (23.4) (15.3) (2.2) 14.0 (3.9) — (30.8) Non-timber sales 8.5 0.5 5.4 — 0.1 — 14.5 Foreign exchange (a) — — (3.2) — — — (3.2) Other (9.7) (b) 1.5 (b) (19.0) (c) 9.5 (d) 0.1 (0.2) (17.8) Nine Months Ended September 30, 2023 $204.1 $96.1 $175.4 $79.5 $34.8 ($0.4) $589.5 (a) Net of currency hedging impact. (b) Includes variance due to stumpage versus delivered sales. (c) Includes variance due to domestic versus export sales. (d) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. Operating Income Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total Three Months Ended September 30, 2022 $22.5 $2.2 $9.3 $15.7 $0.2 ($9.0) $40.9 Volume 5.0 (0.4) (0.3) 6.7 — — 11.0 Price (a) (7.8) (2.4) (0.7) 3.1 — — (7.8) Cost (1.7) (1.2) — (2.6) (0.3) (0.4) (6.2) Non-timber income (b) 2.8 (0.3) 9.3 — — — 11.8 Depreciation, depletion & amortization (2.2) 0.4 — (1.0) — — (2.8) Non-cash cost of land and improved development — — — 2.5 — — 2.5 Other (c) — 1.1 — (15.2) — — (14.1) Three Months Ended September 30, 2023 $18.6 ($0.6) $17.6 $9.2 ($0.1) ($9.4) $35.4 (a) For Timber segments, price reflects net stumpage realizations (i.e., net of cut and haul and shipping costs). For Real Estate, price is presented net of cash closing costs. (b) For the New Zealand Timber segment, includes carbon credit sales. (c) Pacific Northwest Timber includes a $1.1 million timber write-off resulting from a casualty event in Q3 2022. Real Estate includes a gain associated with the multi-family apartment complex sale attributable to NCI in Q3 2022, deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. 50 Operating Income Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total Nine Months Ended September 30, 2022 $76.9 $11.7 $22.7 $37.0 $0.1 ($26.6) $121.7 Volume 13.3 (3.8) (1.5) (13.7) — — (5.7) Price (a) (23.4) (15.3) (2.2) 14.0 — — (26.9) Cost (4.4) (2.8) (0.9) (5.7) 0.3 (1.4) (14.9) Non-timber income (b) 7.5 0.5 5.3 — — — 13.3 Foreign exchange (c) — — (2.0) — — — (2.0) Depreciation, depletion & amortization (7.3) 2.1 0.2 1.8 — (0.3) (3.5) Non-cash cost of land and improved development — — — (3.5) — — (3.5) Other (d) — 1.1 (2.3) (11.2) — — (12.5) Nine Months Ended September 30, 2023 $62.6 ($6.5) $19.3 $18.7 $0.4 ($28.3) $66.1 (a) For Timber segments, price reflects net stumpage realizations (i.e., net of cut and haul and shipping costs). For Real Estate, price is presented net of cash closing costs. (b) For the New Zealand Timber segment, includes carbon credit sales. (c) Net of currency hedging impact. (d) Pacific Northwest Timber includes a $1.1 million timber write-off resulting from a casualty event in Q3 2022. New Zealand Timber includes a $2.3 million timber write-off resulting from a casualty event in Q1 2023. Real Estate includes a gain associated with the multi-family apartment complex sale attributable to NCI in Q3 2022, deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total Three Months Ended September 30, 2022 $36.6 $12.6 $15.6 $8.4 $0.2 ($8.6) $64.7 Volume 7.9 (0.9) (0.6) 11.9 — — 18.3 Price (b) (7.8) (2.4) (0.7) 3.1 — — (7.8) Cost (1.7) (1.2) — (2.6) (0.3) (0.4) (6.2) Non-timber income (c) 2.8 (0.3) 9.3 — — — 11.8 Foreign exchange (d) — — (0.1) — — — (0.1) Other (e) — — — (1.9) — — (1.9) Three Months Ended September 30, 2023 $37.8 $7.8 $23.5 $18.9 ($0.1) ($9.0) $78.9 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators below. (b) For Timber segments, price reflects net stumpage realizations (i.e., net of cut and haul and shipping costs). For Real Estate, price is presented net of cash closing costs. (c) For the New Zealand Timber segment, includes carbon credit sales. (d) Net of currency hedging impact. (e) Real Estate includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. The prior year period included a $4.5 million gain associated with a multi-family apartment complex sale attributable to Rayonier. 51 Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total Nine Months Ended September 30, 2022 $123.7 $48.4 $40.8 $58.4 $0.1 ($25.7) $245.8 Volume 20.8 (9.1) (2.3) (25.0) — — (15.6) Price (b) (23.4) (15.3) (2.2) 14.0 — — (26.9) Cost (4.4) (2.8) (0.9) (5.7) 0.3 (1.4) (14.9) Non-timber income (c) 7.5 0.5 5.3 — — — 13.3 Foreign exchange (d) — — (2.8) — — — (2.8) Other (e) — — — 4.1 — — 4.1 Nine Months Ended September 30, 2023 $124.2 $21.7 $37.9 $45.8 $0.4 ($27.1) $202.9 (a) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators below. (b) For Timber segments, price reflects net stumpage realizations (i.e., net of cut and haul and shipping costs). For Real Estate, price is presented net of cash closing costs. (c) For the New Zealand Timber segment, includes carbon credit sales. (d) Net of currency hedging impact. (e) Real Estate includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to residential and commercial lease revenue. The prior year period included a $4.5 million gain associated with a multi-family apartment complex sale attributable to Rayonier. SOUTHERN TIMBER Third quarter sales of $64.0 million decreased $0.6 million, or 1%, versus the prior year period . Harvest volumes increased 21% to 1.81 million tons versus 1.50 million tons in the prior year period , primarily driven by additional volume from acquisitions completed in the fourth quarter of 2022. Average pine sawtimber stumpage realizations decreased 13% to $28.85 per ton versus $33.31 per ton in the prior year period , primarily due to drier weather conditions, softer demand from sawmills, and decreased competition from pulp mills for chip-n-saw volume. Average pine pulpwood stumpage realizations decreased 27% to $16.54 per ton versus $22.77 per ton in the prior year period due to weaker end-market demand and drier weather conditions. Overall, weighted-average stumpage realizations (including hardwood) decreased 17% to $21.48 per ton versus $25.80 per ton in the prior year period . Operating income of $18.6 million decreased $3.8 million versus the prior year period due to lower net stumpage realizations ($7.8 million), higher depletion rates ($2.2 million), and higher overhead and other costs ($1.7 million), partially offset by higher volumes ($5.0 million) and higher non-timber income ($2.8 million). Third quarter Adjusted EBITDA of $37.8 million was 3%, or $1.2 million, above the prior year period . Year-to-date sales of $204.1 million decreased $3.5 million, or 2%, versus the prior year period . Harvest volumes increased 16% to 5.71 million tons versus 4.92 million tons in the prior year period , primarily driven by the additional volume contributions from acquisitions completed in the fourth quarter of 2022. Average pine sawtimber stumpage realizations decreased 13% to $29.87 per ton versus $34.40 per ton in the prior year period , primarily due to drier weather conditions, softer demand from sawmills, and decreased competition from pulp mills for chip-n-saw volume. Average pine pulpwood stumpage realizations decreased 28% to $16.53 per ton versus $22.88 per ton in the prior year period as weaker end-market demand, drier weather conditions, extended maintenance outages at pulp mills, and unfavorable geographical mix all contributed to softer market conditions. Overall, weighted-average stumpage realizations (including hardwood) decreased 15% to $22.46 per ton versus $26.55 per ton in the prior year period . Operating income of $62.6 million decreased $14.3 million versus the prior year period due to lower net stumpage realizations ($23.4 million), higher depletion rates ($7.3 million), and higher overhead and other costs ($4.4 million), partially offset by higher volumes ($13.3 million) and higher non-timber income ($7.5 million). Year-to-date Adjusted EBITDA of $124.2 million was $0.5 million above the prior year period . PACIFIC NORTHWEST TIMBER Third quarter sales of $29.3 million decreased $5.1 million, or 15%, versus the prior year period . Harvest volumes decreased 6% to 290,000 tons versus 307,000 tons in the prior year period, as some planned harvests were deferred in response to soft market conditions. Average delivered prices for domestic sawtimber decreased 10% to $108.20 per ton versus $120.08 per ton in the prior year period due to weaker domestic and export market demand. Average delivered pulpwood prices decreased 35% to $33.09 per ton versus $50.74 per ton in the prior year period, as the prior year period benefited from much stronger end-market demand. An operating loss of $0.6 million versus operating income of $2.2 million in the prior year period was driven by lower net stumpage 52 realizations ($2.4 million), higher costs ($1.2 million), lower volumes ($0.4 million) and lower non-timber income ($0.3 million), partially offset by lower depletion rates ($0.4 million) and the prior year period write-off of timber basis due to a fire in Washington ($1.1 million). Third quarter Adjusted EBITDA of $7.8 million was 38%, or $4.8 million, below the prior year period. Year-to-date sales of $96.1 million decreased $23.8 million, or 20%, versus the prior year period . Harvest volumes decreased 15% to 1.01 million tons versus 1.19 million tons in the prior year period as some planned harvests have been deferred in response to soft market conditions. Average delivered prices for domestic sawtimber decreased 13% to $98.89 per ton versus $114.20 per ton in the prior year period due to weaker domestic and export market demand, as well as less competition from export markets. Average delivered pulpwood prices decreased 8% to $40.67 per ton versus $44.44 per ton in the prior year period as the prior year period benefited from stronger end-market demand. Operating loss of $6.5 million decreased $18.2 million versus the prior year period due to lower net stumpage realizations ($15.3 million), lower volumes ($3.8 million), and higher costs ($2.8 million), partially offset by lower depletion rates ($2.1 million), the prior year period write-off of timber basis due to a fire in Washington ($1.1 million), and higher non-timber income ($0.5 million). Year-to-date Adjusted EBITDA of $21.7 million was 55%, or $26.7 million, below the prior year period. NEW ZEALAND TIMBER Third quarter sales of $70.4 million decreased $2.0 million, or 3%, versus the prior year period . Harvest volumes decreased 3% to 690,000 tons versus 712,000 tons in the prior year period , as some planned harvests were deferred in response to soft market conditions. Average delivered prices for export sawtimber decreased 23% to $95.23 per ton versus $123.07 per ton in the prior year period , primarily due to weaker demand in China and increased supply from Cyclone Gabrielle salvage volume. Despite the significant decline in delivered pricing, export sawtimber net stumpage realizations were down only 4% due to significantly lower port and freight costs versus the prior year period. Average delivered prices for domestic sawtimber declined 9% to $63.45 per ton versus $69.69 per ton in the prior year period . The decrease in domestic sawtimber prices (in U.S. dollar terms) was driven in part by the decline in the NZ$/US$ exchange rate (US$0.61 per NZ$1.00 versus US$0.62 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 7% versus the prior year period , reflecting weaker domestic demand and decreased competition from export markets. Third quarter non-timber / carbon credit sales totaled $15.6 million versus $6.4 million in the prior year period, as increased volumes were sold into the market following a significant uptick in NZU pricing. Operating income of $17.6 million increased $8.3 million versus the prior year period primarily due to higher carbon credit sales ($9.3 million), partially offset by lower net stumpage realizations ($0.7 million) and lower volumes ($0.3 million). Third quarter Adjusted EBITDA of $23.5 million was 51%, or $7.9 million, above the prior year period . Year-to-date sales of $175.4 million decreased $27.3 million, or 13%, versus the prior year period . Harvest volumes decreased 4% to 1.84 million tons versus 1.93 million tons in the prior year period , primarily due to lost production days resulting from Cyclone Gabrielle in the first quarter and the deferral of planned harvests in response to soft market conditions. Average delivered prices for export sawtimber decreased 21% to $102.93 per ton versus $130.71 per ton in the prior year period , driven by increased salvage volume from Cyclone Gabrielle and weaker demand in China. Average delivered prices for domestic sawtimber decreased 8% to $67.46 per ton versus $73.72 per ton in the prior year period . The decrease in domestic sawtimber prices (in U.S. dollar terms) was partially driven by the decline in the NZ$/US$ exchange rate (US$0.62 per NZ$1.00 versus US$0.65 per NZ$1.00). Excluding the impact of foreign exchange rates, domestic sawtimber prices decreased 4% versus the prior year period , reflecting weaker domestic demand and decreased competition from export markets. Operating income of $19.3 million decreased $3.4 million versus the prior year period due to a timber write-off resulting from a tropical cyclone casualty event ($2.3 million), lower net stumpage realizations ($2.2 million), unfavorable foreign exchange impacts ($2.0 million), lower volumes ($1.5 million), and higher costs ($0.9 million), partially offset by higher carbon credit sales ($5.3 million) and lower depletion rates ($0.2 million). Year-to-date Adjusted EBITDA of $37.9 million was 7% or $2.9 million, below the prior year period . REAL ESTATE Third quarter sales of $31.2 million increased $18.7 million versus the prior year period , while operating income of $9.2 million decreased $6.6 million versus the prior year period . Prior year third quarter operating income included an $11.5 million gain attributable to noncontrolling interests associated with the Bainbridge Island multi-family apartment complex sale. Sales increased versus the prior year period primarily due to a higher number of acres sold (4,281 acres sold versus 1,828 acres sold in the prior year period) and an increase in weighted-average prices ($5,781 per acre versus $5,064 per acre in the prior year period ). 53 Improved Development sales of $3.1 million included $1.8 million from the Heartwood development project south of Savannah, Georgia and $1.4 million from the Wildlight development project north of Jacksonville, Florida. Sales in Heartwood consisted of 24 finished residential lots for $1.1 million ($45,000 per lot or $290,000 per acre) and a 1.3-acre commercial parcel to be used for a quick-service restaurant for $0.7 million ($531,000 per acre). Sales in Wildlight consisted of a 2-acre commercial parcel to be used for a convenience store for $1.4 million ($735,000 per acre). This compares to Improved Development sales of $2.3 million in the prior year period. Unimproved Development sales of $0.1 million consisted of a 10-acre transaction for $11,250 per acre. There were no Unimproved Development sales in the prior year period. Rural sales of $20.5 million consisted of 3,799 acres at an average price of $5,386 per acre. This compares to prior year period sales of $7.0 million, which consisted of 1,809 acres at an average price of $3,848 per acre. Timberland & Non-Strategic sales of $1.1 million consisted of 466 acres at an average price of $2,266 per acre. There were no Timberland & Non-Strategic sales in the prior year period. Third quarter Adjusted EBITDA of $18.9 million increased $10.5 million versus the prior year period . Year-to-date sales of $79.5 million decreased $1.5 million versus the prior year period , while operating income of $18.7 million decreased $18.2 million versus the prior year period . Prior year period operating income included an $11.5 million gain attributable to noncontrolling interests associated with the Bainbridge Island multi-family apartment complex sale. Sales and operating income decreased in the first nine months primarily due to lower volumes (10,122 acres sold versus 15,256 acres sold in the prior year period), partially offset by higher weighted-average prices ($6,501 per acre versus $5,084 per acre in the prior year period). Year-to-date Adjusted EBITDA of $45.8 million decreased $12.7 million versus the prior year period. TRADING Third quarter sales of $6.8 million decreased $4.8 million versus the prior year period due to lower volumes and prices. Sales volumes decreased 35% to 61,000 tons versus 95,000 tons in the prior year period . The Trading segment generated an operating loss of $0.1 million versus operating income of $0.2 million in the prior year period. Year-to-date sales of $34.8 million decreased $18.0 million versus the prior year period due to lower volumes and prices. Sales volumes decreased 28% to 301,000 tons versus 415,000 tons in the prior year period. Year-to-date operating income and Adjusted EBITDA of $0.4 million increased $0.3 million versus the prior year period as improved margins more than offset reduced trading volume. OTHER ITEMS CORPORATE AND OTHER EXPENSE / ELIMINATIONS Third quarter corporate and other operating expenses of $9.4 million increased $0.5 million versus the prior year period , primarily driven by higher compensation and benefits expenses. Year-to-date corporate and other operating expenses of $28.3 million increased $1.7 million versus the prior year period , primarily due to higher compensation and benefits expenses. INTEREST EXPENSE Third quarter and year-to-date interest expense of $12.6 million and $36.7 million increased $3.5 million and $10.3 million, respectively, versus the prior year period, primarily due to higher average outstanding debt and a higher weighted-average interest rate. INTEREST AND OTHER MISCELLANEOUS INCOME, NET Year-to-date interest and other miscellaneous income includes $20.5 million of net recoveries associated with legal settlements . INCOME TAX EXPENSE Third quarter and year-to-date income tax expense of $0.6 million and $1.8 million decreased $0.7 million and $6.3 million, respectively, versus the prior year period. The New Zealand subsidiary is the primary driver of income tax expense. 54 OUTLOOK In our Southern Timber segment, we continue to expect higher non-timber income for full-year 2023 as compared to full-year 2022, driven by growth in our Land-Based Solutions businesses. In our Pacific Northwest Timber segment, we expect continued softness in end-market demand for the balance of the year. In our New Zealand Timber segment, we expect to remain active in the carbon market following the uptick in NZU pricing during the third quarter; however, we anticipate a lower contribution from carbon sales relative to the third quarter. In our Real Estate segment, the demand for HBU properties and timberland assets has remained strong despite the higher interest rate environment. We expect a significant contribution from our Real Estate segment in the fourth quarter based on transaction volume expected to close. LIQUIDITY AND CAPITAL RESOURCES Our principal source of cash is cash flow from operations, primarily the harvesting of timber and sales of real estate. As an UPREIT, our main use of cash is dividends and unitholder distributions. We also use cash to maintain the productivity of our timberlands through replanting and silviculture. Our operations have generally produced consistent cash flow and required limited capital resources. Short-term borrowings have helped fund working capital needs, while acquisitions of timberlands generally require funding from external sources or Large Dispositions. SUMMARY OF LIQUIDITY AND FINANCING COMMITMENTS September 30, December 31, (millions of dollars) 2023 2022 Cash and cash equivalents $107.8 $114.3 Total debt (a) 1,519.0 1,523.1 Noncontrolling interests in the operating partnership 69.8 105.8 Shareholders’ equity 1,832.3 1,880.7 Total capitalization (total debt plus permanent and temporary equity) 3,421.1 3,509.6 Debt to capital ratio 44 % 43 % Net debt to enterprise value (b)(c) 25 % 22 % (a) Total debt as of September 30, 2023 and December 31, 2022 reflects principal on long-term debt, gross of deferred financing costs and unamortized discounts. (b) Net debt is calculated as total debt less cash and cash equivalents. (c) Enterprise value based on market capitalization (including Rayonier, L.P. “OP” units) plus net debt based on Rayonier’s share price of $28.46 and $32.96 as of September 30, 2023 and December 31, 2022, respectively. AT-THE-MARKET (“ATM”) EQUITY OFFERING PROGRAM On November 4, 2022 we entered into a new distribution agreement with a group of sales agents through which we may sell common shares, from time to time, having an aggregate sales price of up to $300 million (the “2022 ATM Program”). As of September 30, 2023, $269.7 million remains available for issuance under the program. The following table outlines common share issuances pursuant to our ATM program (dollars in millions): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Shares of common stock issued under the ATM program — — 400 726,248 Average price per share sold under the ATM program — — $34.03 $41.46 Gross proceeds from common shares issued under the ATM program — — — $30.1 55 CASH FLOWS The following table summarizes our cash flows from operating, investing and financing activities for the nine months ended September 30, 2023 and 2022: (millions of dollars) 2023 2022 Cash provided by (used for): Operating activities $208.9 $209.9 Investing activities (79.7) (55.9) Financing activities (134.2) (237.6) CASH PROVIDED BY OPERATING ACTIVITIES Cash provided by operating activities decreased $1.0 million from the prior year period primarily due to lower operating results and changes in working capital. CASH USED FOR INVESTING ACTIVITIES Cash used for investing activities increased $23.8 million from the prior year period due to higher timberland acquisitions ($10.7 million), higher real estate development investments ($7.8 million), higher capital expenditures ($4.9 million), and lower proceeds from other investing activities ($0.3 million). CASH USED FOR FINANCING ACTIVITIES Cash used for financing activities decreased $103.5 million from the prior year period. This is primarily due to lower net repayments ($125.0 million), lower distributions to consolidated affiliates ($16.5 million), and lower distributions to noncontrolling interests in the operating partnership ($0.5 million), partially offset by lower net proceeds from the issuance of common shares under the ATM equity offering program ($32.0 million), higher dividends paid on common shares ($4.0 million), and lower proceeds from the issuance of common shares under the Company’s incentive stock plan ($2.6 million). FUTURE USES OF CASH We expect future uses of cash to include working capital requirements, principal and interest payments on long-term debt, lease payments, capital expenditures, real estate development investments, timberland acquisitions, dividends on Rayonier Inc. common shares and distributions on Rayonier, L.P. units, distributions to noncontrolling interests, and repurchases of the Company’s common shares to satisfy other commitments. 56 Significant long-term uses of cash include the following (in millions): Future uses of cash (in millions) Total Payments Due by Period 2023 2024-2025 2026-2027 Thereafter Long-term debt (a) $1,519.0 — $20.7 $498.3 $1,000.0 Interest payments on long-term debt (b) 408.7 24.6 171.8 143.2 69.1 Operating leases — timberland (c) 182.4 4.1 16.1 14.4 147.8 Operating leases — PP&E, offices (c) 6.0 0.4 2.0 0.9 2.7 Commitments — real estate projects 40.3 11.1 19.0 2.3 7.9 Commitments — derivatives (d) 5.1 1.6 3.0 0.5 — Commitments — environmental remediation (e) 15.7 1.7 9.7 1.3 3.0 Commitments — other (f) 10.3 0.1 10.2 — — Total $2,187.5 $43.6 $252.5 $660.9 $1,230.5 (a) The book value of long-term debt, net of deferred financing costs and unamortized discounts, is currently recorded at $1,511.5 million on our Consolidated Balance Sheets, but upon maturity the liability will be $1,519.0 million. See Note 6 - Debt for additional information. (b) Projected interest payments for variable-rate debt were calculated based on outstanding principal amounts and interest rates as of September 30, 2023. (c) Excludes anticipated renewal options. (d) Commitments — derivatives represent payments expected to be made on derivative financial instruments (foreign exchange contracts). See Note 7 — Derivative Financial Instruments and Hedging Activities for additional information. (e) Commitments — environmental remediation represents our estimate of potential liability associated with environmental contamination and Natural Resource Damages in Port Gamble, Washington. See Note 10 - Environmental and Natural Resource Damage Liabilities for additional information. (f) Commitments — other includes $8.9 million related to pension plan termination. See Note 15 - Employee Benefit Plans for additional information. We expect to fund future uses of cash with a combination of existing cash balances, cash generated by operating activities, the remaining issuances available under the Company’s ATM Program, Large Dispositions and the use of our revolving credit facilities. We believe we have sufficient sources of funding to meet our business requirements for the next 12 months and in the longer term. EXPECTED 2023 EXPENDITURES Capital expenditures in 2023 are expected to be between $83 million and $87 million, excluding any strategic timberland acquisitions we may make. Capital expenditures are expected to primarily consist of seedling planting, fertilization and other silvicultural activities, property taxes, lease payments, allocated overhead and other capitalized costs. Aside from capital expenditures, we may also acquire timberland as we actively evaluate acquisition opportunities. We anticipate real estate development investments in 2023 to be between $20 million and $23 million, net of reimbursements from community development bonds. Expected real estate development investments are primarily related to Wildlight, our mixed-use community development project located north of Jacksonville, Florida and Heartwood, our mixed-use development project located in Richmond Hill just south of Savannah, Georgia. Our 2023 dividend payments on Rayonier Inc. common shares and distributions to Rayonier, L.P. unitholders are expected to be approximately $170 million and $3 million, respectively, assuming no change in the quarterly dividend rate of $0.285 per share or partnership unit, or material changes in the number of shares or partnership units outstanding. Future share repurchases, if any, will depend on the Company’s liquidity and cash flow, as well as general market conditions and other considerations including capital allocation priorities. Full-year 2023 cash tax payments are expected to be bet ween $5.0 million and $7.0 million, primarily related to the New Zealand subsidiary. See Note 1 – Basis of Presentation for information regarding subsequent events that are expected to impact our future sources and uses of cash. 57 OFF-BALANCE SHEET ARRANGEMENTS We utilize off-balance sheet arrangements to provide credit support for certain suppliers and vendors in case of their default on critical obligations, and collateral for outstanding claims under our previous workers’ compensation self-insurance programs. These arrangements consist of standby letters of credit and surety bonds. As part of our ongoing operations, we also periodically issue guarantees to third parties. Off-balance sheet arrangements are not considered a source of liquidity or capital resources and do not expose us to material risks or material unfavorable financial impacts. See Note 11 — Guarantees for details on the letters of credit and surety bonds as of September 30, 2023. SUMMARY OF GUARANTOR FINANCIAL INFORMATION In May 2021, Rayonier, L.P. issued $450 million of 2.75% Senior Notes due 2031 (the “Senior Notes due 2031”). Rayonier TRS Holdings Inc., Rayonier Inc., and Rayonier Operating Company, LLC agreed to irrevocably, fully and unconditionally guarantee jointly and severally, the obligations of Rayonier, L.P. in regards to the Senior Notes due 2031. As a general partner of Rayonier, L.P., Rayonier Inc. consolidates Rayonier, L.P. and has no material assets or liabilities other than its interest in Rayonier, L.P. These notes are unsecured and unsubordinated and will rank equally with all other unsecured and unsubordinated indebtedness from time to time outstanding. Rayonier, L.P. is a limited partnership, in which Rayonier Inc. is the general partner. The operating subsidiaries of Rayonier, L.P. conduct all of our operations. Rayonier, L.P.’s most significant assets are its interest in operating subsidiaries, which have been excluded in the table below to eliminate intercompany transactions between the issuer and guarantors and to exclude investments in non-guarantors. As a result, our ability to make required payments on the notes depends on the performance of our operating subsidiaries and their ability to distribute funds to us. There are no material restrictions on dividends from the operating subsidiaries. The summarized balance sheet information for the consolidated obligor group of debt issued by Rayonier, L.P. for the nine months ended September 30, 2023 and year ended December 31, 2022 are provided in the table below: (in millions) September 30, 2023 December 31, 2022 Current assets $89.9 $112.2 Non-current assets 128.3 122.8 Current liabilities 21.7 19.8 Non-current liabilities 2,223.3 2,001.9 Due to non-guarantors 747.5 520.4 The summarized results of operations information for the consolidated obligor group of debt issued by Rayonier, L.P. for the nine months ended September 30, 2023 and year ended December 31, 2022 are provided in the table below: (in millions) September 30, 2023 December 31, 2022 Cost and expenses ($23.5) ($28.9) Operating loss (23.4) (28.9) Net loss (50.9) (54.3) Revenue from non-guarantors 641.5 977.9 PERFORMANCE AND LIQUIDITY INDICATORS The discussion below is presented to enhance the reader’s understanding of our operating performance, liquidity, and ability to generate cash and satisfy rating agency and creditor requirements. This information includes two measures of financial results: Adjusted Earnings before Interest, Taxes, Depreciation, Depletion and Amortization (“Adjusted EBITDA”) and Cash Available for Distribution (“CAD”). These measures are not defined by Generally Accepted Accounting Principles (“GAAP”), and the discussion of Adjusted EBITDA and CAD is not intended to conflict with or change any of the GAAP disclosures described above. 58 Management uses CAD as a liquidity measure. CAD is a non-GAAP measure of cash generated during a period that is available for common share dividends, distributions to operating partnership unitholders, distributions to noncontrolling interests, repurchase of the Company’s common shares, debt reduction, timberland acquisitions and real estate development investments. CAD is defined as cash provided by operating activities adjusted for capital spending (excluding timberland acquisitions and real estate development investments) and working capital and other balance sheet changes. CAD is not necessarily indicative of the CAD that may be generated in future periods. Management uses Adjusted EBITDA as a performance measure. Adjusted EBITDA is a non-GAAP measure that management uses to make strategic decisions about the business and that investors can use to evaluate the operational performance of the assets under management. It excludes specific items that management believes are not indicative of the Company’s ongoing operating results. We define Adjusted EBITDA as earnings before interest, taxes, depreciation, depletion, amortization, the non-cash cost of land and improved development, non-operating income and expense, the gain associated with the multi-family apartment complex sale attributable to noncontrolling interests, timber write-offs resulting from casualty events and Large Dispositions. We reconcile Adjusted EBITDA to Net Income for the consolidated Company and to Operating Income for the segments, as those are the most comparable GAAP measures for each. The following table provides a reconciliation of Net Income to Adjusted EBITDA for the respective periods (in millions of dollars): Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net Income to Adjusted EBITDA Reconciliation Net Income $22.7 $31.9 $49.3 $88.1 Interest, net and miscellaneous income 12.0 7.9 35.5 25.0 Income tax expense 0.6 1.2 1.8 8.1 Depreciation, depletion and amortization 37.0 31.1 114.3 114.2 Non-cash cost of land and improved development 6.6 3.1 20.2 20.3 Gain associated with the multi-family apartment complex sale attributable to NCI (a) — (11.5) — (11.5) Timber write-offs resulting from casualty events (b) — 1.1 2.3 1.1 Non-operating expense (income) (c) 0.1 (0.1) (20.5) 0.5 Adjusted EBITDA $78.9 $64.7 $202.9 $245.8 (a) Gain associated with the multi-family apartment complex sale attributable to NCI represents the gain recognized in connection with the sale of property by the Bainbridge Landing joint venture attributable to noncontrolling interests. (b) Timber write-offs resulting from casualty events includes the write-off of merchantable and pre-merchantable timber volume damaged by casualty events which cannot be salvaged. (c) The nine months ended September 30, 2023 includes $20.5 million of net recoveries associated with legal settlements. 59 The following tables provide a reconciliation of Operating Income (Loss) by segment to Adjusted EBITDA by segment for the respective periods (in millions of dollars): Three Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total September 30, 2023 Operating income (loss) $18.6 ($0.6) $17.6 $9.2 ($0.1) ($9.4) $35.4 Depreciation, depletion and amortization 19.2 8.3 6.0 3.1 — 0.4 37.0 Non-cash cost of land and improved development — — — 6.6 — — 6.6 Adjusted EBITDA $37.8 $7.8 $23.5 $18.9 ($0.1) ($9.0) $78.9 September 30, 2022 Operating income $22.5 $2.2 $9.3 $15.7 $0.2 ($9.0) $40.9 Gain associated with the multi-family apartment complex sale attributable to NCI (a) — — — (11.5) — — (11.5) Timber write-off resulting from a casualty event (b) — 1.1 — — — — 1.1 Depreciation, depletion and amortization 14.1 9.4 6.3 1.0 — 0.3 31.1 Non-cash cost of land and improved development — — — 3.1 — — 3.1 Adjusted EBITDA $36.6 $12.6 $15.6 $8.4 $0.2 ($8.6) $64.7 (a) Gain associated with the multi-family apartment complex sale attributable to NCI represents the gain recognized in connection with the sale of property by the Bainbridge Landing joint venture attributable to noncontrolling interests. (b) Timber write-off resulting from a casualty event includes the write-off of merchantable and pre-merchantable timber volume damaged by a casualty event which cannot be salvaged. Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total September 30, 2023 Operating income (loss) $62.6 ($6.5) $19.3 $18.7 $0.4 ($28.3) $66.1 Timber write-off resulting from a casualty event (a) — — 2.3 — — — 2.3 Depreciation, depletion and amortization 61.6 28.2 16.3 6.8 — 1.3 114.3 Non-cash cost of land and improved development — — — 20.2 — — 20.2 Adjusted EBITDA $124.2 $21.7 $37.9 $45.8 $0.4 ($27.1) $202.9 September 30, 2022 Operating income $76.9 $11.7 $22.7 $37.0 $0.1 ($26.6) $121.7 Gain associated with the multi-family apartment complex sale attributable to NCI (b) — — — (11.5) — — (11.5) Timber write-off resulting from casualty event (a) — 1.1 — — — — 1.1 Depreciation, depletion and amortization 46.8 35.6 18.2 12.7 — 0.9 114.2 Non-cash cost of land and improved development — — — 20.3 — — 20.3 Adjusted EBITDA $123.7 $48.4 $40.8 $58.4 $0.1 ($25.7) $245.8 (a) Timber write-off resulting from a casualty event includes the write-off of merchantable and pre-merchantable timber volume damaged by a casualty event which cannot be salvaged. (b) Gain associated with the apartment complex sale attributable to NCI represents the gain recognized in connection with the sale of property by the Bainbridge Landing joint venture attributable to noncontrolling interests. 60 The following table provides a reconciliation of Cash Provided by Operating Activities to Adjusted CAD (in millions of dollars): Nine Months Ended September 30, 2023 2022 Cash provided by operating activities $208.9 $209.9 Capital expenditures (a) (53.1) (48.2) Net recoveries on legal settlements (20.5) — Working capital and other balance sheet changes (21.8) (2.9) CAD $113.5 $158.8 Mandatory debt repayments — — CAD after mandatory debt repayments $113.5 $158.8 Cash used for investing activities ($79.7) ($55.9) Cash used for financing activities ($134.2) ($237.6) (a) Capital expenditures exclude timberland acquisitions of $14.0 million and $3.2 million during the nine months ended September 30, 2023 and September 30, 2022, respectively. The following table provides supplemental cash flow data (in millions of dollars): Nine Months Ended September 30, 2023 2022 Purchase of timberlands ($14.0) ($3.2) Real Estate Development Investments (18.8) (10.9) Distributions to noncontrolling interests in consolidated affiliates — (16.5) LIQUIDITY FACILITIES 2023 DEBT ACTIVITY See Note 6 — Debt for additional information. 61