Item 2. Management’s Discussion and Analysis
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, 2023 (the “2023 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 2023 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, 2024, we owned or leased under long-term agreements approximately 2.7 million acres of timberlands located in the U.S. South (1.84 million acres), U.S. Pacific Northwest (417,000 acres) and New Zealand (411,000 gross acres or 289,000 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 value-added activities such as the licensing of properties for hunting, the leasing of properties for mineral extraction and cell towers, the sale of carbon credits, and revenue from land-based solutions such as carbon capture and storage, solar, and wind energy. 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, 2023 and our sustainability report located at our Responsible Stewardship webpage.
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 2023 Form 10-K.
ACCOUNTING STANDARDS ISSUED BUT NOT YET ADOPTED
See Note 1 — Basis of Presentation for a summary of recently issued accounting standards.
39
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 timber to China and Japan. 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.
Pricing in our timber segments is influenced by macroeconomic factors, including residential construction activity, and can also vary considerably on a local level based on weather, the available inventory of logs, mill demand, and export market access. In our Southern Timber segment, pine pulpwood net stumpage realizations have generally stabilized due to improved demand from pulp mills and weather-related constraints in select markets on competing supply, while pine sawtimber net stumpage realizations have been constrained by softer demand from lumber mills. In our Pacific Northwest Timber segment, weighted-average delivered log prices remain under pressure due to soft domestic demand and reduced export market tension. In our New Zealand Timber segment, lower levels of construction activity in China continue to negatively impact export market demand and 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, our improved development projects, specifically Wildlight, our development project north of Jacksonville, Florida, and Heartwood, our development project south of Savannah, Georgia, continue to benefit from favorable migration and demographic trends, which have thus far outweighed the impacts of higher interest rates.
For additional information on market conditions impacting our business, see Results of Operations .
40
DISCUSSION OF TIMBER INVENTORY AND SUSTAINABLE YIELD
See Item 1 — Business — Discussion of Timber Inventory and Sustainable Yield in our 2023 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, 2024 and December 31, 2023:
(acres in 000s) As of September 30, 2024 As of December 31, 2023
Owned Leased Total Owned Leased Total
Southern
Alabama 250 3 253 250 5 255
Arkansas — 2 2 — 2 2
Florida 361 35 396 361 36 397
Georgia 611 50 661 612 50 662
Louisiana 146 — 146 147 — 147
Oklahoma 91 — 91 91 — 91
South Carolina 15 — 15 16 — 16
Texas 279 — 279 282 — 282
1,753 90 1,843 1,759 93 1,852
Pacific Northwest
Oregon 6 — 6 6 — 6
Washington 408 3 411 408 4 412
414 3 417 414 4 418
New Zealand (a) 178 233 411 188 233 421
Total 2,345 326 2,671 2,361 330 2,691
(a) Represents legal acres owned and leased by the New Zealand subsidiary, in which we own a 77% interest. As of September 30, 2024, legal acres in New Zealand consisted of 289,000 plantable acres and 122,000 non-productive acres.
41
The following tables detail activity for owned and leased acres in our timberland holdings by state from December 31, 2023 to September 30, 2024:
(acres in 000s) Acres Owned
December 31, 2023
Acquisitions Sales Other September 30, 2024
Southern
Alabama 250 — — — 250
Florida 361 1 (1) — 361
Georgia 612 — (1) — 611
Louisiana 147 — (1) — 146
Oklahoma 91 — — — 91
South Carolina 16 — (1) — 15
Texas 282 — (3) — 279
1,759 1 (7) — 1,753
Pacific Northwest
Oregon 6 — — — 6
Washington 408 — — — 408
414 — — — 414
New Zealand (a) 188 — (10) — 178
Total 2,361 1 (17) — 2,345
(a) Represents legal acres owned by the New Zealand subsidiary, in which we have a 77% interest.
(acres in 000s) Acres Leased
December 31, 2023
New Leases Sold/Expired Leases (a) Other (b) September 30, 2024
Southern
Alabama 5 — (2) — 3
Arkansas 2 — — — 2
Florida 36 — (1) — 35
Georgia 50 — — — 50
93 — (3) — 90
Pacific Northwest
Washington (c) 4 — (1) — 3
New Zealand (d) 233 — (3) 3 233
Total 330 — (7) 3 326
(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) 2024 2023 2024 2023
Sales
Southern Timber $62.0 $64.0 $191.3 $204.1
Pacific Northwest Timber 27.2 29.3 76.7 96.1
New Zealand Timber 66.8 70.4 166.3 175.4
Real Estate
Improved Development 12.0 3.1 16.4 20.2
Unimproved Development — 0.1 — 0.1
Rural 13.8 20.5 30.0 42.6
Timberland & Non-Strategic — 1.1 16.1 2.9
Conservation Easement 1.1 — 1.1 —
Deferred Revenue/Other (a) 3.2 6.4 13.0 13.7
Total Real Estate 30.1 31.2 76.6 79.5
Trading 9.0 6.8 26.0 34.8
Intersegment Eliminations (0.1) (0.1) (0.2) (0.4)
Total Sales $195.0 $201.6 $536.7 $589.5
Operating Income (Loss)
Southern Timber $19.8 $18.6 $59.9 $62.6
Pacific Northwest Timber 0.8 (0.6) (5.0) (6.5)
New Zealand Timber (b) 8.9 17.6 19.3 19.3
Real Estate 8.6 9.2 14.3 18.7
Trading (0.1) (0.1) 0.1 0.4
Corporate and Other (c) (10.5) (9.4) (32.3) (28.3)
Operating Income 27.6 35.4 56.3 66.1
Interest expense, net (10.0) (12.6) (29.6) (36.7)
Interest and other miscellaneous income, net (d) 12.8 0.5 8.8 21.7
Income tax (expense) benefit (e) — (0.6) 0.3 (1.8)
Net Income 30.4 22.7 35.8 49.3
Less: Net income attributable to noncontrolling interests in consolidated affiliates (1.3) (3.2) (3.3) (1.9)
Net Income Attributable to Rayonier, L.P. $29.1 $19.5 $32.5 $47.4
Less: Net income attributable to noncontrolling interests in the Operating Partnership (0.3) (0.3) (0.5) (0.8)
Net Income Attributable to Rayonier Inc. $28.8 $19.2 $32.0 $46.6
Adjusted EBITDA (f)
Southern Timber $37.9 $37.8 $116.6 $124.2
Pacific Northwest Timber 8.7 7.8 19.3 21.7
New Zealand Timber 14.6 23.5 33.7 37.9
Real Estate 19.9 18.9 43.4 45.8
Trading (0.1) (0.1) 0.1 0.4
Corporate and Other (9.2) (9.0) (29.4) (27.1)
Total Adjusted EBITDA $71.8 $78.9 $183.7 $202.9
(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 nine months ended September 30, 2023 includes $2.3 million of timber write-offs resulting from casualty events.
(c) The three and nine months ended September 30, 2024 includes $0.9 million and $1.6 million, respectively, of costs related to disposition initiatives.
(d) The three months ended September 30, 2024 includes $12.0 million of net recoveries associated with legal settlements, which is partially offset by $0.3 million of pension settlement charges. The nine months ended September 30, 2024 includes $9.6 million of net recoveries associated with legal settlements, which is partially offset by $6.0 million of pension settlement charges. The nine months ended September 30, 2023 includes $20.5 million of net recoveries associated with legal settlements.
(e) The nine months ended September 30, 2024 includes a $1.2 million income tax benefit related to the pension settlement.
(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 2024 2023 2024 2023
Sales Volume (in thousands of tons)
Pine Pulpwood 909 995 2,851 3,010
Pine Sawtimber 583 745 2,207 2,563
Total Pine Volume 1,492 1,740 5,058 5,574
Hardwood 79 69 194 138
Total Volume 1,570 1,809 5,252 5,712
% Delivered Volume (vs. Total Volume) 36 % 35 % 32 % 34 %
% Pine Sawtimber Volume (vs. Total Pine Volume) 39 % 43 % 44 % 46 %
% Export Volume (vs. Total Volume) (a) — 1 % 1 % 1 %
Net Stumpage Pricing (dollars per ton) (b)
Pine Pulpwood $17.21 $16.54 $17.13 $16.53
Pine Sawtimber 27.46 28.85 29.38 29.87
Weighted Average Pine $21.22 $21.81 $22.48 $22.67
Hardwood 12.35 13.16 12.47 13.98
Weighted Average Total $20.77 $21.48 $22.11 $22.46
Summary Financial Data (in millions of dollars)
Timber Sales $45.4 $54.1 $156.1 $175.0
Less: Cut and Haul (12.5) (14.4) (37.7) (43.4)
Less: Port and Freight (0.4) (0.9) (2.4) (3.6)
Net Stumpage Sales $32.5 $38.8 $116.0 $128.0
Land-Based Solutions (c) 2.8 1.0 7.1 2.9
Other Non-Timber Sales 13.9 8.8 28.1 26.2
Total Sales $62.0 $64.0 $191.3 $204.1
Operating Income $19.8 $18.6 $59.9 $62.6
(+) Depreciation, depletion and amortization 18.1 19.2 56.7 61.6
Adjusted EBITDA (d) $37.9 $37.8 $116.6 $124.2
Other Data
Period-End Acres (in thousands) 1,843 1,899 1,843 1,899
(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) Pulpwood and sawtimber product pricing for composite stumpage sales is estimated based on market data.
(c) Consists of sales from carbon capture and storage (“CCS”), solar and wind energy contracts.
(d) 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 2024 2023 2024 2023
Sales Volume (in thousands of tons)
Pulpwood 42 43 145 181
Domestic Sawtimber (a) 268 226 756 760
Export Sawtimber 9 21 28 65
Total Volume 319 290 929 1,006
% Delivered Volume (vs. Total Volume) 78 % 94 % 85 % 97 %
% Sawtimber Volume (vs. Total Volume) 87 % 85 % 84 % 82 %
% Export Volume (vs. Total Volume) (b) 8 % 11 % 7 % 11 %
Delivered Log Pricing (in dollars per ton)
Pulpwood $30.14 $33.09 $29.85 $40.67
Domestic Sawtimber 95.27 108.20 90.06 98.89
Export Sawtimber (c) 138.00 131.15 137.77 146.58
Weighted Average Log Price $88.06 $98.79 $82.13 $91.44
Summary Financial Data (in millions of dollars)
Timber Sales $25.7 $27.8 $72.8 $91.3
Less: Cut and Haul (10.1) (12.1) (31.1) (44.8)
Less: Port and Freight (0.6) (1.1) (1.8) (3.8)
Net Stumpage Sales $15.0 $14.7 $39.9 $42.7
Land-Based Solutions (d) — — — 1.3
Other Non-Timber Sales 1.5 1.5 3.9 3.4
Total Sales $27.2 $29.3 $76.7 $96.1
Operating Income (Loss) $0.8 ($0.6) ($5.0) ($6.5)
(+) Depreciation, depletion and amortization 7.8 8.3 24.3 28.2
Adjusted EBITDA (e) $8.7 $7.8 $19.3 $21.7
Other Data
Period-End Acres (in thousands) 417 474 417 474
Sawtimber (in dollars per MBF) (f) $663 $726 $660 $722
(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) Pricing is reported on a CFR basis (i.e., inclusive of export costs and freight).
(d) Consists primarily of conservation easement sales for habitat protection in Q2 2023.
(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 2024 2023 2024 2023
Sales Volume (in thousands of tons)
Domestic Pulpwood (Delivered) 64 58 171 163
Domestic Sawtimber (Delivered) 212 211 513 502
Export Pulpwood (Delivered) 67 55 212 167
Export Sawtimber (Delivered) 343 367 862 1,012
Total Volume 686 690 1,757 1,844
% Delivered Volume (vs. Total Volume) 100 % 100 % 100 % 100 %
% Sawtimber Volume (vs. Total Volume) 81 % 84 % 78 % 82 %
% Export Volume (vs. Total Volume) (a) 60 % 61 % 61 % 64 %
Delivered Log Pricing (in dollars per ton)
Domestic Pulpwood $33.84 $32.92 $33.25 $34.60
Domestic Sawtimber 64.89 63.45 65.85 67.46
Export Sawtimber 104.48 95.23 104.75 102.93
Weighted Average Log Price $84.40 $79.47 $84.90 $86.15
Summary Financial Data (in millions of dollars)
Timber Sales $57.9 $54.9 $149.2 $158.8
Less: Cut and Haul (b) (23.3) (22.2) (60.8) (63.2)
Less: Port and Freight (b) (21.1) (16.4) (51.3) (48.8)
Net Stumpage Sales $13.5 $16.2 $37.1 $46.8
Carbon Credit Sales 8.6 15.3 16.4 15.7
Other Non-Timber Sales 0.3 0.2 0.6 0.9
Total Sales $66.8 $70.4 $166.3 $175.4
Operating Income $8.9 $17.6 $19.3 $19.3
(+) Timber write-offs resulting from casualty events (c) — — — 2.3
(+) Depreciation, depletion and amortization 5.6 6.0 14.5 16.3
Adjusted EBITDA (d) $14.6 $23.5 $33.7 $37.9
Other Data
New Zealand Dollar to U.S. Dollar Exchange Rate (e) 0.6085 0.6084 0.6082 0.6166
Net Plantable Period-End Acres (in thousands) 289 298 289 298
Export Sawtimber (in dollars per JAS m 3 )
$121.48 $110.72 $121.79 $119.68
Domestic Sawtimber (in $NZD per tonne) $117.30 $114.72 $119.09 $120.34
(a) Percentage of export volume reflects direct exports through our log export program.
(b) Prior year periods have been restated to reclassify certain export related costs from cut and haul to port and freight.
(c) Timber write-offs resulting from casualty events includes the write-off of merchantable and pre-merchantable timber volume damaged by casualty events that cannot be salvaged.
(d) Adjusted EBITDA is a non-GAAP measure defined and reconciled in Performance and Liquidity Indicators .
(e) Represents the period-average rate.
46
Three Months Ended
September 30, Nine Months Ended
September 30,
Real Estate Overview 2024 2023 2024 2023
Sales (in millions of dollars)
Improved Development (a) $12.0 $3.1 $16.4 $20.2
Unimproved Development — 0.1 — 0.1
Rural 13.8 20.5 30.0 42.6
Timberland & Non-Strategic — 1.1 16.1 2.9
Conservation Easement 1.1 — 1.1 —
Deferred Revenue/Other (b) 3.2 6.4 13.0 13.7
Total Sales $30.1 $31.2 $76.6 $79.5
Acres Sold
Improved Development (a) 116.0 6.9 176.9 302.2
Unimproved Development — 10 — 10
Rural 2,800 3,799 5,737 8,740
Timberland & Non-Strategic — 466 13,536 1,070
Total Acres Sold 2,916 4,281 19,450 10,122
Gross Price per Acre (dollars per acre)
Improved Development (a) $103,421 $454,810 $92,701 $66,694
Unimproved Development — 11,250 — 11,250
Rural 4,916 5,386 5,223 4,872
Timberland & Non-Strategic — 2,266 1,190 2,755
Weighted Average (Total) $8,835 $5,781 $3,212 $6,501
Weighted Average (Adjusted) (c) $4,916 $5,060 $2,391 $4,648
Operating Income $8.6 $9.2 $14.3 $18.7
(+) Depreciation, depletion and amortization 1.5 3.1 9.9 6.8
(+) Non-cash cost of land and improved development 9.8 6.6 19.2 20.2
Adjusted EBITDA (d) $19.9 $18.9 $43.4 $45.8
(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) 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 2024 2023 2024 2023
Sales Volume (in thousands of tons)
U.S. 36 19 64 49
NZ 41 42 173 252
Total Volume 76 61 236 301
Summary Financial Data (in millions of dollars)
Trading Sales $8.6 $6.4 $24.9 $33.5
Non-Timber Sales 0.4 0.4 1.1 1.3
Total Sales $9.0 $6.8 $26.0 $34.8
Operating (Loss) Income ($0.1) ($0.1) $0.1 $0.4
Adjusted EBITDA (a) ($0.1) ($0.1) $0.1 $0.4
(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) 2024 2023 2024 2023
Timber Capital Expenditures
Southern Timber
Reforestation, silviculture and other capital expenditures $5.5 $4.0 $19.6 $17.6
Property taxes 2.0 2.0 5.9 6.0
Lease payments 0.1 0.1 0.6 0.7
Allocated overhead 1.5 1.5 4.7 4.2
Subtotal Southern Timber $9.1 $7.5 $30.7 $28.4
Pacific Northwest Timber
Reforestation, silviculture and other capital expenditures 1.0 1.6 5.1 6.6
Property taxes 0.1 0.3 0.4 0.8
Allocated overhead 1.1 1.5 3.7 4.1
Subtotal Pacific Northwest Timber $2.2 $3.3 $9.2 $11.5
New Zealand Timber
Reforestation, silviculture and other capital expenditures 2.5 3.1 6.8 7.6
Property taxes 0.2 0.2 0.6 0.6
Lease payments 1.4 1.3 3.5 2.6
Allocated overhead 0.7 0.6 2.0 2.0
Subtotal New Zealand Timber $4.8 $5.2 $12.9 $12.9
Total Timber Segments Capital Expenditures $16.1 $16.1 $52.9 $52.8
Real Estate 0.1 — 0.2 0.2
Corporate — 0.2 0.1 0.2
Total Capital Expenditures $16.2 $16.3 $53.2 $53.1
Timberland Acquisitions
Southern Timber $3.6 $4.7 $3.6 $10.4
Pacific Northwest Timber — — — 3.6
Timberland Acquisitions $3.6 $4.7 $3.6 $14.0
Real Estate Development Investments (a)
$8.9 $4.0 $19.1 $18.8
(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, 2024 versus September 30, 2023 (millions of dollars):
Sales Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Intersegment Eliminations Total
Three Months Ended
September 30, 2023
$64.0 $29.3 $70.4 $31.2 $6.8 ($0.1) $201.6
Volume (5.1) 1.5 (0.4) (7.6) 1.6 — (10.0)
Price (1.1) (1.1) (2.6) 8.5 0.6 — 4.3
Non-timber sales (a) 6.8 0.1 (6.6) — — — 0.3
Other (2.6) (b) (2.6) (b) 6.0 (c) (2.0) (d) — — (1.2)
Three Months Ended
September 30, 2024
$62.0 $27.2 $66.8 $30.1 $9.0 ($0.1) $195.0
(a) For the Southern Timber segment, includes sales from carbon capture and storage ("CCS"), solar and wind energy contracts. For the New Zealand Timber segment, includes carbon credit sales.
(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 Conservation Easement sales and 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, 2023
$204.1 $96.1 $175.4 $79.5 $34.8 ($0.4) $589.5
Volume (10.3) (3.3) (7.4) 58.4 (7.2) — 30.2
Price (1.8) 0.5 (8.1) (62.7) (1.4) — (73.5)
Non-timber sales (a) 6.1 (0.9) 0.7 — (0.2) — 5.7
Foreign exchange (b) — — (0.9) — — — (0.9)
Other (6.8) (c) (15.7) (c) 6.6 (d) 1.4 (e) — 0.2 (14.3)
Nine Months Ended
September 30, 2024
$191.3 $76.7 $166.3 $76.6 $26.0 ($0.2) $536.7
(a) For the Southern Timber segment, includes sales from carbon capture and storage ("CCS"), solar and wind energy contracts. For the Pacific Northwest Timber segment, includes Conservation Easement sales for habitat protection in Q2 2023. For the New Zealand Timber segment, includes carbon credit sales.
(b) Net of currency hedging impact.
(c) Includes variance due to stumpage versus delivered sales.
(d) Includes variance due to domestic versus export sales.
(e) Includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to Conservation Easement sales and residential and commercial lease revenue.
50
Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total
Three Months Ended
September 30, 2023
$18.6 ($0.6) $17.6 $9.2 ($0.1) ($9.4) $35.4
Volume (2.6) 0.4 (0.1) (5.2) — — (7.5)
Price (a) (1.1) (1.1) (2.6) 8.5 — — 3.7
Cost 0.1 0.8 (0.2) 1.7 — (0.2) 2.2
Non-timber income (b) 6.2 — (6.6) — — — (0.4)
Foreign exchange (c) — — 0.5 — — — 0.5
Depreciation, depletion & amortization (1.4) 1.3 0.3 0.7 — — 0.9
Non-cash cost of land and improved development — — — (5.8) — — (5.8)
Other (d) — — — (0.5) — (0.9) (1.4)
Three Months Ended
September 30, 2024
$19.8 $0.8 $8.9 $8.6 ($0.1) ($10.5) $27.6
(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 Southern Timber segment, includes income from carbon capture and storage (“CCS”), solar and wind energy contracts. For the New Zealand Timber segment, includes income from carbon credit sales.
(c) Net of currency hedging impact.
(d) Real Estate includes deferred revenue adjustments, revenue true-ups and marketing fees related to Improved Development sales in addition to Conservation Easement sales and residential and commercial lease revenue. Corporate and Other includes $0.9 million of costs related to disposition initiatives.
Operating Income (Loss) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total
Nine Months Ended
September 30, 2023
$62.6 ($6.5) $19.3 $18.7 $0.4 ($28.3) $66.1
Volume (5.4) (0.5) (1.5) 36.1 — — 28.7
Price (a) (1.8) 0.5 (8.1) (62.7) — — (72.1)
Cost (1.3) 0.6 0.7 2.6 (0.3) (2.3) —
Non-timber income (b) 5.7 (0.9) 1.0 — — — 5.8
Foreign exchange (c) — — 4.7 — — — 4.7
Depreciation, depletion & amortization 0.1 1.8 0.9 2.9 — (0.1) 5.6
Non-cash cost of land and improved development — — — 16.7 — — 16.7
Other (d) — — 2.3 — — (1.6) 0.8
Nine Months Ended
September 30, 2024
$59.9 ($5.0) $19.3 $14.3 $0.1 ($32.3) $56.3
(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 Southern Timber segment, includes income from carbon capture and storage (“CCS”), solar and wind energy contracts. For the Pacific Northwest Timber segment, includes Conservation Easement sales for habitat protection in Q2 2023. For the New Zealand Timber segment, includes income from carbon credit sales.
(c) Net of currency hedging impact.
(d) New Zealand Timber includes $2.3 million of timber write-offs resulting from casualty events in 2023. Corporate and Other includes $1.6 million of costs related to disposition initiatives.
51
Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total
Three Months Ended
September 30, 2023
$37.8 $7.8 $23.5 $18.9 ($0.1) ($9.0) $78.9
Volume (5.1) 1.2 — (7.6) — — (11.5)
Price (b) (1.1) (1.1) (2.6) 8.5 — — 3.7
Cost 0.1 0.8 (0.2) 1.7 — (0.2) 2.2
Non-timber income (c) 6.2 — (6.6) — — — (0.4)
Foreign exchange (d) — — 0.5 — — — 0.5
Other (e) — — — (1.6) — — (1.6)
Three Months Ended
September 30, 2024
$37.9 $8.7 $14.6 $19.9 ($0.1) ($9.2) $71.8
(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 Southern Timber segment, includes income from carbon capture and storage (“CCS”), solar and wind energy contracts. For the New Zealand Timber segment, includes income from 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 Conservation Easement sales and residential and commercial lease revenue.
Adjusted EBITDA (a) Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate and Other Total
Nine Months Ended
September 30, 2023
$124.2 $21.7 $37.9 $45.8 $0.4 ($27.1) $202.9
Volume (10.2) (2.6) (2.2) 58.4 — — 43.4
Price (b) (1.8) 0.5 (8.1) (62.7) — — (72.1)
Cost (1.3) 0.6 0.7 2.6 (0.3) (2.3) —
Non-timber income (c) 5.7 (0.9) 1.0 — — — 5.8
Foreign exchange (d) — — 4.4 — — — 4.4
Other (e) — — — (0.7) — — (0.7)
Nine Months Ended
September 30, 2024
$116.6 $19.3 $33.7 $43.4 $0.1 ($29.4) $183.7
(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 Southern Timber segment, includes income from carbon capture and storage (“CCS”), solar and wind energy contracts. For the Pacific Northwest Timber segment, includes Conservation Easement sales for habitat protection in Q2 2023. For the New Zealand Timber segment, includes income from 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 Conservation Easement sales and residential and commercial lease revenue.
SOUTHERN TIMBER
Third quarter sales of $62.0 million decreased $2.0 million, or 3%, versus the prior year period. Harvest volumes decreased 13% to 1.57 million tons versus 1.81 million tons in the prior year period, primarily driven by wet ground conditions that constrained production as well as softer demand from lumber mills. Average pine sawtimber stumpage realizations decreased 5% to $27.46 per ton versus $28.85 per ton in the prior year period, primarily due to softer demand from sawmills and an unfavorable geographic mix. Average pine pulpwood stumpage realizations increased 4% to $17.21 per ton versus $16.54 per ton in the prior year period, primarily driven by improved demand from pulp mills and weather-related constraints on competing supply in certain markets. Overall, weighted-average net stumpage realizations (including hardwood) decreased 3% to $20.77 per ton versus $21.48 per ton in the prior year period. Non-timber sales of $16.7 million increased $6.8 million versus the prior year period, primarily driven by higher pipeline easement revenues and growth in our land-based solutions business. Operating income of $19.8 million increased $1.2 million versus the prior year period as higher non-timber income ($6.2 million) and lower costs ($0.1 million) were partially offset by lower volumes ($2.6 million), higher depletion expense ($1.4 million), and lower net stumpage realizations ($1.1 million). Third quarter Adjusted EBITDA of $37.9 million was $0.2 million above the prior year period.
52
Year-to-date sales of $191.3 million decreased $12.8 million, or 6%, versus the prior year period. Harvest volumes decreased 8% to 5.25 million tons versus 5.71 million tons in the prior year period, primarily driven by wet ground conditions that constrained production and softer demand from lumber mills. Average pine sawtimber stumpage realizations decreased 2% to $29.38 per ton versus $29.87 per ton in the prior year period, primarily due to softer demand from lumber mills. Average pine pulpwood stumpage realizations increased 4% to $17.13 per ton versus $16.53 per ton in the prior year period primarily driven by improved demand from pulp mills. Overall, weighted-average stumpage realizations (including hardwood) decreased 2% to $22.11 per ton versus $22.46 per ton in the prior year period. Operating income of $59.9 million decreased $2.6 million versus the prior year period due to lower volumes ($5.4 million), lower net stumpage realizations ($1.8 million), and higher costs ($1.3 million), partially offset by higher non-timber income ($5.7 million) and lower depletion expense ($0.1 million). Year-to-date Adjusted EBITDA of $116.6 million was 6%, or $7.6 million, below the prior year period.
PACIFIC NORTHWEST TIMBER
Third quarter sales of $27.2 million decreased $2.1 million, or 7%, versus the prior year period. Harvest volumes increased 10% to 319,000 tons versus 290,000 tons in the prior year period. Average delivered prices for domestic sawtimber decreased 12% to $95.27 per ton versus $108.20 per ton in the prior year period due to a combination of weaker demand from domestic lumber mills and an unfavorable species / product mix, as a lower proportion of Douglas-fir sawtimber was harvested in the current year period. Average delivered pulpwood prices decreased 9% to $30.14 per ton versus $33.09 per ton in the prior year period, primarily due to softer mill demand in the region. Operating income of $0.8 million versus an operating loss of $0.6 million in the prior year period was driven by lower depletion expense ($1.3 million), lower costs ($0.8 million), and higher volumes ($0.4 million), partially offset by lower net stumpage realizations ($1.1 million). Third quarter Adjusted EBITDA of $8.7 million was 12%, or $0.9 million, above the prior year period.
Year-to-date sales of $76.7 million decreased $19.3 million, or 20%, versus the prior year period. Harvest volumes decreased 8% to 929,000 tons versus 1,006,000 tons in the prior year period, primarily due to the Large Disposition we completed in Oregon in late 2023. Average delivered prices for domestic sawtimber decreased 9% to $90.06 per ton versus $98.89 per ton in the prior year period primarily due to softer demand from domestic lumber mills and less competition from export markets. Average delivered pulpwood prices decreased 27% to $29.85 per ton versus $40.67 per ton in the prior year period due to softer mill demand in the region. An operating loss of $5.0 million versus an operating loss of $6.5 million in the prior year period was driven by lower depletion expense ($1.8 million), lower costs ($0.6 million), and improved net stumpage realizations ($0.5 million), partially offset by lower non-timber income ($0.9 million) and lower volumes ($0.5 million). Year-to-date Adjusted EBITDA of $19.3 million was 11%, or $2.4 million, below the prior year period.
NEW ZEALAND TIMBER
Third quarter sales of $66.8 million decreased $3.7 million, or 5%, versus the prior year period. Sales volumes decreased 1% to 686,000 tons versus 690,000 tons in the prior year period. Average delivered prices for export sawtimber increased 10% to $104.48 per ton versus $95.23 per ton in the prior year period, as higher shipping costs were partially passed on to export customers through increased prices. Average delivered prices for domestic sawtimber increased 2% to $64.89 per ton versus $63.45 per ton in the prior year period. Despite higher delivered log prices, net stumpage realizations declined 16% versus the prior year quarter, largely due to elevated shipping and production costs. Third quarter non-timber / carbon credit sales totaled $8.9 million versus $15.6 million in the prior year period, primarily due to a lower volume of carbon credits sold as compared to the prior year period. Operating income of $8.9 million decreased $8.6 million versus the prior year period due to lower carbon credit income ($6.6 million), lower net stumpage realizations ($2.6 million), higher costs ($0.2 million), and lower volumes ($0.1 million), partially offset by favorable foreign exchange impacts ($0.5 million) and lower depletion rates ($0.3 million ). Third quarter Adjusted EBITDA of $14.6 million was 38%, or $8.9 million, below the prior year period.
Year-to-date sales of $166.3 million decreased $9.2 million, or 5%, versus the prior year period. Sales volumes decreased 5% to 1.76 million tons versus 1.84 million tons in the prior year period. Average delivered prices for export sawtimber increased 2% to $104.75 per ton versus $102.93 per ton in the prior year period, as higher shipping costs were partially passed on to export customers through increased prices. Average delivered prices for domestic sawtimber decreased 2% to $65.85 per ton versus $67.46 per ton in the prior year period. The decrease in domestic sawtimber prices was primarily driven by weaker domestic demand coupled with the decline in the NZ$/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 1% versus the prior year period. Year-to-date non-
53
timber / carbon credit sales totaled $17.1 million versus $16.6 million in the prior year period. Operating income of $19.3 million was consistent with the prior year period due to favorable foreign exchange impacts ($4.7 million), the prior year write-off of timber basis due to a tropical cyclone casualty event ($2.3 million), higher carbon credit income ($1.0 million), lower depletion rates ($0.9 million), and lower costs ($0.7 million), largely offset by lower net stumpage realizations ($8.1 million) and lower volumes ($1.5 million). Year-to-date Adjusted EBITDA of $33.7 million was 11%, or $4.2 million, below the prior year period.
REAL ESTATE
Third quarter sales of $30.1 million decreased $1.1 million versus the prior year period, while operating income of $8.6 million decreased $0.6 million versus the prior year period. Sales and operating income decreased versus the prior year period due to lower acres sold (2,916 acres sold versus 4,281 acres sold in the prior year period), partially offset by higher weighted-average prices ($8,835 per acre versus $5,781 per acre in the prior year period).
Improved Development sales of $12.0 million included $7.9 million from the Wildlight development project north of Jacksonville, Florida, $3.6 million from the Heartwood development project south of Savannah, Georgia, and $0.5 million from the sale of an industrial-use parcel in Kitsap County, Washington ($266,000 per acre). Sales in Wildlight consisted of two residential pod sales totaling 104 acres for $7.7 million ($74,000 per acre) and two small non-residential sales totaling $0.2 million. Sales in Heartwood consisted of an 8.8-acre commercial parcel for $3.6 million ($410,000 per acre). This compares to Improved Development sales of $3.1 million in the prior year period.
Rural sales of $13.8 million consisted of 2,800 acres at an average price of $4,916 per acre. This compares to prior year period sales of $20.5 million, which consisted of 3,799 acres at an average price of $5,386 per acre.
There were no Timberland & Non-Strategic sales in the third quarter. This compares to prior year period sales of $1.1 million, which consisted of 466 acres at an average price of $2,266 per acre.
Third quarter Adjusted EBITDA of $19.9 million increased $1.1 million versus the prior year period.
Year-to-date sales of $76.6 million decreased $2.9 million versus the prior year period, while operating income of $14.3 million decreased $4.4 million versus the prior year period. Sales and operating income decreased in the first nine months primarily due to lower weighted-average prices ($3,212 per acre versus $6,501 per acre in the prior year period), partially offset by significantly higher acres sold (19,450 acres sold versus 10,122 acres sold in the prior year period). Year-to-date Adjusted EBITDA of $43.4 million decreased $2.4 million versus the prior year period.
TRADING
Third quarter sales of $9.0 million increased $2.2 million versus the prior year period, primarily due to higher volumes and prices. Sales volumes of 76,000 tons increased 24% versus the prior year period. The Trading segment generated an operating loss of $0.1 million, which was consistent with the prior year period.
Year-to-date sales of $26.0 million decreased $8.7 million versus the prior year period, primarily due to lower volumes and prices. Sales volumes of 236,000 tons decreased 21% versus the prior year period. Year-to-date operating income and Adjusted EBITDA of $0.1 million decreased $0.3 million versus the prior year period.
OTHER ITEMS
CORPORATE AND OTHER EXPENSE / ELIMINATIONS
Third quarter corporate and other operating expenses of $10.5 million increased $1.1 million versus the prior year period, primarily due to $0.9 million of costs related to disposition initiatives and higher compensation and benefits expenses, partially offset by lower professional services fees.
Year-to-date corporate and other operating expenses of $32.3 million increased $4.0 million versus the prior year period, primarily due to $1.6 million of costs related to disposition initiatives, higher compensation and benefits expenses, and higher IT related expenses.
INTEREST EXPENSE, NET
Third quarter and year-to-date interest expense of $10.0 million and $29.6 million decreased $2.6 million and $7.2 million, respectively, versus the prior year period, primarily due to lower average outstanding debt.
54
INTEREST AND OTHER MISCELLANEOUS INCOME, NET
Third quarter interest and other miscellaneous income of $12.8 million included $12.0 million of net recoveries associated with legal settlements, partially offset by $0.3 million of pension settlement charges.
Year-to-date interest and other miscellaneous income of $8.8 million includes $9.6 million of net recoveries associated with legal settlements, partially offset by $6.0 million of pension settlement charges. This compares to prior year period interest and other miscellaneous income of $21.7 million, which included $20.5 million of net recoveries associated with legal settlements.
INCOME TAX (EXPENSE) BENEFIT
Third quarter income tax expense decreased $0.5 million versus the prior year period. Year-to-date income tax benefit of $0.3 million versus income tax expense of $1.8 million in the prior year period was primarily due to a $1.2 million tax benefit associated with the pension termination and settlement. The New Zealand subsidiary is the primary driver of income tax expense.
OUTLOOK
In our Southern Timber segment, we now expect full-year harvest volumes slightly below the lower end of our prior guidance range due to the disposition of approximately 91,000 acres in Oklahoma as well as weather-related impacts in certain markets. In our Pacific Northwest Timber segment, we now expect full-year harvest volumes slightly below the lower end of our prior guidance range due to the disposition of approximately 109,000 acres in Washington. In our New Zealand Timber segment, we expect full-year harvest volumes in line with our prior guidance and lower carbon credit sales, softer export markets, and elevated shipping costs. In our Real Estate segment, we continue to expect strong fourth quarter closing activity, contingent on the timing of several large transactions.
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) 2024 2023
Cash and cash equivalents $74.2 $207.7
Total debt (a) 1,313.4 1,372.7
Noncontrolling interests in the Operating Partnership
64.7 81.7
Shareholders’ equity 1,802.8 1,877.6
Total capitalization (total debt plus permanent and temporary equity) 3,180.9 3,332.0
Debt to capital ratio 41 % 41 %
Net debt to enterprise value (b)(c) 20 % 19 %
(a) Total debt as of September 30, 2024 and December 31, 2023 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 $32.18 and $33.41 as of September 30, 2024 and December 31, 2023, respectively.
55
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, 2024, $269.7 million remains available for issuance under the 2022 ATM 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,
2024 2023 2024 2023
Common shares issued under the ATM program — — — 400
Average price of common shares issued under the ATM program — — — $34.03
CASH FLOWS
The following table summarizes our cash flows from operating, investing and financing activities for the nine months ended September 30, 2024 and 2023:
(millions of dollars) 2024 2023
Cash provided by (used for):
Operating activities $173.8 $208.9
Investing activities (74.8) (79.7)
Financing activities (229.9) (134.2)
CASH PROVIDED BY OPERATING ACTIVITIES
Cash provided by operating activities decreased $35.2 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 decreased $4.8 million from the prior year period, due to lower cash used for timberland acquisitions ($10.4 million), partially offset by higher real estate development investments ($0.3 million) and lower proceeds from other investing activities ($5.2 million).
CASH USED FOR FINANCING ACTIVITIES
Cash used for financing activities increased $95.8 million from the prior year period. This is primarily due to higher repayments of debt ($60.0 million), higher dividends paid on common shares ($30.5 million), and higher distributions to noncontrolling interests in consolidated affiliates ($5.5 million), partially offset by lower distributions to noncontrolling interests in the Operating Partnership ($0.1 million) and lower costs associated with the issuance of common shares under the ATM equity offering program ($0.1 million).
56
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.
Significant long-term uses of cash include the following (in millions):
Future uses of cash (in millions) Total Payments Due by Period
2024 2025-2026 2027-2028 Thereafter
Long-term debt (a) $1,291.4 — $225.7 $415.7 $650.0
Current maturities of long-term debt 22.0 — 22.0 — —
Interest payments on long-term debt (b) 272.2 20.8 130.5 84.2 36.7
Operating leases — timberland (c) 196.1 4.4 16.4 15.1 160.2
Operating leases — PP&E, offices (c) 5.5 0.4 1.6 1.0 2.5
Commitments — real estate projects 56.0 18.4 32.2 1.1 4.3
Commitments — environmental remediation (d) 15.5 9.8 3.0 0.7 2.0
Commitments — other (e) 2.9 0.5 1.6 0.4 0.4
Total $1,861.6 $54.3 $433.0 $518.2 $856.1
(a) The book value of long-term debt, net of deferred financing costs and unamortized discounts, is currently recorded at $1,285.2 million on our Consolidated Balance Sheets, but upon maturity the liability will be $1,291.4 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, 2024 and excludes the impact of hedging.
(c) Excludes anticipated renewal options.
(d) 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.
(e) Commitments — other includes other purchase obligations.
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 2024 EXPENDITURES
Capital expenditures in 2024 are expected to be between $79 million and $82 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 2024 to be between $30 million and $34 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 2024 dividend payments on Rayonier Inc. common shares and distributions to Rayonier, L.P. unitholders, excluding the additional dividend and distribution paid on January 12, 2024 to shareholders of record on December 29, 2023, are expected to be approximately $171 million and $2 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.
57
We made cash contributions of $2.7 million in 2024 in order to fund the Defined Benefit Plan on a plan termination basis. Additionally, we settled the Excess Benefit Plan with lump sum cash payments of $1.2 million in 2024. We have no mandatory contribution requirements remaining in 2024. See Note 15 — Employee Benefit Plans for additional information.
Full-year 2024 cash tax payments are expected to be bet ween $5.0 million and $6.0 million, primarily related to the New Zealand subsidiary.
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, 2024.
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, 2024 and year ended December 31, 2023 are provided in the table below:
(in millions) September 30, 2024 December 31, 2023
Current assets $61.0 $197.5
Non-current assets 88.1 98.8
Current liabilities 20.2 60.0
Non-current liabilities 2,429.2 2,181.6
Due to non-guarantors 1,167.2 861.5
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, 2024 and year ended December 31, 2023 are provided in the table below:
(in millions) September 30, 2024 December 31, 2023
Cost and expenses ($27.1) ($32.3)
Operating loss (27.1) (32.3)
Net loss (49.7) (70.5)
Revenue from non-guarantors 536.7 1,108.9
58
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.
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) expense, costs related to disposition initiatives, 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,
2024 2023 2024 2023
Net Income to Adjusted EBITDA Reconciliation
Net Income $30.4 $22.7 $35.8 $49.3
Interest, net and miscellaneous income 8.7 12.0 24.0 35.5
Income tax expense (benefit) (a) — 0.6 (0.3) 1.8
Depreciation, depletion and amortization 33.5 37.0 106.7 114.3
Non-cash cost of land and improved development 9.8 6.6 19.2 20.2
Non-operating (income) expense (b) (11.5) 0.1 (3.3) (20.5)
Costs related to disposition initiatives (c) 0.9 — 1.6 —
Timber write-offs resulting from casualty events (d) — — — 2.3
Adjusted EBITDA $71.8 $78.9 $183.7 $202.9
(a) The nine months ended September 30, 2024 includes a $1.2 million income tax benefit related to the pension settlement.
(b) The three months ended September 30, 2024 includes $12.0 million of net recoveries associated with legal settlements, which is partially offset by $0.3 million of pension settlement charges. The nine months ended September 30, 2024 includes $9.6 million of net recoveries associated with legal settlements, which is partially offset by $6.0 million of pension settlement charges. The nine months ended September 30, 2023 includes $20.5 million of net recoveries associated with legal settlements.
(c) Costs related to disposition initiatives include legal, advisory, and other due diligence costs incurred in connection with our asset disposition plan, which was announced in November 2023.
(d) 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.
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, 2024
Operating income (loss) $19.8 $0.8 $8.9 $8.6 ($0.1) ($10.5) $27.6
Costs related to disposition initiatives (a) — — — — — 0.9 0.9
Depreciation, depletion and amortization 18.1 7.8 5.6 1.5 — 0.4 33.5
Non-cash cost of land and improved development — — — 9.8 — — 9.8
Adjusted EBITDA $37.9 $8.7 $14.6 $19.9 ($0.1) ($9.2) $71.8
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
(a) Costs related to disposition initiatives include legal, advisory, and other due diligence costs incurred in connection with our asset disposition plan, which was announced in November 2023.
Nine Months Ended Southern Timber Pacific Northwest Timber New Zealand Timber Real Estate Trading Corporate
and
Other Total
September 30, 2024
Operating income (loss) $59.9 ($5.0) $19.3 $14.3 $0.1 ($32.3) $56.3
Costs related to disposition initiatives (a) — — — — — 1.6 1.6
Depreciation, depletion and amortization 56.7 24.3 14.5 9.9 — 1.3 106.7
Non-cash cost of land and improved development — — — 19.2 — — 19.2
Adjusted EBITDA $116.6 $19.3 $33.7 $43.4 $0.1 ($29.4) $183.7
September 30, 2023
Operating income (loss) $62.6 ($6.5) $19.3 $18.7 $0.4 ($28.3) $66.1
Timber write-offs resulting from casualty events (b) — — 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
(a) Costs related to disposition initiatives include legal, advisory, and other due diligence costs incurred in connection with our asset disposition plan, which was announced in November 2023.
(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.
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,
2024 2023
Cash provided by operating activities $173.8 $208.9
Capital expenditures (a) (53.2) (53.1)
Net recovery on legal settlements (b) (9.6) (20.5)
Working capital and other balance sheet changes (5.3) (20.6)
CAD $105.7 $114.7
Mandatory debt repayments — —
CAD after mandatory debt repayments $105.7 $114.7
Cash used for investing activities ($74.8) ($79.7)
Cash used for financing activities ($229.9) ($134.2)
(a) Capital expenditures exclude timberland acquisitions and real estate development investments.
(b) Net recovery on legal settlements reflects the net gain from litigation regarding insurance claims.
The following table provides supplemental cash flow data (in millions of dollars):
Nine Months Ended September 30,
2024 2023
Purchase of timberlands ($3.6) ($14.0)
Real Estate Development Investments (19.1) (18.8)
Distributions to noncontrolling interests in consolidated affiliates (5.5) —
LIQUIDITY FACILITIES
2024 DEBT ACTIVITY
See Note 6 — Debt for additional information.
61
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.